Chapter 12Introduction to Cost Management Systems

LEARNING O!EC"I#ES
LO 1 Why do organizations have management control systems?
LO 2 What is a cost management system, and what are its primary goals?
LO 3 What major factors influence the design of a cost management system?
LO What three groups of elements affect the design of a cost management system, and
what are the purposes of these elements?
LO ! What is gap analysis, and how is it used in the implementation of a cost management
system?
$%ES"ION GRI&
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!o"#letion
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Multi#le !$oice
Difficulty Level Learning Objectives
1"
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1"!
%$ort &ns'er
Difficulty Level Learning Objectives
Easy Moderate Difficult LO 1 LO 2 LO 3 LO 4 LO
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1"#
"R%E'(ALSE
1$ %nformation provided &y financial reporting systems provides valua&le information to cost managers$
'()* + ,%+* -asy O./* 1201
2$ ' management information system is a part of a management control system$
'()* 1 ,%+* -asy O./* 1201
3$ ' measuring device that identifies what is actually happening in the process &eing controlled is a
detector$
'()* 1 ,%+* 2oderate O./* 1201
$ ' measuring device that identifies what is actually happening in the process &eing controlled is an
assessor$
'()* + ,%+* 2oderate O./* 1201
!$ +eed&ac3 is another name for an effector$
'()* 1 ,%+* -asy O./* 1201
#$ 1he operation of a management control system is readily o&serva&le$
'()* + ,%+* -asy O./* 1201
4$ ' short0run challenge for a &usiness is maintaining a competitive position$
'()* + ,%+* 2oderate O./* 1202
5$ ' short0run challenge for a &usiness is achieving profita&ility$
'()* 1 ,%+* 2oderate O./* 1202
"$ ' long0run challenge for a &usiness is achieving profita&ility$
'()* + ,%+* 2oderate O./* 1202
16$ ' long0run challenge for a &usiness is maintaining a competitive position$
'()* 1 ,%+* 2oderate O./* 1202
11$ ' cost management system should use cost driver information to trace costs to products and services$
'()* 1 ,%+* -asy O./* 1202
1"4
12$ 2ost smaller &usinesses are organized as corporations$
'()* + ,%+* 2oderate O./* 1203
13$ %t is not necessary to &e familiar with an organization7s mission when designing a cost management
system$
'()* + ,%+* 2oderate O./* 1203
1$ 1he life0cycle stage of a &usiness is an important determinant of an organization7s activities$
'()* 1 ,%+* -asy O./* 1203
1!$ 8ost structure is related to an organization7s proportions of fi9ed and varia&le costs$
'()* 1 ,%+* 2oderate O./* 1203
1#$ 'utomated technology ma3es cost control less difficult for a firm$
'()* + ,%+* 2oderate O./* 1203
14$ %ncreasing automation generally results in cost management &ecoming more long0term in nature$
'()* 1 ,%+* 2oderate O./* 1203
15$ 2otivational elements may &e :uantitative or non0:uantitative in nature
'()* 1 ,%+* 2oderate O./* 120
1"$ ' profit sharing plan is an e9ample of a motivational element$
'()* 1 ,%+* 2oderate O./* 120
26$ 'n important function of a cost management system is to relate resource consumption and cost to
alternative product and process design$
'()* 1 ,%+* 2oderate O./* 120
21$ %n order for cost information to &e effective, a meaningful &aseline performance measure should &e
availa&le for comparison$
'()* 1 ,%+* 2oderate O./* 120
22$ ;erformance measures must &e :uantitative to &e useful$
'()* + ,%+* 2oderate O./* 120
23$ 8ustomer satisfaction is an e9ample of a :ualitative performance measure$
'()* 1 ,%+* 2oderate O./* 120
2$ 8ustomer satisfaction is an e9ample of a :uantitative performance measure$
1"5
'()* + ,%+* 2oderate O./* 120
2!$ 'n effective reporting system is increasingly important in a decentralized organization$
'()* 1 ,%+* 2edium O./* 120
2#$ 'n enterprise resource planning system is composed of numerous software modules$
'()* 1 ,%+* 2oderate O./* 120!
24$ <ap analysis is a &eneficial tool in implementing a cost management system$
'()* 1 ,%+* 2oderate O./* 120
COM)LE"ION
1$ ' structure of interrelated elements that ena&les management to plan, control, and evaluate
performance is referred to as a ==================================$
'()* management information system
,%+* -asy O./* 1201
2$ ' measuring device that identifies what is happening in a process &eing controlled is referred to as a>n?
