4 BALANCED

and
Abalanced scorecard approach may be used to set performance targets
monitor performance.
(a) LISt the four aspects of performance in a balanced scorecard approach.
(4 marks)
OSug9gest how a professional football club might use a balanced scorecard
be identified and
POach. Indicate what key aspects of performance might
Suggest performance targets that a football club might use in a balanced

SCorecard approach. (6 marks)

(Total: 10 marks)

5 VALUE CHAIN
(a) List the primary activities and secondary activities in a value chain. (3 marks)
(b) Explain the significance of the value chain for business strategy. (3 marks)
(c) dentify the primary activities in the value chain for a publisher of educational
text books.
(3 marks)
(d) ldentify the primary activities in the value chain for a company selling
insurance policies (such as car insurance)
by telephone. (3 marks)
(Total: 12 marks)

6 TOTAL QUALITY
(a) List the key aspects of Total
Quality Management (TQM).
(b) What are quality-related costs? What is the
TQM approach to
costs, and how does this differ from the quality-related
costs?
more traditional approach to these
(c) List the key aspects of just-in-time (JIT) management
(d) Briefly explain the nature of activity based
management (ABM).
7 coST AND QUALITY
Explain briefly how each of the following
used to analyse the relationship betweenmanagement accounting techniques can be
cost and
(1) Total Quality
quality
Management (TQM)
(2) Activity Based Costing (ABC)
(3) Balanced scorecard
(4) Just in Time management (JIT)
(5) Value analysis
(10 marks)
 9 CONTROL AND REDUCTION TECHNIQUES
a c c o u n t a n t s is
n a s been suggested that much of the training of management
should be on cost
with cost control whereas the major emphasis
concerned
reduction.

Required:
(a) Distinguish between cost control and cost reduction; (4 marks)
(b) Discuss the proposition contained in the statement. (6 marks)
(Total: 10 marks)

10 IDDI COMPANY

IDDI Company manufactures and distributes generic paper-based products and

Currently has an annual turnover of GH¢10 million.
Atpresent, the management of IDDI Company are uncertain whether the purchasing
department is maximising its potential in terms of purchasing
effectiveness. efficiency and
The management are currently considering the introduction of a of
benchmarking to measure the performance of the purchasing department. system
Required:
(a)
(a) Explain the term
'benchmarking' and briefly discuss the potential benefits
can obtained as a result of undertaking a
be that
successful programme of
benchmarking
(b)
(b) Describe howa system of (6 markss)
benchmarking could
performance of the purchasing department.
be introduced to measure the
(c) Discuss the problems that the (8 marks)
in implementing a management of IDDI
Company might encounter
system of benchmarking and
problems should be successfully addressed. recommend how such
(6 marks)
(Total: 20 marks)
 BALANCED n
targets and measurinc

(a) The four perspectives

in a balanced
scorecard
for performance
approach are: rformanc
what customers value mo
a customer perspective: identifying
(1) the processes th
(2) an systems perspective: identirying
internal customers must
excellence to satisíy
be performed with
learning perspective:
and the or
what must the organisation
(3) an innovation
knowledge and experience
do to innovate or add to its
(4) a financial perspective.

(b)
(b) A professional football club
Here are some suggestions
Customer perspective
Customers value:
results, winning
an enjoyable time at football matches: being entertained (for example
with food and drink).
Targets for performance might be:
the size of attendances at matches
results (points, position in the league table, promotion)
revenue from catering: number of meals sold before matches
Internal processes perspective
Processes that must be excellent to
support customer expectations ug
include ticket selling, getting customers
into the ground quickly on ma
days, catering efficiency, effective
security and policing, and so on.
Targets for performance might be:
Onumber of season ticket sales
targets for number of spectators per minute
turnstile going througn ed
speed of
producing meals in the
number of
catering area
incidents and police
arrests on match days.
 Innovation and learning perspective
Value can be created
by developing well-trained footballers
Coaching and
training, and
make profits. possibly selling througn
them in the transfer market to

Targets for performance might be:

average fitness levels for
players
average number of hours of training each week per player
O revenue from transfers
Financial perspective
Presumably, the football club will be
owners. Targets for expected to make profitsfor ts
investment.
performance might be profits each year, and return on

