Domestic auto parts case study balanced scorecard

MANAGEMENT ACCOUNTING Information for Decision-Making and Strategy Execution

S I X T H E D I T I O N

Anthony A. Atkinson University of Waterloo

Robert S. Kaplan Harvard University

Ella Mae Matsumura University of Wisconsin–Madison

S. Mark Young University of Southern California

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Copyright © 2012, 2007, 2004, 2001, 1997 by Pearson Education, Inc., Upper Saddle River, New Jersey, 07458. Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This publication is protected by Copyright and permission should be obtained from the publisher prior to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by any means, electronic, mechanical, photocopying, recording, or likewise. For information regarding permission(s), write to: Rights and Permissions Department.

Library of Congress Cataloging-in-Publication Data Management accounting / Anthony A. Atkinson . . . [et al.].—6th ed.

p. cm. Includes index. ISBN-13: 978-0-13-702497-1 ISBN-10: 0-13-702497-5

1. Managerial accounting. I. Atkinson, Anthony A. II. Title. HF5657.4.M328 2012 658.15�11—dc22

2011003287

10 9 8 7 6 5 4 3 2

ISBN-10: 0-13-702497-5 ISBN-13: 978-0-13-702497-1

This book is dedicated to our parents and families.

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Preface xvii

Acknowledgments xxi

About the Authors xxiii

CHAPTER 1 How Management Accounting Information Supports Decision Making 1

CHAPTER 2 The Balanced Scorecard and Strategy Map 15

CHAPTER 3 Using Costs in Decision Making 62

CHAPTER 4 Accumulating and Assigning Costs to Products 121

CHAPTER 5 Activity-Based Cost Systems 165

CHAPTER 6 Measuring and Managing Customer Relationships 218

CHAPTER 7 Measuring and Managing Process Performance 252

CHAPTER 8 Measuring and Managing Life-Cycle Costs 301

CHAPTER 9 Behavioral and Organizational Issues in Management Accounting and Control Systems 340

CHAPTER 10 Using Budgets for Planning and Coordination 393

CHAPTER 11 Financial Control 462

Glossary 510

Subject Index 518

Name and Company Index 524

v

BRIEF CONTENTS

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Preface xvii

Acknowledgments xxi

About the Authors xxiii

CHAPTER 1 How Management Accounting Information Supports Decision Making 1

What Is Management Accounting? 2 Management Accounting and Financial Accounting 2 A Brief History of Management Accounting 3

IN PRACTICE: Definition of Management Accounting (2008), Issued by the Institute of Management Accountants 4

Strategy 5 The Plan-Do-Check-Act (PDCA) Cycle 6

IN PRACTICE: Company Mission Statements 7 Behavioral Implications of Management Accounting Information 9 Summary 10 Key Terms 10 Assignment Materials 10

CHAPTER 2 The Balanced Scorecard and Strategy Map 15

The Balanced Scorecard 19 Strategy 23

IN PRACTICE: Infosys Develops a Balanced Scorecard to Describe and Implement Its Strategy 24

Balanced Scorecard Objectives, Measures, and Targets 24 Creating a Strategy Map 25

Financial Perspective 26 Customer Perspective 27 Process Perspective 31 Learning and Growth Perspective 35

Strategy Map and Balanced Scorecard at Pioneer Petroleum 36 Financial Perspective 36 Customer Perspective 37 Process Perspective 39 Learning and Growth Perspective 40

Applying the Balanced Scorecard to Nonprofit and Government Organizations 43 IN PRACTICE: A Balanced Scorecard for a Nonprofit Organization 44

Managing with the Balanced Scorecard 45 Barriers to Effective Use of the Balanced Scorecard 46 Epilogue to Pioneer Petroleum 48

vii

CONTENTS

Summary 49 Key Terms 49 Assignment Materials 50

CHAPTER 3 Using Costs in Decision Making 62

How Management Accounting Supports Internal Decision Making 63

Pricing 63 Product Planning 63 Budgeting 64 Performance Evaluation 64 Contracting 64

