Strategic Cost management ability to make fast changes is critical as a result
of the demand of the new management
Strategy is a set of policies, procedures and
concepts of e-commerce, speed to market, and
approaches to business that produce long-term
flexible manufacturing. Product life cycle – the
success while strategic management involves
time from the introduction of a new product to
the development of a sustainable competitive
its removal from the market – is expected to
position. Strategic cost management involves
become shorter and shorter.
the development of cost management
information to facilitate the principal The strategic emphasis also requires creative
management function which is strategic and integrative thinking, that is, the ability to
management. identify and solve problems from a cross-
functional view. The business functions are
In today’s business environment, the
often identified as marketing, production,
development and use of information especially
finance and accounting/controllership. Instead
cost management information is a critical
of viewing a problem as a production problem,
factor in the effective management of a firm or
a marketing problem, or a finance and
organization.
accounting problem, cross-functional teams
Cost management information is the view it from an integrative approach that
information that the manager needs to combines skills from all functions
effectively manage the firm, profit-oriented as simultaneously.
well as not-for-profit organization. This includes
USERS OF COST MANAGEMENT INFORMATION
both financial information about cost and
revenues as well as relevant nonfinancial Cost management information is useful in all
information about productivity, quality and organizations: business firms, governmental
other key success factors for the firm. units, and not-for-profit organizations. Business
firms are usually categorized by industry, the
Cost management is the practice of accounting
main categories being merchandising,
in which the accountant develops and uses cost
manufacturing, and service. Merchandising
management information. For competitive
firms purchase goods for resale. Merchandisers
success, it is not enough to emphasize only on
that sell to other merchandisers are called
financial information. This could lead manager
wholesalers; those selling directly to consumers
to stress cost reduction (a financial measure)
are retailers.
while ignoring or even lowering quality
standards (a nonfinancial measure). This Governmental and not-for-profit organization
decision could be critical mistake which could provide services, much like the firms in service
lead to the loss of customers and market share industries. However, these organizations
in the long run. Cost management information, provide the services for which no direct
is thus a value-added concept. It adds value by relationship exists between the amount paid
helping a firm be more competitive. Effective and the services provided. Instead, both the
strategic management is very important to the nature of these services and the customers to
success of every firm or organization receive them are determined by government or
philanthropic organizations. The resources are
Strategic thinking involves anticipating changes.
provided by governmental units and/or
Products and production processes are
charities. The services provided by these
designed to accommodate expected changes in
customer demands. Flexibility is important. The
,organizations are often called public goods to Cost management information is needed to
indicate that no typical market exists for them. support recurring decision such as replacing
and maintaining equipment, managing cash
USES OF COST MANAGEMENT INFORMATION
flows, budgeting raw materials purchases,
Cost management information is needed for scheduling product ion, pricing and managing
each of the following management functions, distribution of products to customers, and so
namely: forth.
1. Strategic Management Planning and decision-making involves
budgeting and profit planning, cash flow
Strategic management involves the management and other decision related to the
development of a sustainable competitive firm’s operation such as deciding whether to
position in which the firm’s competitive lease or buy a facility, whether to replace or
advantage spells continued success. A strategy just repair as equipment, when to change a
is a set of goals and specific action plans that if marketing plan or when to begin new product
achieved, provide the desired competitive development.
advantage. Strategic management involves
identifying and implementing these goals and Cost management information is needed for
action plans. each of the following management functions,
namely:
Management must make sound strategic
decisions regarding the choice of product, 3. Management and Operational Control
manufacturing methods, marketing techniques
Cost management information is needed to
and channels and other long-term issues.
provide a fair and effective basis for identifying
The strategic emphasis requires an integrative inefficient operations and to reward and
approach which combines skills from all motivate the most effective manages.
business function, namely, marketing,
Operational Control takes place when mid-
production, finance and
level manager (e.g., product managers,
accounting/controllership, is necessary in a
regional managers) monitors the activities of
dynamic and competitive environment.
operating-level managers and employers (e.g.,
Due to increasing strategic issues, cost production supervisions, department heads).
management has moved from a traditional
Management control on the other hand, is the
role of product costing and operational control
evaluation of mid-level manager by upper-
to a broader strategic focus: strategic cost
level manager (e.g., Controller or the Chief
management.
Financial Officer (CFO).
Strategic cost management is the development
Cost management information is needed for
of cost management information to facilitate
each of the following management functions,
the principal management function, strategic
namely:
management.
