advanced cost management professor william f. o’brien, mba, cpa spring 2005
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STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-2
Introduction
Cost Management Financial Non-Financial
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-3
Financial Management Evolution
DATADATA
INFORMATIONINFORMATION
ANALYSISANALYSIS
IMPLEMENTATIONIMPLEMENTATION
Today’sCorporateFocus is on
Results!
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-4
CompanyF/S
Users
EconomicDecisions
Financial Impact
(useful &relevant)
Financial Accounting Model
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-5
Managerial Accounting Model
Plan
Implement
Monitor
Adjust AccountingInformation
Communication Environment
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-6
Managerial vs. Financial Accounting
Managerial
Internally oriented Prospective Operational and financial focus Timely Not required Non-GAAP Relevant Sub-unit orientation
Financial
Externally oriented Historical Financial focus only Accurate Required GAAP Objective Entire entity orientation
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-7
Four Management Functions
…another Perspective Strategic Management Planning and Decision Making Management and Operational Control F/S Preparation
How is Cost Management Info Used?
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-8
Strategic Cost Management
Strategic cost management is the development of cost management information to facilitate the principal management function--strategic management.
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-9
Factors Influencing Today’s Business
Environment Global competition Manufacturing and IT advances Customer focus Revised organizational structures Social, political and cultural changes
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-10
Contemporary Mgt. Techniques
Benchmarking Total Quality Management (TQM) Continuous Improvement Activity-Based Costing (ABC) and Mgt. (ABM) Reengineering Theory of Constraints (TOC) Mass Customization Target Costing Life-cycle Costing The Balanced Scorecard
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-11
Professional Organizations
Regulatory IRS SEC FASB IASB PCAOB
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-12
Professional Organizations
Associations IMA SMA, Canada AICPA FEI IIA
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-13
Ethics
Lack of ethics--everyone loses South Florida Bermuda Triangle of
Ethics Tyco W.R. Grace Bausch and Lomb Sunbeam
Enron, World-com, Adelphia
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-14
Ethics and You
You will face an ethical challenge It could impact
Your job Your family Your relationships Your financial stability Your physical well-being
You have only ONE reputation...
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-15
Accounting Business Skills
“The What” Business Perspective Organizational Focus Bias for Action Communication Excellence People Proficiency
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-16
Financial Management Guidelines“The How”
Cc KTT MBWA R ƒ R3
responsiveness reliability relevance
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-17
Just Say “No” to...
A
B
C
Things we do to ourselves!!!
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-18
Scarlet Letter of Accounting
• Lacks Reality
• Distraction
• Lacks Cost Mgt.
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-19
Ansari: SMA
Strategic Triangle (QCT) Competition based on quality, cost & Time
Mgt. Acctg. Triangle (TBC) Impacts technical, behavioral & cultural
aspects Mgt. Acctg. Links Strategy with Action
It is not an end unto itself It is an integrating tool
STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-20
SMA, cont.
The two triangles are dependent upon each other
This process is a framework to ensure that our management accounting tools possess the attributes necessary to achieve our strategic goals