Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
Instructor Manual
Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866;
Chapter 1: Introduction to Cost Management
TABLE OF CONTENTS
Purpose and Perspective of the Chapter......................................................................2
Chapter Objectives........................................................................................................2
What’s New in This Chapter........................................................................................2
Key Terms.....................................................................................................................2
Chapter Outline.............................................................................................................5
Complete List of Chapter Activities and Assessments...............................................16
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
, Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
PURPOSE AND PERSPECTIVE OF THE CHAPTER
The purpose of the chapter is to provide an understanding of cost management and its role in decision-
making within organizations. It explains how cost management differs from financial accounting by
focusing on internal reporting, cost control, and strategic planning rather than external financial
statements. This chapter also identifies key factors and trends influencing cost management, such as
technological advancements and global competition. Additionally, it describes the role of management
accountants, highlighting their responsibilities in budgeting, performance evaluation, and strategic
analysis. Lastly, it emphasizes the importance of ethical behavior for management accountants, ensuring
integrity, transparency, and compliance with professional standards.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
1. Explain how cost management differs from financial accounting.
2. Identify factors and trends affecting the use of cost management.
3. Describe how management accountants function within an organization.
4. Understand the importance of ethical behavior for management accountants.
[return to top]
WHAT’S NEW IN THIS CHAPTER
Please download the Transition Guide for a detailed list of the changes to this chapter from the previous
edition.
[return to top]
KEY TERMS
Accounting information system: A system consisting of interrelated manual and computer
parts that uses processes such as collecting, recording, summarizing, analyzing (using decision
models), and managing data to provide output information to users.
Activity-based management: An advanced control system that focuses management’s attention
on activities with the objective of improving the value received by the customer and the profit
received by providing this value.
It includes driver analysis, activity analysis, and performance evaluation and draws on activity-based
costing as a major source of information.
Business ethics: Learning what is right or wrong in the work environment and choosing what is
right.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 2
accessible website, in whole or in part.
, Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
Business sustainability: A company’s ability to create value over the long term by measuring
performance, managing risks, and communicating effectively to key stakeholders in a manner that
consistently reflects the achievement of its strategy.
Certified Internal Auditor (CIA): An accountant certified to possess the professional
qualifications of an internal auditor.
Certified Management Accountant (CMA): An accountant who has satisfied the
requirements to hold a certificate in management accounting.
Certified Public Accountants (CPAs): An accountant certified to possess the professional
qualifications of an external auditor.
Continuous improvement: The relentless pursuit of improvement in the delivery of value to
customers; searching for ways to increase overall efficiency by reducing waste, improving quality,
and reducing costs.
Controller: The chief accountant of an organization.
Controlling: The monitoring of a plan through the use of feedback to ensure that the plan is being
implemented as expected.
Cost accounting information system: A cost management subsystem designed to assign costs
to individual products and services and other objects as specified by management.
Cost management: Identifies, collects, measures, classifies, and reports information that is useful
to managers in costing (determining what something costs), planning, controlling, and decision
making.
Decision making: The process of choosing among competing alternatives.
Enterprise resource planning (ERP) software: Software that has the objective of
providing an integrated system capability—a system that can run all the operations of a company and
provide access to real-time data from the various functional areas of a company.
Feedback: Information that can be used to evaluate or correct steps being taken to implement a
plan.
Financial accounting: The branch of the accounting system that is concerned with the
preparation of financial reports for users external to the organization.
Forensic accounting: The action of identifying, recording, settling, extracting, reporting, and
verifying past financial data or other accounting activities for settling current or prospective legal
disputes or using such past financial data for projecting future financial data to settle legal disputes.
Just-in-time (JIT) manufacturing: A demand-pull system that strives to produce a product
only when it is needed and only in the quantities demanded by customers.
Lean manufacturing: An approach designed to eliminate waste and maximize customer value;
characterized by delivering the right product, in the right quantity, with the right quality (zero-defect),
at the exact time the customer needs it and at the lowest possible cost.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 3
accessible website, in whole or in part.
, Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
Line positions: Positions in an organization filled by individuals who are directly responsible for
carrying out the organization’s basic objectives.
Operational control information system: A cost management sub system designed to
provide accurate and timely feedback concerning the performance of managers and others relative to
their planning and control of activities.
Performance reports: Accounting reports that provide feedback to managers by comparing
planned outcomes with actual outcomes.
Planning: Setting objectives and identifying methods to achieve those objectives.
Staff positions: A position in an organization filled by an individual who provides support for the
line function; thus, a staff person is only indirectly involved with the basic objectives of an
organization.
Target costing: A method of determining the cost of a product or service based on the price that
customers are willing to pay. Also referred to as
price-driven costing.
Theory of constraints: Method used to continuously improve manufacturing activities and
nonmanufacturing activities.
Total quality management: A philosophy that requires managers to strive to create an
environment that will enable workers to manufacture perfect
(zero-defects) products.
Treasurer: The financial officer responsible for the management of cash and investment capital.
Value chain: The set of activities required to design, develop, produce, market, distribute, and
service a product (the product can be a service).
[return to top]
CHAPTER OUTLINE
I. Financial Accounting Versus Cost Management: A Systems Framework (LO 1)
i. An accounting information system consists of interrelated manual and computer
parts and uses processes such as collecting, recording, summarizing, analyzing,
and managing data to transform inputs into information that is provided to users.
ii. The accounting information system within an organization has two major
subsystems:
(a) The financial accounting information system
(b) The cost management accounting information system.
iii. One of the major differences between the two systems is the targeted user.
a. Financial Accounting Information System
i. The financial accounting information system is primarily concerned with
producing outputs for external users.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 4
accessible website, in whole or in part.
Instructor Manual
Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866;
Chapter 1: Introduction to Cost Management
TABLE OF CONTENTS
Purpose and Perspective of the Chapter......................................................................2
Chapter Objectives........................................................................................................2
What’s New in This Chapter........................................................................................2
Key Terms.....................................................................................................................2
Chapter Outline.............................................................................................................5
Complete List of Chapter Activities and Assessments...............................................16
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 1
accessible website, in whole or in part.
, Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
PURPOSE AND PERSPECTIVE OF THE CHAPTER
The purpose of the chapter is to provide an understanding of cost management and its role in decision-
making within organizations. It explains how cost management differs from financial accounting by
focusing on internal reporting, cost control, and strategic planning rather than external financial
statements. This chapter also identifies key factors and trends influencing cost management, such as
technological advancements and global competition. Additionally, it describes the role of management
accountants, highlighting their responsibilities in budgeting, performance evaluation, and strategic
analysis. Lastly, it emphasizes the importance of ethical behavior for management accountants, ensuring
integrity, transparency, and compliance with professional standards.
CHAPTER OBJECTIVES
The following objectives are addressed in this chapter:
1. Explain how cost management differs from financial accounting.
2. Identify factors and trends affecting the use of cost management.
3. Describe how management accountants function within an organization.
4. Understand the importance of ethical behavior for management accountants.
[return to top]
WHAT’S NEW IN THIS CHAPTER
Please download the Transition Guide for a detailed list of the changes to this chapter from the previous
edition.
[return to top]
KEY TERMS
Accounting information system: A system consisting of interrelated manual and computer
parts that uses processes such as collecting, recording, summarizing, analyzing (using decision
models), and managing data to provide output information to users.
Activity-based management: An advanced control system that focuses management’s attention
on activities with the objective of improving the value received by the customer and the profit
received by providing this value.
It includes driver analysis, activity analysis, and performance evaluation and draws on activity-based
costing as a major source of information.
Business ethics: Learning what is right or wrong in the work environment and choosing what is
right.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 2
accessible website, in whole or in part.
, Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
Business sustainability: A company’s ability to create value over the long term by measuring
performance, managing risks, and communicating effectively to key stakeholders in a manner that
consistently reflects the achievement of its strategy.
Certified Internal Auditor (CIA): An accountant certified to possess the professional
qualifications of an internal auditor.
Certified Management Accountant (CMA): An accountant who has satisfied the
requirements to hold a certificate in management accounting.
Certified Public Accountants (CPAs): An accountant certified to possess the professional
qualifications of an external auditor.
Continuous improvement: The relentless pursuit of improvement in the delivery of value to
customers; searching for ways to increase overall efficiency by reducing waste, improving quality,
and reducing costs.
Controller: The chief accountant of an organization.
Controlling: The monitoring of a plan through the use of feedback to ensure that the plan is being
implemented as expected.
Cost accounting information system: A cost management subsystem designed to assign costs
to individual products and services and other objects as specified by management.
Cost management: Identifies, collects, measures, classifies, and reports information that is useful
to managers in costing (determining what something costs), planning, controlling, and decision
making.
Decision making: The process of choosing among competing alternatives.
Enterprise resource planning (ERP) software: Software that has the objective of
providing an integrated system capability—a system that can run all the operations of a company and
provide access to real-time data from the various functional areas of a company.
Feedback: Information that can be used to evaluate or correct steps being taken to implement a
plan.
Financial accounting: The branch of the accounting system that is concerned with the
preparation of financial reports for users external to the organization.
Forensic accounting: The action of identifying, recording, settling, extracting, reporting, and
verifying past financial data or other accounting activities for settling current or prospective legal
disputes or using such past financial data for projecting future financial data to settle legal disputes.
Just-in-time (JIT) manufacturing: A demand-pull system that strives to produce a product
only when it is needed and only in the quantities demanded by customers.
Lean manufacturing: An approach designed to eliminate waste and maximize customer value;
characterized by delivering the right product, in the right quantity, with the right quality (zero-defect),
at the exact time the customer needs it and at the lowest possible cost.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 3
accessible website, in whole or in part.
, Instructor Manual: Hansen, Mowen, Heitger, Cost Management, 6e, 2026, 9798214044866; Chapter 1: Introduction to Cost Management
Line positions: Positions in an organization filled by individuals who are directly responsible for
carrying out the organization’s basic objectives.
Operational control information system: A cost management sub system designed to
provide accurate and timely feedback concerning the performance of managers and others relative to
their planning and control of activities.
Performance reports: Accounting reports that provide feedback to managers by comparing
planned outcomes with actual outcomes.
Planning: Setting objectives and identifying methods to achieve those objectives.
Staff positions: A position in an organization filled by an individual who provides support for the
line function; thus, a staff person is only indirectly involved with the basic objectives of an
organization.
Target costing: A method of determining the cost of a product or service based on the price that
customers are willing to pay. Also referred to as
price-driven costing.
Theory of constraints: Method used to continuously improve manufacturing activities and
nonmanufacturing activities.
Total quality management: A philosophy that requires managers to strive to create an
environment that will enable workers to manufacture perfect
(zero-defects) products.
Treasurer: The financial officer responsible for the management of cash and investment capital.
Value chain: The set of activities required to design, develop, produce, market, distribute, and
service a product (the product can be a service).
[return to top]
CHAPTER OUTLINE
I. Financial Accounting Versus Cost Management: A Systems Framework (LO 1)
i. An accounting information system consists of interrelated manual and computer
parts and uses processes such as collecting, recording, summarizing, analyzing,
and managing data to transform inputs into information that is provided to users.
ii. The accounting information system within an organization has two major
subsystems:
(a) The financial accounting information system
(b) The cost management accounting information system.
iii. One of the major differences between the two systems is the targeted user.
a. Financial Accounting Information System
i. The financial accounting information system is primarily concerned with
producing outputs for external users.
a
© 2026 Cengage Learning, Inc. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly 4
accessible website, in whole or in part.
