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9781844803491

Cost And Management Accounting: An Introduction

by
  • ISBN13:

    9781844803491

  • ISBN10:

    184480349X

  • Edition: 6th
  • Format: Paperback
  • Copyright: 2006-03-30
  • Publisher: CENGAGE Lrng Business Press
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Supplemental Materials

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Table of Contents

Preface and Acknowledgements xv
Walk through tour xxii
About the website xxv
PART 1 Introduction to Management and Cost Accounting
2(48)
Introduction to management accounting
5(22)
The users of accounting information
6(1)
Differences between management accounting and financial accounting
7(1)
The decision-making process
8(4)
Changing competitive environment
12(1)
Focus on customer satisfaction and new management approaches
13(3)
The impact of information technology
16(1)
International convergence of management accounting practices
17(1)
Functions of management accounting
18(2)
Summary of the contents of this book
20(1)
Guidelines for using this book
20(2)
Key terms and concepts
22(1)
Key examination points
23(2)
Review questions
25(2)
An introduction to cost terms and concepts
27(23)
Cost objects
28(1)
Direct and indirect costs
28(2)
Period and product costs
30(1)
Cost behaviour
31(4)
Relevant and irrelevant costs and revenues
35(2)
Avoidable and unavoidable costs
37(1)
Sunk costs
37(1)
Opportunity costs
37(1)
Incremental and marginal costs
38(1)
Job costing and process costing systems
39(1)
Maintaining a cost database
39(2)
Summary
41(1)
Key terms and concepts
42(1)
Key examination points
42(1)
Review questions
43(1)
Review problems
44(6)
PART 2 Cost Accumulation for Inventory Valuation and Profit Measurement
50(188)
Accounting for direct costs
53(34)
Accounting for labour costs
54(1)
Payroll accounting
55(1)
Accounting treatment of various labour cost items
56(1)
Materials recording procedure
57(3)
Pricing the issues of materials
60(4)
Issues relating to accounting for materials
64(1)
Quantitative models for the planning and control of stocks
65(1)
Relevant costs for quantitative models under conditions of certainty
65(1)
Determining the economic order quantity
66(3)
Assumptions of the EOQ formula
69(1)
Determining when to place the order
69(1)
Control of stocks through classification
70(2)
Materials requirement planning
72(1)
Just-in-time systems
73(2)
Summary
75(2)
Key terms and concepts
77(1)
Key examination points
77(2)
Review questions
79(1)
Review problems
80(7)
Cost assignment for indirect costs
87(42)
Assignment of direct and indirect costs
88(1)
Different costs for different purposes
89(1)
Cost-benefit issues and cost systems design
90(1)
Assigning direct costs to cost objects
91(1)
Plant-wide (blanket) overhead rates
92(1)
The two-stage allocation process
93(1)
An illustration of the two-stage process for a traditional costing system
94(8)
Extracting relevant costs for decision-making
102(1)
Budgeted overhead rates
103(1)
Under- and over-recovery of overheads
103(1)
Maintaining the database at standard costs
104(1)
Non-manufacturing overheads
105(2)
Summary
107(1)
Appendix 4.1: Inter-service department reallocation
108(5)
Appendix 4.2: Other allocation bases used by traditional systems
113(2)
Key terms and concepts
115(1)
Key examination points
116(1)
Review questions
117(1)
Review problems
118(11)
Accounting entries for a job costing system
129(28)
Control accounts
130(1)
Recording the purchase of raw materials
130(1)
Recording the issue of materials
131(3)
Accounting procedure for labour costs
134(2)
Accounting procedure for manufacturing overheads
136(1)
Non-manufacturing overheads
137(1)
Accounting procedures for jobs completed and products sold
138(1)
Costing profit and loss account
138(1)
Interlocking accounting
139(1)
Contract costing
139(5)
Work in progress valuation and amounts recoverable on contracts
144(1)
Summary
145(1)
Key terms and concepts
146(1)
Key examination points
146(3)
Review questions
149(1)
Review problems
150(7)
Process costing
157(38)
Flow of production and costs in a process costing system
