Cost Accounting

by Carter, William K.

• ISBN13: 9780759338098
• ISBN10: 0759338094
• Edition: 14th
• Format: Paperback
• Copyright: 2005-08-01
• Publisher: Cengage Learning

Summary

Designed for an introductory course at the undergraduate or graduate level, this dynamic text presents an updated, real-world approach to cost accounting. Cost Accounting, 14e demonstrates the fundamentals and logic of alternative accounting systems and methods. The text emphasizes the use of accounting information in planning and controlling business systems, and in supporting a variety of management decisions. Cost Accounting, 14e aso offers specific consideration to decision-making and human behavioral matters.

Table of Contents

Part 1 Costs: Concepts and Objectives
Management, the Controller, and Cost Accounting	1	(1)
Learning Objectives	1	(1)
Management	1	(4)
Planning	2	(1)
Organizing	3	(1)
Control	3	(1)
Authority, Responsibility, and Accountability	4	(1)
The Organization Chart	4	(1)
The Controller's Participation in Planning and Control	5	(1)
The Cost Department	6	(1)
The Role of Cost Accounting	7	(5)
Budgeting	9	(1)
Controlling Costs	10	(1)
Pricing	10	(1)
Determining Profits	10	(1)
Choosing Among Alternatives	11	(1)
Cost Accounting and Manufacturing Technology	11	(1)
Certification and Ethics	12	(1)
Influence of Private and Governmental Organizations	12
Taxation	12	(2)
Cost Accounting Standards Board	14
Cost Concepts and the Cost Accounting Information System	1	(1)
Learning Objectives	1	(1)
The Cost Concept	1	(3)
Cost Objects	2	(1)
Traceability of Costs to Cost Objects	2	(2)
Cost Traceability in Service Industries	4	(1)
The Cost Accounting Information System	4	(5)
Chart of Accounts	5	(1)
Electronic Data Processing	6	(1)
Sensitivity to Changing Methods	7	(1)
Nonfinancial Performance Measures	7	(2)
Classifications of Costs	9	(7)
Costs in Relation to the Product	9	(3)
Costs in Relation to the Volume of Production	12	(2)
Costs in Relation to Manufacturing Departments or Other Segments	14	(1)
Costs in Relation to an Accounting Period	15	(1)
Costs in Relation to a Decision, Action, or Evaluation	15	(1)
Appendix: The Balanced Scorecard	16
The Scorecard Perspectives	17	(2)
A Series of Predictions	19	(2)
Scorecards Aid in Communication	21
Cost Behavior Analysis	1	(1)
Learning Objectives	1	(1)
Classifying Cost	1	(3)
Fixed Cost	1	(1)
Variable Cost	2	(1)
Semivariable Cost	3	(1)
Separating Fixed and Variable Costs	4
High and Low Points Method	6	(1)
Scattergraph Method	7	(2)
Method of Least Squares	9	(7)
Method of Least Squares for Multiple Independent Variables	16
Part 2 Cost Accumulation
Cost Systems and Cost Accumulation	1	(1)
Learning Objectives	1	(1)
Flow of Production Costs	1	(7)
Reporting the Results of Operations	8	(3)
Income Statement	8	(1)
Balance Sheet	8	(2)
Statement of Cash Flows	10	(1)
Cost Systems	11	(1)
Cost Accumulation	12
Job Order Costing	12	(1)
Process Costing	13	(1)
Aspects Common to Both Job Order and Process Costing	14	(1)
Blended Methods	14	(2)
Backflush Costing	16
Job Order Costing	1	(1)
Learning Objectives	1	(1)
Overview of Job Order Costing	1	(2)
Accounting for Materials	3	(2)
Materials Purchased	3	(1)
Materials Used	4	(1)
Accounting for Labor	5	(2)
Factory Labor Cost Incurred	5	(1)
Factory Labor Costs Distributed	6	(1)
Accounting for Factory Overhead	7	(2)
Actual Factory Overhead Incurred	7	(1)
Estimated Factory Overhead Applied	8	(1)
Accounting for Jobs Completed and Products Sold	9	(2)
Job Order Costing in Service Businesses	11
Process Costing	1	(1)
