Cost Accounting: A Managerial Emphasis / Edition 10by Srikant M. Datar, George Foster, Charles T. Horngren
Pub. Date: 07/02/1999
Publisher: Prentice Hall
This acclaimed, market-leading book embraces the basic theme of "different costs for different purposes." Cost Accounting reaches beyond cost accounting procedures to consider concepts, analyses, and management. Coverage includes discussions on cost-volume-profit analysis; job costing methods; activity-based costing; variance analysis; process costing; the Internet and World Wide Web; organization structure; supply chain; the value-chain concept; and more. For those interested in cost accounting, economics, and corporate finance.
Table of Contents1. The Accountant's Role in the Organization.
New section on "Key Management Accounting Guidelines", Section on "Organization Structure" reworked with NIKE as an example (uses an international perspective). Discussion on Supply Chain added and now incorporates new trends in business. New "Concepts in Action" and "Surveys of Company Practice" added.
2. An Introduction to Cost Terms and Purposes.
Key exhibits now consistently use examples from a single company to better emphasize the value-chain concept. Presentation of cost driver concept provides greater emphasis on the cause-and-effect notion underlying activity-based costing. New examples from the service sector are added to illustrate cost concepts.
3. Cost-Volume-Profit Analysis.
Greater emphasis given to explaining basic concepts of cost-volume-profit analysis. The chapter places more emphasis on CVP analysis rather than only on breakeven point. This allows a greater focus on business applications such as evaluating decisions to do more advertising or to reduce prices. Introduces ideas of operating leverage to summarize risk-return tradeoffs. Adds a small section on breakeven analysis with multiple cost drivers in place of volume being the only cost driver. New "Concepts in Action" box added.
4. Job Costing.
The content of chapters 4 and 5 have been significantly changed. Chapter 4 now describes the basics of job-costing systems in manufacturing, merchandising, and service organizations. Chapter 5 then discusses ABC systems as an extension of job costing systems. The presentation moves from actual to normal costing and develops explicit linkages between the entries made while working on the job, those made at the end of the month, and closing entries at the end of the year. More material has been added on non-manufacturing functions in the value chain and on multiple cost pools. New "Concepts in Action" box added.
5. Activity-Based Costing and Activity-Based Management.
Chapter 5 is basically a new chapter with a new example on ABC systems. The chapter provides motivation for ABC systems by discussing product costing using a single cost-pool system, a departmental costing system, and an ABC system. The cost hierarchy is discussed as an integral part of the chapter. The chapter emphasizes the uses of activity-based costing for decision making and activity-based management (ABM).
6. Master Budget and Responsibility Accounting.
A new and simpler example of a budget (for a furniture manufacturer) is used to illustrate the steps in developing an operating budget. The section on Activity-based Budgeting is expanded and linked to a prior budget illustration for a furniture manufacturer. The importance of coordinating across organizations when budgeting is given greater attention. Greater emphasis is given to the challenge of having managers provide more honest budget forecasts. New "Concepts in Action" box is added to show the use of web-technology to fast-track the budgeting process.
7. Flexible Budgets, Variances and Management Control: I.
More attention is given to the explanations for variances. This includes the link to supply chain concepts to illustrate the diverse sources of variances. A new section on variance analysis in an activity-based costing setting is added. The summary exhibit linking variances at different levels is simplified to highlight the inter-relationships. The benchmarking example is changed to focus on revenue and cost data of United Airlines vis--vis 8 other airlines.
8. Flexible Budgets, Variances, and Management Control: II.
Increased emphasis on the implications of overhead variances for management decisions. Greater linkage of overhead variances with flexible budgeting. New section on activity-based budgeting and variance analysis New "Concepts in Action" box on the use of standard-cost based daily income statements at a plant in Indonesia. New "Survey of Company Practice" box on the relative use of different variances.
9. Inventory Costing and Capacity Analysis.
Section on Inventory Costing revised with a single coordinating example. The straightforward case of absorption costing vs. variable costing for one year is first explained. Then, the discussion adds income differences for several years and throughput costing. Increased analysis of ways to reduce dysfunctional aspects of absorption costing. New discussion of how subcontracting affects variable cost vs. absorption cost differences New section on "Choosing a Denominator Level Concept", Increased decision-making links are now reinforced by including discussion of the downward demand spiral concept and pricing from Chapter 14 (of the Ninth Edition).
10. Determining How Costs Behave.
The organization of the chapter and explanations of cost estimation have been streamlined. Some of the technical details of regression analysis have been redone
11. Decision Making and Relevant Information.
More structure has been added to this chapter to indicate how the same concepts of relevance apply to the different examples in the chapter. A new exhibit 11-3 summarizes these concepts. A new example discusses the relevant costs and relevant revenues for decisions such as closing down/opening sales offices and in particular, the irrelevance of allocated overhead. The discussion of opportunity costs has been simplified. The chapter has been reorganized with more international examples and discussion of internet strategies and behavioral issues. New "Concepts in Action" boxes added.
