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Management accounting for decision makers

Author: Atrill, Peter ; McLaney, EddiePublisher: Pearson Education, 2009. ; Prentice Hall, 2009.Edition: 6th ed.Language: EnglishDescription: 536 p. : Graphs ; 27 cm.ISBN: 9780273723622Type of document: BookBibliography/Index: Includes bibliographical references and index and glossary
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Europe Campus
Main Collection
Print HG40 .A87 2009
(Browse shelf)
001254990
Available 001254990
Total holds: 0

Includes bibliographical references and index and glossary

Digitized

Management Accounting for Decision Makers Contents Guided tour of the book Guided tour of MyAccountingLab Preface How to use this book Acknowledgements xiv xvi xviii xx xxii 1 1 1 2 2 6 7 8 9 9 10 11 12 12 14 15 16 17 18 18 21 22 23 24 25 26 27 28 29 31 1 Introduction to management accounting Introduction Learning outcomes What is the purpose of a business? How are businesses organised? How are businesses managed? 1 Establish mission and objectives 2 Undertake a position analysis 3 Identify and assess the strategic options 4 Select strategic options and formulate plans 5 Perform, review and control The changing business landscape Setting financial aims and objectives Enhancing the owners' wealth Balancing risk and return What is management accounting? How useful is management accounting information? Providing a service But ... is it material? Weighing up the costs and benefits Management accounting as an information system It's just a phase ... What information do managers need? Reporting non-financial information Influencing managers' behaviour Reaping the benefits of IT From bean counter to team member Reasons to be ethical Management accounting and financial accounting Not-for-profit organisations Summary Key terms References Further reading Review questions Exercises 32 34 34 34 35 35 37 37 37 38 39 40 44 45 46 47 48 48 49 49 55 55 55 56 56 58 59 60 61 65 66 67 67 70 70 72 72 74 74 77 78 79 81 83 2 Relevant costs for decision making Introduction Learning outcomes What is meant by 'cost'? A definition of cost Relevant costs: opportunity and outlay costs Sunk costs and committed costs Qualitative factors of decisions Self-assessment question 2.1 Summary Key terms Further reading Review questions Exercises 3 Cost-volume-profit analysis Introduction Learning outcomes Cost behaviour Fixed cost Variable cost Semi-fixed (semi-variable) cost Estimating semi-fixed (semi-variable) cost Finding the break-even point Achieving a target profit Contribution Contribution margin ratio Margin of safety Operating gearing The effect of gearing on profit Profit-volume charts The economist's view of the break-even chart Failing to break even Weaknesses of break-even analysis Using contribution to make decisions - marginal analysis Accepting/rejecting special contracts The most efficient use of scarce resources Make-or-buy decisions Closing or continuation decisions Self-assessment question 3.1 Summary Key terms Further reading Review questions Exercises 85 85 86 86 87 87 4 Full costing Introduction Learning outcomes Why do managers want to know the full cost? What is full costing? Single-product businesses Multi-product businesses Direct and indirect cost Job costing Full (absorption) costing and the behaviour of cost The problem of indirect cost Overheads as service renderers Job costing: a worked example Selecting a basis for charging overheads Segmenting the overheads Dealing with overheads on a cost centre basis Batch costing Full (absorption) cost as the break-even price The forward-looking nature of full (absorption) costing Self-assessment question 4.1 Using full (absorption) cost information Criticisms of full (absorption) costing Full (absorption) costing versus variable costing Which method is better? Summary Key terms Further reading Review questions Exercises 92 92 92 93 94 95 96 96 98 99 100 100 101 105 107 108 119 120 120 120 121 123 123 125 126 128 128 129 129 134 134 134 135 135 135 136 5 Costing and pricing in a competitive environment Introduction Learning outcomes Cost determination in the changed business environment Costing and pricing products in the traditional way Costing and pricing products in the new environment Cost management systems Activity-based costing An alternative approach to full costing What drives the costs? Attributing overheads Benefits of ABC ABC versus the traditional approach ABC and service industries Criticisms of ABC Self-assessment question 5.1 Other approaches to cost management in the modern environment Total (or whole) life-cycle costing Target costing Costing quality control Kaizen costing Benchmarking Pricing Economic theory Some practical considerations Full cost (cost-plus) pricing Pricing on the basis of relevant/marginal cost Target pricing Pricing strategies Summary Key terms Further reading Review questions Exercises 136 137 138 138 139 140 140 144 147 148 148 151 152 153 153 154 155 162 163 166 168 168 169 170 170 171 171 6 Budgeting Introduction Learning outcomes How budgets link with strategic plans and objectives Collecting information on performance and exercising control Time horizon of plans and budgets Limiting factors Budgets and forecasts Periodic and continual budgets How budgets link to one another How budgets help managers The budget-setting process Step 1: Establish who will take responsibility Step 2: Communicate budget guidelines to relevant managers Step 3: Indentify the key, or limiting, factor Step 4: Prepare the budget for the area of the limiting factor Step 5: Prepare draft budgets for all other areas Step 6: Review and co-ordinate budgets 175 175 175 176 177 178 179 179 180 180 183 185 185 186 186 186 187 188 Step 7: Prepare the master budgets Step 8: Communicate the budgets to all interested parties Step 9: Monitor performance relative to the budget Using budgets in practice Incremental and zero-base budgeting Preparing the cash budget