Subsidiary financial targets might be average wages per

revenue from sponsorship deals. player, and

VALUE CHAIN

(a) Value chain activities

Primary activities Secondary activities

Inbound logistics Procurement
Operations Human resource management
Outbound logistics Technological development
Marketing and sales Infrastructure (general management, accounting9
etc)
Service (after sales)
depends
Companies compete with each other, and their
relative success
(b) their value chain.
on their ability to add value throughout
that add value. They should
Companies should try to develop strategies consider whether it can be
chain and
look at each activity in the value
value.
improved to add more
its ability to add
its performance by looking at
A company can also a s s e s s and each
value chain (each primary activity
value in each part of the
secondary activityy).
(c) Primary activities:
fora book. The material is
Publisher or author
thinks ofthe idea
i) written o r assembled.

prepared
what the author has
(i) The publisher edits
for printing
(ii) The text is prepared
(iv) Printing
distribution of books
Warehousing and direct (schools,
(v) intermediaries
(bookshops) or

(vi) Sale of books to

colleges a n d universities

(unsold) copies
back returned
After-sales service:
taking
 (d) Primary activities
Marketing and
Inbound
logistics
Operations
sales After-sales
service
Obtaining
Managing
incoming calls:
Taking calls
Customer Handing claims
information
call systems
Targeting
Providing price
quotations Customers Detecting
fraudulent
quickly claims
Advertising and
Cheap prices
for insurance other forms of Settlement of
marketing
sUccessful
policies claims
6 TOTAL QUALITY
(a) The key aspects of Total Quality Management are
(1) continuous improvement in operations and systems, to improve Cuels

(2) ality
a policy of trying to achieve zero defects in production
(getting thin.
right the first time)
(3) the use of statistical quality control to prevent defective items reachie
Customers hing
(4) employee involvement in efforts to improve quality, for
quality circles
example by usina
(5) measures to improve production systems, such as
minimising inventorv
levels, minimising the movement of materials, minimising
these take time and money but do not add setup times: all
any value.
(b) Quality-related costs can be grouped into four categories:
(1) Prevention costs: these are costs incurred in
problems. Important elements of prevention costs arepreventing
costs of
quality
good product design and costs of training ensuring
employees.
(2) Appraisal costs: these are the costs of testing for quality, such as
inspection costs and quality control costs.
(3) Internal failure costs: these are the
costs of faults and errors in
processing, such as costs of waste, scrap and re-working rejected items.
(4) External failure costs: these are the
costs of
product (or service) has been delivered to the quality problems after
of handling customer customer such as the co
complaints, and the loss of future business/sales
In the traditional approach,
the aim should be to
related costs. At this minimise the total of qualiuy
cost-minimising
The TQM approach is that all errors
level of quality, some errors
wi
CCur.

should be avoided and

is unacceptable. External failure
costs sub-standaidrth worth

spending money on prevention and

are
under-estimated, and it and
external failure costs, which will be appraisal costs to avoid intern
higher.
(c) Key aspects of Ji|
management are
(1) Hold no
inventory. This requires avoid raw
just-in-time purchas
materials inventory) and just-in-time asing (to goods

inventory). Holding inventory is production (to avoid shed

wasteful, and does not addfinis

vaiu
 (2) Just-in-time purchasing calls for close collaboration with key suppliers.
(3) Just-in-time production involves trying to produce items exactly in time to
meet customer needs for delivery: this calls for fast production times and
avoiding breakdowns and any hold-ups or bottleneck in production.

(4) Production systems need to be flexible, to react to changes in demand

from customers.

(5) Avoid over-production (which results in finished goods inventory).

(6) Eliminate inefficiency and poor quality in production eliminate waste,
minimise the movement of materials (which adds no value), minimise
waiting times, improve the layout of the factory floor (to minimise
movement of materials), reduce setup times (which do not add value)
and improve visibility in the work place (by using cards or other
signalling systems).
Activity based management uses activity based costing to analyse the cost of
(d) activities within an organisation. It focuses on the cost of activities and the
causes of these costs occurring (cost drivers). The aim of ABM should be to

improve the value btained from the activities, eliminate activities that do not
add value or reduce the costs of activities.

cOST AND QUALITY

(1) Total Quality Management

TOM seeks to reduce quality costs, where quality costs are categorised as:

Prevention costs

Appraisal costs (inspection costs, etcetera)

Internal failure costs (costs of scrap, waste, re-working and so on)
returned
External failure costs (cost of lost customer goodwill, lost sales,
goods from customers, warranty costs)
total quality costs.
The aim should be to improve quality and reduce
TOM also seeks continuous improvement: improvement can be achieved by
reducing costs or improving quality.
(2) Activity based costing
related to achieving quality, such as
A system of ABC might identify activities
cost driver for those activities. ABC could
quality planning and control, and a
then be used to identify the costs related to the quality activity.

