Management Accounting / Edition 3

Management Accounting / Edition 3

by Anthony Atkinson, Rajiv D. Banker, Robert S. Kaplan, S. Mark Young

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ISBN-10: 0130101958

ISBN-13: 9780130101952

Pub. Date: 10/03/2000

Publisher: Prentice Hall Professional Technical Reference

AUDIENCE: For upper level undergraduate and MBA Management Accounting courses.


APPROACH: Atkinson is a managerially-oriented book that focuses on both quantitative and qualitative aspects of classical and contemporary managerial accounting.


AUDIENCE: For upper level undergraduate and MBA Management Accounting courses.


APPROACH: Atkinson is a managerially-oriented book that focuses on both quantitative and qualitative aspects of classical and contemporary managerial accounting.



Product Details

Prentice Hall Professional Technical Reference
Publication date:
The Robert S. Kaplan Series in Management Accounting
Edition description:
Older Edition
Product dimensions:
7.99(w) x 10.00(h) x 0.44(d)

Table of Contents

Preface     xvii
Acknowledgments     xxi
About the Authors     xxiii
Management Accounting: Information That Creates Value     1
Management Accounting Information     3
What Is Management Accounting Information     3
In Practice: Test Market as Planning Information     4
Differences Between Management Accounting and Financial Accounting     5
A Brief History of Management Accounting     6
In Practice: Reviving Opening Market Transactions     7
Diversity of Management Accounting Information     8
Financial Information     8
Business-Level Strategy and the Value Proposition     9
Nonfinancial Information and the Value Proposition at CBD     10
Delivering the Value Proposition     11
In Practice: Cause-and-Effect Diagrams and Quality Control     12
Management Accounting and Control in Service Organizations     12
Service Companies' Demand for Management Accounting Information     13
Changing Competitive Environment     14
Manufacturing and Service Companies     14
Government and Nonprofit Organizations     14
Financial and Nonfinancial Information in Government and Not-for-Profit Organizations     15
Behavioral Implications of Management Accounting Information     15
Ethics and the Management Accountant     16
In Practice: Published versus Practice Codes of Ethics     18
Summary     19
Key Terms     19
Assignment Materials     19
Cost Management Concepts and Cost Behavior     26
What Does Cost Mean?     28
How the Use of Product Cost Information Defines Its Focus and Form     29
Using Product Cost Informaion Outside the Organization     29
Expenditures, Costs, and Expenses     30
Product Costs     30
Using Product Cost Information Inside the Organization     31
Understanding Cost Behavior to Predict Costs     32
Understanding Cost Behavior to Cost Products     35
In Practice: The Financial Risk of Fixed Costs     37
Using Cost Information to Predict Costs and Profits     38
In Practice: Exploiting CVP Analysis to Predict Profit     40
The CVP Chart     41
Extending CVP Analysis for Multi-product Organizations     42
In Practice: Exploiting Breakeven Information     43
Using Cost Information to Develop Product Costs     45
Cost-Benefit Consideration in Developing Cost Information     47
How Decisions Define the Nature of the Cost Required     47
Do Different Costs for Different Purposes Cause Costing Chaos?     49
Opportunity Cost     50
Long-Run and Short-Run Costs     52
How Organizations Create Costs: An Example     52
Starting Up     52
Early Growth     53
Reaching the Boundaries of Existing Capacity     54
Expanding the Product Line and Acquiring More Capacity Resources     54
Redefining the Business     55
Continued Growth     55
Cost Structures Today     56
In Practice: The Effect of Changing Cost Structures     57
Types of Production Activities     59
Unit-Related Activities     59
Batch-Related Activities     60
Product-Sustaining Activities     60
In Practice: Product-Sustaining Activities     61
Customer-Sustaining Activities     62
Channel-Sustaining Activities     62
Business-Sustaining Activities     62
Other Support Activities     62
Using the Cost Hierarchy     63
Understanding the Underlying Behavior of Costs     63
Nonmanufacturing Costs as Product Costs     66
Evaluating Profit Performance at Lynn's Landscaping Services     67
Summary     68
Key Terms     69
Assignment Materials     69
Traditional Cost Management Systems     83
Cost Management Systems     84
Job Order and Process Costing Systems     85
Manufacturing Costs: Direct and Indirect Cost Categories     85
Components of a Job Bid Sheet Under Job Order Costing     87
Job Costs and Markup     88
Determination of Cost Driver Rates     89
Problems Using Fluctuating Cost Driver Rates     89
