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Cost Management : Accounting and Control,9780324233100
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Cost Management : Accounting and Control

by ;
Edition:
5th
ISBN13:

9780324233100

ISBN10:
0324233108
Format:
Hardcover
Pub. Date:
2/15/2005
Publisher(s):
South-Western College Pub

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Summary

COST MANAGEMENT emphasizes that changing conditions often require a change in systems. Emphasizing this point stresses the dynamic and exciting nature of the field. By taking a systems approach -- one that first covers functional-based cost and control and then activity-based cost systems -- students understand how to understand and manage any cost management system.

Author Biography

Don R. Hansen is Head of the School of Accounting at Oklahoma State University.

Table of Contents

Part 1: Foundation Concepts
1(177)
Introduction to Cost Management
3(25)
Financial Accounting versus Cost Management
3(1)
Factors Affecting Cost Management
4(6)
Global Competition
5(1)
Growth of the Service Industry
5(1)
Advances in Information Technology
5(1)
Advances in the Manufacturing Environment
6(2)
Customer Orientation
8(1)
New Product Development
8(1)
Total Quality Management
8(1)
Time as a Competitive Element
9(1)
Efficiency
9(1)
A Systems Approach
10(1)
Cost Management: A Cross-Functional Perspective
11(1)
The Need for Flexibility
11(1)
Behavioral Impact of Cost Information
12(1)
The Role of Today's Cost and Management Accountant
12(3)
Line and Staff Positions
12(2)
Information for Planning, Controlling, Continuous Improvement, and Decision Making
14(1)
Accounting and Ethical Conduct
15(1)
Benefits of Ethical Behavior
15(1)
Standards of Ethical Conduct for Management Accountants
16(1)
Certification
16(12)
The Certificate in Management Accounting
18(1)
The Certificate in Public Accounting
18(1)
The Certificate in Internal Auditing
18(10)
Basic Cost Management Concepts
28(39)
A Systems Framework
29(5)
Accounting Information Systems
29(3)
Relationship to Other Operational Systems and Functions
32(1)
Different Systems for Different Purposes
32(2)
Cost Assignment: Direct Tracing, Driver Tracing, and Allocation
34(3)
Cost Objects
35(1)
Accuracy of Assignments
35(2)
Product and Service Costs
37(4)
Different Costs for Different Purposes
38(1)
Product Costs and External Financial Reporting
39(2)
External Financial Statements
41(4)
Income Statement: Manufacturing Firm
42(3)
Income Statement: Service Organization
45(1)
Functional-Based and Activity-Based Cost Management Systems
45(22)
Functional-Based Cost Management Systems: A Brief Overview
45(1)
Activity-Based Cost Management Systems: A Brief Overview
46(2)
Choice of a Cost Management System
48(19)
Cost Behavior
67(54)
Basics of Cost Behavior
68(6)
Measures of Activity Output
68(1)
Fixed Costs
68(2)
Variable Costs
70(1)
Linearity Assumption
71(1)
Mixed Costs
72(1)
Time Horizon
73(1)
Resources, Activities, and Cost Behavior
74(6)
Flexible Resources
75(1)
Committed Resources
75(1)
Implications for Control and Decision Making
76(1)
Step-Cost Behavior
77(2)
Activities and Mixed Cost Behavior
79(1)
Methods for Separating Mixed Costs into Fixed and Variable Components
80(9)
The High-Low Method
81(1)
Scatterplot Method
82(3)
The Method of Least Squares
85(2)
Using Regression Programs
87(2)
Reliability of Cost Formulas
89(4)
Hypothesis Test of Parameters
89(1)
Goodness of Fit Measures
89(1)
Confidence Intervals
90(3)
Multiple Regression
93(2)
The Learning Curve and Nonlinear Cost Behavior
95(3)
Cumulative Average-Time Learning Curve
95(2)
Incremental Unit-Time Learning Curve
97(1)
Managerial Judgment
98(23)
Activity-Based Costing
121(57)
Unit-Level Product Costing
122(5)
Overhead Assignment: Plantwide Rates
123(1)
Disposition of Overhead Variances
124(2)
Overhead Application: Departmental Rates
126(1)
Limitations of Plantwide and Departmental Rates
127(6)
Non-Unit-Related Overhead Costs
127(1)
Product Diversity
128(1)
An Example Illustrating the Failure of Unit-Based Overhead Rates
