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Miscellaneous Topics


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absorbtion,marginal,ABC costing,DPP,CPA,pareto,VALUE chain...etc

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Miscellaneous Topics

  1. 1. Miscellaneous Topics 1b. Activity Based Costing (ABC) 1c. Direct Product Profitability (DPP) 1d.Customer Profit Analysis (CPA) 2. Pareto Analysis (20:80) Rule 3.Value Chain 1. Modern Costing System 1a. Kaizen Costing 5. Balance Score Card (BSC) 4.Bench Marking 6. Non Financial Performance Indicators (NFPI’s)
  2. 2. Kaizen Costing <ul><li>Monden describes two types of Kaizen Costing : </li></ul><ul><ul><li>Asset and organization-specific Kaizen Costing activities planned according to the exigencies of each deal </li></ul></ul><ul><ul><li>Product-model-specific costing activities carried out in special projects with added emphasis on value analysis (Monden has the automotive industry in mind) </li></ul></ul><ul><li>Kaizen system: </li></ul><ul><ul><li>Is a cost reduction system whose goal is to reduce final estimations to a level that is lower than standard costs </li></ul></ul><ul><ul><li>Checks that costing targets have been reached </li></ul></ul><ul><ul><li>Continuously reviews existing production conditions in order to reduce costs </li></ul></ul>
  3. 3. ABC (Activity Based Costing) <ul><li>Activity Based Costing (ABC) is a managerial accounting system which determines the cost of activities without distortion and provides management with relevant and timely information. </li></ul><ul><li>It does not represent just a new set of overhead allocation rules or techniques to value inventory. </li></ul><ul><li>ABC represents a way to look at operating costs and provides methods to dissect the underlying activities, which cause costs to exist. </li></ul>
  4. 4. Direct Product Profitability (DPP) <ul><li>It is a measure of profitability commonly used by the retailers, and it was first used in the retail food industry. </li></ul><ul><li>Direct product profit (DPP) equals an item’s gross margin rupees, plus discounts and allowances earned, less direct handling, selling, and inventory holding costs. </li></ul><ul><li>DPP focuses on the contribution profit of individual retail items in individual stores. </li></ul><ul><li>It enables the retailer to develop results for brands, categories, departments, stores etc., thus forming the basis for merchandising decisions. </li></ul>
  5. 5. Customer Profit Analysis (CPA)
  6. 6. Pareto Analysis (20:80) Rule <ul><li>This effect, known as the 80 : 20 rule, can be observed in action so often that it seems to be almost a universal truth. </li></ul><ul><li>Pareto diagrams Advantages: </li></ul><ul><ul><li>Solves efficiently a problem by the identification and the hierarchisation, according to their importance, of the main causes of the faults. </li></ul></ul><ul><ul><li>Sets the priorities for many practical applications. Some examples are: process improvement efforts for increased unit readiness, customer needs, suppliers, investment opportunities. </li></ul></ul><ul><ul><li>Shows where to focus efforts. </li></ul></ul><ul><ul><li>Allows better use of limited resources. </li></ul></ul>
  7. 7. Value Chain Primary Activities. Inbound Logistics. Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation. Operations. This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine. Outbound Logistics. The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer. Marketing and Sales. In true customer orientated fashion, at this stage the organisation prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix. Service. This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.
  8. 8. Support Activities. Procurement. This function is responsible for all purchasing of goods, services and materials. The aim is to secure the lowest possible price for purchases of the highest possible quality. They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organisations), and ePurchasing (using IT and web-based technologies to achieve procurement aims). Technology Development. Technology is an important source of competitive advantage. Companies need to innovate to reduce costs and to protect and sustain competitive advantage. This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments. Human Resource Management (HRM). Employees are an expensive and vital resource. An organisation would manage recruitment and s election, training and development, and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM strategy. Firm Infrastructure. This activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department.
  9. 9. Bench Marking <ul><li>Benchmarking involves comparing the entity under consideration to another entity that is considered to be best in class. </li></ul><ul><ul><li>Competitive benchmarking </li></ul></ul><ul><ul><li>Internal benchmarking </li></ul></ul><ul><ul><li>Functional benchmarking </li></ul></ul><ul><ul><li>Strategic benchmarking </li></ul></ul>
  10. 10. Balance Scorecard
  11. 11. Balance Score Card <ul><li>The balanced scorecard considers both those factors that measure success and those that ensure future success. </li></ul><ul><ul><li>The framework considers the following perspectives; </li></ul></ul><ul><ul><li>Financial perspective </li></ul></ul><ul><ul><li>Customer perspective </li></ul></ul><ul><ul><li>Internal business perspective </li></ul></ul><ul><ul><li>Innovation and learning perspective </li></ul></ul>
  12. 12. Non Financial Performance Indicator NFPI’s <ul><li>Competitiveness </li></ul><ul><li>Activity Level </li></ul><ul><li>Productivity </li></ul><ul><li>Quality Of Service </li></ul><ul><li>Customer Satisfaction </li></ul><ul><li>Quality Of Staff Experience </li></ul><ul><li>Innovation </li></ul>
  13. 13. ALL THE BEST