text: Chapter 5
  tool for developing estimates of current and future costs. Financial managers should define cost targets in
  their cost planning to measure the efficiency and effectiveness of their organization, processes, or projects
  under evaluation.
  COST ACCOUNTING
  5-50. Cost accounting is the dollar valuation of the cost measurements resulting from the organization’s
  operations. The goal of cost accounting is to accumulate and record all the elements of cost incurred to
  accomplish a cost objective (i.e., To conduct an operation or activity, operate a unit, or to complete a unit
  of work of a specific job). The cost objective must be discrete to the extent and singularly identifiable level
  of detail that enables the establishment of cost centers and output products. Financial managers rely on
  FMIS to capture and record cost data from one or several systems that feed financial and non-financial
  transactions into the FMIS. In most organizations, the General Fund Enterprise Business System (GFEBS),
  an enterprise resource planning (ERP) solution, has become the primary accounting system of record and
  links financial data with logistics, asset accounting and other critical information. GFEBS provides a robust
  cost module that is directly linked to the financial data contained in the system‘s financial module and
  given its common cost structure will provide a powerful cost analysis capability to support internal cost
  management initiatives. Whatever accounting system is in place, the resulting cost data must be accurate,
  timely, and relevant to the end user‘s purpose and intent. Financial managers must be able to connect
  financial data to operational output and performance data to provide useful cost analysis to support the
  commander‘s decision-making. In addition to GFEBS, two other ERPs – the Logistics Modernization
  Program (LMP) and the Global Combat Support System-Army (GCSS-Army) – also provide essential
  information to financial and functional managers.
  COST ANALYSIS
  5-51. Cost analysis is the integration of functional outcome data with cost data to produce valid and
  verifiable information to conduct various forms of analysis. Examples of cost analysis include
  organizational performance, cost-benefit analysis, analysis of alternatives, variance analysis, economic
  analysis, cost/risk assessments, and trend analysis. Cost analysis serves many purposes and provides useful
  insight regarding costs to commanders as they make resource decisions.
  5-52. FM planners use cost models, such as the Force Costing Model (FCM) and the Army Contingency
  Operations Cost Model (ACM) (both developed by the Office of the Deputy Assistant Secretary of the
  Army for Cost and Economics) to assist commanders in understanding the full cost of their decisions. Cost
  models enhance cost analysis by providing the logic behind the calculated cost. The logic, assumptions, and
  business rules required to build a model help commanders understand the drivers of cost. When existing
  models do not meet the specific circumstance, local models can be developed.
  5-53. For example, a division commander may be contemplating raising the operational readiness (OR) of
  his BCTs to posture them for future missions. His decision to increase the OR rate from 90% to 95% will
  have operational benefits, but will also reduce the resources available for other missions or requirements,
  thus also producing an operational cost. To address this question analytically, the commander will begin
  by determining whether the requirement is a valid objective to be pursued. A candidate requirement might
  be rejected because it is clearly unaffordable, and in other cases a requirement might be rejected because it
  provides a capability or capacity that goes beyond what is needed. If the requirement is validated, the
  commander will direct that a team, led by the financial manager, identify courses of action (COA) that
  satisfy the requirement, estimate the costs and benefits of each COA, identify the criteria – both cost and
  non-cost – that will be used to compare the COAs, and then evaluate them to identify the COA that delivers
  the optimum balance between cost and benefit. To ensure that all aspects of an issue are considered, this
  must be a team effort. Exclusion of key stakeholders can result in incomplete cost estimates, inaccurate
  identification of benefits, or any number of errors that invalidate the analysis and contribute to poor
  decision making.
  5-54. The cost analysis process is depicted graphically in figure 5-3. The process includes the use of
  models and accounting data to play a key role in developing the cost estimate.