Management accounting demystified

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Title:

Personal Author:

Berry, Leonard Eugene

Publication Information:

New York, NY : McGraw-Hill, 2006

ISBN:

9780071459617

Subject Term:

Managerial accounting

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Library	Item Barcode	Call Number	Material Type	Item Category 1	Status
Searching... PSZ JB	30000010093364	HF5657.4 B47 2006	Open Access Book	Book	Searching... Unknown

Summary

Learn the essentials of management accounting in a flash!

This hands-on self-teaching guide covers thefundamentals of management accounting,including cost accounting, how to develop anduse information for costing products and services,decision making, operational budgeting,performance evaluation, and other importantsubjects and provides an update on recent developments in the field. You will learn the keyaspects of management accounting as they applyto both for-profit companies and nonprofits.

Author Notes

Leonard Eugene Berry, Ph.D., C.I.A. , is Professor Emeritus and Director Emeritus in the School of Accountancy at Georgia State University. He is also a retired C.P.A.

Introduction	p. xix
Chapter 1 What Is Management Accounting?	p. 1
Information for Decision Making	p. 1
Strategic Analysis Information	p. 2
Planning Information	p. 2
Organizing and Directing Information	p. 3
Performance Evaluation Information	p. 3
The Key Accounting and Finance Players in a Large Business	p. 4
Changing Roles of the Controller and Management Accountant	p. 5
The Profession of Accounting	p. 6
Management Accounting Compared to Financial Accounting	p. 6
Summary	p. 7
Chapter 2 Basic Cost Terms and Concepts	p. 9
Cost as an Asset or Expense	p. 10
Costs That Become Assets	p. 10
Costs That Become Expenses	p. 11
Identification of Costs and Expenses in Three Types of Businesses	p. 11
Tracing Costs to Cost Objects	p. 13
Cost Objects	p. 13
Direct Costs	p. 13
Indirect Costs	p. 14
Costs Based on Cost Behavior	p. 16
Total Variable Costs	p. 16
Relevant Range	p. 17
Total Fixed Costs	p. 17
Mixed Variable Costs	p. 18
Stepped Fixed Costs	p. 18
Unit vs. Total Costs	p. 18
Cost Definitions for Decision Making	p. 19
Summary of Cost Definitions	p. 20
Cost Flows in a Manufacturing Business	p. 22
Preparation of Financial Statements	p. 24
The Balance Sheet	p. 24
The Income Statement	p. 24
Summary	p. 26
Practice Problems	p. 27
Solutions to Practice Problems	p. 32
Chapter 3 Job Order Cost Systems	p. 37
Factors in Designing a Cost System	p. 37
Job Order Cost System	p. 38
The Accounting Components of a Job Order Costing System	p. 39
Source Documents Used in the System	p. 39
The General Ledger and Subsidiary Ledgers	p. 41
The Major Steps in Designing a Job Order Cost System	p. 44
Disposition of Overallocated or Underallocated Overhead	p. 48
Summary	p. 59
Practice Problems	p. 60
Solutions to Practice Problems	p. 63
Chapter 4 Cost Allocation Systems	p. 67
Why Allocate Indirect Costs?	p. 68
Nature of Cost Allocation	p. 69
Issues to Address in Cost Allocation	p. 70
An Overview of Cost Flows in a Manufacturing Cost Allocation System	p. 73
Methods of Allocating Support Department Costs	p. 74
Direct Method	p. 74
Step-Down Method	p. 77
Other Methods for Allocating Support Department Overhead	p. 79
Summary	p. 79
Practice Problems	p. 80
Solutions to Practice Problems	p. 85
Chapter 5 Process Cost Systems	p. 89
Process Costing and Job Order Costing Compared	p. 89
A Description of Process Costing	p. 90
Concept of Equivalent Units	p. 92
An Overview of the Major Steps in a Process Cost System	p. 93
A Visual Look at Computing Unit Costs Under the Weighted Average Method and the FIFO Method	p. 93
Weighted Average Method	p. 93