Learning Objectives	1	(1)
Process Cost Accumulation	1	(6)
Costing by Departments	2	(1)
Physical Production Flow	3	(1)
Accounting for Materials, Labor, and Factory Overhead Costs	4	(3)
The Cost of Production Report	7	(8)
Increase in Quantity of Production When Materials Are Added	11	(4)
Appendix: Process Costing with a Fifo Cost Flow Assumption	15
Increase in Quantity of Production When Materials Are Added	19
The Cost of Quality and Accounting for Production Losses	1	(1)
Learning Objectives	1	(1)
The Cost of Quality	2	(5)
Types of Quality Costs	2	(1)
Total Quality Management	2	(2)
Continuous Quality Improvement	4	(2)
Measuring and Reporting the Cost of Quality	6	(1)
Accounting for Production Losses in a Job Order Cost System	7	(5)
Accounting for Scrap	7	(1)
Accounting for Spoiled Goods	8	(2)
Accounting for Rework	10	(2)
Accounting for Production Losses in a Process Cost System	12	(8)
Spoilage Attributable to Internal Failures	12	(4)
Normal Production Shrinkage	16	(4)
Appendix: Process Costing with a Fifo Cost Flow Assumption	20
Spoilage Attribute to Internal Failures	20	(4)
Normal Production Shrinkage	24
Costing By-Products and Joint Products	1	(1)
Learning Objectives	1	(1)
By-Products and Joint Products Defined	1	(2)
Nature of By-Products and Joint Products	2	(1)
Joint Costs	2	(1)
Difficulties in Costing By-Products and Joint Products	2	(1)
Methods of Costing By-Products	3	(4)
Method 1: Recognition of Gross Revenue	3	(2)
Method 2: Recognition of Net Revenue	5	(1)
Method 3: Replacement Cost Method	5	(1)
Method 4: Market Value (Reversal Cost) Method	6	(1)
Underlying Accounting Theory	7	(1)
Methods of Allocating Joint Production Cost to Joint Products	7	(5)
Market Value Method	7	(3)
Average Unit Cost Method	10	(1)
Weighted-Average Method	10	(1)
Quantitative Unit Method	11	(1)
Federal Income Tax Laws and the Costing of Joint Products and By-Products	12	(1)
Joint Cost Analysis for Managerial Decisions and Profitability Analysis	12	(1)
Ethical Considerations	13
Part 3 Planning and Control of Costs
Materials: Controlling, Costing, and Planning	1	(1)
Learning Objectives	1	(1)
Materials Procurement and Use	1	(9)
Purchase of Materials	2	(1)
Purchases of Supplies, Services, and Repairs	3	(1)
Purchasing Forms	3	(1)
Receiving	4	(1)
Invoice Approval and Data Processing	5	(1)
Cost of Acquiring Materials	6	(2)
Storage and Use of Materials	8	(1)
Issuing and Costing Materials	8	(1)
Materials Subsidiary Records	9	(1)
Quantitative Models	10	(7)
Planning Materials Requirements	10	(1)
Economic Order Quantity	11	(3)
The EOQ Formula and Production Runs	14	(1)
Determining the Time to Order	14	(1)
Order Point Formula	15	(2)
Computer Simulation for Materials Requirements Planning	17	(1)
Materials Control	17	(2)
Materials Control Methods	18	(1)
Control of Obsolete and Surplus Inventory	19	(1)
Appendix: Inventory Costing Methods	19
First In, First Out (Fifo)	20	(1)
Average Cost	20	(2)
Last In, First Out (Lifo)	22	(1)
Comparison of Costing Methods	23	(1)
CASB Costing of Materials	24	(1)
Lower of Cost or Market	24	(1)
Interim Financial Reporting of Inventory	24
Just-in-Time and Backflushing	1	(1)
Learning Objectives	1	(1)
Just-in-Time	1	(8)
JIT and Velocity	3	(1)
JIT and Production Losses	4	(2)
JIT and Purchasing	6	(1)
JIT and Factory Organization	7	(1)
JIT---A Balanced View	8	(1)
Backflushing	9
The Essence of Backflush Costing	10	(1)
A Basic Financial Accounting Analogy	11	(1)
Illustration of Backflush Costing	11
Labor: Controlling and Accounting for Costs	1	(1)
