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Strategic Cost
Management
Chapter 1
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Overview of Cost Management and Strategy

 Expected Learning Outcomes

 Introduction

 Users of Cost Management Information

 Uses of Cost Management Information

 Management Accountants Role in Strategic Cost Management

 Relationship Between Cost Accounting and Cost Management

 Strategic Decision and the Cost Management Accountant

 Review Questions and Problems


Expected Learning Outcomes
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 Explain what is strategy is


 Relate strategic cost management to strategic management
 Describe the nature of cost management information and how they are developed.
 Explain the objective, scope and benefits derived from proper cost management.
 Enumerate and describe the various users of cost management information.
 Explain how cost management information is used for the following management
functions:
 Strategic Management
 Planning and Decision-making
 Management and Operational Control.
 Reportorial and compliance to legal and various regulatory requirements.
 Understand the cost management accountant’s role in strategic cost management.
 Describe the role of the cost management accountant in the development and
implementation of strategic decision for the business firm.
Introduction
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 WHAT IS COST?
 An amount that has to be paid or given up in order
to get something. In business, cost is usually a
monetary valuation of (1) effort, (2) material, (3)
resources, (4) time and utilities consumed, (5)
risks incurred, and (6) opportunity forgone in
production and delivery of a good or service. All
expenses are costs, but not all costs (such as
those incurred in acquisition of an income-
generating asset) are expenses.
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Cost Management Information

 Information that the manager needs to effectively


manage the firm, profit oriented as well as non-profit
organization. This includes both financial information
about cost and revenues as well as relevant
nonfinancial information about productivity, quality,
and other key success factors for the firm.
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Cost Management

 The practice of accounting in which the accountant


develops and uses cost management information.
 It adds value by helping a firm be more competitive.
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Strategic Cost Management

 Involves the development of cost management


information to facilitate the principal management
function which is strategic management.
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Strategic Management

 A process of formulating, implementing, and


evaluating cross-functional decisions that enable the
organization to define and achieve its mission, and
ultimately to create value.
 The development of a sustainable competitive
position.
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Strategy

 Set of policies, procedures and approaches to business that


produce long-term success.

 The means to achieve its vision, mission, and objectives.


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Recap

 Explain what is strategy is


 Relate strategic cost management to strategic
management
 Describe the nature of cost management
information and how they are developed.
 Explain the objective, scope and benefits derived
from proper cost management.
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Users of Cost Management Information

 For Profit Organization

 Not for Profit Organization

 Governmental Units
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Uses of Cost Management Information

 Strategic Management

 Planning and Decision Making

 Management and Operational Control

 Reportorial and Compliance to Legal Requirements


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Management Accountant’s Role in
Strategic Cost Management

 Scorekeeping or Data Accumulation

 Interpreting and Reporting of Information

 Problem Solving and Attention Directing


Recap
 Enumerate
z and describe the various users of cost management
information.
 Explain how cost management information is used for the following
management functions:
 Strategic Management
 Planning and Decision-making
 Management and Operational Control.
 Reportorial and compliance to legal and various regulatory
requirements.
 Understand the cost management accountant’s role in strategic cost
management.
 Describe the role of the cost management accountant in the
development and implementation of strategic decision for the business
firm.
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Prepare for a Quiz