ACCT 454v6: Decision Analysis Report a Broken Link

This course provides advanced coverage of managerial accounting concepts and the use of accounting information for managerial decision making. This course aims to develop a conceptual understanding of the role of management accounting information in supporting management decisions.

Lesson 1


Drucker argues that while today's executives have become computer-literate, not many are information-literate. They know how to get data. But most still have to learn how to use data.
This article traces the development of product costing and pricing through four management accounting eras or paradigms.
Mersereau, A. (2006).  Pushing the art of management accounting. CMA Management, 79(9), 22-27. Despite the many new advances in management accounting practices, the implementation effectiveness of these new practices has stalled in many organizations. Mersereau provides three suggestions for increasing this effectiveness.
The article discusses the value chain concept as the central building block of strategic cost management. The authors illustrate their method of developing a value chain within an organization and then use a case study of the paper industry to illustrate their argument.
Both articles (Parts I and II) extend the authors’ work on the balanced scorecard into the area of organizational strategy. Together they introduce the idea of strategy maps and balanced scorecards to develop performance objectives and measures linked to strategy.
Both articles (Parts I and II) extend the authors’ work on the balanced scorecard into the area of organizational strategy. Together they introduce the idea of strategy maps and balanced scorecards to develop performance objectives and measures linked to strategy.

Required Readings


Lesson 2


Cooper, R., & Kaplan, R. S. (1988).  How cost accounting distorts product costs. Management Accounting, 69(10), 20-27. The authors discuss problems with traditional cost accounting, including the inadequacy of both variable and full costing methods for accurate product costing and the failure of both marginal and fixed-cost allocations.
MacArthur, J.B., Waldrup, B.E., & Fane, G.R. (2004).  Caution: Fraud overhead. Strategic Finance, 86(4), 28-32. The authors describe a situation in which the “Wapello Manufacturing Inc.” consultants is called in to investigate a potential fraud. They uncover a number of internal control problems but, as well, the analysis of the company’s records reveals large overhead accounts.
Going to the movies has always been one of society's most pleasurable pastimes. Over the past few years, though, enormous changes have occurred in the movie-making business. Changes and other factors have implications for the motion picture business, the types of movies it will produce, and how and where people will view them.

The authors discuss how the life-cycle revenues are captured by the numerous revenue streams generated after a feature film leaves theatrical release.

The authors present a method for determining whether  ABC is appropriate for a particular company.

Lesson 3


AN ABC system enabled Braintree Hospital, a private rehabilitation hospital, to develop a nursing resource consumption model for the hospital.
Max, M.  (2004). ABC trends in the banking sector: A practitioner's perspective. Journal of Performance Management, 17(3), 23-40. ABC has become common in the financial services arena, and has had a resurgence of interest from organizations worldwide. This change is being driven by a number of critical business needs which are outlined in this paper.
Kaplan, R.S., & Anderson, S.R.   (2004). Time-driven activity-based costing. Harvard Business Review, 82(11), 131-138. Many companies abandoned ABC because it did not capture the complexity of their operations, took too long to implement, and was too expensive to build and maintain. Here's a way around those problems.

Lesson 4


Pitta, D., Fanzak, F., & Fowler, D.   (2006).  A strategic approach to building online customer loyalty: Integrating customer profitability tiers, Journal of Consumer Marketing, 23(7), 421-429. The authors develop  a framework for managing  online customer loyalty. They exploit the concept of customer value tiers and show how managers can use their scarce service resources by serving profitable customers.
The authors state that loyal customers aren’t necessarily profitable and that the relationship between loyalty and profitability is a complex one. They develop a metric that they call Customer Lifetime Value (CLV) that allows companies to make consistent decisions about which customers to retain.

Lesson 5


Caterpillar Inc. incorporated 6 Sigma into all different aspects of its organization. The
company has used 6 Sigma to improve its internal processes, and has even gotten its
suppliers and dealers involved in 6 Sigma projects.

The authors discuss the way in which Caterpillar successfully applied 6 Sigma to its accounting and finance functions.

Albright, T., & Davis, S.  (1999). The elements of supply chain management. International Journal of Strategic Cost Management, 2(2), 49-65.

Lesson 6


Albright, T.L.   (1998). The Use of Target Costing in Developing the Mercedes-Benz M-Class. International Journal of Strategic Cost Management (Autumn), 13-23
The author describes how Mercedes-Benz used target costing in the design and production of the M-Class, a Sport Utility Vehicle (SUV).

