Fundamentals of Cost and Management Accounting

Cover
Half Title
Title Page
Copyright Page
Preface to the ninth edition
Preface to the eighth edition
Preface to the seventh edition
Contents
CHAPTER 1 The context of costing
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	THE NEED FOR RELEVANT ACCOUNTING INFORMATION
	THE DIFFERENT FIELDS OF ACCOUNTING
		Financial accounting
		Management accounting
	THE PLACE AND FUNCTION OF COST ACCOUNTING
	THE FUNCTION OF MANAGEMENT ACCOUNTING
		Planning decisions
		Control decisions
	COST ACCOUNTING SYSTEMS
		Cost determination
		Cost recording
		Cost analysis
		Cost management
		Cost reporting
	ETHICAL CONDUCT
	THE CHARTERED INSTITUTE OF MANAGEMENT ACCOUNTANTS (CIMA)
	THE AIM OF THIS BOOK
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	EXERCISES
CHAPTER 2 Cost classification and terminology
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	THE CONCEPT OF COST
	COST OBJECTS
	ACCOUNTING FOR COST
	COST CLASSIFICATION
		Classification of costs by their nature
		Classifying costs by their timing
		Classifying costs by their function
		Classifying costs according to their behaviour
			Variable costs
			Fixed cost
			Step cost
			Mixed cost
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 3 Elements of cost
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	MATERIAL COST
	TERMINOLOGY
	INVENTORY PILING
	INVENTORY ACTIVITIES
		Acquisition
		Storage
		Distribution and consumption
		Inventory valuation
	JUST IN TIME INVENTORY-HOLDING (JIT)
	ACCOUNTING ENTRIES
	SUMMARY
	REVIEW PROBLEMS – MATERIAL
	LABOUR
	EMPLOYEE AND EMPLOYER EXPECTATIONS
		Productivity
		Humanitarian factors that have an influence on labour productivity
		External factors that have an influence on productivity
	PERSONNEL ADMINISTRATION
	EMPLOYMENT RECORDS
		Personnel records
		Clock cards
		Job cards
		Production reports
	ASSIMILATION OF INFORMATION
	LABOUR REMUNERATION
		Methods of remuneration
		Important terminology
		Calculation of remuneration
	WAGE INCENTIVE SCHEMES
		Straight piecework
		Taylor’s differential piecework system
		Halsey bonus scheme
		Emerson’s efficiency scheme
		Bonus points
		Measured day work
		Group bonus systems, share incentive schemes andprofit-sharing schemes
	RECOVERY OF DIRECT LABOUR COSTS
	LEARNING CURVE
		The learning curve effect
		Learning curve formula
		Application value
		Challenges with the application of the learning curve
	SUMMARY
	REVIEW PROBLEMS – LABOUR
	MANUFACTURING OVERHEADS
	COST PRICE CALCULATION AND MANUFACTURING OVERHEADS
		Problems associated with overheads
		Classification and analysis of overheads
	TOTAL MANUFACTURING OVERHEADS AND THE LINEAR FUNCTION
	TECHNIQUES FOR DIVIDING MANUFACTURING OVERHEADS
		Scatter diagram
		High-low method
		Simple regression
		Multiple regression
	SUMMARY
	REVIEW PROBLEM – MANUFACTURING OVERHEADS
	MARKETING COSTS
	BASES FOR APPORTIONMENT
	PLANNING AND CONTROL
		Products
		Sales representatives
		Areas
		Size of orders
	SUMMARY
	REVIEW PROBLEM – MARKETING
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	EXERCISES
CHAPTER 4 Cost-volume profit analysis
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	MARGINAL COST ACCOUNTING APPROACH
	CVP ANALYSIS USING THE MARGINAL INCOME APPROACH
	CONTRIBUTION
	BREAK-EVEN USING THE MARGINAL INCOME APPROACH
	BREAK-EVEN USING THE MARGINAL INCOME RATIO APPROACH
	APPLICATIONS OF CVP
		Expected profit
