EMBA Term 3. Subject Outline

Transcription

1 EMBA Term 3 Subject Outline Subject Name Strategic Cost Management Subject Code Subject Credits Instructor Office 2 Credits Dr. Sudhindra Bhat is an MBA in Finance and has a degree MFM (Master of Financial Management) ACS, CFA. He has also completed M.Phil. and Ph.D. in Finance. Dr. Bhat is a professor of finance & accounts. He served for KPMG, Deloitte and Bharati Airtel,, ABA, etc., He is a visiting professor and consultant for various foreign universities specially AUT, New Zealand, Dallas university, Sweden school of economics, SP Jain Singapore & Dubai. Dr. Bhat is author of 3 books, Management accounting, Financial Management, Security Analysis & Portfolio Management. Dr. Bhat also a PHD guide for Alagappa university, VTU, AIMA, Manipal University and Aligarh Muslim University sudhindra.bhat@alliance.edu.in Office Hours Summary/Overview Managing cost is the mantra for success of any organization. For most business it is a strategic objective

2 to become the "best-cost producer". Formalized cost reduction programs in good times and bad has become fundamental to effective management. The firm, which rides through the economic downturns in the best possible manner, is the one with the best-cost management system. This course addresses the problem of managing costs in the context of business strategy. This course extends the perspective of cost management/analysis from a primary focus on tactical short-run/micro concerns to an emphasis on strategic long-run/macro issues. The linkage between cost management/analysis and strategy is facilitated by utilizing three powerful strategic management tools: value chain analysis, strategic positioning analysis, and cost driver analysis. Supported by these as well as by other financial and non-financial tools, cost management/analysis evolves into Strategic Cost Management (SCM). SCM exists to support decisionmakers as they develop, communicate, implement, evaluate and modify organizational strategy. Objective and Aims Developing new ways of looking at familiar problems and concepts an SCM look at such familiar issues as product line profitability, make/buy or new product introduction. On completion of this subject participants should have developed skills of analysis, evaluation and synthesis in cost and management accounting and, in the process, created an awareness of current developments and issue in the area. The subject covers the complex modern industrial organizations within which the various facets of decision-making and controlling operations take place; the subject includes discussion of costing systems and activity based costing, activity management, and implementation issues in modern costing systems. Introducing some relatively new and/or interesting topics/tools in cost analysis that facilitate SCM, to include but not limited to: Activity Based Management/Budgeting, SCM for Line of Business Evaluation, Economic Value to the Customers for Product/Channel Decisions, LCC, Target costing, measuring and managing capacity, Strategic Cost Drivers

3 2 3 Core Learning Outcomes Learning Outcomes On completion of this unit you should be able to: This session introduces the strategic focus of cost management and compares this with that of traditional approaches. The case clearly brings out the conventional and strategic analysis approach in dealing with the business highlighted in the case Understand the spin- off points in joint cost situation and allocate joint costs using different methods Relevance of adopting C-V-P concept in business operations. Concept of "contribution". How is it related to profit Application of marginal costing, pricing decision Maintain desired level of profit Accepting additional order Fixation of selling price Key factor analysis Alternative course of action Alternative methods of production Selection of suitable product mix Determining optimum level Evaluation of performances This course is designed for participants who plan to pursue careers as management consultants, as internal consultants or as senior business managers. Regardless of the career path selected, all the participants will benefit from exposure to the unique perspective of contemporary practitioners. Assessment Criteria To achieve the learning outcome you must demonstrate the ability to: The participants will be evaluated based on the conceptual understanding of the learning objectives. In the examination how cost accounting can be viewed as an information system and linking strategy and costing and understand the cost accounting in the context of strategic management In the presentation cost drivers both structural as well as exceptional. In the examination joint cost allocation by using different methods In the presentation Understand the critical tradeoffs existing between total cost and sales volume in determining desired profit goals. How costs respond to changes in production levels, and how those changes affect managements decision to expand or reduce capacity levels. In the examination Decision making problems and theory

