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COST MANAGEMENT

 Accounting & ControlHansen▪Mowen▪Guan

COPYRIGHT © 2009 out!"#estern Pu$lis!ing% a i'ision o( Cengage )earning*Cengage )earning an out!"#estern are trae+ar,s use !erein uner license*

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Chapter 1Introduction to Cost

Management

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tu. O$/ecti'es

-* escri$e a cost +anage+ent s.ste+% itso$/ecti'es% an its +a/or s.ste+s*

2* Ienti(. t!e current (actors a((ecting cost

+anage+ent*1* escri$e !ow +anage+ent accountants

(unction wit!in an organiation

3* 4nerstan t!e i+5ortance o( et!ical $e!a'ior

(or +anage+ent accountants*6* Ienti(. t!e t!ree (or+s o( certi(ication

a'aila$le to internal accountants

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1

 Accounting In(or+ation .ste+

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3

 Accounting In(or+ation .ste+

Financial accounting system

(ollows esta$lis!e rules an con'entions to5ro'ie in(or+ation 7(inancial state+ents8 to

eternal users suc! as in'estors% go'ern+entagencies% an $an,s*

Cost management system

ienti(ies% collects% +easures% classi(ies% an

re5orts in(or+ation t!at is use(ul to +anagersin costing 7eter+ining w!at so+et!ing costs8%5lanning% controlling% an ecision +a,ing*

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6

u$s.ste+s o( t!e

 Accounting In(or+ation .ste+

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Cost Manage+ent .ste+

Cost accounting system

assigns costs to ini'iual 5roucts anser'ices an ot!er cost o$/ects as s5eci(ie $.+anage+ent; satis(ies (inancial re5orting an+anage+ent ecision"+a,ing nees

Operational control system

5ro'ies accurate an ti+el. (ee$ac,concerning 5er(or+ance; concerne wit! w!atacti'ities s!oul $e 5er(or+e an assessingt!ose acti'ities*

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<

=actors A((ecting

Cost Manage+ent

Global Competition

 > ?astl. i+5orte trans5ortation an

co++unication !as le to a glo$al +ar,et (or

+an. +anu(acturing an ser'ice (ir+s*

 > T!e new co+5etiti'e en'iron+ent !as

increase t!e e+an not onl. (or +ore cost

in(or+ation $ut also (or +ore accuratein(or+ation*

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@

=actors A((ecting

Cost Manage+ent

Growth of the Service n!ustry

 > As +anu(acturing inustries !as ecline in

i+5ortance% t!e ser'ice sector o( t!e econo+.

!as increase in i+5ortance*

 > eregulation o( +an. ser'ices !as increase

co+5etition in t!e ser'ice inustr.

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=actors A((ecting

Cost Manage+ent

A!vances in nformation Technology

 > Co+5uters are use to continuousl. +onitor

an control s.ste+"wie o5erations*

 > Increase a$ilit. to accuratel. cost 5roucts

$ecause o( a'ances in a'aila$le tools*

 > +ergence o( electronic co++erce

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=actors A((ecting

Cost Manage+ent

A!vances in Management Environment

 > Theory Of Constraints is use to continuousl.

i+5ro'e +anu(acturing acti'ities an

non+anu(acturing acti'ities*

 > Just-in-Time Manufacturing  is a e+an"5ull

s.ste+ t!at stri'es to 5rouce a 5rouct onl.

w!en it is neee an onl. in t!e Buantitiese+ane $. custo+ers*

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=actors A((ecting

Cost Manage+ent

Computer"ntegrate! Manufacturing

 > Can 5rouce a co+5etiti'e a'antage (or a

(ir+

 > T.5icall. (ollows IT as a res5onse to

increase nees (or Bualit. an s!orter

res5onse ti+e

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=actors A((ecting

Cost Manage+ent

Consumer Orientation

 > ?alue c!ain is t!e set o( acti'ities reBuire to

esign% e'elo5% 5rouce% +ar,et% an eli'er

5roucts an ser'ices to custo+ers

 > =ir+s co+5ete not onl. in ter+s o( tec!nolog.

an +anu(acturing% $ut in t!e s5ee o(

eli'er. an res5onse to eli'er 'alue to t!ecusto+er 

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-1

=actors A((ecting

Cost Manage+ent

New #ro!uct $evelopment

 > Manage+ent recognies t!at a !ig!

