Cover
Title Page
Copyright
Brief Contents
Contents
About the Authors
Preface
1. The Manager and Management Accounting
For Coca-Cola, Smaller Sizes Mean Bigger Profits
Financial Accounting, Management Accounting, and Cost Accounting
Strategic Decisions and the Management Accountant
Value-Chain and Supply-Chain Analysis and Key Success Factors
Value-Chain Analysis
Supply-Chain Analysis
Key Success Factors
Concepts in Action: Cost Leadership at Costco: Rock-Bottom Prices and Sky-High Profits
Decision Making, Planning, and Control: The Five-Step Decision-Making Process
Key Management Accounting Guidelines
Cost–Benefit Approach
Behavioral and Technical Considerations
Different Costs for Different Purposes
Organization Structure and the Management Accountant
Line and Staff Relationships
The Chief Financial Officer and the Controller
Management Accounting Beyond the Numbers
Professional Ethics
Institutional Support
Typical Ethical Challenges
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
2. An Introduction to Cost Terms and Purposes
High Fixed Costs Bankrupt Aéropostale
Costs and Cost Terminology
Direct Costs and Indirect Costs
Cost Allocation Challenges
Factors Affecting Direct/Indirect Cost Classifications
Cost-Behavior Patterns: Variable Costs and Fixed Costs
Concepts in Action: Lyft Helps Hospitals Reduce Their Fixed Transportation Costs
Cost Drivers
Relevant Range
Relationships Between Types of Costs
Total Costs and Unit Costs
Unit Costs
Use Unit Costs Cautiously
Business Sectors, Types of Inventory, Inventoriable Costs, and Period Costs
Manufacturing-, Merchandising-, and Service-Sector Companies
Types of Inventory
Commonly Used Classifications of Manufacturing Costs
Inventoriable Costs
Period Costs
Illustrating the Flow of Inventoriable Costs and Period Costs
Manufacturing-Sector Example
Recap of Inventoriable Costs and Period Costs
Prime Costs and Conversion Costs
Measuring Costs Requires Judgment
Labor Costs
Benefits of Defining Accounting Terms
Different Meanings of Product Costs
A Framework for Cost Accounting and Cost Management
Calculating the Cost of Products, Services, and Other Cost Objects
Obtaining Information for Planning and Control and Performance Evaluation
Analyzing the Relevant Information for Making Decisions
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
3. Cost–Volume–Profit Analysis
How Coachella Tunes Up the Sweet Sound of Profits
Essentials of CVP Analysis
Contribution Margin
Expressing CVP Relationships
Cost–Volume–Profit Assumptions
Breakeven Point and Target Operating Income
Breakeven Point
Target Operating Income
Income Taxes and Target Net Income
Using CVP Analysis for Decision Making
Decision to Advertise
Decision to Reduce the Selling Price
Determining Target Prices
Concepts in Action: Can Cost–Volume–Profit Analysis Help Whole Foods Escape the “Whole Paycheck” Trap?
