Acctg. Ed 6 Strategic Cost Mngt.

Acctg.
Ed 6 Strategic Cost Management
UNIVERSITY OF RIZAL SYSTEM

FLEXIBLE LEARNING
COLLEGE OF ACCOUNTANCY
Acctg. Ed 6
STRATEGIC COST MANAGEMENT

Acctg. Ed 6 Strategic Cost Management
To the Students:
Welcome to Acctg. Ed 6 (Strategic Cost Management). This course guide will guide you
through out the whole semester by telling you what course covers; the requirements, schedule
of assignments, examination, activities and bases for grading.
I am Prof. Ernie D. Tano, your Course Coordinator for Acctg. Ed 1. I am an Assistant

Professor III in the College of Accountancy. I am a Certified Public Accounting (CPA) and a
holder of Master in Business Administration (MBA) degree. I earned two (2) bachelor’s degrees:
BS Commerce and BS Accountancy. Currently, I am pursuing my Doctor in Business
Administration (DBA) degree.
I have been teaching in the University for more than 10 years now and handle subjects
like Financial Accounting and Reporting, Advanced Financial Accounting and Reporting,
Applied Auditing, Taxation and Managerial Accounting
Prior to my stint in the academe, I worked for more than 20 years in the corporate world
where I was assigned to various positions: Internal Auditor, Accountant, Chief Marketing
Officer, Chief Operating Officer, Finance Director and Managing Director for Provincial
Operations.
If you have any question please email me at [email protected] or pm me at

messenger or text me at my contact 0917-4283137 or 0947-9384039.
COURSE TITLE:
Acctg. Ed 6 – Auditing & Assurance Concepts & Application 1
COURSE DESCRIPTION
This course covers cost management and strategy and its implementation. This will
involve the discussion of the uses of cost management, contemporary business environment,
strategic focus and development of competitive strategy, contemporary management
techniques and professional environment of cost management.
Emphasis shall be given on implementation of strategy such as the Balanced Scorecard

and Value Chain, strategy and the Master Budget, Variable Costing, Decision Making with
Relevant Costs and Strategic Emphasis, Cost Planning for the Product Life Cycle, Target
Costing, Theory of Constraints and Strategic Planning, Management Control of Quality,
Management Control and Strategic Performance Measurement, Strategic Investment Units
and Transfer Pricing, and Capital Budgeting. The course culminates in the discussion of
Management Compensation Business Analysis and Business Valuation.
COURSE OBJECTIVES
General Objectives: Understands the concepts and application of cost management and how
can organization utilize such strategy for its strategic position.
Specific Objectives:
At the end of the course, the student should be able to:
1. Understand concept of the following:

1.1 Cost Management & Strategy
1.2 Techniques for Planning & Control
1.3 Tools for Decision Making
1.4 Techniques for Control and Strategic Performance Measurement;
2. Use and apply different technique for use in Decision Making

2.1 The balanced Scorecard
2.2 Cost Planning for Product Life Cycle
2.3 Decentralized Operations and Segment Reporting
2.4 Variable Costing
2.5 Quantitative Techniques
2.6 Capital Investment
3. Analyze Techniques for Strategic Performance Measurement

3.1 Strategic Investment Units and Transfer Pricing
3.2 Financial and non-Financial Performance Measures
3.3 Managing Productivity and Marketing Effectiveness
3.4 Executive Performance Measures and Compensation
COURSE STRUCTURE
The course Acctg. Ed 6 consists of three (4) instructural units divided into (17) modules
namely:
Unit 1 – Introduction to Strategic Cost Management

