Cost Accounting Foundations & Evolutions

by Kinney, Michael R.; Prather-Kinsey, Jenice; Raiborn, Cecily A.

• ISBN13: 9780324235012
• ISBN10: 0324235011
• Edition: 6th
• Format: Hardcover
• Copyright: 2005-02-02
• Publisher: South-Western College Pub

Summary

The most practical, real-world presentation of cost accounting on the market, this book blends a traditional and proven method of teaching cost accounting with the integration of innovative topics. Cost topics are covered in the context of organizational strategy and operational tactics, as cost management decisions are sensitive to strategies driven by quality, cost, and innovation. Kinney, Prather-Kinsey, and Raiborn reinforce the material with real-world examples and visual illustrations that bring cost management techniques into the student's sphere of understanding. A flexible organization appropriate for either a one- or two- semester course--coupled with clear and abundant visual presentations--allows students to clearly understand difficult topics. The text's revised organizational structure streamlines chapter materials as well as reduces redundancy between cost accounting and other business courses.

Table of Contents

Introduction to Cost Accounting	2	(24)
Introducing Donna Krall	3	(1)
Comparison of Financial, Management, and Cost Accounting	4	(3)
Financial Accounting	4	(1)
Management Accounting	5	(1)
Cost Accounting	5	(2)
Cost Management	7	(1)
Organizational Strategy and the Cost Accountant	7	(6)
Developing Strategy	7	(2)
Value Chain	9	(2)
Balanced Scorecard	11	(2)
Competing in a Global Environment	13	(6)
Organizational Structure	13	(2)
Professional Ethics	15	(2)
Ethics in Multinational Corporations	17	(1)
Cost Accounting Standards	18	(1)
Revisiting Donna Krall	19	(1)
Comprehensive Review Module	20	(1)
Key Terms	21	(1)
Questions	21	(1)
Exercises	21	(5)
Cost Terminology and Cost Behaviors	26	(38)
Introducing General Motors	27	(1)
Cost Terminology	28	(1)
Direct and Indirect Costs	28	(1)
Cost Behaviors to Changes in Activity	29	(5)
Cost Classifications on the Financial Statements	32	(2)
The Conversion Process	34	(4)
Retailers versus Manufacturers/Service Companies	35	(3)
Manufacturers versus Service Companies	38	(1)
Stages of Production	38	(1)
Components of Product Cost	39	(3)
Direct Material	39	(1)
Direct Labor	39	(2)
Overhead	41	(1)
Accumulation and Allocation of Overhead	42	(5)
Actual Cost System	43	(2)
Cost of Goods Manufactured and Sold	45	(2)
Revisiting General Motors	47	(1)
Comprehensive Review Module	48	(4)
Key Terms	52	(1)
Questions	52	(1)
Exercises	52	(5)
Problems	57	(7)
Predermined Overhead Rates, Flexible Budgets, and Absortion/Variable Costing	64	(44)
Introducing Baby Gifts-N-Treasures	65	(1)
Normal Costing and Predetermined Overhead	66	(6)
Formula for Predetermined Overhead Rate	67	(1)
Applying Overhead to Production	68	(2)
Disposition of Underapplied and Overapplied Overhead	70	(2)
Alternative Capacity Measures	72	(1)
Separating Mixed Costs	72	(7)
High-Low Method	73	(1)
Least Squares Regression Analysis	74	(3)
Flexible Budgets	77	(1)
Plantwide versus Departmental Overhead Rates	78	(1)
Overview of Absorption and Variable Costing	79	(4)
