Strategic Cost Management
- people don’t plan to fail, they only fail to plan.
- strategy links action plan to its goal. Strategy links the word plan and goal.
- Strategy is a set of POLICIES, PROCEDURES, and APPROACHES to business that produce long-term
success.
- Strategic Management involves the DEVELOPMENT of sustainable competitive position.
- Strategic Cost Management (SCM) involves the DEVELOPMENT OF COST MANAGEMENT INFORMATION
to facilitate the principal management function which is Strategic Management.
FUNCTIONS OF MANAGEMENT
1. Organizing - the process of ESTABLISHING WORKER RELATIONSHIPS to allow workers to work together
to achieve their organizational goals. (positioning of the employees in the company)
2. Leading – the function involves ARTICULATIONG A VISION, energizing employees, inspiring and
motivating people using vision, influence, persuasion, and effective communication.
3. Staffing – RECRUITING AND SELECTIONG EMPLOYEES (within teams and departments)
4. Controlling – EVALUATE how well you are achieving your goals, improving performance and taking
actions. (measure, compare, and make decisions)
5. Planning – the process of CHOOSING APPROPRIATE GOALS AND ACTIONS to pursue.
USERS OF MANAGEMENT INFORMATION
1. Business Firms
2. Governmental Units
3. Non-for-profit Organization
USES OF COST MANAGEMENT INFORMATION
1. Strategic Management – helps in making strategic decisions regarding the products, method of
manufacturing, marketing techniques, etc.
2. Planning and decision making – support decisions
3. Management and operational control - gives fair and effective basis for identifying inefficient
operations.
4. Reportorial and compliance to legal requirements – para maging clear and transparent ung company
sa public, sa authorities, and sa investors din.
MANAGEMENT ACCOUNTANT’S ROLE IN SCM
1. Scorekeeping or data accumulation – to assist the management in establishing plans
2. Interpreting and reporting of information – (ratio analysis) provide timely and frequent updates on
key indicators.
3. Problem-solving – quantification of relative merits of possible courses of action, as well as
recommendations as to the best procedure.
These roles are guided by the following considerations:
1. employ a cost-benefit approach. (proper spending mas Malaki ung benefit kesa sa cost)
2. recognize behavioral as well as technical considerations.
3. use appropriate cost concepts for different purpose.
Cost Concept example: Materiality
RELATIONSHIP BETWEEN COST ACCOUNTING AND COST MANAGEMENT
Cost accounting – about measurement and reporting of cost.
Cost management – this provides managers with information which aids decision. (pano magagamit ung
cost data galing cost accounting)
STRATEGIC DECISION MAKING AND THE COST MANAGEMENT ACCOUNTANT (CMA)
1. A Strategic Management Perspective – nagagamit ung cost information to attract customers
2. An Enterprise Risk Management Perspective – as an accountant, dapat may alam kung paano mag
identify ng risky decision and marunong mag risk management (assessing risks, developing action plans,
implementing action plans, monitoring, and continuously improvement of risk management)
3. A Corporate Social Responsibility Perspective – strategies created are also serving other stakeholders
4. A Process Management Perspective –
5. A Leadership Perspective – uniting the behaviors of the fellow employees. (internal motivation,
external incentives, and cognitive bias)
6. An Ethical Perspective – CMA adopts ethical standard