Managerial Accounting Focus on Decision Making

, by Jackson, Steve; Sawyers, Roby; Jenkins, Greg

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ISBN: 9780324304169 | 0324304161
Cover: Hardcover
Copyright: 1/3/2005

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First and foremost, the emphasis of this managerial accounting text is decision making as opposed to number crunching. Additionally, this text is unique in its first-person, discovery learning approach using a 4-step decision-making model throughout. It truly conveys a management perspective, by including coverage of topics such as ABM, the value chain, and balanced scorecard evaluation techniques. It is also the first managerial text to incorporate coverage on knowledge management (Ch. 13), highlighting the latest developments for improved managerial decision making.

Accounting Information and Managerial Decisions

(23)

Introduction

(1)

Accounting Information

(1)

Knowledge Management Tools

(3)

Data and Knowledge Warehouses

(1)

Enterprise Resource Planning Systems

(1)

Electronic Data Interchange

(1)

The Users of Accounting Information

(2)

External Users

(1)

Internal Users

(1)

The Functional Areas of Management

(1)

The Operations and Production Function

(1)

The Marketing Function

(1)

The Finance Function

(1)

The Human Resource Function

(1)

The Role of the Managerial Accountant

(1)

The Information Needs of Internal and External Users

(1)

An Introduction to Decision Making

(2)

A Decision-Making Model

(1)

Step 1: Define the Problem

(1)

Step 2: Identify Objectives

(1)

Step 3: Identify and Analyze Available Options

(1)

Step 4: Select the Best Option

(1)

Relevant Factors and Decision Making

(1)

Risk and Decision Making

(1)

Ethics and Decision Making

(10)

Part 1 The Costing of Products and Services

(114)

Product Costing: Manufacturing Processes, Cost Terminology, and Cost Flows

(38)

Introduction

(1)

Manufacturing, Merchandising, and Service Companies

(1)

The Production Process

(3)

Manufacturing in a Traditional Environment

(1)

Manufacturing in a JIT Environment

(2)

Product Costs in a Manufacturing Company

(2)

Direct Materials

(1)

Direct Labor

(1)

Manufacturing Overhead

(1)

Nonmanufacturing Costs

(1)

Life-Cycle Costs and the Value Chain

(1)

Cost Flows in a Manufacturing Company-Traditional Environment with Inventory

(1)

The Cost-of-Goods-Sold Model for a Traditional Manufacturing Company with Inventory

(5)

Cost Flows in a Manufacturing Company---JIT Environment

(1)

Merchandising Companies and the Cost of Products

(1)

Service Companies and the Cost of Services

(1)

Product Costs and Period Costs

(21)

Job Costing, Process Costing, and Operations Costing

(38)

Introduction

(1)

Product-Costing Systems

(2)

Job Costing

(1)

Process Costing

(1)

Operations Costing

(1)

Basic Job-Order Costing for Manufacturing and Service Companies

(3)

Measuring and Tracking Direct Material

(2)

Measuring and Tracking Direct Labor

(1)

Manufacturing Overhead

(1)

Cost Drivers and Overhead Rates

(4)

Plantwide Overhead Rates

(1)

Departmental Overhead Rates

(2)

The Use of Estimates

(5)

Predetermined Overhead Rates

(1)

The Problem of Over- and Underapplied Overhead

(3)

Basic Process Costing

(1)

Backflush Costing

(2)

Appendix---Additional Topics in Process Costing

(19)

First-In, First-Out (FIFO)

(1)

Weighted Average Method

(17)

Activity-Based Costing

102

(37)

Introduction

104

(1)

Activity-Based Costing

104

(2)

Unit-, Batch-, Product-, and Facility-Level Costs

105

(1)

Stage 1- Identification of Activities

105

(1)

Stage 2- Identification of Cost Drivers

106

(1)

ABC and Just in Time (JIT)

106

(2)

Cost Flows and ABC

108

(1)

Traditional Overhead Allocation and ABC-An Example

108

(2)

