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ACC804 Advanced Management Accounting: Lecture: Week 8

This document provides an overview of topics related to quality management, throughput accounting, and benchmarking that will be covered in an advanced management accounting lecture. It discusses preparing and analyzing quality cost reports, using the theory of constraints to manage bottlenecks, applying throughput accounting, different forms of benchmarking, and the benchmarking process. The goal is to provide strategic management accounting tools to help firms improve quality, maximize profitability, and gain competitive advantage.

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Ravinesh Prasad
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© © All Rights Reserved
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99 views

ACC804 Advanced Management Accounting: Lecture: Week 8

This document provides an overview of topics related to quality management, throughput accounting, and benchmarking that will be covered in an advanced management accounting lecture. It discusses preparing and analyzing quality cost reports, using the theory of constraints to manage bottlenecks, applying throughput accounting, different forms of benchmarking, and the benchmarking process. The goal is to provide strategic management accounting tools to help firms improve quality, maximize profitability, and gain competitive advantage.

Uploaded by

Ravinesh Prasad
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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ACC804 Advanced Management

Accounting
Lecture: Week 8
Quality management, Throughput and
Benchmarking
Learning Outcomes
Recognise the importance of quality management
Prepare a quality cost report
Analyse a quality cost report
Use theory of constraints to manage cost and time
Apply the notion of throughput in managing costs and
maximising profitability
Examine the role of benchmarking in managing
quality
Apply benchmarking ideas to improve
competitiveness
Understand the processes involved in benchmarking
Lecture Outline
Quality as a competitive weapon
Cost of quality report
TQM philosophy
Theory of constraints
Throughput accounting
Benchmarking
Benchmarking in the context of institutional
theory
Summary and conclusion
Introduction
Focus on strategic management accounting
issues
Financial and non-financial information for
strategic decisions
Todays focus on:
- quality issues costs of quality
- managing bottlenecks and throughput
- benchmarking for competitive advantage
Managing Quality
What is quality?
Features that customers value
Many firms compete on quality
Quality of design
Degree to which a products design specifications meet
customers expectations
Quality of conformance
Degree to which a product meets formal design
specifications
A clear understanding of customer value is needed to
provide customers with a high-quality product
Cost of quality Report
Internal failure costs
Incurred when defective products or services are
detected before they leave the firm
External failure costs
Incurred as a result of defective products or services
being delivered to customers
Appraisal costs
Incurred to determine whether defects exist
Prevention costs
Incurred to prevent internal or external failures and
to minimise appraisal activities
Using cost of quality information
Helps managers reduce cost and improve quality
Places a dollar figure on the costs of poor quality
Helps prioritise quality improvement programs
Helps managers monitor the effects of the
quality effort
Helps identify the optimal level of quality for the
firm
Optimal Level of Quality Performance
Total Quality Management and Quality
Culture
TQM is a management approach that focuses on
meeting customer requirements by achieving
continuous improvement in goods or services
TQM is
1. Organisation-wide
2. Customer-driven
3. Involves empowerment
4. Has a process perspective
5. Is supported by a quality management system
6. Involves continuous improvement
Quality Accreditation
Six Sigma is a rigorous business improvement
methodology that focuses on improving business
processes through identifying and eliminating defects
Organisations may achieve quality accreditation by
meeting international ISO 9000 quality standards
Systems, quality documentation, process controls and delivery
methods that a firm has in place to deliver quality goods and
services
May provide assurance to customers that a firm has high levels
of quality
Expensive to implement and maintain

Education: Bus Eco faculty - AACSB, EQUIS, AMBA


Theory of Constraints and Managing
Throughput
Manage costs, improve quality and delivery
The theory of constraints TOC (Goldratt, 1990)
Focuses on identifying and removing bottlenecks to improve the rate
of throughput
Recognises the rate of production is limited to the capacity of the
constraints (or bottlenecks) that exist
Machine, human, policies and rules
Throughput accounting
Measures effects of bottlenecks and other operational decisions
using measures of throughput, inventory and operating expenses.
Throughput measures the rate at which at which a business
generates money through sales of inventory
Throughput contribution: Revenues minus Only DM costs
Benchmarking
A process of comparing the products, functions and
activities in an organisation against external businesses
recognised as industry leaders
Establish performance goals
Identify areas for improvement
1. Identify the functions/activities to be benchmarked, and
performance measures
2. Select benchmarking partners
3. Data collection and analysis
4. Establish performance goals
5. Implement plans
Forms of Benchmarking
Internal benchmarking
Benchmarking operations that are internal to the larger business
group
Competitive benchmarking
Benchmarking with companies in the same industry
Industry benchmarking
Against companies that have similar interests and technologies
within an industry
Performance measures and practices directly comparable
Best-in-class or process benchmarking
Benchmarking against the best practices that occur in any industry
Summary and Conclusion
Quality and competitive advantage
A cost of quality report
Analysis of the cost of quality report
Theory of constraints to manage bottlenecks
Maximising throughput
Different forms of benchmarking
The benchmarking process
Limitations of benchmarking

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