Management & cost accounting

Front Cover
Half Title Page
Title Page
Copyright Page
Brief Contents
Contents
Guide to the case studies
Preface
Authors’ acknowledgements
Publisher’s acknowledgements
PART I Management and cost accounting fundamentals
	CHAPTER 1 The manager and management accounting
		Management accounting, financial accounting and cost accounting
		Accounting systems and management controls
		Costs, benefits and context
		Value creation
		Digitalisation: management accounting’s most important challenge
		Concepts in action: How the Internet of Things, artificial intelligence and big data make the unknown visible at Rolls-Royce
		Summary
		Appendix: Professional ethics
		Key terms
		References and further reading
		Assessment material
	CHAPTER 2 An introduction to cost terms and purposes
		Costs in general
		Direct costs and indirect costs
		Cost drivers and cost management
		Cost behaviour patterns: variable costs and fixed costs
		Total costs and unit costs
		Concepts in action: Reducing fixed costs and managing profit growth at Porsche
		Financial statements, business sectors and the recognition of costs
		The many meanings of product costs
		Classification of costs
		Summary
		Key terms
		References
		Assessment material
	CHAPTER 3 Job costing
		The building block concept of costing systems
		Job-costing and process-costing systems
		Job costing in service organisations using actual costing
		Normal costing
		Job costing in manufacturing
		An illustration of a job-costing system in manufacturing
		Budgeted indirect costs and end-of-period adjustments
		Summary
		Key terms
		Reference
		Assessment material
	CHAPTER 4 Process costing
		Illustrating process costing
		Case 1: Process costing with no opening or closing work-in-progress stock
		Case 2: Process costing with no opening but a closing work-in-progress stock
		Case 3: Process costing with both some opening and some closing work-in-progress stock
		Weighted-average method
		First-in, first-out method
		Comparison of weighted-average and FIFO methods
		Concepts in action: ExxonMobil and accounting differences in the oil patch
		Standard-costing method of process costing
		Transferred-in costs in process costing
		Concepts in action: Hybrid costing for customised products at Levi Strauss
		Hybrid-costing systems
		Concepts in action: Hybrid costing for Under Armour 3D-printed shoes
		Summary
		Appendix: Operation costing
		Key terms
		Reference
		Assessment material
	CHAPTER 5 Cost allocation
		Purposes of cost allocation
		Cost allocation and costing systems
		Indirect-cost pools and cost allocation
		Allocating costs from one department to another
		Allocating costs of support departments
		Support department cost-allocation methods
		Allocating common costs
		Cost-allocation bases and cost hierarchies
		Is the product-costing system broken?
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 6 Cost allocation: joint-cost situations
		Meaning of joint products and by-products terms
		Why allocate joint costs?
		Approaches to allocating joint costs
		Concepts in action: Chicken processing: costing on the disassembly line
		No allocation of joint costs
		Irrelevance of joint costs for decision making
		Accounting for by-products
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 7 Income effects of alternative stock-costing methods
		PART A: Stock-costing methods
		Variable costing and absorption costing
		Comparison of variable costing and absorption costing
		Performance measures and absorption costing
		Concepts in action: Can ESPN avoid the cord-cutting ‘death spiral’?