Absorption and Variable Costing Illustrations	83	(2)
Comparison of the Two Approaches	85	(2)
Revisiting Baby Gifts-N-Treasures	87	(1)
Comprehensive Review Module	88	(5)
Key Terms	93	(1)
Questions	93	(1)
Exercises	93	(8)
Problems	101	(7)
Job Order Costing	108	(46)
Introducing Calvin Dayes, Custom Shoemaker	109	(1)
Methods of Product Costing	109	(2)
Costing Systems	110	(1)
Valuation Methods	111	(1)
Job Order Costing System	111	(2)
Job Order Costing: Details and Documents	113	(5)
Material Requisitions	113	(1)
Job Order Cost Sheet	114	(2)
Employee Time Sheets	116	(1)
Overhead	117	(1)
Completion of Production	117	(1)
Job Order Costing and Technology	118	(1)
Job Order Costing Illustration	118	(5)
Job Order Costing Using Standard Costs	123	(2)
Job Order Costing to Assist Managers	125	(1)
Custom Engineering	125	(1)
J. Madison's Custom Boats	126	(1)
Product and Material Losses in Job Order Costing	126	(3)
Generally Anticipated on All Jobs	127	(1)
Specifically Identified with a Particular Job	128	(1)
Abnormal Spoilage	128	(1)
Revisiting Calvin Dayes, Custom Shoemaker	129	(1)
Comprehensive Review Module	130	(4)
Key Terms	134	(1)
Questions	134	(1)
Exercises	134	(7)
Problems	141	(13)
Activity-Based Management and Activity-Based Costing	154	(42)
Introducing DynMcDermott Petroleum Operations Company	155	(1)
Activity-Based Management	155	(6)
Value-Added versus Non-Value-Added Activities	156	(3)
Manufacturing Cycle Efficiency	159	(2)
Cost Driver Analysis	161	(6)
Activity-Based Costing	167	(4)
Two-Step Allocation	167	(2)
Activity-Based Costing Illustrated	169	(1)
Short-Term and Long-Term Variable Costs	170	(1)
Determining Whether ABC is Appropriate	171	(3)
With Product Variety and Product Complexity	172	(1)
With Lack of Commonality in Overhead Costs	173	(1)
With Problems in Current Cost Allocations	174	(1)
With Changes in Business Environment	174	(1)
Criticisms of Activity-Based Costing	174	(3)
Revisiting DynMcDermott Petroleum Operations Company	177	(1)
Comprehensive Review Module	178	(2)
Key Terms	180	(1)
Questions	181	(1)
Exercises	181	(4)
Problems	185	(11)
Process Costing	196	(50)
Introducing Williamsburg Soap and Candle Company	197	(1)
Introduction to Process Costing	198	(3)
The Numerator	198	(1)
The Denominator	199	(1805)
Equivalent Units of Production	2004
Weighted Average and FIFO Process Costing Methods	201	(2)
EUP Calculations and Cost Assignments	203	(8)
Weighted Average Method	205	(4)
FIFO Method	209	(2)
Process Costing in a Multidepartment Setting	211	(2)
Process Costing with Standard Costs	213	(3)
Hybrid Costing Systems	216	(2)
Revisiting Williamsburg Soap and Candle Company	218	(1)
Appendix 1: Alternative Calculations of Weighted Average and FIFO Methods	218	(1)
Appendix 2: Spoilage	219	(4)
Comprehensive Review Module	223	(6)
Key Terms	229	(1)
Questions	229	(1)
Exercises	229	(7)
Problems	236	(10)
Standard Costing and Variance Analysis	246	(58)
Introducing Specialized Bicycle Components, Inc.	247	(1)
Development of a Standard Cost System	248	(4)
Material Standards	248	(2)
Labor Standards	250	(1)
Overhead Standards	251	(1)
Variance Computations	252	(2)
Material and Labor Variance Computations	254	(3)
Material Variances	254	(2)
Point of Purchase Material Variance Model	256	(1)
