Topic 2
Overview of Cost
Management
and Strategy
1 Users of Cost Management
Information
Management Accountants
Agenda
2 Role in Strategic Cost
Management
Relationship Between Cost
3 Accounting and Cost
Management
Strategic Decision and the
4 Cost Management Accountant
Meet The Team
Angelo Chavez Khate Diola
Jannen Claveria Joyce Ann Atienza
Rosemarie Beñares
Users of Cost Management
Information
Business Governmental Not-for-profit
Firms Units Organization
Users of Cost Management
Information
Cost Management information - useful in all
organizations: business firms, governmental
units, and not-for-profit organizations.
Business firms are usually categorized by
industry,the main categories being
merchandising, manufacturing, and service.
Merchandisers that sell you other merchandiser
are called “Wholesalers; those who sell
directly to consumers are “Retailers”
Users of Cost Management
Information
Governmental & not-for-profit organization
provide services, much like ithe firms in service
industries.
These organization provide the services from
which no direct relationship exist between the
amount paid and services provided.
The resources are provided by government
units/charities.
Users of Cost Management
Information
The services provided by these organizations
are often called “Public Goods”.
Public goods have a number of unique
characteristics such as the impractically of
limiting consumption to a single customer ( clean
water & police & fire protection are provided
for all residents).
Who am I?
Uses of Cost Management
Information
Planning Management Reportial
Strategic and and and Compliance
Management Decision Operational to Legal
Making Control Requirements
Uses of Cost Management
Information
1. Strategic Management
it involves the development of sustainable
competitive position in which the firms
competitive advantage spells continued success.
involves identifying and implementing these
goals and action plans
SCM is the development of cost management
information to facilitate the principal
management function, strategic management
Uses of Cost Management
Information
Strategy is a set of goals and specific action plans
that if achieved provide desired competitive
advantage.
MANAGEMENT.Must make sound strategic
decisions regarding the choice of products,
manufacturing methods,marketing techniques and
channels and other long-term issues.
Uses of Cost Management
Information
2. Planning & Decision-making
it involves budgeting, and profit planning, cash
flow management and other decision related to
the firm’s operation.
CMI support recurring decisions 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
Uses of Cost Management
Information
3. Management & Operational Control
provide a fair and effective basis for identifying
inefficient operations and to reward and
motivate the most effective manages.
Operational Control mid-level manages (e.g.,
product managers, regional managers) monitors the
activities of operating-level managers and
employees (e.g., production supervisions,
department heads).
Uses of Cost Management
Information
Management Control is the evaluation of mid-level
manager by upper-level manager (e.g., Controller
or the Chief Financial Officer (CFO).
4. Reportorial and Compliance to Legal
requires management to comply with the
financial reporting requirements to regulatory
agency such as SEC, BIR and other relevant
government authorities and agencies.
Uses of Cost Management
Information
FINANCIAL STATEMENT
the role has recently received a renewed focus
and interest as accounting scandals have
shown how crucial and important accurate
financial info for investors
also serves as the other three management
functions as this information is often an
important part of planning and decision making,
control and strategic management
Who would I be?
Management Accountant’s
Role in Strategic Cost
Management
Decision
Planning Control
Making
Management Accountants
accounting professionals who develop provide a variety of reports,
and analyze cost management (1)how well managers and business
information and other accounting units have performed (2)provide
information timely and frequent updates on key
concerned with providing information indicators, analysis of business
to managers, that is, people inside an situation or opportunity and
organization who direct and control analytical reports that are needed to
the operations investigate specific problems
participates, as part of at appropriate levels are involved
management, in assuring that the actively in the process of managing
organization operates as unified whole the entity
in its long-run intermediate and short-
run best interests
Management process
measurement,
of identification,
Accounting accumulation, analysis,
preparation, interpretation, and
communication of financial
assist management in information
establishing plans for
reasonable preparation of financial reports
economic objectives and in for non-
the making of rational management groups such as
decisions with a view shareholders, creditors, regulatory
towards agencies and tax
achieving these objectives authorities
Management Accounting
concerned primarily with providing information to internal managers who
are charged with planning and controlling the operations of the firm and
making a variety of management decisions
A Scorekeeping or data B Interpreting and reporting
accumulation of information
enables both internal and commonly
external
parties to evaluate
organizational performance and
Tasks associated with current planning and
control and
investigations
the analysis and
position of recurring routine internal
accounting reports to signal
situations in which
C Problem-solving
management action may be required
quantification of relative merits of possible courses
of action
as well as recommendation as to the best
procedure
Important Guidelines
Employ a cost-benefit approach
Resources should be spent if they are expected to better attain company
goals in relation to the expected cost of those resources
expected benefits from spending should exceed the expected costs
expected benefits and costs may not be easy to quantify
Recognize behavioral as well as technical considerations
PLANNING. A key activity for all companies. Planning involves identifying
alternatives and selecting a course of action and specifying how the action
will be implemented tofurther the organization’s objectives
Important Guidelines
CONTROL. Evaluating the performance of managers and the operations
for which they are responsible. The reports used evaluate the
performance of managers and the operations they control are
referred to as performance reports.
