strategic cost management

• Managerial accounting


  Provides information for managers inside an organization who direct and control its operations
• Financial accounting


  Provides information to stockholders, creditors and others who are outside the organization
• Differences between financial and managerial accounting

  • Users
  • Time focus
  • Verifiability vs relevance
  • Precision vs timeliness
  • Subject
  • Requirements
• Decentralization is the delegation of decision-making authority throughout an organization
• Line positions


  Directly related to achievement of basic product objectives of an organization
• Staff positions


  Support and assist line positions
• Management accountants


  • Help management pursue the firm's goals
  • Internal consultants or business analysts
  • Time spent interpreting data vs creating it
  • Physically positioned in operating department
  • Work on cross-functional teams
  • Extensive face-to-face communications
  • Actively involved in decision making
  • Trusted advisors
• Business environment changes in the past twenty years

  • Growth of the internet
  • Accelerated pace in innovation of products and services
  • International competition
• New tools for managers

  • Just-In-Time
  • Total Quality Management
  • Process Reengineering
  • Theory of Constraints
• Just-In-Time (JIT) Concept


  1. Receive customer orders

  2. Receive materials just in time for production

  3. Complete parts just in time for assembly into products

  4. Complete products just in time to ship customers

  5. Schedule production, pull system
• JIT Requirements


  • Focused factory layout
  • JIT purchasing
  • Fewer, but more ultra-reliable suppliers
  • Frequent JIT deliveries in small lots
  • Defect-free supplier deliveries
  • Flexible workforce
  • Reduced setup time
  • Zero production defects
• Benefits of a JIT System

  • More rapid response to customer orders
  • Freed-up funds
  • Freed-up space
  • Reduced inventory costs
  • Greater customer satisfaction
  • Higher quality products
  • Increased throughput
• Total Quality Management


  1. Plan

  2. Do

  3. Check

  4. Act
• Benchmarking


  Continuous Improvement
• Process Reengineering


  1. Diagram the business process in detail

  2. Eliminate non-value added steps

  3. Justify every step in the business process

  4. Anticipated results: Process is simplified, completed in less time, costs are reduced, opportunities for errors are reduced
• Theory of Constraints


  1. Measure process capacity

  2. Identify process constraints

  3. Eliminate bottlenecks

  4. Coordinate processes
• Ethical accounting practices build trust and promote loyal, productive relationships with users of accounting information
• Four broad areas of responsibility in the IMA Code of Ethics for Management Accountants

  • Maintain a high level of professional competence
  • Treat sensitive matters with confidentiality
  • Maintain personal integrity
  • Be objective in all disclosures
• Competence in the IMA Code of Ethics for Management Accountants

  • Follow applicable laws, regulations and standards
  • Maintain professional competence
  • Prepare complete and clear reports after appropriate analysis
• Confidentiality in the IMA Code of Ethics for Management Accountants

  • Do not disclose confidential information unless legally obligated to do so
  • Ensure that subordinates do not disclose confidential information
  • Do not use confidential information for personal advantage
• Integrity in the IMA Code of Ethics for Management Accountants


  • Avoid conflicts of interest and advise others of potential conflicts
  • Recognize and communicate personal and professional limitations
  • Do not subvert organization's legitimate objectives
  • Avoid activities that could affect your ability to perform duties
  • Communicate unfavorable as well as favorable information
  • Refrain from activities that could discredit the profession
  • Refuse gifts or favors that might influence behavior
• Objectivity in the IMA Code of Ethics for Management Accountants


  • Communicate information fairly and objectively
  • Disclose all information that might be useful to management
• Resolution of Ethical Conflict

  1. Follow established policies

  2. Discuss the conflict with immediate superior

  3. If supervisor involved, go up chain

  4. If immediate superior is the CEO, consider the board of directors or the audit committee

  5. Maintain confidentiality

  6. Clarify issues in a confidential discussion with an objective advisor

  7. Consult an attorney as to legal obligations

  8. The last resort is to resign