Cost and management accounting : an introduction / Colin Drury

Includes index

Preface xiii
Part One Introduction to Cost and Management Accounting
1 (38)
Introduction to management accounting
3 (16)
The users of accounting information
4 (1)
Differences between management accounting and financial accounting
5 (1)
The decision-making process
5 (5)
Changing competitive environment
10 (1)
Focus on customer satisfaction and new management approaches
10 (3)
The impact of the changing environment of management accounting systems
13 (1)
Functions of management accounting
14 (2)
Summary of the contents of this book
16 (3)
An introduction to cost terms and concepts
19 (20)
Cost objects
19 (1)
Direct and indirect costs
20 (2)
Period and product costs
22 (1)
Cost behaviour
22 (5)
Relevant and irrelevant costs and revenues
27 (1)
Avoidable and unavoidable costs
28 (1)
Sunk costs
28 (1)
Opportunity costs
28 (1)
Incremental and marginal costs
29 (1)
Job costing and process costing systems
30 (1)
Maintaining a cost database
30 (9)
Part Two Cost Accumulation for Inventory Valuation and Profit Measurement
39 (158)
Accounting for labour and materials
41 (30)
Accounting for labour costs
42 (2)
Accounting treatment of various labour cost items
44 (1)
Materials recording procedure
45 (2)
Pricing the issues of materials
47 (4)
Issues relating to accounting for materials
51 (2)
Quantitative models for the planning and control of stocks
53 (1)
Relevant costs for quantitative models under conditions of certainty
53 (1)
Determining the economic order quantity
54 (3)
Assumptions of the EOQ formula
57 (1)
Determining when to place the order
57 (1)
Control of stocks through classification
58 (1)
Materials requirement planning
59 (1)
Just-in-time systems
60 (11)
Cost assignment
71 (36)
Assignment of direct and indirect costs
72 (1)
Different costs for different purposes
72 (2)
Cost-benefit issues and cost systems design
74 (1)
Assigning direct costs to objects
75 (1)
Plant-wide (blanket) overhead rates
75 (2)
The two-stage allocation process
77 (1)
An illustration of the two-stage process for a traditional costing system
78 (7)
Extracting relevant costs for decision-making
85 (1)
Budgeted overhead rates
85 (1)
Under-and over-recovery of overheads
86 (1)
Maintaining the database at standard costs
87 (1)
Non-manufacturing overheads
88 (4)
Appendix 4.1: Inter-service department reallocations
92 (4)
Appendix 4.2: Other allocation bases used by traditional systems
96 (11)
Accounting entries for a job costing system
107 (24)
Control accounts
108 (1)
Recording the purchase of raw materials
109 (1)
Recording the issue of materials
109 (3)
Accounting procedure for labour costs
112 (1)
Accounting procedure for manufacturing overheads
113 (2)
Non-manufacturing overheads
115 (1)
Accounting procedures for jobs completed and products sold
115 (1)
Costing profit and loss account
116 (1)
Interlocking accounting
116 (1)
Contract costing
117 (5)
Work in progress valuation and amounts recoverable on contracts
122 (9)
Process costing
131 (32)
Flow of production and costs in a process costing system
132 (1)
Process costing when all output is fully complete
133 (6)
Process costing with ending work in progress partially complete
139 (3)
Beginning and ending work in progress of uncompleted units
142 (5)
Partially completed output and losses in process
147 (1)
Process costing for decision-making and control
147 (1)
Batch/operating costing
148 (1)
Surveys of practice
149 (3)
Appendix 6.1: Losses in process and partially completed units
152 (11)
Joint and by-product costing
163 (16)
Distinguishing between joint products and by-products
163 (2)
Methods of allocating joint costs
165 (7)
Irrelevance of joint cost allocations for decision-making
172 (1)
Accounting for by-products
173 (1)
By-products, scrap and waste
174 (5)
Income effects of alternative cost accumulation systems
179 (18)
External and internal reporting
180 (1)
Variable costing
181 (1)
Absorption costing
182 (1)
Variable costing and absorption costing: a comparison of their impact on profit
183 (3)
A mathematical model of the profit functions
186 (1)
Some arguments in support of variable costing
187 (1)
Some arguments in support of absorption costing
188 (1)
Surveys of company practice
189 (2)
Appendix 8.1: Derivation of the profit function for an absorption costing system
191 (6)
Part Three Information for Decision-making
197 (112)
Cost-volume--profit analysis
199 (30)
The economist's model
200 (2)
The accountant's cost--volume--profit model
202 (2)
A mathematical approach to cost-volume--profit analysis
204 (4)
Margin of safety
208 (1)
Constructing the break-even chart
208 (1)
Alternative presentation of cost--volume--profit analysis
208 (2)
Multi-product cost--volume--profit analysis
210 (3)
Cost--volume--profit analysis assumptions
213 (3)
Cost--volume--profit analysis and computer applications
216 (1)
Separation of semi-variable costs
216 (13)
Measuring relevant costs and revenues for decision-making
229 (28)
The meaning of relevance
230 (1)
