Ex ante accounting information in analyzing distribution choices: case US logistics center

Abstract

Effective management accounting requires that scarce organizational resources are actively directed towards creating information with most managerial value. This master’s thesis therefore seeks to further the understanding of how managers utilize ex ante accounting information and what information qualities managers consider most important. This is done by creating ex ante accounting information for a case company and later analyzing its use and the associated quality requirements. The first research question of the thesis is: how should different product configurations be distributed to the US market to ensure long-term profitability? This research question addresses the case company’s uncertainties regarding an expansion of US operations and seeks to identify general guidelines for feature option distribution. The second research question is: how do managers use ex ante accounting information in decision making, and what kind of requirements a new decision-making situation sets for ex ante accounting information? The case company situation studied in the first research question is used to analyze the use and requirements for ex ante accounting information. The objective is to further the understanding of how ex ante accounting information is used in decision making and to provide insights with which management accountants can effectively create valuable ex ante accounting information.

The findings indicate that product configuration related distribution-decisions should be based on analyzing the dynamic in which different configurations affect profitability and the operational challenges associated with distribution alternatives. In the sample case, this meant distributing feature options in a way that maximizes the overall sales of the case company’s product families. Studying the use of accounting information showed that managers mainly utilize ex ante accounting information for learning about issue at hand by identifying and weighing factors affecting it. This information is then used to direct attention and analysis. Ex ante accounting information is also used for setting financial boundaries in which decision-alternatives should reside for a more detailed analysis to take place. These uses display in the associated quality requirements. While reasonable accuracy is expected, completeness and believability of accounting information were considered most important. These quality factors work as enablers for trust to be given to the accounting objects representing an uncertain phenomenon and for the information to be used. Representational quality supports in establishing trust in the accounting objects and supports the knowledge integration when creating ex ante accounting objects. Based on the empirical findings, a four-step process model is presented for efficiently creating valuable ex ante accounting information.