: COST MANAGEMENT AND STRATEGY -- AN OVERVIEW
1-1 Firms Using Cost Management. Here are some examples; there are many possible answers.
1. Wal-Mart: to keep costs low by streamlining restocking and sales
2. COMPAQ: to keep costs low by improving manufacturing performance and by using target costing and other management techniques
3. Citicorp: to keep costs low by using activity analysis (see problem 1-23) to identify key operations and to find those that add little or no value
4. A local school district or public agency: to keep costs low in order to provide the best possible service given available funds
5. Procter & Gamble: to assess ...view middle of the document...
It is the information the manager needs to effectively manage the firm or not-for-profit organization -- both financial information about costs and revenues and relevant non-financial information about productivity, quality, and other key success factors for the firm. Typically, cost management is the responsibility of the Chief Financial Officer (CFO) who often delegates much of this responsibility to the Controller.
1-4 In the private sector, the Financial Accounting Standards Board, an independent organization, and the American Institute of Certified Public Accountants (AICPA) supply guidance regarding financial reporting practices. The Sarbanes-Okley Act of 2002 also created the Public Company Accounting Oversight Board which reports to the SEC to oversee auditing standards and practices. The AICPA also provides educational opportunities. In the public sector, The Cost Accounting Standards Board (CASB) sets cost accounting standards for those doing business with the federal government, especially defense contractors. The Institute of Management Accountants (IMA) is the principal organization devoted primarily to management accountants in the United States. The IMA has magazines, newsletters, research reports, management accounting practice reports, professional development seminars, and monthly technical meetings that serve the broad purpose of providing continuing educational opportunities for management accountants. In Canada, the Society of Management Accountants provides a similar role. Similar organizations are present in most other countries around the world. The Financial Executive Institute (FEI) provides services much like the IMA for financial managers, including controllers and treasurers. Because of the nature of its membership, the FEI tends to focus on management and operational control issues, and less on the product costing, planning, and decision-making functions.
1-5 The Certificate in Management Accounting (CMA) is the most relevant certification program for management accountants since it focuses on the types of skills that are most in demand for management accountants: economics, finance, and management, financial accounting and reporting, management analysis and reporting, and decision analysis and information systems. Other relevant certifications include Certificate in Financial Management (CFM) and the Certified Public Accountant (CPA).
1-6 The four functions of management are:
1. Strategic Management -- information is needed by management to make sound strategic decisions regarding choice of products, manufacturing methods, marketing techniques and channels, and other long term issues.
2. Planning and Decision Making -- information is needed to support recurring decisions regarding replacement of equipment, managing cash flow, budgeting raw materials purchases, scheduling production, and pricing.
3. Management and Operational Control -- information is needed to provide a fair...