A 14907 - Strategic Management Accoun6ng (2018-2019) Session 11 - - PowerPoint PPT Presentation

▶
a 14907 strategic management accoun6ng 2018 2019
SMART_READER_LITE
LIVE PREVIEW

A 14907 - Strategic Management Accoun6ng (2018-2019) Session 11 - - PowerPoint PPT Presentation

Sep 03, 2023 343 likes •703 views

A 14907 - Strategic Management Accoun6ng (2018-2019) Session 11 Opera6onal Decisions Paul G. Smith B.A., F.C.A Course Overview 1. Financial Vs Management Accoun4ng 10. Investment Decisions 2. Accoun4ng Principles and Valua4on Criteria

slide-1
SLIDE 1

A 14907 - Strategic Management Accoun6ng (2018-2019)

Session 11 Opera6onal Decisions

Paul G. Smith B.A., F.C.A

slide-2
SLIDE 2

Course Overview

  • 1. Financial Vs Management Accoun4ng
  • 10. Investment Decisions
  • 2. Accoun4ng Principles and Valua4on Criteria –

Current and Fixed Assets

  • 11. Opera4onal Decisions
  • 3. Accoun4ng Principles and Valua4on Criteria –

Current and Fixed Assets ..Cont’d

  • 12. Exam
  • 4. Financial Statement Analysis
  • 13. Target Cos4ng and Life Cycle Cos4ng
  • 5. Performance Measurement and Cost

Accoun4ng

  • 14. Servi4za4on and Cost Management
  • 6. Exam
  • 15. Performance Measurement, Sustainability and CSR
  • 7. Strategic Management Accoun4ng
  • 16. Voluntary Disclosure and Balanced Scorecard – Case Study
  • 8. Budgets and Performance Management
  • 17. Presenta4on and Discussion of Case Study
  • 9. Pricing Decisions
  • 18. Exam

PT PGS LS PGS A 14907 Strategic Management Accoun6ng 2

slide-3
SLIDE 3

Overview Session 11

  • SeJng sales targets
  • Predic6ng the impact of price changes
  • Outsourcing vs in-house opera6on/produc6on
  • Opera6onal restructuring/automa6on of

business processes

  • Closing a business segment
  • Dropping a product/service line

A 14907 Strategic Management Accoun6ng 3

slide-4
SLIDE 4

RECAP PREVIOUS SESSION

A 14907 Strategic Management Accoun6ng 4

slide-5
SLIDE 5

Summary Session 10

  • Tradi6onal investment appraisal techniques.
  • The strengths and weaknesses of individual

appraisal techniques.

  • The use and abuse of investment appraisal

techniques.

  • Financial analysis within the overall context of

investment planning.

  • Non-financial factors in investment appraisal.
  • Alterna6ve strategic approaches to investment

appraisal.

A 14907 Strategic Management Accoun6ng 5

slide-6
SLIDE 6

Session 11 Objec4ves

  • At the end of this session, students will be able to:

– Assess the financial consequences of a range of decision- making situa6ons. – Define the scope and limita6ons of the financial techniques applied.

A 14907 Strategic Management Accoun6ng 6

slide-7
SLIDE 7

OPERATIONAL DECISION MAKING

A 14907 Strategic Management Accoun6ng 7

slide-8
SLIDE 8

Opera4onal decision-making

A 14907 Strategic Management Accoun6ng 8

slide-9
SLIDE 9

COST-VOLUME-PROFIT ANALYSIS (CVP)

A 14907 Strategic Management Accoun6ng 9

slide-10
SLIDE 10

Cost–volume–profit analysis (CVP)

  • Cost–volume–profit analysis is the study of the

interrela6onship between costs and revenues (and therefore profit) at various levels of ac6vity.

A 14907 Strategic Management Accoun6ng 10

slide-11
SLIDE 11

Revenue behaviour

A 14907 Strategic Management Accoun6ng 11

slide-12
SLIDE 12

Fixed costs

A 14907 Strategic Management Accoun6ng 12

slide-13
SLIDE 13

Variable costs

A 14907 Strategic Management Accoun6ng 13

slide-14
SLIDE 14

Total costs

A 14907 Strategic Management Accoun6ng 14

slide-15
SLIDE 15

Total revenue and total costs

A 14907 Strategic Management Accoun6ng 15

slide-16
SLIDE 16

Break-even Point

A 14907 Strategic Management Accoun6ng 16

Profit = PQ – (F + VQ) Where: Q = Quan6ty of units sold P = Selling price V = Variable cost of units sold F = Fixed costs Can be rearranged as: Profit = Q (P-V) – F P – V = Contribu6on Total Revenue = Total Costs where PQ = F + VQ

