Bsa 2205 - Toreja Ben Ryan M. - Activity 2

Ben Ryan M.
Toreja
BSA – 2205
ACTIVITY 2
1. What does the term cost management mean?
Cost management is the development and use of cost management information. It helps
business organizations to organize and make that they get the most about the money they
spend. It also helps to expect and prepare for upcoming expenditures and making sure that they
only consume the money that was intended for the said expenditures.
2. Who in the typical firm or organization is responsible for cost management?
Cost management is typically assigned to the cost accountants of the firm. Their expertise in
that particular field of business is the reason why the executives / board of directors assign cost
management to them. Along with the business’ managers, they coordinate, plan, and create
strategies that will give the best results to any given situation involving costs and expenditures.
3. What type of professional certification is most relevant for the management

accountant and why?
To be a Certified Management Accountant could be considered as the most relevant

professional certification for a Management Accountant. It is because of this exam that a certain
distinction is given to those who passed. Passing the examination and being certified means
that a person has the capacity and the ability to go with the standard given by the organization
that implements the exam. It also proves that the person has given enough time and effort to
strive at this field of accountancy.
4. List the four functions of management. Explain what type of cost management
information is appropriate for each.
The following are the four functions of management and the appropriate cost
management information for each of them:
Strategic Management - cost management information with regards choice of products,

manufacturing methods, marketing techniques and distribution channels, customer
profitability, and other long-term issues. Having this information will give the entity the
advantage it needs to pass over its competitors.
Planning and Decision Making - Cost management information with regards to

recurring decisions regarding replacing equipment, managing cash flow, budgeting raw
materials purchases, scheduling production, and pricing. Manufacturing operations are
where costs are more likely to be of relevance to a business’ revenue earning
operations. By planning and deciding on methods to help optimize operations and
resource gathering, it is one step closer towards earning a higher profit.
Management and Operational Control - Cost management information with regards to

providing fair and effective basis for identifying inefficient operations and to reward and
motivate the most effective managers. Employees are persons too and sometimes all
they need is some motivation to keep improving in their workplace.
Preparation of Financial Statements - Cost management information with regards to

providing accurate accounting for inventory and other assets, in compliance with
reporting requirements, for the preparation of financial reports and for use in the three
other management functions. Financial statements do not only represent numbers but
the business itself.
5. Which is the most important function of management? Explain why.
Strategic Management is the most important function of management as it is the starting

point as well as the guiding light of every business towards its success. Through strategic
management, an entity can have advantages over the competition not only in short term goals
but for bigger, long-term goals.
6. Identify the different types of business firms and other organizations that use cost
management information, and explain how the information is used.
Manufacturing Firms - These are the businesses that particularly use raw materials,
labor, machineries, and the like to create products that they can sell to other business
most likely, merchandising firms. Consequently, cost management information is used
with managing the numerous costs that a manufacturing firm incurs in its operations
such as pricing, upgrading machineries, allowances for spoilage, deterioration, or scrap
materials, and the like.
Merchandising Firms – They are either wholesalers that sell ready-made products to
other merchandising firms or retailers that sell directly to customers. Cost management
information is used in inventory management, warehouse and office costs, freight and
suppliers, and the like.
Service Industries - Unlike manufacturing or merchandising firms, these business

entities obtain profits from offering particular services to the public consumer. Cost
management information is used in managing costs with regards to the particular service
such as tools or equipment, research about better customer service, and figuring out
how to make their service more profitable.
Not-for-profit and Governmental Organizations - This firms are similar to that of

service industries. The difference being it is directly managed by the government or by
some foundation for a cause. Cost management information is used for managing their
finances and for better customer service.
7. What are some factors in the contemporary business environment that are causing
changes in business firms and other organizations?
Changes in business firms and other organizations be brought up by the following

