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MANAGEMENT AND
COST ACCOUNTING
Alnoor Bhimani Charles T. HorngrenSrikant M. Datar Madhav Rajan
Sixth Edition
, 15th edition. The content has been signifi cantly revised to refl ect management accounting syllabuses
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Alnoor Bhimani
Charles T. HorngrenEdmund W. Littlefi eld Professor
Srikant M. Datar
Madhav V. Rajan
Management and Cost Accounting PDF eBook
Table of Contents
Cover
Contents
Guided to the case studies
Preface
Authors acknowledgements
Publishers acknowledgements
Part I Management and cost accounting fundamentalsChapter 1 The accountants role in the organisation
Accounting, costing and strategy
Accounting systems and management controls
Costs, benefits and context
Themes in the design of management accounting systems
Concepts in action Management accounting beyond the numbers
Forces of change in management accounting
Summary
Appendix: Professional ethics
Key terms
References and further reading
Assessment material
Chapter 2 An introduction to cost terms and purposesCosts in general
Direct costs and indirect costs
Cost drivers and cost management
Two types of cost behaviour pattern: variable costs and fixed costs
Total costs and unit costs
Concepts in action How Zipcar helps reduce Twitters transport costs
Financial statements and cost terminology
Service-sector companies
Merchandising- and manufacturing-sector companies
The many meanings of product costs
Classification of costs
Summary
Key terms
References
Assessment material
Chapter 3 Job-costing systemsThe building block concept of costing systems
Job-costing and process-costing systems
Table of Contents
Job costing in service organisations using actual costing
Normal costing
Job costing in manufacturing
An illustration of a job-costing system in manufacturing
Budgeted indirect costs and end-of-period adjustments
Summary
Key terms
Assessment material
Chapter 4 Process-costing systemsIllustrating process costing
Case 1: Process costing with no opening or closing work-in-progress stock
Case 2: Process costing with no opening but a closing work-in-progress stock
Case 3: Process costing with both some opening and some closing work-in-progress
stock
Weighted-average method
First-in, first-out method
Concepts in action ExxonMobil and accounting differences in the oil patch
Comparison of weighted-average and FIFO methods
Standard-costing method of process costing
Transferred-in costs in process costing
Concepts in action Hybrid costing for customised products at Levi Strauss and at
Adidas
Hybrid-costing systems
Summary
Appendix: Operation costing
Key terms
Reference
Assessment material
Chapter 5 Cost allocationPurposes of cost allocation
Cost allocation and costing systems
Indirect cost pools and cost allocation
Allocating costs from one department to another
Allocating costs of support departments
Support department cost-allocation methods
Allocating common costs
Cost-allocation bases and cost hierarchies
Is the product-costing system broken?
Summary
Key terms
References and further reading
Assessment material
Table of Contents
Chapter 6 Cost allocation: joint-cost situationsMeaning of joint products and by-products terms
Why allocate joint costs?
