STRATEGIC COST

MANAGEMENT
AE23
The B.S. Accountancy program is designed to produce
competent and ethical professional accountants capable of
making a positive contribution over their lifetimes to the
profession and society in which they work. In the face of
increasing changes that they will meet later as
professional accountants, it is essential that students
develop and maintain an attitude of learning to learn, to
maintain their competence later as professional
accountants. The BSA Program should also provide a
foundation of professional knowledge, professional skills,
and professional values, ethics, and attitudes that enable
them to continue to learn and adapt to change throughout
their professional lives.

Program Goals
 
• Resolve business issues and problems, with a global and strategic
perspective using knowledge and technical proficiency in the areas of
financial accounting and reporting, cost accounting and management,
accounting and control, taxation, and accounting information systems;
• Conduct accountancy research through independent studies of
relevant literature and appropriate use of accounting theory and
methodologies;
• Employ technology as a business tool in capturing financial and non-
financial information, generating reports and making decisions.
• Apply knowledge and skills to successfully respond to various types of
assessments; and
• Confidently maintain a commitment to good corporate citizenship,
social responsibility, and ethical practice in performing functions
as an accountant.

Graduates of Bachelor of Science in

Accountancy should be able to:
Learning Outcomes
Utilizerelevant costs in decision making
Use objective approaches in situations
involving capital budgeting decisions
Analyze profitability of a firm through
segment reporting
Differentiate business plan from strategic plan
Appraise a firm’s performance with the use of
balanced scorecard, and other financial and
non-financial performance measures
SYLLABUS
Strategy-a set of policies, procedures and
approaches to business that produce long
term success.

Strategic Management- involves the

development of cost management
information to facilitate the principal
management function which is strategic
management.
Cost management information- is the
information that the manager needs to
effectively manage the firm, profit oriented
as well as not for profit organization.
Cost management- is the
practice of accounting in which
the accountant develops and
uses cost management
information.
Uses of Cost Management
Information

1. Strategic Management

2. Planning and Decision Making
3. Management and Operational
Control
4. Reportorial and Compliance to Legal
Requirements
CPA as advisor or Consultant
The practice of management advisory
services arise when an independent CPA
is contracted by a manager to render his
professional and business expertise to
help define problems and recommended
solutions, except those covered in
auditing, assurance tax and legal
services.
Management accountants role in
strategic cost management
Management accountants are the
accounting professionals who develop and
analyze cost management information and
other accounting information.
Management accountants are concerned
with providing information to managers,
that is, people inside an organization who
direct and control the operations.
Management accountants role in
strategic cost management
Management accountant do the following
tasks:

a.) Scorekeeping or data accumulation

b.) Interpreting and reporting of
information
c.) Problem-solving
Administrative functions
Planning- involves setting of goals for the firm,
evaluating the various ways to meet the goals
and picking out what appears to be the best
way to meet the goals.
Controlling- which involves the evaluation of
whether actual performance conforms with the
planned goals
Decision making- which involves determination
of predictive information (relevant costs) for
making important business decisions.
Characteristics of an Management
Service Engagement
Service is for management. Not for
third parties.
Scope is broad.
Future orientation. Forecasting and
Comparison
Non-recurring
Highly qualified staff
Diversity
The focus of management
accounting
Traditional management accounting provides
intelligent information to managers in order to
reduce expenses and increased profit.
Reducing expenses requires thoroughly
understanding it first to be controlled and
managed.
In the recent decades, management
accounting has been critically supplying
information to strategic management thereby
necessitating the accumulation, processes and
reporting of information that go beyond the
normal operating concerns. (qualitative)
Relationship between cost
accounting and cost management
Cost accounting is the accumulation of data
while cost management is the output of
cost accounting to create relevant data
which is cost management information.
Basic Cost Management
Perspectives (qualitative)
A. Strategic Management Perspective
 1. customer intimacy
 2. operational excellence
 3. product leadership
B. Enterprise Risk or Business Risk
C. Corporate Social Responsibility Risk
D. Process Management Perspective
E. Leadership Perspective
F. Ethical Perspective
Cost Concepts
Managing costs means knowing their
nature, behaviour, and other
characteristics. Costs may mean differently
to different people. In the perspective of
accountants, managers and economists.
Cost Concepts
◦ Accountants Perspective
Capital Expenditures v. Operating Expenditures
Cost v. Expenses v. Loss
Product Cost v. Period Cost
Direct Product cost v. Indirect Product Cost

◦ Managers Perspective
Relevant v. Irrelevant Cost
Direct Segment v. Indirect segment cost
Avoidable v. Unavoidable cost
Controllable v. Uncontrollable cost
Planned v. Actual cost
Budgeted v. Standard cost
Sunk cost v. Future Cost
Out of pocket Cost v. Non cash cost
Cost Concepts
Economists perspective

◦ Explicit v. Implicit Cost

◦ Opportunity cost v. Imputed Cost
◦ Incremental cost v. Marginal cost
◦ Variable cost v. Fixed Cost