factors such as Increased global competition, and lean manufacturing. Other factors include
advances in I.T., the internet, greater focus on the customer. Also, enterprise resource
management, new forms of management organization, and changes in the social, political, and
cultural environment of business also factor up in causing changes in business firms and other
organizations.
8. Name the 13 contemporary management techniques and describe each briefly.
The following are the 13 contemporary management techniques:
1. The Balanced Scorecard (BSC) and Strategy Map - Consists of four perspectives
which then are used to create a strategy that encompasses both the financial and non-
financial aspects of a business. This technique helps the business to have an overall
scope of what it takes for them to be competitive. The four perspectives are financial
performance, customer satisfaction, internal processes, and learning and growth.
2. The Value Chain is an analysis tool that organizations use to identify the specific steps
required to provide a competitive product or service to the customer. It helps with cost
reduction and optimization of business operations. It’s main idea it that businesses
should be careful with regards to the steps it takes as each step is crucial for its success.
3. Activity-Based Costing and Management – These two are used by entities that have
complex operations or diverse products or services. Activity Based Costing is used for
analyzing costs and tracing them back to products or customers. Activity Bases
Management on the other hand is used by the management to analyze its operations
and improve overall competitiveness.
4. Business Intelligence – Firms use business intelligence to understand its data using
statistical methods such as regression or correlation analysis to predict consumer
behavior, measure customer satisfaction, or develop models for setting prices, among
other uses.
5. Target Costing – Is used in highly competitive industries, target costing determines the
desired cost for a product on the basis of a given competitive price, such that the product
will earn a desired profit. It forces companies to be stricter in their cost management as
the competition is always high and risk of being left in the race is not unlikely.
6. Life-Cycle Costing - Is a method used to identify and monitor the costs of a product
throughout its life cycle. The steps typically include (1) research and development; (2)
product design, including prototyping, target costing, and testing; (3) manufacturing,
inspecting, packaging, and warehousing and lastly, (4) marketing, promotion, and
distribution; and (5) sales and service.
7. Benchmarking - Is a process by which a firm identifies its critical success factors,

studies the best practices of other firms for achieving these critical success factors, and
then implements improvements in the firm’s processes to match or beat the performance
of those competitors.
8. Business Process Improvement – Is method for creating competitive advantage in

which a firm reorganizes its operating and management functions, often with the result
that positions are modified, combined, or eliminated.
9. Total Quality Management - Is a method by which management develops policies and

practices to ensure that the firm’s products and services exceed customers’
expectations.
10. Lean Accounting – It uses value streams to measure the financial benefits of a firm’s
progress in implementing lean manufacturing. Lean accounting places the firm’s
products and services into value streams, each of which is a group of related products or
services.
11. The Theory of Constraints - Is used to help firms effectively improve a very important
critical success factor: cycle time, the rate at which raw materials are converted to
finished products. It helps identify and eliminate bottlenecks in places where partially
completed products tend to accumulate as they wait to be processed in the production
process.
12. Sustainability – This includes identifying and implementing ways to reduce cost and
increase revenue as well as to maintain compliance with social and environmental
regulations and expectations.
13. Enterprise Risk Management - Is a framework and process that organizations use to
manage the risks such as hazards, financial risks, operating risk, and strategic risk that
could negatively or positively affect the company’s competitiveness and success.

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Ben Ryan M.

1. What does the term cost management mean?

2. Who in the typical firm or organization is responsible for cost management?

3. What type of professional certification is most relevant for the management

To be a Certified Management Accountant could be considered as the most relevant

Strategic Management - cost management information with regards choice of products,

Planning and Decision Making - Cost management information with regards to

Management and Operational Control - Cost management information with regards to

Preparation of Financial Statements - Cost management information with regards to

5. Which is the most important function of management? Explain why.

Strategic Management is the most important function of management as it is the starting

Service Industries - Unlike manufacturing or merchandising firms, these business

Not-for-profit and Governmental Organizations - This firms are similar to that of

Changes in business firms and other organizations be brought up by the following

8. Name the 13 contemporary management techniques and describe each briefly.

The following are the 13 contemporary management techniques:

7. Benchmarking - Is a process by which a firm identifies its critical success factors,

8. Business Process Improvement – Is method for creating competitive advantage in

9. Total Quality Management - Is a method by which management develops policies and

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