Operational improvement and strategic costing
Article Abstract:
Operational improvement and strategic costing are the two modules of enterprise-wide strategic cost management systems. While operational improvement focuses on enabling a firm to become more efficient, strategic costing seeks to identify the profit sources of the firm. Although the two modules require distinct types of cost information, most firms employ only one system to perform the two tasks. Operational improvement requires cost information that is timely, very accurate and specifically focused. On the other hand, strategic costing requires cost information that is periodic, moderately precise and broad-focused. Although the two modules use different types of cost information, they should be managed in relation to one another. The operational improvement module should be the main provider of the information needed in the strategic costing module. The standards used to maintain the relationship between the two are discussed.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1998
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Cost management for internal markets
Article Abstract:
Organizations can broaden the scope of strategic cost management to include internal markets. Strategic cost management enhances the efficiency of the internal supply chain and strengthens the competitiveness of firms. The key is to develop intraorganizational cost management systems that would help firms manage the costs of corporate support services provided by various operating units. These systems are aimed at streamlining the transactions between support divisions and operating units. Organizations may also establish transfer pricing systems to harmonize the supply chain between decentralized operating units. Another option is to use pseudo profit centers to maximize profits from former cost centers. These initiatives not only reduce costs but also enhance service to external customers, leading to a stronger strategic position for the organization.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1998
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Introduction to enterprise-wide cost management
Article Abstract:
The successful development and implementation of an enterprise-wide cost management system depends on the benefits it offers to strategic business units (SBUs) and the central cost management group. Benefits can be provided to SBUs by allowing them to design their own local cost models and collect the cost information needed for these models. This responsibility encourages them to maintain their models since the information they collect will be relevant to their performance. On the other hand, benefits to the central cost management group can be provided by imposing guidelines on local model development. This ensures that the activity structures of the local models complement those of the central group. An activity dictionary detailing activities at the local and central levels should also be developed.
Publication Name: Management Accounting (USA)
Subject: Business, general
ISSN: 0025-1690
Year: 1998
User Contributions:
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