Acc 213 W6 7

UNIVERSITY OF MINDANAO
College of Accounting Education
Program: BSA, BSIA, BSMA, BSAIS
Physically Distanced but Academically Engaged
Self-Instructional Manual (SIM) for

Self-Directed Learning (SDL)
Course/Subject: ACC 213 – Strategic Cost Management
Name of Teacher: ____________________
THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT

FOR REPRODUCTION AND DISTRIBUTION OUTSIDE OF ITS
INTENDED USE. THIS IS INTENDED ONLY FOR THE USE OF
THE STUDENTS WHO ARE OFFICIALLY ENROLLED IN THE
COURSE/SUBJECT.
EXPECT REVISIONS OF THE MANUAL.
COLLEGE OF ACCOUNTING EDUCATION
3F Facundo Hall, Business and Engineering Building
Matina Campus, Davao City
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TABLE OF CONTENTS
Page No.
Course Outline 3
Course Outline Policy 3
Course Information 7
Big Picture Weeks 6-7: Unit Learning Outcomes 8

Big Picture in Focus: Unit Learning Outcome A: 8
Metalanguage 8
Essential Knowledge 9
Self-Help 12
Let’s Check 13
Let’s Analyze 14
In A Nutshell 16
QA List 17
Keywords Index 17
Big Picture in Focus: Unit Learning Outcome B 18
Metalanguage 18
Self-Help 23
Let’s Check 24
Let’s Analyze 25
In A Nutshell 26
QA List 27
Keywords Index 27
Big Picture in Focus: Unit Learning Outcome C 28
Metalanguage 28
Self-Help 32
Let’s Check 32
Let’s Analyze 33
In A Nutshell 34
QA List 35
Keywords Index 35
Course Schedule Weeks 6-7 36
Online Code of Conduct 37
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Course Outline: MAS 1 – Management Accounting, Part 1
Course Coordinator: Myra T. Miraflores

Email: myra_miraflores@umindanao.edu.ph
Student Consultation: By appointment
Mobile: 0917-8135633
Phone: (082) 300-5456 loc. 137
Effectivity Date: May 25, 2020
Mode of Delivery: Blended (On-Line with face to face or virtual sessions)
Time Frame: 54 Hours
Student Workload: Expected Self-Directed Learning
Pre-requisite: ACCTG 10a – Cost Accounting and Cost
Management, Part 2
Credit: 3
Attendance Requirements: A minimum of 95% attendance is required at all
scheduled Virtual or face to face sessions.
Course Outline Policy
Areas of Concern Details

Contact and Non-contact This 3-unit course self-instructional manual is designed for blended
Hours learning mode of instructional delivery with scheduled face to face
or virtual sessions. The expected number of hours will be 54
including the face to face or virtual sessions. The face to face
sessions shall include the summative assessment tasks (exams)
since this course is crucial in the Certified Public Accountant
Licensure Examination (CPALE).
Assessment Task Submission of assessment tasks shall be on 3rd, 5th, 7th and 9th week
Submission of the term. The assessment paper shall be attached with a cover
page indicating the title of the assessment task (if the task is
performance), the name of the course coordinator, date of
submission and name of the student. The document should be
emailed to the course coordinator. It is also expected that you
already paid your tuition and other fees before the submission of the
assessment task.
If the assessment task is done in real time through the features in

the Blackboard Learning Management System, the schedule shall
be arranged ahead of time by the course coordinator.
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Since this course is included in the CPALE, you will be required to

take the Multiple Choice Question exam inside the University. This
should be scheduled ahead of time by your course coordinator.
This is non-negotiable for all licensure-based programs.
Turnitin To ensure honesty and authenticity, all assessment tasks are

Submission required to be submitted through Turnitin with a maximum similarity
(if necessary) index of 30% allowed. This means that if your paper goes beyond
30%, the students will either opt to redo her/his paper or explain in
writing addressed to the course coordinator the reasons for the
similarity. In addition, if the paper has reached more than 30%
similarity index, the student may be called for a disciplinary action
in accordance with the University’s OPM on Intellectual and
Academic Honesty.
Please note that academic dishonesty such as cheating and

commissioning other students or people to complete the task for you
have severe punishments (reprimand, warning, expulsion).
Penalties for Late The score for an assessment item submitted after the designated
Assignments/Assessments time on the due date, without an approved extension of time, will be
reduced by 5% of the possible maximum score for that assessment
item for each day or part day that the assessment item is late.
However, if the late submission of assessment paper has a valid

reason, a letter of explanation should be submitted and approved by
the course coordinator. If necessary, you will also be required to
present/attach evidences.
Return of Assignments/ Assessment tasks will be returned to you two (2) weeks after the
Assessments submission. This will be returned by email or via Blackboard portal.
For group assessment tasks, the course coordinator will require

some or few of the students for online or virtual sessions to ask
clarificatory questions to validate the originality of the assessment
task submitted and to ensure that all the group members are
involved.
Assignment Resubmission You should request in writing addressed to the course coordinator
his/her intention to resubmit an assessment task. The resubmission
is premised on the student’s failure to comply with the similarity index
and other reasonable grounds such as academic literacy standards
or other reasonable circumstances e.g. illness, accidents financial
constraints.
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Re-marking of You should request in writing addressed to the program coordinator

Assessment Papers and your intention to appeal or contest the score given to an assessment
Appeal task. The letter should explicitly explain the reasons/points to
contest the grade. The program coordinator shall communicate with
the students on the approval and disapproval of the request.
If disapproved by the course coordinator, you can elevate your case

to the program head or the dean with the original letter of request.
The final decision will come from the dean of the college.
Grading System All culled from BlackBoard sessions and traditional contact
Course discussions/exercises – 30%
1st formative assessment – 10%
2nd formative assessment – 10%
3rd formative assessment – 10%
All culled from on-campus/onsite sessions (TBA):

Final exam – 40%
Submission of the final grades shall follow the usual University

system and procedures.
Preferred Referencing Depends on the discipline; if uncertain or inadequate, use the

Style general practice of the APA 6 th Edition.
Student Communication You are required to create a umindanao email account which is a
requirement to access the BlackBoard portal. Then, the course
coordinator shall enroll the students to have access to the materials
and resources of the course. All communication formats: chat,
submission of assessment tasks, requests etc. shall be through the
portal and other university recognized platforms.
You can also meet the course coordinator in person through the
scheduled face to face sessions to raise your issues and concerns.
For students who have not created their student email, please
contact the course coordinator or program head.
Contact Details of the Lord Eddie I. Aguilar

