Unit 1309 - Strategic Cost Management

1. Introduction to Strategic Cost Management

• Definition and scope of strategic cost management
• Importance in business decision-making
• Key principles: cost leadership, value chain analysis, strategic positioning
• Strategies for cost management: cost reduction, cost avoidance, cost control

2. Cost Classification and Behavior

• Classification of costs based on behavior:
  • Fixed costs
  • Variable costs
  • Mixed costs (semi-variable)
• Relevant cost concepts (sunk costs, opportunity costs)
• Importance of understanding cost behavior in budgeting and forecasting

3. Cost-Volume-Profit (CVP) Analysis

• Introduction to CVP analysis
• Calculation and interpretation of:
  • Breakeven point (units and sales value)
  • Contribution margin (per unit and ratio)
  • Margin of safety
• Profit planning and target profit analysis
• Assumptions and limitations of CVP analysis

4. Activity-Based Costing (ABC)

• Concept and rationale of ABC
• Differences between traditional costing and ABC
• Steps to implement ABC:
  • Identifying activities
  • Assigning costs to activities
  • Determining cost drivers
  • Allocating costs to products/services
• Advantages and challenges of ABC

5. Target Costing

• Definition and strategic role of target costing
• Market-driven cost planning
• Steps in target costing process:
  • Market research and price determination
  • Desired profit margin setting
  • Cost gap analysis
  • Cost reduction techniques
• Application examples in product development

6. Cost Estimation and Cost Control

• Techniques of cost estimation:
  • Regression analysis
  • Learning curve theory
  • High-low method
• Methods of cost control:
  • Budgetary control
  • Standard costing and variance analysis
  • Cost audits
• Monitoring and managing costs effectively

7. Cost Management in Supply Chain

• Role of cost management in supply chain operations
• Collaboration and partnerships with suppliers
• Cost reduction strategies in procurement, logistics, and inventory management
• Impact on overall supply chain efficiency and competitiveness

8. Lean Management and Cost Reduction

• Principles of lean management:
  • Eliminating waste (Muda)
  • Continuous improvement (Kaizen)
  • Just-in-time production
• Tools and techniques:
  • Value stream mapping
  • 5S methodology
  • Kanban system
• Application of lean methods for cost reduction and operational efficiency

9. Performance Measurement and Cost Management

• Key performance metrics related to cost management:
  • Return on Investment (ROI)
  • Economic Value Added (EVA)
  • Balanced Scorecard perspectives (financial, customer, internal processes, learning & growth)
• Using metrics to evaluate cost management effectiveness
• Linking performance measurement to strategic objectives

10. Cost Management in Decision Making

• Role of cost management in pricing decisions
• Make-or-buy analysis
• Product portfolio analysis and strategic prioritization
• Case studies on how cost management influences key business decisions