Learning Objectives	1	(1)
Productivity and Labor Costs	1	(3)
Planning Productivity	2	(1)
Measuring Productivity	2	(1)
Economic Impact of Productivity	3	(1)
Increasing Productivity by Better Management of Human Resources	3	(1)
Incentive Wage Plans	4	(4)
Purpose of an Incentive Wage Plan	4	(1)
Types of Incentive Wage Plans	5	(2)
Organizational Incentive (Gainsharing) Plans	7	(1)
Time Standards and Learning Curve Theory	8	(2)
Organization for Labor Cost Accounting and Control	10	(5)
Personnel Department	11	(1)
Production Planning Department	11	(1)
Timekeeping Department	12	(2)
Payroll Department	14	(1)
Cost Department	15	(1)
Department Interrelationships and Labor Cost Control and Accounting	15	(1)
Ethical Considerations	15	(2)
Appendix: Accounting for Personnel-Related Costs	17
Overtime Earnings	17	(1)
Bonus Payments and Deferred Compensation Plans	18	(1)
Vacation Pay	19	(1)
Guaranteed Annual Wage Plans	20	(1)
Pension Plans	21	(1)
Additional Legislation Affecting Labor-Related Costs	22	(2)
Labor-Related Deductions	24	(1)
Recording Labor Costs	25
Factory Overhead: Planned, Actual, and Applied	1	(1)
Learning Objectives	1	(1)
The Nature of Factory Overhead	1	(1)
Use of a Predetermined Overhead Rate	2	(1)
Factors Considered in Selecting Overhead Rates	3	(7)
Base to Be Used	3	(5)
Selection of Activity Level	8	(2)
Including or Excluding Fixed Overhead	10	(1)
Calculation of an Overhead Rate	10	(1)
Actual Factory Overhead	11	(1)
Applied Overhead and the Over- or Underapplied Amount	12	(5)
Applying Factory Overhead	12	(1)
Over- or Underapplied Factory Overhead	13	(1)
Disposition of Over- or Underapplied Amount	14	(3)
Changing Overhead Rates	17
Factory Overhead: Departmentalization	1	(1)
Learning Objectives	1	(1)
Departmentalization	1	(1)
Producing and Service Departments	2	(1)
Selection of Producing Department	2	(1)
Selection of Service Departments	3	(1)
Direct Departmental Costs	3	(2)
Supervision, Indirect Labor, and Overtime	3	(1)
Labor Fringe Benefits	4	(1)
Indirect Materials and Supplies	4	(1)
Repairs and Maintenance	4	(1)
Equipment Depreciation	4	(1)
Indirect Departmental Costs	5	(1)
Establishing Departmental Overhead Rates	6	(10)
Estimating Direct Departmental Costs	9	(1)
Factory Survey	9	(1)
Estimating and Allocating Indirect Costs	9	(1)
Distributing Service Department Costs	10	(5)
Calculating Departmental Overhead Rates	15	(1)
Using Departmental Overhead Rates	16	(1)
Actual Factory Overhead---Departmentalized	16	(1)
Steps at End of Fiscal Period	17	(2)
Multiple Overhead Rates	19	(3)
Overhead Departmentalization in Nonmanufacturing Businesses and Not-for Profit Organizations	22
Activity Accounting: Activity-Based Costing and Activity-Based Management	1	(1)
Learning Objectives	1	(1)
Activity-Based Costing	1	(4)
Levels of Costs and Drivers	2	(3)
Comparison of ABC and Traditional Costing	5	(1)
ABC and Product Cost Distortion	5	(5)
Strategic Advantage of ABC	10	(4)
Example of ABC Implementation	14	(1)
Strengths and Weaknesses of ABC	15	(2)
Activity-Based Management	17
Behavioral Changes	19	(1)
Cost Control	19
Part 4 Budgeting and Standard Costs
Budgeting: Profits, Sales, Costs, and Expenses	1	(1)
Learning Objectives	1	(1)
Profit Planning	1	(1)
Setting Profit Objectives	2	(1)
Long-Range Profit Planning	2	(3)
Short-Range Budgets	3	(1)
Advantages of Profit Planning	4	(1)
Limitations of Profit Planning	4	(1)
Principles of Budgeting	5	(3)
The Budget Committee	5	(1)
Budget Development and Implementation	6	(1)
Budgeting and Human Behavior	7	(1)
The Complete Periodic Budget	8	(14)