Dean Dean
Email: aguilar_lordeddie@umindanao.edu.ph
Phone: (082) 3050645 local 137
Contact Details of the Mary Grace S. Sombilon

Assist. Dean and Program Assistant Dean
Heads Email: sombilon_marygrace@umindanao.edu.ph
Phone: (082) 3050645 local 137
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Jade Solana CPA, MBA

Program Head – BSA, BSMA
Email: jd_solana@umindanao.edu.ph
Phone: 082-3050647 local 137
Devzon U. Porras
Program Head - BSIA, BSAIS
Email: dporras@umindanao.edu.ph
Phone: (082) 3050645 local 137
Students with Special Students with special needs shall communicate with the course
Needs coordinator about the nature of his or her special needs. Depending
on the nature of the need, the course coordinator with the approval
of the program coordinator may provide alternative assessment
tasks or extension of the deadline of submission of assessment
tasks. However, the alternative assessment tasks should still be in
the service of achieving the desired course learning outcomes.
Library Contact Brigida E. Bacani

Email: library@umindanao.edu.ph
Phone: 09513766681
for inquiries, you can email at umlic.eresources@gmail.com,

raphael_digal@umindanao.edu.ph or
chat with us here http://library.umindanao.edu.ph/
Facebook page: https://www.facebook.com/UM-Learning-and-
Information-Center-Davao-City-962331877193048/
Well-being Welfare Ronadora E. Deala

Support Help Desk GSTC Head
Contact Email: Ronadora_deala@umindanao.edu.ph
Phone: 09212122846
Zerdszen P. Rañises
GSTC Facilitator
Emai: gstcmain@umindanao.edu.ph
Phone: 09058924090
GSTC Facebook Page:

https://facebook.com/UM-GSTC-Main-CAE-
111901303784349/?modal=admin_todo_tour
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Course Information – see/download course syllabus in the Black Board LMS
CC’s Voice: Hello student! Welcome to this course ACC 213: Strategic Cost
Management. One of the areas that a competent accounting practitioner
must be adept with is cost accounting and management. At this point in
your journey as an accounting student, you have already been oriented
on the basics of cost accounting and management, the cost behavior
and the different methods of cost accumulation and allocation.
CO The course ACC 213 is designed to deepen your knowledge on cost

management. It aims to acquaint the students with the impact of changes
in costs and volume to a company’s profit; advances in cost
management, such as activity-based cost management system;
concepts related to management control systems such as
decentralization, responsibility accounting, divisional performance
evaluation and transfer pricing; advances in inventory and production
management and accounting principles and practices such as economic
order quantity, Just-In-Time manufacturing, backflush costing, lean
accounting and productivity measurement. This course also covers
relevant concepts in budgetary systems, business planning and control.
At the end of this course, you are expected to be able to explain the basic
concepts and practices in cost management, apply knowledge in
problem solving using relevant managerial tools in decision-making and
prepare a Master Budget.
Let us begin!
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Big Picture
Weeks 6-7: Unit Learning Outcomes (ULO): At the end of the unit, you are expected
to
a. Discuss the basic features of the Balanced Scorecard and the delivery
performance measures.
b. Distinguish activity-based management from activity-based costing and
traditional-based costing as a managerial tool.
c. Define quality, describe the four types of quality costs and explain how
environmental costs can be measured and reduced.
Big Picture in Focus: ULOa. Discuss the basic features of the

Balanced Scorecard and the delivery performance measures.
Metalanguage
In this section, the most essential terms relevant to the study of the Balanced
Scorecard and to demonstrate ULOa will be operationally defined to establish a
common frame of reference as to how the texts work in your chosen field or career.
You will encounter these terms as we go through this new lesson. Please refer to these
definitions in case you will encounter difficulty in understanding concepts.
1. Strategic performance management system. This system utilizes performance

measures and evaluation designed to support the organization’s strategy and
objectives.
2. Balanced scorecard. This is a performance management system that puts
strategy at the center of attaining organizational goals and objectives.
3. Lag measures. These are outcome measures or measures of results from past
efforts. Example: customer profitability
4. Lead measures. These are performance drivers or factors that drive future
performance. Example: hours of employee training
5. Objective measures. Those measures that can be readily quantified and verified.
Example: market share
6. Subjective measures. Those measures that are less quantifiable and more
judgmental in nature. Example: employee capabilities
7. Financial measures. Those measures expressed in monetary terms. Example:
Net Profit (Loss)
8. Nonfinancial measures. Those measures that use nonmonetary units. Example:
number of dissatisfied customers
9. External measures. Those measures that relate to customers and shareholders.
Example: customer satisfaction and ROI
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10. Internal measures. Those measures that relate to the processes and capabilities
that create value for customers and shareholders. Example: process efficiency
and employee satisfaction
Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes) for Weeks 6-7 of
the course, you need to fully understand the following essential knowledge that will be
laid down in the succeeding pages. Please note that you are not limited to exclusively
refer to these resources. Thus, you are expected to utilize other books, research
articles and other resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc.
Strategic Performance Management System

Different Models
a. Traditional approach-uses performance measures which are almost always
financial
b. Activity-based approach-utilizes financial and process-oriented measures
c. Strategic-based approach-adds refinements to the activity-based measures that
translates the organization’s strategy
The organization’s strategy is translated into objectives and measures. To align

individual and organizational goals and initiatives, these objectives and measures
must be clearly understood, communicated and acted upon by members of the
organization. Goal congruence is best achieved if the measures are balanced and
linked to the organization’s strategy.
Balanced measures are balanced between:

a. lag measures vs. lead measures
b. objective measures vs. subjective measures
c. financial measures vs. nonfinancial measures
d. external measures vs. internal measures
To establish a closer link to strategy, many different performance measures are used
in the Balanced Scorecard.
THE BALANCED SCORECARD

-expresses the complete story of a company’s strategy through an integrated set of
financial and nonfinancial measures classified into four perspectives
Four Perspective of Performance Measures
1. The financial perspective
2. The customer perspective
3. The internal business process perspective
4. The learning and growth perspective
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Sample Objectives and Measures

