Overview p. 1
Introduction to Cost and Management Accounting in a Global Business Environment p. 2
Learning Objectives p. 2
Introducing ABN AMRO Bank p. 3
Introduction to Cost Accounting p. 3
The Global Environment of Business p. 9
Organizational Strategy p. 16
Influences on Organizational Strategy p. 18
Responses to Competition p. 22
Role of Accounting in Organizations p. 24
Revisiting ABN AMRO Bank p. 28
Chapter Summary p. 29
Introduction to Cost Management Systems p. 40
Learning Objectives p. 40
Introducing Motorola, Inc. p. 41
Introduction to Management Information and Control Systems p. 42
Defining a Cost Management System p. 45
Designing a Cost Management System p. 48
Elements of a Cost Management System p. 55
CMS Implementation p. 61
Revisiting Motorola, Inc. p. 62
Chapter Summary p. 63
Cost Management System Conceptual Design Principles p. 64
Systems and Methods of Product Costing p. 75
Organizational Cost Flows p. 76
Learning Objectives p. 76
Introducing Wisconsin Film and Bag p. 77
Cost Classifications on the Financial Statements p. 78
The Conversion Process p. 79
Stages of Production p. 82
Cost Reactions to Changes in Activity p. 83
Components of Product Cost p. 89
Accumulation and Allocation of Overhead p. 95
Accumulation of Product Costs--Actual Cost System p. 100
Cost of Goods Manufactured and Sold p. 102
Accumulation of Product Costs--Normal Cost System p. 103
Revisiting Wisconsin Film and Bag p. 105
Chapter Summary p. 106
Plantwide versus Departmental Overhead Application Rates p. 107
Solution Strategies p. 110
Demonstration Problem p. 112
Problems p. 122
Activity-Based Cost Systems for Management p. 130
Learning Objectives p. 130
Introducing Carrier Corporation p. 131
Activity-Based Management p. 132
Cost Driver Analysis p. 136
Activity-Based Costing p. 141
Determining Whether ABC is Appropriate p. 147
Criticisms of Activity-Based Costing p. 150
Revisiting Carrier Corporation p. 152
Chapter Summary p. 152
Solution Strategies p. 154
Demonstration Problem p. 154
Problems p. 160
Job Order Costing p. 172
Learning Objectives p. 172
Introducing Aker Gulf Marine p. 173
Methods of Product Costing p. 174
Job Order Costing System p. 176
Job Order Costing: Details and Documents p. 177
Job Order Costing and Technology p. 183
Job Order Costing Illustration p. 184
Job Order Costing Using Standard Costs p. 187
Job Order Costing to Assist Managers p. 190
Revisiting Aker Gulf Marine p. 192
Chapter Summary p. 193
Solution Strategies p. 194
Demonstration Problem p. 194
Problems p. 204
Process Costing p. 218
Learning Objectives p. 218
Introducing Lumina Candles and Art p. 219
Introduction to Process Costing p. 220
Weighted Average and FIFO Process Costing Methods p. 222
EUP Calculations and Cost Assignments p. 224
Process Costing in a Multidepartment Setting p. 233
Process Costing with Standard Costs p. 235
Hybrid Costing Systems p. 238
Revisiting Lumina Candles and Art p. 239
Chapter Summary p. 240
Alternative Calculations of Weighted Average and FIFO Methods p. 241
Solution Strategies p. 242
Demonstration Problem p. 243
Problems p. 251
Special Production Issues: Lost Units and Accretion p. 260
Learning Objectives p. 260
Introducing General Electric Company p. 261
Loss of Units p. 262
Types of Lost Units p. 263
Accounting for Lost Units p. 265
Illustrations of Lost Units p. 266
Defective Units p. 274
Defects/Spoilage in Job Order Costing p. 275
Accretion p. 277
Controlling Quality to Minimize Lost Units p. 279
Revisiting General Electric Company p. 282
Chapter Summary p. 283
Solution Strategies p. 284
Demonstration Problem p. 285
Problems p. 291
Implementing Quality Concepts p. 302
Learning Objectives p. 302
Introducing Solectron Corporation p. 303
What is Quality p. 304
Benchmarking p. 309
Total Quality Management p. 310
Types of Quality Costs p. 314
