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Strategic Cost Analysis: the Evolution from Management to Strategic Accounting.

Strategic Cost Analysis: The Evolution from Management to Strategic Accounting, by John K. Shank and Vijay Govindarajan, Irwin, 1818 Ridge Road, Homewood, Illinois 60430, 1989, 161 pp., $17.50.

To some accountants and business-people, cost accumulation centers around assigning costs to inventory, as generally accepted accounting principles and income tax regulations mandate; it's often interpreted to be a process that lacks flexibility.

This book challenges such a view and provides a look at cost accounting from a strategic perspective. It exposes readers to new ideas that can increase their knowledge of managerial accounting.

Topics presented include fixed versus variable costs and cost-volume-profit analysis and relationships. New cost analysis concepts such as value chain analysis and activity costing also are covered. There is a discussion of linking accounting controls to overall business strategy. Finally, the authors examine situations in which financial information won't help in problem solving--something financial people will face in their careers.

The case study approach makes this material interesting. Many individuals will find similarities between the case studies and their experiences. New concepts are explored by looking at events actually encountered by businesses. Each case ends with discussion questions and references for further research.

I empathize with several of the situations because I've worked in both public accounting and private industry. I understand how the informational needs of outside CPAs and management accountants are often mutually exclusive. Satisfying demands of both an outside audit team and the tax authorities is time-consuming and often takes precedence over other managerial information needs. But the availability of sophisticated data processing equipment at low costs now makes it easier to satisfy the needs of all parties, even in small businesses.

This material explores ways users can obtain benefits from accounting information. Such information, however, shouldn't be an end in itself but, rather, part of a broader base of knowledge that determines the strategies businesses use to succeed.

In addition to accounting educators, students and manufacturers, most persons interested in cost analysis will find this material helpful. I hope it will bring accountants and other professionals together to achieve strategic goals at every level of an organization.

Gerald A. Kosyla, CPA

Price Waterhouse

Philadephia, Pennsylvania
COPYRIGHT 1990 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Kosyla, Gerald A.
Publication:Journal of Accountancy
Article Type:Book Review
Date:May 1, 1990
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