CONTENTS
PREFACE = XV
PART ONE COST ACCOUNTING FUNDAMENTALS
1 The Accountant's Role in the Organization = 1
Purposes of management accounting and financial accounting = 2
Elements of management control = 5
Cost-benefit approach = 8
The pervading duties of themanagement accountant = 9
Professional ethics = 15
PROBLEMS FOR SELF-STUDY = 15
SUMMARY = 16
TERMS TO LEARN = 18
ASSIGNMENT MATERIAL = 18
2 An Introduction to Cost Terms and Purposes = 24
Costs in general = 25
Direct and indirect costs = 27
Cost dirvers = 28
Variable costs and fixed costs = 29
Unit costs and total costs = 31
Manufacturing costs = 34
Costs as assets and expenses = 37
Some cost accounting language = 40
The many meanings of produce costs = 43
Classifications fo costs = 45
PROBLEM FOR SELF-STUDY = 45
SUMMARY = 47
TERMS TO LEARN = 48
ASSIGNMENT MATERIAL = 48
3 Cost-Volume-Profit Relationships = 58
Cost drivers and revenue drivers : The general case = 59
The breakeven point = 60
Cost-volume-profit assumptions = 65
Interrelationships of cost, volume, and profits = 67
Comparison of contribution margin and gross margin = 68
The P／V chart = 69
Effects of sales mix = 70
role of income taxes = 72
Measuring volume = 73
All data in dollars = 73
Nonprofit institutions and cost-volume-revenue analysis = 74
CVP models, personal computers, and spreadsheets = 75
PROBLEMS FOR SELF-STUDY = 76
SUMMARY = 77
TERMS TO LEARN = 78
ASSIGNMENT MATERIAL = 78
4 Job Costing in Manufacturing = 90
Choices in cost accounting systems = 91
Overview of two major cost objects : Departments and products = 92
Job-order product costing = 93
Illustrationof job-order accounting = 93
Applying factory overhead to products = 103
Control by responsibility centers = 112
Manufacturing is only one cost area of the value chain = 113
PROBLEMS FOR SELF-STUDY = 113
SUMMARY = 116
Appendix Supplementray description of ledger relationships = 116
TERMS TO LEARN = 121
ASSIGNMENT MATERIAL = 121
5 Job Costing for Services, Process Costing, and Activity-Based Accounting = 136
Part One Job costing for planning and control of services
General approach to planning and control = 137
Budgeting and pricing : Three alternatives = 138
PROBLEM FOR SELF-STUDY = 143
Part Two An introduction to process - costing systems
Mass production and broad averges = 143
Inventory accounting and journal entries = 145
Five Key steps in process costing = 146
PROBLEM FOR SELF-STUDY = 148
Part Three Activity-based accounting systems
Serving the product-costing purposes and the planning and control purpose = 150
Demands for activity-based accounting = 151
Illustration of activity-based accounting = 152
Major differences between typical systems and activity-based accounting systems = 156
Future of activity-based accounting = 157
PROBLEMS FOR SELF-STUDY = 158
SUMMARY = 159
TERMS TO LEARN = 160
ASSIGNMENT MNATERIAL = 160
PART TWO BUDGETS AND STANDARDS AS KEYS TO PLANNING AND CONTROL
6 Master Budget and responsibility Accounting = 170
Evolution of systems = 171
Major features of budgets] = 172
Advantage of budgets = 173
Types of budgets = 176
Illustration of master budget = 177
Sales forecasting - a difficult task = 184
Financial planning models and computer = 185
Reponsibility accountign = 186
Responsibility and controllability = 190
Human aspects of budgeting = 192
PROBLEM FOR SELF-STUDY = 192
SUMMARY = 192
Appendix The Cash budget = 193
TERMS TO LEARN = 198
ASSIGNMENT MATERIAL = 198
7 Flexble budgets and Standards : Ⅰ = 210
Evolution of accounting systems and the cost-benefit approach = 211
Part One Flexible budgets
Level 0 and level 1 Analysis : Static budget = 212
Level 2 Analysis : Flexible budget = 213
Level 3 Analysis : detailed variance = 217
General applicability of expections = 219
PROBLEM FOR SELF-STUDY = 221
Part Two Standard costs
Standard costs for materlas and labor = 222
Impact of investories = 228
General-ledger entries = 228
Standards used in nonmnanufacturing activities = 230
