CIMA P2
Advanced Management Accounting
For exams in 2016
江西财经大学会计学院 吉伟莉
[email protected]
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Chapter 1
Analysing and
managing costs
—Activity based costing (ABC)
—Activity based management (ABM)
—Customer profitability analysis (CPA)
—Activity based profitability analysis
—TQM
—Other important techniques
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Chapter Overview
Analysing and managing costs
Total quality management
techniques
Activity based costing
TQM
Activity based
management
Just in time
Continuous
improvement
Kaizen
costing
Process re-engineering
Theory of
constraints
Cost of
quality
reporting
Total Quality Management (TQM) 1
Changing customer requirements
— Successful organisations make customer satisfaction
their priority
Key success factors
— Cost efficiency
— Quality
— Time
— Innovation
Total Quality Management (TQM) 2
Total quality management (TQM)
— The process of focusing on quality in the management
of all resources and relationships within the
organisation
Two basic principles of TQM
— Getting things right first time
On the basis that the cost of correcting mistakes is
greater than the cost of preventing them
— Continuous improvement
The belief that it is always possible to improve, no
matter how high quality may be already
Total Quality Management (TQM) 3
Nine key elements of TQM
— The only thing that matters is customer.
— All-pervasive customer-supplier relationship
— Prevent the cause of the defect in the first place
— All personnel’s responsibility
— Zero defects
— Eliminated waste
— All departments attempt to get things right first time
— Quality certification programmes
— Emphasis on the cost of poor quality
Total Quality Management (TQM) 3
Measuring and controlling quality
— Quality assurance (supplier guarantees quality)
— Inspection of output (at various key stages)
— Monitoring customer reaction
Total Quality Management (TQM) 4
Employees and quality
— Workers are empowered and encouraged to
become multiskilled
— Workers are encouraged to take responsibility for
their work
Internal customers and suppliers
— To satisfy external customers’ expectations, the
expectations of internal customers must be satisfied
— Internal customers are therefore linked in quality
chains
Total Quality Management (TQM) 5
Cost of quality
— The difference between the actual cost of producing,
selling and supporting products/services
and
— The equivalent cost if there were no failures during
production/usage
Total Quality Management (TQM) 6
Total Quality Management (TQM) 6
Total Quality Management (TQM) 6
Example: Categorise each cost
I
E
I
P
P
A
P
E
CI and Kaizen costing 1
Continuous improvement (CI)
— The use of an organisation’s human resources to
produce a constant stream of improvements in all
aspects of customer value
— This includes quality, functional design and timely
delivery, while lowering cost at the same time
CI and Kaizen costing 2
Basic concepts of CI
— Quality - defined by the needs of both internal and
external customers
— Process improvements - through technology and
innovative ideas
— Team work - in the form of quality circles and group
problem–solving activities
CI and Kaizen costing 3
Essential factors for CI
— Commitment from senior management
— Opportunity for all employees to contribute
— Information about the organisation’s environment
— Employees’ awareness of their role
— Management of the performance and contribution of
employees
— Good communications
— Recognised quality management systems and standards
— Measurement and evaluation of progress against key
performance indicators and benchmarks
CI and Kaizen costing 4
— Kaizen costing process
CI and Kaizen costing 5
— Standard costing v Kaizen costing
Just-in-time 1
Just-in-time 2
TOC and Throughput accounting 1
TOC and Throughput accounting 2
TOC and Throughput accounting 3
TOC and Throughput accounting 4
The following statements have been made about throughput
accounting.
(1)A factor other than a production resource may be a binding
constraint in throughput accounting.
(2)Production must be limited to the capacity of the bottleneck
resource, but this resource should be utilised fully.
(3)Direct labour should always be treated as a factory cost when
measuring throughput.
(4)If machine time is the bottleneck resource, there is no value in
taking measures to improve direct labour efficiency.
Which of the above statements is/are true?
Answer: all
TOC and Throughput accounting 5
Product X is made in a production process where machine
time is a bottleneck resource. One unit of Product X
requires 0.3 machine hours .The costs and selling price of
Product X are as follows:
$
Materials
8
Labour(0.4 hours) 4
Other factory costs 2
What is the throughput
14
accounting ratio for Product X?
Sales price
18
Profit
4
Answer: 1.67
TOC and Throughput accounting 6
Business processes re-engineering (BPR) 1
— The fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements
— These improvements are seen in critical contemporary
measures of performance such as cost, quality, service
and speed
— A process is a collection of activities that takes one or
more kinds of input and creates an output
Business processes re-engineering (BPR) 2
Business processes re-engineering (BPR) 3
Principles of BPR which influence systems
development continued
— Geographically-dispersed resources should be treated
as if they were centralised
— Parallel activities should be linked, not integrated
— There is no distinction between workers and managers
— Information should be captured once, at source
End of Chapter 1
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