In Practice: Costing Comics at Dark Horse     91
Ken's Auto Service Revisited     92
System Description     92
Recommended System Changes     93
New Cost Accounting System Illustrated     94
Number of Cost Pools     96
Recording Actual Job Costs     96
In Practice: Costs and Revenues in the Motion Picture Industry-Comparing Napoleon Dynamite to Stealth     97
Multistage Process Costing Systems     100
Comparison with Job Order Costing     101
Process Costing Illustrated     101
Equivalent Units of Production      103
Summary     105
Service Department Cost Allocations     106
Key Terms     118
Assignment Materials     118
Activity-Based Cost Systems     132
Traditional Manufacturing Costing Systems     134
Limitations of Ericson's Traditional Cost System     136
Vanilla Factory and Multiflavor Factory     137
Activity-Based Cost Systems     138
Tracing Costs to Activities     139
Tracing Costs from Activities to Products     141
Activity-Based Management     144
In Practice: W. S. Industries Uses ABC Information for Continuous Improvement     145
Concerns with Activity-Based Costing     146
Measuring the Cost of Resource Capacity     147
Fixed Costs and Variable Costs in Activity-Based Cost Systems     148
Time-Driven Activity-Based Costing     149
Marketing, Selling, Distribution, and Administrative Expenses: Tracing Costs to Customers     153
Managing Customer Profitability     155
Process Improvements     156
Activity-Based Pricing     156
Managing Relationships     156
In Practice: Strategic Change at Kemps LLC     157
Service Companies      158
The Technological Edge: Software Gives ABC Systems Convenient Access to Customer Transactions     159
Customer Costs in Service Companies     159
ABC Model for a Service Company     160
Implementation Issues     161
Lack of Clear Business Purpose     161
Lack of Senior Management Commitment     162
Delegating the Project to Consultants     162
Poor ABC Model Design     163
Individual and Organizational Resistance to Change     164
People Feel Threatened     164
Summary     165
Key Terms     166
Assignment Materials     166
Management Accounting Information for Activity and Process Decisions     205
Evaluation of Financial Implications     208
Sunk Costs Are Not Relevant     208
Relevant Costs for the Replacement of a Machine     208
Analysis of Relevant Costs     209
Summary of Relevant Costs     210
Assuming Responsibility for Decisions     210
In Practice: Overcoming the Sunk Cost Fallacy or "Concorde Effect"     210
Make-or-Buy Decisions     212
Avoidable Costs     213
Qualitative Factors     214
Facility Layout Systems      214
Process Layouts     215
Product Layouts     217
In Practice: ABC Versus TOC: Will Ever the Twain Meet?     217
Cellular Manufacturing     218
Inventory Costs and Processing Time     219
Inventory and Processing Time     219
Inventory-Related Costs     219
Costs and Benefits of Changing to a New Layout: An Example Using Cellular Manufacturing     219
Summary of Costs and Benefits     225
Cost of Nonconformance and Quality Issues     226
Quality Standards     228
Costs of Quality Control     228
In Practice: Reducing Customer "Churn" by Enhancing Service Quality     229
Just-in-Time Manufacturing     230
Implications of JIT Manufacturing     230
In Practice: Japanese Tin Robots and the Just-In-Time
Manufacturing System     231
JIT Manufacturing and Management Accounting     232
Tobor Toy Company Revisited     233
Production Flows     233
Effects on Work-in-Process Inventory     234
Effect on Production Costs     235
Cost of Rework     235
Cost of Carrying Work-in-Process Inventory     237
Benefits from Increased Sales      237
Summary of Costs and Benefits     237
Summary     238
Key Terms     240
Assignment Materials     240
Cost Information for Pricing and Product Planning     263
Role of Product Costs in Pricing and Product Mix Decisions     265
Short-Term and Long-Term Pricing Considerations     265
In Practice: Does CD Pricing Affect Piracy in the Music Industry?     266
Short-Term Product Mix Decisions: Price Takers     267
The Impact of Opportunity Costs     271
Short-Term Pricing Decisions: Price Setters     273
Available Surplus Capacity     274
In Practice: A Primer on Gasoline Prices     274
No Available Surplus Capacity     275
Long-Term Pricing Decisions: Price Setters     276
In Practice: Choosing Telecommunications Packages     277
Long-Term Product Mix Decisions: Price Takers     280
In Practice: Congestion Pricing     281
High Performance Springs Revisited     282
Summary     282
Economic Analysis of the Pricing Decision     285
Key Terms     287
Assignment Materials     287
Management Accounting and Control Systems: Assessing Performance over the Value Chain     312
