Accounting Principles A Business Perspective Volume 2 ...

Accounting Principles A Business Perspective Volume 2 Managerial Accounting

Accounting Principles: A Business Perspective

First Global Text Edition, Volume 2 Managerial Accounting

James Don Edwards, PhD, D.H.C.

J.M. Tull Professor Emeritus of Accounting Terry College of Business University of Georgia

Roger H. Hermanson, PhD

Regents Professor Emeritus of Accounting Ernst & Young-J. W. Holloway Memorial Professor Emeritus

Georgia State University

Susan D. Ivancevich, PhD, CPA

Cameron School of Business University of North Carolina Wilmington

Funding for the first Global Text edition was provided by Endeavour International Corporation, Houston, Texas, USA.

The Global Text Project is funded by the Jacobs Foundation, Zurich, Switzerland. This book is licensed under a Creative Commons Attribution 3.0 License

Acknowledgments for the Global Text First Edition:

Revision Editor: Donald J. McCubbrey, PhD Clinical Professor, Daniels College of Business University of Denver

Life member, American Institute of Certified Public Accountants

Revision Assistants Emily Anderson Kyle Block

Assistant Editor Jackie Sharman

Associate Editor Marisa Drexel

Conversion Specialist Varun Sharma

This book is licensed under a Creative Commons Attribution 3.0 License

Table of Contents 19. Process: Cost systems.............................................................................................................5

Nature of a process cost system........................................................................................................................5 Process costing illustration...............................................................................................................................6 Process costing in service organizations.........................................................................................................16 Spoilage...........................................................................................................................................................16

20. Using accounting for quality and cost management..........................................................37

Importance of good accounting information.................................................................................................37 Quality and customer satisfaction measures..................................................................................................41 Just-in-time method.......................................................................................................................................45 Activity-based costing and management.......................................................................................................48 Methods used for activity-based costing........................................................................................................52 Impact of new production environment on cost drivers...............................................................................56 Activity-based costing in marketing...............................................................................................................56 Strategic use of activity-based management..................................................................................................57 Behavioral and implementation issues..........................................................................................................57 Opportunities to improve activity-based costing in practice.........................................................................58

21. Cost-volume-profit analysis.................................................................................................73

Cost behavior patterns....................................................................................................................................74 Methods for analyzing costs...........................................................................................................................78 Cost-volume-profit (CVP) analysis.................................................................................................................79 Finding the break-even point.........................................................................................................................81 Cost-volume-profit analysis illustrated..........................................................................................................84 Assumptions made in cost-volume-profit analysis........................................................................................87 Using computer spreadsheets for CVP analysis.............................................................................................87 Effect of automation on cost-volume-profit analysis....................................................................................88

22. Short-term decision making: Differential analysis..........................................................104

Contribution margin income statements.....................................................................................................104 Differential analysis......................................................................................................................................106 Applications of differential analysis.............................................................................................................108 Applying differential analysis to quality.......................................................................................................113

23. Budgeting for planning and control..................................................................................128

The budget--For planning and control.........................................................................................................129 The master budget illustrated.......................................................................................................................134 Budgeting in merchandising companies......................................................................................................147 Budgeting in service companies...................................................................................................................148 Additional concepts related to budgeting.....................................................................................................148

24. Control through standard costs.........................................................................................165

Uses of standard costs...................................................................................................................................165 Advantages and disadvantages of using standard costs...............................................................................167 Computing variances....................................................................................................................................169 Goods completed and sold............................................................................................................................180 Investigating variances from standard.........................................................................................................181 Disposing of variances from standard..........................................................................................................181 Nonfinancial performance measures...........................................................................................................183 Activity-based costing, standards, and variances........................................................................................183

Accounting Principles: A Business Perspective

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A Global Text

25. Responsibility accounting: Segmental analysis................................................................196

Responsibility accounting.............................................................................................................................196 Responsibility reports...................................................................................................................................198 Responsibility centers...................................................................................................................................201 Transfer prices..............................................................................................................................................204 Use of segmental analysis.............................................................................................................................205 Concepts used in segmental analysis...........................................................................................................205 Investment center analysis..........................................................................................................................208 Economic value added and residual income................................................................................................212 Segmental reporting in external financial statements.................................................................................213

26. Capital budgeting:Long-range planning...........................................................................232

Capital budgeting defined............................................................................................................................232 Profitability index.........................................................................................................................................241 Investments in working capital....................................................................................................................245 The postaudit................................................................................................................................................246 Investing in high technology projects..........................................................................................................246 Capital budgeting in not-for-profit organizations.......................................................................................247 Epilogue........................................................................................................................................................247

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