1. Advanced Cost Management Professor William F. O’Brien, MBA, CPA Fall 2007

2. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-2 Financial Management Evolution DATA INFORMATION ANALYSIS IMPLEMENTATION Today’s Corporate Focus is on Results!

3. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-3 Factors Influencing Today’s Business Environment n Global competition n Manufacturing and IT advances n Customer focus n Revised organizational structures n Social, political and cultural changes

4. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-4 Strategic Cost Management n Strategic cost management is the development of cost management information to facilitate the principal management function--strategic management.

5. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-5 Introduction n Cost Management n Financial n Non-Financial

6. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-6 Company F/S Users Economic Decisions Financial Impact (useful & relevant) Financial Accounting Model

7. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-7 Managerial Accounting Model Plan Implement Monitor Adjust Accounting Information Communication Environment

8. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-8 Four Management Functions …another Perspective n Strategic Management n Planning and Decision Making n Management and Operational Control n F/S Preparation n How is Cost Management Info Used?

9. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-9 Contemporary Mgt. Techniques n Business Partnering n Activity-Based Costing (ABC) and Mgt. (ABM) n Value Chain Analysis n Target Costing n Environmental Cost Analysis n Theory of Constraints (TOC) n Total Quality Management (TQM) n Lean Production/Mass customization n The Balanced Scorecard and Economic Value Added Analysis (EVA®)

10. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-10 Ansari: SMA n Strategic Triangle (QCT) n Competition based on quality, cost & Time n Mgt. Actg. or Attribute Triangle (TBC) n Impacts technical, behavioral & cultural aspects n Mgt. Actg. Links Strategy with Action n It is not an end unto itself n It is an integrating tool

11. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-11 SMA, cont. n The two triangles are dependent upon each other n This process is a framework to ensure that our management accounting tools possess the attributes necessary to achieve our strategic goals

12. STRATEGIC COST MANAGEMENT - BA122B - Fall 2007Slide 1-12 SMA, cont. n QCT Triangle n Self evident n TBC Triangle n Provides Technical insight n Encourages Behavioral changes n Supports Cultural beliefs