STRATEGIC COST MANAGEMENT
action to achieve competitive
CHAPTER I: OVERVIEW OF COST
MANAGEMENT AND STRATEGY
Strategy – is a set of policies, procedures and
approaches to business that produce long term
success.
Strategic management – involves the development
of cost management information to facilitate the
principal management function which is strategic
management.
Cost management information – is a critical
factor in the effective management of a firm or
organization.
- it is also the information that the manager needs
to effectively manage the firm, either profit or
non-profit.
- includes financial information about cost and
revenues as well as non-financial information
about productivity, quality and etc.
Cost management – is the practice of accounting in
which accountant develops and uses cost
management information.
- for competitive success, not only focus on
financial information but rather focus or give
importance to the non-financial and long term
measures of operating performance.
Strategic thinking
- flexibility
- anticipating changes
- creative and integrative thinking
USERS OF COST MANAGEMENT
- Business firms
- Gov’t units
- Non-profit organizations
USES OF COST MANAGEMENT
INFORMATION
Strategic management – involves development of
a sustainable competitive position in which the
firm’s competitive advantage spells continued
success.
 Strategy – set of goals and specific
advantage.
 Strategic management – identifying
and implementing these goals and
action plans.
Planning and decision making – involves
budgeting and profit planning, cash flow
management and other decision related to firms
operation.
Management and Operation Control –
identifying inefficiencies
 Operational control – takes place when
mid-level managers monitors the activities
of operating level managers.
 Management control – mid-level is
evaluated by upper level manager
Reportorial and Compliance to Legal
Requirements – comply financial reporting
requirements with SEC and BIR.
MANAGEMENT ACCOUNTANT’S ROLE IN
STRATEGIC COST MANAGEMENT
Management accountants – are accounting
professionals who develop and analyse cost
management information and other accounting
information.
 They applies:
Management accounting – involves the
application of appropriate techniques
and concepts to economic data so as to
assist the management in establishing
plans for reasonable economic objectives
and rational decisions towards achieving
the objective.
 They are providing advices to managers who is
primarily responsible for decision making
Tasks: organization so that the organization’s objectives,
short term and long term are achieved.
- Data accumulation
- Interpreting and reporting information Management accounting includes persons
- Problem solving involved in:
Again, management accountant gives advice to the - Controllership
managers who have admin functions to: - Treasury
- Financial analysis
- Planning
- Planning and budgeting
- Controlling
- Cost accounting
- Decision making
- Internal audit
Planning - Systems
- General accounting
 Resource planning – cash budgets, capital
budgets, projected SFP. They have the titles of:
 Profit-planning – breakeven analysis, projected
- Controller
IS.
- Treasurer
Control - Budget analyst
- Cost Analyst
 Evaluation of performance is tied up to - Accountant etc.
compensation and promotion.
 Performance reports – gross profit variance Line authority – is the authority to command
analysis, FS analysis, cost variance analysis. action or give orders to subordinates. Line managers
 Management by exception – focusing on major are directly responsible for attaining the objectives
lag problems rather than minor problems. of the business firm as efficiently as possible.

Decision making Ex. Sales and production managers

 Integral part of planning and control process.
RELATIONSHIP BETWEEN COST
ACCOUNTING AND COST MANAGEMENT
Cost management needs the output of cost
accounting. In order to provide managers with
information which aids decision.
No generally accepted principles which specify how
management accounting information is to be
reported.
Staff authority – is the authority to advice but not
command others, it is exercised laterally or upward.
Staff managers give support, advice and service to
line departments.
Ex. Personnel, purchasing, engineering and
accounting.
Functional authority – which is the right to
command action laterally or downward with regard
to a specific function or speciality.
Ex. CFO, Controller

