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CMA Final · Strategic Cost Management · Introduction to Strategic Cost Management

Which of the following best distinguishes strategic cost management from traditional cost management?

Strategic cost management links cost information to the firm's competitive strategy, looking at external factors, competitors and the long term. Traditional cost management concentrates on internal unit cost control and routine reporting, so only the strategy-linked, externally oriented description is correct.

  1. AIt focuses only on reducing the cost per unit of existing products within the factory
  2. BIt uses cost information with an external and long-term orientation, linking cost decisions to the firm's competitive strategyCorrect
  3. CIt is limited to preparing cost sheets and variance reports for the previous month
  4. DIt replaces financial accounting with a cost-only reporting system

Explanation

Strategic cost management uses cost data in the context of the firm's strategy, competitors and the whole value chain, over a long horizon. Traditional cost management concentrates on internal, short-term unit cost control and reporting. Option A describes the traditional view, so it is wrong.

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