Sensitivity Analysis and Margin of Safety
Cost Planning and CVP
Alternative Fixed-Cost/Variable-Cost Structures
Operating Leverage
Effects of Sales Mix on Income
CVP Analysis in Service and Not-for-Profit Organizations
Contribution Margin Versus Gross Margin
Problem for Self-Study
Decision Points
Appendix: Decision Models and Uncertainty
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
4. Job Costing
Job Costing and the New Golden State Warriors Arena
Building-Block Concepts of Costing Systems
Job-Costing and Process-Costing Systems
Job Costing: Evaluation and Implementation
Time Period Used to Compute Indirect-Cost Rates
Normal Costing
General Approach to Job Costing Using Normal Costing
Concepts in Action: Better Job Costing Through Big Data and Data Analytics
The Role of Technology
Actual Costing
A Normal Job-Costing System in Manufacturing
General Ledger
Explanations of Transactions
Subsidiary Ledgers
Materials Records by Type of Material
Labor Records by Employee
Manufacturing Department Overhead Records by Month
Work-in-Process Inventory Records by Jobs
Finished Goods Inventory Records by Jobs
Other Subsidiary Records
Nonmanufacturing Costs and Job Costing
Budgeted Indirect Costs and End-of-Accounting-Year Adjustments
Underallocated and Overallocated Indirect Costs
Adjusted Allocation-Rate Approach
Proration Approach
Write-Off to Cost of Goods Sold Approach
Choosing Among Approaches
Variations of Normal Costing: A Service-Sector Example
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
5. Activity-Based Costing and Activity-Based Management
Activity-Based Costing and the True Cost of Data Breaches
Broad Averaging and Its Consequences
Undercosting and Overcosting
Product-Cost Cross-Subsidization
Simple Costing System at Plastim Corporation
Design, Manufacturing, and Distribution Processes
Simple Costing System Using a Single Indirect-Cost Pool
Applying the Five-Step Decision-Making Process at Plastim
Refining a Costing System
Developments That Have Increased the Demand for Refining Costing Systems
Guidelines for Refining a Costing System
Activity-Based Costing Systems
Plastim’s ABC System
Cost Hierarchies
Implementing Activity-Based Costing
Implementing ABC at Plastim
Comparing Alternative Costing Systems
Considerations in Implementing Activity-Based Costing Systems
Benefits and Costs of Activity-Based Costing Systems
ABC in Service and Merchandising Companies
Behavioral Issues in Implementing Activity-Based Costing Systems
Concepts in Action: Mayo Clinic Uses Time-Driven Activity-Based Costing to Reduce Costs and ImproveCare
Activity-Based Management
Pricing and Product-Mix Decisions
Cost Reduction and Process Improvement Decisions
Design Decisions
Planning and Managing Activities
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
6. Master Budget and Responsibility Accounting
“Scrimping” at the Ritz: Master Budgets
Budgets and the Budgeting Cycle
Strategic Plans and Operating Plans
Budgeting Cycle and Master Budget
Advantages and Challenges of Implementing Budgets
Promoting Coordination and Communication
Providing a Framework for Judging Performance and Facilitating Learning
Motivating Managers and Other Employees
Challenges in Administering Budgets
Developing an Operating Budget
Time Coverage of Budgets
Steps in Preparing an Operating Budget
Financial Planning Models and Sensitivity Analysis
Concepts in Action: P.F. Chang’s and Internet-Based Budgeting
Budgeting and Responsibility Accounting
Organization Structure and Responsibility
Feedback
Responsibility and Controllability
Human Aspects of Budgeting
Budgetary Slack
Stretch Targets
Kaizen Budgeting
Budgeting for Reducing Carbon Emissions
Budgeting in Multinational Companies
Problem for Self-Study
Decision Points
Appendix: The Cash Budget
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
7. Flexible Budgets, Direct-Cost Variances, and Management Control
Walmart’s Fleet Goes Green to Reduce Standard Costs
Static Budgets and Variances
The Use of Variances
Static Budgets and Static-Budget Variances
Flexible Budgets
Flexible-Budget Variances and Sales-Volume Variances
Sales-Volume Variances
Flexible-Budget Variances
Standard Costs for Variance Analysis
Obtaining Budgeted Input Prices and Budgeted Input Quantities
Price Variances and Efficiency Variances for Direct-Cost Inputs
Price Variances
Efficiency Variance
Journal Entries Using Standard Costs
Implementing Standard Costing
Management’s Use of Variances
Concepts in Action Can Chipotle Wrap Up Its Materials-Cost Increases?
