Chapter1IntroductiontoCostManagement.docVIP

CHAPTER 1introduction to cost management questions for writing and discussion 1. Cost management is concerned with assigning costs and using information for planning, controlling, continuous improvement, and decision making. It encompasses cost accounting and management accounting but has a broader focus than the usual roles assigned to cost accounting and management accounting. Cost accounting is concerned with assigning costs to various cost objects such as products, services, and activities. Cost management broadens this focus by emphasizing accuracy of assignments based on causal relationships. Management accounting is concerned with planning, controlling, and decision making. Cost management broadens this focus by emphasizing continuous improvement and expanding planning, control, and decision making to include such factors as processes, value chain, life-cycle analyses, strategic considerations, and environmental costs. 2. Cost management differs from financial accounting in the following major ways: (1) an internal focus, (2) an emphasis on the future, (3) freedom from GAAP and other mandatory rules, (4) a multidisciplinary scope, (5) an evaluation of individual segments within the firm, and (6) the provision of more detailed information. 3. Factors affecting the focus and practice of cost management are global competition, service industry growth, advances in information technology, advances in the manufacturing environment, customer orientation, new product development, total quality management, time as a competitive factor, and efficiency. Global competition means that companies are now competing with the best of the best. Accurate, timely, and relevant accounting data are crucial in appropriately managing costs. Service industry growth has led to the need for increased management accounting information to improve productivity and quality. The advances in information technology have led to the creation of integrated relational databases that allow a v