=====================$
'()* detector or sensor
,%+* -asy O./* 1201
3$ ' device for determining what is happening in a process &eing controlled is referred to as a>n?
======================$
'()* assessor$
,%+* 2oderate O./* 1201
$ ' device that alters &ehavior if the control system indicates a need to do so is referred to as
==========================$
'()* feed&ac3
,%+* -asy O./* 1201
!$ 'n operation whose e9act nature cannot &e o&served is referred to as a>n? ===================$
'()* &lac3 &o9
,%+* 2oderate O./* 1201
1""
#$ ' set of formal methods used to plan and control the cost0generating activities of an organization is
referred to as a>n? =================================$
'()* cost management system
,%+* 2oderate O./* 1202
4$ 1he underlying set of assumptions a&out an organization and the goals, processes, and values that its
mem&ers share is referred to as ==================================$
'()* organizational culture
,%+* 2oderate O./* 1203
5$ @ow costs change relative to changes in production or sales volume is referred to as
====================$
'()* cost structure
,%+* 2oderate O./* 1203
"$ 1hree groups of elements affecting the design of a cost management system are ==================,
==================, and ==================$
'()* motivational, information, reporting
,%+* 2oderate O./* 120
16$ 1he study of the differences &etween a current and a proposed cost management system is referred to
as ========================$
'()* gap analysis
,%+* 2oderate O./* 120!
11$ ' pac3aged &usiness software system that allows an organization to improve the :uality and timeliness
of information as well as integrate and standardize information is referred to as a>n?
=======================================$
'()* -nterprise resource planning >-A;? system$
,%+* 2oderate O./* 120!
266
M%L"I)LE C*OICE
1$ ' management information system should do which of the following?
8ollect
data
Organize data
for managers
'nalyze data
for management
a$
yes no yes
&$
yes yes no
c$
no no yes
d$
yes yes yes
'()* . ,%+* -asy O./* 1201
2$ ' management information system should emphasize satisfying
a$ e9ternal demands for information$
&$ e9ternal and internal demands for information$
c$ internal demands for information$
d$ the 'ccounting ,epartmentBs demands for information$
'()* 8 ,%+* -asy O./* 1201
3$ Who of the following are e9ternal users of data gathered &y a management information system?
8reditors Aegulatory .odies )uppliers
a$
yes no yes
&$
no no no
c$
no yes yes
d$
yes yes yes
'()* , ,%+* -asy O./* 1201
$ Which of the following is not a primary component of a control system?
a$ operator
&$ communications networ3
c$ effector
d$ assessor
'()* ' ,%+* -asy O./* 1201
!$ Which of the following would &e considered a detector?
a$ computer program
&$ source document
c$ variance report
d$ all of the a&ove
'()* . ,%+* -asy O./* 1201
261
#$ Which of the following statements is +a,se concerning a management control system?
a$ ' management control system may &e referred to as a &lac3 &o9$
&$ ' management control system should serve as a guide to organizations$
c$ ' management control system should help implement strategies$
d$ ' management control system is separate from a cost management system$
'()* , ,%+* -asy O./* 1201
4$ +eed&ac3 is reflected in which component of a management control system?
a$ sensor
&$ assessor
c$ effector
d$ detector
'()* 8 ,%+* -asy O./* 1201
5$ Aeactions to information provided &y the management control system are
a$ formulated in the organizationBs strategic plan$
&$ judgmental, and are &ased on interpretations and circumstances$
c$ assessed &y the communications networ3 of the 28)$
d$ determined as those activities that will &e most efficient and effective given the
organizationBs availa&le technology$
'()* . ,%+* -asy O./* 1201
"$ ' cost management system should
a$ identify and evaluate new activities$
&$ determine whether the organization is effective and efficient$
c$ identify the cost of consumed resources within the organization$
d$ all of the a&ove$
'()* , ,%+* -asy O./* 1202
16$ ' cost management system should provide information to
a$ all functional areas of the organization$
&$ only the accounting area of the organization$
c$ only the production area of the organization$
d$ organizational managers, &ut not to staff personnel$
'()* ' ,%+* -asy O./* 1202
11$ Which of the following is not a primary goal of a cost management system?
