BOOK
Management Accounting:Information for Decision-Making and Strategy Execution
Anthony A. Atkinson | Robert S. Kaplan | Ella Mae Matsumura | S. Mark Young
(2013)
Additional Information
Book Details
Abstract
For upper level undergraduate and MBA Management Accounting courses.
An approach to management accounting from the perspective of a business manager.
Atkinson presents state-of-the-art thinking on all of the major topics in management accounting including activity-based management, the Balanced Scorecard, target costing, and management control system design.
This title is a Pearson Global Edition. The Editorial team at Pearson has worked closely with educators around the world to include content which is especially relevant to students outside the United States.
Table of Contents
| Section Title | Page | Action | Price |
|---|---|---|---|
| Cover | Cover | ||
| Contents | 7 | ||
| Preface | 17 | ||
| Acknowledgments | 21 | ||
| About the Authors | 23 | ||
| CHAPTER 1 How Management Accounting Information Supports Decision Making | 25 | ||
| What Is Management Accounting? | 26 | ||
| Management Accounting and Financial Accounting | 26 | ||
| A Brief History of Management Accounting | 27 | ||
| IN PRACTICE: Definition of Management Accounting (2008), Issued by the Institute of Management Accountants | 28 | ||
| Strategy | 29 | ||
| The Plan-Do-Check-Act (PDCA) Cycle | 30 | ||
| IN PRACTICE: Company Mission Statements | 31 | ||
| Behavioral Implications of Management Accounting Information | 33 | ||
| Summary | 34 | ||
| Key Terms | 34 | ||
| Assignment Materials | 34 | ||
| CHAPTER 2 The Balanced Scorecard and Strategy Map | 39 | ||
| The Balanced Scorecard | 43 | ||
| Strategy | 47 | ||
| IN PRACTICE: Infosys Develops a Balanced Scorecard to Describe and Implement Its Strategy | 48 | ||
| Balanced Scorecard Objectives, Measures, and Targets | 48 | ||
| Creating a Strategy Map | 49 | ||
| Financial Perspective | 50 | ||
| Customer Perspective | 51 | ||
| Process Perspective | 55 | ||
| Learning and Growth Perspective | 59 | ||
| Strategy Map and Balanced Scorecard at Pioneer Petroleum | 60 | ||
| Financial Perspective | 60 | ||
| Customer Perspective | 61 | ||
| Process Perspective | 63 | ||
| Learning and Growth Perspective | 64 | ||
| Applying the Balanced Scorecard to Nonprofit and Government Organizations | 67 | ||
| IN PRACTICE: A Balanced Scorecard for a Nonprofit Organization | 68 | ||
| Managing with the Balanced Scorecard | 69 | ||
| Barriers to Effective Use of the Balanced Scorecard | 70 | ||
| Epilogue to Pioneer Petroleum | 72 | ||
| Summary | 73 | ||
| Key Terms | 73 | ||
| Assignment Materials | 74 | ||
| CHAPTER 3 Using Costs in Decision Making | 86 | ||
| How Management Accounting Supports Internal Decision Making | 87 | ||
| Pricing | 87 | ||
| Product Planning | 87 | ||
| Budgeting | 88 | ||
| Performance Evaluation | 88 | ||
| Contracting | 88 | ||
| Variable and Fixed Costs | 88 | ||
| Variable Costs | 88 | ||
| Fixed Costs | 90 | ||
| Cost-Volume-Profit Analysis | 90 | ||
| Developing and Using the CVP Equation | 91 | ||
| IN PRACTICE: Introducing Uncertainty into Cost Volume Profit Analysis | 92 | ||
| Variations on the Theme | 92 | ||
| IN PRACTICE: Breakeven on a Development Project | 93 | ||
| Financial Modeling and What-If Analysis | 93 | ||
| IN PRACTICE: Cost-Volume-Profit Analysis | 93 | ||
| The Multiproduct Firm | 94 | ||
| IN PRACTICE: Estimating the Effect of Unit Sales on Share Price | 94 | ||
| The Assumptions Underlying CVP Analysis | 96 | ||