Standards for control = 231
Performance ameasurement using standards = 223
Controllability and variances = 233
Setup time = 235
When to investigate variances = 236
PROBLEMS FOR SELF-STUDY = 236
SUMMARY = 239
TERMS TO LEAN = 240
ASSIGNMENT MATERIAL = 240
8 Flexible Budgets and Standards : Ⅱ = 252
Variable factory overhead : Control and inventory costng = 253
Fixed factory overhead : Control and invenory costing = 257
Journal entries for overhead = 260
Standard, normal, and actual costing = 261
Analysis of fixed-factory-overhead variances = 262
4-variance, 3-variance, 2-variance overhead analysis of activity area = 266
Overhead variances in the ledger = 270
Checkpoints for analyziing variances = 271
Performance evaluation and variances = 272
PROBLEM FOR SELF-STUDY = 273
SUMMARY = 275
TERMS TO LEARN = 276
ASSIGNMENT MATERIAL = 276
9 Income Effects of Alternative Inventory costing Methods = 287
Part One : Variable and absorption costing
Role of fixed indirect manufacturing costs = 288
Comparison of standard variable costing and standard absorption costing = 292
Breakeven points in variable and absorption costing = 297
Performance measures and absorption costing = 298
PROBLEM FOR SELF-STUDY = 300
Part Two Role of various denominator levels in absorption costing
Characteristics of capacity = 301
Measurement of capacity = 301
Inventory and income effectts = 302
PROBLEM FOR SELF-STUDY = 305
Part Three Standard-cost variances and financial statments
Effects of prorations = 306
Adjusting inventories for external reporting = 308
Variances and interim reporting = 308
PROBLEM FOR SELF-STUDY = 310
SUMMARY = 311
Appendix Standard-cost variances : A more accurate approach to proration = 311
TERMS TO LEARN = 316
ASSIGNMENT MATERIAL = 316
10 Determining How Costs Behave = 331
General approach to estimating cost functions = 332
Assumptions underlying cost classifications = 335
Cost estimation approaches = 337
Steps in estimating a cost function = 339
Data collection and adjustment issues = 343
Cost behavior in activity areas = 344
Nonlinearity and cost functions = 346
Learning curves and cost functions = 347
PROBLEM FOR SELF-STUDY = 351
SUMMARY = 353
Appendix Inflation and cost estimation = 353
TERMS TO LEARN = 356
ASSIGNMENT MATERIAL = 356
PART THREE COST INFORMATION FOR VARIOUS DECISION AND CONTROL PURPOSES
11 Relevance, Costs, and the Decision Process = 365
Information and the decision process = 366
The meaning of relevane = 368
Illustration of relevance : Choosing volume levels = 369
Other illustrations of relevance = 373
Opportunity costs, relevance, and accounting records = 376
irrelevance of past costs = 377
How managers behave = 379
PROBLEM FOR SELF-STUDY = 381
SUMAMRY = 383
Appendix Cost terms used for different purposes = 383
TERMS TO LEARN = 385
ASSIGNMENT MATERIAL = 385
12 Pricing Decisions, Product Profitability Decisions, and Cost Information
Major influences on pricing = 396
Product-cost categories = 397
Pricing for the short run = 398
Pricing for the long run = 401
Life-cycle product budgeting and costing = 403
Undercosting and overcosting products = 406
Target costing as a pricing guide = 409
Effects of antitrust laws on pricing = 411
PROBLEM FOR SELF-STUDY = 412
SUMMARY = 414
TERMS TO LEAN = 415
ASSIGNMENT MATERIAL = 415
13 Managment control Systems : Choice and Application = 425
Management control systems = 426
Evlauating management control systems = 427
An exampl of motivation : Sales compensation plans = 430
Engineered, discretionary, and committed costs = 432
Classifyng costs in functional areas = 433
Budgeting for discretionary costs = 434
Work measurement = 436
Budgeting nonmanufacturing costs = 437
Financial and nonfinancial measures for a personnel department = 439
PROBLEM FOR SELF-STUDY = 443
SUMMARY = 444
Appendix Pronoting and monitoring the effectiveness of efficiency of discretionary-cost centers = 444
TERMS TO LEARN = 446
ASSIGNMENT MATERIAL = 446