Module Writers
1. Overview of Cost Management
And Strategy - Prof. Loida Masinsin
2. The Professional Environment of
Cost Management - Prof. Loida Masinsin
3. Contemporary Business Environment and
Strategic Focus of Cost Management - Prof. Ernie Tano
4. Developing a Competitive Strategy and
Contemporary Cost Management
Techniques - Prof. Ernie Tano
Unit 2 – Strategic Cost Management Concepts and Techniques for Planning and Control
Module Writer
5. Strategy and the Master Budget -
6. Organizational Innovation: Total Quality -
Management; Just-in-Time Production
System
7. The Balanced Scorecard: A Tool to -
Implement Strategy
8. Cost Planning for Product Life Cycle: -
Life-Cycle Costing and Long-Term Pricing:
Target Costing and Theory of Constraints
9. Decentralized Operations and Segment -
Reporting
10. Variable Costing: A Tool for Evaluating -
Management Performance
Unit 3 – Cost Management Concepts and Tools for Decision Making

Module Writers
11. Relevant Cost for Non-Routine -
Decision Making
12. Quantitative Techniques for Decision -
Making
13. Capital Investment Decision -
Unit 4 – Cost Management Concepts and Techniques for Control and Strategic
Performance Measurement
Module Writers
14. Management Control and Strategic -
Performance Measurement: Strategic
Investment Units and Transfer Pricing
15. Financial and Non-Financial Performance -
16. Managing Productivity and Marketing -
Effectiveness
17. Executive Performance Measures and -
Compensation
COURSE REQUIREMENT
The following are the major course requirement:
1. Submission of assigned activities

2. Submission of final term paper
3. Passing the quiz
4. Do the Periodical Exam
GRADING SYSTEM
Your final grade will be based on your performance in written assignments and reports
given the following weights:
1. Periodical Exam 40%
2. Term Paper 30%
3. Quizzes/Activities 20%
4. Attendance/Participation 10%
ACADEMIC INTEGRITY
Being a learner, you are on your own. The activities must be done by you alone. You
must always observe academic integrity. Honesty is very important.
SCHEDULE
Date Session No. Specifications

24 Aug 2020 Study Session 0 1 Classes orientation
Read course guide
07 Sep 2020 Study Session 02 Submission of activities/assignment
for Module 1&2
for Module 3&4
for Module 5&6
for Module 7&8
05 Oct 2020 Study Session 06 Submission of Preliminary Exam
12 Oct 2020 Study Session 07 Submission of activities/assignment
for Module 9
for Module 10
for Module 11
02 Nov 2020 Study Session 10 Submission of activities/assignment
for Module 12
09 Nov 2020 Study Session 11 Submission of Mid-Term Exam
for Module 13
for Module 14-15
for Module 16-17
07 Dec 2020 Study Session 15 Submission of Final Exam
Study Session 16 Submission of Final Term Paper
UNIT I – INTRODUCTION TO STRATEGIC COST MANAGEMENT
This unit introduces what Strategic Cost Management is. It will touch on overview of Cost
Management and Strategy, the Professional Environment of Cost Management, Contemporary
Business Environment and Strategic Focus of Cost Management and Developing a Competitive
Strategy and Contemporary Cost Management Techniques.
MODULE NO. 1 OVERVIEW OF COST MANAGEMENT AND STRATEGY
This module will cover topics: Users of Cost Management Information, Uses of Cost
Management Information, Management Accountants Role in Strategic Cost Management,
Relationship Between Cost Accounting and Cost Management and Strategic Decision and the
Cost Management Accountant.
Introduction
The growing pressures of global competition, trade wars among countries, technological
innovation and changes in business processes have made cost management much more
important, critical and dynamic than ever before. Business managers must think and act
competitively and doing so requires a strategy.
Learning Objectives:
At the end of this module, the learners should be able to:
1. Explain what strategy is;
2. Describe the nature of cost management information and how they
are developed;
3. Enumerate and discuss the various users of cost management
information;
4. Understand the cost management accountant’s role in strategic
cost management; and,
5. Describe the role of the cost management accountant in the
development and implementation of strategic decision for the
business firm.
Strategy is a set of policies, procedures and approaches to business that produce long-
term success while strategic management involves the development of a sustainable
competitive position. Strategic cost management involves the development of cost
management information to facilitate the principal management function which is strategic
management. In today’s business environment, the development and use of information
especially cost management information is a critical factor in the effective management of a
firm or organization.
Cost management information is the information that the manager needs to effectively
manage the firm, profit-oriented as well as not-for-profit organization. This includes both
financial information about cost and revenues as well as relevant non-financial information
about productivity, quality and other key success factors for the firm.
Cost management is the practice of accounting in which the accountant develops and
uses cost management information. For competitive success, it is not enough to emphasize
only on financial information. This could lead manager to stress cost reduction while ignoring
or even lowering quality standards.
Users of Cost Management Information
1. Business Firms
Business firms are usually categorized by industry: merchandising,