(3) Balanced scorecard

element for the financial
In balanced scorecard, cost targets could be an
a
element in the balanced scorecard for
perspective. Quality targets could be an
the internal perspective or the customer perspective.

(4) Just in Time management

JIT seeks reductions in
costs through improvements in production
eliminate breakdowns and bottlenecks, so that
performance. The aim is to
tems can be manufactured as quickly possible.
as
 (2) Just-in-time
(3)
Just-in-time purchasing calls for close
meet production collaboration with
customer needs forinvolves trying to key suppueoliers.
avoiding breakdowns this produce
and delivery:
ce ite
items exactly in time to
(4) Production any hold-ups calls for fast
systems need to be
from customers.
or
botleneckproduction
in times aand
flexible, to react to production
(5) Avoid changes
nges in demand

(6) Eliminate
over-production (which results in finished
minimise theinefficiency and poor quality in goods inventory)
waiting times,movement of materials (which production eliminate wast
movement of improve the layout of
the
adds no
value), min
and improve materials), reduce setup factory floor (to minimise
visibility in the times (which do not add
signalling systems). work place (by
using cards or value) other
(d) Activity based management
activities within an uses activity
causes of these costs organisation. It focusesbased costing to analyse the
on the cost of costo
occurring (cost activities and ne
improve the value obtained drivers).
from the activities,
The aim of ABM
should be
add value or reduce the costs of tO
eliminate activities that do not
activities.
1 coST AND QUALITY
(1) Total Quality
Management
TOM seeks to reduce
quality costs, where quality costs
Prevention costs
are categorised as
Appraisal costs (inspection costs, etcetera)
Internal failure costs (costs of scrap,
waste, re-working and so on)
External failure costs (cost of lost customer
goodwill, lost sales, returned
goods from customers, warranty costs)
The aim should be to improve quality and reduce total
quality costs.
TOM also seeks continuous improvement: improvement can be achieved
reducing costs or improving quality. by
(2) Activity based costing
A system of ABC might identify activities related to achieving quality, such as
quality planning and control, and a cost driver for those activities. ÁBC could
then be used to identify the costs related to the quality activity.

(3) Balanced scorecard

In a balanced scorecard, cost targets could be an element for the financial
perspective. Quality targets could be an element in the balanced scorecard for
the internal perspective or the customer perspective

(4) Just in Time management

JIseeks
JIT seeks reductions in costs through improvements in production
performance. The aim is to eliminate breakdowns and bottlenecks, so that
ems can be manufactured as quickly as possible.
 TECHNIQUES
Manggeeni ACCO7i ty

ntinuous comparison of actual

AND
REDUCTION
d e f i n e d
as
the
continu

for separate
sub-divisions
or
or to exploit fay
ane results
nd taking
avourable
cONTROL
be total variances
can
both
in
control
ad
a dv
v erse
Cost planned,
ct
c o r r e c t

(a) those
action
to
with or
management
cost of goods

in
unit
Terminol Withhout
(CIMA Officialadon
r e d u c t i o n

is the intended
is
Cost
Cost
reduction

reduct for the use

but an
approach
that
ne to
process
routine opportunity.
a the
is not perceives
reduction
management
education
places a lot
lot of empha
of
when
time accounting
is not in On
The fact
that
management

not imply
that cost
reduction

lies will
bodie
nportant.
revea An
(b)
cost
control
does
the syllabi
of all the
accounting
that c a n be used in
co techniques
e x a m i n a t i o n of

being
covered that
are clearly
techniques

not grouped
together under one reduction.
hea ng of
however, are svllabi
These techniques, through the
scattered
professional |labi and studied
Cost reduction',
but are
which cost reduction is just one
wider appication in many
for their
applications.
technology shows that acco
of information
on the study ants
The emphasis and ability to nroo
the power IT for its speed
are interested in using
short time. Also more complex software n ge
amounts of data, in a very
can analyse and identify problem situations which previously we wOu not
have been aware, until it was too late.

