1. Principles of Cost Analysis and Management
Course Introduction
Principles of Cost Analysis and Management

2. Even Super Powers Can Lose a Cost War
Aral Sea, Kazakhstan
Soviet military installation
Paldiski, Estonia
Kamchatka Peninsula , Russia

3. Terminal Learning Objective
Action: Introduce Principles of Cost Analysis and Management
Condition: You are cost advisor technician with access PCAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors.
Standard: With at least 80% accuracy (70% for international learners):
Discuss purpose for increasing cost effectiveness; terminology, and best practices in response to threat
Understand the Purpose of this Course
Understand the asymmetrical threat of lack of resources.

5. Cost Maturation Process
Single Use
Estimated
Future Cost
Cost Benefit
Analysis
Cost Informed
Decisions
Persistent Use
Expected and Actual Cost
Continuous Improvement
Cost-Managed Organizations
Universal Use
Planned & Actual Cost
Role Based, Org Based, Output Based Control
Cost-Managed Enterprise
Cost War Cost War High Cost War Full
Insurgency Intensity Conflict Spectrum Operations
Starting here
(Some work is being done now) TARGET

6. LSA #1 Check on Learning
Q1. What are the three stages of the Cost Maturation Process? A1. Q2. Where is the Army now in the process? A2.
Q1. What are the three stages of the Cost Maturation Process?
A1. Single Use, Persistent Use, Cost Managed Organization
Q2. Where is the Army now in the process?
A2. Single Use – Cost benefit analysis

7. LSA #1 Summary
In this LSA, we discussed the Cost Maturation Process and gave some examples of how even a Super Power can fall victim to poor cost management.

8. Transforming the Army: Four Requirements for Success
Leadership Team with the Assistant to the Commander – Enterprise (ACE) to create “informed” leaders
Exploit existing strong leadership capabilities
ACE Build strong staff, strong organization
Select, develop ACEs
Design and deliver advanced training
Process Modify “winning the cost war” template as needed
Cost Info Use new tools as they come online
Need Status Action

9. ACE Development: PCAM & ICAM
Principles of Cost Analysis and Management
Targeted at entry level CP11 Personnel, Sergeants, Lieutenants, Junior Captains
Course Length: Three Weeks
Intermediate Cost Analysis and Management
Targeted at mid career CP11 Personnel, Staff Sergeants and above, Senior Captains, Majors and above

10. Stackable Credentials
Based on the Financial Management Career Field
All CEs will require basic, advanced, and master skills with a concentration in:
Readiness – Capacity management and force cost analysis
Materiel – Logistics and working capital funds cost analysis
Human Capital – Manpower cost analysis
Services & Infrastructure – Services and capital asset costing
FAs and CPs that are common to all CEs should train to become a master in any CE
* NOTE: Stackable credentials are based on Financial Management (BC36/CP11) career field demands for cost management, which is the Army maximum; other career fields will use a subset of these requirements.

11. PCAM Develop basic cost management skills
First step in becoming an ACE

12. Purpose of Course Develop Skills in Cost Accounting
Includes Conference, Demonstration and Practical Exercises
Emphasizes hands-on experience
Introduces Excel templates to facilitate learning
Introduce and Apply Skills in Cost Management
Case studies give students the opportunity to apply their skills to a real-world scenario

13. Cost Accounting: External Reporting
Overview of Course
Week 1:
Basic Accounting Principles: External Reporting
Accounting
Basic Training
Basic Financial Statements, Cash-based Accounting
Military
Fund Accounting
Budgetary Accounting, Obligations & Expenditures
Financial Accounting
Accrual Accounting Basics – Revolving Funds
Cost Accounting: External Reporting
Accounting for Manufacturing, Job Order Costing
Test Days 1-4
Managerial Cost Intro
Cost Terminology, Relevant Cost Decisions

14. Key Issues for Week 1 Internal vs. External Reporting
Different ways of measuring costs for external reporting
Measuring and reporting the cost of a job
Defense contractor costing
How to use and interpret different types of information prepared for external users

