CHAPTER 1 – INTRODUCTION TO STRATEGIC COST MANAGEMENT Chapter Overview Traditional Cost Management Strategic Cost Management Traditional vs Strategic Cost Management Components of Strategic Cost Management Case Scenario Strategic Frameworks for Value Chain Analysis Industry Structure Analysis (Porter’s 5 forces analysis) Core Competencies Analysis Segmentation Analysis Superior Performance & Competitive Advantage Differentiation Advantage (Product Differentiation) Low-Cost Advantage (Cost Leadership) The Value Chain Approach for Assessing Competitive Advantage Internal Cost Analysis Internal Differentiation Analysis Vertical Linkage Analysis Vision, Mission and Objectives & SCM Value Shop Model or Service Value Chain The Role of the Management Accountant Summary CHAPTER 2 – MODERN BUSINESS ENVIRONMENT Chapter Overview Modern Business Environment From a Sellers’ Market to Buyers’ Market Cost of Quality (COQ) Views regarding Cost of Quality Components of COQ Illustration Optimal COQ Steps of Application of PAF Model Conclusion Total Quality Management (TQM) Six C’s of TQM Contributions in the field of TQM by Deming Implementation of TQM Criticisms of Total Quality Management Conclusion TQM in Practice The Business Excellence Model EFQM Excellence Model Baldrige Criteria for Performance Excellence Business Excellence Model and Organizational Culture Business Excellence Model in Practice Theory of Constraints Operational Measures of Theory of Constraints Goldratt’s Five-Step Method for Improving Performance Throughput Accounting Illustration Advantages and Disadvantages Conclusion Theory of Constraints in Practice Supply Chain Management Types of Supply Chain- Push and Pull Upstream and Downstream Flow More Information on Key Business Processes Service Level Agreements (SLA) Benefits of Supply Chain Supply Chain Management in Practice Gain Sharing Arrangements Outsourcing Outsourcing in Practice Summary CHAPTER 3 – LEAN SYSTEM AND INNOVATION Chapter Overview Lean System Just-in-Time (JIT) Essential Pre-requisites of a JIT system Impact of JIT System on Performance Measurements in a JIT System Back-flushing in a JIT System JIT in Practice Illustration Kaizen Costing Kaizen Costing Principles Case Scenario Kaizen Costing in Practice 5S in Lean Product & Process Development Application of 5S Total Productive Maintenance (TPM) How TPM can be introduced in the organization? Performance Measurement in TPM Illustration Connection Between TQM and TPM Cellular Manufacturing/ One Piece Flow Production System Implementation Process Difficulties in Creating Flow Benefits and Costs Six Sigma Numerical Concept of Six Sigma Implementation of Six Sigma Quality-Management Tools Limitations of Six Sigma Lean Six Sigma Six Sigma in Practice Process Innovation and Business Process Re-engineering Process Innovation Innovation in Practice Business Process Reengineering Principles of BPR Main Stage of BPR BPR in Practice Difference Between Two Approaches (BPR vs PI) Summary CHAPTER 4 – COST MANAGEMENT TECHNIQUES Chapter Overview Cost Control/ Waste Control and Cost Reduction Scope of Cost Reduction Target Costing Advantages of Target Costing Main features of Target Costing System Components of Target Costing System Problems with Target Costing Management Accountant’s Role in a Target Costing Environment Impact of Target Costing on Profitability Target Costing Data Flow Most Useful Situations for Target Costing Target Costing Control Points Implementing a Target Costing System Illustration Case Scenario Life Cycle Costing Product Life Cycle Life Cycle Characteristics Strategies Characteristics of Product Life Cycle Benefits of Product Life Cycle Costing Uses of Product Life Cycle (PLC) Illustration Pareto Analysis Usefulness of Pareto Analysis Application of Pareto Analysis Illustration Environmental Management Accounting [EMA] Environmental Costs Identification of Environmental Costs Controlling Environmental Costs Reasons for Controlling Environmental Cost Role of EMA in Product/ Process Related Decision Making Advantages of EMA Disadvantages of EMA Conclusion EMA in Practice Summary CHAPTER 5 – COST MANAGEMENT FOR SPECIFIC SECTOR Chapter Overview Power Sector Key Risks in the Sector Electricity Distribution – A Complex Network Features of Power Sector Application of Cost Management Techniques in Power Sector Value Chain Analysis Agriculture Sector Features Cost Management Information Technology (IT) Sector IT Organization’s Engagement Model 4D IT Cost Optimization Framework Summary CHAPTER 6 – DECISION MAKING Chapter Overview CVP Analysis Activity Based CVP Analysis Illustration CVP Analysis – Conditions of Uncertainty CVP Analysis in Service and Non-Profit Organisations Illustration CVP Analysis in Just in Time Environment Short Run Decision Making Non-Financial Considerations Ethics Decision Making Model Illustration Some Applications of CVP Analysis and Cost