PART FOUR COST ALLOCATION AND MORE ON COSTING SYSTEMS
14 Cost Allocation : Ⅰ = 454
The terminology of cost allocation = 455
Stages Ⅰ, Ⅱ, and Ⅲ cost allocations = 456
Purposes of cost allocaiton = 458
Criteria to guide cost allocation decisions = 459
The general process of csot allocation = 461
Allocating costs from one department to another = 464
Allocating costs of service departments = 468
Allocation of common costs = 473
Trends in cost allocation practices = 474
PROBLEM FOR SELF-STUDY = 475
SUMMARY = 477
TERMS TO LEARN = 478
ASSIGNMENT MATERIAL = 478
15 Cost Allocation : Ⅱ = 491
Illustrating the general process of application = 492
Choosing indeirect cost pool categories = 495
Evolving trends in cost pools = 497
Choosing cost application bases = 498
Evolving trends in application bases = 501
The contributon approach to cost allocation = 502
Cost justification and reimbursement = 505
PROBLEM FOR SELF-STUDY = 507
SUMMARY = 509
TERMS TO LEARN = 510
ASSIGNMENT MATERIAL = 510
16 Cost Allocation : Joint products and Byproducts = 526
Meaning of terms = 527
Why allocate joint costs? = 528
Methods of allocating joint costs = 529
Irrelevance of joint costs for decision making = 537
Accountign for byproducts = 539
PROBLEM FOR SELF-STUDY = 542
SUMMARY = 543
TERMS TO LEARN = 545
ASSIGNMENT MATERIAL = 545
17 Process-Costing Systems = 556
Five key steps = 557
Weighted-averge method = 560
First-in, first-out mehtod = 564
Comparison of FIFO and weighted-average methods = 567
Standard costs and process costs = 568
Transfers in process costing = 572
Additional aspects of process costing = 577
PROBLEM FOR SELF-STUDY = 579
SUMMARY = 580
TERMS TO LEARN = 581
ASSIGNMENT MATERIAL = 581
18 Spoilage, Reworked Units, and scrap = 590
Management effort and control = 591
Terminology = 592
Spoilage in general = 592
Process costing and spoilage = 594
Job costing and spoilage = 594
Job costing and spoilage = 600
Reworked units = 601
Accounting for scrap = 602
Comparison of accounting for spoilage, rework, and scrap = 604
PROBLEM FOR SELF-STUDY = 605
SUMMARY = 605
Appendix Inspention and spoilge at intermediat staes of completion in process costing = 606
TERMS TO LEARN = 608
ASSIGNMENT MATERIAL = 608
19 Operation Costing, Backflush Costing, and Project Control = 618
Part One Operation costing and backflush costing
Varieties of production systems = 619
Operation costing = 622
Backflush costing = 627
PROBLEM FOR SELF-STUDY = 633
Part Two Control of Projects
Project features = 635
Similarity of control of job and projects = 638
PROBLEM FOR SELF-STUDY = 638
SUMMARY = 638
TERMS TO LEARN = 639
ASSIGNMENT MATERAL = 639
PART FIVE DECISION MODELS AND COST INFORMATION
20 Decision Models, Uncertainty and the Accountant = 649
Coping with uncertainty = 647
Illustrative problem = 649
Buying perfect and imperfect information = 652
Expected monetary value and expected utility = 654
Implementation issues = 657
PROBLEM FOR SELF-STUDY = 658
SUMMARY = 660
TERMS TO LEARN = 661
ASSIGNMENT MATERIAL = 661
21 Capital Budgeting and Cost Analysis = 671
Contrast in purposes of cost analysis = 672
Definition and stages of capital budgeting = 673
The discounted cash-flow method = 674
Sensitivity analysis = 679
Analysis of selected items usign discounted csah flow = 680
The Payback method = 681
The accrual accounting rate-of-return method = 683
Surveys of practice = 685
Breakeven time and capital budgeting for new products = 686
Complexities in capital-budgeting aplications = 688
PROBLEM FOR SELF-STUDY = 690
SUMMARY = 692
TERMS TO LEARN = 693
ASSIGNMENT MATERIAL = 693
22 Capital Budgeting : A Closer Look = 704
Income tax factors = 705
Effects of income taxes on cash flow = 709
Capital budgeting and inflation = 715
Requeired rate of return = 720
Applicability to nonprofit organizations = 720
Administration of capital budgets = 721
Implementing the net present value decision rule = 722
Implementing the internal rate-of-return dicision rule = 723