manufacturing and service.
2. Governmental Units
Governmental units provide services like the firms in the service industries. The
services are provided by the government and often called public goods.
3. Not-for-profit Organization
Not-for-profit organizations are supported by philanthropic organization.
Uses of Cost Management Information
Cost management information is needed for each of the following management

functions, namely:
1. Strategic Management
This involves the development of sustainable competitive position in which the

firm’s competitive advantage spells the continued success.
2. Planning and Decision-making
Cost management information is needed to support recurring decision. Planning

and decision-making involves budgeting and profit planning, cash flow management and
other decision related to the firm’s operation.
3. Management and Operational Control
Cost management information is needed to provide a fair and effective basis for
identifying inefficient operations and to reward and motivate the most effective manager.
Operational control takes place when mid-level manager monitors the activities
of operating-level managers and employers.
Management control is the evaluation of mid-level manager by upper-level

manager.
4. Reportorial and Compliance to Legal Requirements
Reportorial and compliance responsibilities require management to comply with

the financial reporting requirements to regulatory agencies. The financial statement
preparation role has recently received a renewed focus and interest as accounting
scandals have shown crucial and important accurate financial information for investors.
Management Accountant Role in Strategic Cost Management
Cost Management is the practice of accounting in which the accountant develops and
uses cost management information. This area of accountancy practice is performed by
management accountants—accounting professionals who develop and analyze cost
management information and other accounting information.
Management Accounting involves the application of appropriate techniques and

concepts to economic data so as to assist management in establishing plans for reasonable
economic objectives and in the making of rational decisions with a view toward achieving these
objectives. It is concerned 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. Generally, management accountants do the following tasks:
1. Scorekeeping or data accumulation

2. Interpreting and reporting of information
3. Problem-solving
Important guidelines that help management accountants provide the most value:
1. Employ a cost-benefit approach

2. Recognize behavioral as well as technical considerations
3. Use appropriate cost concepts for different purposes
The management accountant provides a system which allows management to receive the
necessary information used in performing its administrative functions of:
(a) Planning – involves setting of goals for the firm, evaluating the various ways to meet the
goals and picking out what appears to be the best way to the goals;
(b) Controlling – involves the evaluation of whether actual performance conforms with
planned goals; and,
(c) Decision-making – involves determination of predictive information for making important

business decisions.
Plan
Plan
Decisions to change Action taken to implement plan

operations or revise
Results
Decisions to reward or punish Comparison of planned and

managers actual results
Evaluation
Figure 1.1 Planning and Control Process
As indicated in The above figure, decision making is an integral part of the planning and
control process—decisions are made to reward or punish managers, and decisions are made
to change operations or revise plans.
Relationship Between Cost Accounting and Cost Management
Cost Accounting is a 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 needs the output of cost accounting. Its purpose is to provide
managers with information which aids a decision.
Strategic Decision and the Cost Management Accountant