Concepts Outsourcing Decision Illustration Sell or Further Process Minimum Pricing Decisions Illustration Keep or Drop Decisions Illustration Special Order Decisions Product Mix Decision Illustration Summary CHAPTER 7 – PRICING DECISION Chapter Overview Pricing Decision Theory of Price Profit Maximization Model Pricing under Different Market Structures Perfect Competition Monopoly Monopolistic Competition Oligopoly Pricing Policy Principles of Product Pricing Price Customization Price Sensitivity Pricing Methods Cost-Based Pricing Method Illustration 1 Illustration 2 Competition-Based Pricing Method Value- Based Pricing Method Pricing in Periods of Recession Pricing Below Marginal Cost Strategic Pricing of New Products Skimming Pricing Penetration Pricing Concept in Practice Pricing and Product Life Cycle Case Scenario Price Adjustment Polices Structured Approach to Pricing Decisions Sensitivity Analysis in Pricing Decisions Pricing of Services: Issues Summary CHAPTER 8 – PERFORMANCE MEASUREMENT AND EVALUATION Chapter Overview Responsibility Accounting (RA) Functional Organizational Structure Divisional Organizational Structure Divisional Performance Measures Return on Investment (RI) Residual Income (RI) Economic Value Added (EVA) Shareholder Value Added (SVA) Triple Bottom Line (TBL) Balanced Scorecard Strategy Mapping Illustration Balanced Scorecard in Practice Performance Pyramid Illustration The Building Block Model Performance Prism Benchmarking Schemes Goals of Benchmarking Process of Benchmarking Pre-requisites for Successful Benchmarking Difficulties in Implementation of Benchmarking Benchmarking Code of Conduct Performance Measurement in the Not for Profit Sector Why do we need performance measure in Not-for-Profit Organisations? Performance Measurement Performance Measurement Process Performance Reports Summary CHAPTER 9 – DIVISIONAL TRANSFER PRICING Chapter Overview Transfer Pricing Utility of Transfer Pricing A Question of Fair Value? Transfer Pricing Methods Market Based Transfer Price Cost Based Transfer Price Negotiation Based Transfer Price Transfer Pricing and Goal Congruence Transfer Pricing Decision, Different Circumstances Different Capacity Levels Different Demand Levels Illustration Proposals for Resolving Transfer Pricing Conflict Dual Rate Transfer Pricing System Two Part Transfer Pricing System Case Scenario International Transfer Pricing International Transfer Pricing and Currency Management Illustration Summary CHAPTER 10 – STRATEGIC ANALYSIS OF OPERATING INCOME Chapter Overview Profitability Analysis Strategic Profitability Analysis Reconciliation of Operating Profit Illustration Profitability Analysis Through Activity Based Costing Direct Product Profitability (DPP) Illustration Customer Profitability Analysis Illustration ABC in Advanced Manufacturing Environment Activity Based Cost Management (ABM) Value Added (VA) Activities / Non-Value Added (NVA) Activities Illustration Business Applications of ABM Implementing ABM Benefits of Activity Based Cost Management Difference between ABC and ABM Activity Based Budgeting (ABB) Illustration ABC: A Decision – Making Tool Concept in Practice Summary CHAPTER 11 CAPITAL BUDGETING Chapter Overview Budgetary Control Feedback and Feed-Forward Control Feedback Control Feed-forward Control Case Scenario Behavioral Aspects of Budgetary Control Effect of the Budget Difficulty on Performance Case Scenario Participation in Budget Setting Process Use of Accounting Information in Performance Evaluation Case Scenario Beyond Budgeting (BB) Characteristics of Beyond Budgeting Suitability Benefits of the ‘Beyond Budgeting’ Model Beyond Budgeting – Principles for Adaptive Performance Management Implementation of Beyond Budgeting Traditional vs Beyond Budgeting Model Conclusion on Budgeting CHAPTER 12 – STANDARD COSTING Chapter Overview Analysis of Advanced Variances Planning & Operational Variances Variance Analysis in Activity Based Costing Illustration Learning Curve- Impact on Variances Illustration Relevant Cost Approach to Variance Analysis Variance Analysis and Throughput Accounting Variance Analysis in Advanced Manufacturing Environment/ High-Technology Firms Standard Costing in Service Sector Standard Costing in Public Sector Standard Marginal Costing Reconciliation of Profit Illustration Investigation of Variances Factors to be Considered When Investigating Variance Method Used for Investing Variance Possible Interdependence Between Variances Interpretation of Variances Illustration Case Scenario Reporting of Variances Behavioral Issues Standard Costing in Contemporary Business Environment Formulae Summary CHAPTER 13 – CASE STUDY Essentials for Case Study Supply Chain Management Transfer Pricing Kaizen Costing Balanced Scorecard Performance Prism Total Productive Maintenance Ethical and Non-Financial Considerations Value Chain Analysis Environmental Management Accounting