CHAPTER 1 - the time from the introduction of a new product to its

removal from the market- is expected to become shorter and

OVERVIEW OF COST MANAGEMENT AND shorter.
STRATEGY

Strategic emphasis
Strategy
- requires creative and integrative thinking, that is, the ability
- is a set of policies, procedures and approaches to business to identify and solve problems from a cross-functional view.
that produce long-term success.
Business functions
Strategic management
- are often identified as marketing, production, finance and
- involves the development of a sustainable competitive accounting/controllership.
position.
- Instead of viewing a problem as a production problem, a
Strategic cost management marketing problem, or a finance an accounting problem, cross-
- involves the development of cost management function functional teams view it from an integrative approach that
which is strategic management. combines skills from all functions simultaneously.

Cost management information Integrative approach

- is critical factor in the effective management of a firm or - is necessary in a dynamic and competitive environment. The
organization. firm's attentions on satisfying the customers' needs; all of the
firm's resources, from all functions, are directed to the goal.
- is the information that the manager needs to effectively
manage the firm, profit-oriented as well as not-for-profit
organization. The includes both financial information about
cost and revenues nonfinancial information about
productivity, quality and other key success factors for the firm. USERS OF COST MANAGEMENT INFORMATION

- is thus a value-added concept. It adds value by helping a firm

be more competitive.
- Merchandising firms purchase goods for resale.
Cost Management
- Merchandisers that sell to other merchandisers are called
- is the practice of accounting in which the accountant wholesalers.
develops and uses cost management information.
- Selling directly to consumers are retailers.
- stress cost reduction (a financial measure)
Governmental and not-for-profit organization
- ignoring or even lowering quality standards (a nonfinancial
measure) - provide services, much like the firms in service industries.

Strategic thinking - provide the services for which no direct relationship exists
between the amount paid and the services provided.
- involves anticipating changes.
- both the nature of these services and the customers to receive
Products and production processes them are determined by government or philanthropic
organizations.
- are designed to accommodate expected changes in customer
demands. - resources are provided by governmental units and/or
charities.
Flexibility
- services provided by these organizations are often called
- the ability to make fast changes is critical as a result of the
public goods to indicate that no typical market exists for
demand of the new management concepts of e-commerce,
them.
speed to market, and flexible manufacturing.
Public goods
Product life cycle
- have a number of unique characteristics, such as the
impractically of limiting consumption to a single customer

STRAT REVIEWER Diana Rose Datoon

(clean water and police and fire protection are provided \for - cost management information is needed to provide a fair and
all residents). effective basis for identifying inefficient operations and to
reward and motivate the most effective manages.

- Operational Control takes place when mid-Level manages

(e.g., product managers, regional managers) monitors the
USES OF COST MANAGEMENT INFORMATION activities of operating-Level managers and employers (e.g.,
production supervisions, department heads).

- Management control on the other hand, is the evaluation of

Cost management information is needed for each of the midlevel manager by upper-level manager (e.g., Controller or
following management functions, namely the Chief Financial Officer (CF 0)).

1. Strategic Management 4. Reportorial and Compliance to Legal Requirements

- involves the development of a sustainable competitive
position in which the firm's competitive advantage spells
continued success.
- a strategy is a set of goals and specific action plans that if
achieved, provide the desired competitive advantage.
- involves identifying and implementing these goals and action
plans.
- management must make sound strategic decisions regarding
the choice of products, manufacturing methods, marketing
techniques and channels and other long-term issues.
-strategic emphasis requires an integrative approach which
combines skills from all business function, namely, marketing,
production, finance and accounting / controllership, is
necessary in a dynamic and competitive environment.
- Strategic cost management is the development 'of cost
management information to facilitate the principal
management function, strategic management.
- Reportorial and compliance responsibilities require
management to comply with the financial reporting
requirements to regulatory agencies such as the Securities and
Exchange Commission (SEC) Bureau of Internal revenue
(BIR), and other relevant government authorities and agencies.
- The financial statement preparation role has recently
received a renewed new focus and interest as accounting
scandals have shown how crucial and important accurate
financial information is for investors.
- The financial statement information also serves the other
three management functions as this information is often an
important part of planning and decision making, control and
strategic ‘management.
MANAGEMENT ACCOUNTANTS’ ROLE IN
STRATEGIC COST MANAGEMENT

2. Planning and Decision-making

- cost management information is needed to support

recurring decision such as replacing and maintaining
equipment, managing cash flows, budgeting raw materials
purchases, scheduling production, pricing and managing
distribution of products to customers, and so forth.

- Planning and decision-making involves budgeting and

profit planning, cash flow management and other decision
related to the firm’s operation such as deciding whether to
lease or buy a facility, whether to replace or just repair as
equipment, when to change a marketing plan or when to
begin new product development.

3. Management and Operational Control

STRAT REVIEWER Diana Rose Datoon