Management & cost accounting

Description

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