Management Accounting

by MORSE/DAVIS/HARTGRAVES

• ISBN13: 9780538878890
• ISBN10: 0538878894
• Format: Paperback
• Copyright: 1999-07-30
• Publisher: South-Western College Pub

Summary

New edition of a text that provides a framework for identifying and analyzing decision alternatives and for evaluating success in accomplishing organizational goals. Thirteen chapters discuss management accounting, activity and profitability cost analysis and planning, contribution analysis for decision making, value chain analysis and activity-based management, product costing and the manufacturing environment, designing product cost systems, inventory valuation approaches and management, operational budgeting, performance assessment, profitability analysis of strategic business segments, and strategic management of price, cost, quality, and capital expenditures.

Table of Contents

Welcome To Management Accounting	p. 1
Management Accounting: A Tool for Decision Making	p. 3
Financial Accounting Is Insufficient for Management	p. 4
Management Accounting Assists Internal Decision Makers	p. 5
Strategic Cost Management Provides the Big Picture	p. 6
Organizations: Their Missions, Goals, and Strategies	p. 7
Strategic Position Analysis	p. 10
The Role of Management Accounting in Goal Attainment	p. 12
Requirements of World-Class Competition	p. 14
Cost Drivers Influence Costs	p. 15
Structural Cost Drivers	p. 16
Organizational Cost Drivers	p. 18
Activity Cost Drivers	p. 18
Changing Cost Drivers and Cost Functions	p. 19
Management Accounting as an Empowerment Tool	p. 20
Measurement, Management, and Ethics	p. 22
Outcome Assessment	p. 23
Ethical Dilemmas	p. 23
Code of Ethics	p. 24
Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management	p. 25
Resolution of Ethical Conflict	p. 26
Activity Cost Analysis and Planning	p. 36
Unit Level Approach to Cost Behavior Analysis	p. 37
Four Basic Cost Behavior Patterns	p. 38
Other Factors Affecting Cost Behavior Patterns	p. 39
Total Cost Function for an Organization or Business Segment	p. 40
Relevant Range for Cost Functions	p. 40
Other Cost Behavior Patterns	p. 41
Committed and Discretionary Fixed Costs	p. 44
Cost Estimation with Unit Level Cost Drivers	p. 44
High-Low Cost Estimation	p. 45
Scatter Diagrams	p. 47
Least-Squares Regression Analysis	p. 48
Additional Issues in Cost Estimation	p. 50
Changes in Technology and Prices	p. 50
Matching Activity and Costs	p. 50
Identifying Activity Cost Drivers	p. 51
Alternative Cost Driver Classification Schemes	p. 52
Manufacturing Cost Hierarchy	p. 53
Customer Cost Hierarchy	p. 53
Cost Estimation with Unit and Nonunit Cost Drivers	p. 56
Errors with the Unit Level Approach	p. 57
Inaccurate Cost Predictions	p. 57
Inaccurate Assignment of Batch Level Costs	p. 58
Inaccurate Assignment of Product Level Costs	p. 60
Least-Squares Regression Analysis Using a Computer Spreadsheet	p. 62
Profitability Analysis and Planning	p. 80
Profitability Analysis with Unit Cost Drivers	p. 81
Assumptions	p. 82
The Profit Formula	p. 83
Contribution and Functional Income Statements	p. 85
Break-Even Point and Profit Planning	p. 87
Profit Planning	p. 87
CVP Graph	p. 88
Profit-Volume Graph	p. 88
Impact of Income Taxes	p. 89
Multiple Product Cost-Volume-Profit Analysis	p. 91
Operating Leverage	p. 92
Profitability Analysis with Unit and Nonunit Cost Drivers	p. 95
Multi-Level Contribution Income Statement	p. 95
Variations in Multi-Level Contribution Income Statements	p. 97
Contribution Analysis for Decision Making	p. 115
Identifying Relevant Costs	p. 116
Future Revenues May Be Relevant	p. 118
Outlay Costs May Be Relevant	p. 118
Sunk Costs Are Never Relevant	p. 120
Sunk Costs May Cause Ethical Dilemmas	p. 120
Disposal and Salvage Values	p. 121
Differential Analysis of Relevant Costs	p. 121
Predicting Relevant Costs	p. 122
Applications of Differential Analysis	p. 123
Multiple Changes in Profit Plans	p. 123
Special Orders	p. 125
Internal or External Acquisition of Components or Services (Outsourcing)	p. 127
Sell or Process Further	p. 130
How To Best Use Limited Resources	p. 131
Single Constraint	p. 131
Multiple Constraints	p. 134