a$ use cost drivers to develop product costs
&$ improve understanding of activities
c$ develop organizational strategies
d$ measure performance
'()* 8 ,%+* -asy O./* 1202
262
12$ ' cost management system will provide the means to develop
a$ the most accurate product or service costs$
&$ a reasona&ly accurate product or service cost given cost0&enefit analysis$
c$ a product or service cost that does not include any non0value0added overhead$
d$ a costing system that traces all costs directly to individual products or services$
'()* . ,%+* -asy O./* 1202
13$ 1he costs generated &y the cost management system are used to
a$ assess productCservice profita&ility$
&$ esta&lish prices for products with significant competition$
c$ determine underlying reasons for variations from standards$
d$ all of the a&ove$
'()* ' ,%+* -asy O./* 1202
1$ %nformation a&out the life0cycle performance of a product or service should &e provided in the
+inancial accounting system 8ost management system
a$
yes yes
&$
yes no
c$
no yes
d$
no no
'()* 8 ,%+* -asy O./* 1202
1!$ 8ost control is an important function of the
+inancial accounting 8ost accounting 8ost management
system system system
a$
no no yes
&$
yes yes no
c$
no yes yes
d$
yes yes no
'()* 8 ,%+* -asy O./* 1202
1#$ ' cost management system would &e an integral part of implementing which of the following?
)trategic resource 8ore competency 8entralized
management assessment management
a$
no yes yes
&$
no no no
c$
yes no yes
d$
yes yes no
'()* , ,%+* -asy O./* 1202
263
14$ Which of the following organizational characteristics critically affect the design of a cost management
system?
8ulture 8ritical success factors 2ission +orm
a$
yes yes yes yes
&$
yes no yes no
c$
no yes no yes
d$
no yes yes no
'()* ' ,%+* -asy O./* 1203
15$ ' cost management system
a$ is finalized when the information currently &eing produced is the same as the information
currently desired$
&$ can &e generically designed to fit the information needs of the majority of domestic >&ut
not glo&al? organizations$
c$ must &e continuously improved to adapt to changes in an organizationBs internal and
e9ternal environment$
d$ that has &een appropriately designed from gap analysis, does not need to &e changed
unless there is a change in organizational management or culture$
'()* 8 ,%+* 2oderate O./* 1203
1"$ %n a highly regulated, monopolistic industry, such as the electrical utility or 1D ca&le, a cost
management system is
a$ of limited need &ecause costs are typically passed along to customers via the rate structure$
&$ essential &ecause of the need to provide the highest degree of cost efficiency possi&le for
customers$
c$ critical to the needs of empowered employees ma3ing decisions at various levels of the
organizational hierarchy$
d$ of no use &ecause there is no attempt &y management to control costs$
'()* ' ,%+* -asy O./* 1203
26$ Which of the following statements is true?
a$ ' good cost management system is a 3ey consideration in determining an organizationBs
mission$
&$ 1he organizationBs mission is a critical success factor in assessing how to react to
competition$
c$ Enowledge of an organizationBs critical success factors help to clarify organizational
mission and develop a cost management system$
d$ 'n organization must esta&lish a position of cost leadership to compete in a glo&al
&usiness environment$
'()* 8 ,%+* -asy O./* 1203
26
21$ Which of the following indicates the mission &eing pursued &y a su&unit that is
using cash? generating cash?
a$
save harvest
&$
build save
c$
harvest build
d$
build harvest
'()* , ,%+* 2oderate O./* 1203
22$ Aeducing the time0to0mar3et for a new product
a$ is only possi&le if a company has formed strategic alliances with its suppliers$
&$ generally increases long0run product costs &ecause of the need to develop new production
processes$
c$ results in the a&ility of a firm to pursue a cost leadership competitive strategy$
d$ may result in design flaws, a need for engineering change orders, and customer F&ad will$F
'()* , ,%+* -asy O./* 1203
23$ 'n increase in the use of technology has caused
a$ fewer costs to &e suscepti&le to short0run control$
&$ companies to &e more fle9i&le in responding to changing short0term conditions$
c$ managers to &e less concerned a&out capacity utilization &ecause of the increased a&ility to
produce in large :uantities$
d$ a decline in the amount of fi9ed costs in an organization$
'()* ' ,%+* 2oderate O./* 1203
2$ -ngaging in product design for manufactura&ility reduces
1raining costs ;reproduction design time 'ssem&ly time
a$
yes yes yes
&$
no yes yes
c$
yes no yes
d$
no no no
'()* 8 ,%+* -asy O./* 1203
2!$ )u&stantial reductions in product cost can &e o&tained &y
a$ decreasing capacity utilization$
&$ using focused factory arrangements$
c$ using tried and true manufacturing techni:ues$
d$ using product life cycle accounting$
'()* . ,%+* -asy O./* 1203
26!