A company earns profit by attracting customers willing to pay for the goods and services
it offers. Customers compare the goods and services offered by a company to same goods
and services offered by other companies. The key to company’s success is creating a value
for customers while differentiating itself from its competitors. Identifying how a company will do
this is what strategy is all about. However, a chosen strategy is only as good as how effectively
it is implemented. The management accountant provides input that aids in developing strategy,
building resources and capabilities, and implementing strategy. To understand the
management accountant’s role, we must first understand the manager’s task in more detail.
SAQ1 Give four examples of firms you think would be significant users of cost management
information and explain why.
SAQ 2 List four functions of management. Explain what type of cost management information
is appropriate for each.
SAQ3 What is meant by business strategy?
ASAQ1
a. Pure Gold: to keep costs low by streamlining restocking and sales

b. COMPAQ: to keep costs low by improving manufacturing performance and by using
target costing and other management techniques
c. Bank of the Philippine Island: to keep costs low by using activity analysis to identify key
operations and to find those that add little or no value
d. A local state school (e.g., Polytechnic University of the Philippines): to keep costs low in
order to provide the best possible service given available funds
e. Proctor & Gamble: to assess the profitability of its different products
f. Any other large, diversified manufacturer, like Procter & Gamble: which needs to be able
to analyze the relative profitability of its different products, using cot management
g. A small machine shop: which needs cost management to determine whether it should
repair or replace a machine
h. A dance studio: to analyze and choose between different compensation plans for its
teacher; and to determine whether it should open a new studio
ASAQ2
The four functions of management are:

1. Strategic Management – information is needed by management to make sound strategic
decisions regarding choice of products, manufacturing methods, marketing techniques
and channels, and other long-term issues.
2. Planning and Decision Making – information is needed to support recurring decisions
regarding replacement of equipment, managing cash flow, budgeting raw materials
purchases, scheduling production and pricing.
3. Management and Operational Control – information is needed to provide a fair and
effective basis for identifying inefficient operations and to reward and support the most
effective managers.
4. Preparation of Financial Statements – information is needed to provide accurate

accounting for inventory and other issues, in compliance with reporting requirements, for
the preparation of financial reports and for use in the three other management functions.
ASAQ3
13. A strategy is a game plan that enables a company to attract customers by distinguishing
itself from competitors. The focal point of a company’s strategy should be its target customers.
MODULE NO. 2 THE PROFESSIONAL ENVIRONMENT OF COST MANAGEMENT
This module will cover topics: Organization Structure and The Management Accountant,
The Chief Financial Officer and the Controller, The Chief Financial Officer and the Treasurer,
Ethical Standards for Management Accountants, Company Code of Conduct, Typical Ethical
Challenges, Code of Conduct on the International Level, International Certification and
Philippine Association of Management Accountants.
Introduction
Many of the activities constituting the field of management accounting are interrelated
and thus must be coordinated, ranked and implemented by the management accountant in
such a fashion as to meet the objectives of the organization as perceived by him or her. A
major function of the management accountant is that of tailoring the application of the process
to the organization so that the organization’s objective, short-term and long-term, are achieved
effectively.
Learning Objectives:
At the end of this module, the learners should be able to:
1. Describe the position of the management accountant in the
organization structure of the business firm;
2. Describe the functions and responsibilities of the Controller as the
top management accountant;
3. Describe the functions and responsibilities of the Treasurer;
4. Understand the ethical standards for management accountants;
5. Realize the need for a company code of conduct; and,
6. Describe the international certifications that are available to
management accountants.
Organization Structure and the Management Accountant
Management accounting is intended to include persons involved in such functions as

