Strategic Cost Management

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 Chapters to be covered
Introduction
Activity-Based Costing
Target Costing
Life Cycle Costing
Value Chain Analysis
Quality Costing

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The challenge

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The Business Hierarchy

The CAM-I CMS FRAMEWORK

Market Data Flow

business hierarchy of needs

Market/customer strategy (why)

Planning Product/service (what) Control

Activities Activities

Process (how)

Inputs (resources)
Accounting Data Flow
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 Business Needs Hierarchy
Why? (market or customer strategy)
should we be developing new product
and/or services?
should we pursue new markets?
should we launch a new quality campaign?

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 Business Needs Hierarchy
What? (product/service)
product/service will we develop?
capabilities will we provide to the customers?
level of functionality will we deliver?

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 Business Needs Hierarchy
How? (process)
the works get done?
the elements of production(material, labour,
facilities and innovations) are to be used to
satisfy the customer’s demand?

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 Business Needs Hierarchy
Resources (inputs)
the specific elements required to
execute the business strategy
the development of resources with
highest degree of productivity

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 Strategic Cost Management
Cost information to
help formulate and communicate
strategies
carry out tactics that implement those
strategies
develop and implement control to
monitor the process and achieve
strategic objectives

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 The lessons

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 A Case Study on Steel Plant

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 The outcome

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