2#$ %n conjunction with a cost management system, gap analysis refers to comparing
a$ the information &eing received &y competitorsB managers to the information &eing received
&y in0house managers$
&$ the information needed to what is availa&le$
c$ current cost information to projected cost information$
d$ &udget figures to actual spending$
'()* . ,%+* -asy O./* 120!
24$ Which of the following limits an organizationBs a&ility to minimize the FgapsF found when a gap
analysis has &een performed?
Limited resources (um&er of managers 1echnology capa&ilities
a$
yes yes yes
&$
yes no yes
c$
no yes no
d$
no no yes
'()* . ,%+* -asy O./* 120!
25$ Which of the following is considered a FfeederF system to the cost management system?
;ayroll .udgeting %nventory valuation
a$
yes no yes
&$
yes yes yes
c$
no no no
d$
yes yes no
'()* . ,%+* -asy O./* 1203
2"$ Which of the following is a primary element of a cost management system?
%nformation Aeporting 2otivation -valuation
a$
yes yes yes yes
&$
no yes yes no
c$
yes no no yes
d$
yes yes yes no
'()* , ,%+* -asy O./* 120
36$ 's part of its control function, a cost management system is useful for
8ost &ehavior D'C(D' activity 'ssignment of joint
analysis identification costs to joint products
a$
yes yes yes
&$
no yes yes
c$
yes no no
d$
yes yes no
'()* , ,%+* -asy O./* 1203
26#
31$ =========== refers to avoiding competition in ma3ing a product distinct from that of competitors &y
adding value or features for which consumers are willing to pay more$
a$ Eaizen
&$ ,ifferentiation
c$ 8onfrontation
d$ 8ost leadership
'()* . ,%+* -asy O./* 1203
32$ ,istinguishing a product &y adding additional features or value is part of which of the following
competitive strategies?
,ifferentiation 8ost leadership 8onfrontation
a$
yes no yes
&$
yes yes yes
c$
yes no no
d$
no yes yes
'()* ' ,%+* -asy O./* 1203
33$ ' cost leadership strategy emphasizes
a$ product features$
&$ low prices$
c$ just0in0time production capa&ilities$
d$ short0run opportunities for cost minimization$
'()* . ,%+* -asy O./* 1203
3$ Which of the following competitive strategies is least profita&le?
a$ differentiation
&$ cost leadership
c$ confrontation
d$ price fi9ing
'()* 8 ,%+* -asy O./* 1203
3!$ ' commonly recognized critical success factor for most organizations is
Guality
,ecentralization )hort cycle time
Aesponsiveness
to change
a$
yes yes yes no
&$
yes no yes yes
c$
no yes no yes
d$
no no yes no
'()* . ,%+* -asy O./* 1203
264
3#$ %n a decentralized organization,
a$ all functions are delegated to su&unit managers who are closest to the information$
&$ su&units under the control of a single manager are normally grouped &y organizational
structure$
c$ it would &e difficult to group geographically related su&units pursuing different missions
under the same manager$
d$ functions such as financing and productCservice pricing are typically retained &y top
management$
'()* 8 ,%+* -asy O./* 1203
34$ Organizational form directly affects which of the following?
,ecision0ma3ing
authority 8ost of capital 1a9ation 2ission
a$
no yes yes yes
&$
yes yes yes no
c$
no yes no yes
d$
yes yes no no
'()* . ,%+* -asy O./* 1203
35$ 's an organization moves to decentralize its operations, an effective reporting system will have
============== when the organization was centralized$
a$ a&out the same importance as
&$ less importance than
c$ more importance than
d$ a level of importance that depends on organizational size as compared to
'()* 8 ,%+* -asy O./* 1203
3"$ 1he performance measurement system should encourage each manager to act in a manner that
a$ ma3es the managerBs units profits as high as possi&le$
&$ most positively supports the organizationBs mission and competitive strategies$
c$ increases hisCher performance reward in the form of profit sharing$
d$ reduces the need for informational elements in support of the managerBs planning function$
'()* . ,%+* -asy O./* 120
6$ ;erformance reports are useful only to the e9tent that performance is measured against
a$ a meaningful &enchmar3$
&$ the performance of all other units or managers$
c$ the &udget as adopted for the period$
d$ competitorsB achievements$
'()* ' ,%+* -asy O./* 120
265
1$ 1he accounting function in an organization is e9pected to support managers in which of the following
functions?