FIFO Method	p. 95
Assigning Costs Using the Weighted Average Method	p. 95
Assigning Costs Using the FIFO Method	p. 98
Costs Transferred in from Other Departments	p. 101
Transferred-In Costs Using the Weighted Average Method	p. 101
Transferred-In Costs Using the FIFO Method	p. 104
Summary	p. 107
Practice Problems	p. 108
Solutions to Practice Problems	p. 111
Chapter 6 Activity-Based Management Systems	p. 115
Activity-Based Management Systems	p. 116
ABC as a Management System	p. 116
ABC in Product Costing	p. 117
An Overview of the Flow of Costs in an ABM System	p. 118
Summary	p. 131
Practice Problems	p. 131
Solutions to Practice Problems	p. 137
Chapter 7 Costs for Decision Making: Cost Estimation and Cost-Volume-Profit Analysis	p. 141
Why Cost Behavior and Cost Estimation Is So Important	p. 142
Review of Cost Behavioral Terms	p. 142
The Basic Linear Cost Function	p. 144
Assumptions Underlying the Linear Cost Model	p. 145
Methods for Estimating Variable and Fixed Costs	p. 146
The Account Analysis Method	p. 146
Industrial Engineering Method	p. 148
Scatter Diagram Method	p. 148
The High-Low Method	p. 150
Regression Analysis	p. 151
Putting It All Together-The Steps in Developing a Cost Estimation or Prediction Formula	p. 152
Cost-Volume-Profit Analysis (CVP) and Its Uses	p. 154
The CVP Model	p. 155
Total Costs vs. Unit Costs	p. 156
Contribution Margin Approach in CVP Analysis	p. 157
The Formula Approach in CVP Analysis	p. 161
Shortcut Approaches to CVP Analysis	p. 164
CVP Analysis and the Multiproduct Firm	p. 165
Summary	p. 166
Practice Problems	p. 167
Solutions to Practice Problems	p. 170
Chapter 8 Costs for Decision Making: Relevant Costing and Capital Expenditure Analysis	p. 173
Decision Making Model	p. 174
Important Accounting Concepts for Decision Making	p. 177
Hazards in Using Relevant Costing	p. 178
Problem: Should a Product, Service, or Business Segment Be Dropped?	p. 178
Problem: How to Make Capital Investment Decisions	p. 180
The Payback Method of Evaluating Capital Investment Projects	p. 181
The Discounted Cash Flow (DCF) Method of Evaluating Capital Investment Projects	p. 182
Problem: Should a Product or Service Be Produced Internally or Outsourced?	p. 185
Problem: Which Product Mix Provides the Greater Profitability?	p. 187
Summary	p. 189
Appendix Computing Present Value of a Lump Sum of Money	p. 190
The Present Value of Money	p. 190
Computing the Present Value of Money	p. 190
Practice Problems	p. 192
Solutions to Practice Problems	p. 195
Chapter 9 Costs for Decision Making: Setting Prices	p. 199
Economics of Pricing	p. 199
Short-Term Pricing Decisions	p. 200
Long-Term Pricing Decisions	p. 202
Cost-Plus Pricing	p. 202
Contribution Margin Approach to Pricing	p. 204
Target Costing	p. 206
The Basic Concepts of Target Costing	p. 206
Steps in Computing the Target Cost	p. 207
Summary	p. 211
Practice Problems	p. 212
Solutions to Practice Problems	p. 215
Chapter 10 Profit Planning Using Master Budgets	p. 217
Purposes and Benefits of Profit Planning	p. 217
The Behavioral Aspects of Profit Planning and Budgeting	p. 218
Budgeting Obstacles	p. 220
The Master Budget Framework	p. 221
Steps in Preparing the Master Budget	p. 221
Budget Gap	p. 240
Activity-Based Budgeting	p. 240
Summary	p. 240
Practice Problems	p. 241
Solutions to Practice Problems	p. 244
Chapter 11 Planning and Performance Evaluation: Using Flexible Budgets	p. 245
Flexible Budgets for Planning	p. 246
Flexible Budgets for Activities and Planning of Overhead Costs	p. 248
General Model for Evaluating Financial Performance	p. 250
Flexible Budgets for Control	p. 252
Flexible Budgeting in Action	p. 252
Illustration of Flexible Budget for Control at the Senior Management Level	p. 252