Financial Perspective: establishes the long- and short-term financial performance
objectives which has three strategic themes: revenue growth, cost reduction and asset
utilization
Objectives Measures
Revenue Growth
Increase the number of new products Percentage of revenues from new products
Create new applications Percentage of revenues from new
applications
Develop new customers and markets Percentage of revenues from new sources
Adopt a new pricing strategy Product and customer profitability
Cost Reduction
Reduce unit product cost Unit product cost
Reduce unit customer cost Unit customer cost
Reduce distribution channel cost Cost per distribution channel
Asset Utilization
Improve asset utilization ROI, EVA
Customer Perspective: defines and selects the customer and market segments in
which the company chooses to compete; the source of the revenue component for the
financial objectives
Objectives Measures
Core
Increase market share Percentage of market
Increase customer retention Percentage growth, Percentage of
repeating customers
Increase customer acquisition Number of new customers
Increase customer satisfaction Ratings from customer surveys
Increase customer profitability Customer profitability
Performance Value
Decrease price Price
Decrease post-purchase costs Post-purchase costs
Improve product functionality Ratings from customer surveys
Improve product quality Percentage or returns
Increase delivery reliability On-time delivery percentage, Aging
schedule
Improve product image Ratings from customer surveys
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Internal Business Process Perspective: processes are the means for creating
customer and shareholder value; entails the identification of processes needed to
achieve customer and financial objectives; the process value chain is made up of three
processes: the innovation process, the operations process and the post-sales process
Objectives Measures
Innovation
Increase number of new products Number of new products/total products
R&D expenses
Increase proprietary products Percentage revenue from proprietary
products; Number of patents pending
Decrease product development cycle time Time to market (from start to finish)
Operations
Increase process quality Quality costs, Output yields,
Percentage of defective units
Increase process efficiency Unit cost trends, Outputs/inputs
Decrease process time Cycle time and velocity, MCE
Post-sales Service
Increase service quality First-pass yields
Increase service efficiency Cost trends, Outputs/input
Decrease service time Cycle time
Some common internal business process performance measures:
Delivery Performance Measures

Order Start of Goods
Received Production Shipped
Wait Time Process Time + Inspection Time + Move Time + Queue Time
Throughput Time (Manufacturing)
Delivery Cycle Time
Figure 7. Delivery Cycle
Delivery Cycle Time = Time from ordering up to the shipment of the goods
Throughput Time = Manufacturing Cycle Time

= Time from the start of production until the goods are shipped
= Process Time + Inspection Time + Move Time + Queue Time
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Process Productivity = Total Units / Value-added Time
Process Quality Yield = Good Units / Total Units
Throughput per hour = Process Productivity x MCE x Process Quality Yield

= Good Units Manufactured / Total Processing Time
Manufacturing Cycle Efficiency = Value-added Time

Throughput Time
Waiting Time = Annual Average x Manufacturing Time

Number of Orders per order
Note:
value added time : process time
non-value added time : inspection time, move time and queue time
Learning and Growth Perspective: the source of the capabilities that enable the
accomplishment of the other three perspectives’ objectives; has three major
objectives: increasing employee capabilities; increasing motivation, empowerment,
and alignment; and increasing information systems capabilities
Objectives Measures
Employee Capabilities
Increase Employee satisfaction ratings
Employee turnover percentage
Employee productivity
Hours of training
Motivation and Alignment
Increase Suggestions per employee
Suggestion implemented per employee
Information Systems Capabilities
Increase Percentage of processes with real-time
feedback capabilities
Self-Help: You can also refer to the sources below to help you further
understand the lesson. You can also use other materials.
Hansen, D., Mowen, M., & Liming, G. 2009, Cost Management Accounting & Control, 6th Edition,
Cengage Learning, Mason, OH.
Horngren, C., Datar, S. & Rajan, M. 2015, Cost Accounting A Managerial Emphasis, 15th Edition,
Pearson Education Limited, England.
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Let’s Check
Activity 1. Please encircle the letter under each item that best reflects your answer.
1. Which of these is the perspective of the balanced scorecard that is at the top of a
nonprofit organizations mission statement?
a. Financial perspective
b. Internal business and production process perspective
c. Learning and growth perspective
d. Customer perspective
2. Which of these is the perspective of the balanced scorecard that is at the top list
for a company’s lenders and shareholders?
a. Financial perspective
b. Internal business and production process perspective
c. Learning and growth perspective
d. Customer perspective
3. Financial control highlights

a. falling profits c. high prices
b. poor quality d. unsatisfactory service
4. Which of the following statements is FALSE regarding financial and nonfinancial

measures of performance?
a. Nonfinancial measures may help to anticipate and explain financial results.
b. Financial results include aggregate measures.
c. Nonfinancial results may help to identify the causes of financial results.
d. Financial results are lead indicators of future success.
5. The purpose of the balance scorecard is BEST described as helping an

organization
a. develop customer relation.
b. mobilize employee skills for continuous improvements in processing
capabilities, quality, and response times.
c. introduce innovative products and services desired by target customers.
d. translate an organization’s mission and strategy into a set of performance
measures that help to implement the strategy.
Let’s Check
Activity 2. Let us try to check your understanding of the four perspectives contained
in the Balanced Scorecard. On the space provided for, classify each performance
measure. Write F (Financial); C (Customer); P (Process); or LG (Learning and
Growth).
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_____1. Market share _____9. Number of vendors used