4 Understanding under costing and over costing of products distinguish between the traditional and the activity-based costing approaches to designing a costing system Describe a four-part cost hierarchy Cost products or services using activitybased costing Use activity-based costing systems for activity-based management Compare activity-based costing and department-costing systems Appreciate the significance of organizational context issues in activitybased costing/management system design and implementation Need of the budget Objectives and Functions Advantages and Limitations, Classification Preparation of Cash and Flexible Budge, responsibility center, Concept of responsibility accounting, implementation of responsibility accounting, centers for controlling responsibility accounting organizational aspect of responsibility accounting, management report system, social report system Understanding segment profitability, Basis of analysis the performance of companies in divisonalised settings. Strategies- target costing and LCC The relevance of Value chain emerges in this session. Diagnostic cost drivers both structural as well as exceptional. Two case clearly help to demonstrate the importance of value chain in two different industries and evaluate cost analysis, consideration and the managerial implication This session advances in to relevance of customer profitability and identifying segment profitability and new product introduction In the presentation and in the case Activity based costing and theoretical aspects on traditional and the activity-based costing approaches to designing a costing system In the examination Use activity-based costing systems for activity-based management, Appreciate the significance of organisational context issues in activity-based costing/management system design and implementation distinguish between the traditional and the activity-based costing approaches to designing a costing system In the presentation and in the examination prepare and evaluate cash well as flexible budgets and understand the different types of budget In the presentation and case responsibility centers, implementation of responsibility accounting system, in the examination centers for controlling responsibility accounting organizational aspect of responsibility accounting, management repost system, social report system ( only theoretical aspects) In the presentation and examination target costing, LCC and performance measurement (theoretical aspect) In the presentation objectives, importance and evaluation of cost analysis and its implication in managerial decision making. In the presentation and examination segment profitability of a business and costing information and factors need to be considered on new product introduction

5 Approach to Learning Assessment Strategy No Assessment Method* Description of Assessment Method. Lectures 2. Student presentation and class room exercises 3. Group discussion 4. Case Analysis Involves orienting the student s towards industry applications of the subject. As far as the presentation are concern it is left to the discretion of the instructor to choose any member at random in a group. Learning Outcomes Assessed Weight % Submission day/week (assignments) or length (exam) CA Continuous Assessment 0 X First week QE Quiz Exam 0 X 2 nd and 3 rd week MSA Mid Semester Exam 20 CP or A Case Presentation or 0 X Every class end Assignment SEE Semester End Exam 50 Total 00 *The following codes for assessment methods apply:- LR literature review PC practical CB computer-based PF performance CS case study PL placement DI dissertation or project PO portfolio EX Exam PR presentation GR group report RE individual report DTA during term test OR oral OT other Outline Teaching Schedule Units Session Topics Session Introduction to modern concepts and the relevance of contemporary issues in the context of the traditional approaches to management and cost accounting. Cost - A Strategic Weapon 2. Understanding The Value Chain and the Cost Drivers 3. Strategic Positioning

6 Case Discussion: Baldwin Bicycle Company 2 Cost Allocation: Joint products/by-products and Bundled products Case study Discussion: J K Aromatics company 3 Tools for Decision Making and CVP Analysis including Marginal costing: Meaning of marginal cost, marginal costing,. Strategic implications of CVP analysis 2. What If Forecasting Exercises 3. Using CVP analysis for management decisions CVP analysis and Break even analysis, Contribution and P/V ratio, Margin of safety, Key factors Application of marginal costing. Cost Analysis. Strategic Pricing Decisions and Value Chain 2. Make or Buy Decisions and Value Chain Decision making : Make or buy, Accept or reject and Product Mix Computation Case study Discussion:. United Instruments Inc. Kinkead Equipment 4 Activity Based Costing. Activity Based Costing and Activity based management 2. Measuring Quality Costs 3. New Technology, JIT, CIM and Cost Management Case Study Discussion: Tijuana Bronze Machining (TBM) 5 Functional-based planning and control; budgeting nature, administration and effectiveness; budgeting cycle; activity-based budgeting; Kaizen approach; ZBB; performance budgeting; human aspects of budgeting; responsibility centers and financial control nature and role of responsibility centers; accounting and evaluation of responsibility centers, measuring the performance of investment centre ROI, RI, EVA; transfer pricing and its applications 2 6 Strategic-based performance measurement system: balanced score card prospective and limitations; establishing objectives and performance measures in different perspectives of balance score card; productivity measurement and control; productivity efficiency; partial and total productivity measurement; measuring changes in activity and process efficiency; quality cost management and Decentralization, Transfer pricing, Life Cycle costing, Target Costing and Performance measurement 2

