Value Creation in Management Accounting by Watts Ted

Author:Watts, Ted...
Language: eng
Format: epub
Published: 2014-01-30T00:07:27.064000+00:00

Figure 7.2. Customer segment data.

Figure 7.3. Tracing costs to attributes.

Developing and Interpreting Value Multipliers

Having traced the resource consumption of the firm to specific value attributes, it is now possible to combine the revenue equivalents by value attribute with the value-added cost for that attribute. As you may remember, the value multiplier is calculated by dividing the revenue equivalent by the value-added dollars that are needed to deliver that value attribute. If the company doesn’t pursue a market segmentation strategy, there will be only one set of multipliers. If segments are managed differently, though, then two sets of multipliers will be developed—one for the company in general and one that details results by segment. Finally, if the data collection suggests that there is more than one segment, as was found at Impact, Inc., then multipliers may be needed for each newly identified segment.

An example of the value multipliers by segment for General Telecom (GTI), one of the earliest projects completed in the VCMS analysis is presented in Figure 7.4. The goal is to present the data in such a way that management can have a strategic perspective where they are spending too much or too little to deliver on specific components of the value profile. This is a critical part of the data analysis that needs to be shared with management.

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