Labor Variances	257	(1)
Overhead Variances	257	(6)
Variable Overhead	258	(1)
Fixed Overhead	259	(2)
Alternative Overhead Variance Approaches	261	(2)
Standard Cost System Journal Entries	263	(2)
Why Standard Cost Systems Are Used	265	(3)
Clerical Efficiency	266	(1)
Motivation	266	(1)
Planning	266	(1)
Controlling	266	(1)
Decision Making	267	(1)
Performance Evaluation	268	(1)
Considerations in Establishing Standards	268	(1)
Appropriateness	268	(1)
Attainability	268	(1)
Changes in Standards Usage	269	(2)
Use of Ideal Standards and Theoretical Capacity	269	(1)
Adjusting Standards	270	(1)
Material Price Variance Based on Purchases Rather Than on Usage	271	(1)
Decline in Direct Labor	271	(1)
Conversion Cost as an Element in Standard Costing	271	(3)
Revisiting Specialized Bicycle Components, Inc.	274	(1)
Appendix: Mix and Yield Variances	274	(5)
Material Price, Mix, and Yield Variances	275	(2)
Labor Rate, Mix, and Yield Variances	277	(2)
Comprehensive Review Module	279	(7)
Key Terms	286	(1)
Questions	286	(1)
Exercises	286	(8)
Problems	294	(10)
The Master Budget	304	(48)
Introducing S & S Hinge Company	305	(1)
The Budgeting Process	306	(2)
Strategic Planning	306	(1)
Tactical Planning	306	(2)
The Master Budget	308	(19)
The Master Budget Illustrated	311	(1)
Sales Budget	312	(1)
Production Budget	312	(1)
Purchases Budget	313	(1)
Personnel Budget	314	(1)
Direct Labor Budget	314	(1)
Overhead Budget	315	(1)
Selling and Administrative Budget	316	(1)
Capital Budget	316	(1)
Cash Budget	317	(5)
Budgeted Financial Statements	322	(5)
Concluding Comments	327	(3)
Revisiting S & S Hinge Company	330	(1)
Appendix: Budget Manual	331	(1)
Comprehensive Review Module	332	(3)
Key Terms	335	(1)
Questions	335	(1)
Exercises	336	(5)
Problems	341	(11)
Break-Even Point and Cost-Volume-Profit Analysis	352	(40)
Introducing Ford Motor Company	353	(1)
The Break-Even Point	354	(1)
Formula Approach to Breakeven	355	(2)
CVP Analysis	357	(5)
Using Cost-Volume-Profit Analysis	357	(1)
Fixed Amount of Profit	358	(1)
Set Amount of Profit Per Unit	359	(3)
The Graph Approach to Breakeven	362	(2)
Traditional Approach	363	(1)
Profit-Volume Graph	364	(1)
The Income Statement Approach	364	(1)
Incremental Analysis for Short-Run Changes	365	(2)
Case 1	366	(1)
Case 2	366	(1)
Case 3	366	(1)
Case 4	367	(1)
CVP Analysis in a Multiproduct Environment	367	(2)
Margin of Safety	369	(1)
Operating Leverage	370	(2)
Underlying Assumptions of CVP Analysis	372	(2)
Revisiting Ford Motor Company	374	(1)
Comprehensive Review Module	375	(4)
Key Terms	379	(1)
Questions	379	(1)
Exercises	379	(6)
Problems	385	(7)
Relevant Information for Decision Making	392	(48)
Introducing Satyam Computer Services, Ltd.	393	(1)
The Concept of Relevance	393	(2)
Association with Decision	394	(1)
Importance to Decision Maker	394	(1)
Bearing on the Future	394	(1)
Sunk Costs	395	(1)
Relevant Costs for Specific Decisions	396	(1)
Outsourcing Decisions	397	(17)
Scarce Resources Decisions	403	(2)
Sales Mix Decisions	405	(4)
Special Order Decisions	409	(2)
Product Line and Segment Decisions	411	(3)
Revisiting Satyam Computer Services, Ltd.	414	(1)
Appendix: Linear Programming	414	(7)
Basics of Linear Programming	415	(1)
