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Management Accounting (Custom Edition)

Management Accounting (Custom Edition)

ISBN 9781488609619
Edition 2
Publication Date
Purchase Type Buy New
Publisher Pearson Education
Author(s)
This product has been discontinued.
Overview

CONTENTS
About the Australian authors xi
About the US authors xii
Preface xiv
Acknowledgements xx
Photo credits 1
1 Management accounting in context 2
Management accounting, financial accounting and cost accounting 4
Sustainability 6
Strategic decisions and the management accountant 7
CONCEPTS IN ACTION: Management accounting beyond the numbers 8
Value chain and supply chain analysis 8
Decision making, planning and control: the five-step decision-making process 11
Key management accounting guidelines 14
Management accountants in organisations 15
Professional ethics 16
Problem for self-study 19
Decision points 20
Terms to learn 21
Assignment material 22
2 An introduction to costs terms and inventory costing 28
Costs and cost terminology 30
Direct costs and indirect costs 31
Cost behaviour patterns: variable costs and fixed costs 32
CONCEPTS IN ACTION: Changing cost structures using software as a service (SaaS)
vendors or application service providers (ASPs) 34
SUSTAINABILITY IN ACTION: How car sharing is helping reduce business
transportation costs 36
Total costs and unit costs 37
Business sectors, types of inventory, inventoriable costs and period costs 39
Illustrating the flow of inventoriable costs and period costs 41
Variable costing and absorption costing 46
Absorption costing and performance measures 52
A comparison of alternative inventory costing methods 54
Contribution margin versus gross margin 55
Measuring costs requires judgement 55
A framework for cost accounting and cost management 58
Problem for self-study 60
Decision points 62
Terms to learn 63
Assignment material 64
3 Determining how costs behave 76
Basic assumptions and examples of cost functions 78
SUSTAINABILITY IN ACTION: Cost savings from going green 80
Identifying cost drivers 81
The cause-and-effect criterion in choosing cost drivers 81
Cost drivers and the decision-making process 82
Cost estimation methods 83
Steps in estimating a cost function using quantitative analysis 85
Evaluating cost drivers of the estimated cost function 89
CONCEPTS IN ACTION: Activity-based costing: identifying cost and revenue drivers 92
Cost drivers and activity-based costing 92
Non-linear cost functions 93
Learning curves 94
Data collection and adjustment issues 98
Problem for self-study 100
Decision points 102
Terms to learn 103
Appendix 3-1: Regression analysis 104
Assignment material 112
4 Cost-volume-profit analysis 126
Essentials of CVP analysis 128
SUSTAINABILITY IN ACTION: Cleaner production and eco-efficiency—turning
waste into profit 132
Cost-volume-profit assumptions 132
Break-even point and target profit 133
CONCEPTS IN ACTION: The break-even point in the battle of the skies 135
Using CVP analysis for decision making 137
Sensitivity analysis and margin of safety 139
Cost planning and CVP 140
Effects of sales mix on income 143
Multiple cost drivers 144
CVP analysis in service and not-for-profit organisations 145
Problem for self-study 146
Decision points 147
Terms to learn 147
Appendix 4-1: Break-even points in variable costing and absorption costing 148
Appendix 4-2: Decision models and uncertainty 149
Assignment material 153
5 Product and service costing 166
Job-costing and process-costing systems 168
Job costing: an example 169
Time period used to calculate indirect cost rates 173
SUSTAINABILITY IN ACTION: It’s back to the future for the aviation industry 173
Normal costing 175
Variations from normal costing: a service sector example 177
Budgeted indirect costs and end-of-accounting-year adjustments 178
Process costing 181
Weighted-average method 186
Transferred-in costs in process costing 188
CONCEPTS IN ACTION: Wicked Wolf and Buderim Ginger 189