Topsail's Stage 1: Identification of Activities

110

(1)

Topsail's Stage 2: Identification of Cost Drivers and Allocation of Costs

110

(4)

ABC Systems in Service Industries

114

(1)

ABC and Nonmanufacturing Activities

114

(1)

Benefits and Limitations of ABC

115

(24)

Part 2 Costs and Decision Making

139

(154)

Cost Behavior and Relevant Costs

140

(34)

Introduction

142

(1)

The Behavior of Fixed and Variable Costs

142

(3)

The Cost Equation

145

(1)

Cost Behavior and Decision Making

145

(2)

Step Costs

147

(1)

Mixed Costs

148

(3)

Separating Mixed Costs into Their Fixed and Variable Components

149

(2)

Regression Analysis

151

(4)

Using a Spreadsheet Program to Perform Regression Analysis

151

(3)

Regression Statistics

154

(1)

Other Uses of Regression Analysis

155

(1)

Estimating Regression Results Using the High/Low Method

155

(1)

Cost Behavior, Activity-Based Costing, and Activity-Based Management

156

(1)

Relevant Costs and Cost Behavior

156

(1)

The Impact of Income Taxes on Costs and Decision Making

157

(1)

Taxes and Decision Making

157

(1)

After-Tax Costs and Revenues

157

(1)

Before- and After-Tax Income

158

(16)

Cost-Volume-Profit Analysis and Variable Costing

174

(40)

Introduction

176

(1)

The Contribution Margin Income Statement

176

(3)

Contribution Margin per Unit

177

(2)

Contribution Margin Ratio

179

(1)

The Contribution Margin and Its Uses

179

(1)

What-If Decisions Using CVP

180

(2)

Option 1- Reduce Variable Costs

180

(1)

Option 2- Increase Sales Incentives (Commissions)

181

(1)

Option 3- Increase Advertising

182

(1)

Changes in Price and Volume

182

(1)

Changes in Cost, Price, and Volume

183

(2)

Break-Even Analysis

185

(1)

Break-Even Calculations with Multiple Products

186

(2)

Break-Even Calculations Using Activity-Based Costing

188

(1)

Target Profit Analysis (Before and After Tax)

189

(1)

The Impact of Taxes

190

(1)

Assumptions of CVP Analysis

191

(1)

Costing Structure and Operating Leverage

192

(2)

Operating Leverage

192

(2)

Variable Costing for Decision Making

194

(20)

Short-Term Tactical Decision Making

214

(32)

Introduction

216

(1)

Special Orders

216

(2)

Outsourcing and Other Make-or-Buy Decisions

218

(5)

Strategic Aspects of Outsourcing and Make-or-Buy Decisions

219

(1)

The Make-or-Buy Decision

220

(3)

The Decision to Drop a Product or a Service

223

(1)

Resource Utilization Decisions

224

(2)

The Theory of Constraints

226

(1)

Decisions to Sell or Process Further

227

(2)

ABC Relevant-Cost Analysis

229

(17)

Long-Term (Capital Investment) Decisions

246

(47)

Introduction

248

(1)

Focus on Cash Flow

248

(1)

Discounted Cash Flow Analysis

249

(1)

Net Present Value

250

(1)

Internal Rate of Return

251

(1)

The Problem of Uneven Cash Flows

252

(1)

Screening and Preference Decisions

253

(3)

The Impact of Taxes on Capital Investment Decisions

256

(3)

An Extended Example

259

(2)

The Impact of Uncertainty on Capital Investment Decisions

261

(1)

Sensitivity Analysis

262

(1)

The Impact of the New Manufacturing Environment on Capital Investment Decisions

262

(1)

The Payback Method

263

(2)

Appendix: Time Value of Money and Decision Making

265

(28)

Future Value

265

(3)

Present Value

268

(5)

Annuities

273

(20)

Part 3 Planning, Performance, Evaluation, and Control

293

(150)

