Professional Documents
Culture Documents
Chapter 1
Introduction to Cost
Management
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Study Objectives
1. Describe a cost management system, its
objectives, and its major systems.
2. Identify the current factors affecting cost
management.
3. Describe how management accountants
function within an organization
4. Understand the importance of ethical behavior
for management accountants.
5. Identify the three forms of certification
available to internal accountants
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Subsystems of the
Accounting Information System
Factors Affecting
Cost Management
Global Competition
Vastly imported transportation and
communication has led to a global market for
many manufacturing and service firms.
The new competitive environment has
increased the demand not only for more cost
information but also for more accurate
information.
Factors Affecting
Cost Management
Growth of the Service Industry
As manufacturing 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
Factors Affecting
Cost Management
Advances in Information Technology
Computers are used to continuously monitor
and control system-wide operations.
Increased ability to accurately cost products
because of advances in available tools.
Emergence of electronic commerce
Factors Affecting
Cost Management
Advances in Management Environment
Theory Of Constraints is 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.
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Factors Affecting
Cost Management
Computer-Integrated Manufacturing
Can produce a competitive advantage for a
firm
Typically follows JIT as a response to
increased needs for quality and shorter
response time
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Factors Affecting
Cost Management
Consumer Orientation
Value chain is the set of activities required to
design, develop, produce, market, and deliver
products and services to customers
Firms compete not only in terms of technology
and manufacturing, but in the speed of
delivery and response to deliver value to the
customer
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Factors Affecting
Cost 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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Factors Affecting
Cost 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.
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Factors Affecting
Cost Management
Time as a Competitive Element
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
Cost Management
Efficiency
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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Certification
Certified Public Accountant
The responsibility of a CPA is to provide assurance
concerning the reliability of financial statements.
Certification
Four areas emphasized on the CMA
exam:
Business analysis
Management accounting and reporting
Strategic management
Business application
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COST MANAGEMENT
Accounting & Control
HansenMowenGuan
End Chapter 1
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