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Management Accounting Demystified : A Self-teaching Guide : The Demystified Series - Leonard Eugene Berry

Management Accounting Demystified : A Self-teaching Guide

The Demystified Series

Paperback Published: 14th December 2005
ISBN: 9780071459617
Number Of Pages: 352

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Learn the essentials of management accounting in a flash

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

Introductionp. xix
What Is Management Accounting?p. 1
Information for Decision Makingp. 1
Strategic Analysis Informationp. 2
Planning Informationp. 2
Organizing and Directing Informationp. 3
Performance Evaluation Informationp. 3
The Key Accounting and Finance Players in a Large Businessp. 4
Changing Roles of the Controller and Management Accountantp. 5
The Profession of Accountingp. 6
Management Accounting Compared to Financial Accountingp. 6
Summaryp. 7
Basic Cost Terms and Conceptsp. 9
Cost as an Asset or Expensep. 10
Costs That Become Assetsp. 10
Costs That Become Expensesp. 11
Identification of Costs and Expenses in Three Types of Businessesp. 11
Tracing Costs to Cost Objectsp. 13
Cost Objectsp. 13
Direct Costsp. 13
Indirect Costsp. 14
Costs Based on Cost Behaviorp. 16
Total Variable Costsp. 16
Relevant Rangep. 17
Total Fixed Costsp. 17
Mixed Variable Costsp. 18
Stepped Fixed Costsp. 18
Unit vs. Total Costsp. 18
Cost Definitions for Decision Makingp. 19
Summary of Cost Definitionsp. 20
Cost Flows in a Manufacturing Businessp. 22
Preparation of Financial Statementsp. 24
The Balance Sheetp. 24
The Income Statementp. 24
Summaryp. 26
Practice Problemsp. 27
Solutions to Practice Problemsp. 32
Job Order Cost Systemsp. 37
Factors in Designing a Cost Systemp. 37
Job Order Cost Systemp. 38
The Accounting Components of a Job Order Costing Systemp. 39
Source Documents Used in the Systemp. 39
The General Ledger and Subsidiary Ledgersp. 41
The Major Steps in Designing a Job Order Cost Systemp. 44
Disposition of Overallocated or Underallocated Overheadp. 48
Summaryp. 59
Practice Problemsp. 60
Solutions to Practice Problemsp. 63
Cost Allocation Systemsp. 67
Why Allocate Indirect Costs?p. 68
Nature of Cost Allocationp. 69
Issues to Address in Cost Allocationp. 70
An Overview of Cost Flows in a Manufacturing Cost Allocation Systemp. 73
Methods of Allocating Support Department Costsp. 74
Direct Methodp. 74
Step-Down Methodp. 77
Other Methods for Allocating Support Department Overheadp. 79
Summaryp. 79
Practice Problemsp. 80
Solutions to Practice Problemsp. 85
Process Cost Systemsp. 89
Process Costing and Job Order Costing Comparedp. 89
A Description of Process Costingp. 90
Concept of Equivalent Unitsp. 92
An Overview of the Major Steps in a Process Cost Systemp. 93
A Visual Look at Computing Unit Costs Under the Weighted Average Method and the FIFO Methodp. 93
Weighted Average Methodp. 93
FIFO Methodp. 95
Assigning Costs Using the Weighted Average Methodp. 95
Assigning Costs Using the FIFO Methodp. 98
Costs Transferred in from Other Departmentsp. 101
Transferred-In Costs Using the Weighted Average Methodp. 101
Transferred-In Costs Using the FIFO Methodp. 104
Summaryp. 107
Practice Problemsp. 108
Solutions to Practice Problemsp. 111
Activity-Based Management Systemsp. 115
Activity-Based Management Systemsp. 116
ABC as a Management Systemp. 116
ABC in Product Costingp. 117