Multiple Causes of Variances
When to Investigate Variances
Using Variances for Performance Measurement
Using Variances for Organization Learning
Using Variances for Continuous Improvement
Financial and Nonfinancial Performance Measures
Benchmarking and Variance Analysis
Problem for Self-Study
Decision Points
Appendix: Mix and Yield Variances for Substitutable Inputs
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
8. Flexible Budgets, Overhead Cost Variances, and Management Control
Managing Overhead Costs at Wework
Planning of Variable and Fixed Overhead Costs
Planning Variable Overhead Costs
Planning Fixed Overhead Costs
Standard Costing at Webb Company
Developing Budgeted Variable Overhead Rates
Developing Budgeted Fixed Overhead Rates
Variable Overhead Cost Variances
Flexible-Budget Analysis
Variable Overhead Efficiency Variance
Variable Overhead Spending Variance
Journal Entries for Variable Overhead Costs and Variances
Fixed Overhead Cost Variances
Production-Volume Variance
Interpreting the Production-Volume Variance
Concepts in Action: Variance Analysis and Standard Costing Help Sandoz Manage Its Overhead Costs
Journal Entries for Fixed Overhead Costs and Variances
Integrated Analysis of Overhead Cost Variances
4-Variance Analysis
Combined Variance Analysis
Production-Volume Variance and Sales-Volume Variance
Variance Analysis and Activity-Based Costing
Flexible Budget and Variance Analysis for Direct Materials-Handling Labor Costs
Flexible Budget and Variance Analysis for Fixed Setup Overhead Costs
Overhead Variances in Nonmanufacturing Settings
Financial and Nonfinancial Performance Measures
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
9. Inventory Costing and Capacity Analysis
Under Armour Races to Defeat Its Inventory Backlog
Variable and Absorption Costing
Variable Costing
Absorption Costing
Comparing Variable and Absorption Costing
Variable Versus Absorption Costing: Operating Income and Income Statements
Comparing Income Statements for One Year
Comparing Income Statements for Multiple Years
Variable Costing and the Effect of Sales and Production on Operating Income
Absorption Costing and Performance Measurement
Undesirable Buildup of Inventories
Proposals for Revising Performance Evaluation
Comparing Inventory Costing Methods
Throughput Costing
A Comparison of Alternative Inventory-Costing Methods
Denominator-Level Capacity Concepts and Fixed-Cost Capacity Analysis
Absorption Costing and Alternative Denominator-Level Capacity Concepts
Effect on Budgeted Fixed Manufacturing Cost Rate
Choosing a Capacity Level
Product Costing and Capacity Management
Pricing Decisions and the Downward Demand Spiral
Concepts in Action: Can ESPN Avoid the Cord-Cutting “Death Spiral”?
Performance Evaluation
Financial Reporting
Tax Requirements
Planning and Control of Capacity Costs
Difficulties in Forecasting Chosen Capacity Levels
Difficulties in Forecasting Fixed Manufacturing Costs
Nonmanufacturing Costs
Activity-Based Costing
Problem for Self-Study
Decision Points
Appendix: Breakeven Points in Variable Costing and Absorption Costing
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
10. Determining How Costs Behave
Southwest Uses “Big Data Analytics” to Reduce Fuel Consumption and Costs
Basic Assumptions and Examples of Cost Functions
Basic Assumptions
Linear Cost Functions
Review of Cost Classification
Identifying Cost Drivers
The Cause-and-Effect Criterion
Cost Drivers and the Decision-Making Process
Cost Estimation Methods
Industrial Engineering Method
Conference Method
Account Analysis Method
Quantitative Analysis Method
Estimating a Cost Function Using Quantitative Analysis
High-Low Method
Regression Analysis Method
Evaluating and Choosing Cost Drivers
Cost Drivers and Activity-Based Costing
Nonlinear Cost Functions
Learning Curves
Cumulative Average-Time Learning Model
Incremental Unit-Time Learning Model
