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Questions and Answers
Which chapter focuses on the analysis of competitive forces affecting an industry?
Which chapter focuses on the analysis of competitive forces affecting an industry?
What is the main focus of the chapter on Value Chain Analysis?
What is the main focus of the chapter on Value Chain Analysis?
Which chapter discusses methods for managing costs by setting a target price for products?
Which chapter discusses methods for managing costs by setting a target price for products?
In which chapter is the concept of continuous improvement emphasized?
In which chapter is the concept of continuous improvement emphasized?
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Which method focuses on reducing the time between the start and delivery of a product?
Which method focuses on reducing the time between the start and delivery of a product?
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What is a major limitation of traditional cost management systems?
What is a major limitation of traditional cost management systems?
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How does strategic cost management differ in its decision-making process compared to traditional cost management?
How does strategic cost management differ in its decision-making process compared to traditional cost management?
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What characteristic best describes the adaptability of strategic cost management?
What characteristic best describes the adaptability of strategic cost management?
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Which approach is emphasized more in strategic cost management than in traditional cost management?
Which approach is emphasized more in strategic cost management than in traditional cost management?
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What perspective does traditional cost management often neglect?
What perspective does traditional cost management often neglect?
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Study Notes
Preface
- Study Material aims to equip students with essential knowledge and skills in accounting.
- Strict permissions required for reproduction or distribution of the material.
- Published by the Elite School of Professional Accountants, revised edition August 2024.
Course Curriculum Overview
- Module 1 encompasses various chapters focused on strategic cost management, analytics, and quality management among others.
- Key chapters include:
- Strategic Cost Management with Business Analytics
- Value Chain Analysis
- Total Quality Management (TQM)
- Theory of Constraints
- Kaizen Costing and Target Costing
Key Limitations of Traditional Cost Management
- Often overlooks long-term customer satisfaction and product quality.
- Employs rigid cost-cutting strategies, failing to adapt to market changes.
- Lacks emphasis on innovation, potentially missing operational efficiency opportunities.
Strategic Cost Management vs. Traditional Cost Management
- Strategic cost management aligns costs with business strategy enhancing decision-making.
- Traditional methods rely on past performance and focus purely on cost reduction.
- Strategic approaches focus on value creation, integrating costs with overall business strategy.
- Predictive analytics plays a crucial role in strategic decision-making compared to historical data used in traditional settings.
Cost of Quality (CoQ)
- Four key components:
- Prevention Costs: Expenses for training and preventive measures.
- Appraisal Costs: Costs for product evaluation, such as inspections.
- Internal Failure Costs: Expenses for defects found before reaching customers (e.g., scrap).
- External Failure Costs: Costs from defects discovered post-delivery, including warranty claims.
- Total Cost of Quality = Prevention + Appraisal + Internal Failure + External Failure.
Total Quality Management (TQM) Benefits
- Enhances customer satisfaction by delivering high-quality products.
- Improves efficiency by eliminating waste and reducing errors.
- Engages employees, fostering a culture of continuous improvement.
- Establishes competitive advantage through a quality reputation.
- Reduces costs related to defects and rework.
Theory of Constraints
- Emphasizes efficient resource management to enhance productivity.
- Focuses on continuous improvement of resource allocation.
- Ensures all resources meet customer needs to drive sustainable growth.
- Effective cost management is essential for maintaining competitiveness.
Kaizen Costing
- Originates from Japanese philosophy indicating 'continuous improvement.'
- Focuses on incremental changes for ongoing process enhancement.
- Case Study: Toyota Motors utilizes Kaizen costing to enhance efficiency and maintain quality.
- Integrates customer feedback into product designs.
- Refines production processes to meet high-quality benchmarks.
- Optimizes assembly lines to reduce waste.
Principles of Kaizen Costing
- Encourages constant pursuit of small improvements in processes and operations.
Market Structures and Pricing Strategies
- Perfect Competition: Many sellers, identical products; prices determined by supply and demand; sellers are price takers.
- Monopoly: Single company dominates with the ability to set prices; example includes Apple's strategy to leverage its brand ecosystem.
- Monopolistic Competition: Multiple sellers with differentiated products; pricing influenced by features and brand reputation, as seen with paint brands like Asian Paints and Nerolac.
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Description
This study material has been created for students at the Elite School of Professional Accountants. It aims to enhance the students' knowledge and skills in accountancy through careful interpretations and discussions. All content is prepared to aid students in their understanding of the subject matter.