		PART B: Denominator-level concepts and absorption costing
		Alternative denominator-level concepts
		Effect on financial statements
		Summary
		Appendix: Breakeven points in variable and absorption costing
		Key terms
		Assessment material
		PART I Case study problems
			101 The European Savings Bank
			102 The ethical dilemma at Northlake
			103 Electronic Boards plc
PART II Accounting information for decision making
	CHAPTER 8 Cost–volume–profit analysis
		Revenue drivers and cost drivers
		CVP assumptions
		The breakeven point
		The PV graph
		Impact of income taxes
		Sensitivity analysis and uncertainty
		Concepts in action: Cost–volume–profit analysis makes Subway’s $5 foot-long sandwiches a success: but innovation challenges loom
		Cost planning and CVP
		Effects of revenue mix on profit
		Not-for-profit organisations and CVP
		Contribution margin and gross margin
		Summary
		Appendix: Decision models and uncertainty
		Key terms
		Reference and further reading
		Assessment material
	CHAPTER 9 Determining how costs behave
		General issues in estimating cost functions
		The cause-and-effect criterion in choosing cost drivers
		Cost estimation approaches
		Steps in estimating a cost function
		Evaluating and choosing cost drivers
		Cost drivers and activity-based costing
		Concepts in action: Activity-based costing and cost estimation
		Big data, machine learning and cost analysis
		Non-linearity and cost functions
		Learning curves and non-linear cost functions
		Summary
		Appendix: Regression analysis
		Key terms
		References and further reading
		Assessment material
	CHAPTER 10 Relevant information for decision making
		Information and the decision process
		The concept of relevance
		An illustration of relevance: choosing output levels
		Outsourcing and make-or-buy decisions
		Concepts in action: Costs, outsourcing and politics
		Opportunity costs, outsourcing and capacity constraints
		Concepts in action: Outsourcing versus automation at Nike
		Product-mix decisions under capacity constraints
		Concepts in action: Slashing cost at LEGO
		Customer profitability and relevant costs
		Irrelevance of past costs and equipment-replacement decisions
		Summary
		Appendix: Linear programming
		Key terms
		References and further reading
		Assessment material
	CHAPTER 11 Activity-based costing
		Undercosting and overcosting
		Costing system at Plastim Limited
		Refining a costing system
		Activity-based costing systems
		Implementing activity-based costing
		Comparing alternative costing systems
		Concepts in action: Mayo Clinic uses time-driven activity-based costing to reduce costs and improve care
		From activity-based costing to activity-based management
		ABC and department-costing systems
		Implementing ABC systems
		Concepts in action: Do banks provide ‘free’ services?
		ABC and the organisational context
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 12 Pricing, target costing and customer profitability analysis
		Major influences on pricing
		Costing and pricing for the short run
		Costing and pricing for the long run
		Concepts in action: Pricing and digitalisation at H&M
		Target costing for target pricing
		Achieving the target cost per unit for Provalue
		Cost-plus pricing
		Concepts in action: Target pricing for the Indian car market
		Life-cycle product budgeting and costing
		Customer profitability analysis
		Customer revenues
		Customer costs
		Customer profitability profiles
		Concepts in action: Amazon Prime and customer profitability
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 13 Capital investment decisions
		Stages of capital budgeting
		Concepts in action: Capital budgeting for sustainability at Johnson & Johnson
		Discounted cash flow methods
		Sensitivity analysis
		Relevant cash flows in discounted cash flow analysis
		Payback method
		Accounting rate of return method
		Managing the project
		Income tax factors
		Capital budgeting and inflation
		Summary
		Key terms
		References and further reading
		Assessment material
		PART II Case study problems
			201 Permaclean Products plc
			202 The Good Night Motel
PART III Planning and budgetary control systems
	CHAPTER 14 Motivation, budgets and responsibility accounting
		Major features of budgets
		Roles of budgets
		Types of budget
		Computer-based financial planning models
		Concepts in action: 24-hour fitness and internet-based budgeting
		Kaizen budgeting
		Activity-based budgeting
		Budgeting and responsibility accounting
		Responsibility and controllability
		Summary
		Appendix: The cash budget
		Key terms
		References and further reading
		Assessment material
	CHAPTER 15 Flexible budgets, variances and management control: I
		Static budgets and flexible budgets
		Static-budget variances
		Steps in developing a flexible budget
		Flexible-budget variances and sales-volume variances
		Price variances and efficiency variances for inputs
		Impact of stocks
		Concepts in action: Starbucks maintains a focus on direct-cost variances
		Management uses of variances
		Concepts in action: Chipotle’s required focus on material cost variances