Incorporating Learning-Curve Effects Into Prices and Standards
Concepts in Action: Learning Curves and the Falling Price of Renewable Energy
Data Collection and Adjustment Issues
Problem for Self-Study
Decision Points
Appendix: Regression Analysis
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
11. Data Analytic Thinking and Prediction
Predictive Analytics Inside: How Intel Drives Value and Speeds Time to Market
Data Science Basics and Management Accounting
Outcome Prediction
Value Creation
Data Science Framework
Concepts in Action: Carnival Uses Big Data and Machine Learning to Sail Toward Greater Profitability
Defining the Problem and the Relevant Data
Step 1: Gain a Business Understanding of the Problem
Step 2: Obtain and Explore Relevant Data
Step 3: Prepare the Data
Data Algorithms and Models
Step 4: Build a Model
Refining the Decision Tree
Overfitting
Pruning
Validating and Choosing Models
Cross-Validation Using Prediction Accuracy to Choose Between Full and Pruned Decision Trees
Using Maximum Likelihood Values to Choose Between Fully Grown and Pruned Decision Trees
Testing the Pruned Decision-Tree Model on the Holdout Sample
Evaluating Data Science Models
Step 5: Evaluate the Model
Step 6: Visualize and Communicate Insights
Working With PeerLend Digital Data
Using Data Science Models
Step 7: Deploy the Model
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
12. Decision Making and Relevant Information
Relevant Costs and Broadway Shows
Information and the Decision Process
The Concept of Relevance
Relevant Costs and Relevant Revenues
Qualitative and Quantitative Relevant Information
One-Time-Only Special Orders
Potential Problems in Relevant-Cost Analysis
Short-Run Pricing Decisions
Insourcing-Versus-Outsourcing and Make-or-Buy Decisions
Outsourcing and Idle Facilities
Strategic and Qualitative Factors
International Outsourcing
The Total Alternatives Approach
Concepts in Action: Starbucks Brews Up Domestic Production
The Opportunity-Cost Approach
Carrying Costs of Inventory
Product-Mix Decisions With Capacity Constraints
Bottlenecks, Theory of Constraints, and Throughput-Margin Analysis
Customer Profitability and Relevant Costs
Relevant-Revenue and Relevant-Cost Analysis of Dropping a Customer
Relevant-Revenue and Relevant-Cost Analysis ofAdding a Customer
Relevant-Revenue and Relevant-Cost Analysis of Closing or Adding Branch Offices or Business Divisions
Irrelevance of Past Costs and Equipment-Replacement Decisions
Decisions and Performance Evaluation
Problem for Self-Study
Decision Points
Appendix: Linear Programming
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
13. Strategy, Balanced Scorecard, and Strategic Profitability Analysis
Barclays Turns to the Balanced Scorecard
What Is Strategy?
Strategy Implementation and the Balanced Scorecard
The Balanced Scorecard
Strategy Maps and the Balanced Scorecard
Implementing a Balanced Scorecard
Different Strategies Lead to Different Scorecards
Environmental and Social Performance and the Balanced Scorecard
Features of a Good Balanced Scorecard
Pitfalls in Implementing a Balanced Scorecard
Evaluating the Success of Strategy and Implementation
Strategic Analysis of Operating Income
Growth Component of Change in Operating Income
Price-Recovery Component of Change in Operating Income
Productivity Component of Change in Operating Income
Further Analysis of Growth, Price-Recovery, and Productivity Components
Concepts in Action: Operating Income Analysis and the Decline of Casual Dining Restaurants
Downsizing and the Management of Capacity
Identifying Unused Capacity Costs
Managing Unused Capacity
Problem for Self-Study
Decision Points
Appendix: Productivity Measurement
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
14. Pricing Decisions and Cost Management
Extreme Pricing and Cost Management at IKEA
Major Factors That Affect Pricing Decisions
Customers
Competitors
Costs
Weighing Customers, Competitors, and Costs
