Advanced Cost Management Professor William F. O’Brien, MBA, CPA Spring 2005.

Advanced Cost Management

Professor William F. O’Brien, MBA, CPA

Spring 2005

STRATEGIC COST MANAGEMENT - BA122B - Spring 2005 Slide 1-2

Introduction

Cost Management Financial Non-Financial


Financial Management Evolution

DATADATA

INFORMATIONINFORMATION

ANALYSISANALYSIS

IMPLEMENTATIONIMPLEMENTATION

Today’sCorporateFocus is on

Results!


CompanyF/S

Users

EconomicDecisions

Financial Impact

(useful &relevant)

Financial Accounting Model


Managerial Accounting Model

Plan

Implement

Monitor

Adjust AccountingInformation

Communication Environment


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


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

Strategic cost management is the development of cost management information to facilitate the principal management function--strategic management.


Factors Influencing Today’s Business

Environment Global competition Manufacturing and IT advances Customer focus Revised organizational structures Social, political and cultural changes


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


Professional Organizations

Regulatory IRS SEC FASB IASB PCAOB


Professional Organizations

Associations IMA SMA, Canada AICPA FEI IIA


Ethics

Lack of ethics--everyone loses South Florida Bermuda Triangle of

Ethics Tyco W.R. Grace Bausch and Lomb Sunbeam

Enron, World-com, Adelphia


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...


Accounting Business Skills

“The What” Business Perspective Organizational Focus Bias for Action Communication Excellence People Proficiency


Financial Management Guidelines“The How”

Cc KTT MBWA R ƒ R3

responsiveness reliability relevance


Just Say “No” to...

A

B

C

Things we do to ourselves!!!


Scarlet Letter of Accounting

• Lacks Reality

• Distraction

• Lacks Cost Mgt.


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


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


SMA, cont.

QCT Triangle Self evident

TBC Triangle Provides Technical insight Encourages Behavioral changes Supports Cultural beliefs

Advanced Cost Management Professor William F. O’Brien, MBA, CPA Spring 2005.

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