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C HAP TE R 2 2 Strategic management accounting and emerging issues Teaching tips and points to stress Accounting as an information and communication system provides the organisation with a means to implement an organisation-wide strategy and the tools by which to evaluate the success of that strategy.
To be deemed successful, any endeavour has to be evaluated by some meaningful measures. The balanced scorecard here, too, provides what is useful. Though all of the factors are
incorporated in the evaluation, the one measure – operating income – serves a profit-seeking organisation the best. With the analysis format presented in Chapter 22, using the three components of growth, price
recovery and productivity, operating income of the current year in comparison with the previous year will yield specific information for judging the success of a cost-leadership or product differentiation strategy. Operating income is, of course, the product of the accounting system and its use demands that the cost or management accountant understand its purpose in the specific situation as well as the broader context of strategy implementation and evaluation. A helpful discussion of capacity needs comes at the end of the chapter. Strategic management that may include reengineering (an across-functions organisation-wide approach) will cause change within an organisation. One of those changes maybe more effective and efficient
use of existing capacity, thereby causing excess. Identifying and managing unused capacity is addressed. Chapter 22 concludes with the expanded view of the role of cost accounting for an organisation. To fully grasp the significance and vital role of management accounting, one needs to look at the whole of the organisation. This is covered by the case study problems that follow the chapter.
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