Variable and Fixed Costs 64 Variable Costs 64 Fixed Costs 66

Cost-Volume-Profit Analysis 66 Developing and Using the CVP Equation 67

IN PRACTICE: Introducing Uncertainty into Cost Volume Profit Analysis 68 Variations on the Theme 68

IN PRACTICE: Breakeven on a Development Project 69 Financial Modeling and What-If Analysis 69

IN PRACTICE: Cost-Volume-Profit Analysis 69 The Multiproduct Firm 70

IN PRACTICE: Estimating the Effect of Unit Sales on Share Price 70 The Assumptions Underlying CVP Analysis 72

Other Useful Cost Definitions 72 Mixed Costs 72 Step Variable Costs 73 Incremental Costs 73 Sunk Costs 74

IN PRACTICE: Sunk Costs 74 IN PRACTICE: Overcoming the Sunk Cost Effect 75 IN PRACTICE: Human Behavior and Sunk Costs 75 Relevant Cost 76 Opportunity Cost 76 Avoidable Cost 77

Make-or-Buy—The Outsourcing Decision 78 IN PRACTICE: Contracting Out 79 Manufacturing Costs 79

The Decision to Drop a Product 82 IN PRACTICE: Be Wary When Labeling Departments Losers 83

Costing Orders 85 Costing Orders and Opportunity Cost Considerations 86

Relevant Cost and Short-Term Product Mix Decisions 87 Multiple Resource Constraints 89

IN PRACTICE: Choosing the Least Cost Materials Mix 90 Building the Linear Program 90 The Graphical Approach to Solving Linear Programs 91

viii Contents

Epilogue to Nolan Industries 93 IN PRACTICE: Excel’s Goal Seek and Solver 96

Summary 96 Key Terms 97 Assignment Materials 97

CHAPTER 4 Accumulating and Assigning Costs to Products 121

IN PRACTICE: On the Importance of Understanding Costs in the Restaurant Business 122

Cost Management Systems 123 Cost Flows in Organizations 123

Manufacturing Organizations 123 Retail Organizations 124 Service Organizations 124

Some Important Cost Terms 125 Cost Object 125 Consumable Resources 125 Capacity-Related Resources 125 Direct and Indirect Costs 125

IN PRACTICE: Cost Objects 125 IN PRACTICE: Indirect Costs 126 Cost Classification and Context 127 Going Forward 127

Handling Indirect Costs in a Manufacturing Environment 128 Multiple Indirect Cost Pools 130 Cost Pool Homogeneity 132

Overhead Allocation: Further Issues 134 Using Planned Capacity Cost 134

IN PRACTICE: Why Costing Matters 135 Reconciling Actual and Applied Capacity Costs 135 Estimating Practical Capacity 138

Job Order and Process Systems 138 Job Order Costing 138 Process Costing 139 Some Process Costing Wrinkles 141 Final Comments on Process Costing 142

Epilogue to Strict’s Custom Framing 144 Summary 145 Appendix 4-1 Allocating Service Department Costs 146 Key Terms 150 Assignment Materials 150

CHAPTER 5 Activity-Based Cost Systems 165

Traditional Manufacturing Costing Systems 167 Limitations of Madison’s Existing Standard Cost System 170 Vanilla Factory and Multiflavor Factory 170 Activity-Based Costing 172

Calculating Resource Capacity Cost Rates 173 Calculating Resource Time Usage per Product 174

Contents ix

x Contents

Calculating Product Cost and Profitability 175 Possible Actions as a Result of the More Accurate Costing 177

IN PRACTICE: Using Activity-Based Costing to Increase Bank Profitability 178 Measuring the Cost of Unused Resource Capacity 179 Fixed Costs and Variable Costs in Activity-Based Cost Systems 179 Using the ABC Model to Forecast Resource Capacity 181 Updating the ABC Model 184

IN PRACTICE: W.S. Industries Uses ABC Information for Continuous Improvement 185

Service Companies 187 Capacity Cost Rate 188 Calculating the Time Equation for the Consumption of Broker’s Capacity 189

Implementation Issues 189 Lack of Clear Business Purpose 190 Lack of Senior Management Commitment 190 Delegating the Project to Consultants 190 Poor ABC Model Design 191 Individual and Organizational Resistance to Change 191 People Feel Threatened 192