Approaches to allocating joint costs
Concepts in action Chicken processing: costing on the disassembly line
No allocation of joint costs
Irrelevance of joint costs for decision making
Accounting for by-products
Summary
Key terms
References and further reading
Assessment material
Chapter 7 Income effects of alternative stock-costing methodsPART ONE: Stock-costing methods
Variable costing and absorption costing
Comparison of variable costing and absorption costing
Capsule comparison of stock-costing methods
Performance measures and absorption costing
Concepts in action Absorption costing and the bankruptcy of US automakers
PART TWO: Denominator-level concepts and absorption costing
Alternative denominator-level concepts
Effect on financial statements
Summary
Appendix: Breakeven points in variable and absorption costing
Key terms
Assessment material
PART I Case study problemsCase 101 The European Savings Bank
Case 102 The ethical dilemma at Northlake
Case 103 Electronic Boards plc
Part II Accounting information for decision makingChapter 8 Costvolumeprofit relationships
Revenue drivers and cost drivers
CVP assumptions
The breakeven point
The PV graph
Impact of income taxes
Sensitivity analysis and uncertainty
Concepts in action How the the biggest rock show ever turned a big profit
Cost planning and CVP
Effects of revenue mix on profit
Table of Contents
Not-for-profit organisations and CVP
Contribution margin and gross margin
Summary
Appendix: Decision models and uncertainty
Key terms
Assessment material
Chapter 9 Determining how costs behaveGeneral issues in estimating cost functions
The cause-and-effect criterion in choosing cost drivers
Cost estimation approaches
Steps in estimating a cost function
Evaluating and choosing cost drivers
Cost drivers and activity-based costing
Concepts in action Activity-based costing and cost estimation
Non-linearity and cost functions
Learning curves and non-linear cost functions
Summary
Appendix: Regression analysis
Key terms
References and further reading
Assessment material
Chapter 10 Relevant information for decision makingInformation and the decision process
The concept of relevance
An illustration of relevance: choosing output levels
Outsourcing and make-or-buy decisions
Opportunity costs, outsourcing and capacity constraints
Concepts in action VW takes outsourcing to the limit
Product-mix decisions under capacity constraints
Concepts in action The LEGO Group
Customer profitability and relevant costs
Irrelevance of past costs and equipment-replacement decisions
Summary
Appendix: Linear programming
Key terms
References and further reading
Assessment material
Chapter 11: Activity-based costingUndercosting and overcosting
Costing system at Plastim Limited
Refining a costing system
Table of Contents
Activity-based costing systems
Implementing ABC at Plastim Limited
Comparing alternative costing systems
Concepts in action Hospitals use time-driven activity-based costing to reduce
costs and improve care
Using ABC systems for cost and profit management
ABC and department-costing systems
Implementing ABC systems
Concepts in action Do banks provide free services?
Concepts in action Successfully championing ABC
ABC and the organisational context
Summary
Key terms
References and further reading
Assessment material
Chapter 12 Pricing, target costing and customer profitability analysisMajor influences on pricing
Product-cost categories and time horizon
Costing and pricing for the short run
Costing and pricing for the long run
Concepts in action Extreme target pricing and cost management at IKEA
Target costing for target pricing
Achieving the target cost per unit for Provalue
Concepts in action Tata Motors and target pricing
Cost-plus pricing
Life-cycle product budgeting and costing
Customer profitability analysis
Customer revenues
Customer costs
Customer profitability profiles
Concepts in action Managing profits by understanding customers
Summary
Key terms
References and further reading
Assessment material
Chapter 13 Capital investment decisionsTwo focuses of cost analysis
Stages of capital budgeting
Concepts in action International capital budgeting at Disney
Discounted cash-flow methods
Sensitivity analysis
Relevant cash flows in discounted cash-flow analysis
Table of Contents
Payback method
Accounting rate-of-return method
Concepts in action International comparison of capital-budgeting methods
Managing the project
Income tax factors
Capital budgeting and inflation
Choosing between the net present-value and the internal rate-of-return decision
approaches
Summary
Key terms
References and further reading
Assessment material
PART II Case study problemsCase 201 Permaclean Products plc
Case 202 Tankmaster Manufacturing Company
Case 203 Siemens Electric Motor Works
Case 204 Colombo Frozen Yogurt
Part III Planning and budgetary control systemsChapter 14 Motivation, budgets and responsibility accounting
Major features of budgets
Roles of budgets
Types of budget
Computer-based financial planning models
Concepts in action Web-enabled budgeting and Hendrick Motorsports
Kaizen budgeting
Activity-based budgeting
Budgeting and responsibility accounting
Responsibility and controllability
Budgeting: a discipline in transition