4. Reportorial and Compliance to Legal
Cost management information is needed for
Requirements
each of the following management functions,
namely: Reportorial and compliance responsibilities
require management to comply with the
2. Planning and Decision-making
,financial reporting requirements to regulatory Management accountants (including cost
agencies such as the Securities and Exchange accountants) are concerned with providing
Commission (SEC), Bureau of Internal Revenue information to managers, that is, people inside
(BIR), and other relevant government an organization who direct and control the
authorities an agencies. operations. They provide a variety of reports.
Some reports focus on how well managers and
The financial statement preparation role has
business units have performed while other
recently received a renewed new focus and
reports provide timely and frequent updates
interest as accounting scandals have shown
on key indicators, analysis of business
how crucial and important accurate financial
situation or opportunity and analytical reports
information is for investors.
that are needed to investigate specific
The financial statement information also problems.
serves the other three management functions
Management accounting is concerned
as this information is often an important part
primarily with providing information to
of planning and decision making, control and
internal managers who are charged with
strategic management.
planning and controlling the operations of the
Management Accountant’s Role in Strategic firm and making a variety of management
Cost Management decisions. Generally, management accountants
do the following tasks:
Cost Management is the practice of accounting
in which the accountant develops and uses a. Scorekeeping or data accumulation
cost management information. This area of which enables both internal and
accountancy practice is performed by external parties to evaluate
management accountants. Management organizational performance and
accountants are the accounting professionals position.
who develop and analyze cost management
b. b. Interpreting and reporting of
information and other accounting information.
information that helps managers to
Management Accounting involves the focus on operating problems,
application of appropriate techniques and opportunities as well as inefficiencies.
concepts to economic data so as to assist
c. Generally, management accountants
management in establishing plans for
do the following tasks:
reasonable economic objectives and in the
making of rational decisions with a view d. b. This is commonly associated with
toward achieving these objectives. It is the current planning and control and the
process of identification, measurement, analysis and investigations of recurring
accumulation, analysis, preparation, and routine internal accounting reports to
communication of financial information, which signal situations in which management
is used by management to plan, evaluate and action may be required.
control activities within an organization. It also
e. c. Problem-solving or quantification of
comprises the preparation of financial reports
the relative merits of possible courses
for non-management groups such as
of action as well as recommendations s
shareholders, creditors, regulatory agencies
to the best procedure. This is
and tax authorities.
, commonly associated with non- m. b. Controlling which involves the
recurring decisions. evaluation of whether actual
performance conforms with planned
f. Three important guidelines help
goals; and
management accountants provide the
most value when scorekeeping provide n. c. Decision making which involves
the most value when scorekeeping, determination f predictive information
problem-solving and attention (e.g. relevant costs) for making
directing (interpreting and reporting). important business decisions.
These are
PLANNING
g. 1. Employ a cost-benefit approach
A key activity for all companies is planning.
h. 2. Recognize behavioral as well as Planning involves identifying alternatives and
technical considerations and selecting a course of action and specifying how
the action will be implemented to further the
i. 3. Use appropriate cost concepts for
organization’s objectives.
different purpose
The plan communicates a company’s goals to
j. Management accountants continually
employees and specifies the resources needed
face resource-allocation decisions,
to achieve them. The plans of management are
such as whether to purchase a new
often expressed formally in budgets. Cash
software package or hire a new
budgets, capital budgets, and projected
employee. The cost-benefit approach
statements of financial position are examples of
should be used in making these
contributions which accounting can make in
decisions: Resources should be spent if
resource planning while break-even analysis,
they are expected to better attain
projected income statements are examples of
company goals in relation to the
useful tools in profit planning.
expected costs of those resources. The
expected benefits and costs may not CONTROL
be easy to quantify. Nevertheless, the
Control of organizations is achieved by
cost-benefit approach is useful for
evaluating the performance of managers and
making resource-allocation decisions.
the operations for which they are responsible.
k. Specifically, the management The distinction between evaluating managers
accountant provides system which and evaluating the operations they control is
allows management to receive the important. Managers are evaluated to
necessary information used in determine how their performance should be
performing its administrative functions rewarded or punished, which in turn motivates
of: them to perform at a high level. Based on an
evaluation indicating good performance, a
l. a. Planning which involves setting of
manager might receive substantial bonus
goals for the firm, evaluating the
compensation. An evaluation indicating a
various ways to meet the goals and
manager performed poorly might lead to the
picking out what appears to be the
manager being fired.
