STRATEGIC COST MANAGEMENT AND

MANAGEMENT ACCOUNTING

PLANNING
 Is the process of translating the goals and objectives
of an organization and developing a strategy for
achieving those goals in a systematic manner.
 Goals are abstract achievements
 Objectives are desired quantifiable achievements
for a period of time

ACCOUNTING INFORMATION
 An information system (IS) is a structured system
that collects, processes, stores, and distributes
information to support decision-making,
coordination, control, analysis, and visualization
within an organization. It helps manage data
efficiently and facilitates the smooth operation of
businesses and organizations.
 Accounting system is a formal mechanism for
gathering, organizing, and communicating
information about an organization’s activities.
CONTROLLING
Quantitative Vs. Qualitative Information  Is the process of setting performance standards,
 QUANTITATIVE INFORMATION measuring performance, periodically comparing
-Allows managers to know the number impact of every actual performance with standards, and taking
alternative choice corrective measures or actions when operations do
-It involves financial data that is useful in answering not conform with what is expected.
“how much” or “how many”
PERFORMANCE EVALUATION
 QUALITATIVE INFORMATION  Is the process of determining the degree of success
-Furnishes the facts that help eliminate some of the in accomplishing the plan. It Is done to determine if
inherent uncertainties related to such alternative choices. the actual results materially differ with what was set
-It involves non-financial data that is useful in by the firm.
answering “why” or “how”  Effectiveness – is a measure of how well an
organization’s goals and objectives are achieved.
MANAGEMENT INFORMATION NEEDS  Efficiency – is a measure of the degree to which
 Controlling is the function of management that tasks were performed to produce the best yield at
deals with the determination and evaluation on the lowest cost from the resources available
whether the goals and objectives set are being
achieved. DECISION MAKING
 Controlling involves performance evaluation as an  Is the process of choosing among the possible
action to take a consideration whether actual solutions available to a given problem situation.
operations accomplished perfectly the goals that The manager’s ability to choose the best solutions
were planned. or the most acceptable alternative course of action
 Planning and controlling are two functions of depends on the manager’s ability to make good
management that goes together in order to decisions.
determine the proper course of action.
KEY ASPECT OF DECISION MAKING
DECISION AND THE NEED FOR INFORMATION 1. Identifying the Problem or Opportunity:
 In order for managers to be able to choose proper The decision-making process begins by recognizing a
decisions that would add value to the success of the problem or an opportunity that requires a solution or
entity, the need for information now becomes action. This could stem from internal or external factors,
highly important. such as performance issues, market changes, or new
 Proper information must be accessible to the opportunities.
managers so that they will be able to decide on the 2. Gathering Information:
proper course of action to take. Erroneous decisions To make informed decisions, managers need relevant
usually leads to high costs and unsuccessful results. data and information. This could involve research,
market analysis, or consulting with team members or
experts.
3. Developing Alternatives:
Managers must brainstorm and develop several possible
courses of action or alternatives. The goal is to consider
different perspectives and options to solve the problem
or exploit the opportunity.
4. Evaluating Alternatives:
Each alternative should be evaluated based on factors
such as cost, feasibility, risk, alignment with goals, and
potential impact. This step often involves assessing the
pros and cons of each option.
5. Choosing the Best Alternative:
After evaluating the alternatives, the manager selects the
most suitable option. This choice is made based on the
desired outcome, available resources, and other relevant
criteria.
6. Implementing the Decision:
Once a decision is made, it must be implemented
effectively. This requires proper planning, delegation,
and coordination with relevant stakeholders.
7. Monitoring and Reviewing:
After implementation, the outcomes of the decision
should be monitored. Managers should assess whether
the decision is producing the desired results and be
ready to make adjustments if necessary.

STRATEGIC COST MANAGEMENT

Strategic cost management is the application of cost
management techniques which aims to reduce costs
while strengthening the strategic decision of the business.

THREE WAYS TO INTSTITUE COST

MANAGEMENT

1. Develop system that would streamline the

transactions between corporate support departments and
the operating units.
2. Establish transfer pricing systems to coordinate the
buyer supplier interactions between decentralized
organizational operating units. ORGANIZATIONAL STRUCTURE
3. Utilize pseudo profit centers to create profit  Refers to how authority as well as responsibility for
maximizing behavior in what were formerly cost centers. making decisionsis distributed in the organization.
 A good organizational chart must depict the flow of
MANAGEMENT ACCOUNTING authority and responsibility. The chart will show
 Management accounting focuses on the information lines of authority and lines of responsibility. The
needs of an organization’s internal managers that line going down depicts the line of authority and
are related to their planning, controlling, and the same line going up depicts the line of
decision making functions. responsibility.
 It is the process of identifying, measuring,
accumulating, analyzing, preparing, interpreting,
and communicating information that helps
managers fulfil organizational objectives.

OBJECTIVES OF MANAGEMENT ACCOUNTING

 Provide managers with information for decision
making and planning.
 Assisting managers in directing and controlling
operations.
 Motivating managers toward achieving
organization’s goals.
 Measuring performance of managers and sub-units
within the organization.