10 IDDI COMPANY

(a) Benchmarking has been defined as the establishment, through data

gathering, of targets and comparators through whose use relative levels of
performance (and particularly areas of underperformance)
can be identified
By the adoption of identified best practices it is hoped that
improve. performance will
A major problem facing the
accessing of information aboutmanagement
of lddi
the activities of a Company lies in the
considered to'best practice' methods of
use competitor firm that is
can be used to
avoid the
problems operating.
of information
Internal benchmarking
with other access, but comparisons
parts of the same entity limits the
benchmarking. The most common scope of what
method of
can be achieved by
process
benchmarking,
Practice' firm where the
in a different
benchmarking
benchmark for pracice is used in
and industry comparison
making comparisons does not (which means that exchanging
is a
besi
a competitor).
involve informato the exchange of trade secrets wul
ddi Company is
concerned with the
department
comparison
to
establish and processes used by its
of such would be
activities. achieve targets. The
another entity that is best
purcuc singfor
The highly regarded
re for benchimai
its managen
sharingobjective to is
information inimprove a way performance. This is best achieved
benchmarking
other, each programme.
that
As a provides mutual Denefit to Dy
of
by meS to the means

procedures. entity will be result of

able to
review making
vith each
ng comparisons
lo evaluate the the
purchasing policies
and

benchmarki
"best n g operational
practice' standardsbe ofusedperformance
should of the
to
purchasing
n tt e a m

establish basis a
hat refl
performandance with
asis for targets
regard to Durch sing activiti
 As a dired
procedures withonsequence
the other of a
comparison of existing
vhere improvem
ments can be
those improvements.
(benchmark) entity, managers can standards and
achieved and
An important benefit to be
evaluate measuresfocus
for
on
areas
programme shouldld be derived by Iddi achieving
the Company from the
ossible, so that profits can
identification
be of areas
where benchmarking
eetting of more realistic increased. cost
hdgeting. purchasing targets:Another benefit savings are
The this will resultshould be the
nersonnel will serveimproved performance in
improved
as, for example,
as a
better platform for of the purchasing
the introduction
pertormance-related pay for the of initiatives such department
purchasing department. personnel within the
(b) The benchmarking programme should
the programme begins. The be planned
company carefully and detail before
must first review
oractices. Of fundamental and assess
measurable targets and importance to the
determine how programme is the need to
current
define
measured in quantitative terms. those targets
This is critical since are
going to be
ineffective without a reliable form
of benchmarking will be
within INA Company might relate, measurement. Appropriate targets for use
for example, to
percentage of turnover, costs of inventory, amount of the cost of sales as a
number of stock-outs, the discounts
order, and the overall costs of the
number of
emergency' orders placed, obtained, the
the costs per
purchasing department.
Significant costs in terms of
management time need to be invested in the
benchmarking programme. During the preliminary
the company will need to stages of the
give detailed consideration as toprogramme,
benchmarking exercise is to be conducted. The fundamental aimhow the
of the
programme should be to obtain
comparative information so that performance
indicators/measures can be developed. In turn, these will be used to
areas in which improvements and cost identify
savings can be obtained.
When this preparation complete, the
company then needs to
Practice firm to use as a benchmark. Having done so, it must identify
a 'Best
then persuade
that firm to collaborate in the benchmarking
programme and in to particular
share information. This is not easy to accomplish, as many business entities
are reluctant to reveal confidential information to other companies.
Once the benchmarking exercise is complete ldi Company will benefit from
improved levels of efficiency and effectiveness within the purchasing
department, via better management information about performance. In
particular, improved visibility of costs incurred by the company will facilitate
better decision-making.
There are a number of potential problems inherent in undertaking a
(c)
incentive for the
programme of benchmarking. There needs to be sufficient a
mutual benefit, since the
respective parties to share information to their
on obtaining accurate
Success of the benchmarking programme depends
Moreover, it is
information about the comparator (benchmark) organisation. similar
used as a benchmark are enough
essential that the business functions must also be
The value of the exercise
to Tacilitate meaningful comparisons. need to be
involved. Behavioural issues will
SUrficient to justify the cost
Management should
any benchmarking programme. to
considered in a programme of benchmarking
Communicate the for undertaking reduce the
co-operation and
reasons
their full
involved in order to gain need to handle
the ethical
e personnel to change.
Management
in a sensitive manner
Evel of resistance the
of benchmarking
introduction to the
reassurance

nplications relating to is possible,

to provide
endeavour, insofar as
Should