slide-17
SLIDE 17

Break-even point

Break-even point (in units) = Fixed costs . Contribu6on per unit

A 14907 Strategic Management Accoun6ng 17

Q = F P - V

slide-18
SLIDE 18

Margin of safety

A 14907 Strategic Management Accoun6ng 18

slide-19
SLIDE 19

Evalua4on of the CVP technique

  • CVP analysis ignores price elas6city of demand and economies of scale.
  • CVP analysis focuses on the short term.
  • CVP analysis usually assumes a single product.
  • CVP analysis assumes simple, single-stage manufacturing
  • CVP analysis assumes that costs can be categorized into either variable or

fixed.

  • CVP analysis assumes that the forces influencing a business are sta6c

rather than dynamic.

A 14907 Strategic Management Accoun6ng 19

slide-20
SLIDE 20

RELEVANT COSTING

A 14907 Strategic Management Accoun6ng 20

slide-21
SLIDE 21

Relevant cos4ng

  • The relevant costs for decision-making are those future costs

that will be affected by the decision. Costs that are independent of the decision are not relevant and should not be considered when making that decision.

A 14907 Strategic Management Accoun6ng 21

slide-22
SLIDE 22

Relevant cos4ng

A 14907 Strategic Management Accoun6ng 22

slide-23
SLIDE 23

OPPORTUNITY COST

A 14907 Strategic Management Accoun6ng 23

slide-24
SLIDE 24

Opportunity cost

  • A measure of the opportunity that is lost or

sacrificed when the choice of one course of ac6on requires that an alterna6ve course of ac6on be given up.

  • An opportunity cost is always measured financially in

terms of lost contribu6on. (Contribu4on = Sales revenue − Variable costs)

A 14907 Strategic Management Accoun6ng 24

slide-25
SLIDE 25

OUTSOURCING CONSIDERATIONS

A 14907 Strategic Management Accoun6ng 25

slide-26
SLIDE 26

The considera4on of qualita4ve factors in outsourcing

  • Redundancies
  • Employee morale
  • Reliance on suppliers
  • Produc6on flexibility
  • Ability to meet customer requirements
  • Control over quality

A 14907 Strategic Management Accoun6ng 26

slide-27
SLIDE 27

THE SHUTDOWN DECISION

A 14907 Strategic Management Accoun6ng 27

slide-28
SLIDE 28

The shutdown decision: dele4ng a business segment

A business ‘segment’ could be a:

  • product;
  • type of customer;
  • geographic region;
  • distribu6on channel; or
  • any other iden6fiable part of a business.

A 14907 Strategic Management Accoun6ng 28

slide-29
SLIDE 29

Relevant cos4ng: summary

  • When decision-making, only relevant costs should be
  • considered. Any costs deemed not to be relevant should be

ignored.

  • Relevant costs are those future costs that will be changed by

a par6cular decision. This may include opportunity costs.

  • Whether any given cost is relevant will depend upon the

situa6on.

  • The 6me horizon chosen will impact upon what costs become

relevant for a given situa6on.

A 14907 Strategic Management Accoun6ng 29

slide-30
SLIDE 30

REQUIRED READING AND RESEARCH

A 14907 Strategic Management Accoun6ng 30

slide-31
SLIDE 31

Required reading and research

  • Reading – required

– Accoun6ng and Finance for Managers – Chapter 11 Opera6onal Decisions

  • Reading – Op6onal

– None

  • Exercises

– Comprehension ques6ons 1 – 8 – Exercises 9.1 - 9.3 – Addi6onal Instructor Ques6ons 1 - 4

A 14907 Strategic Management Accoun6ng 31

slide-32
SLIDE 32

SESSION SUMMARY, VALIDATION AND OVERVIEW SESSION 11

A 14907 Strategic Management Accoun6ng 32

slide-33
SLIDE 33

Summary Session 11

  • SeJng sales targets
  • Predic6ng the impact of price changes
  • Outsourcing vs in-house opera6on/produc6on
  • Opera6onal restructuring/automa6on of

business processes

  • Closing a business segment
  • Dropping a product/service line

A 14907 Strategic Management Accoun6ng 33

slide-34
SLIDE 34

Session 11 Valida6on

  • What is a CVP Analysis?
  • What is it useful for?
  • What are some of CVP analysis’s drawbacks?
  • What are the relevant costs to consider in

decisions making?

  • What do we mean by opportunity cost?
  • What issues arise from outsourcing or off-

shoring?

A 14907 Strategic Management Accoun6ng 34