Importance of qualitative factors
230 (1)
Special pricing decisions
231 (4)
Product-mix decisions when capacity constraints exist
235 (2)
Replacement of equipment -- the irrelevance of past costs
237 (2)
Outsourcing and make or buy decisions
239 (4)
Discontinuation decisions
243 (2)
Determining the relevant costs of direct materials
245 (1)
Determining the relevant costs of direct labour
245 (12)
Activity-based costing
257 (28)
The role of a cost accumulation system in generating relevant cost information for decision-making
258 (1)
Types of cost systems
259 (1)
A comparison of traditional and ABC systems
260 (2)
The emergence of ABC systems
262 (1)
Volume-based and non-volume-based cost drivers
262 (3)
An illustration of the two-stage process for an ABC system
265 (4)
Designing ABC systems
269 (3)
Activity hierarchies
272 (1)
Cost versus benefits considerations
273 (1)
Periodic review of an ABC data base
274 (1)
ABC in service organizations
274 (1)
ABC cost management applications
275 (10)
Capital investment decisions
285 (24)
The opportunity cost of an investment
286 (1)
Compounding and discounting
286 (2)
The concept of net present value
288 (2)
Calculating net present values
290 (1)
The internal rate of return
291 (3)
Relevant cash flows
294 (1)
Timing of cash flows
294 (1)
Techniques that ignore the time value of money
295 (1)
Payback method
295 (3)
Accounting rate of return
298 (1)
Qualitative factors
299 (2)
Appendix 12.1: Taxation and investment decisions
301 (8)
Part Four Information for Planning, Control and Performance Measurement
309 (106)
The budgeting process
311 (28)
Relationship between budgeting and long-term planning
312 (1)
The multiple functions of budgets
312 (2)
Conflicting roles of budgets
314 (1)
The budget period
314 (1)
Administration of the budgeting process
315 (1)
Stages in the budgeting process
316 (4)
A detailed illustration
320 (1)
Sales budget
320 (3)
Production budget and budgeted stock levels
323 (1)
Direct materials usage budget
324 (1)
Direct materials purchase budget
324 (1)
Direct labour budget
325 (1)
Factory overhead budget
325 (1)
Selling and administration budget
326 (1)
Departmental budgets
327 (1)
Master budget
327 (2)
Cash budgets
329 (1)
Final review
329 (1)
Computerized budgeting
330 (9)
Management control systems
339 (28)
Different types of controls
340 (3)
Cybernetic control systems
343 (1)
Feedback and feed-forward controls
343 (1)
Management accounting control systems
344 (1)
Responsibility centres
344 (2)
The nature of management accounting control systems
346 (1)
The controllability principle
347 (4)
Setting financial performance targets
351 (1)
Participation in the budgeting and target setting process
352 (2)
Non-financial performance measures
354 (1)
Activity-based cost management
355 (12)
Standard costing and variance analysis
367 (48)
Operation of a standard costing system
368 (3)
Establishing cost standards
371 (3)
Types of cost standards
374 (4)
Variance analysis
378 (1)
Material variances
378 (1)
Material price variances
379 (2)
Material usage variance
381 (1)
Total material variance
382 (1)
Labour variances
382 (1)
Wage rate variance
382 (1)
Labour efficiency variance
383 (1)
Total labour variance
384 (1)
Variable overhead variances
384 (1)
Variable overhead expenditure variance
384 (1)
Variable overhead efficiency variance
385 (1)
Similarities between materials, labour and overhead variances
386 (1)
Fixed overhead expenditure or spending variance
386 (1)
Sales variances
387 (1)
Total sales margin variance
387 (1)
Sales margin price variance
388 (1)
Sales margin volume variance
389 (1)
Reconciling budgeted profit and actual profit
389 (1)
Standard absorption costing
389 (2)
Volume variance
391 (1)
Volume efficiency variance
392 (1)
Volume capacity variance
393 (1)
Summary of fixed overhead variances
393 (1)
Reconciliation of budgeted and actual profit for a standard absorption costing system
393 (2)
Performance reports
395 (3)
Recording standard costs in the accounts
398 (17)
Questions
415 (126)
Bibliography
541 (4)
Appendices
545 (4)
Appendix A
546 (1)
Appendix B
547 (2)
Index 549

Cost & Management Accounting: An Introduction (previously entitled Costing: An Introduction) is a rigorous, clear and easy-to-understand introduction to management accounting, with a tried, tested and successful format that has enabled literally thousands of students to pass their exams. It is intended primarily for accounting students taking a one-or two-semester introductory course and covers all of the basic topics required. The book is a companion volume to the author's best-selling Management & Cost Accounting, which includes more advanced topics not suitable for introductory courses. The strong pedagogic emphasis of Cost & Management Accounting: An Introduction enables students to learn effectively -- each chapter contains learning objectives, examples, exhibits, review problems (with answers), questions (with answers divided between the Students' and Instructors' Manuals), summary, key terms and concepts, and key examination points.

eng