Management Accounting: Past, Now and Future

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Management Accounting Past, Now and
Future

• 1. Management Accounting Procedure Development
  Business Environments
• 1825-1925First partCost efficiency
• Second partManagement
  control for
• 
  Diversified organizations
• 1925-1985Slow in innovation
• 1985- Relevance to strategy
  formation and building
• competitive advantages

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2. The Role of Management Accounting3. The
Emphasis of Traditional Management Accounting4.
The Problems of Traditional Management
Accounting Systems5. How to Restore the
Relevance of Management Accounting6. How to
Build a Strategic Management Accounting
System (1) Value Chain Analysis (2)
Position Analysis (3) Cost Driver Analysis7.
Computerized Cost System Design
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Value Chain and Value Added

• Shank Govindarajan Michael
  Porter
• Industry Value Chain----------------gt Value
  System
• Value Added Process----------------gt Value Chain

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Exhibit 2-1 Differences in Cost Management
Caused by Differences in Strategy
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• COST DRIVER CONCEPT
• Strategic Cost Drivers
• 1. Structure cost drivers (1)Scale
• 
  (2)Scope
• 
  (3)Experience
• 
  (4)Technology
• 
  (5) Complexity
• 2. Executional cost drivers
• Work force involvement TQM
  
• Capacity utilization Plant
  layout efficiency
• Product configuration External
  linkages
• Process Cost Drivers ABC/ABM

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Exhibit 2-3 The Management Accounting Versus the
Strategic Cost Paradigm
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Why Some Factories are More Productive Than Others

• I. A fogged window is relying on traditional
• accounting information
• (1) Cost is distorted
• (2) The system measure what is spentnot
  consumed.
• (3) The system measure A. The direct effect
• B.
  The realized events
• (4) Measured in the nominal terms, not real
  times.
• (5) Inappropriate measurementreduction in
  labor hours.
• ?
  capital for labor

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• (6) Measuring direct costs with
  computers, but not the
• indirect overhead costs.
• (7) Pay little attention on material
  productivity
• A. Record in dollars, not in
  physical terms.
• B. Record material consumed based
  on standard costs
• without adjusting inflation.
• (8) Only review the large transactions
  (engineering changes)
• but not all of them.
• (9) The lag on bookkeeping.

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• II. Research Design
• Time line1973-1982
• Process5 factories
• Fab4
• Hi-Tech 3/12 factories( 3 companies)
• TFP ?Output Standard cost 1982
• ? Input Price 1982
• Methods(1) Longitudinal (Time series)
• (2) Cross-Sectional
• (3) Combined

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• II. Factors Affecting Productivity
• (1) Capital investment ? Long-term benefit,
  short-term
• unfavorable.
• (2) Reduce wastePercentage of reject.
• (3) Get WIP out
• (4) Reduce confusion

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Restoring the Relevance of Management Accounting,
Hiromoto

• I. Innovation is key to the rapidly changing
  business
• environment.
• In Japan, Management Accounting is used to
  link
• with strategy for innovation.
• (1) Use non-financial
• (2) Cost allocation is used to promote
  automation,
• standardization, shortening lead time.
• (3) Restructure for globalization.
• Theme The design of measurement control
  system
• for continuous innovation.

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II. Traditional Management Accounting (1)
Overemphasis on Information for decision
making. (2) Overemphasis on
constrained optimization.
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III. New Management Accounting (1) A
behavior influencing focus A. From
information for decision to a behavior
influencing. B. Integrate the
behavior influencing focus with strategy.
(2) From technology driven to market
drivenTarget costing. (3) From static to
dynamic approach (4) From baton passing to
team-oriented approach Variance
analysis.
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IV. Four Examples (1) TWN Common
Parts (2) HeadCount ? Depart ? Products
(by sales) (3) Transfer Price (4)
Term Measure (No actual
processing time is reported)
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Stage 1 Systems Broken
Stage 2 Systems Finl. Reporting Driven
Stage 3 Systems Customized, Stand-alone
Stage 4 Systems Integrated
Systems Aspects Data Quality External
Financial Reporting Product/Customer Costs
Operational and Strategic Control
?Financial reporting systems
?Integrated ABM systems
?Operational Strategic Performance
Measurement sys.