Preparing other budgets Activity-based budgeting Self-assessment question 6.1 Non-financial measures in budgeting Budgets and management behaviour Who needs budgets? Beyond conventional budgeting Long live budgets! Summary Key terms References Further reading Review questions Exercises 188 188 188 190 192 194 197 201 202 203 203 204 205 207 208 209 209 209 210 210 217 217 217 218 219 220 221 222 225 225 227 228 233 234 234 235 238 239 239 241 242 243 244 244 244 7 Accounting for control Introduction Learning outcomes Budgeting for control Types of control Variances from budget Flexing the budget Sales volume variance Sales price variance Materials variances Labour variances Fixed overhead variance Reasons for adverse variances Variance analysis in service industries Non-operating profit variances Investigating variances Compensating variances Making budgetary control effective Behavioural issues The impact of management style Failing to meet the budget Self-assessment question 7.1 Standard quantities and costs Setting standards Who sets the standards? How is information gathered? What kinds of standards should be used? The learning-curve effect Other uses for standard costing Some problems ... The new business environment Summary Key terms References Further reading Review questions Exercises 245 245 246 247 247 249 250 252 252 252 253 253 257 257 257 258 259 261 262 263 265 267 269 270 270 272 272 275 277 278 278 279 283 283 286 290 290 291 292 302 303 304 304 8 Making capital investment decisions Introduction Learning outcomes The nature of investment decisions Investment appraisal methods Accounting rate of return (ARR) ARR and ROCE Problems with ARR Payback period (PP) Problems with PP Net present value (NPV) Interest lost Risk Inflation What will a logical investor do? Using discount tables The discount rate and the cost of capital Why NPV is better NPV's wider application Internal rate of return (IRR) Problems with IRR Some practical points Investment appraisal in practice Self-assessment question 8.1 Investment appraisal and strategic planning Dealing with risk Assessing the level of risk Reacting to the level of risk Managing investment projects Stage 1: Determine investment funds available Stage 2: Identify profitable project opportunities Stage 3: Evaluate the proposed project Stage 4: Approve the project Stage 5: Monitor and control the project Summary Key terms References Further reading Review questions Exercises 305 305 305 308 310 310 310 311 311 317 317 318 318 319 319 323 327 328 329 329 330 331 333 334 339 340 340 341 343 344 344 346 348 350 350 355 357 359 359 360 361 361 361 362 362 9 Strategic management accounting Introduction Learning outcomes What is strategic management accounting? Facing outwards Competitor analysis Customer profitability analysis Competitive advantage through cost leadership Total life-cycle costing Target costing Kaizen costing Value chain analysis An alternative view Translating strategy into action The balanced scorecard Measuring shareholder value The quest for shareholder value How can shareholder value be created? The need for new measures Net present value (NPV) analysis Extending NPV analysis: shareholder value analysis (SVA) Measuring free cash flows Business value and shareholder value Managing with SVA The implications of SVA Economic value added (EVA®) EVA® and SVA compared EVA® or SVA? Just another fad? Self-assessment question 9.1 Summary Key terms References Further reading Review questions Exercises 10 Measuring performance Introduction Learning outcomes Divisionalisation Why do businesses divisionalise? Types of divisions Divisional structures Is divisionalisation a good idea? Measuring divisional profit Contribution Controllable profit Divisional profit before common expenses Divisional profit for the period Divisional performance measures Return on investment (ROI) Residual income (RI) Looking to the longer term Comparing performance EVA® revisited Self-assessment question 10.1 Transfer pricing The objectives of transfer pricing Transfer pricing and tax mitigation Transfer pricing policies Market prices Variable cost Full cost Negotiated prices Divisions with mixed sales Differential transfer prices Transfer pricing and service industries Non-financial measures of performance What is measured? Choosing non-financial measures Who should report? Summary Key terms Further reading Review questions Exercises 366 366 366 367 367 367 367 369 372 373 374 374 374 376 376 379 381 383 383 385 386 386 388 389 389 390 391 391 392 394 396 396 397 400 400 401 403 403 404 404 11 Managing working capital Introduction Learning outcomes 409 409 409 What is working capital? Managing working capital The scale of working capital Managing inventories Budgeting future demand Financial ratios Recording and reordering systems Levels of control Inventories management models Economic order quantity Materials requirement planning systems Just-in-time inventories management Managing receivables Which customers should receive credit and how much credit should they be offered? Length of credit period Cash discounts Self-assessment question 11.1 Debt factoring and invoice discounting Collection policies and reducing the risk of non-payment Managing cash Why hold cash? How much cash should be held? Controlling the cash balance Cash budgets and managing cash The operating cash cycle Cash transmission Bank overdrafts Managing trade payables Taking advantage of cash discounts Controlling trade payables Summary Key terms Further reading Review questions Exercises 410 411 411 414 416 416 416 418 419 419 422 422 424 424 426 428 428 429 429 431 431 432 433 434 434 438 439 439 440 441 442 444 444 445 445 452 461 470 480 521 523 Appendix A: Glossary of key terms Appendix B: Solutions to self-assessment questions Appendix C: Solutions to review questions Appendix D: Solutions to selected exercises Appendix E: Present value table Index

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