128(5)
Activity-Based Costing System
133(9)
Activity Identification, Definition, and Classification
134(4)
Assigning Costs to Activities
138(1)
Assigning Secondary Activity Costs to Primary Activities
139(1)
Cost Objects and Bills of Activities
140(1)
Activity Rates and Product Costing
140(2)
Classifying Activities
142(1)
Reducing the Size and Complexity of an ABC System
142(4)
Approximately Relevant ABC Systems
143(1)
Equally Accurate Reduced ABC Systems
144(2)
ABC System Concepts
146(32)
ABC Database
147(1)
ABC and ERP Systems
148(30)
Part 2: Fundamental Costing and Control
178(306)
Product and Service Costing: Job-Order System
180(46)
Characteristics of the Production Process
180(5)
Manufacturing Firms versus Service Firms
181(3)
Unique versus Standardized Products and Services
184(1)
Setting Up the Cost Accounting System
185(6)
Cost Accumulation
186(1)
Cost Measurement
186(2)
Cost Assignment
188(2)
Choosing the Activity Level
190(1)
The Job-Order Costing System: General Description
191(4)
Overview of the Job-Order Costing System
191(1)
Materials Requisitions
192(1)
Job Time Tickets
193(1)
Overhead Application
194(1)
Unit Cost Calculation
195(1)
Job-Order Costing: Specific Cost Flow Description
195(9)
Accounting for Direct Materials
196(1)
Accounting for Direct Labor Cost
196(2)
Accounting for Overhead
198(1)
Accounting for Finished Goods Inventory
199(2)
Accounting for Cost of Goods Sold
201(2)
Accounting for Nonmanufacturing Costs
203(1)
Single versus Multiple Overhead Rates
204(2)
Appendix: Accounting for Spoilage in a Traditional Job-Order System
206(20)
Product and Service Costing: A Process Systems Approach
226(50)
Process-Costing Systems: Basic Operational and Cost Concepts
226(5)
Cost Flows
227(2)
The Production Report
229(1)
Unit Costs
230(1)
Process Costing with No Work-in-Process Inventories
231(2)
Service Organizations
231(1)
JIT Manufacturing Firms
232(1)
The Role of Activity-Based Costing
232(1)
Process Costing with Ending Work-in-Process Inventories
233(3)
Equivalent Units as Output Measures
233(1)
Cost of Production Report Illustrated
234(1)
Nonuniform Application of Productive Inputs
235(1)
Beginning Work-in-Process Inventories
236(1)
FIFO Costing Method
236(5)
Step 1: Physical Flow Analysis
237(1)
Step 2: Calculation of Equivalent Units
238(1)
Step 3: Computation of Unit Cost
238(1)
Step 4: Valuation of Inventories
238(1)
Step 5: Cost Reconciliation
239(2)
Journal Entries
241(1)
Weighted Average Costing Method
241(4)
Step 1: Physical Flow Analysis
241(1)
Step 2: Calculation of Equivalent Units
241(1)
Step 3: Computation of Unit Cost
242(1)
Step 4: Valuation of Inventories
243(1)
Step 5: Cost Reconciliation
243(1)
Production Report
243(1)
FIFO Compared with Weighted Average
243(2)
Treatment of Transferred-In Goods
245(4)
Step 1: Physical Flow Schedule
247(1)
Step 2: Calculation of Equivalent Units
247(1)
Step 3: Computation of Unit Costs
247(1)
Step 4: Valuation of Inventories
247(2)
Operation Costing
249(3)
Basics of Operation Costing
249(1)
Operation Costing Example
250(2)
Appendix: Spoiled Units
252(24)
Allocating Costs of Support Departments and Joint Products
276(49)
An Overview of Cost Allocation
276(6)
Types of Departments
277(2)
Types of Allocation Bases
279(1)
Objectives of Allocation
280(2)
Allocating One Department's Costs to Another Department
282(6)
A Single Charging Rate
282(1)
Dual Charging Rates
283(2)
Budgeted versus Actual Usage
285(2)
Fixed versus Variable Bases: A Note of Caution
287(1)
Choosing a Support Department Cost Allocation Method
288(7)
Direct Method of Allocation
288(2)
Sequential Method of Allocation
290(1)
Reciprocal Method of Allocation
291(3)
Comparison of the Three Methods
294(1)
Departmental Overhead Rates and Product Costing
295(1)
Accounting for Joint Production Processes
296(29)
Cost Separability and the Need for Allocation
297(1)
Distinction and Similarity between Joint Products and By-Products
298(1)
Accounting for Joint Product Costs
299(2)
Allocation Based on Relative Market Value
301(24)
Budgeting for Planning and Control
325(57)
