eBook - MANAGEMENT AND COST ACCOUNTING Eighth Edition by Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar

PART I Management and cost accounting fundamentals CHAPTER 1 The manager and management accounting — p. 2 Management accounting, financial accounting and cost accounting — p. 3 Accounting systems and management controls — p. 8 Costs, benefits and context — p. 12 Value creation — p. 13 Digitalisation and management accounting — p. 18 Summary — p. 21 Appendix: Professional ethics — p. 22 References and further reading — p. 23 Assessment material — p. 25 CHAPTER 2 An introduction to cost terms and purposes — p. 33 Costs in general — p. 34 Direct costs and indirect costs — p. 35 Cost drivers and cost management — p. 36 Cost behaviour patterns: variable costs and fixed costs — p. 37 Total costs and unit costs — p. 40 Financial statements, business sectors and the recognition of costs — p. 43 The many meanings of product costs — p. 48 Classification of costs — p. 48 Summary — p. 49 References — p. 50 Assessment material — p. 51 CHAPTER 3 Job costing — p. 59 The building block concept of costing systems — p. 60 Job-costing and process-costing systems — p. 60 Job costing in service organisations using actual costing — p. 62 Normal costing — p. 64 Job costing in manufacturing — p. 66 An illustration of a job-costing system in manufacturing — p. 68 Budgeted indirect costs and end-of-period adjustments — p. 76 Summary — p. 80 References — p. 81 Assessment material — p. 82 CHAPTER 4 Process costing — p. 90 Illustrating process costing — p. 91 Case 1: Process costing with no opening or closing work-in-progress stock — p. 92 Case 2: Process costing with no opening but a closing work-in-progress stock — p. 93 Case 3: Process costing with both some opening and some closing work-in-progress stock — p. 97 Weighted-average method — p. 98 First-in, first-out method — p. 101 Comparison of weighted-average and FIFO methods — p. 104 Standard-costing method of process costing — p. 105 Transferred-in costs in process costing — p. 109 Hybrid-costing systems — p. 115 Summary — p. 116 Appendix: Operation costing — p. 117 Reference — p. 120 Assessment material — p. 121 CHAPTER 5 Cost allocation — p. 128 Purposes of cost allocation — p. 129 Cost allocation and costing systems — p. 130 Indirect-cost pools and cost allocation — p. 131 Allocating costs from one department to another — p. 133 Allocating costs of support departments — p. 137 Support department cost-allocation methods — p. 137 Allocating common costs — p. 143 Cost-allocation bases and cost hierarchies — p. 144 Is the product-costing system broken? — p. 146 Summary — p. 146 References and further reading — p. 147 Assessment material — p. 148 CHAPTER 6 Cost allocation: joint-cost situations — p. 157 Meaning of joint products and by-products terms — p. 158 Why allocate joint costs? — p. 159 Approaches to allocating joint costs — p. 160 No allocation of joint costs — p. 168 Irrelevance of joint costs for decision making — p. 169 Accounting for by-products — p. 171 Summary — p. 174 References and further reading — p. 174 Assessment material — p. 175 CHAPTER 7 Income effects of alternative stock-costing methods — p. 183 PART A: Stock-costing methods — p. 184 Variable costing and absorption costing — p. 184 Comparison of variable costing and absorption costing — p. 188 Performance measures and absorption costing — p. 194 PART B: Denominator-level concepts and absorption costing — p. 196 Alternative denominator-level concepts — p. 196 Effect on financial statements — p. 198 Summary — p. 200 Appendix: Breakeven points in variable and absorption costing — p. 200 Assessment material — p. 203 PART I Case study problems — p. 212 101 The European Savings Bank — p. 212 102 The ethical dilemma at Northlake — p. 214 103 Electronic Boards plc — p. 216 PART II Accounting information for decision making CHAPTER 8 Cost–volume–profit analysis — p. 220 Revenue drivers and cost drivers — p. 221 CVP assumptions — p. 222 The breakeven point — p. 222 The PV graph — p. 226 Impact of income taxes — p. 227 Sensitivity analysis and uncertainty — p. 228 Cost planning and CVP — p. 230 Effects of revenue mix on profit — p. 232 Not-for-profit organisations and CVP — p. 233 Contribution margin and gross margin — p. 233 Summary — p. 235 Appendix: Decision models and uncertainty — p. 235 Reference and