Costing and Pricing for the Long Run
Calculating Product Costs for Long-Run Pricing Decisions
Alternative Long-Run Pricing Approaches
Market-Based Approach: Target Costing for Target Pricing
Understanding Customers’ Perceived Value
Competitor Analysis
Implementing Target Pricing and Target Costing
Concepts in Action: Zara Uses Target Pricing to Become the World’s Largest Fashion Retailer
Value Engineering, Cost Incurrence, and Locked-In Costs
Value-Chain Analysis and Cross-Functional Teams
Achieving the Target Cost per Unit for Provalue
Cost-Plus Pricing
Cost-Plus Target Rate of Return on Investment
Alternative Cost-Plus Methods
Cost-Plus Pricing and Target Pricing
Life-Cycle Product Budgeting and Costing
Life-Cycle Budgeting and Pricing Decisions
Managing Environmental and Sustainability Costs
Customer Life-Cycle Costing
Noncost Factors in Pricing Decisions
Predatory Pricing
Collusive Pricing
Price Discrimination
International Pricing
Peak-Load Pricing
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
15. Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis
Starbucks Rewards Starts Rewarding Big Spenders
Customer-Profitability Analysis
Customer-Revenue Analysis
Customer-Cost Analysis
Customer-Level Costs
Customer-Profitability Profiles
Concepts in Action: Amazon Prime and Customer Profitability
Presenting Profitability Analysis
Using the Five-Step Decision-Making Process to Manage Customer Profitability
Cost-Hierarchy-Based Operating Income Statement
Criteria to Guide Cost Allocations
Fully Allocated Customer Profitability
Implementing Corporate and Division Cost Allocations
Issues in Allocating Corporate Costs to Divisions and Customers
Using Fully Allocated Costs for Decision Making
Sales Variances
Static-Budget Variance
Flexible-Budget Variance and Sales-Volume Variance
Sales-Mix Variance
Sales-Quantity Variance
Market-Share and Market-Size Variances
Market-Share Variance
Market-Size Variance
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
16. Allocation of Support-Department Costs, Common Costs, and Revenues
Cost Allocation and the United States Postal Service
Allocating Support Department Costs Using the Single-Rate and Dual-Rate Methods
Single-Rate and Dual-Rate Methods
Allocation Based on the Demand for (or Usage of) Materials-Handling Services
Allocation Based on the Supply of Capacity
Advantages and Disadvantages of Single-Rate Method
Advantages and Disadvantages of Dual-Rate Method
Budgeted Versus Actual Costs and the Choice of Allocation Base
Budgeted Versus Actual Rates
Budgeted Versus Actual Usage
Fixed-Cost Allocation Based on Budgeted Rates and Budgeted Usage
Fixed-Cost Allocation Based on Budgeted Rates and Actual Usage
Allocating Budgeted Fixed Costs Based on Actual Usage
Allocating Costs of Multiple Support Departments
Direct Method
Step-Down Method
Reciprocal Method
Overview of Methods
Calculating the Cost of Job WPP 298
Allocating Common Costs
Stand-Alone Cost-Allocation Method
Incremental Cost-Allocation Method
Cost Allocations and Contract Disputes
Concepts in Action: Contract Disputes Over Reimbursable Costs With the U.S. Government
Bundled Products and Revenue Allocation Methods
Bundling and Revenue Allocation
Stand-Alone Revenue-Allocation Method
Incremental Revenue-Allocation Method
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Exercises
Problems
17. Cost Allocation: Joint Products and Byproducts
Joint-Cost Allocation and the Wounded Warrior Project
Joint-Cost Basics
Concepts in Action: Big Data Joint Products and ByproductsCreate New Business Opportunities
Allocating Joint Costs
Approaches to Allocating Joint Costs
Sales Value at Splitoff Method
Physical-Measure Method
Net Realizable Value Method
Constant Gross-Margin Percentage NRV Method
Choosing an Allocation Method
Not Allocating Joint Costs
Why Joint Costs Are Irrelevant for Decision Making
Sell-or-Process-Further Decisions