Theory of Constraints	p. 134
Relevant Cost Information for Quantitative Models Such as Linear Programming	p. 136
Quantitative Models Are Decision Aids	p. 137
Linear Programming	p. 137
Incorporating an Activity-Cost Hierarchy with the Use of Integer Programming	p. 141
Value Chain Analysis and Activity-Based Management	p. 168
Elements of Strategic Cost Management	p. 169
The Importance of the Value Chain in Decision Analysis	p. 170
Usefulness of the Value Chain	p. 171
Value-Added and Value Chain Perspectives	p. 173
Determining the Entities in the Value Chain of a Product or Service	p. 174
Disaggregating an Entity Level Link into Internal Processes and Activities	p. 175
Process Map	p. 177
Storyboards and Employee Empowerment	p. 179
Process and Activity-Based Management	p. 179
Reducing Non-Value-Added Activities: A Goal of Continuous Improvement	p. 181
Activity Cost Data	p. 182
Activity-Based Costing	p. 182
Two-Stage Model	p. 183
Additional Considerations	p. 188
Product Costing and the Manufacturing Environment	p. 222
Inventory Costs in Various Types of Organizations	p. 223
Inventory Costs for Financial Reporting	p. 225
Product Costs and Period Costs	p. 225
Three Components of Product Costs	p. 226
A Closer Look at Manufacturing Overhead	p. 228
ABC and Inventory Costs for Financial Reporting	p. 230
The Manufacturing Environment	p. 231
Production Files and Records	p. 232
Impact of Computers on Manufacturing	p. 235
Job Costing for Products and Services	p. 236
Job Costing Illustrated	p. 238
Statement of Cost of Goods Manufactured	p. 243
Overapplied and Underapplied Overhead	p. 245
Job Costing in Service Organizations	p. 247
Process Costing	p. 247
The Cost of Production Report	p. 249
Weighted Average and First-In, First-Out Process Costing	p. 252
Process Costing in Service Organizations	p. 253
Designing Product Cost Systems	p. 277
Allocating Indirect Costs	p. 278
Cost Objectives	p. 279
Cost Pools	p. 279
Allocation Bases	p. 279
Types of Department Costs	p. 280
Service Department Cost Allocation	p. 281
Direct Method	p. 282
Step Method	p. 284
Linear Algebra Method	p. 286
Dual Rates	p. 286
ABC Product Costing	p. 288
The ABC Product Costing Model	p. 288
Activity-Based and Organizational-Based Costing Systems Compared	p. 290
The Product Costing Continuum Illustrated	p. 292
Applying Manufacturing Overhead with Plantwide Rates	p. 292
Applying Manufacturing Overhead with Departmental Rates	p. 293
Applying Manufacturing Overhead with Activity-Based Costing	p. 294
Limitations of Krown Drink ABC Illustration	p. 296
ABC Implementation Issues	p. 296
Inventory Valuation Approaches and Just-in-Time Inventory Management	p. 330
Inventory Valuation with Absorption and Variable Costing	p. 331
Basic Concepts	p. 332
Inventory Valuations	p. 333
Income Measurement Under Absorption and Variable Costing	p. 333
Sales Vary But Production Remains Constant	p. 334
Sales Remain Constant But Production Varies	p. 336
Summary and Reconciliation of Income Differences	p. 338
Evaluation and Comparison of Alternative Approaches to Inventory Valuation	p. 340
Arguments Favoring Variable Costing	p. 340
Arguments Opposing Variable Costing	p. 340
Comparison of Absorption and Variable Costing with Theory of Constraints and Activity-Based Costing Models	p. 341
Just-In-Time Inventory Management	p. 342
Reducing Raw Materials Inventory	p. 343
Reducing Work-In-Process Inventory	p. 343
Reducing Finished Goods Inventory	p. 345
Other Aspects of JIT	p. 345
Performance Evaluation and Record Keeping in a Just-In-Time Environment	p. 345
Performance Evaluation	p. 345
Simplified Record Keeping	p. 347
Strategic Management of Price, Cost, and Quality	p. 372
The Pricing Decision	p. 373
Economic Approaches to Pricing	p. 374
Cost-Based Approaches to Pricing	p. 375
Ethical and Legal Considerations in Pricing	p. 379
Target Costing	p. 380
Target Costing Is a Proactive Approach to Cost Management	p. 380
Target Costing Encourages Design for Manufacture	p. 380
Target Costing Reduces Time to Introduce New Products	p. 382
Target Costing Components	p. 382
Target Costing Requires Detailed Cost Information	p. 382
Target Costing Requires Coordination	p. 382
