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Unformatted text preview: Chapter 01 - Cost Management and Strategy CHAPTER 1 : COST MANAGEMENT AND STRATEGY QUESTIONS 1-1 Firms Using Cost Management. Here are some examples; there are many possible answers. 1. Wal-Mart: to keep costs low by streamlining restocking and sales 2. COMPAQ: to keep costs low by improving manufacturing performance and by using target costing and other management techniques 3. Citicorp: to keep costs low by using activity analysis (see problem 1-31) to identify key operations and to find those that add little or no value 4. A local school district or public agency: to keep costs low in order to provide the best possible service given available funds 5. Procter & Gamble: to assess the profitability of its different products 6. Any other large, diversified manufacturer, like Procter & Gamble: which needs to be able to analyze the relative profitability of its different products, using cost management 7. A small machine shop: which needs cost management to determine whether it should repair or replace a machine 8. A dance studio: to analyze and choose between different compensation plans for its teachers; and to determine whether it should open a new studio 1-2 Firms not expected to be significant users of cost management information: 1. Microsoft: here the focus is on forming strategic alliances, innovation and competition; cost management is more important for other firms in the information technology business, such as COMPAQ, Hewlett Packard, and IBM that compete in part on innovation but also on price 2. Versace: a high fashion firm competes on innovation and product leadership; the development and communication of attractive new ideas is the key to competitive success rather than cost management 3. Other firms in the fashion industry, such as Chanel, Givency, and Armani: for reasons similar to Versace 4. Major league sports: dependent primarily on the development of fan support, good coaching and player acquisition 1-3 Cost management information is a broad concept. It is the information the manager needs to effectively manage the firm or not-for-profit organization -- both financial information about costs and revenues and relevant non-financial information about productivity, quality, and other key success factors for the firm. Typically, cost management is the responsibility of the Chief Financial Officer (CFO) who often delegates much of this responsibility to the Controller. 1-1 Chapter 01 - Cost Management and Strategy 1-4 In the private sector, the Financial Accounting Standards Board, an independent organization, and the American Institute of Certified Public Accountants (AICPA) supply guidance regarding financial reporting practices. The Sarbanes-Okley Act of 2002 also created the Public Company Accounting Oversight Board which reports to the SEC to oversee auditing standards and practices. The AICPA also provides educational opportunities. In the public sector, The Cost Accounting Standards Board (CASB) sets cost accounting standards for those doing...
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This note was uploaded on 05/28/2010 for the course ACG 361 taught by Professor Xxx during the Spring '10 term at University of Central Florida.
- Spring '10