15. Expectations There are lots of different methods to account for costs
The goal of this course is to create awareness of the different methods
Students are not expected to become experts but should understand where each method is used and why

16. Activity Based Costing
Overview of Course
Week 2:
Cost Relationships and Cost Tradeoffs
Cost Relationships I
Fixed, Variable, Linear and Non-linear relationships
Cost Relationships II
Net Present Value and Expected Value
Activity Based Costing
Allocation Mechanics, Cost Driver Selection, Pitfalls
Cost Tradeoffs I
Breakeven Analysis, Sensitivity, Indifference Points I
Test Days 5-9
Cost Tradeoffs II
Batch Quantity Tradeoffs, Indifference Points II

17. Key Issues for Week 2 Identify and express cost relationships
Evaluate investment courses of action using net present value and expected value
Identify behavioral issues with cost measurement
Explain the concept of cost tradeoff and identify points of indifference

18. Cost Planning and Estimation
Overview of Course
Week 3:
Cost Planning & Explanation, CBA
Cost Planning and Estimation
Flexible Forecasting, Trend Projection, Learning Curve
Cost Benefit Analysis
Eight Steps to Cost Benefit Analysis
Cost Explanation
Variance Analysis and Reconciliation
Winning the Cost War
After Action Review
Prepare After Action Review Briefing from Case Study
Final Exam
Comprehensive Final Exam, Closing Activities

19. Key Issues for Week 3 Tools for cost planning and projection
Cost Benefit Analysis
Cost explanation and After Action Review

20. LSA #2 Check on Learning Q1. What is an ACE? A1. Q1. What is an ACE?
A1. Assistant to Commander of the Enterprise. This is a key position in a Cost Managed Organization.

21. LSA #2 Summary
During this instruction, we discussed the entire 3-week course overview, and the expectations and issues with each. Also, the requirements for success along with the four levels of Cost Management training.

22. Remember Valley Forge
Read the article by Ms. Matiella

23. LSA #3 Check on Learning
Q1. Why does the Army need to become more cost effective? A1. Q2. What is the difference between Cost Benefit Analysis and a Cost-Managed Organization? A2.
Q1. Why does the Army need to become more cost effective?
A1. The three alternatives are listed in the article. Get more cash (not likely), cut services (not attractive) or increase cost effectiveness.
Q2. What is the difference between Cost Benefit Analysis and a Cost-Managed Organization?
A2. Among other points students should gather that Cost Benefit Analysis is done on a project by project basis, essentially a one-time effort. A Cost Managed Organization has an ongoing, systematic process for planning, measuring, and evaluating performance.

24. LSA #3 Check on Learning (Cont.)
Q3. How do fiscal constraints pose an “asymmetric threat”? A3. Q4. How should we respond? A4.
Q3. How do fiscal constraints pose an “asymmetric threat”?
A3. Fiscal constraints pose an emerging asymmetric threat that we have labeled as the “Cost War.” The Cost War is the struggle to meet the mission in an environment of constrained budgets. Even a superpower can lose a Cost War and history has some very prominent examples.
Q4. How should we respond?
A4. This should stimulate varied responses from students. To quote the article: Winning the Cost War requires a dedicated, proactive, results oriented effort that should appeal to the aggressive nature of the American Soldier. The Army’s posture is not to wait for the inevitable budget cuts and merely react to the situation. We seek to shape the issue through the third option: increasing cost effectiveness through the development of a cost conscious culture.

25. LSA #3 Summary
During this instruction, we read the Article “Remember Valley Forge” by Ms. Matiella and briefly discussed it’s outcome.

26. Payoff: Better Execution, Not Necessarily Less Spending$ $
Budget
Management
Better Mission
Appropriated
Execution $ $
Reprogrammed
Efficiencies

27. TLO Summary
Action: Introduce Principles of Cost Analysis and Management
Condition: You are cost advisor technician with access PCAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors.
Standard: With at least 80% accuracy:
Discuss purpose for increasing cost effectiveness; terminology, and best practices response to threat
Understand the Purpose of this Course
Understand the asymmetrical threat of lack of resources.