Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 30

Assessing the Use and Role of Nonfinancial Performance Indicators This question pertains to the use of nonfinancial performance indicators as part of a comprehensive management accounting and control system. You are asked to think critically about the value and challenges of using such data for performance-evaluation purposes. The following source should be accessed and read prior to answering the questions that appear below: Christopher D. Ittner and David F. Larker, “Coming Up Short on Nonfinancial Performance Measurement,” Harvard Business Review (November 2003), pp. 88-95.

Required

1. What are the primary benefits of incorporating nonfinancial performance indicators as part of an overall management accounting and control system?

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2. Why do the authors of this above-referenced article believe that many companies fail to realize the kinds of benefits listed above in (1)?

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3. The Institute of Management Accountants (IMA) recently revised its definition of “management accounting” (see www.imanet.org/pdf/definition.pdf). After accessing this statement, comment on an appropriate role of the management accountant as regards the development and use of nonfinancial performance indicators.

Step 1 of 4

Management and Control of Quality

Quality is explained as a term associated with customer satisfaction. It is the total level of satisfaction any customer gets from any organization’s products or service. There are two components of quality- Design Quality and Performance Quality. There are various approaches to setting quality related expectations and among those alternatives one is the Cost of Quality (COQ) Reporting. It provides relevant cost and revenue data used for decision-making purposes.