Exhibit 1 1 FourStage Model of Cost System

Exhibit 1 -1 Four-Stage Model of Cost System Design Systems Aspects Stage I Systems Broken Data Quality Stage II Systems Financial Reporting-Driven Stage III Systems Customized, Stand-alone Stage IV Systems Integrated • Many errors • No Surprises • Large • Meets audit • Variances Standards • Shared data-bases • Stand-alone systems • Information linkages • Fully linked databases and systems External Financial Reporting • Inadequate • Tailored to financial reporting needs • Stage II system maintained for financial transactions and periodic reporting • Financial reporting systems Product/ Customer Costs • Inadequate • Inaccurate • Hidden costs and profits • PC-based ABC for costing activities, products, and cost to serve customers (Several Stand-alone ABC systems) • Integrated ABM systems Operational and Strategic Control • Inadequate • Financial feedback only • Delayed, aggregate • Kaizen costing, pseudo profit centers; Timely non-financial feedback • (Several stand-alone • Operational and strategic performance measurement system

Exhibit 1 -2 Stage II Cost Systems Driven from Financial Reporting Requirements Financial Reporting Systems Product Costing Systems Financial Performance Measurement and Variance Analysis

Exhibit 2 -3 Stage III: Specialized, Customized Managerial Systems Financial Reporting Systems Customer Costing Product Costing Activity-Based Management Systems Operational Feedback for Learning and Improvement: • Yield • Defects • Cycle Time • Throughput • Actual Resource consumption (Quantity and Cost)

Exhibit 2 -4 Stage IV: Tomorrow Financial Reporting Systems Planning and Budgeting Activity-Based Management Systems Actual Utilization and Efficiencies Operational and Strategic Performance Measurement Systems