further reading — p. 238 Assessment material — p. 239 CHAPTER 9 Determining how costs behave — p. 247 General issues in estimating cost functions — p. 248 The cause-and-effect criterion in choosing cost drivers — p. 251 Cost estimation approaches — p. 251 Steps in estimating a cost function — p. 253 Evaluating and choosing cost drivers — p. 258 Cost drivers and activity-based costing — p. 260 Big data, machine learning and cost analysis — p. 261 Non-linearity and cost functions — p. 262 Learning curves and non-linear cost functions — p. 263 Summary — p. 268 Appendix: Regression analysis — p. 269 References and further reading — p. 278 Assessment material — p. 279 CHAPTER 10 Relevant information for decision making — p. 287 Information and the decision process — p. 288 The concept of relevance — p. 289 An illustration of relevance: choosing output levels — p. 291 Outsourcing and make-or-buy decisions — p. 293 Opportunity costs, outsourcing and capacity constraints — p. 297 Product-mix decisions under capacity constraints — p. 301 Customer profitability and relevant costs — p. 302 Irrelevance of past costs and equipment-replacement decisions — p. 305 Summary — p. 307 Appendix: Linear programming — p. 307 References and further reading — p. 311 Assessment material — p. 312 CHAPTER 11 Activity-based costing — p. 318 Undercosting and overcosting — p. 319 Costing system at Plastim Limited — p. 320 Refining a costing system — p. 323 Activity-based costing systems — p. 324 Implementing activity-based costing — p. 328 Comparing alternative costing systems — p. 333 From activity-based costing to activity-based management — p. 334 ABC and department-costing systems — p. 336 Implementing ABC systems — p. 337 ABC and the organisational context — p. 339 Summary — p. 341 References and further reading — p. 341 Assessment material — p. 342 CHAPTER 12 Pricing issues and customer profitability analysis — p. 351 Major influences on pricing — p. 352 Costing and pricing for the short run — p. 353 Costing and pricing for the long run — p. 355 Target costing for target pricing — p. 358 Achieving the target cost per unit for Provalue — p. 362 Cost-plus pricing — p. 364 Life-cycle product budgeting and costing — p. 367 Customer profitability analysis — p. 371 Customer revenues — p. 371 Customer costs — p. 372 Customer profitability profiles — p. 374 Summary — p. 377 References and further reading — p. 378 Assessment material — p. 379 CHAPTER 13 Capital investment decisions — p. 387 Stages of capital budgeting — p. 388 Discounted cash flow methods — p. 392 Sensitivity analysis — p. 397 Relevant cash flows in discounted cash flow analysis — p. 398 Payback method — p. 400 Accounting rate of return method — p. 402 Managing the project — p. 403 Income tax factors — p. 404 Capital budgeting and inflation — p. 405 Summary — p. 406 References and further reading — p. 407 Assessment material — p. 408 PART II Case study problems — p. 417 201 Permaclean Products plc — p. 417 PART III Planning and budgetary control systems CHAPTER 14 Motivation, budgets and responsibility accounting — p. 422 Major features of budgets — p. 423 Roles of budgets — p. 424 Types of budget — p. 428 Financial planning models — p. 437 Kaizen budgeting — p. 438 Activity-based budgeting — p. 438 Budgeting and responsibility accounting — p. 440 Responsibility and controllability — p. 441 Summary — p. 443 Appendix: The cash budget — p. 443 References and further reading — p. 449 Assessment material — p. 450 CHAPTER 15 Flexible budgets, variances and management control: I — p. 459 Static budgets and flexible budgets — p. 460 Static-budget variances — p. 461 Steps in developing a flexible budget — p. 462 Flexible-budget variances and sales-volume variances — p. 463 Price variances and efficiency variances for inputs — p. 465 Impact of stocks — p. 471 Management uses of variances — p. 472 Flexible budgeting and activity-based costing — p. 475 An illustration of journal entries using standard costs — p. 477 Benchmarking and variance analysis — p. 478 Summary — p. 480 References and further reading — p. 481 Assessment material — p. 482 CHAPTER 16 Flexible budgets, variances and management control: II — p. 490 Planning of variable- and fixed-overhead costs — p. 491 Developing budgeted variable-overhead rates — p. 492 Variable-overhead cost variances — p. 493 Developing budgeted