158(1)
Process costing when all output is fully complete
158(8)
Process costing with ending work in progress partially complete
166(3)
Beginning and ending work in progress of uncompleted units
169(4)
Partially completed output and losses in process
173(1)
Process costing for decision-making and control
174(1)
Batch/operating costing
175(1)
Surveys of practice
176(1)
Summary
177(2)
Appendix 6.1: Losses in process and partially completed units
179(4)
Key terms and concepts
183(1)
Key examination points
183(2)
Review questions
185(1)
Review problems
186(9)
Joint and by-product costing
195(20)
Distinguishing between joint products and by-products
196(1)
Methods of allocating joint costs
196(8)
Irrelevance of joint cost allocations for decision-making
204(1)
Accounting for by-products
204(2)
By-products, scrap and waste
206(1)
Summary
207(1)
Key terms and concepts
208(1)
Key examination points
208(1)
Review questions
209(1)
Review problems
210(5)
Income effects of alternative cost accumulation systems
215(23)
External and internal reporting
216(1)
Variable costing
217(2)
Absorption costing
219(1)
Variable costing and absorption costing: a comparison of their impact on profit
220(2)
A mathematical model of the profit functions
222(1)
Some arguments in support of variable costing
223(1)
Some arguments in support of absorption costing
224(2)
Summary
226(1)
Appendix 8.1: Derivation of the profit function for an absorption costing system
227(1)
Key terms and concepts
228(1)
Key examination points
228(3)
Review questions
231(1)
Review problems
232(6)
PART 3 Information for Decision-making
238(184)
Cost--volume--profit analysis
241(32)
The economist's model
242(1)
The accountant's cost-volume-profit model
243(3)
A mathematical approach to cost-volume-profit analysis
246(4)
Margin of safety
250(1)
Constructing the break-even chart
250(1)
Alternative presentation of cost-volume-profit analysis
251(2)
Multi-product cost-volume-profit analysis
253(3)
Cost-volume-profit analysis assumptions
256(2)
Cost-volume-profit analysis and computer applications
258(1)
Summary
259(1)
Key terms and concepts
260(1)
Key examination points
260(3)
Review questions
263(1)
Review problems
264(9)
Cost estimation and cost behaviour
273(22)
General principles applying to estimating cost functions
274(1)
Cost estimation methods
275(7)
Tests of reliability
282(4)
A summary of the steps involved in estimating cost functions
286(1)
Summary
287(1)
Key terms and concepts
288(1)
Key examination points
288(1)
Review questions
289(1)
Review problems
289(6)
Measuring relevant costs and revenues for decision-making
295(36)
The meaning of relevance
296(1)
Importance of qualitative factors
297(1)
Special pricing decisions
297(5)
Product-mix decisions when capacity constraints exist
302(2)
Replacement of equipment - the irrelevance of past costs
304(2)
Outsourcing and make or buy decisions
306(4)
Discontinuation decisions
310(3)
Determining the relevant costs of direct materials
313(1)
Determining the relevant costs of direct labour
313(1)
Summary
313(2)
Appendix 11.1: Calculating optimum selling prices using differential calculus
315(1)
Key terms and concepts
316(1)
Key examination points
316(3)
Review questions
319(1)
Review problems
320(11)
The application of linear programming to management accounting
331(16)
Linear programming
332(2)
Graphical method
334(5)
Summary
339(1)
Key terms and concepts
339(1)
Key examination points
339(2)
Review questions
341(1)
Review problems
342(5)
Activity-based costing
347(28)
The need for a cost accumulation system in generating relevant cost information for decision-making
348(1)
Types of cost systems
348(1)
A comparison of traditional and ABC systems
349(1)
The emergence of ABC systems
350(1)
Volume-based and non-volume-based cost drivers
351(4)
An illustration of the two-stage process for an ABC system
355(5)
Designing ABC systems
360(2)
Activity hierarchies
362(1)
Cost versus benefits considerations
363(1)
Periodic review of an ABC database
364(1)
ABC in service organizations
364(2)
ABC cost management applications
366(3)
Summary
369(1)
