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Course Introduction © Dale R. Geiger 20111
Even Super Powers Can Lose a Cost War Kamchatka Peninsula, Russia Aral Sea, Kazakhstan Soviet military installation Paldiski, Estonia © Dale R. Geiger 20112
Terminal Learning Objective Task: Introduce Principles of Cost Analysis and Management Condition: You are cost advisor technician with access PCAM course handouts, readings, and spreadsheet tools and awareness of Operational Environment (OE)/Contemporary Operational Environment (COE) variables and actors Standard: With at least 80% accuracy: Discuss purpose for increasing cost effectiveness; terminology, and best practices response to threat Understand the Purpose of this Course Understand the asymmetrical threat of lack of resources. © Dale R. Geiger 20113
Cost Maturation Process Single Use Estimated Future Cost Cost Benefit Analysis Cost Informed Decisions Single Use Estimated Future Cost Cost Benefit Analysis Cost Informed Decisions Persistent Use Expected and Actual Cost Continuous Improvement Cost-Managed Organizations Persistent Use Expected and Actual Cost Continuous Improvement Cost-Managed Organizations Universal Use Planned & Actual Cost Role Based, Org Based, Output Based Control Cost-Managed Enterprise Universal Use Planned & Actual Cost Role Based, Org Based, Output Based Control Cost-Managed Enterprise Cost War Cost War High Cost War Full Insurgency Intensity Conflict Spectrum Operations Starting here (Some work is being done now) TARGET © Dale R. Geiger 20115
Check on Learning What are the three stages of the Cost Maturation Process? Where is the Army now in the process? © Dale R. Geiger 20116
Transforming the Army: Four Requirements for Success Transforming the Army: Four Requirements for Success Need Status Action Leadership Team with ACE* to create informed leaders Exploit existing strong leadership capabilities ACE Build strong staff, strong organization Select, develop ACEs (*Asst to Comdr – Enterprise) Design and deliver advanced training Process Modify winning the cost war template as needed Cost Info Use new tools as they come online © Dale R. Geiger 20117
Principles of Cost Accounting and Management Targeted at entry level CP11 Personnel, Sergeants, Lieutenants, Junior Captains Course Length: Three Weeks Pre-requisites: On Line Math Refresher Intermediate Cost Accounting and Management Targeted at mid career CP11 Personnel, Staff Sergeants and above, Senior Captains, Majors and above Course Length: Three Weeks Pre-requisites: On Line Math Refresher ACE Development: PCAM & ICAM © Dale R. Geiger 2011 8
All CEs will require basic, advanced, and master skills with a concentration in: Readiness – Capacity management and force cost analysis Materiel – Logistics and working capital funds cost analysis Human Capital – Manpower cost analysis Services & Infrastructure – Services and capital asset costing FAs and CPs that are common to all CEs should train to become a master in any CE Stackable Credentials * NOTE: Stackable credentials are based on Financial Management (BC36/CP11) career field demands for cost management, which is the Army maximum; other career fields will use a subset of these requirements. Based on the Financial Management Career Field © Dale R. Geiger 2011 9
PCAM Develop basic cost management skills First step in becoming an ACE © Dale R. Geiger 201110
Purpose of Course Develop Skills in Cost Accounting Includes Conference, Demonstration and Practical Exercises Emphasizes hands-on experience Introduces Excel templates to facilitate learning Introduce and Apply Skills in Cost Management Case studies give students the opportunity to apply their skills to a real-world scenario © Dale R. Geiger 201111
Overview of Course Week 1: Basic Accounting Principles: External Reporting Accounting Basic Training Military Fund Accounting Financial Accounting Cost Accounting: External Reporting Test Days 1-4 Managerial Cost Intro Basic Financial Statements, Cash-based Accounting Budgetary Accounting, Obligations & Expenditures Accrual Accounting Basics – Revolving Funds Accounting for Manufacturing, Job Order Costing Cost Terminology, Relevant Cost Decisions © Dale R. Geiger 201112
Key Issues for Week 1 Internal vs. External Reporting Different ways of measuring costs for external reporting Measuring and reporting the cost of a job Defense contractor costing How to use and interpret different types of information prepared for external users © Dale R. Geiger 201113
Expectations There are lots of different methods to account for costs The goal of this course is to create awareness of the different methods Students are not expected to become experts but should understand where each method is used and why © Dale R. Geiger 201114
Overview of Course Week 2: Cost Relationships and Cost Tradeoffs Cost Relationships I Cost Relationships II Activity Based Costing Cost Tradeoffs I Test Days 5-9 Cost Tradeoffs II Fixed, Variable, Linear and Non-linear relationships Net Present Value and Expected Value Allocation Mechanics, Cost Driver Selection, Pitfalls Breakeven Analysis, Sensitivity, Indifference Points I Batch Quantity Tradeoffs, Indifference Points II © Dale R. Geiger 201115
Key Issues for Week 2 Identify and express cost relationships Evaluate investment courses of action using net present value and expected value Identify behavioral issues with cost measurement Explain the concept of cost tradeoff and identify points of indifference © Dale R. Geiger 201116
Overview of Course Week 3: Cost Planning & Explanation, CBA Cost Planning and Estimation Cost Benefit Analysis Cost Explanation Winning the Cost War After Action Review Final Exam Flexible Forecasting, Trend Projection, Learning Curve Eight Steps to Cost Benefit Analysis Variance Analysis and Reconciliation Prepare After Action Review Briefing from Case Study Comprehensive Final Exam, Closing Activities © Dale R. Geiger 201117
Key Issues for Week 3 Tools for cost planning and projection Cost Benefit Analysis Cost explanation and After Action Review © Dale R. Geiger 201118
Check on Learning What is an ACE? © Dale R. Geiger 201119
Remember Valley Forge Read the article by Ms. Matiella © Dale R. Geiger 201120
Check on Learning Why does the Army need to become more cost effective? What is the difference between Cost Benefit Analysis and a Cost-Managed Organization? How do fiscal constraints pose an asymmetric threat? How should we respond? © Dale R. Geiger 201121
$ $ Budget Appropriated Manage ment Better Mission Execution $ $ $ $ Reprogrammed Efficiencies $ $ Payoff: Better Execution, Not Necessarily Less Spending © Dale R. Geiger 2011 22
Democracy, Innovation and Partnerships Jens Thorhauge Danish Agency for Libraries and Media.
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Explain Change in Financial Position Over a Period of Time © Dale R. Geiger
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The Change Implications for Organisation Systems and Structures ©TPP
Estimate Future Costs Given Planning Factors © Dale R. Geiger
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Recommend A Course Of Action In Outsourcing And Keep Or Replace Decisions © Dale R. Geiger
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