AC211 Michaelmas Term Reading Notes

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Lecture 1

Peter F Drucker: What Executives Need (Information Tools)

Traditional costing vs. Activity based costing

1. What are the differences between the two costing systems?

Toyota is an example of a company that manages from supply - creation/ making - distribution and service.

- one cost system (economic chain)

- Using Activity based costing

Cost led pricing vs. Price led costing

2. What are the differences in the two costing approaches?

Companies can practice price led costing only if they know and can manage cost of economic chain

Economic chain costing: Requires information sharing

- Often resisted

- How do you share information?

- Create a database

- Specialists are often needed to interpret some information

1. Foundation Information

- Cash flow - liquidity projections

2. Productivity Information

- EVA (Economic Value Added Analysis)

- Benchmarking (used to measure total factor productivity and manage it

3. Competence information

- core compentence: Innovation

4. Resource Allocation Information

Measuring capital appropriations

- Return on Investment - Payback period - cashflow - discounted present vale

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