ORGANIZATIONAL OFFICERS
1. Chief Executive Officer
2. Chief Finance Officer
3. Treasurer
4. Controller
 TRADITIONAL ACCOUNTANT TO FINANCIAL
MANAGER
 Good financial management contributes to better
products and services, higher salaries to employees,
and greater returns to investors.
 Good financial management contributes greatly to
the success of the organization.
 A good financial officer should be good in
management functions and using accounting
information for decision making.
 Accounting information is being used as a tool for
decision making.
 Thus, traditional accountants can also transform as
a financial manager since accounting information
used in managerial decision making can contribute
in good financial management that can continue to PROFESSIONAL ETHICS FOR MANAGEMENT
add value to the business. ACCOUNTANTS
Institute of Management Accountant or IMA is the
FINANCIAL MANAGEMENT association of accountants and financial professionals in
 It means planning, organizing, directing, and business and considered as one of the largest and most
controlling the financial activities such as respected association focused exclusively on advancing
procurement and utilization of funds of the the management accounting profession.
enterprise. It means applying general management
principles to financial resources of the enterprise.
 It also involve specific activities such as
procurement and planning, capital investment and
financing decision, and controlling and
coordinating.

TREASURER VS CONTROLLER
Controllership
- Is the practice of the established science of control
which is the process by which management assures itself
that the resources are procured and utilized according to
plans in order to achieve the company’s objective.

Controller
- Is known as the CHIEF ACCOUNTANT. It main COMPETENCE
function is related to supervision of record keeping,  Maintain an appropriate level of professional
taxation, reporting as well as processes to attain competence by ongoing development of their
objectives of internal control. knowledge and skills.
 Perform their professional duties in accordance
Treasurership with laws, regulations, and technical standards.
- Is concerned with the acquisition, financing, and  Prepare complete and clear reports and
management of assets of a business to maximize the recommendations after appropriate analyses of
wealth of the firm for its owners. relevant and reliable information.

Treasurer CONFIDENTIALITY
- Serves as the protector of a company’s value and  Refrain from disclosing confidential information
finances from financial risk that arises from business acquired in the course of their work, except when
activities. A treasurer deals with money and exercises authorized, unless legally obligated to do so.
prudence on handling, using, and managing the money  Inform subordinates as appropriate regarding the
of the organization. confidentiality of information acquired in the
course of their work and monitor their activities to
Controller’s Function assure the maintenance of that confidentiality.
• Reporting and interpreting data  Refrain from using or appearing to use confidential
• Tax administration information acquired in the course of their work for
• Government reporting unethical or illegal advantage either personally or
• Management audit through third parties.
• Internal audit
• Economic appraisal INTEGRITY
• Protection of assets  Avoid actual or apparent conflict if interest and
• Planning and controlling advise all appropriate parties of any potential
conflict.
Treasurer’s Function  Refrain from engaging in any activity that would
• Provision of capital prejudice their ability to carry out their duties
• Investor relations ethically.
• Short-term financing  Refuse any gift, favor, or hospitality that would
• Banking and custody of funds influence or would appear to influence their actions.
• Credit and collections  Refrain from either actively or passively subverting
• Investments and insurances the attainment of the organization’s legitimate and
ethical objectives.
 Recognize and communicate professional
limitations or other constraints that would preclude
 responsible judgment or successful performance of COST MANAGEMENT SYSTEM
an activity. A cost management system includes a set of formal
 Communicate unfavorable as weel as favorable methods developed for planning and controlling an
information and professional judgments and organization’s cost-generating activities relative to its
opinions. goals and objectives. It helps managers to:
 Refrain from engaging in or supporting any activity  Identify the cost of resources consumed in
that would discredit the profession. performing significant activities.
 Determine the efficiency and effectiveness of the
OBJECTIVITY activities performed.
 Communicate information fairly and objectively.  Identify and evaluate new activities that can
 Disclose fully all relevant that could reasonably be improve future performance.
expected to influence an intended user’s  Adapt the firm to changes in new technologies.
understanding of the reports, comments, and
recommendations presented. CHARACTERISTICS AND QUALITIES OF
INFORMATION

 ACCURACY AND VERIFIABILITY

 COMPLETENESS
 RELEVANCE
 TIMELINESS

MANAGEMENT ACCOUNTING INFORMATION

SYSTEM
A Management Accounting Information System (MAIS)
refers to the integrated set of processes, tools, and
technologies used by an organization to collect, process,
and analyze financial and non financial data. The goal
is to provide managers with relevant information that
supports decision-making, planning, and control
activities.
 A system that provides past, present, and projected
information that is timely and relevant to be able to
be used as a tool for decision making. It is a system
that captures data from operations within the firm
and organizes them into information relevant to
managerial decision making. It also provides a way
for managers to generate information they needed.
 The design of management accounting system
should fit within the operations of the entity and
conform with the characteristics of the firm (legal ELEMENTS OF A GOOD INTERNAL CONTROL
nature, organization structure, and organizational • Reliable personnel
culture and specific processes. • Separation of duties
• Supervision
• Responsibility
• Document control
• Job rotations and forced leaves
• Periodic review of the system
• Physical safeguards
• Routine and spot checks
• Cost feasibility