Lecture 1: Management & Cost Accounting I
Professor Noel Cooperberg
Learning Objectives & Intro to Management Accounting: 1:09
Organizational Chart: 3:59
Cost and Management Accounting Overview: 6:06
Cost Management vs. Financial Reporting
(Cost Accounting vs. Financial Accounting): 9:36
The Four Functions of Management: 12:36
Developing Cost Management Systems: 14:52
Contemporary Business Drivers: 15:54
Contemporary Cost Management Techniques: 21:44
Michael Porter: Strategic Positioning
(Cost Leadership and Differentiation): 32:04
Competitive Strategy: 34:16
Mission Statements: 35:39
Review Questions: 38:02
Question Solutions (Review): 45:35
Ethics of Management Accounting: 52:28
Cost/management accounting provides information for decision making and planning, assists in directing and controlling activities, motivates managers and other employees towards the organization's goals, measuring the performance of sub-units, programs, projects, managers, and employees, and assessing the organization's competitive position.
Financial reporting focuses on external users and places an emphasis on accuracy and compliance. Cost management is oriented towards internal users and focuses on efficiency, effectiveness, and emphasizing usefulness and timeliness.
Cost management information aids management in its fundamental functions: (1) strategic management, (2) planning and decision-making, (3) management and operational control, and (4) preparation of financial statements.
Management accounting functions include strategic management (which in turn includes identifying and implementing goals / action plans to maintain competitive advantage and monitoring CSF's, or critical success factors) and planning / decision making (which in turn includes supporting recurring decisions such as production scheduling and product pricing, and budgeting and profit planning, i.e. cost-volume profit analysis).
Contemporary business drivers include the global business environment (economic interdependence, increased competition, and transfer pricing / tax considerations), lean manufacturing (just-in-time / JIT inventory methods, inventory reduction and quality control, emphasis on speed-to-market, and flexible manufacturing systems), information technology (increased use of the internet, factory floor automation), focus on the customer (since consumers have higher expectations and products have shorter life cycles and become obsolete more quickly, like computers), shifts in management organization, and social / political / cultural considerations (i.e. diversifying workforce, ethics, deregulation).
The balanced scorecard (BSC) and strategy map address a firm's performance in financial, customer, internal business processes, and innovation / learning. The strategy map links the four perspectives in a cause-and-effect diagram. The value chain identifies the steps required to provide a competitive product and helps identify the steps that be eliminated or outsourced. Activity-based costing (ABC) improves the tracing of allocated costs to individual products and customers. Activity-based management (ABM) improves operational and management control. Business intelligence involves using data analytics to understand and analyze performance. To determine the target cost, subtract the desired profit from the market determined price. It is relevant for intensely competitive markets. Life-cycle costing says that costs are monitored throughout a product's life cycle - from research and development (R&D) to sales and service.
Benchmarking involves identifying critical success factors (CSFs), studying best practicies of other firms in achieving these CSFs, and institute change based on the assessment. Business process improvement (BPI) is when managers and workers commit to a program of continuous improvement in quality and other CSFs. Total quality management (TQM) implements policies and practices to ensure that the firm's products and services exceed customer's expectations. Lean accounting uses value streams to measure the financial benefits of progress in implementing lean manufacturing. The theory of constraints (TOC) improves cycle-time (i.e. the rate at which raw materials are converted to finished products). Enterprise sustainability is managing to balance short and long term goals in performance (social, environmental, and financial). Enterprise risk management is a framework and process to manager the risks that could affect competitiveness and success.
Cost leadership involves outperforming competitors by producing at the lowest cost, consistent with the quality demanded by the consumer. Differentiation involves creating value for the customer through product innovation, product features, and customer service for which the customer is willing to pay.