Formulating a LP Problem	415	(3)
Solving a LP Problem	418	(3)
Comprehensive Review Module	421	(3)
Key Terms	424	(1)
Questions	424	(1)
Exercises	424	(6)
Problems	430	(10)
Allocation of Joint Costs and Accounting for By-Products	440	(40)
Introducing Perdue Farms Incorporated	441	(1)
Outputs of a Joint Process	442	(1)
The Joint Process	443	(1)
The Joint Process Decision	444	(2)
Allocation of Joint Cost	446	(8)
Physical Measure Allocation	448	(1)
Monetary Measure Allocation	449	(5)
Accounting for By-Products and Scrap	454	(3)
Net Realizable Value Approach	455	(1)
Realized Value Approach	456	(1)
By-Products and Scrap in Job Order Costing	457	(2)
Joint Costs in Service and Not-For-Profit Organizations	459	(1)
Revisiting Perdue Farms Incorporated	460	(1)
Comprehensive Review Module	461	(4)
Key Terms	465	(1)
Questions	465	(1)
Exercises	465	(7)
Problems	472	(8)
Introduction to Cost Management Systems	480	(30)
Introducing Imperial Sugar Company	481	(1)
Introduction to Management Information and Control Systems	482	(2)
Defining a Cost Management System	484	(3)
Designing a Cost Management System	487	(6)
Organizational Form, Structure, and Culture	487	(2)
Organizational Mission and Core Competencies	489	(2)
Operations and Competitive Environment and Strategies	491	(2)
Determine Desired Outputs of CMS	493	(5)
Motivational Elements	493	(2)
Informational Elements	495	(1)
Reporting Elements	496	(2)
Perform Gap Analysis and Assess Improvements	498	(1)
Revisiting Imperial Sugar Company	499	(1)
Appendix: Cost Management System Conceptual Design Principles	499	(2)
Comprehensive Review Module	501	(1)
Key Terms	502	(1)
Questions	502	(1)
Exercises	502	(2)
Problems	504	(6)
Responsibility Accounting and Transfer Pricing in Decentralized Organizations	510	(48)
Introducing Johnson & Johnson	511	(1)
Decentralization	511	(2)
Responsibility Accounting Systems	513	(4)
Types of Responsibility Centers	517	(2)
Cost Centers	517	(1)
Revenue Centers	518	(1)
Profit Centers	518	(1)
Investment Centers	519	(1)
Service Department Cost Allocation	519	(3)
Reasons for Service Department Cost Allocation	520	(1)
Allocation Bases	520	(1)
Methods of Allocating Service Department Costs	521	(1)
Service Department Cost Allocation Illustration	522	(7)
Direct Method Allocation	523	(1)
Step Method Allocation	524	(2)
Algebraic Method Allocation	526	(3)
Transfer Pricing	529	(5)
Cost-Based Transfer Prices	531	(1)
Market-Based Transfer Prices	532	(1)
Negotiated Transfer Prices	532	(1)
Dual Pricing	533	(1)
Selecting a Transfer Pricing System	533	(1)
Transfer Prices in Multinational Settings	534	(2)
Revisiting Johnson & Johnson	536	(1)
Comprehensive Review Module	537	(4)
Key Terms	541	(1)
Questions	541	(1)
Exercises	542	(4)
Problems	546	(12)
Capital Budgeting	558	(46)
Introducing Merck & Co.	559	(1)
Capital Asset Acquisition	559	(1)
Use of Cash Flows in Capital Budgeting	560	(2)
Cash Flows Illustrated	562	(2)
Time Lines	563	(1)
Payback Period	563	(1)
Discounting Future Cash Flows	564	(1)
Discounted Cash Flow Methods	565	(5)
Net Present Value Method	565	(2)
Profitability Index	567	(1)
Internal Rate of Return	567	(3)
The Effect of Depreciation on After-Tax Cash Flows	570	(2)