DECISION MAKING. An integral part of planning and control process.
Decisions are made to reward or punish managers and to made a change
operation or revise plans.
Use appropriate cost concepts for different purpose
I am capable of?
Relationship Between Cost
Accounting and Cost
Management
Cost Cost
vs
Accounting Management
COST ACCOUNTING
systematic set of procedures for
recording and reporting measurements
of the cost of manufacturing goods and
performing services in the aggregate
and in detail.
COST MANAGEMENT
Its purpose is to provide managers with
information which aid decision.
Strategic Decision Making
and the Cost Management
Accountant
Enterprise
Process
Risk Ethical
Management
Management
Corporate
Strategic
Social Leadership
Management Responsibility
Strategic Management CUSTOMER INTIMACY STRATEGY
“You should choose us because we can
Perspective
customize our products and services to
meet your individual needs better than
our customers.”
OPERATIONAL EXCELLENCE
“You should choose us because we
deliver products and service faster, more
conviniently, and at a lower price than
our competitors.”
Strategic Management
PRODUCT LEADERSHIP
Perspective
“You should choose us because we offer
higher quality products than our
competitors.”
Am I choosing right?
An Enterprise Risk Management Perspective
A simplified framework for an Enterprise-wide Risk
Management Process follows:
Risk Management System Top Management System
Oversight Activities:
Establish goals and
objectives, roles and Set management policy,
responsibilities, common establish context, set limits
language, and oversight and tolerance, etc.
structure.
STEP 1. Assess Risks Ensure that process captures all
Identify source, measure business risks
Risk Management
STEP 2. Develop/Design
Ensure that all available tools and
Action Plans: Reduce, avoid,
methodologies are used
retain, transer, exploit
Process
Review effectiveness of plans,
Step 3: Implement Action Plans
Check capabilities
Step 4. Monitor and report risk Review and evaluate regular
management performance reports on performance
Step 5. Continuously improve risk Evaluate recommendations for
management improvement
Enterprise Risk Management
is a process used by an entity to identify risks
and develop responses to them that enable it to
be assured of meeting its goals.
The following schedule shows examples of business
risks that companies face and the corresponding
example of a control that could be implemented
to help reduce each the risks mentioned:
Corporate social responsibility (CSR)
RESPONSIBILITY
is a concept where business
A CORPORATE
PERSPECTIVE
organizations consider the needs of
SOCIAL
all stakeholders when making
decisions.
Examples of corporate social
responsibilities that are of interest to
the stockholders groups follow.
Companies should:
I. Provide its customers with:
a. Safe, high-quality products that are fairly
priced.
b. Easy-to-use information systems for shopping
and tracking orders.
c. Competent, courteous, and rapid delivery of
products and services.
II. Provide suppliers with:
a. Hassle-free acceptance of timely and
complete deliveries.
b. Fair contract terms and prompt
payments.
c. Reasonable time to prepare orders.
d. Cooperative rather than unilateral
actions.
III. Provide stockholders with:
a. Competent management.
b. Full disclosure of enterprise risks.
c. Easy access to complete and accurate
financial information.
d. Honest answers to knowledgeable
questions.
IV. Provide its employees with:
a. Fair compensation.
b. Safe and humane working conditions.
c. Non-discriminatory treatment and the
right to organize and file grievances.
d. Opportunities for training, promotion, and
personal development.
V. Provide the communities with:
a. Payment of fair taxes.
b. Resources that support charities, schools,
and civic activities.
c. Honest information about plans such as
plant closings,
d. Reasonable access to media sources.
VI. Provide environmental and human rights
advocate with:
a. Recycling and resource conversation
data.
b. Full disclosure of suppliers located in
developing countries.
c. Greenhouse gas emission data.
d. Child labor transparency.
A Process
Management
Perspective
A PROCESS MANAGEMENT PERSPECTIVE companies organize
themselves by business processes in order to serve the needs of the
customers.
BUSINESS PROCESS is a series of steps that are followed in orders to
carry out some tasks in a business.
VALUE CHAIN is often used to describe how an organization functuonal
departments interact with one another to form businees processes.
Business Functions Making up the
Value Chain
LEAN THINKING/ LEAN PRODUCTION
a management approach that organizes resources such as people and
machines around the flow of the business processes and that only
produces units in response to customer order.
LEADERSHIP PERSPECTIVE
Leadership perspective to achieve success, organizational
leader must be able to unite the behaviour of the fellow
employee who have diverse needs, belief and goal to
workplace.
A. Internal motivation refers to motivation that comes front
within one self. A leader who is perceived by employees as
credible and respectful of their value to the company can
increase the extent to which those employees are intrinsically
motivated to pursue strategic goals.
LEADERSHIP PERSPECTIVE
B. External incentives such as bonus compensation, are given
by many organizations to highlight important goals and to
motivate employees to achieve them.
C. Cognitive bias leaders should be aware that are all people
(including themselves) should possess cognitive biases or
distorted thought processes such as promoting false assertion
that can adversely affect planning, controlling and decision
making.
Ethical behavior is the lubricant that keep the economy
AN ETHICS
running smoothly. PERSPECTIVE
What can I do?
Thank You
For Your Attention