PROBLEM FOR SELF-STUDY = 724
SUMMARY = 727
Appendix Modified accelerated cost recovery system = 727
TERMS TO LEARN = 729
ASSIGNMENT MATERIAL = 729
23 Operations Managment and the Accountant : Materials and Inventory = 739
Managing goods for sale in retail organizations = 740
Difficultie with accounting data for managing goods for sale = 746
Just-in-time purchasing = 748
Managing materials in manufcturing organizations = 750
PROBLEMS FOR SELF-STUDY = 754
SUMMARY = 756
TERMS TO LEARN = 757
ASSIGNMENT MATERIAL = 757
24 Operations Management and the Accountant : Linear Programming = 762
The linear-programming model = 763
Steps in solving an LP problem = 764
Substitution of scarce resource = 768
Implications of LP for managers and accountants = 769
Other uses of linear programming = 770
Building the model = 771
PROBLEM FOR SELF-STUDY = 772
SUMMARY = 772
TERMS TO LEARN = 774
ASSIGNMENT MATERIAL = 774
PART SIX MORE ON COST BEHAVIOR AND ANALYSIS
25 Cost Behavior and Regression Analysis = 782
Guidelines for regression analysis = 783
Choosing among cost functions = 785
Criterion 1 : Economec plausibility = 786
Criterion 2 : Goodness of fit = 787
Criterion 3 : Significance of independent variable (s) = 787
Criterion 4 : Specification analysis = 788
An example of choosing among cost functions = 791
Multiple regrssion = 792
Cost drivers and differing time spans = 794
PROBLEM FOR SELF-STUDY = 796
SUMMARY = 798
Appendix 25 A : Specification analysis = 799
Appendix 25 B : Regression analysis = 799
TERMS TO LEARN = 807
ASSIGNMENT MATERIAL = 807
26 Variances : Mix, Yield, and Investigation = 817
Part One Sales variances
Sales volume variances = 819
Sales quantity and sales mix variances = 822
Market siza market share variances = 824
PROBLEM FOR SELF-STUDY = 825
Part Two Production variances
Direct material yield and direct material mix variances = 827
Direct material yield and direct material mix variances = 831
PROBLEM FOR SELF-STUDY = 834
Part Three Variance investigation decisions
Souces of variances = 835
Cost-benefit analysis of variance investigation decisions = 838
Difficulties in analysis of variances = 840
Statistical quality control = 841
PROBLEM FOR SELF-STUDY = 842
SUMMARY = 842
TERMS TO LEARN = 844
ASSIGNMENT MATERIAL = 844
PART SEVEN COST ACCOUNTING, SYSTMES CHOICE, STRATEGY, AND MANAGEMENT CONTROL
27 Systems Choice : Decentralization and Transfer Pricing = 851
Organization structure and decentralization = 852
Choices about responsibility centers = 854
Transfer pricing = 855
Illustration of transfer pricing = 857
Taxation considerations = 860
Market-based transfer prices = 861
a general rule for transfer pricing ? = 863
Multinational transfer pricing = 864
Surveys of company practice = 865
PROBLEM FOR SELF-STUDY = 867
SUMMARY = 868
TERMS TO LEARN = 869
ASSIGNMENT MATERIAL = 869
28 Systems Choice : Performance Measurement and Executive Compensation = 880
Financial and nonfinancial performance measures = 881
Designing an accounting-based performance measure = 882
Different performance measures = 883
Alternative definitions of investment = 888
Measurement alternatives for assets = 888
Goal congruence and performance measures = 892
Nonfinancial performance measures = 893
Executive compensation plans = 894
Ethics and cooking the books = 895
PROBLEM FOR SLEF-STUDY = 896
SUMMARY = 897
TERMS TO LEARN = 898
ASSIGNMENT MATERIAL = 898
29 Strategic Control Systems = 911
Quality as a competitive weapon = 912
Quality-related management control initiatives = 913
Time as a competitive weapon = 915
Time-related management control initiatives = 916
Cost as a competitive weapon = 918
PROBLEM FOR SELF-STUDY = 921
SUMMARY = 922
TERMS TO LEARN = 923
ASSIGNMENT MATERIAL = 923
APPENDIX A Recommended Readings = 928
APPENDIX B Notes on Compound Interest and Interest Table = 930
APPENDIX C Cost Accounting in Proferssional Examinations = 938
GLOSSARY = 941
AUTHOR INDEX = 951
COMPANY INDEX = 953
SUBJECT INDEX = 955