Epilogue to Madison Dairy 192 Summary 193 Appendix 5-1 Historical Origins of Activity-Based Costing 194 Key Terms 196 Assignment Materials 196

CHAPTER 6 Measuring and Managing Customer Relationships 218

Measuring Customer Profitability: Extending the Madison Dairy Case 220

Reporting and Displaying Customer Profitability 222

IN PRACTICE: Building a Whale Curve of Customer Profitability 224 Customer Costs in Service Companies 224

Increasing Customer Profitability 226 Process Improvements 226 Activity-Based Pricing 226 Managing Relationships 226 The Pricing Waterfall 227

Salesperson Incentives 232 Life-Cycle Profitability 233 Measuring Customer Performance with Nonfinancial Metrics 235

Customer Satisfaction 235 Customer Loyalty 236 The Net Promoter Score 238

Epilogue to Madison Dairy 239 Summary 240 Key Terms 240 Assignment Materials 241

CHAPTER 7 Measuring and Managing Process Performance 252

Process Perspective and the Balanced Scorecard 255 Facility Layout Systems 255

Process Layouts 256 Product Layouts 257

IN PRACTICE: Manufacturing a CD 258 Group Technology 259

Inventory Costs and Processing Time 259 Inventory and Processing Time 259 Inventory-Related Costs 260 Costs and Benefits of Changing to a New Layout: An Example Using Group Technology 260 Summary of Costs and Benefits 266

IN PRACTICE: History of Lean Manufacturing 267 Cost of Nonconformance and Quality Issues 268

Quality Standards 268 Costs of Quality Control 269

Just-in-Time Manufacturing 270 Implications of JIT Manufacturing 270 JIT Manufacturing and Management Accounting 271

IN PRACTICE: Using Lean Manufacturing in a Hospital Setting 272

Kaizen Costing 273 Comparing Traditional Cost Reduction to Kaizen Costing 273 Concerns about Kaizen Costing 274

Benchmarking 275 Stage 1: Internal Study and Preliminary Competitive Analyses 276 Stage 2: Developing Long-Term Commitment to the Benchmarking Project and Coalescing the Benchmarking Team 277 Stage 3: Identifying Benchmarking Partners 277 Stage 4: Information Gathering and Sharing Methods 278 Stage 5: Taking Action to Meet or Exceed the Benchmark 279

IN PRACTICE: Benchmarking Mobile Web Experiences 279 Epilogue to Blast from the Past Robot Company 280

Production Flows 280 Effects on Work-in-Process Inventory 281 Effect on Production Costs 281 Cost of Rework 282 Cost of Carrying Work-in-Process Inventory 283 Benefits from Increased Sales 283 Summary of Costs and Benefits 284

Summary 285 Key Terms 285 Assignment Materials 285

CHAPTER 8 Measuring and Managing Life-Cycle Costs 301

Managing Products over Their Life Cycle 302 Research, Development, and Engineering Stage 303 Manufacturing Stage 303 Postsale Service and Disposal Stage 304

Contents xi

Target Costing 305 A Target Costing Example 308 Concerns about Target Costing 314

IN PRACTICE: Target Costing and the Mercedes-Benz M-Class 315

Breakeven Time: A Comprehensive Metric for New Product Development 316 Innovation Measures on the Balanced Scorecard 320

Market Research and Generation of New Product Ideas 320 Design, Development, and Launch of New Products 321

IN PRACTICE: Life-Cycle Revenues: The Case of Motion Pictures 321

Environmental Costing 324 Controlling Environmental Costs 324

IN PRACTICE: The Cisco Take-Back and Recycle Program 328 IN PRACTICE: Scientific Progress and the Reduction of Environmental Costs: The Case of Chromium in Groundwater 328

Summary 329 Key Terms 329 Assignment Materials 329

CHAPTER 9 Behavioral and Organizational Issues in Management Accounting and Control Systems 340

What Are Management Accounting and Control Systems? 342 The Meaning of “Control” 342

Characteristics of a Well-Designed MACS 342 Technical Considerations 342 Behavioral Considerations 343

The Human Resource Management Model of Motivation 344 The Organization’s Ethical Code of Conduct and MACS Design 345