| Other Useful Cost Definitions | 96 | ||
| Mixed Costs | 96 | ||
| Step Variable Costs | 97 | ||
| Incremental Costs | 97 | ||
| Sunk Costs | 98 | ||
| IN PRACTICE: Sunk Costs | 98 | ||
| IN PRACTICE: Overcoming the Sunk Cost Effect | 99 | ||
| IN PRACTICE: Human Behavior and Sunk Costs | 99 | ||
| Relevant Cost | 100 | ||
| Opportunity Cost | 100 | ||
| Avoidable Cost | 101 | ||
| Make-or-Buy—The Outsourcing Decision | 102 | ||
| IN PRACTICE: Contracting Out | 103 | ||
| Manufacturing Costs | 103 | ||
| The Decision to Drop a Product | 106 | ||
| IN PRACTICE: Be Wary When Labeling Departments Losers | 107 | ||
| Costing Orders | 109 | ||
| Costing Orders and Opportunity Cost Considerations | 110 | ||
| Relevant Cost and Short-Term Product Mix Decisions | 111 | ||
| Multiple Resource Constraints | 113 | ||
| IN PRACTICE: Choosing the Least Cost Materials Mix | 114 | ||
| Building the Linear Program | 114 | ||
| The Graphical Approach to Solving Linear Programs | 115 | ||
| Epilogue to Nolan Industries | 117 | ||
| IN PRACTICE: Excel’s Goal Seek and Solver | 120 | ||
| Summary | 120 | ||
| Key Terms | 121 | ||
| Assignment Materials | 121 | ||
| CHAPTER 4 Accumulating and Assigning Costs to Products | 145 | ||
| IN PRACTICE: On the Importance of Understanding Costs in the Restaurant Business | 146 | ||
| Cost Management Systems | 147 | ||
| Cost Flows in Organizations | 147 | ||
| Manufacturing Organizations | 147 | ||
| Retail Organizations | 148 | ||
| Service Organizations | 148 | ||
| Some Important Cost Terms | 149 | ||
| Cost Object | 149 | ||
| Consumable Resources | 149 | ||
| Capacity-Related Resources | 149 | ||
| Direct and Indirect Costs | 149 | ||
| IN PRACTICE: Cost Objects | 149 | ||
| IN PRACTICE: Indirect Costs | 150 | ||
| Cost Classification and Context | 151 | ||
| Going Forward | 151 | ||
| Handling Indirect Costs in a Manufacturing Environment | 152 | ||
| Multiple Indirect Cost Pools | 154 | ||
| Cost Pool Homogeneity | 156 | ||
| Overhead Allocation: Further Issues | 158 | ||
| Using Planned Capacity Cost | 158 | ||
| IN PRACTICE: Why Costing Matters | 159 | ||
| Reconciling Actual and Applied Capacity Costs | 159 | ||
| Estimating Practical Capacity | 162 | ||
| Job Order and Process Systems | 162 | ||
| Job Order Costing | 162 | ||
| Process Costing | 163 | ||
| Some Process Costing Wrinkles | 165 | ||
| Final Comments on Process Costing | 166 | ||
| Epilogue to Strict’s Custom Framing | 168 | ||
| Summary | 169 | ||
| Appendix 4-1 Allocating Service Department Costs | 170 | ||
| Key Terms | 174 | ||
| Assignment Materials | 174 | ||
| CHAPTER 5 Activity-Based Cost Systems | 189 | ||
| Traditional Manufacturing Costing Systems | 191 | ||
| Limitations of Madison’s Existing Standard Cost System | 194 | ||
| Vanilla Factory and Multiflavor Factory | 194 | ||
| Activity-Based Costing | 196 | ||
| Calculating Resource Capacity Cost Rates | 197 | ||
| Calculating Resource Time Usage per Product | 198 | ||
| Calculating Product Cost and Profitability | 199 | ||
| Possible Actions as a Result of the More Accurate Costing | 201 | ||
| IN PRACTICE: Using Activity-Based Costing to Increase Bank Profitability | 202 | ||
| Measuring the Cost of Unused Resource Capacity | 203 | ||
| Fixed Costs and Variable Costs in Activity-Based Cost Systems | 203 | ||
| Using the ABC Model to Forecast Resource Capacity | 205 | ||
| Updating the ABC Model | 208 | ||
| IN PRACTICE: W.S. Industries Uses ABC Information for Continuous Improvement | 209 | ||
| Service Companies | 211 | ||
| Capacity Cost Rate | 212 | ||