		Calculating the margin of safety
		Evaluating the impact on profit of changes in cost and/or quantity
		Change in selling price
		Change in variable costs
		Change in fixed costs
		Product mix
	CHANGE-OVER POINT
	BREAK-EVEN ANALYSIS USING A GRAPHICAL APPROACH
		Break-even graphs
	CVP ANALYSIS USING AN ALGEBRAIC AND EQUATION APPROACH
		Algebraic method
		Equation method
	CVP ANALYSIS IN SERVICE INDUSTRIES
	COST STRUCTURE AND THE OPERATING LEVERAGE FACTOR
	EVALUATING CVP ANALYSIS
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 5 Relevant information for short-termdecision making
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	COST CONCEPTS FOR DECISION-MAKING
		Differential costs
		Opportunity costs
		Relevant costs
		Imputed costs
		Sunk costs
	TYPES OF SHORT-TERM DECISIONS
		Price determination
		Acceptance of a special order
		Elimination of non-profitable products
		Purchasing or manufacturing of a product/part (outsourcing)
		Joint products
		Closing down a factory or continuing with production
		Capital investment decisions
	THE INFLUENCE OF LIMITING FACTORS
	LINEAR PROGRAMMING (LP)
	UNCERTAINTY IN DECISION-MAKING
	PROBABILITY IN DECISION-MAKING
	PAYOFF TABLES AND DECISION TREES
		Payoff tables
		Decision trees
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 6 The flow of cost information
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	PLANNING
		Establishment
		Factory layout
		The production line
		Labour
		Material (Raw material)
	THE MANUFACTURING PROCESS
	CONTROL
	THE FLOW OF COSTS
	ACCOUNTING FOR A MANUFACTURING ENTERPRISE
	COST FLOWS
	INVENTORY ACCOUNTS IN A MANUFACTURING ENTERPRISE
	THE STATEMENT OF PROFIT AND LOSS OF A MANUFACTURINGENTERPRISE
	COLUMNAR FORM OF COST AND STATEMENT OF PROFIT AND LOSS
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 7 Manufacturing overhead calculation and allocation:A traditional approach
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	BUDGETED MANUFACTURING OVERHEADS
	APPLIED MANUFACTURING OVERHEADS
	ACTUAL MANUFACTURING OVERHEADS
		Depreciation
		Interest on capital/investment
		Indirect material and indirect labour
		Rental and maintenance of factory buildings
	OVER OR UNDERAPPLIED MANUFACTURING OVERHEADS
	DEPARTMENTALISATION OF MANUFACTURING OVERHEADS
	PRIMARY ALLOCATION OF MANUFACTURING OVERHEADS
	SECONDARY ALLOCATION OF MANUFACTURING OVERHEADS
	APPLICATION TO THE PRODUCTS AND/OR JOBS
	REPEATED ALLOCATION METHOD
	ACTIVITY-BASED COSTING (ABC)
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 8 Variable and absorption costing
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	THE APPLICATION OF VARIABLE AND ABSORPTION COSTING
		Inventory valuation
		Statement of Profit or Loss: Comparing variable costingto absorption costing
		Revenue, production and income relationships
		Impact of revenue fluctuations
		Reconciliation of the variable costing profit with the absorption costing profit
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 9 Activity-based costing (ABC)
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
		ABC system design
		Step 1: Identify activities
		Step 2: Identify cost drivers for each activity
		Step 3: Cost pool creation and allocation
		Step 4: Trace activity costs to cost objectives
	AN ILLUSTRATIVE EXAMPLE OF ABC
		Criteria for use of an ABC system
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 10 Job costing systems