;lanning 8ontrolling -valuating performance
a$
yes yes no
&$
no yes no
c$
no no yes
d$
yes yes yes
'()* 8 ,%+* -asy O./* 120
2$ Aelating resource consumption and cost to alternative product and process designs can &e achieved
through
a$ 3aizen costing$
&$ reverse engineering$
c$ computer simulation$
d$ all of the a&ove$
'()* 8 ,%+* -asy O./* 120
3$ 1he reward system for su&unit managers of mature &usinesses should emphasize
a$ long0term competitive prospects$
&$ near0term profit and cash flow$
c$ success in product design and development$
d$ e9ceeding last yearBs su&unit profit$
'()* . ,%+* -asy O./* 120
$ ;rofit sharing is a method of employee compensation that
a$ allocates an e:ual amount of profit reward to each manager in the organization$
&$ allows organizational profits to &e divided among employees in a non0ta9a&le status$
c$ is contingent &ased on the level of su&unit profit generated$
d$ is used in many foreign companies &ut is virtually none9istent in most H$)$ organizations$
'()* 8 ,%+* -asy O./* 120
!$ 2ost managers evaluate decision alternatives &ased on how
a$ much the decision will increase or decrease organizational profits$
&$ the outcomes may affect selected performance measurement and reward criteria$
c$ much the outcome will reduce the organizationBs cost of capital$
d$ easily the decision impacts can &e :uantified in the organizationBs cost
management system$
'()* . ,%+* 2oderate O./* 120
#$ ;erformance measurements and a reward system are part of which cost management element?
a$ motivational
&$ informational
c$ reporting
d$ all of the a&ove
'()* ' ,%+* -asy O./* 120
26"
4$ +ocus on cost control and assessing core competencies are part of which cost management element?
a$ motivational
&$ informational
c$ reporting
d$ all of the a&ove
'()* . ,%+* -asy O./* 120
5$ Which of the following should &e a&le to provide the financial information needed for &udget
preparation?
8ost management
system
+inancial accounting
system
8ost accounting
system
a$
no yes yes
&$
no yes no
c$
yes no yes
d$
yes yes yes
'()* , ,%+* -asy O./* 120
"$ %n the future competitive environment, companies will emphasize
a$ achievement of financial results$
&$ development of strategic alliances$
c$ development of annual plans$
d$ conformity to project e9pectations$
'()* . ,%+* -asy O./* 120
!6$ 1he life cycles of many products are &ecoming shorter
a$ causing companies to recognize that it may &e more advantageous to confront, rather than
compete with, the competition$
&$ ma3ing products in the maturity stage of their life cycle the &asis on which firms e9pect
growth to &e generated$
c$ so companies spend less and less on product design and development &ecause products
will not last as long as previously$
d$ meaning that tools such as &enchmar3ing and target costing &ecome less important in
adapting to the competitive environment$
'()* ' ,%+* 2oderate O./* 1203
!1$ ' responsi&ility accounting system provides information to top management a&out the
a$ organizational responsi&ilities of each su&unit manager$
&$ performance of each organizational su&unit and its manager$
c$ a&ility of each su&unit manager to ensure a satisfactory cost to revenue relationship$
d$ all of the a&ove$
'()* . ,%+* -asy O./* 120
216
!2$ Which of the following should &e considered in a cost management system design?
