Professional Documents
Culture Documents
Presentations Part 1
Presentations Part 1
Multinational Companies
Associate Professor
IGOR BARANOV
Graduate School of Management
St.Petersburg State University
INTRODUCTION
Activities
Lectures
Presentations
Textbooks
Blocher, Chen, Cokins, Lin. Cost
Management: A Strategic Emphasis. 2005.
Drury C. Cost and Management
Accounting. 2006.
Case studies
Cases in Management Accounting: Current
Practices in European Companies. T.Groot
and K.Lukka (eds.)
HBS case studies
Russian case studies
Case studies
Grading Policy
Case studies (based on your input) 20%
Presentations 10% (presentation +
report).
Mid-term exam 20%
Final exam 50%
Discussion questions
Problems and mini cases
Contacts
E-mail: baranov@som.pu.ru
10
Management Accounting
in an Organization
Learning Objectives
12
Compare Financial
& Managerial Accounting
Financial Accounting
Managerial
Accounting
13
Business units
Divisions
Departments
18
Changing Focus
Three dimensions:
19
Management Accounting
Deals with activities
inside an organization
Deals with
responsibilities centers
within the organization
as well as with the
organization as a whole
Unregulated
May use projections
about the future
20
A Brief History (1 of 4)
A Brief History (2 of 4)
A Brief History (3 of 4)
23
Transformation
1990s
Transformation
1980s
Transformation
1950s
Transformation
1910s
Focus
Cost
Determination
and Financial
Control
Information
for
Management
Planning and
Control
Reduction of
Waste of
Resources in
Business
Processes
Creation of Value
through Effective
Resource Use
A Brief History (4 of 4)
1.
2.
Work Activities
That Will Increase In Importance
2000+3yrs
More Most
time
New!
PROCESS IMPROVEMENT
PERFORMANCE EVALUATION
New!
critical
New!
INTERNAL CONSULTING
FINANCIAL & ECONOMIC ANALYSIS
New!
0.1
0.2
0.3
0.4
0.5
0.6
0.7
PERCENT
Source: The Practice Analysis of Management Accounting, 1996, p.14; Counting More, Counting Less, 1999, p. 17.
26
Volume-based costing
Activity-based costing
Responsibility accounting
27
Finance
Vice-President (CFO)
Other
Vice-Presidents
Treasurer
Controller
Internal Audit
Management
Accounting
Financial
Reporting
Tax
Reporting
28
Finance function:
Russian companies (traditional)
General Director
Chief
Accountant
Accounting
Department
Finance Director
Finance
Department
Planning
Department
Wages
Department
29
Finance function:
Russian companies (modern)
General Director
Chief
Accountant
Accounting
Department
Finance Director
Finance
Department
Management
Accounting /
Budgeting
Department
30
Professional Environment
www.imanet.org
www.cimaglobal.org
31
32
Expense
Cost Object
Direct Cost
Indirect Cost
A sacrifice of resources
Cash Inflow
(-) Costs
= Profit
35
Opportunity Cost
Classification of Costs
39
40
Semifixed Costs
41
Cost Object
A
A product
A
pair of pants
A product line
Womens
An organizational unit
The
42
Direct Cost
A cost of a resource or activity that is
acquired for or used by a single cost
object
Cost object = A dining room table
Indirect Cost
The cost of a resource that was acquired
to be used by more than one cost object
The cost of a saw used in a furniture
factory to make different products
44
Direct or Indirect?
45
46
Unit related
Batch related
Product sustaining
Customer sustaining
Business sustaining
47
Cost Hierarchies
Activity Category
Examples
Capacity
Customer
Mkt Research
Product
Batch
Machine Setups
Direct Materials
Unit
48
Unit-Related Activities
Loading shipments onto a truck is an example of a unitrelated activity because it is proportional to the volume
of shipments
49
Batch-Related Activities
50
Product-Sustaining Activities
51
Customer-Sustaining Activities
Customer-sustaining activities enable the
company to sell to an individual customer
but are independent of the volume and
mix of the products and services sold and
delivered to the customer
Examples of customer-sustaining activities
include:
Sales calls
Technical support provided to individual
customers
52
Business-Sustaining Expenses
53
Business-Sustaining Activities
54
To predict costs
To develop the costs for a cost object such as
a product or product line
Full costing
57
Cost Pools
Cost pools are groups of costs
Three major types of cost pools:
Plant (traditional)
Department (traditional)
Activity center (activity-based costing)
58
60
Machine maintenance
Production engineering
Machine setup
Production scheduling
1.
2.
63
64
65
Activity-based costing
Activity-Based Costing
Volume
Small
Large
Low
P1
P2
High
P3
P4
Traditional:
Uses actual departments or
cost centers for
accumulating and
redistributing costs
Asks how much of an
allocation basis (usually
based on volume) is used by
the production department
Service department
expenses are allocated to a
production department
based on the ratio of the
allocation basis used by the
production department
ABC:
Uses activities, for
accumulating costs and
redistributing costs
Asks what activities are
being performed by the
resources of the service
department
Resource expenses are
assigned to activities based
on how much of the
resource is required or
used to perform the
activities
69
70
Tracing Marketing-Related
Costs to Customers
71
(@35% of Sales)
Operating profit
Profit percentage
ALPHA
BETA
$320,000
$315,000
154,000
156,000
$166,000
$159,000
112,000
110,250
$ 54,000
$ 48,750
16.9%
15.5%
72
74
Duration drivers
76
Beta
$166,000
$159,000
7,000
54,000
Travel to customer
1,200
7,200
100
100
4,000
42,000
500
18,000
Warehouse inventory
800
8,800
Ship to customers
12,600
42,000
26,200
172,100
$ 139,800
$ (13,100)
43.7%
(4.2%)
Operating profit
Profit percentage
77
79
Customer Profitability
82
Process improvements
Activity-based pricing
Managing customer relationships
83
Life-cycle costing
Life-Cycle Costs
Life-cycle costing is a relatively new
perspective that argues that organizations
should consider a products costs over its
entire lifetime when deciding whether to
introduce a new product
There are five distinct stages in a typical
products life cycle
85
86
Introduction phase
87
Growth phase
88
89
90
Direct costing
and short-term decisions
Cost-Volume-Profit Analysis
93
CVP Model
Break-even Volume
Using the CVP profit equation, break-even
volume is determined by calculating the
volume where profit = 0
0 = (Units sold x Contribution margin per
unit) - Fixed costs
Units sold to break even =
Fixed costs
Contribution margin per unit
96
Target Profit
97
Margin of Safety
Multiple Product
Financial Modeling (1)
99
Multiple Product
Financial Modeling (2)
Fixed Costs________
Weighted Average Contribution Margin
100
Multiple Product
Financial Modeling (3)
101
Total fixed costs, variable costs per unit, and sales price
per unit remain constant throughout the relevant range
102
104
105