An Overview of the Flow of Costs in an ABM Systemp. 118
Summaryp. 131
Practice Problemsp. 131
Solutions to Practice Problemsp. 137
Costs for Decision Making: Cost Estimation and Cost-Volume-Profit Analysisp. 141
Why Cost Behavior and Cost Estimation Is So Importantp. 142
Review of Cost Behavioral Termsp. 142
The Basic Linear Cost Functionp. 144
Assumptions Underlying the Linear Cost Modelp. 145
Methods for Estimating Variable and Fixed Costsp. 146
The Account Analysis Methodp. 146
Industrial Engineering Methodp. 148
Scatter Diagram Methodp. 148
The High-Low Methodp. 150
Regression Analysisp. 151
Putting It All Together-The Steps in Developing a Cost Estimation or Prediction Formulap. 152
Cost-Volume-Profit Analysis (CVP) and Its Usesp. 154
The CVP Modelp. 155
Total Costs vs. Unit Costsp. 156
Contribution Margin Approach in CVP Analysisp. 157
The Formula Approach in CVP Analysisp. 161
Shortcut Approaches to CVP Analysisp. 164
CVP Analysis and the Multiproduct Firmp. 165
Summaryp. 166
Practice Problemsp. 167
Solutions to Practice Problemsp. 170
Costs for Decision Making: Relevant Costing and Capital Expenditure Analysisp. 173
Decision Making Modelp. 174
Important Accounting Concepts for Decision Makingp. 177
Hazards in Using Relevant Costingp. 178
Problem: Should a Product, Service, or Business Segment Be Dropped?p. 178
Problem: How to Make Capital Investment Decisionsp. 180
The Payback Method of Evaluating Capital Investment Projectsp. 181
The Discounted Cash Flow (DCF) Method of Evaluating Capital Investment Projectsp. 182
Problem: Should a Product or Service Be Produced Internally or Outsourced?p. 185
Problem: Which Product Mix Provides the Greater Profitability?p. 187
Summaryp. 189
Computing Present Value of a Lump Sum of Moneyp. 190
The Present Value of Moneyp. 190
Computing the Present Value of Moneyp. 190
Practice Problemsp. 192
Solutions to Practice Problemsp. 195
Costs for Decision Making: Setting Pricesp. 199
Economics of Pricingp. 199
Short-Term Pricing Decisionsp. 200
Long-Term Pricing Decisionsp. 202
Cost-Plus Pricingp. 202
Contribution Margin Approach to Pricingp. 204
Target Costingp. 206
The Basic Concepts of Target Costingp. 206
Steps in Computing the Target Costp. 207
Summaryp. 211
Practice Problemsp. 212
Solutions to Practice Problemsp. 215
Profit Planning Using Master Budgetsp. 217
Purposes and Benefits of Profit Planningp. 217
The Behavioral Aspects of Profit Planning and Budgetingp. 218
Budgeting Obstaclesp. 220
The Master Budget Frameworkp. 221
Steps in Preparing the Master Budgetp. 221
Budget Gapp. 240
Activity-Based Budgetingp. 240
Summaryp. 240
Practice Problemsp. 241
Solutions to Practice Problemsp. 244
Planning and Performance Evaluation: Using Flexible Budgetsp. 245
Flexible Budgets for Planningp. 246
Flexible Budgets for Activities and Planning of Overhead Costsp. 248
General Model for Evaluating Financial Performancep. 250
Flexible Budgets for Controlp. 252
Flexible Budgeting in Actionp. 252
Illustration of Flexible Budget for Control at the Senior Management Levelp. 252
Determining the Cause of Flexible Budget Variancesp. 254
Activity-Based Flexible Budgeting and Variance Analysisp. 254
Summaryp. 256
Practice Problemsp. 257
Solutions to Practice Problemsp. 260
Performance Evaluation: Standard Costing and Variances Analysisp. 263
What Is a Standard?p. 264
Ideal Standardsp. 264
Practical Standardsp. 264
Advantages of Standard Costingp. 265
Criticisms of Standard Costingp. 265
