Cost Management Accounting & Control, Chapter 13
COST MANAGEMENT
Accounting & Control
Hansen▪Mowen▪Guan
Chapter 13
The Balanced Scorecard:
Strategic-Based Control
COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license.
1
Study Objectives
1. Compare and contrast activity-based and
strategic-based responsibility accounting
systems.
2. Discuss the basic features of the
Balanced Scorecard.
3. Explain how the Balanced Scorecard
links measures to strategy.
4. Describe how an organization can
achieve strategic alignment.
2
Activity-Based versus StrategicBased Responsibility Accounting
• The activity-based system adds a process
perspective to the financial perspective of
the functional-based responsibility
accounting system.
• A strategy-based responsibility accounting
system translates the strategy of the
organization into operational objectives
and measures.
3
Activity-Based versus StrategicBased Responsibility Accounting
• The Balanced Scorecard is a strategicbased performance management system
that typically identifies objectives and
measures for four different perspectives.
– The financial perspective
– The customer perspective
– The process perspective
– The learning and growth perspective
4
Activity-Based versus StrategicBased Responsibility Accounting
5
Activity-Based versus StrategicBased Responsibility Accounting
6
Activity-Based versus StrategicBased Responsibility Accounting
7
Activity-Based versus StrategicBased Responsibility Accounting
8
Basic Concepts of the Balanced
Scorecard
Strategy:
• choosing the market and customer segments the
business unit intends to service
• identifying the critical internal and business processes
that the unit must excel at to deliver the value
propositions to customers in the targeted market
segments
• selecting the individual and organizational capabilities
required for the internal, customer, and financial
objectives.
9
Basic Concepts of the Balanced
Scorecard
Process value analysis
– is fundamental to activity-based responsibility
accounting
– focuses on accountability for activities rather than
costs
– emphasizes the maximization of systemwide
performance instead of individual performance.
– is concerned with:
• Driver analysis
• Activity analysis
• Performance measurement
10
Basic Concepts of the Balanced
Scorecard
11
Basic Concepts of the Balanced
Scorecard
12
Basic Concepts of the Balanced
Scorecard
Only financial
measure among
core objectives
13
Basic Concepts of the Balanced
Scorecard
Customer value is the difference between
– Realization … what the customer receives
and
– Sacrifice … what the customer gives up
14
Basic Concepts of the Balanced
Scorecard
• Internal business process perspective
– Describes the internal processes needed to
provide value for customers and owners
• Process value chain consists of three
processes
– Innovation process
– Operations process
– Postsales process
15
Basic Concepts of the Balanced
Scorecard
• Responsiveness: The time it takes a
company to respond to a customer order
– Cycle time (manufacturing) is the length of
time it takes to produce a unit of output from
the time materials are received until the good
is delivered to finished goods inventory.
– Velocity is the number of units of output that
an be produced in a given period of time.
16
Basic Concepts of the Balanced
Scorecard
Conversion Cost Example
A company has the following data for one of its
manufacturing cells:
Theoretical velocity:
40 units per hour
Productive minutes available (per year):
1,200,000
Annual conversion costs:
$4,800,000
Actual velocity:
30 units per hour
17
Basic Concepts of the Balanced
Scorecard
18
Basic Concepts of the Balanced
Scorecard
19
Basic Concepts of the Balanced
Scorecard
20
Linking Measures to Strategy
21
Strategic Management
22
COST MANAGEMENT
Accounting & Control
Hansen▪Mowen▪Guan
End Chapter 13
COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license.
23
Accounting & Control
Hansen▪Mowen▪Guan
Chapter 13
The Balanced Scorecard:
Strategic-Based Control
COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license.
1
Study Objectives
1. Compare and contrast activity-based and
strategic-based responsibility accounting
systems.
2. Discuss the basic features of the
Balanced Scorecard.
3. Explain how the Balanced Scorecard
links measures to strategy.
4. Describe how an organization can
achieve strategic alignment.
2
Activity-Based versus StrategicBased Responsibility Accounting
• The activity-based system adds a process
perspective to the financial perspective of
the functional-based responsibility
accounting system.
• A strategy-based responsibility accounting
system translates the strategy of the
organization into operational objectives
and measures.
3
Activity-Based versus StrategicBased Responsibility Accounting
• The Balanced Scorecard is a strategicbased performance management system
that typically identifies objectives and
measures for four different perspectives.
– The financial perspective
– The customer perspective
– The process perspective
– The learning and growth perspective
4
Activity-Based versus StrategicBased Responsibility Accounting
5
Activity-Based versus StrategicBased Responsibility Accounting
6
Activity-Based versus StrategicBased Responsibility Accounting
7
Activity-Based versus StrategicBased Responsibility Accounting
8
Basic Concepts of the Balanced
Scorecard
Strategy:
• choosing the market and customer segments the
business unit intends to service
• identifying the critical internal and business processes
that the unit must excel at to deliver the value
propositions to customers in the targeted market
segments
• selecting the individual and organizational capabilities
required for the internal, customer, and financial
objectives.
9
Basic Concepts of the Balanced
Scorecard
Process value analysis
– is fundamental to activity-based responsibility
accounting
– focuses on accountability for activities rather than
costs
– emphasizes the maximization of systemwide
performance instead of individual performance.
– is concerned with:
• Driver analysis
• Activity analysis
• Performance measurement
10
Basic Concepts of the Balanced
Scorecard
11
Basic Concepts of the Balanced
Scorecard
12
Basic Concepts of the Balanced
Scorecard
Only financial
measure among
core objectives
13
Basic Concepts of the Balanced
Scorecard
Customer value is the difference between
– Realization … what the customer receives
and
– Sacrifice … what the customer gives up
14
Basic Concepts of the Balanced
Scorecard
• Internal business process perspective
– Describes the internal processes needed to
provide value for customers and owners
• Process value chain consists of three
processes
– Innovation process
– Operations process
– Postsales process
15
Basic Concepts of the Balanced
Scorecard
• Responsiveness: The time it takes a
company to respond to a customer order
– Cycle time (manufacturing) is the length of
time it takes to produce a unit of output from
the time materials are received until the good
is delivered to finished goods inventory.
– Velocity is the number of units of output that
an be produced in a given period of time.
16
Basic Concepts of the Balanced
Scorecard
Conversion Cost Example
A company has the following data for one of its
manufacturing cells:
Theoretical velocity:
40 units per hour
Productive minutes available (per year):
1,200,000
Annual conversion costs:
$4,800,000
Actual velocity:
30 units per hour
17
Basic Concepts of the Balanced
Scorecard
18
Basic Concepts of the Balanced
Scorecard
19
Basic Concepts of the Balanced
Scorecard
20
Linking Measures to Strategy
21
Strategic Management
22
COST MANAGEMENT
Accounting & Control
Hansen▪Mowen▪Guan
End Chapter 13
COPYRIGHT © 2009 South-Western Publishing, a division of Cengage Learning.
Cengage Learning and South-Western are trademarks used herein under license.
23