best way to meet the goals;
of the demand of the new management
Strategy is a set of policies, procedures and
concepts of e-commerce, speed to market, and
approaches to business that produce long-term
flexible manufacturing. Product life cycle – the
success while strategic management involves
time from the introduction of a new product to
the development of a sustainable competitive
its removal from the market – is expected to
position. Strategic cost management involves
become shorter and shorter.
the development of cost management
information to facilitate the principal The strategic emphasis also requires creative
management function which is strategic and integrative thinking, that is, the ability to
management. identify and solve problems from a cross-
functional view. The business functions are
In today’s business environment, the
often identified as marketing, production,
development and use of information especially
finance and accounting/controllership. Instead
cost management information is a critical
of viewing a problem as a production problem,
factor in the effective management of a firm or
a marketing problem, or a finance and
organization.
accounting problem, cross-functional teams
Cost management information is the view it from an integrative approach that
information that the manager needs to combines skills from all functions
effectively manage the firm, profit-oriented as simultaneously.
well as not-for-profit organization. This includes
USERS OF COST MANAGEMENT INFORMATION
both financial information about cost and
revenues as well as relevant nonfinancial Cost management information is useful in all
information about productivity, quality and organizations: business firms, governmental
other key success factors for the firm. units, and not-for-profit organizations. Business
firms are usually categorized by industry, the
Cost management is the practice of accounting
main categories being merchandising,
in which the accountant develops and uses cost
manufacturing, and service. Merchandising
management information. For competitive
firms purchase goods for resale. Merchandisers
success, it is not enough to emphasize only on
that sell to other merchandisers are called
financial information. This could lead manager
wholesalers; those selling directly to consumers
to stress cost reduction (a financial measure)
are retailers.
while ignoring or even lowering quality
standards (a nonfinancial measure). This Governmental and not-for-profit organization
decision could be critical mistake which could provide services, much like the firms in service
lead to the loss of customers and market share industries. However, these organizations
in the long run. Cost management information, provide the services for which no direct
is thus a value-added concept. It adds value by relationship exists between the amount paid
helping a firm be more competitive. Effective and the services provided. Instead, both the
strategic management is very important to the nature of these services and the customers to
success of every firm or organization receive them are determined by government or
philanthropic organizations. The resources are
Strategic thinking involves anticipating changes.
provided by governmental units and/or
Products and production processes are
charities. The services provided by these
designed to accommodate expected changes in
customer demands. Flexibility is important. The
,organizations are often called public goods to Cost management information is needed to
indicate that no typical market exists for them. support recurring decision such as replacing
and maintaining equipment, managing cash
USES OF COST MANAGEMENT INFORMATION
flows, budgeting raw materials purchases,
Cost management information is needed for scheduling product ion, pricing and managing
each of the following management functions, distribution of products to customers, and so
namely: forth.
1. Strategic Management Planning and decision-making involves
budgeting and profit planning, cash flow
Strategic management involves the management and other decision related to the
development of a sustainable competitive firm’s operation such as deciding whether to
position in which the firm’s competitive lease or buy a facility, whether to replace or
advantage spells continued success. A strategy just repair as equipment, when to change a
is a set of goals and specific action plans that if marketing plan or when to begin new product
achieved, provide the desired competitive development.
advantage. Strategic management involves
identifying and implementing these goals and Cost management information is needed for
action plans. each of the following management functions,
namely:
Management must make sound strategic
decisions regarding the choice of product, 3. Management and Operational Control
manufacturing methods, marketing techniques
Cost management information is needed to
and channels and other long-term issues.
provide a fair and effective basis for identifying
The strategic emphasis requires an integrative inefficient operations and to reward and
approach which combines skills from all motivate the most effective manages.
business function, namely, marketing,
Operational Control takes place when mid-
production, finance and
level manager (e.g., product managers,
accounting/controllership, is necessary in a
regional managers) monitors the activities of
dynamic and competitive environment.
operating-level managers and employers (e.g.,
Due to increasing strategic issues, cost production supervisions, department heads).
management has moved from a traditional
Management control on the other hand, is the
role of product costing and operational control
evaluation of mid-level manager by upper-
to a broader strategic focus: strategic cost
level manager (e.g., Controller or the Chief
management.
Financial Officer (CFO).
Strategic cost management is the development
Cost management information is needed for
of cost management information to facilitate
each of the following management functions,
the principal management function, strategic
namely:
management.
