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Carson Wellington, president of Mallory Plastics, was considering a report sent to him by Emily Sorensen, vice president of operations. The report was a summary of the progress made by an activity-based management system that was implemented three years ago. Significant progress had indeed been realized. At the conclusion of the report, Emily urged Carson to consider the adoption of the Balanced Scorecard as a logical next step in the company’s efforts to establish itself as a leader in its industry. Emily clearly was impressed by the Balanced Scorecard and intrigued by the possibility that the change would enhance the overall competitiveness of Mallory. She requested a meeting of the executive committee to explain the similarities and differences between the two approaches. Carson agreed to schedule the meeting but asked Emily to prepare a memo in advance, listing the most important similarities and differences between the two approaches to responsibility accounting. Required: Prepare the memo requested by Carson.

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 13, Problem 20P
Textbook Problem
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Carson Wellington, president of Mallory Plastics, was considering a report sent to him by Emily Sorensen, vice president of operations. The report was a summary of the progress made by an activity-based management system that was implemented three years ago. Significant progress had indeed been realized. At the conclusion of the report, Emily urged Carson to consider the adoption of the Balanced Scorecard as a logical next step in the company’s efforts to establish itself as a leader in its industry. Emily clearly was impressed by the Balanced Scorecard and intrigued by the possibility that the change would enhance the overall competitiveness of Mallory. She requested a meeting of the executive committee to explain the similarities and differences between the two approaches. Carson agreed to schedule the meeting but asked Emily to prepare a memo in advance, listing the most important similarities and differences between the two approaches to responsibility accounting.

Required:

Prepare the memo requested by Carson.

To determine

Prepare the memo requested by Person C.

Explanation of Solution

Activity-Based responsibility accounting: Activity based responsibility accounting indicates a vital change regarding the manner, in which responsibility is assigned, measured and evaluated.

Strategic-based responsibility accounting: Strategic-based performance management system translates the strategy of an entity into “operational objectives and measures”.

Memo

From

Student A

To

The president

Company M

Re:  Comparison of Activity-and strategic-based responsibility accounting.

Dear Sir,

As suggested, I am giving a list of some of the main “similarities and differences” among “activity and strategic-based responsibility accounting” in advance.

Similarities:

  • Both of the approaches give emphasis to support and motivate continuous improvement.
  • Both of the approaches use “financial and nonfinancial measures”
  • Both of the approaches give importance to the process responsibility and financial responsibility.
  • Both of the approaches are based on rewards on “multidimensional performance” and lets “gainsharing” as a probable incentive structure...

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Chapter 13 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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