Cost And Management Accounting

Colin Drury, University of Huddersfield ISBN-13: 9781844803491 eISBN-13: 9781844808441 ISBN: 184480349X eISBN: 1844808440 MARC Record [.mrc format] The aim of this established and best-selling textbook is to provide an introduction to the theory and practice of cost and management accounting. The book is intended primarily for accounting students who are pursuing a one or two semester basic introductory cost and management accounting course. It covers the basic topics needed on an introductory course in management accounting. This book is a companion volume to Management and Cost Accounting, which includes more advanced topics not suitable for introductory courses. Overall, the book is a rigorous, clear and easy-to understand introduction to cost and management accounting, with a tried and tested successful format that has enabled literally thousands of students to pass their exams. The book has an accompanying Student's Manual, which is an optional purchase for students. It contains answers to Review Problems in the white-tinted text boxes. The book stands entirely on its own without the Student's Manual. There is also a hard-copy Instructor's manual available. There is a Companion Website where tutors can download the Student's manual and Instructor's Manual as well as other resources.

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Chapter Abstracts Ch. 1 Introduction to Management Accounting Chapter One covers how to distinguish between management accounting and financial accounting; how to identify and describe the elements involved in the decision-making, planning and control process; how to justify the view that a major objective of commercial organizations is to broadly seek to maximize the present value of future cash flows; explains the factors that have influenced the changes in the competitive environment; outlines and describes the key success factors that directly affect customer satisfaction and identifies and describes the functions of a management accounting system Ch. 2 An Introduction to Cost Terms and Concepts Chapter Two covers why it is necessary to understand the meaning of different cost terms; defines and illustrates a cost object; explains the meaning of each of the key terms listed at the end of this chapter; explains why in the short term some costs and revenues are not relevant for decision-making; distinguishes between job costing and process costing and describes the three purposes for which cost information is required Ch. 3 Accounting for Direct Costs Chapter Three covers the distinction between payroll and labour cost accounting; describes the materials recording procedure; explains the accounting treatment of holiday pay, overtime premiums, employment costs idle time, stores losses and delivery and materials handling costs; the distinction between first in, first out (FIFO), last in, first out (LIFO) and average cost methods of stores pricing justify which costs are relevant and should be included in the calculation of the economic order quantity (EOQ); how to calculate the EOQ using the formula and tabulation methods; how to describe the ABC classification method and how to describe materials requirement planning (MRP) systems outline the main features of just-in-time systems Ch. 4 Cost Assignment for Indirect Costs Chapter Four covers the distinction between cause-and-effect and arbitrary cost allocations; explains why different cost information is required for different purposes; describes how cost systems differ in terms of their level of sophistication; how understand the factors influencing the choice of an optimal cost system; explains why departmental overhead rates should be used in preference to a single blanket overhead rate; how to construct an overhead analysis sheet and calculate cost centre allocation rates; how to justify why budgeted overhead rates should be used in preference to actual overhead rates and calculate and explains the accounting treatment of the under- over-recovery of overheads Ch. 5 Accounting Entries for a Job Costing System Chapter Five covers the accounting entries for an integrated and interlocking accounting system, the distinction between an integrated and an interlocking accounting system, the distinguishing features of contract costing and contract accounts and the profit attributable to each contract Ch. 6 Process Costing Chapter Six covers when process costing systems are appropriate, the accounting treatment of normal and abnormal losses, process, normal loss, abnormal loss and abnormal gain accounts when there is no ending work in progress, equivalent units, the value of closing work in progress and completed production using the weighted average and first in, first out methods of valuing work in progress and how to distinguish between the different cost per unit calculations that are necessary for inventory valuation, decision-making and performance reporting for cost control Ch. 7 Joint and By-product Costing Chapter Seven covers the distinction between joint products and by-products, explain and identify the split-off point in a joint-cost situation;explain the alternative methods of allocating joint costs to products;discuss the arguments for and against each of the methods of allocating joint costs to