7 Case Discussion: Sloan Styles 7 Value chain concepts: Building linkage within the value chain of a Business unit as well as across the business unit Case discussion:. Ajax Airlines Northam Package Company 8 Segment profitability and Customer profitability Analysis New product introduction Case Discussion Dansk Minox Recommended Resources Essential Textbook Instructors Hand Out Reference Textbooks: TOTAL 0 sessions Journals. Shank, John K., and Govindarajan, Strategic Cost Management, Publisher Free Press, ISBN - 0 and Management Accounting By Dr. Sudhindra Bhat st edition Excel Publication New Delhi. ISBN Hongren, Foster, Datar, Cost Accounting : A managerial Emphasis 3 th edition 4. R. Cooper, and Kaplan Robert S.: Design of Cost Management Systems, Prentice 5. Kaplan Robert S., and Atkinson Anthony A.: Advanced Management Accounting, Prentice Hall. 6. Barry J. Brinker, (ed.): Emerging Practices in Cost Management, Warren Gorham and Lamont. 7. Burns, W.J., and R.S. Kaplan (Eds.):Accounting and Management: Field Study Perspectives, Harvard University Press. 8. Institute of Management Accounting: Statements on Management Accounting, Prentice- Hall,. Harvard Business Review 2. Management Accounting 3. Journal of Cost Management 4. Strategic management Journal

8 5. Accounting Horizons 6. Accounting Organizations and Society Websites: Approach to Learning The teaching methods will consist of formal lectures, case study analysis, practical workshops and discussion groups. Major Assignments:. In-depth study of manufacturing or service firm, covering following aspects. Existing cost management principles and practices of the firm 2. Lean management initiatives for cost reduction and cost control 3. Innovation in the fields of inventory management, employee cost management, etc. 4. Identifying issues related to product cost and solutions implemented The objective of this assignment is to have hands on knowledge of the current practices in the industry and be abreast with the latest trends. Guidelines on Case Discussions Everyone will come to class prepared to discuss thoroughly the case assigned for that session. This means that you have ) studied the case thoroughly, 2) developed a defensible solution, and 3) are in a position to critique the solutions of others as well as your own. In addition, you should be prepared to answer inquiries from the instructor. I suggest that study teams be formed so that you can discuss the cases together. This is very effective if everyone on the study team does their job. Guidelines on Topic Presentations Each team will present one topic. The guidelines for a topic presentation require: A written report that does not exceed six pages, double-spaced, exclusive of exhibits, using 2-point New Roman font. A PowerPoint presentation not to exceed 5 slides. a minimum of three references from the internet or a variety of publications such as, but not necessarily limited to, the Journal of Cost Management, the Journal of Management Accounting Research; Accounting, Organizations and Society; Harvard Business Review; and Sloan Management Review. I will be available to review your plans for these activities. COURSE PREPARATION AND PARTICIPATION The course will rely heavily on student-intensive activities. Students will have the responsibility for analyzing cases and presenting/discussing topics as shown in the course schedule that

9 follows. Each student must accept the responsibility for course preparation. Thus, for each session, every student must study the assigned readings. In addition, each student is expected to participate actively in classroom discussions. The course uses cases extensively. In order to derive maximum benefit, it is essential that you mentally "get inside" the case situation. Do not approach a case as you would a chapter in a book or an article in a journal. You are not an observer but a participant. If a case centers on a decision that needs to be made, put yourself in the shoes of the decision-maker. Feel the frustration (s)he feels with respect to data limitations. Feel the pressure (s)he feels with respect to difficult tradeoffs, limited resources, potential conflicts, etc. Share your ideas with others as we work jointly to resolve the issues. Continuous Assessment (Class individual participation) - 0 grades Quiz Exam - 0 grades Case presentation or Assignment - 30 grades Term End Examination (TEE) - 50 grades Total 00 Grade Form completed by: Name: Chair: Date: