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Designing and elements of a cost management system

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Advanced
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biology
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UKIM

About the document

Biljana D.
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documents in English
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10 pages
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  1. Introduction.
  2. Organizational form, structure, and culture.
    1. The most popular form for large publicly traded businesses.
    2. Organizational form.
    3. Designing the organizational structure.
  3. Organizational mission and core competencies.
    1. Pursuing the business mission.
    2. The globalization of markets.
  4. Competitive environment and strategies.
    1. The cost management implications.
    2. Implication of the changing cost structure.
    3. Time-to-market.
  5. Elements of a cost management system.
    1. Motivational elements.
    2. Profit sharing.
    3. Informational elements.
    4. Reporting elements.
  6. Conclusion.

An entity's legal nature reflects its organizational form. Selecting the organizational form is one of the most important decisions business owners make. This choice affects the costs of raising capital, operating the business (including taxation issues), and, possibly, litigating. The available organizational form alternatives have increased remarkably in recent years.The most popular form for large, publicly traded businesses is the corporation. However, smaller businesses or cooperative ventures between large businesses also use general partnerships, limited partnerships, limited liability partnerships (LLPs), and limited liability companies (LLCs). These latter two forms have recently emerged due to new federal, state, and international legislation. Both the LLP and LLC provide more protection for a partner's personal assets than a general partnership in the event of litigation that leads to firm liquidation. Accordingly, LLPs and LLCs may offer better control for legal costs than general partnerships.

[...] Another operating environment consideration in the design of a cost management system is the need to integrate the organization's current information systems. The systems (such as payroll, inventory valuation, budgeting, and costing) that are in place should be evaluated to answer the following questions: What data are being gathered and in what form? What outputs are being generated and in what form? How do the current systems interact with one another and how effective are those interactions? Is the current chart of accounts appropriate for the cost management information desired? [...]


[...] Competition is prevalent among supply or chains as well as individual businesses. Thus, future financial specialists will develop only cost management systems that include activities not occurring within single firms but occurring within a supply chain and involving several firms. SUMMARY It is not feasible to simply adopt a generic, ?off-the-shelf? cost management system. As in the design of any control system, managers must be sensitive to the unique aspects of their organizations. Three factors that specifically should be taken into account in designing [...]


[...] In such a culture, the requirements of a cost management system would have been limited because few individuals needed information, decisions were made at the top of the organization, and cost control was not a consideration because costs were passed on to customers through the rate structure. After divestiture, the company's culture changed to embrace decentralized decision making, cost efficiency, and individual responsibility and accountability. Supporting such a changed culture requires different types, quantities, and distributions of cost management information. [...]

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