Determining the Cause of Flexible Budget Variances	p. 254
Activity-Based Flexible Budgeting and Variance Analysis	p. 254
Summary	p. 256
Practice Problems	p. 257
Solutions to Practice Problems	p. 260
Chapter 12 Performance Evaluation: Standard Costing and Variances Analysis	p. 263
What Is a Standard?	p. 264
Ideal Standards	p. 264
Practical Standards	p. 264
Advantages of Standard Costing	p. 265
Criticisms of Standard Costing	p. 265
Standard Costing in Performance Evaluation	p. 266
Who Is Responsible for Setting Standards?	p. 267
Purchasing	p. 267
Industrial Engineering	p. 267
Human Resources	p. 267
Management Accountant	p. 268
Using Standard Costing in Material and Labor Cost Variance Analysis	p. 268
Causes of Direct Material and Direct Labor Variances	p. 271
Variable Manufacturing Overhead Variances	p. 272
Explanation and Causes of Variable Manufacturing Overhead Variances	p. 275
Fixed Manufacturing Overhead Variances	p. 276
Explanation and Causes of Fixed Manufacturing Overhead Variances	p. 278
Different Approaches for Analyzing Manufacturing	p. 279
Cost Variances in the General Ledger	p. 281
Disposition of Cost Variances	p. 284
Summary	p. 285
Practice Problems	p. 286
Solutions to Practice Problems	p. 289
Chapter 13 Performance Evaluation: Sales Variances and the Balanced Scorecard	p. 291
Sales Variances	p. 292
Total Sales Budget Variance	p. 294
Sales Price Variance	p. 295
Sales Volume Variance	p. 296
Sales Mix Variance	p. 296
Sales Quantity Variance	p. 297
Sales Market Share Variance	p. 298
Sales Market Size Variance	p. 299
Evaluating the Success of a Strategic Initiative	p. 300
Balancing Financial and Nonfinancial Success Factors	p. 301
Some Guidelines for Adopting the Balanced Scorecard	p. 302
Measuring the Key Success Areas	p. 303
Vision and Strategy	p. 304
Learning and Innovation	p. 304
Learning and Innovation Measures of Performance	p. 305
Internal Business Processes	p. 305
Internal Business Process Performance Measures	p. 306
Customer Focus	p. 308
Customer Performance Measures	p. 308
Financial Performance	p. 310
Financial Performance Measures	p. 310
Six Sigma and the Balanced Scorecard	p. 311
Six Sigma in Action	p. 311
Performance Dashboard	p. 312
Benchmarking	p. 312
Summary	p. 313
Practice Problems	p. 314
Solutions to Practice Problems	p. 317
Chapter 14 Performance Evaluation in Decentralized Companies	p. 321
Nature of Decentralization	p. 322
Advantages of Decentralization	p. 322
Disadvantages of Decentralization	p. 323
Responsibility Accounting System	p. 324
The Issue of Controllability	p. 324
Managerial Evaluation Compared to Segment Evaluation	p. 325
Responsibility Centers	p. 325
Measuring Investment Center (Divisional) Performance	p. 329
Return on Investment (ROI)	p. 329
Residual Income (RI)	p. 330
Economic Value Added (EVA)	p. 332
Measuring Income and the Investment Base	p. 334
How Is Income Measured?	p. 334
What Is Included in the Investment Base?	p. 335
How Is the Investment Base Valued?	p. 336
Activity-Based Costing and Responsibility Accounting	p. 337
Transfer Pricing	p. 337
Transfer Pricing When There Is No External Market	p. 337
Transfer Pricing When There Is an External Market	p. 338
Transfer Pricing When the Producing Division Has Excess Capacity	p. 338
Transfer Pricing When the Producing Division Can Use Idle Facilities for Other Purposes	p. 340
Transfer Pricing When Producing Division Has No Excess Capacity	p. 341
Transfer Pricing in a Multinational Environment	p. 342
A Synthesis of Performance Evaluation Methodologies	p. 342
Summary	p. 343
Practice Problems	p. 345
Solutions to Practice Problems	p. 348
Final Exam	p. 351
Glossary	p. 381
Index	p. 399

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Table of Contents