This preview shows pages 1–3. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: Chapter 18 Author: Anna Rovira Beavers Needles 2008 8/6/07 1 Managerial Accounting Activity-Based Systems: ABM and JIT Chapter 18 I. Activity-Based Systems and Management Companies operate under the strong influence of customer demands. Customer criteria for value may be product quality, timely delivery, and price. Companies generate revenue when customers see value in their product or service. Therefore, revenue may be seen as a product of customer value = revenue generated. To create value and to satisfy customer needs for quality, reasonable price, and timely delivery, managers must: Work with suppliers and customers View the organization as a collection of value-adding activities Use resources for value-adding activities Reduce or eliminate Nonvalue-adding activities Know the total cost of creating value for a customer Activity-based systems Information systems that provide quantitative information about the activities in an organization. II. Activity Based Accounting, ABC: Managing an organization by identifying all major operating activities. Identifies the following: 1. What resources are consumed by activity 2. How resources are consumed by activity 3. Categorized activities as value added or non-value added Usefulness of ABC: 1. Helps in making decisions about business segments and helps the elimination of non-value added activities. 2. Helps in eliminating waste and inefficiencies. 3. Assists in costing of objects for product costing and decision making. 4. Helps managers to price, valuate inventory, and make profitability decisions. Supply Networks and Value Chains: Two tools of ABM, supply networks and value chains, help managers better understand their organizations external and internal operations. Supply Network: A network of companies that supply the organization with materials, products or services to a customer. The network flows from materials through production, distribution and retailing to the final customer. As the product undergoes the transformation from raw materials to finish product various processes, departments, and organizations (suppliers companies) will be adding value to the product. Effective managers need to Chapter 18 Author: Anna Rovira Beavers Needles 2008 8/6/07 2 understand not only their own added value process but also its suppliers. This will help them find efficiencies in the value chain ....
View Full Document