Republic of the Philippines

DAVAO DEL SUR STATE COLLEGE

Brgy. Matti, Digos City, Davao del Su r, Philippines 8002 del Su r, Philippines

MODULE 1
Application

Answer the following questions.

1. Give four examples of firms you believe would be significant users of cost
management information and explain why
• A local school district or public organization – To keep costs low in order to
offer the best service possible given the resources at hand.
• A small machine shop – Where deciding whether to repair or replace a
machine requires cost management.
• Diversified manufacturing company – With the use of cost management, it
must assess the relative profitability of its many goods.
• Mini Marts – To save costs, streamline sales and restocking.

2. Give three examples of firms you believe would require somewhat unique types
of cost management information because of their unique competitive strategy,
and explain why.
 Major league sports (PBA, NBA, Football Cup, etc.) rely heavily on building
fan support, having competent coaches, and finding players.
 Signature brand (Prada, Gucci, Channel, Dior, etc.) - High fashion
companies compete on product leadership and innovation. Also, rather
than cost management, the secret to competitive success is the creation
and dissemination of appealing new ideas.
 Applications (Google, Facebook, YouTube, etc.): Focus on creating
strategic alliances, innovation, and competition. In the information
technology industry, cost management is more crucial for some types
than for others.
3. What does the term cost management mean? Who in the typical firm or
organization is responsible for cost management?
 Cost management is the process of planning, controlling, and monitoring
the costs a business or organization incurs to carry out its objectives. It
comprises assessing all costs associated with producing goods or services
and determining how to cut those costs while maintaining or improving
the quality of the final result.
 Chief Financial Officer (CFO)- who delegates much of their responsibility to
the controller.
4. List the four functions of management. Explain what type of cost management
information is appropriate for each.
 Strategic function- information regarding choice of products, manufacturing
methods, marketing techniques and channels, and other long-term issues.
 Republic of the Philippines

DAVAO DEL SUR STATE COLLEGE

Brgy. Matti, Digos City, Davao del Su r, Philippines 8002 del Su r, Philippines

 Planning and decision-making function- information that supports recurring

decisions regarding replacement of equipment, managing cash flow, budgeting
raw materials purchases, scheduling production and pricing.
 Management and operational control function- information that provides a fair
and effective basis for identifying inefficient operations, and to reward and
support the most effective mangers.
 Preparation of financial statements function- information that provides for
inventory and other assets, in compliance with reporting requirements for the
preparations of financial report and for use in the three other management
functions
5. Which is the most important function of management? Explain why.
 The essential management function is the strategic function since it is the
function in which it targets the goals, defines how the firm will compete, and
make the business successful by defining goals that correspond with the
strategy.
 Republic of the Philippines

DAVAO DEL SUR STATE COLLEGE

Brgy. Matti, Digos City, Davao del Su r, Philippines 8002 del Su r, Philippines

LESSON 2

Application

Answer the following questions:

1. What are some factors in the contemporary business environment that are
causing changes in business firms and other organizations? How are the changes
affecting the way those firms and organizations use cost management
information?
 Increase in global competition – Since there is an increase in global
competition, firms used cost management information to sustain
competitiveness.
 Advances in manufacturing technologies – With this, cost management
information regarding production is more on about the machineries
rather than the labor work performance.
 Advances in information technologies, the internet and e-commerce –
Cost management information are now easily obtained and accessed by
the individuals within the firm and the business environment.
 Greater focus on the customers – Firms focuses more in nonfinancial
information because the new business process focuses on the satisfaction
of customers.
 New forms of management organization – A new form of organization has
a lot changes such as focusing more on quality, on critical success factors
and forms take importance on the nonfinancial information.
 Changes in the political, social and cultural environment – The changes on
the three environments are more on the nonfinancial aspects thus,
making nonfinancial information important.
2. Contrast past and present business environments about the following aspects:
basis of competition, manufacturing processes and manufacturing technology,
required labor skills, emphasis on quality, number of products, number of
markets, types of cost management information needed, management
organizational structure, and management focus.
 Business environment is evolving with time. All business aspects, whether
labor skills, management strategies, or manufacturing processes, have
been upgraded. Labor is more qualified and technically sound than
earlier. Technology has upgraded a lot as all aspects of business use
technology, and with the help of technology, business functions are more
accessible and faster than before.
 Technology is also used in manufacturing processes to make them more
effective and efficient. There is more emphasize on quality of products
 Republic of the Philippines