Sales Budget	8	(4)
Production Budget	12	(1)
Manufacturing Budgets	13	(6)
Budgeting Commercial Expenses	19	(3)
Budgeted Income Statement	22	(1)
Budgeted Balance Sheet	23
Budgeting: Capital Expenditures, Research and Development Expenditures, and Cash; PERT/Cost	1	(1)
Learning Objectives	1	(1)
Capital Expenditures Budget	1	(1)
Evaluating Capital Expenditures	2	(1)
Short- and Long-Range Capital Expenditures	2	(1)
Research and Development Budget	2	(3)
Form of a Research and Development Budget	3	(1)
Accounting for Research and Development Costs	4	(1)
Cash Budget	5	(4)
Purpose and Nature of a Cash Budget	5	(1)
Preparation of a Periodic Cash Budget	6	(1)
Development of Daily Cash Budget Detail	7	(1)
Electronic Cash Management	8	(1)
Planning and Budgeting for Nonmanufacturing Businesses and Not-for-Profit Organizations	9	(2)
Nonmanufacturing Businesses	9	(1)
Not-for-Profit Organizations	9	(2)
Zero-Base Budgeting	11	(1)
Computerized Budgeting	11	(1)
Prospective Financial Information for External Users	12	(1)
PERT and PERT/Cost Systems for Planning and Control	13	(3)
The PERT System	13	(2)
The PERT/Cost System	15	(1)
Computer Applications	16	(1)
Probabilistic Budgets	16
Responsibility Accounting and Reporting	1	(1)
Learning Objectives	1	(1)
Responsibility Accounting and Cost Control---the Traditional View	1	(10)
Organizational Structure	2	(1)
Determining Who Controls Cost	3	(2)
Responsibility for Overhead Costs	5	(3)
Responsibility Reporting	8	(1)
Fundamental Characteristics of Responsibility Reports	8	(2)
Responsibility-Reporting Systems Illustrated	10	(1)
Reviewing the Reporting Structure	10	(1)
The Flexible Budget and Variance Analysis	11	(7)
Preparing a Flexible Budget	12	(4)
Preparing a Variance Report	16	(2)
Responsibility Accounting and Reporting---An Alternative View	18
Dysfunctional Behavior of Managers	18	(2)
Usefulness of the Data to Managers	20
Standard Costing: Setting Standards and Analyzing Variances	1	(1)
Learning Objectives	1	(1)
Usefulness of Standard Costs	1	(2)
Setting Standards	3	(2)
Determining Standard Production	5	(2)
Determining Standard Cost Variances	7	(9)
Materials Standards and Variances	7	(2)
Labor Standards and Variances	9	(2)
Factory Overhead Standards and Variances	11	(5)
Mix and Yield Variances	16	(3)
Mix Variance	16	(1)
Yield Variance	17	(1)
Illustration of Mix and Yield Variances	17	(2)
Responsibility and Control of Variances	19	(9)
Causes of Variances	20	(6)
Tolerance Limits for Variance Control	26	(1)
Overemphasizing Variances	26	(2)
Appendix: Alternative Factory Overhead Variance Methods	28
Alternative Three-Variance Method	28	(1)
Four-Variance Method	29
Standard Costing: Incorporating Standards into the Accounting Records	1	(1)
Learning Objectives	1	(1)
Recording Standard Cost Variances in the Accounts	1	(1)
Standard Cost Accounting for Materials	2	(2)
Method 1	2	(1)
Method 2	3	(1)
Method 3	3	(1)
Standard Cost Accounting for Labor	4	(1)
Standard Cost Accounting for Factory Overhead	5	(1)
Two-Variance Method	6	(1)
Three-Variance Method	6	(1)
Standard Cost Accounting for Completed Products	6	(1)
Disposition of Variances	7	(7)
Variances Treated as Period Expenses	7	(3)
Variances Allocated to Cost of Goods Sold and Ending Inventories	10	(2)
The Logic of Disposing of Variances	12	(2)
Disposition of Variances for Interim Financial Reporting	14	(1)
Revision of Standard Costs	14	(1)
Broad Applicability of Standard Costing	15	(1)
Appendix: Alternative Factory Overhead Variance Methods	16
Alternative Three-Variance Method	16	(1)