| Calculating the Time Equation for the Consumption of Broker’s Capacity | 213 | ||
| Implementation Issues | 213 | ||
| Lack of Clear Business Purpose | 214 | ||
| Lack of Senior Management Commitment | 214 | ||
| Delegating the Project to Consultants | 214 | ||
| Poor ABC Model Design | 215 | ||
| Individual and Organizational Resistance to Change | 215 | ||
| People Feel Threatened | 216 | ||
| Epilogue to Madison Dairy | 216 | ||
| Summary | 217 | ||
| Appendix 5-1 Historical Origins of Activity-Based Costing | 218 | ||
| Key Terms | 220 | ||
| Assignment Materials | 220 | ||
| CHAPTER 6 Measuring and Managing Customer Relationships | 242 | ||
| Measuring Customer Profitability: Extending the Madison Dairy Case | 244 | ||
| Reporting and Displaying Customer Profitability | 246 | ||
| IN PRACTICE: Building a Whale Curve of Customer Profitability | 248 | ||
| Customer Costs in Service Companies | 248 | ||
| Increasing Customer Profitability | 250 | ||
| Process Improvements | 250 | ||
| Activity-Based Pricing | 250 | ||
| Managing Relationships | 250 | ||
| The Pricing Waterfall | 251 | ||
| Salesperson Incentives | 256 | ||
| Life-Cycle Profitability | 257 | ||
| Measuring Customer Performance with Nonfinancial Metrics | 259 | ||
| Customer Satisfaction | 259 | ||
| Customer Loyalty | 260 | ||
| The Net Promoter Score | 262 | ||
| Epilogue to Madison Dairy | 263 | ||
| Summary | 264 | ||
| Key Terms | 264 | ||
| Assignment Materials | 265 | ||
| CHAPTER 7 Measuring and Managing Process Performance | 276 | ||
| Process Perspective and the Balanced Scorecard | 279 | ||
| Facility Layout Systems | 279 | ||
| Process Layouts | 280 | ||
| Product Layouts | 281 | ||
| IN PRACTICE: Manufacturing a CD | 282 | ||
| Group Technology | 283 | ||
| Inventory Costs and Processing Time | 283 | ||
| Inventory and Processing Time | 283 | ||
| Inventory-Related Costs | 284 | ||
| Costs and Benefits of Changing to a New Layout: An Example Using Group Technology | 284 | ||
| Summary of Costs and Benefits | 290 | ||
| IN PRACTICE: History of Lean Manufacturing | 291 | ||
| Cost of Nonconformance and Quality Issues | 292 | ||
| Quality Standards | 292 | ||
| Costs of Quality Control | 293 | ||
| Just-in-Time Manufacturing | 294 | ||
| Implications of JIT Manufacturing | 294 | ||
| JIT Manufacturing and Management Accounting | 295 | ||
| IN PRACTICE: Using Lean Manufacturing in a Hospital Setting | 296 | ||
| Kaizen Costing | 297 | ||
| Comparing Traditional Cost Reduction to Kaizen Costing | 297 | ||
| Concerns about Kaizen Costing | 298 | ||
| Benchmarking | 299 | ||
| Stage 1: Internal Study and Preliminary Competitive Analyses | 300 | ||
| Stage 2: Developing Long-Term Commitment to the Benchmarking Project and Coalescing the Benchmarking Team | 301 | ||
| Stage 3: Identifying Benchmarking Partners | 301 | ||
| Stage 4: Information Gathering and Sharing Methods | 302 | ||
| Stage 5: Taking Action to Meet or Exceed the Benchmark | 303 | ||
| IN PRACTICE: Benchmarking Mobile Web Experiences | 303 | ||
| Epilogue to Blast from the Past Robot Company | 304 | ||
| Production Flows | 304 | ||
| Effects on Work-in-Process Inventory | 305 | ||
| Effect on Production Costs | 305 | ||
| Cost of Rework | 306 | ||
| Cost of Carrying Work-in-Process Inventory | 307 | ||
| Benefits from Increased Sales | 307 | ||
| Summary of Costs and Benefits | 308 | ||
| Summary | 309 | ||
| Key Terms | 309 | ||
| Assignment Materials | 309 | ||
| CHAPTER 8 Measuring and Managing Life-Cycle Costs | 325 | ||
| Managing Products over Their Life Cycle | 326 | ||
