Cost Management A Strategic Emphasis Chapter 1 Key Terms

Activity Analysis
Used to develop a detailed description of the specific activities performed
Activity-Based Costing (ABC)
Used to improve accuracy of cost analysis by improving tracking of costs to products or to individual customers
Activity-Based MGT (ABM)
Uses activity analysis and ABC to help managers improve value of products or services to increase org competitiveness
Balanced Scorecard (BSC)
Accounting Report Includes Critical Success Factors in 4 areas:
1) Financial Performance
2) Customer Satisfaction
3) Internal Processes
3) Learning and Growth
Financial Performance under the BSC
Measure profitability, market value, other indicators to see how well the firm satisfies its owners and shareholders
Customer Satisfaction under the BSC
Measures quality of service and low cost, other indicators of how well the firm satisfies customers
Internal Processes under the BSC
Measure of the efficiency and effectiveness of production of the product or service
Learning and Growth under the BSC
Measures of the firm’s ability to develop/utilize human resources to meet its strategic goals now/future
Benchmarking
Understanding you CSF and the best practices of other firms and then improving your firms processes to match or beat the performance of others
Business Intelligence
An approach to strategy implementation in which MGT accountant use data to understand and analyze business performance
Business Process Improvement (BPI)
MGT method where managers and workers commit to a program of continuous improvement in quality and other CSF
Cost Leadership
Stand out to consumers because your product does not compromise quality but is cheaper
Cost MGT
The development and use of Cost MGT Information
Cost MGT Information
Used to implement the companys strategy; Consists of Financial Information and Non-Financial Information
Examples of Financial Cost MGT Information
Cost and Revenue
Examples of Non-Financial Cost MGT Information
Customer Retention, Quality, and Productivity
Critical Success Factors (CSF)
Measure of aspects of the firm’s performance that are essential to its competitive advantage/success
Differentiation, Product Leadership, Consumer-Focused, Customer-Solution Strategy
Standing out to consumers because your product is innovative, higher-quality, customer service product features, or unique
Enterprise Risk MGT
Framework/Process thats orgs, use to manage risk
3 Types of Risk
1) Hazards such as flood or fire
2) Financial risks due to fluctuations in current currency, int. rates, and price
3) Operation risks related to customers, products, or employees
4) Strategic risk of decisions by MGT about firm strat and implementation
Enterprise Sustaiability
Balancing of company short term and long term goals in social, environmental, and financial dimensions
Lean Accounting
Using Value Streams to understand the profitability of its process improvements using lean manufacturing
Life-Cycle Accounting
MGT Accounting
A Profession that includes partnering in MGT decision making, devising and planning, performance MGT systems, and providing expertise in Financial reporting to help implement an organizations strategy.
MGT Control
Step 3 of the 4 MGT Functions; The evaluation of mid-level managers by upper-level ones
Operational Control
Step 3 of the 4 MGT Functions; The evaluation of operation-level managers and employees by mid-level managers
What are the four major MGT functions?
1) Strategic Management
2) Planning and Decision Making
3) MGT and Operational Control
4) Preparation of Financial Statements
Planning and Decision Making
Step 2 of the 4 MGT Functions; Using Cost MGT Info to support reoccurring decisions (re: replace equip,manage cash flow, budgeting raw mats, scheduling productions, and pricing.)
5 Steps of Strategic Decision Making
1) Determine the issues surrounding the problem
2) Identify the alternatives
3) Analyze and gain info on all the alternatives
4) Implement the chosen alternative based on step 3
5) Do ongoing evaluations of the effectiveness of implementation in step 4
Preparation of Financial Statements
Step 4 of the 4 MGT Functions; Manager compliance of financial reporting requirements of regulatory agencies
Strategic MGT
Step 1 of the 4 MGT Functions; Development and implementation of a sustainable competitive position using external and internal information; a group effort
Strategy
A plan to achieve competitive success, road map to accomplish company ‘missions’
Strategy Map
Method based on the Balanced Scorecard which links the four perspectives in a cause and effect diagram
Target Costing
Lowering costs enough to make the product or service profitable
Theory of Constraints (TOC)
Used to help firms improve the rate at which raw products convert to finished products
Total Quality MGT (TQM)
Method of MGT: develops policies and practices to ensure that products/services exceed customer expectations
Value Chain
An analysis tool used to identify the steps required to provide a certain product or service to the customer; we can analyze the step and see if we can reduce cost or outsource
3 Types of Organizations
Servicing, Manufacturing, and Merchanidisng (Wholesale: Merch sells to other merch OR Retail: Merch to Customer)
IMA
Institute of Management Accountants
AICPA
American Institute of Certified Public Accountants
IRS
Internal Revenue Service
FTC
Federal Trade Commission
SEC
Securities Exchange Comission
PCASB
Public Company Accounting Standards Board
FASB
Financial Accounting Standards Board
CASB
Cost Accounting Standards Board
CMA
Certified Management Accountant
CPA
Certified Public Accountant
What are the 4 points within the Code of Ethics by the IMA?
1) Competence
2) Confidentiality
3) Integrity
4) Credibility