Cost Management and Strategic Decision Making

Chapter 1

Provide management with information to evaluate the impact of current or proposed strategic and operational activities

Create more value at less cost

Minor role – measure and report costs that have already occurred

The Role of Management Accounting

Strategy and information support

Provide information and guidance

Evaluate alternatives

Cost management vs. cost cutting

Value inventory

Functions of the Management Accountant

Characteristics of the Management Accountant

Team playerVisionary

Long-term focusUnderstands quantitative and qualitative

aspects

Self-guidedUnderstands causality of costsEthical

IMA Standards of Ethical Conduct

CompetenceContinues education, follows laws, rules and

standards, provides clear, complete information, recognizes and communicates own professional limitations

ConfidentialityMaintains and enforces confidentiality of

information, refrains from using confidential information for unethical advantage

IMA Standards of Ethical Conduct

IntegrityAvoids conflicts of interest, outside influence,

unethical conduct, subversion of organization objectives, activities that would discredit the profession

CredibilityCommunicate information fairly and objectively,

disclose all relevant information, disclose delays or deficiencies in information, timeliness, processing or internal controls

Identifying Competitive Advantages

SWOT analysis

Internal

Strengths

Weaknesses

External

Opportunities

Threats

Identifying Competitive Advantages

Value chain analysisFocus on improving customer’s perceived

value

Should not just look inwardThe way we do things is only a part of the chain

How do we make moneyCost vs. profit strategic business units (SBUs)

Do we outsource?

Fostering a Culture of Improvement

Identify a need or opportunity for change

Get help

Create a vision and strategy to achieve it

Communicate in both directions

Highlight achievements

Learn from mistakesDo not fear or penalize failures