To: ACC503 Students



Emerging Issues and State-of-the-Art Practices in Managerial Accounting:

1. Japanese Management Accounting

The success of Japanese companies as fierce competitors in international markets has forced U.S. managers and accountants to examine Japanese management accounting techniques. Some have argued that management accounting techniques are Japan's secret weapon in an economic war.

Required:

A. Briefly define and identify

.1 Target Costing

.2 Hoshin Planning

.3 Kaizen Costing

B. Compare and contrast target costing with traditional standard costing practices. Be sure to discuss how standards are set and how they seek to control or reduce costs.

C. Some U.S. managers and accountants have argued that Japanese managerial accounting techniques such as target costing won't work in U.S. organizations. Argue Pro or Con on this assertion. Discuss obstacles to implementing Target Costing and provide examples of successes or failures to support your position.

2. Activity Based Management(ABM) and Strategic Cost Management(SCM):

Required:

A. Briefly define and identify:

.1 Activity Based Costing

.2 Strategic Cost Management

.3 Activity Based Management

B. Compare and contrast ABM and SCM using ABC with traditional management practices using traditional managerial accounting information.

C. Evaluate the strengths and weaknesses of ABM/SCM as a management tool for the next decade.

3. Activity Based Budgeting

With the decline in popularity of Zero Based Budgeting, many managers and accountants have expressed concern about the adequacy of traditional departmental operating budgets as a tool for planning and control(e.g. "Why Budgets are Bad for Business..." and have proposed new styles of budgeting, new practices, and alternative uses of budget information. Some innovative organizations have created new supplemental budgets, changed the budget paradigm, and attempted to change the incentive structures to promote better planning and control. Budgeting experts have called for the development of multivariate budgets and have begun to experiment with new forms of budgeting based on recently installed activity based costing systems.

Required:

A. Briefly identify and discuss three major weaknesses or dysfunctional behavior problems associated with traditional budgeting practices.

B. Define Activity Based Budgeting and explain how activity related budgeting practices may alleviate or avoid traditional budgeting problems.

C. Some budgeting experts have argued that most budgeting problems have their origin in attempts to use the same budget for both planning and control purposes. Evaluate this assertion (Pros/cons) and describe a budgeting system which would focus on planning, communication and coordination objectives as separate issues from the performance evaluation and motivation objectives.

4. Accounting and Quality Management

Some quality experts have argued that accounting has been a major obstacle to improving quality while other participants in the quality movement have argued that accounting techniques can be designed to support or promote quality.

Required:

A. Compare and contrast major features or tenets of traditional management with the Quality Movement(e.g. TQM, CQI)approach.

B. Briefly discuss three ways traditional accounting has frustrated or impeded attempts to improve quality.

C. The Cost of Quality (COQ) report has been widely advocated as an example of using accounting information to promote quality improvement. Briefly discuss the

COQ report, explain how it should be used or interpreted, and evaluate COQ as a quality tool.

D. Discuss and briefly explain accounting's (potential) role or contribution in quality management.

In other words, explain how accountants and financial managers can contribute to the achievement of corporate for improving quality.

5. Accounting support for Re-Engineering

In 1990's, numerous CEOs have committed their corporations to major re-engineering programs as their best (perhaps only) hope for withstanding intense global competition. Some of these efforts have been considered successful, while others have been painful experiences for all participants. Recent prescriptions for making re-engineering successful have focused on the need to re-engineer the management process.

Required:

A. Briefly define re-engineering. Explain how re-engineering works and discuss the major distinguishing features of the re-engineering movement. Be sure to compare and contrast re-engineering with the continuous improvement philosophies such as TQM and empowerment.

B. Accounting may support re-engineering process (and the re-engineering of the management process) in at least three ways. For each of the following approaches, discuss the role of accounting in the re-engineering of management and the managerial process. Be sure to discuss and explain the implications of each of the following suggestions for supporting or contributing to re-engineering process and the management process.

