ch11tc - COST MANAGEMENT Accounting & Control...

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COST MANAGEMENT 1 Hansen▪Mowen▪Guan Chapter 11 Strategic Cost Management
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2 Study Objectives 1. Explain what strategic cost management is and how it can be used to help a firm create a competitive advantage. 2. Discuss value-chain analysis and the strategic role of activity-based customer and supplier costing. 3. Tell what life-cycle cost management is and how it can be used to maximize profits over a product’s life cycle. 4. Identify the basic features of JIT purchasing and manufacturing. 5. Describe the effect JIT has on cost traceability and product costing.
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3 Strategic Cost Management: Basic Concepts Three general strategies have been identified: Cost leadership Product differentiation Focusing
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4 Strategic Cost Management: Basic Concepts Cost leadership strategy To provide the same or better value to customers at a lower cost than offered by competitors. A company might redesign a product so that fewer parts are needed, lowering production costs and the costs of maintaining the product after purchase.
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5 Strategic Cost Management: Basic Concepts Differentiation strategy Strives to increase customer value by increasing what the customer receives (customer realization). A retailer of computers might offer on-site repair service, a feature not offered by other rivals in the local market
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6 Strategic Cost Management: Basic Concepts Focusing strategy A firm selects or emphasizes a market or customer segment in which to compete. Paging Network, Inc., a paging services provider, has targeted particular kinds of customers and is in the process of weeding out the nontargeted customers.
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7 Strategic Cost Management: Basic Concepts The industrial value chain The linked set of value-creating activities from basic raw materials to the disposal of the finished product by end-use customers. Fundamental to a value-chain framework is the recognition that there exist complex linkages and interrelationships among activities both within and external to the firm.
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8 Strategic Cost Management: Basic Concepts Value-chain framework linkages Internal linkages : relationships among activities that are performed within a firm’s portion of the value chain
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This note was uploaded on 02/08/2010 for the course ACTG 3000 taught by Professor C during the Spring '10 term at Oregon State.

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ch11tc - COST MANAGEMENT Accounting & Control...

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