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CFO Fundamentals: Your Quick Guide to Internal Controls, Financial Reporting, IFRS, Web 2.0, Cloud Computing, and More by ALLISON I. SHIM, JOEL G. SIEGEL, JAE K. SHIM

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CHAPTER NINE

Cost Management and Analysis

HOW DO FIRMS fare in the world market? Do global companies firms really measure the costs of products and services they offer accurately? Today American managers are finding themselves operating in a highly competitive global economy. Manufacturing and service industries are seeing their profits squeezed by the pinch of foreign price and quality competition. Costs are now of strategic significance in a more intensive way than ever before.

Firms that do know how to measure product costs accurately will find the going tough, whereas firms that fail to recognize and solve cost measurement problems and to analyze cost data are probably destined for extinction.

Today's CFOs bear the tremendous responsibility for analyzing cost data. They are the ones who ensure that their cost accounting systems produce accurate (not distorted) cost data for managerial uses for performance measurement and for strategic decisions on pricing, product mix, process technology, and product design. They must know how to analyze cost information for operational planning and control, how to be competitive in a global economy, and how to make informed decisions, both tactical and strategic.

WHAT IS COST MANAGEMENT AND ANALYSIS?

Cost management and analysis involves obtaining accurate product-costing data and managing it to assist managers in making critical decisions regarding pricing, product mix, and process technology. It also involves measuring and analyzing cost ...

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