Chapter 9: Accounting beyond the current year

Chapter 9

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  • Created by: Jane Lee
  • Created on: 30-05-11 02:47

Strategic Management Accounting

SMA moves from more traditional management accounting :

  • from a single financial year to the longer term in realtion
  • looks beyond the boundary of the organisation to its supply chain
  • makes comparrisons with its competitors 
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Strategic Management Accounting

SMA moves from more traditional management accounting :

  • from a single financial year to the longer term in realtion
  • looks beyond the boundary of the organisation to its supply chain
  • makes comparrisons with its competitors 
2 of 12

Strategic Management Accounting

SMA moves from more traditional management accounting :

  • from a single financial year to the longer term in realtion
  • looks beyond the boundary of the organisation to its supply chain
  • makes comparrisons with its competitors 
3 of 12

Just in time processing and customer profitability

Just in time: philosophy that aims to reduce inventory. It uses a pull aporach where goods are ordered to fufil a customer order. It requires a strong relationship with supplier

Benefits:

  • inventories are significantly reduced or eliminated
  • product quality is enhanced
  • invenotry stroage coss are reduced or eliminated.

Customer Profitablity Analysis: essential to customer relationship management as an entity faces three alternatives. Gives a strategic view of multiple dimensions of profitability and make strategic decisions about which should be retained, what needs further investment and which need oprice or cost adjustments or just need to be abandoned. 

4 of 12

Just in time processing and customer profitability

Just in time: philosophy that aims to reduce inventory. It uses a pull aporach where goods are ordered to fufil a customer order. It requires a strong relationship with supplier

Benefits:

  • inventories are significantly reduced or eliminated
  • product quality is enhanced
  • invenotry stroage coss are reduced or eliminated.

Customer Profitablity Analysis: essential to customer relationship management as an entity faces three alternatives. Gives a strategic view of multiple dimensions of profitability and make strategic decisions about which should be retained, what needs further investment and which need oprice or cost adjustments or just need to be abandoned. 

5 of 12

Just in time processing and customer profitability

Just in time: philosophy that aims to reduce inventory. It uses a pull aporach where goods are ordered to fufil a customer order. It requires a strong relationship with supplier

Benefits:

  • inventories are significantly reduced or eliminated
  • product quality is enhanced
  • invenotry stroage coss are reduced or eliminated.

Customer Profitablity Analysis: essential to customer relationship management as an entity faces three alternatives. Gives a strategic view of multiple dimensions of profitability and make strategic decisions about which should be retained, what needs further investment and which need oprice or cost adjustments or just need to be abandoned. 

6 of 12

Life Cycle Costing and Target Costing

Life cycle costing: estimates and accumulates the cost of a product/service over its entire life, from inception to abandonment. It helps determine whether the profits generated during the production phase cover all the life cycle costs. This information helps managers to make decisions about future product service development and the need for cost control during the development phase. 

Target costing: Concerned with managing whole of life costs during the design phase of the product lifecycle . It involves:

  • determining the target price that customers are willing to pay
  • deducting a target profit margin to determine the target cost
  • estimiating the actual cost of the product
  • investingating ways of reducing the estimated cost to the target cost.
7 of 12

Life Cycle Costing and Target Costing

Life cycle costing: estimates and accumulates the cost of a product/service over its entire life, from inception to abandonment. It helps determine whether the profits generated during the production phase cover all the life cycle costs. This information helps managers to make decisions about future product service development and the need for cost control during the development phase. 

Target costing: Concerned with managing whole of life costs during the design phase of the product lifecycle . It involves:

  • determining the target price that customers are willing to pay
  • deducting a target profit margin to determine the target cost
  • estimiating the actual cost of the product
  • investingating ways of reducing the estimated cost to the target cost.
8 of 12

Life Cycle Costing and Target Costing

Life cycle costing: estimates and accumulates the cost of a product/service over its entire life, from inception to abandonment. It helps determine whether the profits generated during the production phase cover all the life cycle costs. This information helps managers to make decisions about future product service development and the need for cost control during the development phase. 

Target costing: Concerned with managing whole of life costs during the design phase of the product lifecycle . It involves:

  • determining the target price that customers are willing to pay
  • deducting a target profit margin to determine the target cost
  • estimiating the actual cost of the product
  • investingating ways of reducing the estimated cost to the target cost.
9 of 12

Kaizen Costing, TQM and Environmental management a

Kaizen making incremental improvements to the production process. Is applied during the production phase when large innovations may not be possible.

TQM ecompassess the design, purchasing, operations, distribution, marketing and administration processes of an entity

Cost of Quality: the difference between actual costs of production, selling and after service and the costs that would be incurred if there were no failures during production of usage of products/services.

Environmental accounting: concerned with recognising environmental costs for the purposes of internal decision making. Costs are

  • prevention costs to avoid environmental damage
  • measurement costs to determine the extent of environmental impact
  • internal failure costs where remedial action ahs to be taken
  • external failure costs: including penalties incurred for environmental damage
10 of 12

Kaizen Costing, TQM and Environmental management a

Kaizen making incremental improvements to the production process. Is applied during the production phase when large innovations may not be possible.

TQM ecompassess the design, purchasing, operations, distribution, marketing and administration processes of an entity

Cost of Quality: the difference between actual costs of production, selling and after service and the costs that would be incurred if there were no failures during production of usage of products/services.

Environmental accounting: concerned with recognising environmental costs for the purposes of internal decision making. Costs are

  • prevention costs to avoid environmental damage
  • measurement costs to determine the extent of environmental impact
  • internal failure costs where remedial action ahs to be taken
  • external failure costs: including penalties incurred for environmental damage
11 of 12

Kaizen Costing, TQM and Environmental management a

Kaizen making incremental improvements to the production process. Is applied during the production phase when large innovations may not be possible.

TQM ecompassess the design, purchasing, operations, distribution, marketing and administration processes of an entity

Cost of Quality: the difference between actual costs of production, selling and after service and the costs that would be incurred if there were no failures during production of usage of products/services.

Environmental accounting: concerned with recognising environmental costs for the purposes of internal decision making. Costs are

  • prevention costs to avoid environmental damage
  • measurement costs to determine the extent of environmental impact
  • internal failure costs where remedial action ahs to be taken
  • external failure costs: including penalties incurred for environmental damage
12 of 12

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