The Role of Budgeting in Planning and Control
326(5)
Purposes of Budgeting
326(1)
The Budgeting Process
327(2)
Gathering Information for Budgeting
329(2)
Preparing the Operating Budget
331(7)
Operating Budgets for Merchandising and Service Firms
337(1)
Preparing the Financial Budget
338(7)
The Cash Budget
338(4)
Budgeted Balance Sheet
342(1)
Shortcomings of the Traditional Master Budgeting Process
342(3)
Flexible Budgets for Planning and Control
345(6)
Static Budgets versus Flexible Budgets
345(6)
Activity-Based Budgets
351(4)
The Behavioral Dimension of Budgeting
355(27)
Characteristics of a Good Budgetary System
356(26)
Standard Costing: A Functional-Based Control Approach
382(48)
Developing Unit Input Standards
383(2)
Establishing Standards
383(1)
Usage of Standard Costing Systems
384(1)
Standard Cost Sheets
385(2)
Variance Analysis and Accounting: Direct Materials and Direct Labor
387(9)
Calculating Direct Materials Price and Usage Variances
388(3)
Accounting for Direct Materials Price and Usage Variances
391(1)
Calculating Direct Labor Variances
391(2)
Accounting for the Direct Labor Rate and Efficiency Variances
393(1)
Investigating Direct Materials and Labor Variances
393(2)
Disposition of Direct Materials and Direct Labor Variances
395(1)
Variance Analysis: Overhead Costs
396(11)
Four-Variance Method: The Two Variable Overhead Variances
396(4)
Four-Variance Analysis: The Two Fixed Overhead Variances
400(4)
Accounting for Overhead Variances
404(1)
Two- and Three-Variance Analyses
405(2)
Mix and Yield Variances: Materials and Labor
407(23)
Direct Materials Mix and Yield Variances
407(1)
Direct Labor Mix and Yield Variances
408(22)
Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing
430(54)
Responsibility Accounting
431(1)
Types of Responsibility Centers
431(1)
The Role of Information and Accountability
431(1)
Decentralization
432(3)
Reasons for Decentralization
432(2)
The Units of Decentralization
434(1)
Measuring the Performance of Investment Centers
435(10)
Return on Investment
435(4)
Residual Income
439(2)
Economic Value Added
441(3)
Multiple Measures of Performance
444(1)
Measuring and Rewarding the Performance of Managers
445(5)
Incentive Pay for Managers---Encouraging Goal Congruence
445(1)
Managerial Rewards
445(3)
Measuring Performance in the Multinational Firm
448(2)
Transfer Pricing
450(1)
The Impact of Transfer Pricing on Income
450(1)
Setting Transfer Prices
451(33)
Market Price
451(1)
Negotiated Transfer Prices
452(5)
Cost-Based Transfer Prices
457(2)
Transfer Pricing and the Multinational Firm
459(25)
Part 3: Advanced Costing and Control
484(250)
Strategic Cost Management
486(62)
Strategic Cost Management: Basic Concepts
487(6)
Strategic Positioning: The Key to Creating and Sustaining a Competitive Advantage
487(2)
Value-Chain Framework, Linkages, and Activities
489(2)
Organizational Activities and Cost Drivers
491(1)
Operational Activities and Drivers
492(1)
Value-Chain Analysis
493(8)
Exploiting Internal Linkages
493(3)
Exploiting Supplier Linkages
496(2)
Exploiting Customer Linkages
498(3)
Life-Cycle Cost Management
501(8)
Product Life-Cycle Viewpoints
501(2)
Interactive Viewpoint
503(4)
Role of Target Costing
507(2)
Just-In-Time (JIT) Manufacturing and Purchasing
509(4)
Inventory Effects
510(1)
Plant Layout
511(1)
Grouping of Employees
512(1)
Employee Empowerment
513(1)
Total Quality Control
513(1)
JIT and Its Effect on the Cost Management System
513(35)
Traceability of Overhead Costs
514(1)
Product Costing
515(1)
JIT's Effect on Job-Order and Process-Costing Systems
516(1)
Backflush Costing
516(32)
Activity-Based Management
548(42)
The Relationship of Activity-Based Costing and Activity-Based Management
549(1)
Process Value Analysis
550(4)
Driver Analysis: Defining Root Causes
550(1)
Activity Analysis: Identifying and Assessing Value Content
550(3)
Assessing Activity Performance
553(1)
Financial Measures of Activity Efficiency
554(9)
Reporting Value- and Non-Value-Added Costs
554(2)
Trend Reporting of Non-Value-Added Costs
556(1)
Drivers and Behavioral Effects
557(1)