| Research, Development, and Engineering Stage | 327 | ||
| Manufacturing Stage | 327 | ||
| Postsale Service and Disposal Stage | 328 | ||
| Target Costing | 329 | ||
| A Target Costing Example | 332 | ||
| Concerns about Target Costing | 338 | ||
| IN PRACTICE: Target Costing and the Mercedes-Benz M-Class | 339 | ||
| Breakeven Time: A Comprehensive Metric for New Product Development | 340 | ||
| Innovation Measures on the Balanced Scorecard | 344 | ||
| Market Research and Generation of New Product Ideas | 344 | ||
| Design, Development, and Launch of New Products | 345 | ||
| IN PRACTICE: Life-Cycle Revenues: The Case of Motion Pictures | 345 | ||
| Environmental Costing | 348 | ||
| Controlling Environmental Costs | 348 | ||
| IN PRACTICE: The Cisco Take-Back and Recycle Program | 352 | ||
| IN PRACTICE: Scientific Progress and the Reduction of Environmental Costs: The Case of Chromium in Groundwater | 352 | ||
| Summary | 353 | ||
| Key Terms | 353 | ||
| Assignment Materials | 353 | ||
| CHAPTER 9 Behavioral and Organizational Issues in Management Accounting and Control Systems | 364 | ||
| What Are Management Accounting and Control Systems? | 366 | ||
| The Meaning of “Control” | 366 | ||
| Characteristics of a Well-Designed MACS | 366 | ||
| Technical Considerations | 366 | ||
| Behavioral Considerations | 367 | ||
| The Human Resource Management Model of Motivation | 368 | ||
| The Organization’s Ethical Code of Conduct and MACS Design | 369 | ||
| Avoiding Ethical Dilemmas | 369 | ||
| Dealing with Ethical Conflicts | 370 | ||
| IN PRACTICE: Does Cheating at Golf Lead to Cheating in Business? | 371 | ||
| The Elements of an Effective Ethical Control System | 373 | ||
| Steps in Making an Ethical Decision | 373 | ||
| Motivation and Congruence | 373 | ||
| Task and Results Control Methods | 375 | ||
| IN PRACTICE: Monitoring in the Workplace | 375 | ||
| Using a Mix of Performance Measures: A Balanced Scorecard Approach | 377 | ||
| The Need for Multiple Measures of Performance: Non–Goal-Congruent Behavior | 377 | ||
| Dysfunctional Behavior | 377 | ||
| Using the Balanced Scorecard to Align Employees to Corporate Goals and Business Unit Objectives | 378 | ||
| Change Management | 379 | ||
| Empowering Employees to Be Involved in MACS Design | 379 | ||
| Participation in Decision Making | 379 | ||
| Education to Understand Information | 380 | ||
| Behavioral Aspects of MACS Design: An Example from Budgeting | 381 | ||
| Designing the Budget Process | 381 | ||
| Influencing the Budget Process | 383 | ||
| Developing Appropriate Incentive Systems to Reward Performance | 384 | ||
| Choosing between Intrinsic and Extrinsic Rewards | 385 | ||
| Extrinsic Rewards Based on Performance | 386 | ||
| Effective Performance Measurement and Reward Systems | 386 | ||
| Conditions Favoring Incentive Compensation | 388 | ||
| Incentive Compensation and Employee Responsibility | 388 | ||
| Rewarding Outcomes | 388 | ||
| Managing Incentive Compensation Plans | 389 | ||
| Types of Incentive Compensation Plans | 390 | ||
| IN PRACTICE: UNIBANCO—Tying the Balanced Scorecard to Compensation | 391 | ||
| Epilogue to Advanced Cellular International and Chapter Summary | 395 | ||
| Key Terms | 396 | ||
| Assignment Materials | 397 | ||
| CHAPTER 10 Using Budgets for Planning and Coordination | 417 | ||
| Determining the Levels of Capacity-Related and Flexible Resources | 418 | ||
| The Budgeting Process | 419 | ||
| The Role of Budgets and Budgeting | 419 | ||
| The Elements of Budgeting | 421 | ||
