How ABC was used in capital budgeting

Article Abstract:

A major company established a new division to investigate new business opportunities in the interactive television market. The company's first project was the creation of a 'cybermall' where buyers and sellers in the television marketplace can meet. Using the 'speed-to-market' strategy, senior management developed a business case forecast at a strategic level without substantial supporting detail. The chief financial officer was able to convince management not to pursue the speed-to-market strategy, but instead use an activity-based-costing (ABC) model in capital budgeting. The ABC-based approach has proven to be very useful in analyzing business opportunities and generating detailed information about the cybermall processes and activities. It has also underscored the importance of management accounts as participants in the decision-making process.

Cable Networks, Cable and other pay TV services, Interactive CATV, Accounting and auditing, Interactive television

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Frame breaking: management accountants should be prepared to drive change

Article Abstract:

'Frame breaking' refers to the abandonment of outdated traditional methods of management processes. Also described as 'out-of-the-box' thinking, frame breaking is based on the concept of reengineering. Knowing how to effect change is of greater concern to management accountants because they are responsible for providing management with timely and precise performance information, for developing budgets and plans, and for assessing business cases. It is important for these professionals to be ready to implement any change that would result in more efficient process management and better strategic decision-making. Management accountants can become change agents by gaining a good understanding of cost management techniques. Once they know how to apply these tools, they can initiate reengineering projects in their companies.

Cover Story, Cost Accounting

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