Management accounting chapter 2 questions 6th edition

Financial and Management Accounting: An Introduction is aimed at first-level undergraduates on business studies degrees taking introductory financial accounting and management accounting classes; first-level specialist accounting undergraduate students; introductory core accounting for MBA and postgraduate specialist Masters students, focusing on analysis through the accounting equation and a questioning approach to problem solving; and professional courses where accounting is introduced for the first time.

Management accounting chapter 2 questions 6th edition

However, financial measures tend to be lagging indicators of the strategy. Firms monitor nonfinancial measures to understand whether they are building or destroying their capabilities—with customers, processes, employees, and systems—for future growth and profitability. Key nonfinancial measures are leading indicators of financial performance, in the sense that improvements in these indicators should lead to better financial performance in the future, while decreases in the nonfinancial indicators such as customer satisfaction and loyalty, process quality, and employee motivation generally predict decreased future financial performance.

The growing importance of intangible assets complements the growing interest in the Balanced Scorecard because the Balanced Scorecard helps organizations measure, and therefore, manage the performance of their intangible, knowledge-based, assets.

With the Balanced Scorecard measurement system, companies continue to track financial results but they also monitor, with nonfinancial measures, whether they are building or destroying their capabilities—with customers, processes, employees, and systems—and how the company is managing intangible assets to create future growth and profitability.

The Balanced Scorecard provides a framework for describing how intangible and tangible assets such as property, plant, equipment, and inventory will be combined to create value for the organization.

First, it creates a competitive advantage by positioning the company in its external environment where its internal resources and capabilities deliver something to its customers better than or different from its competitors.

That is, a strategy map provides a comprehensive visual representation of the linkages among objectives in the four perspectives of the Balanced Scorecard. This example shows how an entire chain of cause-and-effect relationships can be described to interconnect objectives and their measures in each of the four perspectives.

Companies generally start their Balanced Scorecard project by building a strategy map that contains the word statements of their strategic objectives in the four perspectives and the linkages among them. The process of building a Balanced Scorecard should start with word statements, called objectives that describe what the company is attempting to accomplish.

Objectives concisely express actions and may express the means and the desired results.

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An example of an objective for the financial perspective might be to increase revenues through expanded sales to existing customers. Measures describe how success in achieving an objective will be determined. A measure should be specific in order to provide clear focus for the objective.

An example of a measure for the objective above might be to measure the percent increase in sales to existing customers each month. Targets establish the level of performance or rate of improvement required for a given measure.

For example, a target could be a two percent increase in sales each month to existing customers. Then the measures customer satisfaction, customer retention, customer profitability and market share must be applied to the customer segments in which they choose to compete.

The low-total-cost value proposition is used by companies such as Target http: The objectives of this value proposition emphasize attractive prices relative to competitorsexcellent and consistent quality for the product attributes offered, good selection, short lead times, and ease of purchase.

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This value proposition emphasizes particular features and functionalities of the products that leading-edge customers place value in and are willing to pay more to receive. Specific measures include speed, accuracy, size, power consumption, design or other performance characteristics that exceed the performance of competing products and that are valued by important customer segments.

It is important to be first-to-market when using the product innovation and leadership value proposition. Certain objectives that are stressed include completeness of the solution, exceptional service both before and after the sale, and the quality of the relationship between the company and its customers.

Furthermore, the Balanced Scorecard includes objectives and measures to evaluate performance on these critical processes. To illustrate, airlines will likely track on-time arrivals and departures at each airport because these measures are important to customers.

In this example, the process perspective should contain objectives that are controllable by employees, but perhaps not completely, since an individual employee or department may control only one component of a process. Employees can influence on-time departure but weather conditions might disrupt an otherwise orderly process.

To achieve desired ground turnaround time, multiple processes must operate efficiently: Thus, the Balanced Scorecard may include a common metric for several different employee groups, none of which can completely determine performance on the metric.

Moreover, performance improvement may involve teamwork across processes. Some typical objectives for operations management processes are 1 achieve superior supplier capability, 2 improve the cost, quality and cycle times of operating processes, 3 improve asset utilization and 4 deliver goods and services responsively to customers.

Three important objectives for customer management processes are 1 Acquire new customers, 2 Satisfy and retain existing customers, and 3 Generate growth with customers. Also, successful innovation drives customer acquisition, loyalty, and growth, which lead to enhanced operating margins.

They are 1 Developing innovative products and services, and 2 Achieving excellence in research and development processes. Companies manage and report their regulatory and social performance along a number of critical dimensions.Managerial Accounting Chapter 2.

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Management accounting chapter 2 questions 6th edition

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