Avoiding Ethical Dilemmas 345 Dealing with Ethical Conflicts 346

IN PRACTICE: Does Cheating at Golf Lead to Cheating in Business? 347 The Elements of an Effective Ethical Control System 349 Steps in Making an Ethical Decision 349 Motivation and Congruence 349 Task and Results Control Methods 351

IN PRACTICE: Monitoring in the Workplace 351 Using a Mix of Performance Measures: A Balanced Scorecard Approach 353

The Need for Multiple Measures of Performance: Non–Goal-Congruent Behavior 353 Dysfunctional Behavior 353 Using the Balanced Scorecard to Align Employees to Corporate Goals and Business Unit Objectives 354 Change Management 355

Empowering Employees to Be Involved in MACS Design 355 Participation in Decision Making 355 Education to Understand Information 356

xii Contents

Behavioral Aspects of MACS Design: An Example from Budgeting 357 Designing the Budget Process 357 Influencing the Budget Process 359

Developing Appropriate Incentive Systems to Reward Performance 360

Choosing between Intrinsic and Extrinsic Rewards 361 Extrinsic Rewards Based on Performance 362 Effective Performance Measurement and Reward Systems 362 Conditions Favoring Incentive Compensation 364 Incentive Compensation and Employee Responsibility 364 Rewarding Outcomes 364 Managing Incentive Compensation Plans 365 Types of Incentive Compensation Plans 366

IN PRACTICE: UNIBANCO—Tying the Balanced Scorecard to Compensation 367

Epilogue to Advanced Cellular International and Chapter Summary 371 Key Terms 372 Assignment Materials 373

CHAPTER 10 Using Budgets for Planning and Coordination 393

Determining the Levels of Capacity-Related and Flexible Resources 394 The Budgeting Process 395

The Role of Budgets and Budgeting 395 The Elements of Budgeting 397 Behavioral Considerations in Budgeting 398 Budget Components 398 Operating Budgets 400 Financial Budgets 400

The Budgeting Process Illustrated 400 Oxford Tole Art, Buoy Division 400 Demand Forecast 403 The Production Plan 403 Developing the Spending Plans 405 Choosing the Capacity Levels 406 Handling Infeasible Production Plans 408

Interpreting the Production Plan 408 The Financial Plans 409 Understanding the Cash Flow Statement 409 Using the Financial Plans 413 Using the Projected Results 414

What-If Analysis 415 Evaluating Decision-Making Alternatives 415 Sensitivity Analysis 415

Comparing Actual and Planned Results 417 Variance Analysis 417 Basic Variance Analysis 418 Canning Cellular Services 418 First-Level Variances 420 Decomposing the Variances 420 Planning and Flexible Budget Variances 421

Contents xiii

Quantity and Price Variances for Material and Labor 422 Sales Variances 428

The Role of Budgeting in Service and Not-For-Profit Organizations 431 Periodic and Continuous Budgeting 431 Controlling Discretionary Expenditures 432

Incremental Budgeting 432 Zero-Based Budgeting 433 Project Funding 433

Managing the Budgeting Process 434 Criticisms of the Traditional Budgeting Model and the “Beyond Budgeting” Approach 434

Epilogue to the California Budget Crisis 435 Summary 436 Key Terms 437 Assignment Materials 437

CHAPTER 11 Financial Control 462

The Environment of Financial Control 463 Financial Control 464 The Motivation for Decentralization 464

IN PRACTICE: Standard Operating Precedures at Mercedes-Benz USA 465 IN PRACTICE: Evaluating Performance at McDonald’s Corporation Restaurants 466

Responsibility Centers and Evaluating Unit Performance 467 Coordinating Responsibility Centers 467

IN PRACTICE: The High Cost of Coordination 468 Responsibility Centers and Financial Control 469

IN PRACTICE: Nonfinancial Performance Measures at Federal Express: The Service Quality Indicator 469 Responsibility Center Types 470

IN PRACTICE: Investment Centers at General Electric in 2010 472 Evaluating Responsibility Centers 474

IN PRACTICE: Financial Statement Business Segment Reporting 477

Transfer Pricing 481 Approaches to Transfer Pricing 481

IN PRACTICE: International Transfer Pricing 482 Transfer Prices Based on Equity Considerations 485

