Over the past twenty years, changes in the business environment have profoundly
affected cost accounting and cost management. A few examples of these changes
are an increased emphasis on providing value to customers, total quality management,
time as a competitive element, advances in information and manufacturing technology,
globalization of markets, service industry growth, deregulation, and heightened
awareness of ethical and environmental business practices. These changes are driven by
the need to create and sustain a competitive advantage. For many firms, the information
required to realize a competitive advantage can no longer be derived from a traditional
cost management system. The traditional system relies on functional-based costing and
control. In a functional-based system, costing and control are centered on organizational
functions. Unfortunately, this functional-based approach often fails to provide information
that is detailed, accurate, and timely enough to support the requirements of this new
environment. This has resulted in the emergence of an activity-based cost management
system. Typically, an activity-based cost management system is more detailed and more
accurate than a functional-based cost management system and, thus, more costly to
operate. Furthermore, the need to add a formal guidance mechanism to the new activitybased
system has created a demand for strategic-based cost management. Thus, the new
cost management system might be more accurately referred to as an activity- and strategicbased
cost management system. The adoption of activity- and strategic-based cost management
in many firms therefore suggests that in many cases the benefits of this more
sophisticated system outweigh its costs. On the other hand, the continued existence and
reliance on functional-based systems suggests the opposite for other firms.
The coexistence of functional-based systems with activity- and strategic-based cost
management systems necessitates the study of both systems, thus providing flexibility and
depth of understanding. In creating a text on cost management, we had to decide how to
design its structure. We believe that a systems approach provides a convenient and logical
framework. Using a systems framework allows us to easily integrate the functional- and
activity-based approaches in a way that students can easily grasp. Integration is achieved by
developing a common terminology—a terminology that allows us to define each system and
discuss how they differ. Then the functional and activity-based approaches can be compared
and contrasted as they are applied to costing, control, and decision making. We believe this
integration will allow students to appreciate the differences that exist between functionaland
activity-based approaches. This integration is especially useful in the decision-making
chapters, as it allows students to see how decisions change as the information set changes.
For example, how does a make-or-buy decision change as we move from a functional-based,
traditional cost management system to the richer, activity-based cost management system?
Compared to the 5th edition, this text has been streamlined by combining and
eliminating some materials. Notably, the coverage of environmental costs in Chapter 16
is reduced and combined with Chapter 14. A new Chapter 16, on lean accounting, is
instituted for this edition. The end-of-chapter exercises are also streamlined.
Introduce your students to the dynamic, exciting nature of cost management as this edition demonstrates how today's conditions consistently require change in cost management systems. Hansen/Mowen/Guan's COST MANAGEMENT: ACCOUNTING AND CONTROL, Sixth Edition, first covers functional-based cost and control and then activity-based cost systems, giving students the understanding and skills to manage any cost management system. This edition's expansive coverage and consistent attention to technical detail provides a thorough, well-researched foundation for learning. It addresses the most recent influential topics and emerging processes affecting the discipline, including a new chapter on lean accounting and a focus on technology tools that positively impact internal costing practices.