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HANSEN & MOWENHANSEN & MOWEN
Cost ManagementCost ManagementACCOUNTING AND CONTROLACCOUNTING AND CONTROL
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Introduction to Cost Introduction to Cost ManagementManagement 1
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Financial Accounting Financial Accounting Versus Management Versus Management AccountingAccounting
Financial accounting is devoted to providing information for external users; these users include investors, government agencies, and banks.
Cost management identifies, collects, measures, classifies, and reports information that is useful to managers in costing (determining what something costs), planning, controlling, and decision making.
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Financial Accounting Financial Accounting Versus Management Versus Management AccountingAccounting
Cost accounting attempts to satisfy costing objectives for both financial and management accounting.
Management accounting is concerned specifically with how cost information and other financial and nonfinancial information should be used for planning, controlling, and decision making.
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Factors Affecting Factors Affecting Cost ManagementCost Management
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.
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Global Competition
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Factors Affecting Factors Affecting Cost ManagementCost Management
Growth of the Service Industry
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As the traditional industries has declined in importance, the service sector of the economy has increased in importance.
Deregulation of many services has increased competition in the service industry.
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Factors Affecting Factors Affecting Cost ManagementCost Management
Advances in Information Technology
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Computers are used to monitor and control operations. The result is an operational system that is fully integrated with marketing and accounting data.
Increased ability to accurately cost products because of advances in tools.
Emergence of e-commerce Internet trading Electronic data interchange Bar coding
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Factors Affecting Factors Affecting Cost ManagementCost Management
Advances in Management Environment
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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.
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Factors Affecting Factors Affecting Cost ManagementCost Management
Customer Orientation
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Firms are competing not only in terms of technology and manufacturing, but in the speed of delivery and response to deliver value to the customer.
Companies must also satisfy the needs of internal customers, such as staff functions exist to support line functions.
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Factors Affecting Factors Affecting Cost ManagementCost Management
New Product Development
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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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Factors Affecting Factors Affecting Cost ManagementCost Management
Total Quality Management
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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.
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Factors Affecting Factors Affecting Cost ManagementCost Management
Time as a Competitive Element
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Time is the crucial element in all phases of the value chain.
Decreasing non-value-added time appears to go hand-in-hand with increasing quality.
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Factors Affecting Factors Affecting Cost ManagementCost Management
Efficiency
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While quality and time are important, improving these dimensions without corresponding improvements in financial performance may be futile, if not fatal.
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Journal EntriesJournal Entries
Posting to Accounts
Financial Reports
TransactionsTransactions
Traditional Accounting Traditional Accounting SystemSystem
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TransactionsTransactionsCustom Report
Custom Report
Custom Report
Custom Report
Data-Based Relationship Data-Based Relationship Accounting SystemAccounting System
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Cost Management: Cost Management: A Cross-Functional PerspectiveA Cross-Functional Perspective 4
Product costing must take into account costs associated with other functions, such as marketing, management and logistics.
A cost management system must be flexible enough to provide the appropriate cost for the circumstance.
Today’s accountant must be an expert at valuing methods of Costing and achieving quality Differentiating between value-added and non-value-
added activities Measuring and accounting for productivity
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
Line positionsLine positions are positions that have direct responsibility for the basic objectives of an organization.
Staff positionsStaff positions are positions that are supportive in nature and have only indirect responsibility for an organization’s basic objectives.
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
The ControllerThe ControllerFinancial reportsSEC reportingTax planning and reportingPerformance reporting Internal auditingBudgeting Accounting systems and
internal controls
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
The TreasurerThe TreasurerCollection of cashMonitoring of cash
paymentsMonitors cash availabilityShort-term investmentsShort and long-term
borrowingIssuing of capital stock
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
Planning Planning is the detailed formulation of future actions to achieve a particular end. Planning requires setting objectives and identifying methods to achieve those objectives.
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
ControllingControlling is the managerial activity of monitoring a plan’s implementation and taking corrective action as needed.
Feedback Feedback is information that can be used to evaluate or correct the steps being taken to implement a plan.
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
Continuous Continuous improvementimprovement is required in a dynamic environment if a firm is to remain competitive or to establish a competitive advantage.
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The Role of Today’s Cost and The Role of Today’s Cost and Management AccountantManagement Accountant 5
Decision makingDecision making is the process of choosing among competing alternatives.
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Accounting and Accounting and Ethical ConductEthical Conduct
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Benefits of Ethical BehaviorBenefits of Ethical Behavior Can create customer and
employee loyalty Avoid litigation costs
Standards of Ethical Conduct for Management Standards of Ethical Conduct for Management AccountantsAccountants
Competence Confidentiality Integrity Objectivity
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CertificationCertification 7
CMA:CMA: One of the main purposes of the CMA was to establish management accounting as a recognized, professional discipline, separate from the profession of public accounting.
CPA:CPA: The responsibility of a CPA is to provide assurance concerning the reliability of financial statements.
CIA:CIA: The focus of the CIA is to recognize competency in internal auditing rather than external auditing as with the CPA.
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CertificationCertification 7
1) Economics, finance, and management
2) Financial accounting and reporting
3) Management report, analysis, and behavioral issues
4) Decision analysis and information systems
Four areas emphasized on the CMA exam:
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End of End of Chapter Chapter
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