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	THE JOB DESCRIPTION
	COST DETERMINATION OF A JOB
	INVENTORY LEDGERS
	COMPREHENSIVE EXAMPLE OF A JOB COSTING SYSTEM
		The recording of material costs
		The recording of labour costs
		The recording of manufacturing overheads
		The recording of completed/finished goods
	SPOILT UNITS
		Spoilt products
		Wastage
		Shrinkage and evaporation
		Normal wastage
		Abnormal wastage
		Scrap
	ACCOUNTING FOR SPOILT WORK IN JOB COSTING SYSTEMS
		As a general manufacturing cost
		Job-related normal wastage
		Re-processing costs
	CONTRACT COSTING
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 11 Process costing
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	DEPARTMENTALISATION AND UNIT COSTS
	PRODUCT AND COST FLOWS
	PROCESS COST REPORTS
	SINGLE PRODUCT: SINGLE PROCESS(NO OPENING OR CLOSING INVENTORY)
	SINGLE PRODUCT: MULTIPLE PROCESSES
	THE CALCULATION OF INCOMPLETE UNITS IN THE CLOSING INVENTORYOF A PROCESS
	EQUIVALENT COMPLETE UNITS
	WAYS OF USING MANUFACTURING RESOURCES
	INCOMPLETE UNITS IN CLOSING INVENTORY
	INCOMPLETE UNITS IN OPENING INVENTORY
	ALTERNATIVE LAYOUT FOR THE COMBINED PRODUCTIONCOST REPORT
	INCREASE IN UNITS AS A RESULT OF THE ADDITION OF MATERIAL
	ACCOUNTING FOR SPOILT UNITS
	ACCOUNTING FOR WASTAGE WHERE THE WEIGHTED AVERAGEMETHOD IS APPLIED
	ACCOUNTING FOR WASTAGE WHERE THE FIFO METHOD IS APPLIED
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 12 Joint and by-products
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	CLASSIFICATION INTO JOINT AND BY-PRODUCTS
		Common costs
		Additional processing costs
		Costing methods for joint products
	COSTING METHODS FOR BY-PRODUCTS
	BY-PRODUCTS AND WASTE MATERIAL
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 13 Budgets
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	THE CONCEPTS BUDGET AND BUDGET CONTROL
		Budgets
		Budget control
	THE FUNCTIONS OF BUDGETS AND BUDGET CONTROL
		Planning
		Co-ordination
		Control
	AIMS OF BUDGET CONTROL
	ADVANTAGES OF BUDGETS AND BUDGETS CONTROL
	DISADVANTAGES OF BUDGETS AND BUDGETARY CONTROL
	IMPORTANT ASPECTS FOR THE PREPARATION OF BUDGETS
		The human factor
		Budget period
		Budget personnel
		Budget factor
	TYPES OF BUDGETS IN A MANUFACTURING ENTERPRISE
		Sales budget
		Production budget
		Plant utilisation budget
		Trading purchases budget
		Direct material or raw material budget
		Labour budget
		Manufacturing overheads budget
		Production cost budget
		Ending finished goods inventory budget
		Marketing cost budget
		Administrative budget
		Research and development budget
		Capital budget
		Cash budget
		Budgeted Statement of Profit and Loss
		Budgeted Statement of Financial Position
		Master budget
	ZERO-BASED BUDGETING (ZBB)
	RESPONSIBILITY ACCOUNTING AND COST CONTROL
		Responsibility centres
		Responsibility budgets
		Controllable and uncontrollable costs
		Reporting
	FLEXIBLE BUDGETING
	ACTIVITY-BASED BUDGETING (ABB)
	NON-FINANCIAL PERFORMANCE INDICATORS
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 14 Standard costing
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	AIMS
	CHARACTERISTICS OF STANDARD COSTING
	THE USES OF STANDARDS AND STANDARD COSTS
	THE CLASSIFICATION OF STANDARDS
	ADVANTAGES OF STANDARD COSTING
	THE IMPLEMENTATION OF A STANDARD COSTING SYSTEM
	MATERIAL STANDARDS AND VARIANCES
	MATERIAL PRICE VARIANCE
		Purchase price variance