Short Product Life Cycles Increase the Importance of Target Costing	p. 382
Target Costing Helps Manage Life-Cycle Costs	p. 383
Continuous Improvement (Kaizen) Costing	p. 386
Quality Costs	p. 386
Quality of Design and Quality of Conformance	p. 387
Types of Quality Costs	p. 388
Quality Cost Trend Analysis	p. 391
International Organization for Standardization	p. 392
Benchmarking	p. 394
Strategic Management of Capital Expenditures	p. 421
Long-Range Planning and Capital Budgeting Procedures	p. 423
Capital Budgeting Models that Consider the Time Value of Money	p. 425
Organizing Expected Cash Flows	p. 425
Ethics and Predicting Cash Flows	p. 425
Net Present Value	p. 426
Internal Rate of Return	p. 428
Cost of Capital	p. 429
Capital Budgeting Models that Do Not Consider the Time Value of Money	p. 430
Payback Period	p. 430
Accounting Rate of Return	p. 431
Evaluation of Capital Budgeting Models	p. 432
Additional Aspects of Capital Budgeting	p. 433
Multiple Investment Criteria	p. 433
Evaluating Risk	p. 434
Total and Differential Analysis of Cash Flows	p. 436
Predicting Differential Costs and Revenues for High-Tech Investments	p. 437
Mutually Exclusive Investments	p. 440
Taxes in Capital Budgeting Decisions	p. 443
Depreciation Tax Shield	p. 443
Investment Tax Credit	p. 444
Time Value of Money	p. 447
Future Value	p. 447
Present Value	p. 447
Annuities	p. 449
Unequal Cash Flows	p. 450
Deferred Returns	p. 450
Table Approach to Determining the Internal Rate of Return	p. 453
Equal Cash Inflows	p. 453
Unequal Cash Inflows	p. 453
Operational Budgeting	p. 476
Reasons for Budgeting	p. 477
Budgets Compel Planning	p. 477
Budgets Improve Communications and Coordination	p. 477
Budgets Provide a Guide to Action	p. 478
Budgets Provide a Basis of Performance Evaluation	p. 478
General Approaches to Budgeting	p. 478
Budgeting with Unit Level Cost Drivers	p. 478
Budgeting with Unit and Nonunit Level Cost Drivers	p. 480
Activity-Based Budgets	p. 480
The Master Budget	p. 482
Sales Budget	p. 484
Purchases Budget	p. 484
Selling Expense Budget	p. 486
General and Administrative Expense Budget	p. 487
Cash Budget	p. 487
Budgeted Financial Statements	p. 490
Finalizing the Budget	p. 490
Budget Development and Human Behavior	p. 491
Employee Participation	p. 491
Role of the Budget Committee	p. 493
Budgeting Periods	p. 493
Forecasts	p. 494
Ethics	p. 495
Developing Budgets that Work	p. 495
Manufacturing Budgets	p. 497
Performance Assessment	p. 527
Responsibility Accounting	p. 528
Financial Planning Feedback	p. 530
Performance Reporting and Organizational Structures	p. 530
Financial Performance Measures	p. 531
Nonfinancial Performance Measures	p. 532
Types of Responsibility Centers	p. 534
Performance Reporting for Cost Centers	p. 535
Development of Flexible Budgets	p. 536
Flexible Budgets Emphasize Performance	p. 537
Standard Costs	p. 539
Relational and Discretionary Cost Centers	p. 540
Variance Analysis for Primary Variable Costs	p. 541
Materials Standards and Variances	p. 542
Overhead Standards and Variances	p. 547
Performance Reports for Revenue Centers	p. 548
Inclusion of Controllable Costs	p. 549
Revenue Centers as Profit Centers	p. 549
Variable Overhead Variances	p. 552
Interpreting Variable Overhead Variances	p. 553
Fixed Overhead Variances	p. 554
Reconciling Budgeted and Actual Income	p. 556
Profitability Analysis of Strategic Business Segments	p. 588
Strategic Business Segments	p. 589
Management Philosophies of Decentralized Operations	p. 590
Segment Reporting	p. 593
Multilevel Contribution Margin Income Statements	p. 594
Direct Versus Common Segment Costs	p. 597
Segment Decisions	p. 598
Transfer Pricing	p. 598
Management Considerations	p. 599
Determining Transfer Prices	p. 601
Suboptimization	p. 606
Evaluation Measures	p. 607
Return on Investment	p. 607
Investment Base	p. 609
Investment Center Income	p. 609
Asset Measurement	p. 610
Residual Income	p. 610
Economic Value-Added Residual Income	p. 610
Which Measurement Is Best?	p. 611
Performance Measurement Systems	p. 612
Value Chain Cases	p. 647
Glossary	p. 681
Index	p. 689
Check Figures	p. 701
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