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131HANSEN & MOWENCost Management

ACCOUNTING AND CONTROL

132 The Balanced Scorecard: Strategic-Based ControlCHAPTER13133The 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 Strategic-Based Responsibility AccountingOBJECTIVE1134The Balanced Scorecard is a strategic-based performance management system that typically identifies objectives and measures for four different perspectives.The financial perspectiveThe customer perspectiveThe process perspectiveThe learning and growth perspectiveActivity-Based versus Strategic-Based Responsibility AccountingOBJECTIVE1135Activity-Based versus Strategic-Based Responsibility AccountingOBJECTIVE1Responsibility Assignments Compared

136Activity-Based versus Strategic-Based Responsibility AccountingOBJECTIVE1Performance Measures Compared

137Activity-Based versus Strategic-Based Responsibility AccountingOBJECTIVE1Performance Evaluation Compared: ABC versus Strategic-Based

138Activity-Based versus Strategic-Based Responsibility AccountingOBJECTIVE1Rewards Compared

139Strategy is 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, and selecting the individual and organizational capabilities required for the internal, customer, and financial objectives.Basic Concepts of the Balanced ScorecardOBJECTIVE21310Process value analysis is fundamental to activity-based responsibility accounting, focuses on accountability for activities rather than costs, and emphasizes the maximization of systemwide performance instead of individual performance.Process value analysis is concerned with:(1) Driver analysis(2) Activity analysis(3) Performance measurementBasic Concepts of the Balanced ScorecardOBJECTIVE21311

Strategy Translation ProcessBasic Concepts of the Balanced ScorecardOBJECTIVE2

1312Summary of Objectives and Measures: Financial PerspectiveBasic Concepts of the Balanced ScorecardOBJECTIVE2

1313Summary of Objectives and Measures: Customer PerspectiveBasic Concepts of the Balanced ScorecardOBJECTIVE2

Only financial measure among core objectives1314Customer value is the difference between realization and sacrifice, where realization is what the customer receives and sacrifice is what is given up.Basic Concepts of the Balanced ScorecardOBJECTIVE21315The time it takes a company to respond to a customer order is referred to as responsiveness.Cycle time and velocity are two operation measures of responsiveness.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.Basic Concepts of the Balanced ScorecardOBJECTIVE21316A company has the following data for one of its manufacturing cells:Theoretical velocity: 40 units per hourProductive minutes available (per year): 1,200,000Annual conversion costs: $4,800,000Actual velocity: 30 units per hourBasic Concepts of the Balanced ScorecardOBJECTIVE2Conversion Cost Example1317Conversion Cost ComputationsBasic Concepts of the Balanced ScorecardOBJECTIVE2

1318Summary of Objectives and Measures: Process PerspectiveBasic Concepts of the Balanced ScorecardOBJECTIVE2

1319Summary of Objectives and Measures: Learning and Growth PerspectiveBasic Concepts of the Balanced ScorecardOBJECTIVE2

1320OBJECTIVE3Linking Measures to StrategyStrategy Map: Testable Strategy Illustrated

1321Strategic AlignmentOBJECTIVE4ABM Implementation Model

1322 End of Chapter 13