Question

Discuss the concept of cost transformation and how management accountants can contribute towards the cost transformation of an organisation.

Answer 1

Transformation Costs means all costs associated with the manufacture of the Products, excluding raw material costs.True cost transformation is about simplifying, refocusing and strengthening your organization so you can pursue growth and provide a better customer experience.

The concept of cost transformation focuses on behavioural change by providing practical and logical planning and control framework to transform and continuously achieve and maintain cost competitiveness. This is can be done by management accountant. Managment accountant can contribute in following ways towards cost transformation of an organisation :

1. By engendering a cost-conscious culture

2. By managing the risks inherent in driving cost competitiveness

3. By connecting products with profitability

4. By generating maximum value through new products

5. By incorporating sustainability to optimise profits

6. By understanding cost drivers, cost accounting systems and processes.