Management Accounting: Principles and Applications

Cover......Page 1
Management Accounting - Principles and Applications......Page 4
ISBN 1412908434  ISBN 1853963836......Page 5
Contents......Page 6
List of Illustrations......Page 7
Preface......Page 11
Acknowledgements......Page 13
The Nature and Role of Management Accounting......Page 14
What is Management Accounting?......Page 15
Management Accounting and Financial Accounting......Page 17
The History and Context of Management Accounting......Page 18
The Scope of Management Accounting......Page 20
Users of Management Accounting Information......Page 21
Issues Affecting the Evolution and Design of Management Accounting Systems......Page 23
The Time Focusof Management Accounting......Page 25
The Role, Power and Responsibilities of the Management Accountant......Page 26
Information Requirements for Management Accounting: Practicalities, Costs and Organisational Implications......Page 28
Recommended Further Reading......Page 30
Traditional School and the Neo-classical Revision......Page 31
Questions......Page 33
Introduction......Page 34
Cost Management Essentials – The Basic Process and Requirements......Page 35
Cost Classification......Page 39
Cost Behaviour by Volume of Activity......Page 40
Unit Costs......Page 43
Service Costing......Page 48
Summary......Page 49
Recommended Further Reading......Page 55
Questions......Page 59
Introduction......Page 65
Allocation and Apportionment of Overheads to Cost Centres......Page 66
The Over- and Under-Absorption of Overheads......Page 70
Reasons for the Apportionment and Absorption of Overheads......Page 71
Criticisms of Apportionment and Absorption......Page 72
Activity-Based Costing......Page 73
Overview......Page 75
Illustration......Page 76
Overcosting and Undercosting of Products......Page 77
Types of Activity Cost Pools......Page 78
The Benefits of ABC......Page 79
The Problems with ABC......Page 80
Break-Even and Target Contribution......Page 81
Margin of Safety......Page 82
Break-Even Charts......Page 83
Illustration......Page 84
Summary......Page 85
Recommended Further Reading......Page 86
Questions......Page 91
Missions, Objectives, Aims, Goals, Targets and Plans......Page 97
The Organisational Planning Process – An Overview......Page 102
What is a Budget?......Page 103
What are Budgets Used For?......Page 104
The Budget Preparation Process – General Principles......Page 105
Toll Processing or Contract Manufacturing......Page 118
Organisational Contexts and Budgeting Requirements......Page 120
Behavioural Consequences of Budgetary Control Systems......Page 122
Recommended Further Reading......Page 123
Questions......Page 135
Cost Estimation......Page 138
High–Low Method......Page 139
Mathematical Methods......Page 140
Advances in Budgetary Techniques......Page 143
Zero-Based Budgets......Page 144
Planned Programme Budget Systems......Page 145
Activity-Based Cost Management......Page 146
Balanced Scorecard......Page 147
Economic Value-Added Analysis......Page 149
Beyond Budgeting......Page 150
Just-in-Time Stock Control and Production Systems......Page 151
Recommended Further Reading......Page 153
Questions......Page 157
The Control Process......Page 160
Feedback Concepts......Page 161
Summarising Information......Page 163
Fixed and Flexible Budgets......Page 164
Flexible Budgets......Page 165
The Development of Flexible Budgets......Page 166
Calculating Budget Variances......Page 168
The Construction of Standard Costs......Page 169
The Concept of Standard Time......Page 171
The Use of Standard Costs in Variance Analysis......Page 173
Subvariances......Page 174
Interpretation of Variances......Page 178
Performance Measures......Page 179
Summary......Page 180
Recommended Further Reading......Page 181
Questions......Page 195
Further Aspects of Standard Costing......Page 199
Mix Variances......Page 200
Interpreting Mix and Yield Variances......Page 206
Standard Costing in Non-Manufacturing Environments......Page 207
Service (Non-Manufacturing) Environments......Page 209
Statistical Approaches to Variance Investigation......Page 210
Normal Distribution Theory......Page 214
Principal–Agent Theory......Page 215
Behavioral Impacts, the Aspects of Power and Social Groupings and the Importance of Ethical Considerations......Page 216
The Theory of Constraints......Page 217
Conclusions......Page 218
Recommended Further Reading......Page 219
Questions......Page 228
Introduction......Page 232
Marginal Cost and Marginal Revenue......Page 233
Using Contribution Analysis for Decision Making......Page 235
Financial Modelling using Contribution......Page 236
Setting Target Profits......Page 240
The Model in Context......Page 241
Assumptions Underpinning Break-Even Analysis......Page 242
Linear Programming......Page 244
Cessation of Production of a Product or Service......Page 251
Make or Buy Decisions......Page 253
Pricing Decisions......Page 260
Summary......Page 262
Recommended Further Reading......Page 263
Questions......Page 267
The Nature of Strategic Decision Making......Page 273
Steps in Project Appraisal......Page 274
Compounding, Discounting and Present Value......Page 276
Net Present Value......Page 277
The Internal Rate of Return......Page 280
Payback......Page 282
Accounting Rate of Return......Page 283
The Impact of Taxation on Project Appraisal......Page 285
Inflation and Project Appraisal......Page 286
Sensitivity Analysis (or ‘what if?’ analysis)......Page 287
The Value of Sensitivity Analysis......Page 289
Desiderata Analysis......Page 290
Cost–Benefit Analysis......Page 291
Conclusions......Page 292
Recommended Further Reading......Page 293
Questions......Page 304
The Need for Effective Performance Measurement Systems......Page 308
The Influence of the Organisational Environment on Performance Measurement Systems......Page 309
Public Sector Aspects......Page 310
Divisionalisation and Decentralisation: Degrees of Responsibility and Power......Page 311
Decentralisation and Divisionalisation......Page 312
Accounting Measures of Performance and Financial Ratio Analysis......Page 320
Non-Financial Aspects of Performance Measurement......Page 326
Performance Measurement and Contemporary Organisational Environments......Page 327
Strategic Aspects of Performance Measurement – Taking a Broader View and Avoiding Short-Termism......Page 329
Summary......Page 330
Recommended Further Reading......Page 331
Questions......Page 350
Bibliography and Recommended Further Reading......Page 352
Index......Page 356