What are Management Accounting and Control Systems?     313
The Meaning of Control"
Characteristics of Well-Designed MACS     316
The Value Chain     317
Total-Life-Cycle Costing     317
Target Costing     320
Comparing Traditional Cost Reduction to Target Costing     320
Traditional Cost Reduction     320
A Target Costing Example     323
Concerns About Target Costing     328
In Practice: Target Costing and the Mercedes-Benz M-Class     329
Kaizen Costing     331
Comparing Traditional Cost Reduction to Kaizen Costing     332
Concerns About Kaizen Costing     332
Environmental Costing     333
Controlling Environmental Costs     333
Benchmarking     334
Internal Study and Preliminary Competitive Analyses     335
In Practice: Scientific Progress and the Reduction of Environmental Costs: The Case of Chromium in Groundwater     336
Developing Long-Term Commitment to the Benchmarking Project and Coalescing the Benchmarking Team     337
Identifying Benchmarking Partners     337
Information Gathering and Sharing Methods     338
Taking Action to Meet or Exceed the Benchmark      339
Summary     339
Key Terms     340
Assignment Materials     340
Motivating Behavior in Management Accounting and Control Systems     351
Management Accounting and Control Systems     352
The Human Resource Management Model of Motivation     353
The Organization's Ethical Code of Conduct and MACS Design     354
Avoiding Ethical Dilemmas     354
Dealing with Ethical Conflicts     355
Conflicts Between Individual and Organizational Values     355
In Practice: Does Cheating at Golf Lead to Cheating at Other Things?     356
Conflicts Between the Organization's Stated and Practiced Values     357
The Elements of an Effective Ethical Control System     358
Steps in Making an Ethical Decision     358
Motivation and Congruence     358
In Practice: The Wall Street Journal Workplace-Ethics Quiz     360
Task and Results Control Methods     361
Using a Mix of Performance Measures     363
The Need for Multiple Measures of Performance     363
Non-Goal-Congruent Behavior     363
Using a Mix of Performance Measures     365
Empowering Employees to Be Involved in MACS Design      365
Participation in Decision Making     366
Education to Understand Information     366
Developing Appropriate Incentive Systems to Reward Performance     367
Choosing Between Intrinsic and Extrinsic Rewards     368
Extrinsic Rewards Based on Performance     368
Effective Performance Measurement and Reward Systems     369
Conditions Favoring Incentive Compensation     371
Incentive Compensation and Employee Responsibility     371
Rewarding Outcomes     372
Managing Incentive Compensation Plans     373
Types of Incentive Compensation Plans     373
In Practice: Where Have All the Raises Gone?     375
In Practice: The New Accounting Rules for Stock Options: The Case of SFAS 123 (R)     378
Summary     379
Key Terms     380
Assignment Materials     381
The Balanced Scorecard     392
The Balanced Scorecard     395
Vision, Mission, and Strategy     398
Objectives, Measures, and Targets     400
The Strategy Map and Balanced Scorecard     401
Financial Perspective     401
Customer Perspective     403
Process Perspective     406
Learning and Growth Perspective     411
Strategy Map and Balanced Scorecard at Metro Bank     411
Financial Perspective     413
Customer Perspective     413
Process Perspective     414
Learning and Growth Perspective     415
In Practice: Media General Implements a Convergence Strategy     416
Key Performance Indicator Scorecards     417
In Practice: Mellon Europe     418
Applying the Balanced Scorecard to Nonprofits and Government Organizations     419
In Practice: New Profit, Inc.     420
In Practice: Royal Canadian Mounted Police     421
Managing with the Balanced Scorecard     422
Technological Edge: Business Intelligence Software     423
Pitfalls of the Balanced Scorecard     424
Epilogue to Metro Bank     427
Summary     428
Examples of Balanced Scorecard Objectives and Measures     430
Key Terms     432
Assignment Materials     432
Using Budgets to Achieve Organizational Objectives     442
Determining the Levels of Capacity-Related and Flexible Resources     443
The Budgeting Process     444
Operating Budgets     449
Financial Budgets      450
The Budgeting Process Illustrated     450
Oxford Tole Art, Buoy Division     450
Demand Forecast     452
The Production Plan     453
Developing the Spending Plans     454
Choosing the Capacity Levels     455
Handling Infeasible Production Plans     458
Interpreting the Production Plan     458
The Financial Plans     459
Understanding the Cash Flow Statement     461
Using the Financial Plans     463
Using the Projected Results     464
What-If Analysis     465