The Role of Kaizen Standards
557(1)
Benchmarking
558(1)
Activity Flexible Budgeting
559(3)
Activity Capacity Management
562(1)
Implementing Activity-Based Management
563(3)
Discussion of the ABM Implementation Model
563(2)
Why ABM Implementations Fail
565(1)
Financial-Based versus Activity-Based Responsibility Accounting
566(24)
Assigning Responsibility
567(1)
Establishing Performance Measures
568(1)
Evaluating Performance
569(1)
Assigning Rewards
570(20)
The Balanced Scorecard: Strategic-Based Control
590(31)
Activity-Based versus Strategic Based Responsibility Accounting
591(4)
Assigning Responsibility
592(1)
Establishing Performance Measures
592(2)
Performance Measurement and Evaluation
594(1)
Assigning Rewards
595(1)
Basic Concepts of the Balanced Scorecard
595(8)
Strategy Translation
595(1)
The Financial Perspective, Objectives, and Measures
596(2)
Customer Perspective, Objectives, and Measures
598(1)
Process Perspective, Objectives, and Measures
599(3)
Learning and Growth Perspective
602(1)
Linking Measures to Strategy
603(3)
The Concept of a Testable Strategy
604(1)
Strategic Feedback
605(1)
Strategic Alignment
606(15)
Communicating the Strategy
606(1)
Targets and Incentives
607(1)
Resource Allocation
608(13)
Quality Cost Management
621(43)
Costs of Quality
622(6)
The Meaning of Quality
623(1)
Defining Quality Costs
624(1)
Quality Cost Measurement
625(3)
Reporting Quality Costs
628(5)
Quality Cost Reports
628(1)
Distribution of Quality Costs: The Acceptable Quality View
628(2)
Distribution of Quality Costs: Zero-Defects View
630(2)
The Role of Activity-Based Cost Management
632(1)
Quality Cost Information and Decision Making
633(4)
Decision Making Contexts
633(2)
Certifying Quality Through ISO 9000
635(2)
Controlling Quality Costs
637(27)
Choosing the Quality Standard
637(2)
Types of Quality Performance Reports
639(25)
Productivity Measurement and Control
664(31)
Productive Efficiency
665(1)
Partial Productivity Measurement
665(3)
Partial Productivity Measurement Defined
666(1)
Partial Measures and Measuring Changes in Productive Efficiency
667(1)
Advantages of Partial Measures
668(1)
Disadvantages of Partial Measures
668(1)
Total Productivity Measurement
668(4)
Profile Productivity Measurement
668(2)
Profit-Linked Productivity Measurement
670(2)
Price-Recovery Component
672(1)
Measuring Changes in Activity and Process Efficiency
672(23)
Activity Productivity Analysis
673(2)
Process Productivity Analysis
675(1)
Process Productivity Model
676(3)
Quality and Productivity
679(16)
Environmental Costs: Measurement and Control
695(39)
Defining, Measuring, and Controlling Environmental Costs
696(9)
The Ecoefficiency Paradigm
696(2)
Competing Paradigms
698(1)
Environmental Costs Defined
699(1)
Environmental Cost Report
700(2)
Environmental Cost Reduction
702(2)
An Environmental Financial Report
704(1)
Environmental Costing
705(2)
Environmental Product Costs
705(1)
Unit-Based Environmental Cost Assignments
705(1)
Activity-Based Environmental Cost Assignments
706(1)
Life-Cycle Cost Assessment
707(4)
Product Life Cycle
707(1)
Assessment Stages
708(3)
Strategic-Based Environmental Responsibility Accounting
711(23)
Environmental Perspective
711(2)
The Role of Activity Management
713(21)
Part 4: Decision Making
734(233)
Cost-Volume-Profit Analysis
736(45)
The Break-Even Point in Units
737(4)
Operating-Income Approach
737(1)
Contribution-Margin Approach
738(1)
Profit Targets
739(1)
After-Tax Profit Targets
740(1)
Break-Even Point in Sales Dollars
741(4)
Profit Targets
744(1)
Comparison of the Two Approaches
745(1)
Multiple Product Analysis
745(4)
Break-Even Point in Units
745(3)
Sales Dollars Approach
748(1)
Graphical Representation of CVP Relationships
749(4)
The Profit-Volume Graph
749(1)
The Cost-Volume-Profit Graph
749(2)
Assumptions of Cost-Volume-Profit Analysis
751(2)
Changes in the CVP Variables
753(6)
Introducing Risk and Uncertainty
755(4)
Sensitivity Analysis and CVP
759(1)
CVP Analysis and Activity-Based Costing
759(22)
Example Comparing Conventional and ABC Analysis
760(1)
