Kế toán, kiểm toán - Chapter 4: Strategic management of costs, quality, and time

1Strategic Management of Costs, Quality, and TimeCHAPTER 4Managerial Accounting 11E Maher/Stickney/WeilPowerPoint Presentation by LuAnn BeanProfessor of AccountingFlorida Institute of Technology© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2CHAPTER GOALThis chapter illustrates the significance of quality. Prizes recognize improvements in quality.Japan: Deming PrizeUS: Baldrige Quality AwardInternational standards measure qualityISO 9000: standards for quality managementISO 14000: standards for communicating financial impact of environmental issues☼☼3TRADITIONAL VIEWThe traditional view of quality assumes that improving quality always requires increasing costs.Firms can reduce total costs byProducing lower-quality goodsTolerating some level of defective goodsLO 14QUALITY-BASED VIEWThe quality-based view holds that firms should always attempt to improve quality. Attempts to improve quality will succeed without limitFirms Should not wait for inspections of finished products to reveal defectsMust establish quality goals and proceduresAim for zero defectsHigh quality pays for itselfLO 15TRADITIONAL VS. QUALITY-BASED VIEWLO 1Traditional ViewQuality-based ViewQuality increases costsQuality decreases costsGoods require inspectionDefect-free goods require no inspectionWorkers cause most defectsSystem causes most defectsRequire standards, quotas, goalsEliminate standards, quotas, goalsBuy from lowest cost supplierBuy on basis of lowest total costFocus on short-run profitsFocus on long-run profitsEXHIBIT 4.16QUALITY: Customer ViewThree success factors to meet customer requirements ServiceAll the products features, tangible and intangibleQuality Firm’s ability to deliver its service commitmentsCost Customers will buy product that provides them with preferred mix of quality, service, priceLO 27VALUE CHAINLO 2Research and DevelopmentDesignProductionMarketingDistributionCustomer ServicePrevent quality problems hereIdentify quality problems hereDeal with unhappy customers hereEXHIBIT 4.38COSTS OF QUALITYPrevention Procurement inspectionProcessing controlDesignQuality trainingMachine inspectionAppraisalEnd-process samplingField testingLO 39COSTS OF FAILING TO IMPROVE QUALITYInternal failure costs: detection before delivery ScrapReworkReinspection/retestingExternal failure costs: detection after deliveryWarranty repairsProduct liabilityMarketing costsLost salesLO 310EXAMPLESteve’s Sushi makes sushi for delivery only. Steve has concerns about quality and so he considers various ways he can ensure/improve quality. He throws away any prepared sushi that does not meet strict quality standards. A quality report follows.LO 4Continued11LO 4EXHIBIT 4.4COST OF QUALITY REPORT: Steve’s SushiPrevention Costs Quality training$ 5,800 Materials inspection10,400$ 16,2001.62%Appraisal Costs End-of-process sampling10,0001.00Internal Failure Costs Scrap14,4001.44External Failure Costs Customer complaints3,0000.30 Cost of lost business17,0001.70Total costs of quality$ 60,0006.06%Cost CategoriesCosts of Quality% of SalesWhat actions can Steve forego if he can’t do everything? 12EXHIBIT 4.5LO 4Generally there is a long-run decline in total costs of quality 13TOOLS Tools to identify quality problems includeControl chartsCause-and-effect analysisPareto chartsProduce signals about quality controlLO 514SIGNAL: DefinitionIs information provided to a decision maker.Warning signal indicates something is wrongDiagnostic signal suggests cause of problem and possible solutionsLO 515EXHIBIT 4.6LO 5Control charts distinguish between random variations and variations to investigate. 16CAUSE and EFFECT: DefinitionIs analysis that first defines the effect and then identifies the cause.LO 517EXHIBIT 4.7LO 5Pareto charts illustrate graphically the problems or defects. 18JUST-IN-TIME: DefinitionIs a philosophy that seeks to purchase/produce goods and/or services just when the company needs them.LO 619JITFactors for success in JITTotal qualitySmooth production flowPurchasing quality materialsWell-trained, flexible workforceShort customer-response timesBacklog of ordersLO 620IMPORTANCE OF TIMESuccess in competitive markets demands shorter new-product development time and more rapid response to customers. Customer response time is: (1) new-product development time and (2) operational measures of time.LO 721NEW-PRODUCT DEVELOPMENT TIME: DefinitionRefers to the period between a firm’s first consideration of a product and its delivery to the customer.LO 722BREAK-EVEN TIME EQUATIONLO 7Break-even time = (Investment ÷ Annual Discounted Cash Flow)+Time period from Project approval until Sales begin23LIMITATIONS: Break-even TimeBreak-even timeIgnores cash flows after break-even pointDoes not consider strategic, nonfinancial reasons for new productVaries from one business to next, depending on product life cycles and investment requirements.LO 724OPERATIONAL MEASURESIndicateSpeedReliability Customer response timeDelivery cycle timeTime from order to deliveryOn-time performanceDelivered as scheduledLO 725BALANCED SCORECARD: DefinitionReports an integrated group of financial and nonfinancial performance measures based on vision and strategy.LO 826EXHIBIT 4.9LO 8Balanced scorecard can maximize profits and improve performance if used effectively. 27TOTAL QUALITY MANAGEMENT (TQM)TQM requires five changes to traditional managerial accounting systemsSystem includes information to help solve problemsLine employees collect information for feedbackInformation should be available quicklyInformation should be more detailedBase rewards on quality, customer satisfactionLO 928End of CHAPTER 4