Measuring the Cost of Quality p. 317
Obtaining Information from the Cost Management System p. 321
Quality as an Organizational Culture p. 322
Revisiting Solectron Corporation p. 324
Chapter Summary p. 325
International Quality Standards p. 326
Solution Strategies p. 328
Demonstration Problem p. 328
Problems p. 334
Cost Allocation for Joint Products and By-Products p. 342
Learning Objectives p. 342
Introducing Buckhead Beef Company p. 343
Outputs of a Joint Process p. 344
The Joint Process p. 345
Management Decisions Regarding Joint Processes p. 348
Allocation of Joint Cost p. 350
Accounting for By-Products and Scrap p. 357
By-Products or Scrap in Job Order Costing p. 360
Joint Costs in Service and Not-for-Profit Organizations p. 362
Revisiting Buckhead Beef Company p. 362
Chapter Summary p. 363
Solution Strategies p. 364
Demonstration Problem p. 364
Problems p. 373
Standard Costing p. 380
Learning Objectives p. 380
Introducing Commerce Bancorp p. 381
Development of a Standard Cost System p. 382
Variance Computations p. 387
Material and Labor Variance Computations p. 389
Overhead Variances p. 392
Standard Cost System Journal Entries p. 398
Why Standard Cost Systems Are Used p. 401
Considerations in Establishing Standards p. 405
Changes in Standards Usage p. 406
Conversion Cost as an Element in Standard Costing p. 408
Revisiting Commerce Bancorp p. 410
Chapter Summary p. 411
Mix and Yield Variances p. 412
Solution Strategies p. 417
Demonstration Problem p. 420
Problems p. 428
Planning and Controlling p. 441
Absorption/Variable Costing and Cost-Volume-Profit Analysis p. 442
Learning Objectives p. 442
Introducing Torrington Supply Co. p. 443
An Overview of Absorption and Variable Costing p. 443
Absorption and Variable Costing Illustrations p. 446
Comparison of the Two Approaches p. 450
Definition and Uses of CVP Analysis p. 451
The Break-Even Point p. 451
Formula Approach to Breakeven p. 454
Using Cost-Volume-Profit Analysis p. 455
The Income Statement Approach p. 460
Incremental Analysis for Short-Run Changes p. 461
CVP Analysis in a Multiproduct Environment p. 463
Margin of Safety p. 465
Operating Leverage p. 467
Underlying Assumptions of CVP Analysis p. 469
Quality and Costs p. 470
Revisiting Torrington Supply Co. p. 471
Chapter Summary p. 472
Graphic Approaches to Breakeven p. 473
Solution Strategies p. 478
Demonstration Problem p. 479
Problems p. 485
Relevant Costing p. 498
Learning Objectives p. 498
Introducing PricewaterhouseCoopers p. 499
The Concept of Relevance p. 500
Sunk Costs p. 502
Relevant Costs for Specific Decisions p. 504
Revisiting PricewaterhouseCoopers p. 521
Chapter Summary p. 521
Linear Programming p. 522
Solution Strategies p. 528
Demonstration Problem p. 529
Problems p. 539
The Master Budget p. 550
Learning Objectives p. 550
Introducing The HON Company p. 551
The Budgeting Process p. 552
The Master Budget p. 556
The Master Budget Illustrated p. 559
Concluding Comments p. 575
Revisiting The HON Company p. 577
Chapter Summary p. 578
The Budget Manual p. 578
Solution Strategies p. 579
Demonstration Problem p. 581
Problems p. 588
Capital Budgeting p. 600
Learning Objectives p. 600
Introducing Amazon.com p. 601
Use of Cash Flows in Capital Budgeting p. 602
Cash Flows Illustrated p. 603
Discounting Future Cash Flows p. 606
Discounted Cash Flow Methods p. 607
The Effect of Depreciation on After-Tax Cash Flows p. 612
Assumptions and Limitations of Methods p. 615
The Investment Decision p. 615
Ranking Multiple Capital Projects p. 620
Ranking Projects Under Capital Rationing p. 625
Compensating for Risk in Capital Project Evaluation p. 627
Postinvestment Audit p. 631
Revisiting Amazon.com p. 632
Chapter Summary p. 632
Time Value of Money p. 634
Accounting Rate of Return p. 635
Solution Strategies p. 637