.1 ABC information helps refine the value chain and promotes elimination of non value added (NVA) activities so as to allow managers to better reduce and control costs.

.2 ABC information supports managers in their attempts to improve outsourcing decisions. ABC helps managers establish a transfer pricing system which promotes a better understanding of the value chain and creates incentives for cost control.

.3 Accountants participate in the development of a strategic control system or performance measurement systems (e.g. balanced score card approach) which improves strategic focus and promotes achievement of strategic objectives.

6. Activity Based Costing Software Choices

Selection of software is one of the most important decisions made by a team implementing Activity Based Costing (ABC). The software chosen may influence the success of the project and usefulness of the system. The choice of an satisfactory ( or optimal) ABC software system requires determination of the capabilities and features needed or desired by the organization, giving appropriate consideration to the technical, organization, and financial constraints.

Required:

A. Briefly outline the advantages and disadvantages of the following software application approaches and explain when each might be most appropriate.

.1 Spreadsheet Application

.2 "Off the shelf package" ABC Software Application

.3 Custom Programming development project

B. As a recent ASU graduate hired by XYZ Company, you have been appointed to an ABC implementation team and charged with the responsibility of developing specifications to guide the purchase of an ABC software package from one of the many software vendors in this market. Identify and briefly discuss specifications and requirements for an ABC software application. In other words, you should identify and discuss characteristics or attributes of a good ABC software system for the following situation.

XYZ Company, is a medium sized manufacturer of home improvement products. XYZ has significant product and customer diversity and reports very high indirect costs, so ABC seems to be an important tool for improving management in this organization and achieving corporate objectives. XYZ Company produces a full line of over 100 products using several different technologies, operates four regional warehouses. The sales staff sells to major customers directly, but to others through jobbers, and manufactures agents on a commission basis. The company has 5000 employees in two plants: the Eastern Plant was built in 1957 uses a traditional functional plant layout, has a union and uses traditional production techniques, while the Western Plant which has implemented TQM, JIT, and FMS techniques was completed three years ago. The corporate headquarters staff includes a group of ten accountants who are assigned the role of decision support for both plants and sales operations. This teamperforms as internal consultants for the entire organization. The cost accounting group is generally knowledgeable about traditional cost accounting systems, but only two accountants have expressed any interest in ABC. XYZ also has a computer information systems (CIS)team composed team of ten computer systems analyst/programming professionals. This CIS team has provided custom programming solutions but has struggled to meet the computer support needs of management. The CIS Team leader indicates that it will be six months before her team could begin working on an ABC implementation project.

7. ABC Implementation

Recent surveys suggest that many if not most (50-60%) of large U.S. firms have plans to implement an Activity Based Costing System during the next five years. Observing that early attempts at implementing ABC have produced a both successes and disappointments, ABC advocates argue that the failures are failures of implementation, which can be avoided by a well designed implementation plan based on well established principles of change management.

Required:

A. Identify and discuss five common pitfalls or problems encountered in implementing ABC systems, and explain how you will deal with each of them.

B. Outline and briefly discuss the key features of a implementation plan designed to gain acceptance and use of an ABC system. In other words, describe good practice in implementing an ABC system.

C. Consultants are frequently employed to assist with the design

and implementation of an ABC system. Identify and discuss good practices in the use of consultants in an ABC project. What would you have consultants do? What pitfalls should be avoided?

8. Activity Based Costing for the Service Industries

Accounting systems in service organizations have typically been simple systems which attempted to report revenues and costs by functional department or operating unit.

Required:

A. Describe and discuss accounting systems in a typical service industry. Be sure to discuss factors and influences which have caused traditional service organization not to invest in sophisticated cost accounting information systems.

B. Activity based costing techniques which have been developed in manufacturing environments, have recently been applied in service industry settings with good results. Describe three service industry situations which might provide attractive opportunities for ABC implementation projects. Be sure to explain the benefits which may result from ABC information in these situations.