The Use of Budgets in Planning and Decision Making

294

(42)

Introduction

296

(1)

The Budget Development Process

296

(2)

Budgets for Planning, Operating, and Control

296

(2)

Advantages of Budgeting

298

(1)

The Master Budget

298

(2)

Budgeting for Sales

300

(1)

Operating Budgets--An Example

301

(7)

Production Budget

301

(2)

Material Purchases Budget

303

(2)

Direct Labor Budget

305

(1)

Manufacturing Overhead Budget

305

(3)

Selling and Administrative Expense Budget

308

(1)

Cash Budgets

308

(4)

Why Focus on Cash?

308

(1)

The Cash Receipts Budget

309

(1)

The Cash Disbursements Budget

309

(1)

Summary Cash Budget

310

(2)

Budgeted Financial Statements

312

(4)

Budgets for a Manufacturing Company in a JIT Environment

316

(1)

Budgets for Merchandising Companies and Service Companies

316

(1)

Nonfinancial Budgets

316

(1)

Budgeting in an International Environment

316

(1)

Static versus Flexible Budgets

317

(2)

ABC and Flexible Budgets

319

(17)

Variance Analysis---A Tool for Cost Control and Performance Evaluation

336

(36)

Introduction

338

(1)

Standard Costing

338

(2)

Ideal versus Practical Standards

339

(1)

Use of Standards by Nonmanufacturing Organizations

340

(1)

Flexible Budgeting with Standard Costs

340

(3)

Sales Volume Variance

341

(1)

Flexible Budget Variance

342

(1)

Sales Price Variance

343

(1)

Variable Manufacturing Cost Variances

343

(4)

Analyzing Variable Manufacturing Cost Variances

345

(1)

Direct Material Variances

345

(2)

Direct Labor Variances

347

(1)

Variable Overhead Variances

348

(2)

Fixed Overhead Variances

350

(1)

Overhead Variance Analysis Using Activity-Based Costing

351

(1)

Selling and Administrative Expense Variance

352

(1)

Interpreting and Using Variance Analysis

353

(19)

Management by Exception

354

(1)

Interpreting Favorable and Unfavorable Variances

354

(1)

Behavioral Considerations

355

(17)

Decentralization and Performance Evaluation

372

(40)

Introduction

374

(1)

Management of Decentralized Organizations

374

(2)

Responsibility Accounting and Segment Reporting

376

(1)

Cost, Revenue, Profit, and Investment Centers

376

(2)

Profit Center Performance and Segmented Income Statements

378

(3)

The Segmented Income Statement

379

(2)

Segment Performance and Activity-Based Costing

381

(1)

Investment Centers and Measures of Performance

381

(9)

Return on Investment

382

(3)

Residual Income

385

(1)

ROI vs. Residual Income

386

(1)

Economic Value Added (EVA)

386

(3)

Decentralization and Performance Evaluation in a Multinational Company

389

(1)

Performance and Management Compensation Decisions

390

(3)

Cash Compensation

390

(1)

Stock-Based Compensation

391

(1)

Noncash Benefits and Perks

392

(1)

Measuring and Rewarding Performance in a Multinational Environment

392

(1)

Segment Performance and Transfer Pricing

393

(1)

General Model for Computing Transfer Prices

393

(19)

International Aspects of Transfer Pricing

395

(17)

Performance Evaluation Using the Balanced Scorecard

412

(31)

Introduction

414

(1)

The Balanced Scorecard

414

(1)

Financial Perspective

415

(1)

Customer Perspective

415

(1)

Internal Business Perspective

415

(1)

Learning and Growth Perspective

415

(1)

Measuring and Controlling Quality Costs

416

(2)

The Costs of Quality

418

(1)

Minimizing Quality Costs

419

(3)

Measuring and Controlling Environmental Costs

422

(1)

Environmental Costing

423

(2)

Productivity

425

(1)

Efficiency and Timeliness

426

(2)

Marketing Effectiveness

428

(1)