Assigning and Valuing Assets in Investment Centers 486 The Efficiency and Productivity Elements of Return on Investment 487

Assessing Productivity Using Financial Control 489 Questioning the Return on Investment Approach 489

xiv Contents

IN PRACTICE: Labor Productivity in a Consultancy 489 IN PRACTICE: Managing Productivity in Airlines 490 Using Residual Income 490

IN PRACTICE: Organization Adopt Economic Value Added for Different Reasons 492

The Efficacy of Financial Control 493 Epilogue to Adrian’s Home Services 494 Summary 496 Key Terms 497 Assignment Materials 497

Glossary 510

Subject Index 518

Name and Company Index 524

Contents xv

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Intended Audience

The sixth edition of Management Accounting targets undergraduate and MBA courses in managerial accounting with a major redesign and several new topics. It integrates state-of-the-art thinking on recent innovations in management accounting including:

• the Balanced Scorecard, • strategy maps, • time-driven activity-based costing for product and customer profitability

analysis, • target costing, • environmental costing, and • the design of management control systems.

The author team consists of top scholars who have served as advisers to small, medium-sized, and large enterprises in the private, nonprofit, and public sectors. They present a conceptually sound and practically relevant perspective on the role of management accounting information in informing important decisions made by business managers, aligning employees and organizational units with strategic objectives, driving continuous process improvements, and influencing the design of products and services. The sixth edition provides problems and cases drawn from the authors’ practical experience including cases from Harvard Business School and the Institute of Management Accountants (IMA) that engage students in strategic and organizational analyses. This action orientation makes the text an excellent fit for management accounting courses taught from a managerial perspective. Although this text is primarily intended for business and accounting students, it will also be useful to practicing managers who would benefit from understanding how to mobi- lize management accounting to drive value in their organizations.

All Enterprises Need Management Accounting

Management accounting information creates value for all types of organizations: private sector companies attempting to deliver superior and sustainable returns to shareholders, nonprofit and nongovernmental organizations (NGOs) striving to deliver positive social impact to targeted constituents, and public-sector agencies that are empowered to improve the lives of citizens. The common thread across all of these diverse enterprises is how to implement a strategy that delivers long-term value to their stakeholders. Strategy implementation requires decision making that is aligned with strategic goals, continuous improvement of critical processes, motiva- tion and alignment of employees with organizational objectives, and innovation that develops new products and services. This book is the only management accounting book that explains in detail how to use measurement and management systems for sustainable value creation.

xvii

PREFACE

New to This Edition

• Chapter 1 introduces the plan–do–check–act cycle as an organizing framework for embedding multiple management accounting processes.

• Chapter 2 is an updated and repositioned chapter on the Balanced Scorecard and strategy maps. It uses an extended example, drawn from an actual company’s experience, to illustrate how to develop a Balanced Scorecard and strategy map for a company’s new strategy. Placing this chapter at the front of the book helps students to understand the strategic context for the measure- ment, decision-making, and control topics discussed in subsequent chapters.

• Chapter 3 is an entirely rewritten chapter for introducing students to funda- mental cost concepts. Variable, fixed, incremental, relevant, sunk, avoidable, and opportunity costs are explained and illustrated. Students’ understanding of the concepts is highlighted through decision-making examples on make versus buy, product abandonment, financial modeling for what-if analyses, and product mix optimization with constrained resources. The chapter ends with several numerical examples that enable students to test their ability to apply fundamental cost concepts in diverse settings. In addition, the chapter contains a new case on product costing and decision analysis in the wine industry.

• Chapter 4, also a major update for the sixth edition, provides the foundation for understanding how cost systems can be designed to assign direct and indirect costs to cost objects, such as products, services, and operating depart- ments. It features an explicit and extensive treatment of capacity measurement and costing that sets the stage for the activity-based costing material that follows in subsequent chapters.

• Chapter 5 covers the measurement and management of product costs through the framework of time-driven activity-based costing. This recent innovation helps product costing to be done in a simple, transparent, accurate, and flexible manner. The chapter features the many ways managers can eliminate losses and improve product profitability once they understand the fundamental economics of their products and services.