CHIEF FINANCIAL OFFICER

CHAPTER II: THE PROFESSIONAL (CFO)
ENVIRONMENT OF COST MANAGEMENT
ORGANIZATION STRUCTURE AND THE
MANAGEMENT ACCOUNTANT
Controller Chief Financial Treasurer
Management accountant major function is – that Officer – is the
of tailoring the application of the process of the executive
responsible for overseeing the financial operations Treasurer – has the custody of cash and funds
of an organization. invested in various marketable securities
 Responsibilities: - Generally responsible for maintaining
- Controllership = providing financial relationships with investors, banks and other
information for reports to managers and creditors.
stakeholders. - Plays major role in managing cash and
- Treasury = includes banking and short term marketable securities, preparing cash forecasts
and long term financing, investments and and obtaining financing from banks and other
management of cash lenders.
- Risk management = includes managing
financial risk of interest-rate and exchange rate  Functions:
and derivatives management - Funds procurement
- Taxation = includes income taxes, sales taxes - Banking and custody of cash
and international taxes planning. - Investments of funds
- Internal audit = includes reviewing and - Other responsibilities
analysing financial records if that adheres to the
Treasurership – is concerned with the
standards.
acquisition, financing and management of
Controller – is the financial executive responsible assests of a business concern to maximize the
for management accounting and financial wealth of the firms for its owners.
accounting.
- Provides reports for planning and evaluating
ETHICAL STANDARDS FOR
company activities and provides information
MANAGEMENT ACCOUNTANTS
needed to make management decisions.
- Responsible for all financial accounting reports International Management Accountants (IMA)
and tax fillings. develops very useful code called Standards of
Ethical Conduct for Practitioners of Management
 Functions: Accounting and Financial Management.
- Financial reporting
- Budgeting and Performance reporting There are 2 parts of standards, which is the general
- Systems development guidelines and what is mentioned earlier.
- Financial analysts and special studies Code of Conduct for Management Accountants
- Taxation reporting (1st part)
- Cost management
1. To maintain a high level of professional
Controllership – is the practice of the established competence.
science of control which is the process by which 2. To treat sensitive matters with
management assures itself that the resources are confidentiality.
procured and utilized according to plans in order to 3. To maintain personal integrity
achieve company’s objective. 4. To objective in all disclosing
Basic Function of Controllership Standards of Ethical Conduct for Practitioners
- Planning of Management Accounting and Financial
- Control Management (2nd part)
- Reporting 1. Competence
- Accounting 2. Confidentiality
- Other primary responsibilities 3. Integrity
4. Objectivity
Resolution of Conflict CHAPTER 3: CONTEMPORARY BUSINESS
ENVIRONMENT AND STRATEGIC FOCUS
- Discuss the problems to immediate superior
OF COST MANAGEMENT
EXCEPT if he is involved, in which case it must
be presented to the next higher level of Contemporary Business Environment
management. If the said problems cannot be
Changes in:
achieved when it is presented then submit the
issues to the next higher level of management. 1. An increase in global competition
- If the immediate superior is CFO or equivalent, 2. Advances in manufacturing technologies
the acceptable reviewing authority may be a 3. Advances in information technologies
group such as audit committee, executive (Internet and E-Commerce)
committee, BOD, BOT or owners. It must be 4. A greater focus on the customer
communicated first to the immediate superior 5. New forms of management organization
provided that he is not involved, before it must 6. Changes in social, political and cultural
be communicated to higher level of environment of business.
management, except when legally prescribed.
- Clarify ethical issues with an objective advisor Speed-to-market – a key competitive edge that
(IMA Ethics Counselling Service) forms has the ability to deliver the product or
- Consult to your attorney. service faster than competition.
- If the ethical conflict is still high after the said **In terms of management organization, the
issues are tackled, then resign from organization emphasis has shifted from financial and profit-based
and inform the representative of said measures of performance to customer-related, non-
organization. After resignation, notify the other financial performance measures such as quality,
parties depending on the nature of conflict. time to delivery and service.
Critical Success Factors (CSF) – are measures of
Institute of Management Accountant (IMA) - the those aspects of the firm’s performance essential to
principal organization of management accountants its competitive advantage and therefore to its
in the US, has instituted a program to provide success. It includes financial and nonfinancial
certifications for management accountants and factors.
financial managers.
Philippine Association of Management
Accountants (PAMA) – it was founded primarily
to provide its members with educational and
professional activities that supplement in the
knowledge of management accounting practices and
methods.
Objectives:
1. To establish management accounting as a
recognized profession
2. To foster higher educational standards in the
field of management accounting
3. To assist employees, educators and students
in the field of management accounting.