5ro5ortion o( 5rouction costs are co++itte

uring t!e e'elo5+ent an esign stage o( anew 5rouct*

 > T!e reBuire+ent to control cost encourages

t!e use o( target costing an acti'it."$ase+anage+ent*

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=actors A((ecting

Cost Manage+ent

Total %uality Management

 > Continual i+5ro'e+ent an eli+ination o(

waste are t!e two (ounation 5rinci5les t!at

go'ern a state o( +anu(acturing ecellence*

 > A 5!iloso5!. o( total Bualit. +anage+ent% in

w!ic! +anagers stri'e to create an

en'iron+ent t!at will ena$le organiations to+anu(acture 5er(ect 5roucts% !as re5lace

t!e acce5ta$le Bualit. attitues o( t!e 5ast*

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=actors A((ecting

Cost Manage+ent

Time as a Competitive Element

 > Ti+e is t!e crucial ele+ent in all 5!ases o( t!e

'alue c!ain*

 > ecreasing non"'alue"ae ti+e a55ears to

go !an"in"!an wit! increasing Bualit.*

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=actors A((ecting

Cost Manage+ent

Efficiency

 > #!ile Bualit. an ti+e are i+5ortant%

i+5ro'ing t!ese i+ensions wit!out

corres5oning i+5ro'e+ents in (inancial5er(or+ance +a. $e (utile% i( not (atal*

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T!e Role o( Cost an Manage+ent

 Accountant

D Res5onsi$le (or generating (inancial in(or+ationreBuire $. t!e (ir+ (or  > Internal re5orting

 > ternal re5orting

D  Accounting s.ste+ in(or+ation is use $.+anage+ent to

 > Plan > Control

 > Ma,e ecisions

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T!e Role o( Cost an Manage+ent

 Accountant

#lanning

 > etaile (or+ulation o( (uture actions to

ac!ie'e a 5articular en*

 > ReBuires setting o$/ecti'es an ienti(.ing

+et!os to ac!ie'e t!ose o$/ecti'es*

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T!e Role o( Cost an Manage+ent

 Accountant

Controlling > T!e +anagerial acti'it. o( +onitoring a 5lanEs

i+5le+entation an ta,ing correcti'e action

as neee* > =ee$ac, is in(or+ation t!at can $e use to

e'aluate or correct t!e ste5s $eing ta,en toi+5le+ent a 5lan*

D Per(or+ance re5orts co+5are $ugete an actualata

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T!e Role o( Cost an Manage+ent

 Accountant

Continuous mprovement > ReBuire in a .na+ic en'iron+ent i( a (ir+ is

to re+ain co+5etiti'e or to esta$lis! a

co+5etiti'e a'antage* > earc!ing (or wa.s to increase o'erall

e((icienc. t!roug!D Reuction o( waste

D Fualit. i+5ro'e+entD Cost reuction

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T!e Role o( Cost an Manage+ent

 Accountant

$ecision Ma&ing

 > T!e 5rocess o( c!oosing a+ong co+5eting

alternati'es*

 > ecisions are $ase on in(or+ation 5ro'ie

$. t!e accounting s.ste+

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 Accounting an t!ical Conuct

'enefits of Ethical 'ehavior  > Can create custo+er an e+5lo.ee lo.alt. > A'oi litigation costs

 > Increases li,eli!oo o( co++ercial success

Stan!ar!s of Ethical Con!uct forManagement Accountants

 > Co+5etence > Con(ientialit. > Integrit. > Crei$ilit.

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Certi(ication

Certifie! #ublic Accountant > T!e res5onsi$ilit. o( a CPA is to 5ro'ie assurance

concerning t!e relia$ilit. o( (inancial state+ents*

Certifie! nternal Au!itor  > T!e (ocus o( t!e CIA is to recognie co+5etenc. in

internal auiting rat!er t!an eternal auiting*

Certifie! Managerial Accountant > One o( t!e +ain 5ur5oses o( t!e CMA was to esta$lis!+anage+ent accounting as a recognie% 5ro(essionalisci5line% se5arate (ro+ t!e 5ro(ession o( 5u$licaccounting*

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Certi(ication

D =our areas e+5!asie on t!e CMA

ea+

 > usiness anal.sis

 > Manage+ent accounting an re5orting

 > trategic +anage+ent

 > usiness a55lication

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COST MANAGEMENT

 Accounting & ControlHansen▪Mowen▪Guan

COPYRIGHT © 2009 out!"#estern Pu$lis!ing% a i'ision o( Cengage )earning*Cengage )earning an out!"#estern are trae+ar,s use !erein uner license* 26

End Chapter 1