12. Pricing Decisions and Cost Management.
The discussion on long-run pricing and target costing has been reorganized to highlight issues of value engineering, value-added and non-value-added costs Life cycle costing is now linked to the target pricing discussion. The sections on predatory pricing, dumping, and collusive pricing have been updated New "Concepts in Action" box added.
13. Strategy, Balanced Scorecard, and Strategic Profitability Analysis.
This is a new chapter in the book covering the topics of strategy, implementation of strategy, the balanced scorecard, strategic profitability analysis, productivity measurement, downsizing, and reengineering. No other book has a chapter of this type.
14. Cost Allocation.
Chapter is now restructured to link with Chapter 5 on activity-based costing, including extensive discussion of how cost pools at corporate are allocated to divisions added. More explicit discussion on allocating support department costs. New "Concepts in Action" box on "Contract Disputes Over Reimbursable Cost for U.S. Government Agencies",
15. Cost Allocation: Joint Products and Byproducts.
Section on Accounting for Byproducts restructured to better highlight key concepts. Journal entries added to illustrate each method. Performance evaluation issues discussed in joint cost allocation choices. New "Surveys of Company Practice" box on "Joint Cost Allocation in the Oil Patch",
16. Revenues, Sales Variances, and Customer-Profitability Analysis.
Revenue allocation approaches expanded to include stand-alone product revenues and management judgment. Part Two on Sales Variances uses a new example to illustrate variance analyses in multi-product settings. Part Three on Customer Profitability revised to integrate revenue and cost analysis in a single example. Greater emphases on ways to assess customer value New appendix on Mix and Yield Variances for Substitutable Inputs (includes material from Chapter 24 of Ninth Edition).
17. Process Costing.
Chapter has been rewritten using the five-step approach of the Eighth Edition, in place of the four-step approach used in the Ninth Edition. The concept of equivalent units and the steps in the various methods of process costing (weighted-average, FIFO, and standard costing) have been explained in more detail The Appendix to this chapter is new and covers the topics of hybrid costing and operation costing (taken from Chapter 19 of the Ninth Edition). Cost management issues are emphasized some more.
18. Spoilage, Rework, and Scrap.
To be consistent with Chapter 17, the process costing and spoilage material has been rewritten using the five-step approach of the Eighth Edition in place of the four-step approach used in the Ninth Edition. The material on inspection points at intermediate stages of the production cycle has been consolidated at one point in the chapter and elaborated on in the Appendix. Cost management issues are emphasized more.
19. Quality, Time, and the Theory of Constraints.
The presentations of the quality and time sections have been streamlined. The section on theory of constraints (TOC) has been changed to describe how TOC and ABC complement one another. New "Concepts in Action" box added.
20. Inventory Management, Just-in-Time, and Backflush Costing.
Chapter 20 integrates material from Chapters 20-21 of Ninth Edition. New section added on Inventory Management and Supply-Chain Analysis. Backflush Costing section reversed to highlight links of journal entries to flow of operations. New "Concepts in Action" box on Cisco's use of the internet to streamline its purchasing processes. New "Survey of Company Practice" box on the Challenges of Obtaining the Benefits from a Supply-Chain Analyser.
21. Capital Budgeting and Cost Analysis.
Chapter 21 integrates material from Chapters 22-23 of Ninth Edition. Capital budgeting example proceeds from a simple no-tax case to incorporate income taxes in the same example. New section added on Intangible Assets and Capital Budgeting. New "Concepts in Action" box on the financing of the Cincinnati Bengals' new football stadium.
22. Management Control Systems, Transfer Pricing, and Multinational Considerations.
More structure has been added to this chapter by explicitly using the criterion of goal congruence, submit performance evaluation, management effort, and autonomy to evaluate different transfer pricing methods. Exhibit 22-3 summarizes this discussion. The chapter illustration has been simplified by using two divisions instead of three to explain transfer pricing. A new section has been added on variable cost-based transfer pricing. The multinational focus of this chapter and the Concepts in Action box has been retained.
23. Performance Measurement, Compensation, and Multinational Considerations.
The steps in developing accounting-based performance measure serves as a framework for much of the chapter. More material has been added on economic value added (EVA), sub unit managers' compensation, and team-based compensation. The section on alternative ways to calculate the investment base (for example, gross book value versus net book value) has been streamlined. The multinational focus of this chapter has been retained New "Concepts in Action" box added.
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Though this book is very pretty, it is hard to understand and follow, and the author makes illustrations harder than they need to be to learn the material. If you are a student taking this course, I urge you to make certain you have a good teacher for it. You will not get the gist of cost accounting by reading and studying this book alone.
The book is excellent. Provides great insight into cost accounting practices and systems. Very useful to management students like me.