8ost
principles
;ersonnel
training principles
%nvestment
management principles
a$
yes yes yes
&$
no yes yes
c$
no no no
d$
yes no yes
'()* , ,%+* -asy O./* 120
S*OR" ANS-ER
1$ ,iscuss the four primary components of a control system$
'()*
1he four components include the following* a detector which is a measuring device that identifies what
is happening in the controlled processI an assessor that helps determine the significance of what is
happeningI an effector that changes the &ehavior if indicated &y the assessorI and a communications
networ3 that transmits information &etween the detector and assessor and &etween the assessor and the
effector$
,%+* 2oderate O./* 1201
2$ ,efine a cost management system and indicate how it should help managers$
'()*
' cost management system is a set of formal methods developed for planning and controlling an
organizationBs cost activities relative to the goals and o&jectives of the organization$ ' cost
management system should determine how effective and efficient the organizationBs activities are and
identify the cost of resources consumed in performing these activities$ 1he system should also identify
and evaluate any new activities that may improve future performance of the organization while &eing
aware of the changing environment in which the &usiness operates$
,%+* 2oderate O./* 1202
3$ ,iscuss from where an organization receives information and what happens to information within an
organization$
'()*
'n organization receives information from its e9ternal operating environment that includes the
following* competition, suppliers, creditors, and the government$ 1his information is then circulated
throughout the organization in &oth a vertical and horizontal direction$ 1he information gathered &y
the organization is used for planning, decision ma3ing, evaluating performance, and controlling within
the organization$
,%+* 2oderate O./* 1201
211
$ ,iscuss the characteristics of an organization for which a true cost management system would &e
appropriate$
'()*
1he organization for which a true 82) would &e appropriate would have specified strategic goals to
which its operating position is lin3ed$ %ts technology, human &ehavior, and information systems would
&e integrated as would its managerial and operating systems$ 1he organization would engage in
intergroup coordination and coordinated management through employee empowerment$ ' focus would
&e on cost elimination rather than cost allocation0thus implying an activity0&ased management
approach$ ;erformance evaluation would rely on &oth financial and nonfinancial measurements$
+inally, the company would utilize changing technologies and em&race customer values and customer
satisfaction as part of organizational culture$ 1his organization would &e confronting high0:uality
worldwide competition$
,%+* 2oderate O./* 1202
!$ What are the si9 primary goals of a cost management system? %llustrate how a 82) achieves each of
these goals$
'()*
1he si9 goals of a cost management system are >1? to develop fairly accurate product costs &y using
cost drivers, >2? to assess product andCor service life0cycle performance, >3? to improve understanding
of activities and processes, >? to control costs, >!? to measure performance, and >#? to pursue
organizational strategies$ 1he illustrations given &y the students should support details provided &y the
te9t$
,%+* 2oderate O./* 1202
#$ List and discuss the four stages in the design of a cost management system$
'()*
1he four stages in designing a cost management system are >1? analyze,
>2? determine, >3? perform, and >? assess$ %n the first stage, organizational structure, culture, and form
must &e analyzed, as well as the mission and critical success factors of the organization$ 1he second
stage involves determining what outputs are desired while considering motivational, informational,
and reporting elements of the organization$ 1he third stage involves performing gap analysis &etween
desired output and current output$ 1he fourth stage is to assess the improvements generated &y
reducing the gap$
,%+* 2oderate O./* 1203
4$ ,efine confrontation strategy and indicate why many companies may &elieve it is the only way to face
competitors$
'()*
8onfrontation strategy means that a company, while attempting to differentiate its products or
&ecoming a low0cost producer, meets the competition head0on03nowing that any competitive
advantage will last only a short time$ 8onfrontation may &ecome the way of the future &ecause of
decreased product life cycles >companies are &etter at reverse engineering and continuous
improvement than in the past?$
,%+* 2oderate O./* 1203
212
5$ (ame five items that would &e considered critical success factors &y most world0class companies$
Why is each of these factors so important to organizational longevity?
'()*
1he five items most commonly named are timeliness >time0to0mar3et?, :uality, customer service,
efficiencyCcost control, and responsiveness to change$ -ach student will have different ideas as to why
these items are important, &ut the answer should address the glo&al &usiness environment and thus, the
increase in competition, reduction in product life cycles, costs to o&tain versus retain customers,
litigation issues, and so forth$
,%+* 2oderate O./* 1203
"$ What are five ways that an organization could reduce product costs? ;rovide an e9ample of how each
method would cause cost reduction$
'()*
1he answer could include any of the following* >1? developing new production processes, >2? capture
learning curve and e9perience data, >3? increase capacity, >? use a focused factory arrangement, >!?
design products for manufactura&ility, >#? design products for logistical support, >4? design products
for relia&ility, >5? design products for maintaina&ility, and >"? use advanced technology in
manufacturing products$ -9amples will differ &y student$
,%+* 2oderate O./* 1203
16$ ,iscuss the three elements of a cost management system$
'()*
2otivational elements include performance measurements and the reward structure of the
organization$ )upport of the organizational mission and competitive strategy are also considered
motivational elements$ %nformational elements include support of the &udgeting process as well as
support of cost reduction initiatives$ 8ore competencies assessment and ma3e0or0outsource decision
analyses are part of informational elements$ -mphasis is placed on product life cycle, and distinctions
must &e made &etween value0added and non0value0added activities in the informational elements of a
cost management system$ Lastly, reporting elements include the preparation of financial statements
and provision of details for responsi&ility accounting systems$
,%+* 2oderate O./* 120
213