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Fall 2003

MAQ Fall 2003 Cover


By Audrey G. Taylor, Ph.D., and Savya Rafai
Most companies use the “lawnmower method” of cost reduction in which each department is required to reduce costs by a given percentage. Here the authors show how strategic budgeting can identify where true excesses exist in support department budgets without endangering the level and quality of the service provided and without threatening the jobs of those working in these departments.
By Brian Ballou, Dan L. Heitger, and Richard Tabor
Here is the story of how East Alabama Medical Center employs nonfinancial performance measures to improve and maintain a high level of customer service, operation, and financial success.
By L. Kevin McNelis, Ph.D., CPA, and Gary Whitsett
Many companies are using the balanced scorecard to gain insight into daily operations and to measure customer satisfaction, employee absenteeism, and a variety of activities. A visual scorecard, however, can give managers a quick overview of the current situation and enable them to see trends more easily.
By Susan B. Hughes, Ph.D., CPA, and Kathy A. Paulson Gjerde, Ph.D.
The authors surveyed financial and accounting professionals at 130 U.S. manufacturing companies regarding the use of activity-based costing (ABC), variable costing, and traditional cost systems to see what, if any, differences exist in the information generated from them. They found that there are few differences among the users but that ABC and variable-cost systems serve user needs better than traditional cost systems.
By Bruce Dehning, Ph.D.; Kevin E. Dow, Ph.D.; and Theophanis Stratopoulos, Ph.D.
In the 1980s, information technology investments were not particularly beneficial to manufacturing companies, probably because technology was just put on top of existing processes and not used to streamline and improve operations. As a result, discussions about the productivity paradox--which refers to this lack of contribution by IT to productivity at the economy-wide, industry-wide, or corporate level--started and still haven’t gone away despite evidence to the contrary. The authors explore this phenomenon and offer evidence supporting today’s IT investments.
By Allen I. Schiff, Ph.D., and Jonathan B. Schiff, Ph.D., CMA
The authors criticize Standard & Poor’s “core earnings” method of determining what goes into and out of pro forma earnings, calling it a “cookie cutter” “one size fits all” approach that may not be the right metric to use as a basis for projecting earnings. Then they offer their own approach--Recurring Earnings (RE)--as a better way to report pro forma earnings.
By Mike Thomas, Ph.D.
In a project developed for introductory management accounting classes and used in seven courses at two universities, students create a spreadsheet program to conduct “what-if” and goal-seeking analyses using the built-in financial functions of Microsoft Excel. The program is earning kudos from the students, who say it is enhancing their learning experience.
By Donald S. Holmes and Richard E. Hurley, Ph.D., CPA, J.D.
The authors take a new look at the findings in a previous Management Accounting Quarterly article on statistical process control and present another way to view the data and an alternate analysis and conclusion about what indicates process stability.
By Kenneth S. Lorek, Ph.D., CPA, and G. Lee Willinger, DBA
A new generation of financial statement analysis textbooks promotes the abnormal earnings (AE) valuation model as an alternative to or substitute for discounted cash flow (DCF) valuation models. In an extensive study of the model, the authors found that statistically based predictions of annual net earnings one to five years ahead result in explosive earnings forecast errors for many companies. This introduces measurement error in the AE valuation process that finance professionals need to be aware of.