controllership, treasury, financial analysis, planning, and budgeting, cost accounting, internal
audit, systems and general accounting. Management accountants thus may have titles as
controller, treasurer, budget analyst, cost analyst, and accountant, among others.
The accounting function is usually “staff”, with responsibility for providing line managers
and also other staff managers, with specialized service. This includes advice and help in the
areas of budgeting, controlling, pricing and special decisions.
Line authority is the authority to command action or give orders to subordinates. Line
managers are directly responsible for attaining the objectives of the business firm as efficiently
as possible. Sales and production managers typically have line authority.
Staff authority is the authority to advise but not to command others; it is exercised literally
or upward. Staff managers give support, advice and service to line department. Examples of
staff authority are found in personnel, purchasing, engineering and accounting.
Except for exercising line authority over his department, the chief accounting officer
usually the controller generally fills the staff role in his company as contrasted with the line roles
of sales and production executives. Theoretically, the controller transmits the best accounting
procedures to be followed by the line people to the President who will communicate such
through a manual of instructions. In practice however, the controller holds delegated authority
from top line management to direct the line people on how to apply these procedures. This is
known as functional authority which is the right to command action, laterally downward, with
regard to a specific function or specialty.
The Chief Financial Officer and the Controller
The Chief Financial Officer (CFO) – also called the Finance Director in many countries
– is the executive responsible for overseeing the financial operations of an organization. The
responsibilities of the CFO vary among organizations, but they usually include the following
areas:
• Controllership
• Treasury
• Risk Management
• Taxation
• Internal Audit
In some organizations, the CFO is also responsible for information systems. In other
organizations, an officer of equivalent rank to CFO – called the Chief Information Officer –
responsible for information systems.
The Controller (also called Chief Accounting Officer) is the financial executive primarily
responsible for management accounting and financial accounting. Modern controllers do not
do any controlling in terms of line authority except over their own departments. Yet, the modern
concept of controllership maintains that the controller does control in a special sense. That is,
by reporting and interpreting relevant data, the controller exerts a force or influence that impels
management toward making better-informed decisions.
Chairman
Chief Executive Officer Board of Directors
(CEO)
President
Chief Operating Officer
(COO)
Chief Financial Officer

(CFO)
Controller Treasurer
Figure 2-1 Reporting Relationship for the CFO and the Corporate Controller
The Controller as the Top Management Accountant
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 objectives.
The controller provides reports for planning and evaluating company activities and
provides the information needed to make management decisions. He/she also has the
responsibility for all financial accounting reports and tax filings with the BIR and other taxing
agencies, as well as coordinating the activities of the firm’s external auditors.
A simplified illustration of the organization chart for the controller’s office is shown is
Figure 2-2.
Controller
Budgeting and
Financial Financial Analysis
Performance Cost Management
Reporting and Special Studies
Reporting
Systems Taxation
Development Reporting
Figure 2-2 A Typical Organization Chart Showing the Functions of the Controller
Basic Functions of Controllership
The basic principal functional responsibilities and activities of controllership may be

categorized as follows:
1. Planning
2. Control
3. Reporting
4. Accounting
5. Other Primary Responsibilities
Qualifications of the Controller
The qualifications of an effective controller would include:
1. An excellent technical foundation in accounting and finance with an understanding and

thorough knowledge of accounting principles;
2. An understanding of the principles of planning, organizing and control;
3. A general understanding of the industry in which the company competes and the social,
economic, and political forces involved;
4. A thorough understanding of the company, including its technologies, products, policies,
objectives, history, organization and environment;
5. The ability to communicate with all levels of management and a basic understanding of
the other functional problems related to engineering, production, procurement, industrial
relations, and marketing;
6. The ability to express ideas clearly in writing or in making informative presentations; and,
7. The ability to motivate others to achieve positive action and results.
The Chief Financial Officer and the Treasurer
Although organizational structures vary from firm to firm, the role of finance is assigned
to the Chief Financial Officer (CFO) or the Vice President – Finance who reports to the
President.
The financial vice president’s key subordinates are the Treasurer and the Controller.
Treasurership
Treasurership is concerned with the acquisition, financing and management of assets of

a business concern to maximize the wealth of the firms for its owners.
Treasurer has the following responsibilities:
1. Funds procurement
2. Banking and custody of funds
3. Investment of funds
4. Operating responsibilities related to
a. Credit and collection
b. Inventory management
c. Corporate pension and retirement fund
d. Investor relations
e. Insurance
f. Compliance with legal and regulatory provisions to funds procurement, use and
distribution as well as coordination of the finance function with accounting
function.
Ethical Standards for Management Accountants
The Institute of Management Accountants (IMA) issued the Standards of Ethical Conduct
for Practitioners of Management Accounting and Financial Management. For further reading
please refer to:
https://www.imanet.org/-/media/b6fbeeb74d964e6c9fe654c48456e61f.ashx
There are two parts to the standards. The first part provides general guidelines for
ethical behavior. In a nutshell, the management accountant has ethical responsibilities in four
broad areas namely:
1. To maintain a high level of professional competence;