Borkowski, S.C., Welsh, M.J. & Wentzel, K.,  (2010). Johnson & Johnson: A model for sustainability reporting. Strategic Finance, 92(3), 29-37. The authors detail how Johnson & Johnson accounts for the nonfinancial factors related to environmental, social, and governance issues that affect the company’s future performance.
Young, S.M., Gong, J.J., & Van der Stede, W.   (2010). The business of making money with movies. Strategic Finance, 91(8), 35-40. The authors discuss how the life-cycle revenues are captured by the numerous revenue streams generated after a feature film leaves theatrical release.

Lesson 7


Merchant, K.  (1982). The control function of management. Sloan Management Review, 23(4), 43-55. The author presents a framework for determining the appropriate use of management controls. Merchant discusses specific action controls, those designed to make sure that individuals take the most appropriate actions.
Lin, T.W.  (2005). Effective OEC management control at China Haier Group. Strategic Finance, 86(11), 39-45. Lin describes a Chinese company that has implemented a very clear cultural change based on modern-day operations and control principles.
Henry, K  (2009).  Leading with your soul. Strategic Finance, 90(8), 44-cobdivit This article describes a comprehensive leadership model whose goal is to create an ethical workplace that will lead to sustainability for companies.
Kohn, A.  (1993). Why incentive plans cannot work. Harvard Business Review, 71(5), 54-63 Kohn argues that incentive plans that link rewards to measured performance are fundamentally flawed. Citing research evidence, he believes that employees who expect to be rewarded for their efforts do not perform as well as those who do not.

Lesson 8


Albright, C., & Steele, R.  (2004). Games managers play at budget time. MIT Sloan Management Review, 45(3), 81-84. The authors describe five archetypes of bad behaviour that are used by managers to subvert the budgeting system for their own ends.
Jensen, M.,  (2000). Corporate budgeting is broken—Let's fix it. Harvard Business Review, 79(10), 94-101. The author’s thesis is that traditional corporate budgeting is a joke. The process takes an inordinate amount of time and causes usually honest people to be dishonest as they strive to low-ball targets and inflate results.
Hope, J., & Fraser, R.  (2000). Beyond  budgeting. Strategic Finance, 82(4), 30-35. This article is a strong critique of traditional budgeting. The authors discuss two new approaches to budgeting – devolution and strategic performance management. The beyond budgeting approach combines effective devolution and effective performance management systems.

Lesson 9


Elloumi, F.  (2013). An introduction to capital budgeting. This is a proposed addition to the course textbook. It provides an in-depth exploration of the capital budgeting process and decision-making considerations.
Grinyer, J.R., & Daing, N.I.  (1993). The use of abandonment values in capital budgeting—A research note. Management Accounting Research, 4(1), 49-62 Information about the abandonment values (AVs) of major capital projects may provide additional perspectives concerning risk and liquidity.  The authors discuss this possibility, and put special emphasis on managerial perspectives. The paper then outlines the results of a survey of the responses of financial managers to questions on the topic.
Muksherjee, T.K., & Henderson, G.V.   (March/April, 1987). The capital budgeting process: Theory and practice. Interfaces, 17(2), 78-90. Survey evidence in a four-stage framework for the capital budgeting process reveals that many capital budgeting practices differ from what the relevant theory prescribes.
Jacobs, D.F.   (2008). A review of capital budgeting practices. IMF Working Paper 08/160.

Lesson 10


Kaplan, R. S., Weiss, D., & Desheh, E.   (1997). Transfer pricing with ABC. Management Accounting, 78(11), 20-28. The authors trace Teva Pharmaceutical Industries’ history in arriving at a transfer price that would satisfy senior management, division managers, and the financial staff.
Epstein, M.J. and Young, S.D.  (1999). “Greening” with EVA. Management Accounting, 80(7), 45-49. The authors present a checklist of what must be considered before EVA is implemented. The checklist includes behavioural factors as well as technical factors.
Pohlen, T.L., & Coleman, B.J.  (2005). Evaluating internal operations and supply chain performance using EVA and ABC. SAM Advanced Management Journal, 70(2), 45-59. The authors provide a very clear dyadic linkage between the methods of ABC and EVA as applied to supply chain management.
Kaplan, R.  (20 December 2006). The demise of cost and profit centers. Harvard Business School Working Paper, 070-030. Kaplan discusses how the balanced scorecard approach can be used to look at the way a company organizes itself. Specifically, Kaplan argues that the distinction between cost and profit centers is no longer significant because every unit, by contributing to effective strategy execution, has the opportunity to support and create profit.