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VCM-MODULE-2

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3 views

VCM-MODULE-2

sdasdasd

Uploaded by

Ivan Albert Aguitas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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MODULE 2: MANAGEMENT

ACCOUNTING CONCEPTS AND


TECHNIQUES FOR
PERFORMANCE
MEASUREMENT
RESPONSIBILITY
ACCOUNTING
a system of accounting wherein costs and revenues are
accumulated and reported by levels of responsibility or by
responsibility centers within the organization.
Responsibility center (also called
accountability center)

– a clearly identified part or segment of an organization


that is accountable for a specified
function or set of activities.
– any part of the organization that a particular manager is
responsible for
TYPES OF RESPONSIBILITY CENTERS:

a. Cost Center (or expense center) – a segment of an organization in


which managers are held responsible for the costs or expenses incurred
in the segment.
b. Revenue Center – where management is responsible primarily for
revenues.
c. Profit Center – a segment of the organization in which the manager is
held responsible for both revenues and costs.
d. Investment Center – a segment of the organization where the
manager controls revenues, costs, and investments. The center’s
performance is measured in terms of the use of the assets as well as the
revenues earned and the costs incurred.
CLASSIFICATIONS OF COSTS IN
RESPONSIBILITY ACCOUNTING

1. By responsibility center
2. By cost type, as to controllability
3. By specific cost items or cost elements
within each classification in (1) and (2).
RESPONSIBILITY vs.
ACCOUNTABILITY

Responsibility has two facets, (1) the obligation


to secure results, and (2) the obligation to report
back the results achieved to higher authority.
Accountability denotes the obligation to report
results achieved to higher authority.
THE CONCEPT OF DECENTRALIZATION
Decentralization refers to the separation or division of
the organization into more manageable units wherein
each unit is managed by an individual who is given
decision authority and held accountable for his
decisions.

• Goal congruence – all members of an organization have


incentives to perform for a common interest.
• Sub-optimization – occurs when one segment of a
company takes action that is in its own best interests,
but is detrimental to the firm as a whole.
MEASURING THE
PERFORMANCE OF
INVESTMENT CENTERS
Return on investment (ROI) is the most
common measure of performance for
investment centers.
Residual income (RI) - the difference between
operating income and the minimum peso return
required on a company’s operating assets. The
equation for RI can be
expressed as follows:
ECONOMIC VALUE ADDED (EVA) – a more specific version of
residual income. It represents the segment’s true economic
profit because it measures the benefit obtained by using
resources in a particular way.
THE BALANCED SCORECARD: STRATEGIC-BASED
CONTROL

The Balanced Scorecard is a strategic management system that


defines a strategic-based responsibility accounting system.

Strategy is defined as choosing the market and customer


segments the business unit intends to serve, 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.
The balanced scorecard as a motivation and feedback mechanism. The performance
measures on the balanced scorecard provide motivation and feedback for
improving.

The Financial Perspective


The financial perspective establishes the long- and short-term financial
performance objectives. The financial perspective is concerned with the global
financial consequences of the other three perspectives. Thus, the objectives and
measures of the other perspectives must be linked to the financial objectives. The
financial perspective has three strategic themes: revenue growth, cost reduction,
and asset utilization.

Customer Perspective
The customer perspective is the source of the revenue component for the financial
objectives. This perspective defines and selects the customer and market segments
in which the company chooses to compete.
Process Perspective
To provide the framework needed for this perspective, a process value
chain is defined. The process value chain is made up of three processes:
the innovation process, the operations process, and the post sales
process.

Cycle time is the time required to produce one unit of product.


Velocity is the number of units that can be produced in a given period
of time (e.g.,units per hour).

Learning/Innovation and Growth Perspective


The learning and growth perspective is the source of the capabilities
that enable the accomplishment of the other three perspectives’
objectives.
Control activities are performed by an organization to prevent or detect poor
quality. Control costs are the costs of performing control activities. There are two
broad categories of control costs: prevention costs and appraisal costs. Prevention
costs are incurred to prevent poor quality in the products or services being
produced. Appraisal costs are incurred to determine whether products and services
are conforming to their requirements or customer needs.

Failure activities are performed by an organization or its customers in response to


poor quality. Failure costs are the costs incurred by an organization because failure
activities are performed. There are two broad categories of failure costs: internal
failure costs and external failure costs. Internal failure costs are incurred because
products and services do not conform to specifications or customer needs and the
nonconformance is detected prior to being delivered to outside parties. External
failure costs are incurred because products or services fail to conform to
requirements or satisfy customer needs and the nonconformance is detected after
being delivered to outside parties.
Borcelle University

Thank
You
Presented by Juliana Silva

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