2. To treat sensitive matters with confidentiality;
3. To maintain personal integrity; and,

4. To be objective in all disclosing.
The second part of the standards gives specific guidance concerning what should be
done if an individual finds evidence of ethical misconduct within an organization.
The ethical standards provide sound, practical advice for management accountants and
managers. They require professional behavior, especially in avoiding conflicts of interest. They
require management accountants to bring bad news to the attention of their supervisors, and
to work competently.
Company Code of Conduct
Many companies have adopted formal ethical codes of conduct. These codes are
generally broad-based statements of a company’s responsibilities to its employees, its
customers, its suppliers and the community in which the company operates. Codes give
guidelines rather than that spell out specific do’s and dont’s or suggest proper behavior in a
specific situation. Companies with a strong code of ethics can create strong customer and
employee loyalty.
Codes of Conduct on an International Level
In July 1990, the International Federation of Accountants (IFAC) in which the Philippines
through PICPA is a member, issued the “Guidelines on Ethics for Professional Accountants”
which governs the activities of all professional accountants throughout the world; regardless of
whether they are practicing as independent CPAs, employed in government service or
employed as internal accountants. In addition to outlining ethical requirements in matters
dealing with competence, objectivity, independence and confidentiality, the IFAC’s code also
outlines the accountant’s ethical responsibilities in matters relating to taxes, fees and
commissions, advertising and solicitation, the handling of monies and cross-border activities.
Where cross-border activities are involved, the IFAC ethical requirements must be followed if
these requirements are stricter than the ethical requirements of the country in which the work
is being performed.
International Certifications
The three certifications available to management accountants are as follows:
• Certificate of Management Accountants (CMA)

• Certificate in Public Accounting (CPA)
• Certificate in Internal Auditing (CIA)
Institute of Management Accountants (IMA)
Management accountants have gained status in recent years as they now spend more
time analyzing a company’s operations and less with the problems of recording and computing
costs of products. The Institute of Management Accountants, the principal organization of
management accountants in the US, has instituted a program to provide certifications for
management accountants and financial managers.
• Certified Management Accountant (CMA)

• Certified in Financial Management (CFM)
Philippine Association of Management Accountants (PAMA)

PAMA was established in 1972 as the National Association of Accountants (NAA)
Philippine Chapter, Inc. It is affiliated with NAA in New York. It was founded primarily to provide
its members with educational and professional activities that supplement in the knowledge of
management accounting practices and methods.
To propagate and professionalize Management Accounting in the Philippines, PAMA

conducts the Certificate in Management Accounting (CMA) Program through its continuing
education arm, the Philippine Institute of Management Accounting (PIMA). Basic objectives of
the program are:
1. To establish management accounting as a recognized profession by identifying the role

of the management accountant and the underlying body of knowledge, and by outlining
a course of study by which such knowledge can be acquired.
2. To foster higher educational standards in the field of management accounting.
3. To assist employees, educators and students by establishing an objective measure of
an individual’s knowledge and competence in the field of management accounting.
SAQ1
What roles do management accountants perform?
SAQ2
“Planning is really more vital than control.” Do you agree? Why?
SAQ3
The items that follow are associated with a management accounting information system.
a. Repairing a defective part.

