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A325Cost Accounting

January 7, 2013

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What we will do today

1) Introduce the course and ourselves2) Go over the syllabus3) Have an abbreviated discussion of

chapters 1 and 2.4) Get started with Chapter 3

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Syllabus

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Syllabus - materials

Cost Management: A strategic emphasis

Blocher, Chen, Cokins, and Lin (5ed)

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Syllabus - the way things work

1) Regular updates/modifications to they syllabus will be on ONCOURSEa) YOU ARE RESPONSIBLE FOR THESE

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Syllabus

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Reed SmithAccounting (BS, MAcc Tennessee)(PhD, Ohio State)(Faculty: Texas, Oregon, SUNY-Buffalo, Indiana University)e-mail: jrsmith2@iupui.edu

I am a big college football enthusiast. I also like to sail and swim.

I play a little guitar, but I’m not that good anymore. I spent the Summer in Croatia doing research with the Economics Institute of Zagreb. I also just bought a house and have been moving in for the past few weeks.

A little about me…

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Four Functions of Management

Strategicmanagement

Strategicmanagement

Planning anddecision makingPlanning and

decision making

Management and operational controlManagement and

operational controlPreparation of

financial statementsPreparation of

financial statements

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Strategic Cost Management

Strategic cost management is the development of cost

management information to facilitate the principal

management function, strategic management

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Strategic Management

Strategic management requires:• Anticipating changes• Understanding the business and

competitive environment• Ability to make changes quickly• Ability to identify and solve problems

from a cross-functional view

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Types of Organizations

MerchandisersMerchandisersManufacturersManufacturers Servicefirms

Servicefirms

Government and Not-for-profit

Government and Not-for-profit

WholesalersWholesalers RetailersRetailers

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Changes in Business Environment

1) Increase in global competition2) Advances in manufacturing technologies3) Advances in information technologies4) Greater focus on the customer5) New forms of management organization6) Social, political, and cultural changes

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Target Costing

Identify product opportunity.

Determine price that wouldmake product competitive.

Determine if product can be made at cost sufficiently low to provide a

desired profit.

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The Value Chain

1) The value chain is an analysis tool firms use to identify the specific steps required to provide a product or service to the customer

2) An analysis of the firm’s value chain helps management discover:a) which steps or activities are not competitiveb) where costs can be reducedc) which activity should be outsourced

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The Balanced Scorecard

The balanced scorecard is an accounting report that includes the firm’s critical success factors in four areas:

1) Financial performance2) Customer satisfaction3) Internal business processes4) Innovation and learning

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Learning improvesbusiness processes.

Improved businessprocesses improve

customer satisfaction.

Improving customersatisfaction improves

financial results.

The Balanced Scorecard

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Strategic Positioning

Firms arrive at one of two competitive strategies:

• Cost leadership is a competitive strategy in which a firm succeeds in producing products or services at the lowest cost in the industry

• Differentiation is a competitive strategy in which a firm succeeds by developing and maintaining a unique value for the product as perceived by consumers