Decision Making and Performance Evaluation
Pricing Decisions
Accounting for Byproducts
Production Method: Byproducts Recognized at Time Production Is Completed
Sales Method: Byproducts Recognized at Time of Sale
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
18. Process Costing
Cryptocurrency and FIFO Versus LIFO Accounting
Illustrating Process Costing
Case 1: Process Costing With Zero Beginning or Ending Work-in-Process Inventory
Case 2: Process Costing With Zero Beginning and Some Ending Work-in-Process Inventory
Summarizing the Physical Units and Equivalent Units (Steps 1 and 2)
Calculating Product Costs (Steps 3, 4, and 5)
Journal Entries
Case 3: Process Costing With Some Beginning and Some Ending Work-in-Process Inventory
Weighted-Average Method
First-In, First-Out Method
Comparing the Weighted-Average and FIFO Methods
Transferred-In Costs in Process Costing
Transferred-In Costs and the Weighted-Average Method
Transferred-In Costs and the FIFO Method
Points to Remember About Transferred-In Costs
Hybrid Costing Systems
Overview of Operation-Costing Systems
Concepts in Action: Hybrid Costing for Adidas Customized 3D Printed Shoes
Illustrating an Operation-Costing System
Journal Entries
Problem for Self-Study
Decision Points
Appendix: Standard-Costing Method of Process Costing
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
19. Spoilage, Rework, and Scrap
Rework Hampers Tesla Model 3 Production
Defining Spoilage, Rework, and Scrap
Two Types of Spoilage
Normal Spoilage
Abnormal Spoilage
Spoilage in Process Costing Using Weighted-Average and FIFO
Count All Spoilage
Five-Step Procedure for Process Costing With Spoilage
Weighted-Average Method and Spoilage
FIFO Method and Spoilage
Journal Entries
Inspection Points and Allocating Costs of Normal Spoilage
Job Costing and Spoilage
Job Costing and Rework
Accounting for Scrap
Recognizing Scrap at the Time of Its Sale
Recognizing Scrap at the Time of Its Production
Concepts in Action: Google’s Zero Waste to Landfill Initiative
Problem for Self-Study
Decision Points
Appendix: Standard-Costing Method and Spoilage
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
20. Balanced Scorecard: Quality and Time
“Dieselgate” Derails Volkswagen’s Grand Ambitions
Quality as a Competitive Tool
The Financial Perspective: The Costs of Quality
Using Nonfinancial Measures to Evaluate and Improve Quality
The Customer Perspective: Nonfinancial Measures of Customer Satisfaction
The Internal-Business-Process Perspective: Analyzing Quality Problems and Improving Quality
The Learning-and-Growth Perspective: Quality Improvements
Weighing the Costs and Benefits of Improving Quality
Evaluating a Company’s Quality Performance
Time as a Competitive Tool
Customer-Response Time and On-Time Performance
Time Drivers and Bottlenecks
Concepts in Action: Facebook Works to Overcome Mobile Data Bottlenecks
Relevant Revenues and Costs of Delays
Balanced Scorecard and Time-Based Measures
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
21. Inventory Management, Just-in-Time, and Simplified Costing Methods
Target Leverages the Internet of Things to Respond to the Changing Retail Landscape
Inventory Management in Retail Organizations
Costs Associated With Goods for Sale
The Economic-Order-Quantity Decision Model
When to Order, Assuming Certainty
Safety Stock
Estimating Inventory-Related Relevant Costs and Their Effects
Cost of a Prediction Error
Conflicts Between the EOQ Decision Model and Managers’ Performance Evaluation
Just-in-Time Purchasing
JIT Purchasing and EOQ Model Parameters
Relevant Costs of JIT Purchasing
Supplier Evaluation and Relevant Costs of Quality and Timely Deliveries
JIT Purchasing, Planning and Control, and Supply-Chain Analysis
Inventory Management, MRP, and JIT Production
Materials Requirements Planning
Just-in-Time (JIT) Production
Features of JIT Production Systems
Concepts in Action: Just-in-Time Live Concert Recordings
