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 Study Objectives Compare and contrast activity-based and strategic-based responsibility accounting systems Discuss the basic features of the Balanced Scorecard Explain how the Balanced Scorecard links measures to strategy Describe how an organization can achieve strategic alignment 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 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 Activity-Based versus StrategicBased Responsibility Accounting Activity-Based versus StrategicBased Responsibility Accounting Activity-Based versus StrategicBased Responsibility Accounting Activity-Based versus StrategicBased Responsibility Accounting 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 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 ... 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... objectives and measures Activity-Based versus StrategicBased Responsibility Accounting • The Balanced Scorecard is a strategicbased performance management system that typically identifies objectives and. ..Study Objectives Compare and contrast activity-based and strategic-based responsibility accounting systems Discuss the basic features of the Balanced Scorecard