Accounting - Handbook Of Cost Management


CONTENTS
Preface xi
About the Editors xiii
Contributors xv
1 Glossary of Cost Management Concepts (Roman L. Weil) 1
This glossary contains hundreds of accounting and management-related
terms, including a summary of financial statement ratios and a chart that
explains the distinction between cost terms.
2 Economic Concepts of Cost in Managerial Accounting
(Gordon Shillinglaw and Roman L. Weil) 157
This chapter defines basic economic terms and explains their application to
and interface with management accounting.
3 Different Costs for Different Purposes
(Russell A. Taussig and Roman L. Weil) 175
This chapter explains how the purpose of costs affects their definition and
measurement. The chapter discusses cost classification, including costs for
internal decision making and costs for responsibility accounting.
4 Accounting Magic (Roman L. Weil) 187
This chapter shows how alternative accounting treatments of identical
events can lead to reported income figures that differ from each other.
5 Mathematical Concepts in Cost Accounting ( Joel S. Demski) 197
This chapter discusses the role of mathematics in management, including
probability as a model of uncertainty and decision theory as a model of
choice behavior.
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vi Contents
6 Activity-Based Costing and Management (Michael W. Maher) 217
This chapter explains the mechanics of activity-based costing and the value
that this tool offers to management, including analysis of unused resources
and analysis of activities that add value versus those that do not.
7 Target Costing for New Product Development
(Robin Cooper and Regine Slagmulder) 243
This chapter shows how companies can use target costing in the design
stage of a product. It considers market-driven costing, product-level
costing, and component-level costing.
8 Kaizen Costing for Existing Products
(Robin Cooper and Regine Slagmulder) 271
This chapter discusses the mechanics of kaizen costing and how companies
can use this process for continuous improvement toward manufacturing
efficiency and quality.
9 Interorganizational Costing
(Robin Cooper and Regine Slagmulder) 289
This chapter explains how companies can use interorganizational cost
management to manage costs through the cooperative actions of firms in
a supplier network.
10 Costs and Benefits of Quality Improvement
(Christopher D. Ittner and David F. Larcker) 313
This chapter discusses some methods to assess the quality improvement
projects that offer the highest returns and shows how firms can quantify the
financial payback from these investments.
11 Logistics and Marketing Costs ( James M. Reeve) 329
This chapter discusses the logistics of supply chain activities, which
include marketing and selling activities. It discusses expense planning and
control through activity-based costing and how to calculate the total cost of
delivering a product.
12 Estimating Cost Behavior
(Michael W. Maher and M. Laurentius Marais) 351
This chapter explains the distinction among costs, expenses, and
expenditures. It also examines the function and methods of cost estimation,
from simple costs with a single cost driver to costs with several cost drivers.
Contents vii
13 Spoilage, Waste, and Scrap, Including Green Accounting
(William N. Lanen) 367
This chapter explains the mechanics of cost accounting for spoilage, waste,
and scrap. It also considers the implications for management in controlling
the generation, handling, and disposal of such material.
14 Job, Process, and Operations Costing (Michael W. Maher) 389
This chapter provides an overview of the basic cost flow model.
It also discusses four production systemsjust-in-time, job, process,
and operationand their implications for cost measurement and
management.
15 Standard Costing Systems ( James A. Largay III) 425
This chapter shows the mechanics of variance analysis for costs, including
raw material, variable and fixed overhead, and direct labor expenses. It then
discusses different methods to investigate such variances.
16 Allocations of Cost and Revenue (Roman L. Weil) 465
This chapter examines more advanced topics related to allocation: that of
joint products, byproducts, and commonother than jointproducts. It
also discusses allocation of revenue. The chapter appendix explains the
mechanics of step-down and reciprocal allocation methods.
17 Cost-Volume-Profit Analyses
(Nicholas Dopuch and Michael W. Maher) 483
This chapter discusses breakeven analysis that considers changes in prices,
costs, and output volume. It also considers the implications for
management decisions, such as whether to add or drop a product, and
whether to make or buy a unit.
18 Forecasting Pro Forma Financial Statements
( James M. Wahlen) 503
This chapter shows the mechanics and uses of pro forma financial
statements.
19 Operating Budgets and Budgeting—Benefits and Costs
(Michael D. Shields) 539
This chapter discusses management issues related to budgeting:
participation, motivation, and evaluation. It considers several budgeting
methods and management implications of each.
viii Contents
20 Theory of Constraints (Eric Noreen) 573
This chapter explains how firms can identify, exploit, and focus on a
constraint, then relax the constraint. It discusses the implications for
efficiency, process reengineering, and pricing.
21 Capital Budgeting: Concepts and Methods (Roman L. Weil) 587
This chapter discusses and evaluates various methods used to compare
investment opportunities for companies. It also considers issues related to
leasing.
22 Capital Budgeting: Implementation (Roman L. Weil) 611
This chapter offers guidance for investment management, which includes
relating investment decisions to strategic plans, evaluating investments by
financial and nonfinancial criteria, and assessing risk of investments.
23 Compound Interest: Concepts and Applications
(Roman L. Weil) 627
This chapter explains simple and compound interest and how to perform
future value calculations. It also discusses annuities and perpetuities and
shows calculations for these financial instruments under different
scenarios.
24 Performance Evaluation in Decentralized Organizations
(Michael W. Maher) 645
This chapter discusses why firms should adopt a decentralized structure,
the organizational options for a decentralized structure, and performance
measurement in such organizations.
25 The Balanced Scorecard and Nonfinancial Performance
Measures (Michael W. Maher) 657
This chapter considers the value of nonfinancial performance measures,
different perspectives related to the balanced scorecard, and how firms can
measure and improve performance related to nonfinancial goals.
26 Economic Value Added (EVA®) ( James J. Wallace) 669
This chapter discusses EVA®, a shareholder value and management concept
derived from residual income. It also discusses evidence of EVA®’s success
and problems, as well as implementation issues.
Contents ix
27 Transfer Pricing (Michael W. Maher) 683
This chapter explains how transfer pricing affects performance
measurements. It also discusses transfer pricing calculations and issues
under four scenarios and shows how the buying and selling divisions can
negotiate a price or decide to transact with entities outside the firm.
28 A Managerial Accounting Guide for Nonprofit Managers
(Leslie G. Eldenburg and Naomi Soderstrom) 697
This chapter discusses cost accounting practices in nonprofit organizations,
including hospital and government entities. It also discusses issues related
to environmental accounting reports.
29 Introduction to Costs in Litigation (Elizabeth A. Evans) 721
This chapter explains concepts of costs that litigation questions frequently
employ. It shows how cost accounting issues apply to questions of both
liability and damages.
30 The Historical Development of Management Accounting
(Richard Vangermeersch and Henry R. Schwarzbach) 731
This chapter recounts the history and progress of the accounting profession
from the first book of accounting (printed in the 1200s) to current writings.
31 Corporate Scandals: The Accounting Underpinnings
(Kathleen Fitzgerald and Roman L. Weil) 759
This chapter surveys the current financial reporting environment, discusses
management incentives to report fraudulent earnings, and explains specific
methods used to manipulate financial reports.
Appendix: Compound Interest, Present Value,
and Annuity Tables 809
Index 819