Strategic Cost Management

Credits: 3


The quality, timeliness and credibility of the cost information used in corporate decision-making can have a significant impact on value creation. This is because cost information is important not only in strategy formulation and in the development and implementation of action plans that link strategies to value creation, but also because such data serve as measures of financial performance for products, processes, organizational sub-units and managers. In particular, product and service cost estimates have a major influence on corporate strategic decisions such as pricing, resource allocation, product development, supply chain design and customer focused management. In addition, product costs are informative signals of operational efficiency. Therefore, they constitute financial measures of the success of management actions such as continuous improvement and business process reengineering. Over-aggregate or obsolete cost systems can have a significant adverse impact on cost reduction in particular and overall corporate strategy and competitiveness in general. The objective of this course is to develop an integrated approach to analyzing these issues. In particular, we will study (a) how product cost measurement affects strategy and resource allocation decisions; (b) how to be sophisticated users of cost feedback and how to understand the strategic distortions that are induced by flaws in cost system design; (c) the strategic role of value-driver information and the relationship between process improvement and cost reduction; (d) the use of budgetary control systems and financial measures in performance evaluation and management and (e) incentive conflicts in organizations and their mitigation through appropriate mechanisms.

Prerequisites: BACC 2401 Financial Accounting. Please note: Due to content overlap, students CANNOT have already completed either BACC 2528 Managerial Accounting or BACC 2549 Strategic Cost Analysis, nor may they register for these courses in subsequent terms, if they elect to register for BACC 2258.