MANAGEMENT AND COST ACCOUNTING Seventh 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: management accounting’s most important challenge — p. 16 CHAPTER 2 An introduction to cost terms and purposes — p. 30 Costs in general — p. 31 Direct costs and indirect costs — p. 32 Cost drivers and cost management — p. 33 Cost behaviour patterns: variable costs and fixed costs — p. 34 Total costs and unit costs — p. 36 Financial statements, business sectors and the recognition of costs — p. 40 The many meanings of product costs — p. 44 Classification of costs — p. 45 CHAPTER 3 Job costing — p. 55 The building block concept of costing systems — p. 56 Job-costing and process-costing systems — p. 56 Job costing in service organisations using actual costing — p. 58 Normal costing — p. 60 Job costing in manufacturing — p. 62 An illustration of a job-costing system in manufacturing — p. 64 Budgeted indirect costs and end-of-period adjustments — p. 72 CHAPTER 4 Process costing — p. 85 Illustrating process costing — p. 86 Case 1: Process costing with no opening or closing work-in-progress stock — p. 87 Case 2: Process costing with no opening but a closing work-in-progress stock — p. 88 Case 3: Process costing with both some opening and some closing work-in-progress stock — p. 92 Weighted-average method — p. 93 First-in, first-out method — p. 96 Comparison of weighted-average and FIFO methods — p. 99 Standard-costing method of process costing — p. 101 Transferred-in costs in process costing — p. 104 Hybrid-costing systems — p. 111 CHAPTER 5 Cost allocation — p. 124 Purposes of cost allocation — p. 125 Cost allocation and costing systems — p. 126 Indirect-cost pools and cost allocation — p. 127 Allocating costs from one department to another — p. 129 Allocating costs of support departments — p. 133 Support department cost-allocation methods — p. 133 Allocating common costs — p. 139 Cost-allocation bases and cost hierarchies — p. 140 Is the product-costing system broken? — p. 142 CHAPTER 6 Cost allocation: joint-cost situations — p. 153 Meaning of joint products and by-products terms — p. 154 Why allocate joint costs? — p. 155 Approaches to allocating joint costs — p. 156 No allocation of joint costs — p. 164 Irrelevance of joint costs for decision making — p. 165 Accounting for by-products — p. 167 CHAPTER 7 Income effects of alternative stock-costing methods — p. 179 PART A: Stock-costing methods — p. 180 Variable costing and absorption costing — p. 180 Comparison of variable costing and absorption costing — p. 184 Performance measures and absorption costing — p. 190 PART B: Denominator-level concepts and absorption costing — p. 192 Alternative denominator-level concepts — p. 192 Effect on financial statements — p. 194 PART II Accounting information for decision making CHAPTER 8 Cost–volume–profit analysis — p. 216 Revenue drivers and cost drivers — p. 217 CVP assumptions — p. 218 The breakeven point — p. 218 The PV graph — p. 222 Impact of income taxes — p. 223 Sensitivity analysis and uncertainty — p. 224 Cost planning and CVP — p. 226 Effects of revenue mix on profit — p. 228 Not-for-profit organisations and CVP — p. 229 Contribution margin and gross margin — p. 229 CHAPTER 9 Determining how costs behave — p. 244 General issues in estimating cost functions — p. 245 The cause-and-effect criterion in choosing cost drivers — p. 248 Cost estimation approaches — p. 249 Steps in estimating a cost function — p. 250 Evaluating and choosing cost drivers — p. 256 Cost drivers and activity-based costing — p. 257 Big data, machine learning and cost analysis — p. 259 Non-linearity and cost functions — p. 259 Learning curves and non-linear cost functions — p. 261 CHAPTER 10 Relevant information for decision making — p. 284 Information and the decision process — p. 285 The concept of relevance — p. 286 An illustration of relevance: choosing output levels — p. 288 Outsourcing and make-or-buy decisions — p. 291 Opportunity costs, outsourcing and capacity constraints — p. 294 Product-mix decisions under capacity constraints — p. 298 Customer profitability and relevant costs — p. 300 Irrelevance of past costs and equipment-replacement decisions — p. 303 CHAPTER 11 Activity-based costing — p. 316 Undercosting and overcosting — p. 317 Costing system at Plastim Limited — p. 318 Refining a costing system — p. 321 Activity-based costing systems — p. 322 Implementing activity-based costing — p. 326 Comparing alternative costing systems — p. 331 From activity-based costing to activity-based management — p. 332 ABC and department-costing systems — p. 334 Implementing ABC systems — p. 335 ABC and the organisational context — p. 337 CHAPTER 12 