Four-Variance Method	16
Part 5 Analysis of Costs and Profits
Direct Costing, Cost-Volume-Profit Analysis, and the Theory of Constraints	1	(1)
Learning Objectives	1	(1)
Direct Costing	2	(11)
Contribution Margin Defined	2	(1)
Internal Uses of Direct Costing	3	(4)
External Uses of Direct Costing	7	(6)
Cost-Volume-Profit Analysis	13	(10)
Constructing a Break-Even Chart	16	(2)
Cost-Volume-Profit Analysis for Decision Making	18	(5)
The Theory of Constraints	23
Measures Used in the Theory of Constraints	24	(1)
Using the Theory of Constraints	24	(1)
Examples of TOC Implementation	25	(1)
Embracing TOC as an Accounting Tool	26
Differential Cost Analysis	1	(1)
Learning Objectives	1	(1)
Differential Cost Studies	1	(2)
Examples of Differential Cost Studies	3	(14)
Accepting Additional Orders	4	(1)
Reducing the Price of a Special Order	5	(2)
Make-or-Buy Decisions	7	(2)
Decisions to Shut Down Facilities	9	(2)
Decisions to Discontinue Products	11	(2)
Additional Applications of Differential Cost Analysis	13	(4)
Appendix: Linear Programming	17
Maximization of Contribution Margin	17	(4)
Minimization of Cost	21	(1)
Simplex Method	22
Planning for Capital Expenditures	1	(1)
Learning Objectives	1	(1)
Planning for Capital Expenditures	1	(3)
Relating Plans to Objectives	1	(1)
Structuring the Framework	2	(1)
Searching for Proposals	2	(1)
Budgeting Capital Expenditures	2	(1)
Requesting Authority for Expenditures	3	(1)
Ethical Considerations	3	(1)
Evaluating Capital Expenditures	4	(13)
Classification of Capital Expenditures	5	(2)
Estimating Cash Flows	7	(4)
Inflationary Considerations in the Estimation of Cash Flows	11	(1)
Income Tax Considerations in the Estimation of Cash Flows	12	(5)
Economic Evaluation of Cash Flows	17	(1)
Controlling Capital Expenditures	17
Control While in Process	18	(1)
Follow-up of Project Results	18
Economic Evaluation of Capital Expenditures	1	(1)
Learning Objectives	1	(1)
The Cost of Capital	1	(1)
Economic Evaluation Techniques	2
The Payback Period Method	4	(1)
The Accounting Rate of Return Method	5	(2)
The Net Present Value Method	7	(5)
The Internal Rate of Return Method	12	(1)
The Error Cushion	13	(1)
Purchasing versus Leasing	14
Decision Making Under Uncertainty	1	(1)
Learning Objectives	1	(1)
Using Probabilities in Decision Making	1	(3)
Determining the Best Strategy Under Uncertainty	4	(9)
Payoff Tables	4	(7)
Decision Trees	11	(2)
Continuous Probability Distributions	13	(3)
Monte Carlo Simulations	16	(1)
Considering Uncertainty in Capital Expenditure Evaluation	16	(8)
Independent Cash Flows	19	(1)
Perfectly Correlated Cash Flows	19	(2)
Mixed Cash Flows	21	(1)
Evaluating Investment Risk	22	(2)
Incorporating Nonquantitative Factors into the Analysis	24
Profit Performance Measurements and Intracompany Transfer Pricing	1	(1)
Learning Objectives	1	(1)
Rate of Return on Capital Employed	1	(12)
The Formula	2	(1)
The Formula's Underlying Data	3	(3)
Using the Rate of Return on Capital Employed	6	(1)
Divisional Rates of Return	7	(2)
Graphs as Operating Guides	9	(1)
Advantages of Using the Return on Capital Employed	10	(1)
Limitations of Using the Return on Capital Employed	10	(1)
Multiple Performance Measures	11	(1)
Management Incentive Compensation Plans	12	(1)
Selecting Performance Measures	13	(1)
Intracompany Transfer Pricing	13
Transfer Pricing Based on Cost	15	(1)
Market-Based Transfer Pricing	16	(1)
Cost-Plus Transfer Pricing	16	(1)
Negotiated Transfer Pricing	17	(1)
Arbitrary Transfer Pricing	17	(1)
Dual Transfer Pricing	17
Glossary	1	(1)
Index	1