Summary
Appendix The cash budget
Key terms
References and further reading
Assessment material
Chapter 15 Flexible budgets, variances and management control: IStatic budgets and flexible budgets
Static-budget variances
Steps in developing a flexible budget
Flexible-budget variances and sales-volume variances
Price variances and efficiency variances for inputs
Impact of stocks
Table of Contents
Concepts in action Starbucks reduces direct-cost variances to brew a turnaround
Management uses of variances
Concepts in action Flexible budgets at Corning
Flexible budgeting and activity-based costing
An illustration of journal entries using standard costs
Benchmarking and variance analysis
Summary
Key terms
Assessment material
Chapter 16 Flexible budgets, variances and management control: IIPlanning of variable- and fixed-overhead costs
Developing budgeted variable-overhead rates
Variable-overhead cost variances
Developing budgeted fixed-overhead rates
Fixed-overhead cost variances
Production-volume variance
Integrated analysis of overhead cost variances
Different purposes of manufacturing overhead cost analysis
Journal entries for overhead costs and variances
Concepts in action Variance analysis and standard costing: helping Sandoz manage
overhead costs
Engineered, discretionary and infrastructure costs
Financial and non-financial performance measures
Actual, normal and standard costing
Activity-based costing and variance analysis
Summary
Key terms
Assessment material
Chapter 17 Measuring yield, mix and quantity effectsInput variances
Direct materials yield and mix variances
Direct manufacturing labour yield and mix variances
Revenue and sales variances
Variance analysis for multiple products
Summary
Key terms
Assessment material
Part III Case study problemsCase 301 Zeros plc
Case 302 Instrumental Ltd
Case 303 Hereford Steak Houses
Part IV Management control systems and performance issues
Table of Contents
Chapter 18 Control systems and transfer pricingManagement control systems
Evaluating management control systems
Organisational stucture and decentralisation
Choices about responsibility centres
Transfer pricing
An illustration of transfer pricing
Market-based transfer prices
Cost-based transfer prices
Negotiated transfer prices
A general guideline for transfer-pricing situations
Transfer pricing and tax considerations
Concepts in action Transfer pricing dispute temporarily stops the flow of Fiji
Water
Summary
Key terms
Assessment material
Chapter 19 Control systems and performance measurementFinancial and non-financial performance measures
Designing an accounting-based performance measure
Different performance measures
Concepts in action Misalignment between CEO compensation and performance at
Lloyds
Alternative definitions of investment
Alternative performance measures
Choosing targeted levels of performance and timing of feedback
Distinction between managers and organisational units
Performance measures at the individual activity level
Environmental and ethical responsibilities
Strategy and levers of control
Summary
Key terms
References and further reading
Assessment material
Part IV Case study problemsCase 401 BBR plc
Case 402 Cresta Plating Company Ltd
Case 403 Clayton Industries
Part V Quality, time and the strategic management of costsChapter 20 Quality and throughput concerns in managing costs
Quality as a competitive weapon
Costs of quality
Table of Contents
Techniques used to identify quality problems
Relevant costs and benefits of quality improvement
Concepts in action Does Mercedes stand for quality? What about Toyota?
Non-financial measures of quality and customer satisfaction
Evaluating quality performance
Theory of constraints
Concepts in action Overcoming wireless data bottlenecks: the wired world is
quickly going wireless
Summary
Key terms
References and further reading
Assessment material
Chapter 21 Accounting for just-in-time systemsJust-in-time systems
Major features of JIT production systems
Concepts in action After the encore: just-in-time live concert recordings
Enterprise resource planning (ERP) systems
Concepts in action RFID at Selexys
Backflush costing
Managing goods for sale in retail organisations
Challenges in estimating stock-related costs and their effects
Just-in-time purchasing
Stock costs and their management in manufacturing organisations
Summary
Key terms
References and further reading
Assessment material
Chapter 22 Strategic management accounting and emerging issuesConceptions of strategy
Concepts in action Changing strategic gears
What is strategic management accounting?
The balanced scorecard
Concepts in action The growth versus profitability choice at Facebook
Evaluating the success of a strategy
The tableau de bord
Enterprise governance and strategy
The strategic management accounting potential
Emerging issues impacting management accounting
Summary
Key terms
References and further reading
Assessment material
Table of Contents
Part V Case study problemsCase 501 High-Tech Limited
Case 502 Empire Glass Company (A)
Case 503 Osram
Case 504 Coors: balanced scorecard
Appendix A: Solutions to selected exercises
Appendix B: Notes on compound interest and interest tables
Glossary
Names Index
Subject Index