Pricing, target costing and customer profitability analysis — p. 349 Major influences on pricing — p. 350 Costing and pricing for the short run — p. 351 Costing and pricing for the long run — p. 353 Target costing for target pricing — p. 357 Achieving the target cost per unit for Provalue — p. 360 Cost-plus pricing — p. 361 Life-cycle product budgeting and costing — p. 366 Customer profitability analysis — p. 369 Customer revenues — p. 369 Customer costs — p. 370 Customer profitability profiles — p. 372 CHAPTER 13 Capital investment decisions — p. 386 Stages of capital budgeting — p. 387 Discounted cash flow methods — p. 391 Sensitivity analysis — p. 396 Relevant cash flows in discounted cash flow analysis — p. 397 Payback method — p. 399 Accounting rate of return method — p. 401 Managing the project — p. 402 Income tax factors — p. 403 Capital budgeting and inflation — p. 404 PART III Planning and budgetary control systems CHAPTER 14 Motivation, budgets and responsibility accounting — p. 424 Major features of budgets — p. 425 Roles of budgets — p. 426 Types of budget — p. 430 Computer-based financial planning models — p. 439 Kaizen budgeting — p. 440 Activity-based budgeting — p. 441 Budgeting and responsibility accounting — p. 442 Responsibility and controllability — p. 444 CHAPTER 15 Flexible budgets, variances and management control: I — p. 462 Static budgets and flexible budgets — p. 463 Static-budget variances — p. 464 Steps in developing a flexible budget — p. 465 Flexible-budget variances and sales-volume variances — p. 466 Price variances and efficiency variances for inputs — p. 468 Impact of stocks — p. 472 Management uses of variances — p. 474 Flexible budgeting and activity-based costing — p. 477 An illustration of journal entries using standard costs — p. 479 Benchmarking and variance analysis — p. 481 CHAPTER 16 Flexible budgets, variances and management control: II — p. 492 Planning of variable- and fixed-overhead costs — p. 493 Developing budgeted variable-overhead rates — p. 494 Variable-overhead cost variances — p. 494 Developing budgeted fixed-overhead rates — p. 499 Fixed-overhead cost variances — p. 499 Production-volume variance — p. 500 Integrated analysis of overhead cost variances — p. 502 Different purposes of manufacturing overhead cost analysis — p. 503 Journal entries for overhead costs and variances — p. 505 Engineered, discretionary and infrastructure costs — p. 507 Financial and non-financial performance measures — p. 508 Actual, normal and standard costing — p. 509 Activity-based costing and variance analysis — p. 512 CHAPTER 17 Measuring yield, mix and quantity effects — p. 526 Input variances — p. 527 Direct materials yield and mix variances — p. 527 Direct manufacturing labour yield and mix variances — p. 531 Revenue and sales variances — p. 534 Variance analysis for multiple products — p. 535 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. 560 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 CHAPTER 19 Control systems and performance measurement — p. 585 Financial and non-financial performance measures — p. 586 Designing an accounting-based performance measure — p. 587 Different performance measures — p. 587 Alternative definitions of investment — p. 594 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 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. 627 The four perspectives of the balanced scorecard — p. 627 Aligning the balanced scorecard to strategy — p. 629 Features of a good balanced scorecard — p. 629 Evaluating the success of a strategy — p. 632 Costs of quality under the balanced scorecard — p. 636 The internal-business-process perspective: analysing quality problems — p. 640 The learning-and-growth perspective: quality improvements — p. 642 CHAPTER 21 Accounting, time and efficiency — p. 661 Just-in-time systems — p. 662 Major features of JIT production systems — p. 662 Enterprise resource planning (ERP) systems — p. 666 Backflush costing — p. 667 Managing goods for sale in retail organisations — p. 675 Challenges in estimating stock-related costs and their effects — p. 680 Just-in-time purchasing — p. 682 Stock costs and their management in manufacturing organisations — p. 685 Theory of constraints — p. 687 Balanced scorecards and time-based measures — p. 690 CHAPTER 22 Emerging issues: digital technologies, governance and sustainability — p. 704 Digital transformation is unstoppable — p. 705 Digital technologies and accounting — p. 707 The digitally advanced enterprise control loop — p. 709 Enterprise governance — p. 710 Environmental management accounting — p. 711 Management accounting changes highlight managerial context — p. 716