Evaluating Decision-Making Alternatives     466
Sensitivity Analysis     466
Comparing Actual and Planned Results     467
Variance Analysis     467
Basic Variance Analysis     469
Canning Cellular Services     469
First-Level Variances     470
Decomposing the Variances     471
Planning and Flexible Budget Variances     472
Quantity and Price Variances for Material and Labor     473
Sales Variances     479
The Role of Budgeting in Service and Not-For-Profit Organizations     483
Periodic and Continuous Budgeting      483
Controlling Discretionary Expenditures     484
Incremental Budgeting     484
Zero-Based Budgeting     485
Project Funding     485
Extending the Flexible Budgeting Process: Activity-Based Budgeting     486
Managing the Budgeting Process     487
Behavioral Aspects of Budgeting     487
Designing the Budget Process     488
Influencing the Budget Process     489
Criticisms of the Traditional Budgeting Model: The Beyond Budgeting Roundtable     490
Epilogue to the Financing Crisis in Mount Pleasant     491
Summary     493
Key Terms     495
Assignment Materials     495
Capital Budgeting: Long-Term Assets     521
Long-Term (Capital) Assets     523
Investment and Return     523
Time Value of Money     524
Some Standard Notation     524
Future Value     524
Multiple Periods     525
Computing Future Values for Multiple Periods     525
Compound Growth of Interest     527
Present Value     527
Decay of a Present Value     530
Present Value and Future Value of Annuities      530
Computing the Annuity Required to Repay a Loan     534
Cost of Capital     535
Capital Budgeting     537
Shirley's Doughnut Hole     537
Payback Method     537
Accounting Rate of Return Criterion     538
Net Present Value Criterion     539
Internal Rate of Return Criterion     541
In Practice: Using Net Present Values to Evaluate a Merger     541
Profitability Indes     543
Economic Value Added Criterion     544
Effect of Taxes     544
In Practice: Popularity of the Capital Budgeting Methods     545
Effect of Inflation     547
New Product Evaluation: An Example     548
Payback Criterion     548
Accounting Rate of Return Criterion     549
Net Present Value Criterion     549
Internal Rate of Return Criterion     549
Uncertainty in Cash Flows     550
High Low Method     551
Expected Value Method     551
Wait and See Possibilities     552
In Practice: Using Simulation to Identify Project Risk     556
What-If and Sensitivity Analysis     554
Strategic Considerations      556
Postimplementation Audits and Capital Budgeting     557
Budgeting Other Spending Proposals     557
Epilogue to Dow Chemical Purchases Union Carbide     558
Summary     559
Key Terms     559
Assignment Materials     559
Financial Control     572
The Environment of Financial Control     578
Financial Control     578
The Motivation for Decentralization     579
In Practice: Standard Operating Procedures at Mercedes-Benz USA     580
In Practice: Evaluating Performance at McDonald's Corporation Restaurants     581
Responsibility Centers and Evaluating Unit Performance     581
Coordinating Responsibility Centers     581
In Practice: The High Cost of Coordination     582
Responsibility Centers and Financial Control     583
In Practice: Nonfinancial Performance Measures at Federal Express: The Service Quality Indicator     584
Responsibility Center Types     584
In Practice: The Business Directory at General Electric     587
Evaluating Responsibility Centers     588
In Practice: Financial Statement Business Segment Reporting     591
Transfer Pricing     595
In Practice: International Transfer Pricing     596
Approaches to Transfer Pricing     596
Cost Allocations to Support Financial Control     599
Transfer Prices Based on Equity Considerations     602
Assigning and Valuing Assets in Investment Centers     603
Efficiency and Productivity Elements of Return on Investment     603
Assessing Productivity Using Financial Control     604
In Practice: Labor Productivity in a Consultancy     605
Questioning the Return on Investment Approach     605
In Practice: Managing Productivity in Airlines     606
Using Residual Income     606
In Practice: Organizations Adopt Economic Value Added for Different Reasons     607
The Efficacy of Financial Control     608
External Financial Control: Financial Ratio Analysis     609
Profitability Ratios     613
Efficiency Ratios     616
Financial Leverage     616
Liquidity     617
Asset Use     618
Market Value     620
Ratio Trends     620
Limitations of Financial Ratio Analysis     623
Epilogue to Nucor Corporation: The Future After 2004     624
Summary     625
Key Terms      625
Assignment Materials     626
Glossary     639
Subject Index     649
Name and Company Index     655

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