b. Providing information for planning and control.
c. Designing a product.
d. Measuring the cost of design.
e. A budget that shows how much should be spent on design activity.
f. Using output information to make a decision
g. Usage of material.
h. A report comparing the actual costs of quality with the expected costs of quality.
i. Surveying customers to assess post purchase costs.
j. Incurrence of post purchase costs.
k. Costing out products.
l. Assigning the cost of labor to product.
m. Report showing the cost of a product.
n. Measuring the cost of quality.
Required:
Classify the items into one of the following categories:
1. Inputs
2. Processes
3. Outputs
4. System objectives
ASAQ1
In most organizations, management accountants perform multiple roles: problem solving

(comparative analyses for decision making), scorekeeping (accumulating data and reporting
reliable results), and attention directing (helping managers properly focus their attention).
ASAQ2
Line authority is exerted downward over subordinates. Staff authority is the authority to
advise but not command others; it is exercised laterally or upward. Functional authority is the
right to command action laterally and downward with regard to a specific function or specialty.
ASAQ3
1. Inputs: b, g, i, m
2. Processes: a, d, f, j
3. Outputs: e, k, n
4. System objectives: c, h, l

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Acctg.

Ed 6 Strategic Cost Management

UNIVERSITY OF RIZAL SYSTEM

STRATEGIC COST MANAGEMENT

I am Prof. Ernie D. Tano, your Course Coordinator for Acctg. Ed 1. I am an Assistant

If you have any question please email me at [email protected] or pm me at

Acctg. Ed 6 – Auditing & Assurance Concepts & Application 1

Emphasis shall be given on implementation of strategy such as the Balanced Scorecard

1. Understand concept of the following:

2. Use and apply different technique for use in Decision Making

3. Analyze Techniques for Strategic Performance Measurement

Unit 1 – Introduction to Strategic Cost Management

Unit 3 – Cost Management Concepts and Tools for Decision Making

1. Submission of assigned activities

Date Session No. Specifications

UNIT I – INTRODUCTION TO STRATEGIC COST MANAGEMENT

MODULE NO. 1 OVERVIEW OF COST MANAGEMENT AND STRATEGY

At the end of this module, the learners should be able to:

1. Explain what strategy is;

2. Describe the nature of cost management information and how they

3. Enumerate and discuss the various users of cost management

4. Understand the cost management accountant’s role in strategic

cost management; and,

5. Describe the role of the cost management accountant in the

development and implementation of strategic decision for the

Users of Cost Management Information

Business firms are usually categorized by industry: merchandising,

Not-for-profit organizations are supported by philanthropic organization.

Uses of Cost Management Information

Cost management information is needed for each of the following management

This involves the development of sustainable competitive position in which the

2. Planning and Decision-making

Cost management information is needed to support recurring decision. Planning

3. Management and Operational Control

Management control is the evaluation of mid-level manager by upper-level

4. Reportorial and Compliance to Legal Requirements

Reportorial and compliance responsibilities require management to comply with

Management Accountant Role in Strategic Cost Management

Management Accounting involves the application of appropriate techniques and

1. Scorekeeping or data accumulation

1. Employ a cost-benefit approach

(c) Decision-making – involves determination of predictive information for making important

Decisions to change Action taken to implement plan

Decisions to reward or punish Comparison of planned and

Figure 1.1 Planning and Control Process

Relationship Between Cost Accounting and Cost Management

Cost Accounting is a systematic set of procedures for recording and reporting

Strategic Decision and the Cost Management Accountant

SAQ3 What is meant by business strategy?

a. Pure Gold: to keep costs low by streamlining restocking and sales

The four functions of management are:

4. Preparation of Financial Statements – information is needed to provide accurate

MODULE NO. 2 THE PROFESSIONAL ENVIRONMENT OF COST MANAGEMENT

At the end of this module, the learners should be able to:

1. Describe the position of the management accountant in the

organization structure of the business firm;

2. Describe the functions and responsibilities of the Controller as the

top management accountant;

3. Describe the functions and responsibilities of the Treasurer;

4. Understand the ethical standards for management accountants;