4. Reportorial and Compliance to Legal
Cost management information is needed for
Requirements
each of the following management functions,
namely: Reportorial and compliance responsibilities
require management to comply with the
2. Planning and Decision-making
,financial reporting requirements to regulatory Management accountants (including cost
agencies such as the Securities and Exchange accountants) are concerned with providing
Commission (SEC), Bureau of Internal Revenue information to managers, that is, people inside
(BIR), and other relevant government an organization who direct and control the
authorities an agencies. operations. They provide a variety of reports.
Some reports focus on how well managers and
The financial statement preparation role has
business units have performed while other
recently received a renewed new focus and
reports provide timely and frequent updates
interest as accounting scandals have shown
on key indicators, analysis of business
how crucial and important accurate financial
situation or opportunity and analytical reports
information is for investors.
that are needed to investigate specific
The financial statement information also problems.
serves the other three management functions
Management accounting is concerned
as this information is often an important part
primarily with providing information to
of planning and decision making, control and
internal managers who are charged with
strategic management.
planning and controlling the operations of the
Management Accountant’s Role in Strategic firm and making a variety of management
Cost Management decisions. Generally, management accountants
do the following tasks:
Cost Management is the practice of accounting
in which the accountant develops and uses a. Scorekeeping or data accumulation
cost management information. This area of which enables both internal and
accountancy practice is performed by external parties to evaluate
management accountants. Management organizational performance and
accountants are the accounting professionals position.
who develop and analyze cost management
b. b. Interpreting and reporting of
information and other accounting information.
information that helps managers to
Management Accounting involves the focus on operating problems,
application of appropriate techniques and opportunities as well as inefficiencies.
concepts to economic data so as to assist
c. Generally, management accountants
management in establishing plans for
do the following tasks:
reasonable economic objectives and in the
making of rational decisions with a view d. b. This is commonly associated with
toward achieving these objectives. It is the current planning and control and the
process of identification, measurement, analysis and investigations of recurring
accumulation, analysis, preparation, and routine internal accounting reports to
communication of financial information, which signal situations in which management
is used by management to plan, evaluate and action may be required.
control activities within an organization. It also
e. c. Problem-solving or quantification of
comprises the preparation of financial reports
the relative merits of possible courses
for non-management groups such as
of action as well as recommendations s
shareholders, creditors, regulatory agencies
to the best procedure. This is
and tax authorities.
, commonly associated with non- m. b. Controlling which involves the
recurring decisions. evaluation of whether actual
performance conforms with planned
f. Three important guidelines help
goals; and
management accountants provide the
most value when scorekeeping provide n. c. Decision making which involves
the most value when scorekeeping, determination f predictive information
problem-solving and attention (e.g. relevant costs) for making
directing (interpreting and reporting). important business decisions.
These are
PLANNING
g. 1. Employ a cost-benefit approach
A key activity for all companies is planning.
h. 2. Recognize behavioral as well as Planning involves identifying alternatives and
technical considerations and selecting a course of action and specifying how
the action will be implemented to further the
i. 3. Use appropriate cost concepts for
organization’s objectives.
different purpose
The plan communicates a company’s goals to
j. Management accountants continually
employees and specifies the resources needed
face resource-allocation decisions,
to achieve them. The plans of management are
such as whether to purchase a new
often expressed formally in budgets. Cash
software package or hire a new
budgets, capital budgets, and projected
employee. The cost-benefit approach
statements of financial position are examples of
should be used in making these
contributions which accounting can make in
decisions: Resources should be spent if
resource planning while break-even analysis,
they are expected to better attain
projected income statements are examples of
company goals in relation to the
useful tools in profit planning.
expected costs of those resources. The
expected benefits and costs may not CONTROL
be easy to quantify. Nevertheless, the
Control of organizations is achieved by
cost-benefit approach is useful for
evaluating the performance of managers and
making resource-allocation decisions.
the operations for which they are responsible.
k. Specifically, the management The distinction between evaluating managers
accountant provides system which and evaluating the operations they control is
allows management to receive the important. Managers are evaluated to
necessary information used in determine how their performance should be
performing its administrative functions rewarded or punished, which in turn motivates
of: them to perform at a high level. Based on an
evaluation indicating good performance, a
l. a. Planning which involves setting of
manager might receive substantial bonus
goals for the firm, evaluating the
compensation. An evaluation indicating a
various ways to meet the goals and
manager performed poorly might lead to the
picking out what appears to be the
manager being fired.
best way to meet the goals;
