Course Introduction © Dale R. Geiger 20111. Even Super Powers Can Lose a Cost War Kamchatka Peninsula, Russia Aral Sea, Kazakhstan Soviet military installation.

Course IntroductionCourse Introduction

© Dale R. Geiger 2011 1

Even Super Powers Can Lose a Cost WarEven Super Powers Can Lose a Cost War

Kamchatka Peninsula , Russia

Aral Sea, Kazakhstan

Soviet military installationPaldiski, Estonia


Terminal Learning ObjectiveTerminal 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 20114

Cost Maturation ProcessCost Maturation Process

Single Use

EstimatedFuture Cost

Cost BenefitAnalysis

Cost InformedDecisions

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

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 2011 5

Check on LearningCheck on Learning

• What are the three stages of the Cost Maturation Process?

• Where is the Army now in the process?


Transforming the Army:Transforming the Army:Four Requirements for SuccessFour 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


• 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 & ICAMACE Development: PCAM & ICAM


All CEs will require basic, advanced, and master skills with a concentration in:Readiness – Capacity management and force cost analysisMateriel – Logistics and working capital funds cost analysisHuman Capital – Manpower cost analysisServices & Infrastructure – Services and capital asset costingFAs and CPs that are common to all CEs should train to become a master in any CE

Stackable CredentialsStackable 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


PCAM PCAM

• Develop basic cost management skills• First step in becoming an ACE


Purpose of CoursePurpose 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


Overview of CourseOverview of Course

• Week 1: • Basic Accounting Principles: External Reporting

Accounting Basic Training

Military Fund Accounting

Financial Accounting

Cost Accounting: External Reporting

Test Days 1-4Managerial 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 2011 12

Key Issues for Week 1Key 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


ExpectationsExpectations

• 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



• Week 2:• Cost Relationships and Cost Tradeoffs

Cost Relationships I

Cost Relationships II

Activity Based Costing

Cost Tradeoffs I

Test Days 5-9Cost 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 2011 15


• 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



• Week 3:• Cost Planning & Explanation, CBA

Cost Planning and Estimation

Cost Benefit Analysis

Cost Explanation

Winning the Cost WarAfter 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 2011 17


• Tools for cost planning and projection• Cost Benefit Analysis• Cost explanation and After Action Review



• What is an ACE?


Remember Valley ForgeRemember Valley Forge

• Read the article by Ms. Matiella



• 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?


$

BudgetAppropriated

Manage

ment

Better MissionExecution

$ $

Reprogrammed Efficiencies

$

Payoff: Better Execution,Payoff: Better Execution,Not Necessarily Less SpendingNot Necessarily Less Spending


Course Introduction © Dale R. Geiger 20111. Even Super Powers Can Lose a Cost War Kamchatka Peninsula, Russia Aral Sea, Kazakhstan Soviet military installation.

Documents

cost management

principles of cost analysis

cost war template

actual cost role

principles of cost accounting

needed cost info

cost war kamchatka peninsula

course introduction