Key terms and concepts
370(1)
Key examination points
370(1)
Review questions
371(1)
Review problems
372(3)
Decision-making under conditions of risk and uncertainty
375(16)
Probabilities
376(1)
Probability distributions and expected value
377(2)
Measuring the amount of uncertainty
379(1)
Decision-tree analysis
380(3)
Buying perfect and imperfect information
383(2)
Summary
385(1)
Key terms and concepts
385(1)
Key examination points
386(1)
Review questions
387(1)
Review problems
388(3)
Capital investment decisions
391(31)
The opportunity cost of an investment
392(1)
Compounding and discounting
393(2)
The concept of net present value
395(1)
Calculating net present values
396(2)
The internal rate of return
398(3)
Relevant cash flows
401(1)
Timing of cash flows
402(1)
Techniques that ignore the time value of money
402(1)
Payback method
402(5)
Accounting rate of return
407(1)
Qualitative factors
408(1)
Summary
408(2)
Appendix 15.1: Taxation and investment decisions
410(3)
Key terms and concepts
413(1)
Key examination points
414(1)
Review questions
415(1)
Review problems
416(6)
PART 4 Information for Planning, Control and Performance Measurement
422(118)
The budgeting process
425(30)
Relationship between budgeting and long-term planning
426(1)
The multiple functions of budgets
426(2)
Conflicting roles of budgets
428(1)
The budget period
428(1)
Administration of the budgeting process
429(1)
Stages in the budgeting process
430(4)
A detailed illustration
434(1)
Sales budget
434(4)
Production budget and budgeted stock levels
438(1)
Direct materials usage budget
438(1)
Direct materials purchase budget
439(1)
Direct labour budget
439(1)
Factory overhead budget
440(1)
Selling and administration budget
440(1)
Departmental budgets
441(1)
Master budget
442(1)
Cash budgets
443(1)
Final review
444(1)
Computerized budgeting
444(1)
Summary
445(1)
Key terms and concepts
446(1)
Key examination points
446(1)
Review questions
447(1)
Review problems
448(7)
Management control systems
455(34)
Different types of controls
456(3)
Cybernetic control systems
459(1)
Feedback and feed-forward controls
460(1)
Management accounting control systems
460(1)
Responsibility centres
461(2)
The nature of management accounting control systems
463(1)
The controllability principle
463(5)
Setting financial performance targets
468(1)
Participation in the budgeting and target-setting process
469(2)
Non-financial performance measures
471(1)
Activity-based cost management
472(2)
Summary
474(3)
Appendix 17.1: Responsibility in profit and investment centres
477(3)
Key terms and concepts
480(1)
Key examination points
480(1)
Review questions
481(1)
Review problems
482(7)
Standard costing and variance analysis
489(51)
Operation of a standard costing system
490(3)
Establishing cost standards
493(3)
Types of cost standards
496(3)
Variance analysis
499(1)
Material variances
499(4)
Material usage variance
503(1)
Total material variance
504(1)
Labour variances
504(1)
Wage rate variance
505(1)
Labour efficiency variance
506(1)
Total labour variance
507(1)
Variable overhead variances
507(1)
Variable overhead expenditure variance
507(1)
Variable overhead efficiency variance
508(1)
Similarities between materials, labour and overhead variances
509(1)
Fixed overhead expenditure or spending variance
509(1)
Sales variances
510(1)
Total sales margin variance
510(1)
Sales margin price variance
511(1)
Sales margin volume variance
512(1)
Reconciling budgeted profit and actual profit
512(1)
Standard absorption costing
512(2)
Volume variance
514(1)
Volume efficiency variance
515(1)
Volume capacity variance
515(1)
Summary of fixed overhead variances
516(1)
Reconciliation of budgeted and actual profit for a standard absorption costing system
516(1)
Performance reports
517(3)
Recording standard costs in the accounts
520(6)
Summary
526(3)
Key terms and concepts
529(1)
Key examination points
530(1)
Review questions
531(1)
Review problems
532(8)
Bibliography 540(3)
Appendices 543(3)
Answers to Review problems 546(40)
Case Studies available from the website 586(3)
Index 589

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