• Chapter 6, measuring and managing customer relationships, is an entirely new chapter for the sixth edition. The chapter is new not only to the text but also to most management accounting courses. It features the strategic importance of understanding and transforming customer profitability through decisions on product features, product mix, order pricing, and customer relationships. Entirely new material in this chapter includes the pricing waterfall for measur- ing customer discounts, promotions, and allowances, and an extended treat- ment of how to derive customer satisfaction and loyalty metrics for a business unit’s Balanced Scorecard.

• Chapter 7 features the role for management accounting information to drive strategy execution through enhanced continuous improvement activities, includ- ing lean management, kaizen costing, theory of constraints, cost of quality, six sigma, just-in-time, and benchmarking techniques. As in Chapter 6, new mater- ial illustrates how to derive process improvement performance measures for the organization’s Balanced Scorecard.

• Chapter 8 introduces students to the total life-cycle costing concept. At the front end, the chapter shows how target costing can inform decisions made dur- ing the product design and development stages. Target costing helps companies to develop products that meet customers’ functionality requirements at a cost that yields targeted profit margins. New material in the chapter introduces the breakeven time concept for measuring the performance of the product

xviii Preface

development process, and the selection of other innovation metrics that compa- nies can incorporate into their Balanced Scorecards. The chapter concludes by examining processes and metrics at the back end of the product life cycle, when consumers dispose of or return their used products.

• The sixth edition drops two topics, capital budgeting and financial ratio analysis, that our research shows are now usually covered in other courses. It retains and updates chapters from the fifth edition on the behavioral and organizational aspects of management accounting, budgeting, and financial and managerial control of decentralized operations.

• Also retained are the valuable HBS cases, first introduced in the fifth edition: * Sippican (A) and (B) (integrating time-driven activity-based costing,

budgeting, and the Balanced Scorecard), * Midwest Office Products (time-driven ABC in a service setting), * Chadwick, Inc. (designing a Balanced Scorecard for a pharmaceutical

company), and * Domestic Auto Parts (building a Balanced Scorecard).

• An additional HBS case is new to the sixth edition: * Citibank: Performance Evaluation (the costs and benefits of using multiple

performance measures to evaluate performance).

All of these cases are brief for preparation ease and are accompanied by Instructor Case Notes found in the instructor resources.

• The sixth edition also retains the following Institute of Management Accountants cases: * How Mercedes-Benz used target costing to develop its new SUV and * Precision Systems, Inc.: Improving processes in order entry, with linkages to

value-chain ideas (effects on customers, sales representatives, manufacturing, and other internal uses of the order entry information).

• Readings in Management Accounting, Sixth Edition, by S. Mark Young This supplement contains 53 recent and classic business press and academic articles that correlate with the chapter coverage in Management Accounting, Sixth Edition. Ideal for additional content reinforcement and for any case-based course, this supplement includes articles from a variety of sources to show the application of management accounting in diverse organizational settings.

Instructor Materials

The following supplements are available to adopting instructors. For detailed descriptions, please visit www.pearsonhighered.com.

• Instructor’s Manual—teaching tips and additional resources for each chapter. • Test Bank—over 1,200 test questions. • Solutions Manual—solutions for every question, exercise, problem,

and HBS case study. • PowerPoint slides—presentations for every chapter.

Preface xix

www.pearsonhighered.com
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We would like to acknowledge, with thanks, the individuals who made this text possible.

We appreciate and benefited from the reviews and suggestions of Professors:

Signe Cahn, Webster University Alan Czyzewski, Indiana State University Fara Elikai, University of North Carolina–Wilmington Judith Harris, Nova Southeastern University Kay Poston, South University Barbara Pughsley, South University P. K. Sen, University of Cincinnati

For the sixth edition, we also thank the following individuals:

Carol O’Rourke, Production Project Manager Christina Rumbaugh, Editorial Project Manager Lynn Steines, Project Manager, S4Carlisle Publishing Services Stephanie Wall, Acquisitions Vice President

We also gratefully acknowledge Professors Shahid Ansari, Jan Bell, Thomas Klammer, and Carol Lawrence for allowing us to use some of their material on target costing; Professor Priscilla Wisner for permitting us to use her case on the wine industry; Carolyn Streuly for her valuable contributions; and Professor Michael D. Shields and Professor Thomas Lin for their continuing support of the book.