Assumptions and Limitations of Methods	572	(1)
The Investment Decision	573	(3)
Is the Activity Worthy of an Investment?	574	(1)
Which Assets Can Be Used for the Activity?	574	(1)
Of the Available Assets for Each Activity, Which Is the Best Investment?	574	(1)
Of the ``Best Investments'' for All Worthwhile Activities, in Which Ones Should the Company Invest?	575	(1)
Ranking Multiple Capital Projects	576	(1)
Compensating for Risk in Capital Project Evaluation	577	(4)
Judgmental Method	578	(1)
Risk-Adjusted Discount Rate Method	578	(1)
Sensitivity Analysis	579	(2)
Postinvestment Audit	581	(1)
Revisiting Merck & Co.	582	(1)
Appendix 1: Time Value of Money	582	(2)
Present Value of a Single Cash Flow	583	(1)
Present Value of an Annuity	583	(1)
Appendix 2: Accounting Rate of Return	584	(1)
Comprehensive Review Module	585	(5)
Key Terms	590	(1)
Questions	590	(1)
Exercises	591	(4)
Problems	595	(9)
Managing Costs and Uncertainty	604	(46)
Introducing JetBlue Airways	605	(1)
Cost Control Systems	605	(2)
Understanding Cost Changes	607	(2)
Cost Changes Due to Cost Behavior	607	(1)
Cost Changes Due to Inflation/Deflation	607	(1)
Cost Changes Due to Supply/Supplier Cost Adjustments	608	(1)
Cost Changes Due to Quantity Purchased	609	(1)
Cost Containment	609	(1)
Cost Avoidance and Reduction	609	(2)
Committed Fixed Costs	611	(1)
Discretionary Costs	612	(8)
Controlling Discretionary Costs	613	(7)
Cash Management	620	(3)
What Variables Influence the Optimal Level of Cash?	621	(1)
What Are the Sources of Cash?	621	(1)
What Variables Influence the Cost of Carrying Cash?	622	(1)
Banking Relationships	623	(1)
Supply Chain Management	623	(2)
Information Technology and Purchasing	624	(1)
Advances in Authorizing and Empowering Purchases	624	(1)
Coping with Uncertainty	625	(6)
The Nature and Causes of Uncertainty	625	(1)
Four Strategies for Dealing with Uncertainty	626	(5)
Revisiting JetBlue Airways	631	(1)
Comprehensive Review Module	632	(3)
Key Terms	635	(1)
Questions	635	(1)
Exercises	635	(6)
Problems	641	(9)
Implementing Quality Concepts	650	(42)
Introducing The Ritz-Carlton Hotel Company, LLC	651	(1)
What is Quality?	652	(4)
Production View of Quality	652	(2)
Consumer View of Quality	654	(2)
Benchmarking	656	(2)
Total Quality Management	658	(3)
The Quality System	658	(1)
Employee Involvement	659	(1)
Product/Service Improvement	659	(1)
Long-Term Supplier Relationships	660	(1)
The Baldrige Award	661	(1)
Benefits of TQM	662	(1)
Types of Quality Costs	663	(3)
Measuring the Cost of Quality	666	(4)
Obtaining Information on Quality from the Balanced Scorecard and CMS	670	(2)
Quality as an Organizational Culture	672	(2)
Revisiting The Ritz-Carlton Hotel Company, LLC	674	(1)
Appendix: Assessing Quality Internationally	675	(3)
ISO	675	(1)
EFQM	676	(2)
Comprehensive Review Module	678	(3)
Key Terms	681	(1)
Questions	681	(1)
Exercises	682	(4)
Problems	686	(6)
Inventory and Production Management	692	(46)
Introducing Jezek Tool & Machine Co., LLC	693	(1)
Important Relationships in the Value Chain	693	(1)
Buying or Producing and Carrying Inventory	694	(2)
Understanding and Managing Production Activities and Costs	696	(5)
Product Life Cycles	697	(1)
Life Cycle and Target Costing	698	(3)
