PDF Ebook Cost Management: Control and Profitability
All executives and managers account for cost. In various ways, all business professionals manage cost, and most managers engage in capital investment decisions, forecasting, pricing, and product or service management. All these business activities are deeply embedded in the work of cost accounting.Cost related tasks consume a significant amount of management time at all levels of the organization. A business professional must understand the organization’s cost accounting practices to competently manage a specified area and understand how personal accountabilities are calculated and tracked. An accounting instructor with considerable experience in the field always gave her MBA students the same advice, “Learn the language of accounting. It’s the language of business, and if you don’t learn it, some little bean counter wearing a green eyeshade will blow your grand marketing or operations idea right out of the water!”
Bellwether organizations that employ advanced management systems still run their accounting systems—“keep their books”—according to basic cost accounting principles. Importantly, conventional practices shape advanced techniques; therefore, more mature methods cannot be fully understood without reference to their predecessors. As a baseline, an organization’s executives must establish management/cost accounting practice foundations that serve decision making and operations, first, and financial accounting, second, before moving to advanced systems. To accomplish this, executives need the ability to distinguish system alternatives. This chapter addresses these requirements.
After reading this chapter you will be able to
• Understand the objectives of an effective cost management system (CMS)
• Explain the relationship between control and profitability
• Explain the connection points between cost and financial accounting systems
• Articulate the design features of a value-focused CMS
• Distinguish between cost and performance management systems
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PDF Ebook Cost Management: Control and Profitability
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