Demonstration Problem p. 638
Problems p. 648
Financial Management p. 660
Learning Objectives p. 660
Introducing Lucent Technologies p. 661
Cost Control Systems p. 661
Committed Fixed Costs p. 671
Discretionary Costs p. 672
Controlling Discretionary Costs p. 677
Activity-Based Budgeting p. 682
Cash Management Issues p. 683
Revisiting Lucent Technologies p. 686
Chapter Summary p. 686
Program and Zero-Base Budgeting p. 687
Solution Strategies p. 690
Demonstration Problem p. 691
Problems p. 699
Decision Making p. 709
Innovative Inventory and Production Management Techniques p. 710
Learning Objectives p. 710
Introducing Alexander Doll Co. p. 711
Important Sets of Relationships in the Value Chain p. 712
Buying or Producing and Carrying Inventory p. 713
Purchasing Techniques p. 714
Understanding and Managing Production Activities and Costs p. 717
Theory of Constraints p. 740
Revisiting Alexander Doll Co. p. 742
Chapter Summary p. 743
EOQ and Related Issues p. 744
Solution Strategies p. 748
Demonstration Problem p. 749
Problems p. 756
Emerging Management Practices p. 762
Learning Objectives p. 762
Introducing CarPoint p. 763
The Changing Workplace p. 764
Enterprise Resource Planning Systems (ERP) p. 771
Strategic Alliances p. 775
Open-Book Management p. 777
Environmental Management Systems p. 782
Revisiting CarPoint p. 784
Chapter Summary p. 785
Responsibility Accounting and Transfer Pricing in Decentralized Organizations p. 796
Learning Objectives p. 796
Introducing Abbott Laboratories p. 797
Decentralization p. 797
Responsibility Accounting Systems p. 801
Basic Types of Responsibility Centers p. 806
Pseudo and Real Microprofit Centers p. 811
Service Department Cost Allocation p. 812
Service Department Cost Allocation Illustration p. 816
Transfer Pricing p. 823
Transfer Prices for Service Departments p. 830
Advantages and Disadvantages of Service Transfer Prices p. 830
Transfer Prices in Multinational Settings p. 832
Revisiting Abbott Laboratories p. 834
Chapter Summary p. 834
Solution Strategies p. 836
Demonstration Problem p. 837
Problems p. 844
Evaluating Performance p. 855
Measuring Short-Run Organizational Performance p. 856
Learning Objectives p. 856
Introducing Wachovia p. 857
Organizational Roles of Performance Measures p. 858
Designing a System of Performance Measurement p. 862
Traditional Short-Term Financial Performance Measures p. 866
Revisiting Wachovia p. 878
Chapter Summary p. 878
Solution Strategies p. 879
Demonstration Problem p. 880
Problems p. 887
Measuring Long-Run and Nonfinancial Organizational Performance p. 898
Learning Objectives p. 898
Introducing WMC Limited p. 899
Vision and Mission Statements p. 899
Differences in Perspectives p. 901
Nonfinancial Performance Measures p. 903
Throughput as a Nonfinancial Performance Measure p. 908
Activity-Based Management and Performance Evaluation p. 910
Performance Evaluation in Multinational Settings p. 912
Using a Balanced Scorecard for Measuring Performance p. 914
Revisiting WMC Limited p. 918
Chapter Summary p. 918
Developing Comprehensive Performance Indicators p. 919
Performance Measurement Areas and Cost Drivers p. 920
Solution Strategies p. 922
Demonstration Problem p. 922
Problems p. 925
Rewarding Performance p. 928
Learning Objectives p. 928
Introducing Meridia Health System p. 929
Compensation Strategy p. 930
Pay-for-Performance Plans p. 932
Considerations in Setting Performance Measures p. 936
Managerial Compensation p. 940
Not-for-Profit and Governmental Compensation p. 942
Tax Implications of Compensation Elements p. 942
Ethical Considerations of Compensation p. 944
Global Compensation p. 948
Revisiting Meridia Health System p. 949
Chapter Summary p. 950
Solution Strategies p. 951
Present Value Tables p. 1
Glossary p. 1
Author Index p. 1
Organization Index p. 4
Subject Index p. 8