Chapter 15 - Strategic management of costs. In this chapter students will be able to: Explain how value chain analysis, supply chain, and JIT are used to improve operations; explain target costing and calculate target costs; explain kaizen costing and compare it to target costing;. | LO1 Explain how value chain analysis, supply chain, and JIT are used to improve operations LO2 Explain target costing and calculate target costs LO3 Explain kaizen costing and compare it to target costing LO4 Explain life cycle costing LO5 Explain lean accounting and discuss how it is used Chapter 15: Strategic Management of Costs LO1 Explain how value chain analysis, supply chain, and JIT are used to improve operations Value Chain Analysis A value chain is the sequence of business processes in which value is added to a product or service. Value chains explicitly recognize that no organization operates in isolation from suppliers and customers. Value-Added and Non-Value-Added Activities Value-added activities are tasks or functions that increase the worth of an organization’s products and services to customers and include the manufacturing process and other operations that allow the organization to perform processes essential for attracting new and retaining old customers. Non-value-added activities do not directly affect customers, such as accounting, while essential and related to daily operations, are not usually related to customer value. Before activities in the value chain can be improved or eliminated, they must be identified and then categorized as value-added or non-value-added activities. Supply Chain Analysis The supply chain is the flow of resources from the initial suppliers through the delivery of goods and services to customers and clients. Accountants analyze supply chains by determining inventory level requirements. Opportunities to reduce costs and improve quality are identified through tracking and analyzing usage patterns of raw materials, supplies, finished goods, and shipped goods. Just-in-Time Production With Just-in-time (JIT) production, materials are purchased and units are produced at the time customers demand them. Successful implementation of JIT systems requires that organizations do the following: Find high-quality suppliers Choose | LO1 Explain how value chain analysis, supply chain, and JIT are used to improve operations LO2 Explain target costing and calculate target costs LO3 Explain kaizen costing and compare it to target costing LO4 Explain life cycle costing LO5 Explain lean accounting and discuss how it is used Chapter 15: Strategic Management of Costs LO1 Explain how value chain analysis, supply chain, and JIT are used to improve operations Value Chain Analysis A value chain is the sequence of business processes in which value is added to a product or service. Value chains explicitly recognize that no organization operates in isolation from suppliers and customers. Value-Added and Non-Value-Added Activities Value-added activities are tasks or functions that increase the worth of an organization’s products and services to customers and include the manufacturing process and other operations that allow the organization to perform processes essential for attracting new and retaining old customers. .
