Current Developments and Emerging Issues in PM

Question 1

What are the reasons for the role of management accountants changing?

Answer 1

• Elimination of routine jobs
• Line managers with accounting knowledge
• More forward looking information
• A wider role for the management accountants

Question 2

What are the reasons of elimination of routine jobs

Answer 2

• Data generated from an “IT system”
• Changed quality and quantity of information used to make decisiions.
• Wide variety of reports that can be generated from IT systems.
• More analytical and interpretative skills required.

Question 3

Why do line managers now have more accounting knowledge?

Answer 3

• Shift in responsibility for budgeting
• Shift in accountability of producing budgets
• Reporting to senior managers
• All changing the information needs for meetings - progression of organisation.

Question 4

What difficulties may MA’s facce in the broadening of the role?

Answer 4

• Difficulty in interpreting mgmt expectations.
• Difficulty in adapting to differential styles of mgmt.
• Conflict w/ operational managers who may not want them to be involved.

Question 5

What is Total Quality Management (TQM)

Answer 5

Continuous improvement in quality, productivity and effectiveness obtained by establishing mgmt responsibility for processes as well as outputs.

Also known as Kaizen

Question 6

Why do we want to ensure goods are of a sufficently high quality?

Answer 6

• avoid goods being returned
• avoid wasted efforts of return
• avoid reputational damage.
  *

Question 7

What is the definition of quality?

Answer 7

• Fitness of use
• The totality of characterisitics .. ability to satisfy customers’ stated or implied needs’

Question 8

What is quality management?

Answer 8

Overseeing all the activities needed to achieve and maintain the required quality.

Question 9

What are the costs associated with quality?

Answer 9

*** Costs of conformance **
* Prevention Costs - assurance
* Appraisal Costs- quality control

Question 10

What is a lean system?

Answer 10

The idea of getting:
* To the right things
* To the right place
* At the right time - connecrted w/ RIFD technology

To reduce wastage, obsolescence, staff time and change org culture.

Question 11

What is the five S concept

Answer 11

• Structurise- Logical for where inventory stored.
• Systemise - system for identifying inventory.
• Sanitise- look after inventory.
• Standardise - consistent approach.
• Self-discipline -reports should identify items stored incorrectly. It systems now manage quality not just finance.

Question 12

What is the acronym for the problem solving approach?

Answer 12

• DMAIC
• Define - Define proble, clarify purpose, develop project plan.
• Measure- data collection to quantify the problem. CSF’s
• Analyze- consider process, materials, environmental factors and staff.
• Improve- develop solutions, implement.
• Control- monitor changes. Deal w/ problems arising. Control process.

Question 13

What is lifecycle costing?

Answer 13

Seeks to ensure costs in all phase of product: design, manufacture, operation and end of life are exceeded by revenue.

Question 14

What are the four principal lessons of Lifecycle costing?

Answer 14

1. All costs considered when working out cost per unit and profitability
2. Better chance of achieving target of cost reduction and profit.
3. May costs are linked. Improved training reduce end-of-life costs.
4. Costs are committed and incurred in the future because of decisions that have already been made.

Question 15

Just-In-Time

Answer 15

Focus is on allowing the demand to demand to determine the production (‘demand-pull’ production).

Results in greater customer satisfaction, savings resulting from greater efficiency, and savings resulting from the need to have lower stock levels.

Question 16

When may JIT not be appropriate?

Answer 16

Raw Materials
* Some materials produced seasonally so must be purchased when available.
* * To obtain bulk discounts

Work-in-progress

• Having some partially completed will allow fast completion.
• Chemical processes that take time to complete.

Finished goods
* To deal w/ variable demand.
* Chemical processes that take time to complete.

Question 16

Main Featurs of A Just-In-Time Approach?

Answer 16

• Very little (or no) inventory held
• A pull approach: inventory is ‘pulled in’ response to orders recieved.
• A very high degree of coordination is needed internall and with suppliers and customers. Good management information system.
• Reliable suppliers and transportation.

Question 17

How may one reduce a cost gap?

Answer 17

• Simplification of design
• New suppliers to reduce inputs cost.
• Use of standardized components
• Training of staff to improve productivity reduce waste

Question 18

What are the benefits of target costing?

Answer 18

• Early external focus
• Value adding features only
• Early cost control
• Lower costs per unit
• Reduced time to market

Question 19

What is Environmental Accounting?

Answer 19

Accounting information of managers in relations to corporate objectives
* Identifying and estimating costs of environmental related activities.
* Identifying and monitoring the usage and cost of resources such as water and fuels.
* Assesing the likelihood of environmental risks.
* Setting environmental related indicators as part of the control and monitoring process.
* Benchmarking activitiies against environmental best practice.

Question 20

What are the major areas for the application of EMA?

Answer 20

• Assesment of annual environmental costs/expenditures
• Product pricing
• Budgeting
• Investment appraisal
• Calculating costs
• Savings of environmental projects, or setting quantified performance targets.

Question 21

What are the costs of classifications?

Answer 21

1. Environmental preventon costs: prevent waste
2. Environmental detection costs:
ensure compliance with standards and laws.

**3.Environmental Internal failure costs: ** activities that have produced contaminants and waste that have not been discharged into the environment.

4.Environmental external failure costs: -costs incurred on activities performed after discharging waste into the environemnt.

Question 22

What are Identification of Costs?

Answer 22

Conventional costs: Direct inputs
Potentially hidden costs: captured by accounting systems but lose identity in overheads.
Contingent Costs: e.g. clean up costs
Image & relationship costs: intangible. Cost of preparing environmental report.

Question 23

Methods for accounting for environmental costs?

Answer 23

1. Input/Outflow analysis
2. Flow cost accounting
3. ABC costing
4. Lifecycle costing

Question 24

Input/Outflow analysis

Answer 24

Records inflows and balances with outlfows in cash terms.

Question 25

Flow cost accounting

Answer 25

Divides material flows into three categories: material, system and delivery and disposal.

Question 26

Activity-based costing

Answer 26

Allocates internal costs to costs centers and cost drivers on the basis of the activities that give rise to the costs. It distinguishes between environment-related costs, whcih can be attributed to joint cost-centers, and environment-driven costs which tend to be hidden in general overheads.

Question 27

Lifecycle Costing

Answer 27

Requires full environmental costs to be take into account.