products, present relevant financial information for a decision as to whether a product should be sold at a particular stage or further processed;describe the accounting treatment of by-products Ch. 8 Income Effects of Alternative Cost Accumulation Systems Chapter Eight covers the differences between an absorption costing and a variable costing system, profit statements based on a variable costing and absorption costing system, the difference in profits between variable and absorption costing profit calculations and the arguments for and against variable and absorption costing Ch. 9 Cost-Volume-Profit Analysis Chapter Nine covers the differences between the accountant's and the economist's model of cost-volume-profit analysis, the use of linear cost and revenue functions in the accountant's model, the mathematical approach to answer questions similar to those listed in Example 9.1, how to construct break-even, contribution and profit-volume graphs, the assumptions on which cost-volume-profit analysis is based and cost-volume-profit analysis in a multi-product setting Ch. 10 Cost estimation and Cost Behaviour Chapter Ten covers the different methods of estimating costs, regression equations using the high-low, scattergraph and least-squares techniques, the six steps required to estimate cost functions from past data, tests of reliability and the meaning of the term 'correlation coefficient' Ch. 11 Measuring Relevant Costs and Revenues for Decision-Making Chapter Eleven covers relevant and irrelevant costs and revenues, the importance of qualitative factors, the relevant and irrelevant costs and revenues for the five decisionmaking problems described, the key concept that should be applied for presenting information for product-mix, decisions when capacity constraints apply, why the book value of equipment is irrelevant when making equipment replacement decisions and the opportunity cost concept Ch. 12 The Application of Linear Programming to Management Accounting Chapter Twelve covers the situations when it may be appropriate to use linear programming, the circumstances when the graphical method can be used, linear programming to find the optimum output levels and the opportunity cost (shadow price) of scarce resources and the meaning of these terms Ch. 13 Activity-Based Costing Chapter Thirteen covers why a cost accumulation system is required for generating relevant cost information for decision-making, the differences between activity-based and traditional costing systems, why traditional costing systems can provide misleading information for decision-making, product costs using an ABC system, the four stages involved in designing ABC systems and the ABC cost hierarchy Ch. 14 Decision-Making Under Conditions of Risk and Uncertainty Chapter Fourteen covers the meaning of expected values, the meaning of the terms standard deviation and coefficient of variation as measures of risk and outline their limitations, how to construct a decision tree when there is a range of alternatives and possible outcomes and the value of perfect and imperfect information Ch. 15 Capital Investment Decisions Chapter Fifteen covers the opportunity cost of an investment, how to distinguish between compounding and discounting, the concepts of net present value (NPV), internal rate of return (IRR), payback method and accounting rate of return (ARR), how to calculate NPV, IRR, the payback period and ARR, the superiority of NPV over the IRR, the limitations of payback and ARR and why the payback and ARR methods are widely used in practice Ch. 16 The Budgeting Process Chapter Sixteen covers how budgeting fits into the overall planning and control framework, the six different purposes of budgeting, the various stages in the budget process, functional and master budgets and the use of computer-based financial models for budgeting Ch. 17 Management Control Systems Chapter Seventeen covers the three different types of controls used in organizations, a cybernetic control system, how to distinguish between feedback and feed-forward controls, the four different types of responsibility centres, the different elements of management accounting control systems, the controllability principle and the methods of implementing it, the different approaches that can be used to determine financial performance targets and discuss the impact of their level of difficulty on motivation and performance, the influence of participation in the budgeting process, why a performance measurement system should also emphasize non-financial measures and activity-based cost management Ch. 18 Standard Costing and Variance Analysis Chapter Eighteen covers how a standard costing system operates, how standard costs are set, the meaning of standard hours produced, basic, ideal and currently attainable standards, the purposes of a standard costing system, how to calculate labour, material, overhead and sales margin variances and reconcile actual profit with budgeted profit, the causes of labour, material, overhead and sales margin variances, how to construct a departmental performance report, how to distinguish between standard variable costing and standard absorption costing and how to prepare a set of accounts for a standard costing system

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