DAVAO DEL SUR STATE COLLEGE

Brgy. Matti, Digos City, Davao del Su r, Philippines 8002 del Su r, Philippines

than before. Management is also more advanced and competition is very

high in the market. To survive in the market, up gradation and
advancement of all functions of a business is very necessary.
3. Name the 13 contemporary management techniques and describe each briefly.
 Value Chain Analysis is a tool for identifying specific steps to provide goods
and services.
 A Balanced Scorecard is an accounting tool that includes success factors of
organization in four areas: Learning and growth, customer satisfaction,
internal processes, and financial performance.
 Life Cycle Costing is a method of managing the cost of a product or service
through its life cycle.
 Business Analytics is an approach where the management uses data to analyze
and understand the performance of the business.
 Target Costing is a method in management to determine the cost of a product
after taking into consideration the price offered by the competitors in the
market.
 Activity-based costing and management focus on improving the tracing of
manufacturing cost and increasing the accuracy of product cost and also help
managers in increasing the value of products and services, which gives a
competitive advantage to the organization.
 Benchmarking is a process of measuring the performance of a company's
products, services, or processes against those of other organizations that are
considered best in the industry. It basically identifies internal improvement
opportunities.
 Business Process Improvement is a process in which leaders use various
methods to analyze their procedures and to identify areas where they can
increase accuracy, effectiveness, and then redesign those processes to realize
the improvements.
 Total Quality Management is a management approach to long-term success
through customer satisfaction. All the members in the organization participate
to improve the working by improving the product, service offered, etc
collectively.
 Lean Accounting is the combination of principles and processes that give
numerical feedback for manufacturers implementing lean manufacturing and
lean inventory practices and it measures the financial benefit of the
organization’s progress.
 The Theory of Constraints is a technique used to improve the rate at which
raw materials are converted into final or finished goods.
 Sustainability is an act that can anticipate and meet the needs of present and
future generations of consumers and stakeholders through creating and
innovating business strategies and activities that increase positive social
change, help in protecting and preserving environmental integrity while
increasing business performance.
 Enterprise Risk Management manages the risk that can affect the working and
stability of the organization so that it should grow and succeed only.
 Republic of the Philippines

DAVAO DEL SUR STATE COLLEGE

Brgy. Matti, Digos City, Davao del Su r, Philippines 8002 del Su r, Philippines

LESSON 3
Application
Answer the following questions:
1. Name a firm or organization you know of that you are reasonably sure uses cost
management and explain why it does so. Does it use cost leadership or
differentiation, and why
 General Motors is a great example of a company that implements strategic
cost management in a reasonable manner. In 2009, it was incorporated in
Delaware. The corporation creates, manufactures, and sells a variety of
automobiles. Trucks, cars, and vehicles are among the vehicles sold, and it
is the world's second-largest automobile manufacturer.
 Because General Motors Corporation is a manufacturing company, it
undoubtedly employs strategic cost management in precisely assessing
product costs and specifying variable and fixed expenses. According to
Antoinette L. Lynch's research, General Motors implemented the ABC
costing method in their organization in 1993. They developed ABC costing
to assist the organization in estimating the true cost of a service, product,
or job. ABC's decisions promote congruent with lean production, which
involves reducing inventories, increasing common components, and
increasing quality, among other things.
2. Many firms rely on the internet extensively. Explain how firms using cost
leadership and firms using differentiation might use the internet.
 The ability of commercial entities to sell and produce goods, interact with
stakeholders and customers, and manage corporate operations is all
made possible by the internet. The internet has made it simpler for newer
businesses to compete directly with more established ones without as
many hurdles and without the need for large financial investments or
sales forces. The business entities are encouraged by the competition to
find new ways to improve operations and generate more money.
 A strategy that gets its competitive advantage from being able to provide
a differentiating good or service to its rivals is known as product
differentiation. The internet has aided businesses in attaining their
strategic objectives by helping them meet customer demands, monitor
customer perceptions, deliver goods on schedule, improve quality control,
and support R&D. In this approach, it helps businesses establish a
distinctive position in a market where customers place a high value on
differentiation.
3. What would you consider to be the strategy of The Coca-Cola Company: cost
leadership or differentiation? Why?
 To establish its dominance on the CSD market, Coca-Cola also employs a
cost leadership strategy. A corporation can employ a number of strategies
to achieve cost advantages, such as the design of the product or the usage
Republic of the Philippines

DAVAO DEL SUR STATE COLLEGE

Brgy. Matti, Digos City, Davao del Su r, Philippines 8002 del Su r, Philippines

of less expensive raw materials. The best approach to save expenses is

through economies of scale, especially for companies like Coca-Cola who
have a varied product line. Coca-cost Cola's leadership approach is
accomplished by learning, expertise, and experience in the production
and operational processes, as well as through economies of scale in
research, development, and promotion. Moreover, it is accomplished
through productive manufacturing and distribution systems.