C. Discuss three special problems(e.g. problems not typically encountered in implementing ABC in a manufacturing environment) which may be encountered in attempting to implement an ABC system in a service industry setting and comment on possible approaches for overcoming these obstacles.

9. Activity Based Costing and Support for Marketing

Required:

A. Briefly discuss and explain why marketing costs have received so little attention from cost accounting and why progressive organizations are today rushing to develop cost information systems to support marketing decisions.

B. Describe a customer profitability analysis system and explain under what conditions such as system might provide sufficient benefits justify the costs.

C. Customer profitability analysis has frequently determined that 20% of the firms customers produce 80% of the profits. Assuming this is the case, describe the approach would you recommend for dealing with the 80% of the customers which are the least profitable.

D. Sales Variances have been analyzed using flexible budgets to isolate the profit impact of budget to actual changes in marketing variables such as volume, price, market size, market share, sales mix, as well as the control of marketing expenses. Describe the construction of a flexible budget to isolate a market size and market share variances. What type of variance analysis extensions would be appropriate for a firm that has developed a customer profitability analysis system.

10. Accounting for the Advanced Manufacturing Environment - High technology manufacturing companies have developed a variety of lean production methods (e.g. FMS, CIM, JIT, TOC) which offer great promise for improving competitiveness, improving quality and responsiveness, and improving productivity. Traditional cost accounting systems often fail to describe the new economic reality of these new production processes or in other ways support these lean production processes.

Required:

A. Discuss potential conflicts between traditional accounting methods and a Just-in-time (JIT) production method. Describe a backflush or other cost system that is suitable for JIT.

B. Reducing cycle time is a major objective in many lean production systems. Describe and briefly discuss accounting approaches and techniques which may support the objective of reducing cycle time.

C. Flexible Manufacturing Systems(FMS) have become a favorite approach to lean manufacturing. Describe an FMS approach to lean manufacturing and discuss the features that an accounting system for this FMS environment should have.

11. Ethics of Managing Earnings

Assume you have been hired as the Special Assistant to H. Robert Crosby, President of Toarx Drug, a large pharmaceutical firm listed on the New York Stock Exchange. The company has reported increasing earnings for the last five years and has been able to grow rapidly by acquiring smaller competitors in an exchange for stock. Toarx is decentralized on a product line basis, with production operations in 12 states and three foreign countries. Toarx has an international sales and distribution network which account for 30% or its sales and 50% of its reported profits. There is a well developed budgeting system and an incentive system for product managers based on their segment net income and budget.

Your boss is concerned about the quality of ethical decision being made in the organization. Specifically, he believes that managers are making choices to increase short-run net income, but which may jeopardize the reputation of the firm and it chances for long-run success( access to capital markets). He has asked you to generate as many ideas as possible that might help enhance the ethical climate in the organization and / or improve the quality of ethical decisions.

Required:

A. Define and identify the following:

.1 Organizational ethical climate

.2 Ethical decision making

B. Why might managers want to report higher short-run earnings? What consequences might result if Toarx managers actually are increasing short-run earnings at the expense of long-run earnings. What are the consequences if Toarx develops a reputations for “low quality” earnings. Who is responsible for preventing such “problematic” behavior?

C. Briefly describe practices of procedures which may help improve the ethical climate and the quality of ethical decision making at Toarx.

Open Books Management

Progressive managers have recently attempted to involve employees in the decision making process. In these firms, there is an a belief that employees will only be able to “do the right thing” and make good decisions for the organization if they understand the financial reporting system, have access to current information, and are well informed about the current objectives and strategies of the organization. This open philosophy is in contrast with many traditional organizations where access to financial information was strictly limited based on a “need to know” principle.

Required:

A. Identify and briefly discuss three the strengths and weaknesses of the Open Books Management Approach.

B. Briefly discuss key factors in making the Open Books Management Approach successful.

C. Describe a plan for successful implementation of the Open Books Approach.

Comment on the implications of the Open Books Approach for accountants and the accounting function.

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