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Limson - NOTES
MODULE 1: COST MANAGEMENT AND STRATEGY
OUTLINE
I. MANAGEMENT
A. Accounting as a tool for decision making
II. Strategic Cost Management
III. Management Accounting
IV. Financial, Cost, and Management
Accounting
V. Organizational Structure and Financial
Information
VI. Professional Ethics for Management
Accountants
VII. Management Accounting Information
System
A. Elements of a management accounting
system
VIII. Cost Management Systems
IX. Accounting Information Systems
MANAGEMENT
DEFINITIONS:
- Is a process of leading and controlling a group of
people, resources, or an organization in totality to
achieve the goals and objectives of the entity in
pursuit of success and value-creation.
FOUR MANAGEMENT FUNCTIONS
PLANNING
- Determining proper courses of action and
strategizing tactics to enforce in order to achieve
goals set
- “WHAT SHOULD WE DO?”
ORGANIZING
- Coordinating activities and resources and
delegation of responsibility
- May plano na then you organize the things so that
flow would be smooth
- Assigning duties, delegation of authority, creation of
responsibilities
LEADING
- Managing and guiding people, along with proper
motivation and direction
CONTROLLING
- Monitoring and evaluating activities to ensure they
answer the goals being set
- Comparing the target and the actual results
MANAGERIAL INFORMATION NEEDS
- Controlling is the function of management that deals
with the determination and evaluation on whether
the goals and objectives set are being achieved
- Planning and controlling are two functions of
management that goes together in order to
determine the proper courses of action the
management shall do – what’s next? Decision-
making comes in
DECISIONS AND THE NEED FOR INFORMATION
- Information is necessary for managers to be able
to choose proper decisions that would add value
to the success of the entity
- Proper information must be accessible to
managers to decide on the proper courses of action
to take
o Erroneous decisions (basta-basta)
usually leads to high costs and
unsuccessful results
ACCOUNTING AS A TOOL FOR DECISION MAKING
Accounting
- Is a service activity
- Function is to provide quantitative information,
primarily financial in nature, about economic entities
(provide quantitative information about business
entities)
- Intended to be useful in making economic
decisions, and in making reasoned choices among
alternative courses of action (Decision making tool
by owners and managers)
STRATEGIC COST MANAGEMENT
- Is the application of cost management techniques
which aims to reduce costs while strengthening the
strategic position of a business
- Is the use of cost information as a tool for
decision making and business development that
would support the strategic placement of an
entity
COST ACCOUNTING – plain information about the cost of
the business (COGS, COS, etc)
COST MANAGEMENT – cost information is used for
decision making such as lowering cost
STRATEGIC COST MANAGEMENT – uses the cost
accounting information to make adjustments such as using
the information to lower the costs with certain strategic
application
STRATEGIC PLACEMENT AND ITS RELATION WITH
COST
What are the strategies applied in order for a company to
have competitive advantage
1. Cost leadership
- Managing costs through cost reduction to sell
products with the lowest price in the market
STRATEGY
Lower cost > lower price > higher revenue since many will
buy due to cheap prices
2. Product differentiation
- Managing costs through unique products
STRATEGY
Not so lower but regulated costs> unique products> higher
prices but still higher revenue since you are the only one who
sells it
