Fourth Edition: Cost Management
Fourth Edition: Cost Management
Fourth Edition: Cost Management
Cost Management
ACCOUNTING AND CONTROL
1-2
Introduction to
Cost Management
1-3
Objectives
Objectives
1. List the similarities
and differences
between
After
studying
this
After studying this
financial accounting
and should
cost management.
chapter,
you
chapter, you should
2. Identify the current
factors
affecting
cost
be
able
to:
be able to:
management.
3. Discuss the importance of the accounting
system for internal and external reporting.
4. Explain the need for todays cost accountant
to acquire cross-functional expertise.
1-4
Objectives
Objectives
5. Describe how management accountants
function within an organization.
6. Understand the importance of ethical
behavior for management accounts.
7. Identify the thee forms of certification
available to internal accountants.
1-5
Financial
Financial Accounting
Accounting Versus
Versus
Cost
Cost Management
Management
Financial accounting is devoted to providing
Financial
Financial Accounting
Accounting Versus
Versus
Cost
Cost Management
Management
Cost accounting attempts to satisfy costing
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Global Competition
The new competitive
environment has increased the
demand not only for more cost
information but also for more
accurate information.
Vastly imported transportation
and communication has led to a
global market for many
manufacturing and service firms.
1-8
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Growth of the Service Industry
As the traditional industries has
1-9
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Advances in Information Technology
Computers are used to monitor and
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Advances in Management Environment
The theory of constraints is a method used to continuously
improve manufacturing activities and nonmanufacturing
activities.
Just-in-time manufacturing is a demand-pull system that
strives to produce a product only when it is needed and
only in the quantities demanded by customers.
Computer-integrated manufacturing is the automation of the
manufacturing environment.
1-11
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Customer Orientation
Firms are concentrating on the
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
New Product Development
Management recognizes that a high
proportion of production costs are
committed during the development
and design stage of a new product.
The requirement to control cost
encourages the use of target costing
and activity-based management.
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Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Total Quality Management
Continual improvement and elimination of waste are
the two foundation principles that govern a state of
manufacturing excellence.
A philosophy of total quality management, in which
managers strive to create an environment that will
enable organizations to manufacture perfect products,
has replaced the acceptable quality attitudes of the
past.
1-14
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Time as a Competitive Element
Time is the crucial
element in all phases of
the value chain.
Decreasing non-valueadded time appears to go
hand-in-hand with
increasing quality.
1-15
Current
Current Factors
Factors Affecting
Affecting Cost
Cost
Management
Management
Efficiency
While quality and time are
important, improving these
dimensions without
corresponding improvements
in financial performance may
be futile, if not fatal.
.
1-16
Traditional
Traditional Accounting
Accounting System
System
Transactions
Journal Entries
Posting to
Accounts
Financial
Reports
1-17
Data-Based
Data-Based Relationship
Relationship
Accounting
Accounting System
System
Transactions
Custom
Report
Custom
Report
Custom
Report
Custom
Report
1-18
Line
Line and
and Staff
Staff Positions
Positions
Line positions are positions
that have direct responsibility
for the basic objectives of an
organization.
Staff positions are positions
that are supportive in nature
and have only indirect
responsibility for an
organizations basic objectives.
1-19
Staff Function
Production
Vice-President
Financial VicePresident
Production
Supervisor
Machining
Foreman
Assembly
Foreman
Controller
Internal
Audit
Cost
Financial
Treasurer
Systems
Tax
1-20
Role
Role of
of Controller
Controller and
and Treasurer
Treasurer
Controller
1.
2.
3.
4.
5.
6.
7.
Financial reports
SEC reporting
Tax planning and reporting
Performance reporting
Internal auditing
Budgeting
Accounting systems and
internal controls
1-21
Role
Role of
of Controller
Controller and
and Treasurer
Treasurer
Treasurer
1. Collection of cash
2. Monitoring of cash
payments
3. Monitors cash availability
4. Short-term investments
5. Short and long-term
borrowing
6. Issuing of capital stock
1-22
The
The Management
Management Process
Process
Planning is the
detailed formulation of
future actions to
achieve a particular
end. Planning requires
setting objectives and
identifying methods to
achieve those
objectives.
1-23
The
The Management
Management Process
Process
Controlling is the
managerial activity of
monitoring a plans
implementation and
taking corrective
action as needed.
Control
Feedback
isis usually
is
achieved
that
with
can
be
used
of
evaluate
Control
Feedback
usually
is information
information
achieved
that
with
canthe
the
beuse
use
used
ofto
tofeedback.
feedback.
evaluate
or
or correct
correct the
the steps
steps being
being taken
taken to
to implement
implement aa plan.
plan.
1-24
The
The Management
Management Process
Process
Continuous
improvement is
required in a dynamic
environment if a firm is
to remain competitive
or to establish a
competitive advantage.
1-25
The
The Management
Management Process
Process
Decision making is
the process of
choosing among
competing
alternatives.
1-26
Standards
Standards of
of Ethical
Ethical Conduct
Conduct
for
for Management
Management Accountants
Accountants
1-27
Standards
Standards of
of Ethical
Ethical Conduct
Conduct
for
for Management
Management Accountants
Accountants
Standards
Standards of
of Ethical
Ethical Conduct
Conduct
for
for Management
Management Accountants
Accountants
Standards
Standards of
of Ethical
Ethical Conduct
Conduct
for
for Management
Management Accountants
Accountants
1-30
Standards
Standards of
of Ethical
Ethical Conduct
Conduct
for
for Management
Management Accountants
Accountants
1-31
Professional
Professional Certifications
Certifications
CMA: One of the main purposes of the CMA was to
The
The CMA
CMA
Four areas emphasized on the exam:
1) Economics, finance, and management
2) Financial accounting and reporting
3) Management report, analysis, and behavioral
issues
4) Decision analysis and information systems
1-33
End of
Chapter
1-34
1-35