The authors and product team would appreciate hearing from you! Let us know what you think about this book by writing to stephanie.wall@pearson.com. Please include “Feedback about AKMY 6e” in the subject line.

xxi

ACKNOWLEDGMENTS

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Anthony A. Atkinson

A professor in the School of Accountancy at the University of Waterloo, Anthony A. Atkinson received a bachelor of commerce and M.B.A. degrees from Queen’s University in Kingston, Ontario, and M.S. and Ph.D. degrees in industrial administra- tion from Carnegie-Mellon University in Pittsburgh. He is a fellow of the Society of Management Accountants of Canada and has written or coauthored two texts, vari- ous monographs, and more than 35 articles on performance measurement and cost- ing. In 1989, the Canadian Academic Accounting Association awarded Atkinson the Haim Falk Prize for Distinguished Contribution to Accounting Thought for his mono- graph that studied transfer pricing practice in six Canadian companies. He has served on the editorial boards of two professional and five academic journals and is a past editor of the Journal of Management Accounting Research. Atkinson also served as a member of the Canadian government’s Cost Standards Advisory Committee, for which he developed the costing principles it now requires of government contractors.

Robert S. Kaplan

Robert S. Kaplan is Baker Foundation Professor at the Harvard Business School, where he has taught for 27 years. Previously, he served on the faculty and as Dean of the Tepper Business School at Carnegie-Mellon University. Kaplan received a B.S. and M.S. in electrical engineering from M.I.T., and a Ph.D. in operations research from Cornell University.

Kaplan has done extensive writing, teaching, and consulting on linking cost and performance management systems to strategy implementation. He has helped to develop both activity-based costing and the Balanced Scorecard. His 14 books have been translated into 28 languages. Kaplan’s most recent books are The Execution Premium with David Norton and Time-Driven Activity-Based Costing with Steven Anderson. He has also authored or coauthored 21 Harvard Business Review articles and more than 100 others in academic and professional journals.

Kaplan was inducted into the Accounting Hall of Fame in 2006 and received the Lifetime Contribution Award from the Management Accounting Section of the American Accounting Association in January 2006. In 2008, his coauthored book, Relevance Lost: The Rise and Fall of Management Accounting, received the AAA Seminal Contribution to Accounting Literature Award. His articles and books have also been recognized with several Wildman Medal and AAA Notable Contributions to Accounting Literature Awards.

Kaplan received the Outstanding Accounting Educator Award in 1988 from the American Accounting Association (AAA), the 1994 CIMA Award from the Chartered Institute of Management Accountants (UK) for “Outstanding Contributions to the Accountancy Profession,” and the 2001 Distinguished Service Award from the Institute of Management Accountants (IMA) for contributions to the practice and academic community.

xxiii

ABOUT THE AUTHORS

Ella Mae Matsumura

Ella Mae Matsumura is an associate professor in the Department of Accounting and Information Systems in the School of Business at the University of Wisconsin–Madison, and is affiliated with the university’s Center for Quick Response Manufacturing. She received an A.B. in mathematics from the University of California, Berkeley, and M.Sc. and Ph.D. degrees from the University of British Columbia. Matsumura has won two teaching excellence awards at the University of Wisconsin–Madison and was elected as a lifetime fellow of the university’s Teaching Academy, formed to promote effective teaching. She is a member of the university team awarded an IBM Total Quality Management Partnership grant to develop curriculum for total quality management education.

Professor Matsumura was a co-winner of the 2010 Notable Contributions to Management Accounting Literature Award. She has served in numerous leadership positions in the American Accounting Association (AAA). She was coeditor of Accounting Horizons and has chaired and served on numerous AAA committees. She has been secretary–treasurer and president of the AAA’s Management Accounting Section. Her past and current research articles focus on decision making, perfor- mance evaluation, compensation, supply chain relationships, and sustainability. She coauthored a monograph on customer profitability analysis in credit unions.