Just-in-Time Systems	701	(2)
Changes Needed to Implement JIT Manufacturing	703	(4)
Supplier Relationships and Distribution	703	(1)
Product Design	704	(1)
Product Processing	705	(1)
Plant Layout	705	(2)
Logistics of the JIT Environment	707	(2)
Accounting Implications of JIT	709	(6)
Flexible Manufacturing Systems and Computer-Integrated Manufacturing	714	(1)
Lean Enterprises	715	(1)
Theory of Constraints	715	(2)
Revisiting Jezek Tool & Machine Company, LLC	717	(1)
Appendix: Economic Order Quantity and Related Issues	717	(5)
Economic Order Quantity	717	(1)
Economic Production Run	718	(1)
Order Point and Safety Stock	719	(1)
Pareto Inventory Analysis	720	(2)
Comprehensive Review Module	722	(5)
Key Terms	727	(1)
Questions	727	(1)
Exercises	727	(5)
Problems	732	(6)
Emerging Management Practices	738	(32)
Introducing Albums, Inc.	739	(1)
The Changing Workplace	739	(1)
Business Process Reengineering	740	(2)
Downsizing, Layoffs, and Restructuring	742	(2)
Workforce Diversity	744	(1)
Enterprise Resource Planning (ERP) Systems	745	(4)
Strategic Alliances	749	(1)
Open-Book Management	750	(5)
Games People Play	751	(2)
Motivating Employees	753	(1)
Implementation Challenges	754	(1)
Environmental Management Systems	755	(3)
Revisiting Albums, Inc.	758	(1)
Comprehensive Review Module	759	(1)
Key Terms	760	(1)
Questions	760	(1)
Exercises	760	(4)
Problems	764	(6)
Performance Measurement, Balanced Scorecards, and Performance Rewards	770
Introducing Intel	771	(1)
Organization Mission Statements	772	(1)
Organizational Roles of Performance Measures	772	(2)
Internal Performance Measures	773	(1)
External Performance Measures	774	(1)
Designing a Performance Measurement System	774	(3)
General Criteria	775	(1)
Assess Progress toward Mission	775	(1)
Awareness of and Participation in Performance Measures	776	(1)
Appropriate Tools of Performance	776	(1)
Need for Feedback	776	(1)
Short-Term Financial Performance Measures for Management	777	(6)
Divisional Profits	777	(1)
Cash Flow	778	(1)
Return on Investment	778	(3)
Residual Income	781	(1)
Economic Value Added	782	(1)
Limitations of Return on Investment, Residual Income, and Economic Value Added	783	(1)
Differences in Perspectives	783	(1)
Nonfinancial Performance Measures	784	(5)
Selection of Nonfinancial Measures	785	(1)
Establishment of Comparison Bases	786	(1)
Use of Multiple Measures	786	(3)
Using a Balanced Scorecard for Measuring Performance	789	(2)
Performance Evaluation in Multinational Settings	791	(1)
Compensation Strategy	792	(1)
Pay-for-Performance Plans	793	(1)
Considerations in Setting Performance Measures	794	(3)
Degree of Control over Performance Output	795	(1)
Incentives Relative to Organizational Level	795	(1)
Performance Plans and Feedback	795	(1)
Worker Pay and Performance Links	796	(1)
Promoting Overall Success	796	(1)
Nonfinancial Incentives	796	(1)
Tax Implications of Compensation Elements	797	(1)
Ethical Considerations of Compensation	797	(1)
Global Compensation	797	(2)
Revisiting Intel	799	(1)
Comprehensive Review Module	800	(5)
Key Terms	805	(1)
Questions	805	(1)
Exercises	806	(3)
Problems	809
Appendix A: Present Value Tables	1	(1)
Glossary	1	(1)
Name Index	1	(2)
Organization Index	3	(2)
Subject Index	5