Hybrid costing systems 190
Problem for self-study 190
Decision points 192
Terms to learn 193
Appendix 5-1: First-in, first-out method 194
Assignment material 197
8 Decision making and relevant information 298
Information and the decision process 300
The concept of relevance 300
An illustration of relevance: choosing output levels 302
Insourcing-versus-outsourcing and make-versus-buy decisions 305
SUSTAINABILITY IN ACTION: The challenge-integrating sustainability
considerations in decision making 308
CONCEPTS IN ACTION: The changing benefits and costs of ‘offshoring’ 309
Opportunity costs and outsourcing 309
Product mix decisions with capacity constraints 313
Customer profitability, activity-based costing and relevant costs 314
Irrelevance of past costs and equipment-replacement decisions 318
Decisions and performance evaluation 320
Problem for self-study 321
Decision points 322
Terms to learn 323
Appendix 8-1: Linear programming 324
Assignment material 328
10 Master budget and responsibility accounting 372
Budgets and the budgeting cycle 374
SUSTAINABILITY IN ACTION: Budgeting for the environment 375
Advantages of budgets 376
Developing an operating budget 378
Steps in developing an operating budget 378
Financial planning models and sensitivity analysis 387
Budgeting and responsibility accounting 388
CONCEPTS IN ACTION: Budgeting with ERPs 389
Human aspects of budgeting 391
Kaizen budgeting 393
Budgeting in multinational companies 393
Problem for self-study 394
Decision points 395
Terms to learn 396
Appendix 10-1: The cash budget 397
Assignment material 402
11 Flexible budgets, direct cost variances and management control 418
The use of variances 420
SUSTAINABILITY IN ACTION: Small changes equal big savings for the environment 421
Standard costs 422
Static budgets and static-budget variances 424
Flexible budgets 425
Flexible-budget variances and sales-volume variances 426
Price variances and efficiency variances for direct cost inputs 428
Implementing standard costing 435
Management uses of variances 435
CONCEPTS IN ACTION: Hospitals use variance analysis to provide more
efficient, quality healthcare 437
Variance analysis and activity-based costing 438
Benchmarking and variance analysis 440
Problem for self-study 442
Decision points 443
Terms to learn 444
Appendix 11-1: Further variances: sales and substitutable inputs 444
Assignment material 452
12 Flexible budgets, overhead cost variances and management control 466
Planning of variable and fixed overhead costs 468
Standard costing at Webb Ltd 469
Developing budgeted variable overhead cost rates 469
Developing budgeted fixed overhead rates 470
Variable overhead cost variances 471
SUSTAINABILITY IN ACTION: Cleaner production = overhead savings 474
Fixed overhead cost variances 476
Production-volume variance 477
CONCEPTS IN ACTION: Variance analysis and standard costing help Sandoz
manage its overhead costs 479
Journal entries for fixed overhead costs and variances 479
Integrated analysis of overhead cost variances 481
Production-volume variance and sales-volume variance 484
Variance analysis and activity-based costing 485
Overhead variances in non-manufacturing and service settings 489
Financial and non-financial performance measures 489
Problem for self-study 490
Decision points 492
Terms to learn 493
Assignment material 494
13 Allocation of support-department costs, common costs and revenues 506
Allocating costs of a support department to operating departments 508
SUSTAINABILITY IN ACTION: The Qantas Group and resource consumption
(water, electricity and waste diverted directly to landfill) 513
Allocating costs of multiple support departments 513
Allocating common costs 520
Cost allocations and contracts 522
CONCEPTS IN ACTION: Cost allocations at Australia Post 522
Revenue allocation and bundled products 523
Revenue-allocation methods 523
Problem for self-study 526
Decision points 528
Terms to learn 529
Assignment material 529
Glossary 799
Index 809