Costs and Benefits of JIT Production
JIT in Service Industries
Enterprise Resource Planning (ERP) Systems
Performance Measures and Control in JIT Production
Effect of JIT Systems on Product Costing
Backflush Costing
Simplified Normal or Standard-Costing Systems
Lean Accounting
Problems for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
22. Capital Budgeting and Cost Analysis
NPV and California’s New Residential Solar Panel Rules
Stages of Capital Budgeting
Concepts in Action: AkzoNobel Integrates Sustainability Into Capital Budgeting
Discounted Cash Flow
Net Present Value Method
Internal Rate-of-Return Method
Comparing the Net Present Value and Internal Rate-of-Return Methods
Sensitivity Analysis
Payback Method
Uniform Cash Flows
Nonuniform Cash Flows
Accrual Accounting Rate-of-Return Method
Relevant Cash Flows in Discounted Cash Flow Analysis
Relevant After-Tax Flows
Categories of Cash Flows
Project Management and Performance Evaluation
Post-Investment Audits
Performance Evaluation
Strategic Considerations in Capital Budgeting
Investment in Research and Development
Customer Value and Capital Budgeting
Problem for Self-Study
Decision Points
Appendix: Capital Budgeting and Inflation
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
Answers to Exercises in Compound Interest (Exercise 22-21)
23. Management Control Systems, Transfer Pricing, and Multinational Considerations
Apple Forced to Pay Ireland €14.3 Billion in Tax Settlement
Management Control Systems
Formal and Informal Systems
Effective Management Control
Decentralization
Benefits of Decentralization
Costs of Decentralization
Comparing Benefits and Costs
Decentralization in Multinational Companies
Choices About Responsibility Centers
Transfer Pricing
Criteria for Evaluating Transfer Prices
Calculating Transfer Prices
An Illustration of Transfer Pricing
Market-Based Transfer Prices
Perfect Competition
Imperfect Competition
Cost-Based Transfer Prices
Full-Cost Bases
Variable-Cost Bases
Hybrid Transfer Prices
Prorating the Difference Between Maximum and Minimum Transfer Prices
Negotiated Pricing
Dual Pricing
A General Guideline for Transfer-Pricing Situations
How Multinationals Use Transfer Pricing to Minimize Their Income Taxes
Concepts in Action: IRS Accuses Medtronic of Unfair Tax Deal
Transfer Prices Designed for Multiple Objectives
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Exercises
Problems
24. Performance Measurement, Compensation, and Multinational Considerations
CEO Compensation at General Electric
Financial and Nonfinancial Performance Measures
Accounting-Based Measures for Business Units
Return on Investment
Residual Income
Economic Value Added
Return on Sales
Comparing Performance Measures
Choosing the Details of the Performance Measures
Alternative Time Horizons
Alternative Definitions of Investment
Alternative Asset Measurements
Target Levels of Performance and Feedback
Choosing Target Levels of Performance
Choosing the Timing of Feedback
Performance Measurement in Multinational Companies
Calculating a Foreign Division’s ROI in the Foreign Currency
Calculating a Foreign Division’s ROI in U.S. Dollars
Distinguishing the Performance of Managers From the Performance of Their Subunits
The Basic Tradeoff: Creating Incentives Versus Imposing Risk
Intensity of Incentives and Financial and Nonfinancial Measurements
Concepts in Action: Performance Measurement at Unilever
Benchmarks and Relative Performance Evaluation
Performance Measures at the Individual Activity Level
Executive Performance Measures and Compensation
Strategy and Levers of Control
Boundary Systems
Belief Systems
Interactive Control Systems
Problem for Self-Study
Decision Points
Terms to Learn
Assignment Material
Questions
Multiple-Choice Questions
Exercises
Problems
Appendix A: Notes on Compound Interest and Interest Tables
Glossary
Index
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