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Chapter 12 in Horngren's cost accounting 16th edition textbook Current thinking is that there are two basic strategies for running a business, product differentiation and

Chapter 12 in Horngren's cost accounting 16th edition textbook

Current thinking is that there are two basic strategies for running a business, product differentiation and cost leadership.

Explain how a company, knowing its overall basic strategy, creates a strategy map from its near-term and long-term objectives, then classifies the objectives according to the four perspectives of the balanced scorecard. (Be sure to name and describe the four perspectives.)

At the end of a year, or even a few years, the accountant compares operating income in the base year with operating income in the current year. What are the three components of change in profit? One measures change in income based solely on difference in units sold in the two years being compared. Another measures change in income based on changes in selling price of the product and costs of material and conversion (i.e., labor and overhead and even administrative costs). Another measures change in income based on productivity, the use of materials and time and administrative resources to make product and to sell it. (Be sure to state which component measures what.)

The final part of the analysis is to remove the influence of outside forcesthe marketfrom company growth, and to decide which parts of each component of the change in operating income result from product differentiation and which result from cost leadership. To what must this reshuffled analysis, now based on industry market-size factor, product differentiation factor and cost leadership factor, add up?

Use the textbook only!

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