		Flexible budgeting and activity-based costing
		An illustration of journal entries using standard costs
		Benchmarking and variance analysis
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 16 Flexible budgets, variances and management control: II
		Planning of variable- and fixed-overhead costs
		Developing budgeted variable-overhead rates
		Variable-overhead cost variances
		Developing budgeted fixed-overhead rates
		Fixed-overhead cost variances
		Production-volume variance
		Integrated analysis of overhead cost variances
		Different purposes of manufacturing overhead cost analysis
		Journal entries for overhead costs and variances
		Concepts in action: Variance analysis and standard costing: helping Sandoz manage overhead costs
		Engineered, discretionary and infrastructure costs
		Financial and non-financial performance measures
		Actual, normal and standard costing
		Activity-based costing and variance analysis
		Summary
		Key terms
		Reference and further reading
		Assessment material
	CHAPTER 17 Measuring yield, mix and quantity effects
		Input variances
		Direct materials yield and mix variances
		Direct manufacturing labour yield and mix variances
		Revenue and sales variances
		Variance analysis for multiple products
		Summary
		Key terms
		Assessment material
		PART III Case study problems
			301 Zeros plc
			302 Instrumental Ltd
PART IV Management control systems and performance issues
	CHAPTER 18 Control systems and transfer pricing
		Management control systems
		Evaluating management control systems
		Organisational structure and decentralisation
		Choices about responsibility centres
		Transfer pricing
		An illustration of transfer pricing
		Market-based transfer prices
		Cost-based transfer prices
		Negotiated transfer prices
		A general guideline for transfer-pricing situations
		Transfer pricing and tax considerations
		Concepts in action: EU accuses Starbucks and the Netherlands of unfair tax deal
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 19 Control systems and performance measurement
		Financial and non-financial performance measures
		Designing an accounting-based performance measure
		Different performance measures
		Concepts in action: CEO compensation at Lloyds: ‘kick in the teeth’ or well-deserved?
		Alternative definitions of investment
		Alternative performance measures
		Choosing targeted levels of performance and timing of feedback
		Distinction between managers and organisational units
		Concepts in action: Performance measurement at Unilever
		Performance measures at the individual activity level
		Environmental and ethical responsibilities
		Strategy and levers of control
		Summary
		Key terms
		References and further reading
		Assessment material
		PART IV Case study problems
			401 BBR plc
PART V Strategy, quality, time and emerging issues
	CHAPTER 20 Strategy, the balanced scorecard and quality
		Strategy and strategic management accounting
		Concepts in action: Strategic renewal at Puma
		The balanced scorecard
		Quality improvement and reengineering at Chipset
		The four perspectives of the balanced scorecard
		Aligning the balanced scorecard to strategy
		Features of a good balanced scorecard
		Evaluating the success of a strategy
		Concepts in action: The growth versus profitability choice at Facebook
		Costs of quality under the balanced scorecard
		The internal-business-process perspective: analysing quality problems
		The learning-and-growth perspective: quality improvements
		Concepts in action: Does Mercedes really stand for quality? What about Toyota?
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 21 Accounting, time and efficiency
		Just-in-time systems
		Major features of JIT production systems
		Concepts in action: Just-in-time live-concert recordings
		Enterprise resource planning (ERP) systems
		Concepts in action: How big data and machine learning helps with stock management
		Backflush costing
		Managing goods for sale in retail organisations
		Challenges in estimating stock-related costs and their effects
		Just-in-time purchasing
		Stock costs and their management in manufacturing organisations
		Theory of constraints
		Concepts in action: Netflix works to overcome internet bottlenecks
		Balanced scorecards and time-based measures
		Summary
		Key terms
		References and further reading
		Assessment material
	CHAPTER 22 Emerging issues: digital technologies, governance and sustainability
		Digital transformation is unstoppable
		Digital technologies and accounting
		The digitally advanced enterprise control loop
		Enterprise governance
		Environmental management accounting
		Management accounting changes highlight managerial context
		Concepts in action: Stonyfield Farm: a culture of sustainable farming
		Summary
		Key terms
		References and further reading
		Assessment material
		PART V Case study problems
			501 High-Tech Limited
			502 Tanner Pharmaceuticals and the price of a new drug
			503 Osram
Appendix A: Solutions to selected exercises
Appendix B: Notes on compound interest and interest tables
Glossary
Names index
Subject index