Summary SMA

Strategic cost accounting

1 SMA 1

1.1 Introduction

Role of management accounting/accountants in organizations
 Past: need for scorekeepers of manufacturing achievements detached from line
management and strategic planning
 Today:
o Costing still important
o Increased use of software, computer-based control systems  vooral
software heel belangrijk om de calculaties te doen, samenbrengen van
fysieke info: hoeveel is onze voorraad bv., financiële informatie: wat is de
kost van de producten, kwalitatieve info, …  veel meer info wordt
samengebracht tegenover vroeger was het de accountant die met de
financiële info moest komen
 Consequence?  more teamwork, more focus on service (after sales) and
consumers
 Line management = het hele proces van R&D, productie, sales, after-sales, …
(heel de lijn tot dat het product tot de consument komt)

Dramatic changes in organizations today

Fresh challenge for accountants
1) Need for multidisciplinary, cross-functional knowledge and practices
2) Importance of personal skills for involvement with general management


Strategic management accounting (SMA)
= process of identifying, gathering, choosing and analyzing accounting data for helping
the management team to make strategic decisions and to assess organizational
effectiveness’  = proces van het identificeren, verzamelen, kiezen en analyseren van
boekhoudkundige gegevens om het managementteam te helpen strategische beslissingen te
nemen en de effectiviteit van de organisatie te beoordelen ’ (Z. Hoque, ‘Strategic management
accounting. Concepts, Processes and Issues’, Pearson, 2003, p.2)

 Awareness of the
 Sociological
 Technological
 Economic
 Political factors

 Internal competition, increasing bargaining power of suppliers and customers

 MAS: management accounting system  information on objectives, plans,
implementation, progress…
 But is also a process of change
 In other words: need for a strategy – and environment-oriented MAS




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,Typical organizational structure and the management accountant




Accounts payable  hoeveel moeten we nog
Account receivable  hoeveel moeten we nog krijgen



Management accounting as part of the finance department
1. Financial accounting (extern)
 Legal, 1-7 accounts, annual accounts as summary  regels hoe je moet rapporteren

2. Management accounting (intern)
a. Cost accounting
 Cost center (service-departments)/ cost object (products, services,
projects…)
 2 systems
1. Legal system (8/9-accounts) = link met financial accounting and
2. Own company analytical scheme = internal for management accounting

b. Costing  in termen van een kostobject
 Cost terms (DC, IC, FC, VC, TC, MC, …)
 Profitability concepts:
1. Break-even analysis
2. Contribution margin = sales – variable costs
3. Sensitivity analysis (what if), …
 Cost allocation
1. Indirect costs (classical method, ABC and TDABC)  idem for DC
2. support-department costs (Ch15)
3. common costs and revenues (Ch15)
 Investment analysis (DCF, IRR, ROI, …)  financial accounting
 Sales analysis:
1. Pricing decision making
2. Customer-profitability analysis
3. Sales variances analysis) (Ch14)
 Decision Making: Make or buy, insourcing or outsourcing
 Pricing decision (target pricing)
 Inventory management
1. JIT: just in time
2. Backflushing-concept  het niet alloceren van de DC voor elke case
maar sneller terugspoelen en zien waar de kost van komt, …) (Ch. 20)
 Management-concepts: ABC-management, Kaizen, Lean,…



2

, 3. Management control
 Budget and variances analysis
 KPI & BSC = balanced score card (incl. benchmarking)
 Corporate performance management (in BI environment)
 …


1.2 Strategic cost accounting in the company processes

Which functions can be identified in the value chain, which dependencies can be made,
and what are the consequences for the management accounting system?




 Warehouse:
o Reception of the raw materials/components (incl. quality control) and
comparing with the purchase order  het magazijn met voorraad
o Temporary storage of the finished goods
o Controlling the availability of raw materials, components, …
 Inventory management: JIT, backflushing, …
 Production:
o Producing the goods (based on BOM: bill of material and BOL: bill of labor 
hoeveel arbeidsuren zijn gebruikt)
o Recording the order in the production scheme
 Forwarding: sending out the finished goods (trade conditions!)
 Sales: preparation and sending out the sales invoice
 Accounting:
o Receiving the purchase invoice and comparing with the purchase order
o Payment of purchase invoices / follow-up of sales invoices
 Accounting (controlling): after calculation
o Customer profitability analysis  hoeveel kosten de klanten je? Zie je aan
hun koopgedrag
o Sales variance analysis  meer verkocht dan verwacht?
 Sales:
o Ask for a quote by a customer
o Giving a sales price to the customer based on a pre-calculated cost price
 Sales pricing decision: target pricing  ik maak een nieuwe auto
hoeveel zouden de klanten ervoor betalen  hoeveel is de markt bereid
ervoor te betalen? Men vertrekt vanuit de waarde voor de klant or
traditional cost-based pricing  als we iets produceren bv. auto
hoeveel kost het ons?
 Cost pricing decision: full costing or direct costing?
 Allocation of the indirect costs: classical, ABC, TDABC, …?
o Confirming the order
 Purchasing:
o Placing /sending a purchase order
 Purchasing conditions: based on a real price or standard price



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