A Summary of Key Nonfinancial Measures of the Balanced Scorecard

429

(14)

Part 4 The Impact of Management Decisions

443

(54)

The Strategic Use of Managerial Accounting Information

444

(26)

Introduction

446

(1)

Strategy and Creating a Competitive Advantage

446

(1)

Pricing of Products and Services

447

(5)

Economic Concepts and Pricing

447

(1)

Costs and Pricing

447

(1)

Target Pricing

448

(1)

Cost-Plus Pricing

449

(2)

Time and Material Pricing

451

(1)

Value Pricing

451

(1)

Other Pricing Policies

451

(1)

Legal and Ethical Issues in Pricing

451

(1)

Cost Management and Strategy

452

(18)

The Value Chain

452

(2)

Supply-Chain Management

454

(2)

Customer Relationship Management

456

(1)

Activity-Based Management and the Value Chain

457

(13)

Internal Control, Corporate Governance, and Ethics

470

(27)

Introduction

472

(1)

Fraud

472

(1)

Sarbanes-Oxley Act of 2002

472

(1)

Types of Fraud

473

(3)

Misappropriation of Assests

475

(1)

Causes of Fraud

476

(2)

Situational Pressures and Incentives

477

(1)

Opportunities

477

(1)

Personal Characteristics and Attitudes

478

(1)

Combating Fraud

478

(1)

Internal Control

479

(3)

Control Environment

480

(1)

Risk Assessment

481

(1)

Control Activities

481

(1)

Information and Communication

482

(1)

Monitoring

482

(1)

The Impact of Information Technology on Internal Control

482

(2)

Corporate Governance

484

(2)

The Need for Ethics

486

(11)

Ethics Programs

487

(1)

Codes of Ethics

487

(2)

Responding to Ethics Violations

489

(8)

Part 5 Other Topics

497

(60)

Financial Statement Analysis

498

(32)

Introduction

500

(1)

Why Analyze Financial Statements?

500

(1)

Limitations of Financial Statement Analysis

501

(1)

The Impact of Inflation on Financial Statement Analysis

501

(1)

Horizontal Analysis

501

(4)

Vertical Analysis

505

(2)

Ratio Analysis

507

(23)

Ratio Analysis and Return on Investment

507

(1)

Current Ratio

508

(1)

Acid-Test Ratio

509

(1)

Cash Flow from Operations to Current-Liabilities Ratio

509

(2)

Accounts Receivable Analysis

511

(1)

Inventory Analysis

511

(2)

Cash-to-Cash Operating Cycle Ratio

513

(1)

Debt-to-Equity Ratio

513

(1)

Times-Interest-Earned Ratio

513

(1)

Debt Service Coverage Ratio

513

(1)

Cash Flow from Operations to Capital Expenditures Ratio

514

(1)

Return on Assets

515

(1)

Return on Common Stockholders' Equity

516

(1)

Earnings per Share

517

(1)

Price Earnings Ratio

517

(13)

The Statement of Cash Flows

530

(27)

Introduction

532

(1)

Purpose of the Statement of Cash Flows

532

(3)

The Composition of the Statement of Cash Flows

532

(1)

Operating Activities

533

(1)

Investing Activities

533

(1)

Financing Activities

533

(2)

The Definition of Cash: Cash and Cash Equivalents

535

(1)

Noncash Transactions

535

(1)

Cash Flows from Operating Activities

536

(1)

Direct Method

536

(1)

Indirect Method

537

(1)

The Statement of Cash Flows and the Accounting Equation

537

(1)

Preparing the Statement of Cash Flows

538

(7)

Direct Method

540

(1)

Indirect Method

541

(4)

Using the Cash Flow Statement in Decision Making

545

(1)

Cash Flow Adequacy

545

(12)

Glossary

557

(5)

Company Index

562

(1)

Subject Index

563

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Managerial Accounting Focus on Decision Making

Summary

Table of Contents

Supplemental Materials