		Issue price variance
	MATERIAL QUANTITY VARIANCE
	MATERIAL SUB-VARIANCES
	RECORDING OF MATERIAL COSTS
	LABOUR STANDARDS AND VARIANCES
	LABOUR RATE VARIANCE
	LABOUR EFFICIENCY VARIANCE
	SUB-VARIANCES
	RECORDING OF LABOUR COSTS
	MANUFACTURING OVERHEADS STANDARDS AND VARIANCE
	SEPARATE VARIABLE AND FIXED MANUFACTURING OVERHEADSVARIANCES
		Variable manufacturing overheads variances
		Fixed manufacturing overheads variances
		Causes of manufacturing overheads variances
	COMBINED VARIABLE AND FIXED MANUFACTURING OVERHEADSVARIANCES
		Two-variance analysis method
		Three-variance analysis method
	RECORDING OF MANUFACTURING OVERHEADS
	STANDARD COSTING RATIOS
	SALES VARIANCES
		Analysis of variances
	PROBLEMS IN APPLICATION
	RECONCILIATION OF ACTUAL COSTS WITH STANDARD COSTS
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 15 Performance evaluation
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	CHOICE OF ORGANISATIONAL STRUCTURE
	RESPONSIBILITY CENTRES
	ADVANTAGES OF DECENTRALISATION
	DISADVANTAGES OF DECENTRALISATION
	DIVISIONAL PERFORMANCE MEASUREMENT
		Profit
		Return on investment (ROI)
		Advantages and disadvantages of return on investment
		Residual income
		Advantages and disadvantages of residual income
	NON-FINANCIAL PERFORMANCE MEASUREMENT
	THE BALANCED SCORECARD
		Customer perspective: How do customers see us?
		Internal business perspective: What must we excel at?
		Innovation and learning perspective: Can we continue to improve andcreate value?
		Financial perspective: How do we look to shareholders?
	USING THE BALANCED SCORECARD
		The Balanced Scorecard, more than a performance measurement tool
		Advantages of the Balanced Scorecard
		Disadvantages of the Balanced Scorecard
	PERFORMANCE EVALUATION FOR NOT-FOR-PROFITS ANDTHE PUBLIC SECTOR
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 16 Transfer pricing in decentralised enterprises
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	CRITERIA FOR THE DEVELOPMENT OF TRANSFER PRICES
		Goal congruence
		Performance evaluation
		Autonomy
		Administrative cost
	COMPANY POLICIES GOVERNING INTER-UNIT TRANSFERS
	TRANSFER PRICING
		Market-based transfer prices
		Cost-based transfer prices
		Negotiated price
		Dual transfer prices
	AN ILLUSTRATIVE EXAMPLE OF TRANSFER PRICING
	INTERNATIONAL TRANSFERS
	SUMMARY
	PERSPECTIVES ON COSTING
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
	EXERCISES
CHAPTER 17 An introduction to costing in the modernbusiness environment
	LEARNING OUTCOMES
	CHAPTER OUTLINE
	INTRODUCTION
	MATERIAL REQUIREMENTS PLANNING
	MANUFACTURING RESOURCE PLANNING
	ENTERPRISE RESOURCE PLANNING
	TOTAL QUALITY MANAGEMENT
		Just-in-Time
		Lean management
		Kaizen
	LIFE-CYCLE COSTING
	TARGET COSTING
		Establishing a selling price and determining the desired profit margin
		Product-level target cost
		Component-level target cost
	THE THEORY OF CONSTRAINTS AND THROUGHPUT ACCOUNTING
	SIX SIGMA
		Key principles of Six Sigma
		Advantages of Six Sigma
		Disadvantages of Six Sigma
	BUSINESS PROCESS RE-ENGINEERING
		Where to apply BPR?
		How to implement Business Process Re-engineering
		Practical application limitations
	THE FOURTH INDUSTRIAL REVOLUTION
		Challenges and opportunities
		Impact on Cost Accounting
		Big Data
		Robotic Process Automation (RPA)
		Blockchain Technology
	PERSPECTIVES ON COSTING
	SUMMARY
	KEY TERMS AND CONCEPTS
	REVIEW PROBLEMS
Index