Summary of

“Introduction to Strategic Cost Management and Management Accounting”

 Strategic Cost Management – this relates to the use of cost data to develop and identify
superior strategies that will create an advantage of the company over to the competitor.
 Generic competitive advantage – it is the superior quality, superior efficiency, superior
customer responsiveness, and superior innovation. Creating better customer value. The
customer value is the difference between customer realization which is the satisfaction of the
customers from the company’s product offers for them a customer sacrifice this is the amount
that they paid to get product and services (customer realization – customer sacrifice).

Strategies for increasing customers value to achieve competitive advantage:

 Cost Leadership – the company looks to provide the better value to customers at the lower cost
than offered by the competitors. In increasing customer value by minimizing the customer
sacrifice. Products are being sold at lower prices.
 Differentiation – the company attempts to increase customer value by increasing what the
customer receives. Focusing of creating better quality products and services.
 Focusing – the company places emphasis on a market for targeting audience.

The Primary Goal of Accounting

- To provide useful information for decision making.

Difference between financial accounting and managerial accounting is the intended user of the
information.

Financial Accounting Managerial Accounting

 Users  External users  Internal users
perspective
 Types of  Financial statements  Monetary and non-monetary
Reports reports
 Guiding  GAAP/ PFRS  Management needs and wants
Principles
 Purpose/  Financial reports and  Decision making
End Result compliance
 Necessity  Mandatory  Discretional
 Time  Past Data  Future-oriented
Orientation
 Nature of  Prepared periodically  Prepared as needed
information
 Level of  Focus on business as a  Extensive and detailed
details whole
Functions of Management:

 Planning/Organizing – objectives/ goals, resources, best alternatives

 Directing/Leading - implementation, motivation
 Controlling – actual results vs. plan results, monitoring, corrective actions, adjust plans
 Decision Making – choosing, present in all functions of management.

Two Management Approaches: Management by Objectives vs. Management by Exception

Management by Objectives Management by Exception

 Goals  Significant variances only
 Methods  Focuses on non-routine items
 Plans Benefits:
 Evaluation 1. Efficient time
Benefits: 2. Efficient resources
1. Employee motivation and Weakness:
commitment 1. Budget not formulated, many
2. Better communication irrelevant variances.
Weakness:
1. Emphasis on setting of goals, not on
the systematic plan to do so.

TREASURERS VS. CONTROLLER (both of this positions and functions are under the Chief Financial
Officer)

Treasurer: in charge with the finance

 Raising capital
 Safeguarding of assets
 Management of finances

Controller: in charge with accounting and reporting of company’s’ operations

 Supervising of accounting department

 Preparing information and reports for managerial and financial accounting

Internal Auditor is responsible of reviewing the accounting procedures, records and reports in both the
controller and treasurer areas of responsibility. Expresses opinion regarding the effectiveness of the
organizations accounting system.

LINE FUNCTION VS STAFF FUNCTION

Line Function:

 Authority to give command

 Directly involved in the provision of goods and services

Staff Function:
  Authority to advise
 Provides line and other staff personnel with specialized technical advice for support
 Not directly involved in the provision of goods and services

PROFESSIONAL ETHICS (right from wrong)

 Competence
 Confidentiality
 Integrity
 Credibility/objectivity

MAJOR IMPROVEMENT TOOLS

 Time Quality Management

 Just-in-time
 Flexible Manufacturing System
 Theory of Constrains
 Life Cycle Costing
 Activity Based Costing
 Target Costing
 Value Engineering
 Process Reengineering