Cost Management: Measuring, Monitoring, and Motivating Performance, 2nd Edition

CHAPTER 13

Strategic Pricing and Cost Management

In Brief

Managers and accountants make decisions about long-term organizational strategies as well as short-term operating plans. These strategies and plans include mutually dependent decisions about how to control costs and price products. Managers increasingly adopt practices such as target costing and just-in-time inventory management to help them improve efficiency and achieve profitability goals. Cost measurements help managers make these types of decisions. Business risk increases when decision time frames are extended, demand is more uncertain, firms rely more on their relationships with vendors, and as competition increases. Information and decision quality become increasingly important to business risk management.

This Chapter Addresses the Following Questions:

• Q1 How is value chain analysis used to improve operations?
• Q2 What is target costing, and how is it performed?
• Q3 What is kaizen costing, and how does it compare to target costing?
• Q4 What is life cycle costing?
• Q5 What is lean accounting and how is it used?
• Q6 How are prices set?
• Q7 How do cost and pricing practices affect managers' incentives and decisions?
• Q8 What additional factors affect prices?

COMPETITION AND STRATEGIC LOSSES

For many years, three electronics giants (Sony, Nintendo, and Microsoft) have been locked in a market-share battle for video games ...