_____2. Earnings per share _____10. Cash flow from operations
_____3. Manufacturing cycle efficiency _____11. Employee training hours
_____4. Machine downtime _____12. Gross margin
_____5. Number of patents held _____13. Employee education
_____6. Employee suggestions _____14. Manufacturing downtime
_____7. Number of repeat sales _____15. Service response time
_____8. Levels of inventories held
Let’s Analyze
Activity 1. Let us test your skill in using delivery performance measures. Read each
problem carefully and provide what is being required.
Problem 1 (adapted)
The Cute Corporation produces small plastic dolls in its Florida manufacturing plant.
The company is currently evaluating ways to improve productivity. The accountant of
the firm’s parent organization suggested that management implement a new
compensation plan based on throughput performance measure as an incentive to
increase productivity. To demonstrate how such a measure might work, the
accountant gathered the following production data for a recent month:
Total units attempted 6,000,000
Good units manufactured 4,800,000
Processing time (total hours) 800
Value-added processing 600
Required:
1. How many defective units were produced?
2. Compute manufacturing cycle efficiency (MCE).
3. Compute process productivity.
4. Compute process quality yield.
5. Compute hourly throughput.
Problem 2 (adapted)
Electron Inc. produces a variety of electronic products which it sells to retail stores
throughout the country. The following data is available for the year for one of the
products:
Units started into production 2,000,000
Total goods units completed 1,950,000
Total hours of value-added production time 300,000
Total production hours 380,000
Required:
1. Compute the manufacturing cycle efficiency (MCE).
2. What is the total throughput per hour?
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Problem 3 (adapted)
The following information for a recent project was taken from the records of Glory
Company:
Days
Process Time 15.0
Inspection 0.5
Waiting Time
From order receipt until start of production 6.0
From start of production through project completion 3.0
Move Time 1.5
Required:
1. How long did it take to complete the project once production commenced?
2. Compute the manufacturing cycle efficiency.
3. As judged by the cycle efficiency, what percentage of the overall production
time was spent on (1) value adding activities and (2) non-value adding
activities?
Problem 4 (adapted)
Ninong Corporation’s management keeps track of the time it takes to process orders.
During the most recent month, the following average times were recorded per order:
Days
Wait Time 15.6
Inspection Time 0.8
Process Time 1.6
Move Time 0.7
Queue Time 3.9
Required:
1. Compute the throughput time.
2. Compute the manufacturing cycle efficiency (MCE).
3. What percentage of the production time is spent in non-value-added activities?
4. Compute the delivery cycle time.
Problem 5 (adapted)
Laredo Company is a manufacturer of electronic components. The following
manufacturing information is available for the month of May:
Good units manufactured 40,000

Value-added hours of manufacturing time 20,000
Total units manufactured 50,000
Total hours of manufacturing time 30,000
Required:
1. What is the throughput per hour?
2. What is the process quality yield?
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In a Nutshell
Activity 1. The Balanced Scorecard is a strategic performance management system
that translates the vision and strategy of an organization into operational objectives
and measures.
In this portion of the module, you were oriented about the Balanced Scorecard as a
management tool and the different delivery performance measures. Now, you will be
required to state your arguments or synthesis relevant to the topics presented. You
may highlight their basic features. I will supply the first two items and you will continue
the rest.
1. The Balanced Scorecard actually unfolds a company’s strategy.

2. With measures covering the four perspectives in the Balanced Scorecard,
there is a greater chance of attaining goal congruence.
Your Turn
3. _____________________________________________________________
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_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
4. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
5. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
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_____________________________________________________________
Q&A LIST
Do you have any question/issue/concern for clarification? Please list them down
below and raise them formally by posting the list in the designated forum section. Your
teacher or any of your classmates may provide the answer or clarification you need.
Once satisfied, you return to this list and write the corresponding answers in your own
words. This list will help you in the review of the concepts and essential knowledge.
Questions / Issues / Concerns Answers
1.
2.
3.
4.
5.
KEYWORDS INDEX
In this section, keywords are listed down to help you recall the lesson. The list may
include concepts, ideas, theories, names of people and other vital terms to remember
that may or may not necessarily be found in the Metalanguage section. You may refer
to this list as you review the lesson.
Balanced Scorecard Financial Perspective Process Productivity
Customer Perspective Lag Measures Process Quality Yield
Delivery Cycle Time Lead Measures Process Time
Delivery Performance Measures Learning & Growth Perspective Queue Time
External Measures Manufacturing Cycle Efficiency Strategic Performance Mgmt.
IB Process Perspective Move Time Subjective Measures
Innovation Nonfinancial Measures Throughput per hour
Inspection Time Non-value Added Time Throughput Time
Internal Measures Objective Measures Value Added Time
Financial Measures Post-sales Service Wait Time
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Big Picture in Focus: ULOb. Distinguish activity-based management

from activity-based costing and traditional costing.
Metalanguage
In this section and in order to demonstrate ULOb, the most essential terms
relevant to the study of activity-based management will be operationally defined. You
will encounter these terms as we go through this new lesson. Please refer to these
definitions in case you will encounter difficulty in understanding related terms and
concepts.
1. Traditional costing. This is a costing method that uses a traditional unit-level

base.
2. Activity-based costing. This is a costing method of allocating indirect factory
overhead, indirect selling and indirect administrative expenses.
3. Activity-based management. This a systemwide, integrated approach that
focuses management’s attention on activities with the objectives of improving
customer value and increasing the profit achieved by providing this value.
4. Continuous improvement. Improving performance by constantly searching for
ways to eliminate waste.
5. Value-added activities. These activities contribute to customer value or help
meet an organization’s needs or both.
6. Non-value added activities. These are those that are not necessary and not
valued by both, internal and external, customers.
Essential Knowledge
ACTIVITY-BASED COSTING (ABC)

-the major source of information for activity-based management
Advantages: accuracy; better cost information (more precise, reliable and

informative); continuous improvement (better cost control and more efficient
operations)
Limitations: costly; product costing does not conform with GAAP
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ABC is applicable to organizations with products or services that

✓ vary significantly in volume, have diversified activities and complexity of
operations
✓ relatively high overhead costs
✓ have undergone major technological or design change
ABC provides cost information on indirect costs with the use of activity drivers.
Specifically, it is a method of allocating indirect factory overhead, indirect selling and
indirect administrative expenses.
Cost object–the item for which managers want cost information

Activity driver–measure the capacity of an activity and its output
Examples:
✓ materials handling may be measured by the number of moves
✓ shipping goods may be measured by units sold
✓ laundering hospital linen may be measured by the pounds of laundry
Cost drivers per production event (cost pool):
Unit-level direct labor hours, machine hours
Batch-level material moves, set-up hours, number of orders, tooling hours,
inspection hours, machine realignment and cleaning, scheduling
Production-level design hours, testing hours, advertising, prototyping
Facility-level number of personnel, area occupied, kilowatt hours, life in years,
maintenance hours
The ABC Process

1. Set-up the ABC System
2. Identify the resource drivers
3. Identify the activity drivers
4. Group similar or homogenous activities (specific activity driver)
5. Estimate costs based on their cost-driver or activity-driver
Let us recall that:

Under a traditional costing, cost behavior is assumed to be described by unit-based
drivers only.
Under activity-based costing, both unit and non-unit-based drivers are used, thus,
provides much richer view of cost behavior.
Computing the Overhead Rate

Traditional Costing Activity-Based Costing
OH Rate = Budgeted FOH OH Rate = Budgeted FOH
Traditional Base Cost Driver
Traditional Base:
DLH, machine hours, number of units produced,
direct labor in peso
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Illustration (7-1): Activity-Based Costing vs. Traditional Costing

(adapted)
Cacay Company has two products with the following information:
Product X Product Y
Direct materials P10.00 P20.00
Direct labor 20.00 30.00
Units produced 8,000 2,000
Machine hours 16,400 3,600
Inspection hours 300 2,700
Inspection cost, P4,500,000
Inspection costs are classified as indirect costs and to be allocated between products
A and B. Traditionally the company uses machine hours to allocate indirect costs.
Based on a cause-and-effect study, the cost driver of inspection costs is the number
of inspection hours.
Required:
1. Factory overhead rate using traditional costing
2. Factory overhead rate using activity-based costing
3. Assuming no other indirect costs, determine the following for each product:
a. unit cost under the traditional costing method
b. unit cost under the activity-based costing method
c. difference in unit costs under the traditional costing and activity-based
costing methods
d. effects of the mis-costing under the traditional costing system
Solution:
1. Traditional costing
FOH rate = Budgeted FOH = P4,500,000 = P4,500,000 = P225/MH
Traditional Base 16,400 + 3,600 20,000 MH
2. Activity-based costing
FOH rate = Budgeted FOH = P4,500,000 = P4,500,000 = P1,500/hr
Cost Driver 300 + 2,700 3,000 hrs
3. Traditional costing vs. Activity-based costing

Product X Traditional Costing Activity-based Costing
Direct materials 10 10
Direct labor 20 20
Overhead per unit
(16,400 MH x P225/MH) 461.25
8,000 units
(300 hrs x P1,500/hr) 56.25
8,000 units
Total Unit Cost P491.25 P86.25
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Product Y Traditional Costing Activity-based Costing

Direct materials 20 20
Direct labor 30 30
Overhead per unit
(3,600 MH x P225/MH) 405
2,000 units
(2,700 hrs x P1,500/hr) 2,025
2,000 units
Total Unit Cost P455 P2,075
Product X Product Y
Difference
P491.25 – P86.25 P405
P455 – P2,075 (P1,620)
Effects on
Unit Cost Overstated by P405 Understated by P1,620
Profit Understated Overstated
ACTIVITY-BASED MANAGEMENT (ABM)

Activity-based management is more comprehensive than an ABC system. ABM
adds a process view to the cost view of ABC. ABM is anchored on the importance of
processes in achieving organizational goals through continuous improvement.
Processes are composed of activities that are tied-up to specific objectives. Thus,
improving processes for the attainment of these objectives requires improving the
ways of accomplishing related activities. Contrary to the traditional approach, ABM
focuses on managing these activities, instead of costs, as an effective control
measure. The ABM concept has two dimensions: cost and process.
cost dimension
-provides cost information about resources, activities, and cost objects of interests
such as products, customers, suppliers, and distribution channels
Objective: improving the accuracy of cost assignments
ABC is the main source of cost information needed in ABM.
process dimension
-provides information about what activities are performed, why they are performed,
and how well they are performed
-provides the means to pursue and measure continuous improvement
Objective: cost reduction
To understand how the process view connects with continuous improvement, a more
explicit understanding of process value analysis is needed.
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PROCESS VALUE ANALYSIS (PVA)

-fundamental to activity-based responsibility accounting
-focuses on accountability for activities rather than costs
-emphasizes the maximization of systemwide performance instead of individual
performance
Concerned with the following:

1. driver analysis (defining root causes)
✓ what factors cause activities to be performed
✓ what causes activity costs to change
2. activity analysis (identifying, describing and assessing value content)

✓ what activities are performed
✓ how many people perform the activities
✓ time and resources required to perform the activities
✓ value of the activities to the organization (classifying activities into value-
added or non-value-added)
value-added activities-those activities that contribute to customer value or help

meet an organization’s needs, or both
✓ activities that comply with legal mandates
✓ discretionary activity that meets all three of the following conditions:
(1) the activity produces a change of state,
(2) the change of state was not achievable by preceding activities, and
(3) the activity enables other activities to be performed.
determining whether or not a discretionary activity is value-added
-more of an art than a science and depends on subjective judgment
non-value-added activities (manufacturing): scheduling, moving, waiting,

inspecting and storing
3. performance measurement (assessing activity performance)

-measures are both financial and nonfinancial
-major dimensions:
a. efficiency-relationship of activity outputs to activity inputs
b. quality-doing the activity right the first time it is performed
c. time-longer time usually mean resource consumption and less ability to
respond to customer demand
Financial Measures of Activity Efficiency

(1) value-added and non-value added activity costs
(2) trends in activity costs
(3) kaizen standard setting
(4) benchmarking
(5) activity flexible budgeting
(6) activity capacity management
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Overall Objective of ABM: To improve a firm’s profitability by

1. improving decision making through providing accurate cost information (ABC)
2. reducing costs through encouraging and supporting continuous improvement efforts
(PVA)
Implementing Activity-Based Management
ABM Model
Systems Planning
Identify, Define & Classify

Activities
PVA ABC
Assess Value Content of Assign Resource Cost

Activities (Activities)
Define Root Cause per Identify Cost Objects and

Activity Activity Drivers
Reduce Improve
Costs Decision
Establish Activity
Calculate Activity Rates
Performance Measures
Increase
Search for Improvement Profitability Assign Costs to Cost
Opportunities Objects
Figure 8. ABM Implementation Model
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Let’s Check
Activity 1. Please encircle the letter under each item that best reflects your answer.
1. A base used to allocate the cost of a resource to the different activities using that
resource is a(n)
a. resource driver c. final cost object
b. activity driver d. none of the above
2. A base used to allocate the cost of products, customers or other final cost objects
is a(n)
a. resource driver c. final cost object
c. activity driver d. none of the above
3. Examples of batch-level costs are:

a. portions of electricity and indirect materials
b. salaries of schedulers and setup personnel
c. salaries of designers and programmers
d. depreciation and insurance on buildings
4. Examples of activities at the product-level of costs include:

a. scheduling, setting up and moving
b. designing, changing and advertising
c. heating, lighting and security
d. cutting, painting and packaging
5. Examples of unit-level activity drivers include:

a. number of batches and material moves
b. square footage occupied
c. number of products and design changes
d. units of output and direct labor hours
6. Plant-level costs are costs that

a. are incurred to support the number of different products produced.
b. are incurred to sustain the capacity at a production site.
c. inevitably increase whenever a unit is produced.
d. are caused by the number of batches produced and sold.
7. Traditional costing systems are characterized by their use of which of the following
measures as bases for allocating overhead to output
a. unit-level drivers c. product-level drivers e. none of the above
b. batch-level drivers d. plant-level drivers
8. ABC systems are characterized by their use of which of the following measures
as bases for allocating overhead to output
a. unit-level drivers c. product-level drivers e. none of the above
b. batch-level drivers d. plant-level drivers
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9. Activity-based management (ABM) is

a. a costing system in which multiple overhead cost pools are allocated using
bases that include one or more nonvolume related factors
b. a based used to allocate the cost of a resource to the different activities using
it
c. the use of information obtained from ABC to make improvement in the firm
d. a base used to allocate the cost of an activity to products and customers
10. All of the following are examples of non-value-added activities except

c. ordering c. assembling e. setting-up
d. receiving d. inspections
Let’s Check
Activity 2. Listed below are potential activity drivers. Identify the most likely level of
each activity driver. On the space provided for, write U (unit-level); B (batch-level); or
P (product-level).
_____1. Loads of materials moved _____6. Number of setups
_____2. Direct materials dollars _____7. Number of work orders
_____3. Marketing promotions _____8. Machine hours
_____4. Number of design changes _____9. Number of part number
_____5. Design hours _____10. Pounds of product
Let’s Analyze
Activity 1. Now, it’s your turn to apply activity-based costing. Read each problem
carefully and provide what is required.
Problem 1 (adapted)
Kai Corp. manufactures two models of beds, the standard and the deluxe model.
The following activity and cost information has been compiled:
Standard Deluxe OH Costs
No. of setups 9 21 P 90,000
No. of components 90 150 210,000
No. of DLH 650 150
Required:
Compute the total amount of overhead costs assigned to each model using:
1. Traditional costing system
2. Activity-based costing system
3. Discuss the effects of the difference in the computed amounts of overhead
costs.
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Problem 2 (adapted)
Aguila Company has two major segments with the following information:
Skyscraper Ground Zero Total
Annual Revenue P200,000 P600,000 P800,000
Annual Salesperson Salaries P30,000 P45,000 P75,000
Number of Customers 50 75 125
Miles Driven 80,000 40,000 120,000
The business also has overhead costs as follows:

Cost pool Cost in pool Cost driver
Travel P36,000 miles driven
Entertainment P144,000 number of customers
Administrative P150,000 salaries
TOTAL P330,000
Required:
1. Allocate the overhead costs to the segments based on sales revenue.
2. Determine the income of each segment.
3. Allocate the overhead costs to the segments using ABC.
4. Determine the income of each segment under ABC.
In a Nutshell
Activity 1. Distinguish activity-based management from activity-based costing and
traditional costing as a managerial tool. List down their differences and similarities.
1. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
2. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
3. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
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Q&A LIST
1.
2.
3.
4.
5.
KEYWORDS INDEX
Activity-based costing Continuous improvement Process value analysis
Activity-based management Cost pools Traditional costing
Activity drivers Non-value added activities Value-added activities
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Big Picture in Focus: ULOc. Define quality, describe the four types of
quality costs and explain how environmental costs can be measured
and reduced.
Metalanguage
In this section and in order to demonstrate ULOc, the most essential terms
relevant to the study of quality and environmental cost management will be
operationally defined. You will encounter these terms as we go through this new
lesson. Please refer to these definitions in case you will encounter difficulty in
understanding related terms and concepts.
1. Quality. This is referred as the degree or grade of excellence. Therefore, it is a

relative measure of goodness.
2. Quality product or service. It is one that meets or exceeds customer
expectations.
3. Customer expectations. This relate to attributes such as product performance,
reliability, durability, and fitness for use.
4. Quality specification. It is the specific level of performance planned for a given
quality attribute. Customers expect a quality product or service to perform
according to specifications.
5. Quality of conformance. It is a measure of how a product meets its
specifications.
6. Defective product. It is one that does not conform to specifications.
7. Zero defects. It means that all products conform to specifications.
Essential Knowledge
There are numerous quality-related activities, all of which consume resources that
determine the level of quality costs incurred by a firm. Inspecting or testing parts, for
example, is an appraisal activity that has the objective of detecting bad products.
Detecting bad products and correcting them before they are sent to customers is
usually less expensive than letting them be acquired by customers. The objective of
quality cost management is to find ways to minimize total quality costs.
Competitive forces are requiring firms to pay increasing attention to quality. Customers
are demanding higher-quality products and services. Improving quality may actually
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be the key to survival for many firms. Improving process quality and the quality of
products and services is a fundamental strategic objective that is part of any well-
designed Balanced Scorecard. If quality is improved, then customer satisfaction
increases; if customer satisfaction increases, then market share will increase; and if
market share increases, then revenues will increase. Thus, improving quality can
enhance a firm’s financial and competitive position.
Defining Quality Costs

Quality-linked activities are those activities performed because poor quality may or
does exist. The costs of performing these activities are referred to as costs of quality.
Costs of quality-costs that exist because poor quality may or does exist; incurred to
prevent defects or incurred as a result of defects occurring
Subcategories of quality-related activities:

a. Control activities-performed by an organization to prevent or detect poor quality
(because poor quality may exist). Control activities are made up of prevention and
appraisal activities.
b. Failure activities-performed by an organization or its customers in response to
poor quality (poor quality does exist). If the response to poor quality occurs before
delivery of a bad (nonconforming, unreliable, not durable, and so on) product to a
customer, the activities are classified as internal failure activities; otherwise, they
are classified as external failure activities.
Four Categories of Quality Costs

Control costs-costs of performing control activities; also considered as conformance
costs incurred to keep defective products from falling into the hands of customers
1. Prevention costs are incurred to prevent poor quality in the products or

services being produced. As prevention costs increase, we would expect the
costs of failure to decrease.
2. Appraisal costs are incurred to determine whether products and services are
conforming to their requirements or customer needs.
Failure costs-costs incurred by an organization because failure activities are

performed; also considered as non-conformance costs incurred because defects are
produced despite efforts to prevent them
3. Internal failure costs are incurred because products and services do not
conform to specifications or customer needs. This nonconformance is detected
prior to being shipped or delivered to outside parties. These are the failures
detected by appraisal activities. These costs disappear if no defects exist.
4. External failure costs are incurred because products and services fail to
conform to requirements or satisfy customer needs after being delivered to
customers. Of all the costs of quality, this category can be the most devastating.
External failure costs, like internal failure costs, disappear if no defects exist.
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Examples of Quality Costs

Prevention Costs Appraisal Costs
quality engineering inspection and testing of materials
quality training programs packaging inspection
quality planning supervising appraisal activities
quality reporting product acceptance
supplier evaluation and selection process acceptance
quality audits field testing
quality circles outside certification
field trials continuing supplier verification
design reviews
recruiting
marketing research
prototype inspection
vendor certification
Internal Failure Costs External Failure Costs
scrap Recalls
rework lost sales (performance-related)
downtime (due to defects) returns and allowances (poor quality)
reinspection discounts due to defects
retesting warranties
design changes repair
repairs product liability
customer dissatisfaction
lost market share
complaint adjustment
Environmental Costs
Historically, firms have often released contaminants into the atmosphere and water
without bearing the full cost of such activities. Many people believe that polluters
should bear the full cost of any environmental damage caused by production of goods
and services. By bearing the full cost, firms may then seek more ecoefficient
production methods.
Ecoefficiency
-the ability to produce competitively priced goods and services that satisfy customer
needs while simultaneously reducing negative environmental impacts, resource
consumption, and costs
-means producing more goods and services using less materials, energy, water, and
land, while, at the same time, minimizing air emissions, water discharges, waste
disposal, and the dispersion of toxic substances
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Interestingly, some initial experiences suggest that it may be possible to improve

environmental quality without reducing useful goods and services while
simultaneously increasing profits.
Damage to environment-defined as either direct degradation of the environment such

as the emission of solid, liquid, or gaseous residues into the environment (e.g., water
contamination and air pollution) or indirect degradation such as unnecessary usage of
materials and energy
Environmental costs
-referred to as environmental quality costs that are incurred because poor
environmental quality exists or may exist
-associated with the creation, detection, remediation, and prevention of environmental
degradation.
Four categories of environmental costs:

1. Environmental prevention costs are the costs of activities carried out to
prevent the production of contaminants or waste that could cause damage
to the environment.
2. Environmental detection costs are the costs of activities executed to
determine if products, processes, and other activities within the firm are in
compliance with appropriate environmental standards.
3. Environmental internal failure costs are costs of activities performed
because contaminants and waste have been produced but not discharged
into the environment. Thus, internal failure costs are incurred to eliminate
and manage contaminants or waste once produced.
4. Environmental external failure costs are the costs of activities performed
after discharging contaminants and waste into the environment. External
failure costs can be subdivided into:
a. Realized external failure costs-incurred and paid for by the firm
b. Unrealized external failure (societal) costs-caused by the firm but
are incurred and paid for by parties outside the firm. Societal costs
can be further classified as (1) those resulting from environmental
degradation and (2) those associated with an adverse impact on the
property or welfare of individuals. In either case, the costs are borne
by others and not by the firm even though the firm causes them.
Of the four environmental cost categories, the external failure category is the most
devastating. Within the external failure cost category, societal costs are labeled with
an “S.” The costs for which the firm is financially responsible are called private costs.
All costs without the S label are private costs.
Environmental Cost Reduction

Investing more in prevention and detection activities can bring about a significant
reduction in environmental failure costs.
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Environmental costs appear to behave in much the same way as quality costs. The
lowest environmental costs are attainable at the zero-damage point much like the
zero-defects point of the total quality cost model. Thus, an ecoefficient solution would
focus on prevention with the usual justification that prevention is cheaper than the
cure. Analogous to the total quality management model, zero damage is the lowest
cost point for environmental costs.
Let’s Check
Activity 1. Now that you know the most essential terms in the study of quality and
environmental cost management, let us try to check your recollection of these terms.
In the spaces provided below, write the missing terms to complete the following
statements:
1. _______________ relate to attributes such as product performance, reliability,

durability, and fitness for use.
2. _______________ are costs incurred to prevent poor quality in the products or
services being produced.
3. _______________ are costs incurred because defects are produced despite
efforts to prevent them.
4. _______________ are the costs of activities executed to determine if products,
processes, and other activities within the firm are in compliance with appropriate
environmental standards.
5. _______________ is the ability to produce competitively priced goods and
services that satisfy customer needs while simultaneously reducing negative
environmental impacts, resource consumption, and costs.
Let’s Check
Activity 2. Classify each of the following quality costs as prevention costs, appraisal
costs, internal failure costs or external failure costs.
___________________1. Reentering data because of keypunch errors
___________________2. Technical support provided to suppliers
___________________3. Costs of inspecting raw materials
___________________4. Lost sales arising from a reputation for poor quality
___________________5. Design and engineering costs
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Let’s Analyze
Activity 1. You are now familiar with the essential terms related to quality and
environmental cost management. But it is important that you are also able to
confidently discuss the concepts introduced. On the space provided below, please
write a thorough discussion of the required information.
1. Define quality.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
2. Describe the four types of quality costs.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
3. Explain how environmental costs can be measured and reduced.
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
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In a Nutshell
Activity 1. Based on the definition of the most essential terms in the study of the
quality and environmental cost management and the learning exercises that you have
done so far, please feel free to write your arguments or lessons learned below in
relation to this topic.
1. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
2. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
3. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
4. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
5. _____________________________________________________________
_____________________________________________________________
_____________________________________________________________
_____________________________________________________________
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Q&A LIST
1.
2.
3.
4.
5.
KEYWORDS INDEX
Appraisal costs Ecoefficiency Prevention costs
Customer expectations Environmental costs Quality
Conformance costs External failure costs Quality product or service
Damage to environment Internal failure costs Quality specification
Defective product Non-conformance costs Zero defects
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Course Schedule
Please be guided by this calendar of activities (partial list).

Activity Date Where to submit
Practice Set BB Practice Set
Weeks 6-7 ULO A Let’s Check Activity 1 & 2 BB Weeks 6-7 ULO A
Weeks 6-7 ULO A Let’s Analyze Activity 1 BB Weeks 6-7 ULO A
Weeks 6-7 ULO A In a Nutshell Activity 1 BB Weeks 6-7 Forum A
Weeks 6-7 ULO A Q&A List BB discussion feature
Weeks 6-7 ULO B Let’s Check Activity 1 & 2 BB Weeks 6-7 ULO B
Weeks 6-7 ULO B Let’s Analyze Activity 1 BB Weeks 6-7 ULO B
Weeks 6-7 ULO B In a Nutshell Activity 1 BB Weeks 6-7 Forum B
Weeks 6-7 ULO B Q&A List BB discussion feature
Weeks 6-7 ULO C Let’s Check Activity 1 & 2 BB Weeks 6-7 ULO B
Weeks 6-7 ULO C Let’s Analyze Activity 1 BB Weeks 6-7 ULO B
Weeks 6-7 ULO C In a Nutshell Activity 1 BB Weeks 6-7 Forum B
Weeks 6-7 ULO C Q&A List BB discussion feature
Third Exam
Competency Assessment
Final Exam
Special Instructions: Sample Filename Formats:
STUDENT’S SURNAME_6-7 ULO_A_Check_1
1. All online submissions must be in PDF file. STUDENT’S SURNAME_6-7 ULO_B_Check_2
2. Follow sample filename format. Filename will STUDENT’S SURNAME_6-7 ULO_B_ Analyze_1
serve as your guide in your submission. STUDENT’S SURNAME_6-7 ULO_A_ Analyze_2
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Online Code of Conduct

1. Students are expected to abide by and honor code of conduct, and thus everyone and all are
exhorted to exercise self-management and self-regulation.
2. All students are guided by professional conduct as learners in attending On-Line Blended Delivery
(OBD) course. Any breach and violation shall be dealt with properly under existing guidelines,
specifically in Section 7 (Student Discipline) in the Student Handbook.
3. Professional conduct refers to the embodiment and exercise of the University’s Core Values,
specifically in the adherence to intellectual honesty and integrity; academic excellence by giving
due diligence in virtual class participation in all lectures and activities, as well as fidelity in doing
and submitting performance tasks and assignments; personal discipline in complying with all
deadlines; and observance of data privacy.
4. Plagiarism is a serious intellectual crime and shall be dealt with accordingly. The University shall
institute monitoring mechanisms online to detect and penalize plagiarism.
5. Students shall independently and honestly take examinations and do assignments, unless
collaboration is clearly required or permitted. Students shall not resort to dishonesty to improve
the result of their assessments (e.g. examinations, assignments).
6. Students shall not allow anyone else to access their personal LMS account. Students shall not
post or share their answers, assignment or examinations to others to further academic
fraudulence online.
7. By enrolling in OBD course, students agree and abide by all the provisions of the Online Code of
Conduct, as well as all the requirements and protocols in handling online courses.
Prepared by:
Myra T. Miraflores, CPA

Course Coordinator
Reviewed by:
Jade D. Solaña, CPA, MBA Devzon U. Porras, CPA, MSA

Program Head – BSA and BSMA Program Head – BSIA and BSAIS
Mary Grace S. Sombilon, CPA, MSA

Assistant Dean
Approved by:
Lord Eddie I. Aguilar, MBA, CPA

Dean
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UNIVERSITY OF MINDANAO

College of Accounting Education

Program: BSA, BSIA, BSMA, BSAIS

Physically Distanced but Academically Engaged

Self-Instructional Manual (SIM) for

Course/Subject: ACC 213 – Strategic Cost Management

Name of Teacher: ____________________

THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT

Big Picture Weeks 6-7: Unit Learning Outcomes 8

Course Outline: MAS 1 – Management Accounting, Part 1

Course Coordinator: Myra T. Miraflores

Course Outline Policy

Areas of Concern Details

If the assessment task is done in real time through the features in

Since this course is included in the CPALE, you will be required to

This is non-negotiable for all licensure-based programs.

Turnitin To ensure honesty and authenticity, all assessment tasks are

Please note that academic dishonesty such as cheating and

However, if the late submission of assessment paper has a valid

For group assessment tasks, the course coordinator will require

Re-marking of You should request in writing addressed to the program coordinator

If disapproved by the course coordinator, you can elevate your case

All culled from on-campus/onsite sessions (TBA):

Submission of the final grades shall follow the usual University

Preferred Referencing Depends on the discipline; if uncertain or inadequate, use the

Contact Details of the Lord Eddie I. Aguilar

Contact Details of the Mary Grace S. Sombilon

Jade Solana CPA, MBA

Library Contact Brigida E. Bacani

for inquiries, you can email at umlic.eresources@gmail.com,

Well-being Welfare Ronadora E. Deala

GSTC Facebook Page:

Course Information – see/download course syllabus in the Black Board LMS

CO The course ACC 213 is designed to deepen your knowledge on cost

Big Picture in Focus: ULOa. Discuss the basic features of the

1. Strategic performance management system. This system utilizes performance

Strategic Performance Management System

The organization’s strategy is translated into objectives and measures. To align

Balanced measures are balanced between:

THE BALANCED SCORECARD

Sample Objectives and Measures

Some common internal business process performance measures:

Delivery Performance Measures

Throughput Time (Manufacturing)

Delivery Cycle Time

Figure 7. Delivery Cycle

Throughput Time = Manufacturing Cycle Time

Process Productivity = Total Units / Value-added Time

Process Quality Yield = Good Units / Total Units

Throughput per hour = Process Productivity x MCE x Process Quality Yield

Manufacturing Cycle Efficiency = Value-added Time

Waiting Time = Annual Average x Manufacturing Time

3. Financial control highlights

4. Which of the following statements is FALSE regarding financial and nonfinancial

5. The purpose of the balance scorecard is BEST described as helping an

_____1. Market share _____9. Number of vendors used

Good units manufactured 40,000

1. The Balanced Scorecard actually unfolds a company’s strategy.

Questions / Issues / Concerns Answers

Balanced Scorecard Financial Perspective Process Productivity

Customer Perspective Lag Measures Process Quality Yield

Delivery Cycle Time Lead Measures Process Time

_1. Market share _9. Number of vendors used