Standard Costing in Performance Evaluationp. 266
Who Is Responsible for Setting Standards?p. 267
Purchasingp. 267
Industrial Engineeringp. 267
Human Resourcesp. 267
Management Accountantp. 268
Using Standard Costing in Material and Labor Cost Variance Analysisp. 268
Causes of Direct Material and Direct Labor Variancesp. 271
Variable Manufacturing Overhead Variancesp. 272
Explanation and Causes of Variable Manufacturing Overhead Variancesp. 275
Fixed Manufacturing Overhead Variancesp. 276
Explanation and Causes of Fixed Manufacturing Overhead Variancesp. 278
Different Approaches for Analyzing Manufacturingp. 279
Cost Variances in the General Ledgerp. 281
Disposition of Cost Variancesp. 284
Summaryp. 285
Practice Problemsp. 286
Solutions to Practice Problemsp. 289
Performance Evaluation: Sales Variances and the Balanced Scorecardp. 291
Sales Variancesp. 292
Total Sales Budget Variancep. 294
Sales Price Variancep. 295
Sales Volume Variancep. 296
Sales Mix Variancep. 296
Sales Quantity Variancep. 297
Sales Market Share Variancep. 298
Sales Market Size Variancep. 299
Evaluating the Success of a Strategic Initiativep. 300
Balancing Financial and Nonfinancial Success Factorsp. 301
Some Guidelines for Adopting the Balanced Scorecardp. 302
Measuring the Key Success Areasp. 303
Vision and Strategyp. 304
Learning and Innovationp. 304
Learning and Innovation Measures of Performancep. 305
Internal Business Processesp. 305
Internal Business Process Performance Measuresp. 306
Customer Focusp. 308
Customer Performance Measuresp. 308
Financial Performancep. 310
Financial Performance Measuresp. 310
Six Sigma and the Balanced Scorecardp. 311
Six Sigma in Actionp. 311
Performance Dashboardp. 312
Benchmarkingp. 312
Summaryp. 313
Practice Problemsp. 314
Solutions to Practice Problemsp. 317
Performance Evaluation in Decentralized Companiesp. 321
Nature of Decentralizationp. 322
Advantages of Decentralizationp. 322
Disadvantages of Decentralizationp. 323
Responsibility Accounting Systemp. 324
The Issue of Controllabilityp. 324
Managerial Evaluation Compared to Segment Evaluationp. 325
Responsibility Centersp. 325
Measuring Investment Center (Divisional) Performancep. 329
Return on Investment (ROI)p. 329
Residual Income (RI)p. 330
Economic Value Added (EVA)p. 332
Measuring Income and the Investment Basep. 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 Accountingp. 337
Transfer Pricingp. 337
Transfer Pricing When There Is No External Marketp. 337
Transfer Pricing When There Is an External Marketp. 338
Transfer Pricing When the Producing Division Has Excess Capacityp. 338
Transfer Pricing When the Producing Division Can Use Idle Facilities for Other Purposesp. 340
Transfer Pricing When Producing Division Has No Excess Capacityp. 341
Transfer Pricing in a Multinational Environmentp. 342
A Synthesis of Performance Evaluation Methodologiesp. 342
Summaryp. 343
Practice Problemsp. 345
Solutions to Practice Problemsp. 348
Final Examp. 351
Glossaryp. 381
Indexp. 399
Table of Contents provided by Ingram. All Rights Reserved.

ISBN: 9780071459617
ISBN-10: 0071459618
Series: Demystified
Audience: General
Format: Paperback
Language: English
Number Of Pages: 352
Published: 14th December 2005
Publisher: McGraw-Hill Education - Europe
Country of Publication: US
Dimensions (cm): 23.6 x 19.3  x 2.5
Weight (kg): 0.78
Edition Number: 1

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