Cost & Management Accounting & Types of costs involvement. Direct costing as an analysis tool & Cost volume profit analysis. Target costing & Cost object analysis. Process analysis & Zero base budgeting. Cost reduction strategy & Compensation cost reduction. Procurement cost reduction & Responsibility accounting. Facilities cost reduction & Finance cost reduction. Cost management is a form of management accounting. Cost management is the process of planning and controlling the budget of a  business which related to activities achieved by collecting, analyzing, evaluating and reporting cost information used for budgeting, estimating, forecasting, and monitoring costs.

1. Current Trends In Cost &
Management Accounting
-To Prof. Smita Jape Madam
Cost Accounting

2. Group Members
 Pooja Kulkarni – B 31
 Ravi Dongre – B 16
 Tushar Sadhye – B 47
 Sneha Dixit – B 15
 Shweta More – B 36
 Nikita Rathod – B 46
 Sayali Phatak – B 44

3. Content Covered
 Cost & Management Accounting & Types of costs
involvement.
 Direct costing as an analysis tool & Cost volume profit
analysis.
 Target costing & Cost object analysis.
 Process analysis & Zero base budgeting.
 Cost reduction strategy & Compensation cost reduction.
 Procurement cost reduction & Responsibility
accounting.
 Facilities cost reduction & Finance cost reduction.

4. Cost management
 Cost management is a form of management accounting.
 Cost management is the process of planning and
controlling the budget of a business which related to
activities achieved by collecting, analyzing, evaluating
and reporting cost information used for budgeting,
estimating, forecasting, and monitoring costs.

5. Types of Cost
 Fixed cost
 Variable cost
 Marginal cost
 Actual cost
 Direct cost
 Indirect cost
 Economic cost

6. Direct costing as an analysis tool
 Direct costing is a specialized form of cost analysis that only
uses variable costs to make decisions. It does not consider fixed
costs, which are assumed to be associated with the time periods
in which they were incurred.
 Direct costing is of great use as an analysis tool. The following
decisions all involve the use of direct costs as inputs to decision
models.
 Automation investment
 Cost reporting
 Customer profitability
 Profit volume relationship
 Outsourcing

7. Cost–volume–profit
 Cost–volume–profit (CVP), in managerial economics, is a
form of cost accounting. It is a simplified model, useful for
elementary instruction and for short-run decisions.
 The components of CVP analysis are:
 Level or volume of activity
 Unit selling prices
 Variable cost per unit
 Total fixed costs
Total costs – fixed costs +(unit variable cost * no. of units)
Total Revenue = Sales price * no. of units
Profit is computed as TR-TC; it is a profit if
positive, a loss if negative.

8. TARGET COSTING
 Target Costing is a pricing technique which can be defined as a tool to reduce
the cost of product over a lifecycle with the help of design, engineering and
technology.
 A target cost is the maximum cost which can be charged for a product with
earning of profits over the given selling price.
 Target Costing in simple words involves setting a target cost after subtracting
a good profit margin from the market price.
 The objective of setting a target is to manage a business in an effective
manner.
 Target Costing is one of the most important tools for achieving constant
profit in a highly competitive work environment.

9. STEPS OF TARGET COSTING
 Defining the Product
 Set the Price and Cost Targets
 Achieve the Targets
 Maintain competitive Cost

10. COST OBJECT
 A cost object is any item for which costs are being
separately measured.
 It is a key concept used in managing the costs of a business.
Types of Cost Object:-
 Output - The most common cost objects are a company's
products and services, since it wants to know the cost of its
output for profitability analysis and price setting.

11. Cont…
 Operational - A cost object can be within a company, such as
a department, machining operation, production line, or
process. For example, you could track the cost of designing a
new product, or a customer service call, or of reworking a
returned product.
 Business relationship - A cost object can be outside of a
company - there may be a need to accumulate costs for a
supplier or a customer, to determine the cost of dealing with
that entity. Another variation on the concept is the cost of
renewing a license with a government agency.

12. Process Analysis
 A step-by-step breakdown of the phases of a process,
used to convey the inputs, outputs, and operations that
take place during each phase.
 A process analysis can be used to improve
understanding of how the process operates, and to
determine potential targets for process improvement
through removing waste and increasing efficiency.
 Process analysis involves two forms:-
1. It can provide information about how something works
(informative)
2. It can explain how to do something (directive).

13. Zero Base Budgeting
 The Objective of Zero Based Budgeting is to
“reset the clock” each year.
 Zero Based Budgeting implies that managers need
to build a budget from the ground up, starting at
zero.
 Budgets are then built around what is needed for
the upcoming period, regardless of whether the
budget is higher or lower than the previous one.

14. Steps involved in Zero base budgeting
There are three Steps involved in Zero Base
budgeting :-
 Identification of Decision Units
 Development Of Decision Packages
 Review and Ranking For Decision Making

15. Cost reduction strategies
 Process ,systems and technological
improvements.
 Behavior modifications.
 Correction of billing errors.
 Elimination of overcharges & unnecessary
services.
 Rate reduction from current providers.
 Savings from alternate providers.

16. Compensation cost reduction
 Get management behind it.
 Use modified duty.
 Understand what contributes to your
 workers compensation costs.
 Train your employees well.
 Actively put your policies into practice.
 Report claims promptly
 Investigate causes

17. Procurement cost reduction
5 trend in strategic procurement
 Business Integration and Collaboration
 Importance of Technology in Procurement
 Centralization
 Supplier Collaboration
 Modern Procurement Organizations

18. Responsibility Accounting
Responsibility accounting is an underlying concept of
accounting performance measurement systems. The basic
idea is that large diversified organizations are difficult, if
not impossible to manage as a single segment, thus they
must be decentralized or separated into manageable parts.
1. Revenue centre-segment that generates revenue with
little cost
2. Cost centre- segment generate cost but no revenue
3. Profit centre-segment generates both revenue and cost
4. Return on investment -a segment such as a division of a
company where the manager controls the acquisition and
utilization of assets, as well as revenue and costs

19. Facilities cost reduction
7 Trends in facilities cost reduction :-
1. Doing more with less.
2. Automation.
3. Outsourcing.
4. Increasing complexity.
5. Value-driven design.
6. Energy conservation.
7. Short term staffing.

20. Finance cost reduction
5 trends in finance cost reduction:-
 Cloud computing solutions.
 Supply chain management.
 Being prepared for risky times.
 Go paperless.
 Latching on to BYOD {Bring your own device} trend.