| Behavioral Considerations in Budgeting | 422 | ||
| Budget Components | 422 | ||
| Operating Budgets | 424 | ||
| Financial Budgets | 424 | ||
| The Budgeting Process Illustrated | 424 | ||
| Oxford Tole Art, Buoy Division | 424 | ||
| Demand Forecast | 427 | ||
| The Production Plan | 427 | ||
| Developing the Spending Plans | 429 | ||
| Choosing the Capacity Levels | 430 | ||
| Handling Infeasible Production Plans | 432 | ||
| Interpreting the Production Plan | 432 | ||
| The Financial Plans | 433 | ||
| Understanding the Cash Flow Statement | 433 | ||
| Using the Financial Plans | 437 | ||
| Using the Projected Results | 438 | ||
| What-If Analysis | 439 | ||
| Evaluating Decision-Making Alternatives | 439 | ||
| Sensitivity Analysis | 439 | ||
| Comparing Actual and Planned Results | 441 | ||
| Variance Analysis | 441 | ||
| Basic Variance Analysis | 442 | ||
| Canning Cellular Services | 442 | ||
| First-Level Variances | 444 | ||
| Decomposing the Variances | 444 | ||
| Planning and Flexible Budget Variances | 445 | ||
| Quantity and Price Variances for Material and Labor | 446 | ||
| Sales Variances | 452 | ||
| The Role of Budgeting in Service and Not-For-Profit Organizations | 455 | ||
| Periodic and Continuous Budgeting | 455 | ||
| Controlling Discretionary Expenditures | 456 | ||
| Incremental Budgeting | 456 | ||
| Zero-Based Budgeting | 457 | ||
| Project Funding | 458 | ||
| Managing the Budgeting Process | 458 | ||
| Criticisms of the Traditional Budgeting Model and the “Beyond Budgeting” Approach | 458 | ||
| Epilogue to the California Budget Crisis | 459 | ||
| Summary | 460 | ||
| Key Terms | 461 | ||
| Assignment Materials | 461 | ||
| CHAPTER 11 Financial Control | 486 | ||
| The Environment of Financial Control | 487 | ||
| Financial Control | 488 | ||
| The Motivation for Decentralization | 488 | ||
| IN PRACTICE: Standard Operating Precedures at Mercedes-Benz USA | 489 | ||
| IN PRACTICE: Evaluating Performance at McDonald’s Corporation Restaurants | 490 | ||
| Responsibility Centers and Evaluating Unit Performance | 491 | ||
| Coordinating Responsibility Centers | 491 | ||
| IN PRACTICE: The High Cost of Coordination | 492 | ||
| Responsibility Centers and Financial Control | 493 | ||
| IN PRACTICE: Nonfinancial Performance Measures at Federal Express: The Service Quality Indicator | 493 | ||
| Responsibility Center Types | 494 | ||
| IN PRACTICE: Investment Centers at General Electric in 2010 | 497 | ||
| Evaluating Responsibility Centers | 498 | ||
| IN PRACTICE: Financial Statement Business Segment Reporting | 501 | ||
| Transfer Pricing | 505 | ||
| Approaches to Transfer Pricing | 505 | ||
| IN PRACTICE: International Transfer Pricing | 506 | ||
| Transfer Prices Based on Equity Considerations | 509 | ||
| Assigning and Valuing Assets in Investment Centers | 510 | ||
| The Efficiency and Productivity Elements of Return on Investment | 511 | ||
| Assessing Productivity Using Financial Control | 513 | ||
| Questioning the Return on Investment Approach | 513 | ||
| IN PRACTICE: Labor Productivity in a Consultancy | 513 | ||
| IN PRACTICE: Managing Productivity in Airlines | 514 | ||
| Using Residual Income | 514 | ||
| IN PRACTICE: Organization Adopt Economic Value Added for Different Reasons | 516 | ||
| The Efficacy of Financial Control | 517 | ||
| Epilogue to Adrian’s Home Services | 518 | ||
| Summary | 520 | ||
| Key Terms | 521 | ||
| Assignment Materials | 521 | ||
| Glossary | 534 | ||
| Subject Index | 542 | ||
| Name and Company Index | 548 |