Strategic Implications: Conventional CVP Analysis versus ABC Analysis
761(1)
CVP Analysis and JIT
762(19)
Activity Resource Usage Model and Tactical Decision Making
781(42)
Tactical Decision Making
782(3)
The Tactical Decision-Making Process
782(2)
Qualitative Factors
784(1)
Relevant Costs and Revenues
785(3)
Relevant Costs Illustrated
785(1)
Irrelevant Cost Illustrated
786(1)
Relevant Costs and Benefits in International Trade
786(2)
Relevancy, Cost Behavior, and the Activity Resource Usage Model
788(2)
Flexible Resources
788(1)
Committed Resources
788(2)
Illustrative Examples of Tactical Decision Making
790(33)
Make-or-Buy Decisions
790(4)
Keep-or-Drop Decisions
794(3)
Special-Order Decisions
797(2)
Decisions to Sell or Process Further
799(2)
Relevant Costing and Ethical Behavior
801(22)
Pricing and Profitability Analysis
823(55)
Basic Pricing Concepts
824(2)
Demand and Supply
824(1)
Price Elasticity of Demand
824(1)
Market Structure and Price
825(1)
Pricing Policies
826(3)
Cost Based Pricing
826(2)
Target Costing and Pricing
828(1)
Other Pricing Policies
829(1)
The Legal System and Pricing
829(3)
Predatory Pricing
829(1)
Price Discrimination
830(1)
Ethics
831(1)
Measuring Profit
832(7)
Reasons for Measuring Profit
832(2)
Absorption-Costing Approach to Measuring Profit
834(2)
Variable-Costing Approach to Measuring Profit
836(3)
Profitability of Segments
839(7)
Profit by Product Line
839(4)
Divisional Profit
843(1)
Customer Profitability
843(2)
Overall Profit
845(1)
Analysis of Profit-Related Variances
846(3)
Sales Price and Price Volume Variances
846(1)
Contribution Margin Variance
847(1)
Market Share and Market Size Variances
848(1)
The Product Life Cycle
849(3)
Limitations of Profit Measurement
852(26)
Capital Investment
878(51)
Capital Investment Decisions
879(2)
Payback and Accounting Rate of Return: Nondiscounting Methods
881(2)
Payback Period
881(2)
Accounting Rate of Return
883(1)
The Net Present Value Method
883(2)
The Meaning of NPV
884(1)
Weighted Average Cost of Capital
884(1)
An Example Illustrating Weighted Average Cost of Capital
885(1)
Internal Rate of Return
885(2)
Example with Uniform Cash Flows
885(2)
IRR and Uneven Cash Flows
887(1)
NPV versus IRR: Mutually Exclusive Projects
887(3)
NPV Compared with IRR
888(2)
Example: Mutually Exclusive Projects
890(1)
Computing After-Tax Cash Flows
890(9)
Inflationary Adjustments
892(1)
Conversion of Gross Cash Flows to After-Tax Cash Flows
892(7)
Capital Investment: Advanced Technology and Environmental Considerations
899(6)
How Investment Differs
900(1)
How Estimates of Operating Cash Flows Differ
900(1)
An Example: Investing in Advanced Technology
901(1)
Salvage Value
902(1)
Discount Rates
903(2)
Appendix A: Present Value Concepts
905(3)
Future Value
905(1)
Present Value
906(1)
Present Value of an Uneven Series of Cash Flows
906(1)
Present Value of a Uniform Series of Cash Flows
907(1)
Appendix B: Present Value Tables
908(21)
Inventory Management: Economic Order Quantity, JIT, and the Theory of Constraints
929(38)
Just-in-Case Inventory Management
930(5)
Justifying Inventory
930(1)
Economic Order Quantity: A Model for Balancing Acquisition and Carrying Costs
931(1)
Calculating EOQ
932(1)
When to Order or Produce
933(1)
Demand Uncertainty and Reordering
933(1)
An Example Involving Setups
934(1)
EOQ and Inventory Management
934(1)
JIT Inventory Management
935(8)
A Pull System
936(1)
Setup and Carrying Costs: The JIT Approach
937(1)
Due-Date Performance: The JIT Solution
938(1)
Avoidance of Shutdown and Process Reliability: The JIT Approach
938(3)
Discounts and Price Increases: JIT Purchasing versus Holding Inventories
941(1)
JIT's Limitations
941(2)
Basic Concepts of Constrained Optimization
943(4)
One Binding Internal Constraint
943(1)
Internal Binding Constraint and External Binding Constraint
944(1)
Multiple Internal Binding Constraints
944(3)
Theory of Constraints
947(20)
Operational Measures
947(2)
Five-Step Method for Improving Performance
949(18)
Glossary 967(12)
Subject Index 979(24)
Company Index 1003


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