Overview

CONTENTS
About the Australian authors xi
About the US authors xii
Preface xiv
Acknowledgements xx
Photo credits 1
1 Management accounting in context 2
Management accounting, financial accounting and cost accounting 4
Sustainability 6
Strategic decisions and the management accountant 7
CONCEPTS IN ACTION: Management accounting beyond the numbers 8
Value chain and supply chain analysis 8
Decision making, planning and control: the five-step decision-making process 11
Key management accounting guidelines 14
Management accountants in organisations 15
Professional ethics 16
Problem for self-study 19
Decision points 20
Terms to learn 21
Assignment material 22
2 An introduction to costs terms and inventory costing 28
Costs and cost terminology 30
Direct costs and indirect costs 31
Cost behaviour patterns: variable costs and fixed costs 32
CONCEPTS IN ACTION: Changing cost structures using software as a service (SaaS)
vendors or application service providers (ASPs) 34
SUSTAINABILITY IN ACTION: How car sharing is helping reduce business
transportation costs 36
Total costs and unit costs 37
Business sectors, types of inventory, inventoriable costs and period costs 39
Illustrating the flow of inventoriable costs and period costs 41
Variable costing and absorption costing 46
Absorption costing and performance measures 52
A comparison of alternative inventory costing methods 54
Contribution margin versus gross margin 55
Measuring costs requires judgement 55
A framework for cost accounting and cost management 58
Problem for self-study 60
Decision points 62
Terms to learn 63
Assignment material 64
3 Determining how costs behave 76
Basic assumptions and examples of cost functions 78
SUSTAINABILITY IN ACTION: Cost savings from going green 80
Identifying cost drivers 81
The cause-and-effect criterion in choosing cost drivers 81
Cost drivers and the decision-making process 82
Cost estimation methods 83
Steps in estimating a cost function using quantitative analysis 85
Evaluating cost drivers of the estimated cost function 89
CONCEPTS IN ACTION: Activity-based costing: identifying cost and revenue drivers 92
Cost drivers and activity-based costing 92
Non-linear cost functions 93
Learning curves 94
Data collection and adjustment issues 98
Problem for self-study 100
Decision points 102
Terms to learn 103
Appendix 3-1: Regression analysis 104
Assignment material 112
4 Cost-volume-profit analysis 126
Essentials of CVP analysis 128
SUSTAINABILITY IN ACTION: Cleaner production and eco-efficiency—turning
waste into profit 132
Cost-volume-profit assumptions 132
Break-even point and target profit 133
CONCEPTS IN ACTION: The break-even point in the battle of the skies 135
Using CVP analysis for decision making 137
Sensitivity analysis and margin of safety 139
Cost planning and CVP 140
Effects of sales mix on income 143
Multiple cost drivers 144
CVP analysis in service and not-for-profit organisations 145
Problem for self-study 146
Decision points 147
Terms to learn 147
Appendix 4-1: Break-even points in variable costing and absorption costing 148
Appendix 4-2: Decision models and uncertainty 149
Assignment material 153
5 Product and service costing 166
Job-costing and process-costing systems 168
Job costing: an example 169
Time period used to calculate indirect cost rates 173
SUSTAINABILITY IN ACTION: It’s back to the future for the aviation industry 173
Normal costing 175
Variations from normal costing: a service sector example 177
Budgeted indirect costs and end-of-accounting-year adjustments 178
Process costing 181
Weighted-average method 186
Transferred-in costs in process costing 188
CONCEPTS IN ACTION: Wicked Wolf and Buderim Ginger 189
Hybrid costing systems 190
Problem for self-study 190
Decision points 192
Terms to learn 193
Appendix 5-1: First-in, first-out method 194
Assignment material 197
8 Decision making and relevant information 298
Information and the decision process 300
The concept of relevance 300
An illustration of relevance: choosing output levels 302
Insourcing-versus-outsourcing and make-versus-buy decisions 305
SUSTAINABILITY IN ACTION: The challenge-integrating sustainability
considerations in decision making 308
CONCEPTS IN ACTION: The changing benefits and costs of ‘offshoring’ 309
Opportunity costs and outsourcing 309
Product mix decisions with capacity constraints 313
Customer profitability, activity-based costing and relevant costs 314
Irrelevance of past costs and equipment-replacement decisions 318
Decisions and performance evaluation 320
Problem for self-study 321
Decision points 322
Terms to learn 323
Appendix 8-1: Linear programming 324
Assignment material 328
10 Master budget and responsibility accounting 372
Budgets and the budgeting cycle 374
SUSTAINABILITY IN ACTION: Budgeting for the environment 375
Advantages of budgets 376
Developing an operating budget 378
Steps in developing an operating budget 378
Financial planning models and sensitivity analysis 387
Budgeting and responsibility accounting 388
CONCEPTS IN ACTION: Budgeting with ERPs 389
Human aspects of budgeting 391
Kaizen budgeting 393
Budgeting in multinational companies 393
Problem for self-study 394
Decision points 395
Terms to learn 396
Appendix 10-1: The cash budget 397
Assignment material 402
11 Flexible budgets, direct cost variances and management control 418
The use of variances 420
SUSTAINABILITY IN ACTION: Small changes equal big savings for the environment 421
Standard costs 422
Static budgets and static-budget variances 424
Flexible budgets 425
Flexible-budget variances and sales-volume variances 426
Price variances and efficiency variances for direct cost inputs 428
Implementing standard costing 435
Management uses of variances 435
CONCEPTS IN ACTION: Hospitals use variance analysis to provide more
efficient, quality healthcare 437
Variance analysis and activity-based costing 438
Benchmarking and variance analysis 440
Problem for self-study 442
Decision points 443
Terms to learn 444
Appendix 11-1: Further variances: sales and substitutable inputs 444
Assignment material 452
12 Flexible budgets, overhead cost variances and management control 466
Planning of variable and fixed overhead costs 468
Standard costing at Webb Ltd 469
Developing budgeted variable overhead cost rates 469
Developing budgeted fixed overhead rates 470
Variable overhead cost variances 471
SUSTAINABILITY IN ACTION: Cleaner production = overhead savings 474
Fixed overhead cost variances 476
Production-volume variance 477
CONCEPTS IN ACTION: Variance analysis and standard costing help Sandoz
manage its overhead costs 479
Journal entries for fixed overhead costs and variances 479
Integrated analysis of overhead cost variances 481
Production-volume variance and sales-volume variance 484
Variance analysis and activity-based costing 485
Overhead variances in non-manufacturing and service settings 489
Financial and non-financial performance measures 489
Problem for self-study 490
Decision points 492
Terms to learn 493
Assignment material 494
13 Allocation of support-department costs, common costs and revenues 506
Allocating costs of a support department to operating departments 508
SUSTAINABILITY IN ACTION: The Qantas Group and resource consumption
(water, electricity and waste diverted directly to landfill) 513
Allocating costs of multiple support departments 513
Allocating common costs 520
Cost allocations and contracts 522
CONCEPTS IN ACTION: Cost allocations at Australia Post 522
Revenue allocation and bundled products 523
Revenue-allocation methods 523
Problem for self-study 526
Decision points 528
Terms to learn 529
Assignment material 529
Glossary 799
Index 809

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