fixed-overhead rates — p. 497 Fixed-overhead cost variances — p. 498 Production-volume variance — p. 498 Integrated analysis of overhead cost variances — p. 500 Different purposes of manufacturing overhead cost analysis — p. 501 Journal entries for overhead costs and variances — p. 503 Engineered, discretionary and infrastructure costs — p. 505 Financial and non-financial performance measures — p. 506 Actual, normal and standard costing — p. 507 Activity-based costing and variance analysis — p. 510 Summary — p. 514 Reference and further reading — p. 515 Assessment material — p. 516 CHAPTER 17 Measuring yield, mix and quantity effects — p. 524 Input variances — p. 525 Direct materials yield and mix variances — p. 525 Direct manufacturing labour yield and mix variances — p. 530 Revenue and sales variances — p. 532 Variance analysis for multiple products — p. 533 Summary — p. 540 Assessment material — p. 541 PART III Case study problems — p. 549 301 Zeros plc — p. 549 302 Instrumental Ltd — p. 551 PART IV Management control systems and performance issues CHAPTER 18 Control systems and transfer pricing — p. 556 Management control systems — p. 557 Evaluating management control systems — p. 557 Organisational structure and decentralisation — p. 558 Choices about responsibility centres — p. 561 Transfer pricing — p. 561 An illustration of transfer pricing — p. 562 Market-based transfer prices — p. 565 Cost-based transfer prices — p. 566 Negotiated transfer prices — p. 569 A general guideline for transfer-pricing situations — p. 569 Transfer pricing and tax considerations — p. 570 Summary — p. 572 References and further reading — p. 573 Assessment material — p. 574 CHAPTER 19 Control systems and performance measurement — p. 585 Financial and non-financial performance measures — p. 586 Different performance measures — p. 587 Alternative definitions of investment — p. 593 Alternative performance measures — p. 594 Choosing targeted levels of performance and timing of feedback — p. 597 Distinction between managers and organisational units — p. 598 Performance measures at the individual activity level — p. 601 Environmental and ethical responsibilities — p. 602 Strategy and levers of control — p. 603 Summary — p. 605 References and further reading — p. 605 Assessment material — p. 607 PART IV Case study problems — p. 615 401 BBR plc — p. 615 PART V Strategy, quality, time and emerging issues CHAPTER 20 Strategy, the balanced scorecard and quality — p. 622 Strategy and strategic management accounting — p. 623 The balanced scorecard — p. 626 Quality improvement and reengineering at Chipset — p. 626 The four perspectives of the balanced scorecard — p. 627 Aligning the balanced scorecard to strategy — p. 628 Features of a good balanced scorecard — p. 630 Evaluating the success of a strategy — p. 632 Costs of quality under the balanced scorecard — p. 635 The internal-business-process perspective: analysing quality problems — p. 640 The learning-and-growth perspective: quality improvements — p. 642 Summary — p. 646 References and further reading — p. 647 Assessment material — p. 649 CHAPTER 21 Accounting, time and efficiency — p. 660 Just-in-time systems — p. 661 Major features of JIT production systems — p. 661 Enterprise resource planning (ERP) systems — p. 665 Backflush costing — p. 666 Managing goods for sale in retail organisations — p. 674 Challenges in estimating stock-related costs and their effects — p. 679 Just-in-time purchasing — p. 681 Stock costs and their management in manufacturing organisations — p. 684 Theory of constraints — p. 686 Balanced scorecards and time-based measures — p. 688 Summary — p. 689 References and further reading — p. 690 Assessment material — p. 691 CHAPTER 22 Emerging issues: digitalisation and sustainability — p. 702 Digitalisation is changing data — p. 703 Digital technologies are changing accounting — p. 705 The digitalised enterprise control loop — p. 708 Management accounting and sustainability — p. 709 Context and communication remain key — p. 715 Alternative definitions of investment — p. 716 Summary — p. 717 References and further reading — p. 717 Assessment material — p. 719 PART V Case study problems — p. 725 501 High-Tech Limited — p. 725 502 Tanner Pharmaceuticals and the price of a new drug — p. 732 503 Osram — p. 736 Appendix A: Solutions to selected exercises — p. 741