Cost Accounting (14th Edition)

CONTENTS V
Sensitivity Analysis and Margin of Safety 73
Cost Planning and CVP 75
Alternative Fixed-Cost/Variable-Cost Structures 75
Operating Leverage 76
Effects of Sales Mix on Income 77
Concepts in Action: Fixed Costs, Variable Costs, and
the Future of Radio
CVP Analysis in Service and Nonprofit Organizations 80
Contribution Margin Versus Gross Margin 81
Problem for Self-Study 82 | Decision Points 83
APPENDIX: Decision Models and Uncertainty 84
Terms to Learn 86 | Assignment Material 87 |
Questions 87 | Exercises 87 | Problems 91 |
Collaborative Learning Problem 97
4 Job Costing 98
Job Costing and Nexamp’s Next Generation Energy and
Carbon Solutions
Building-Block Concepts of Costing Systems 99
Job-Costing and Process-Costing Systems 100
Job Costing: Evaluation and Implementation 102
Time Period Used to Compute Indirect-Cost
Rates 103
Normal Costing 104
General Approach to Job Costing 104
Concepts in Action: Job Costing on Cowboys Stadium
The Role of Technology 109
Actual Costing 110
A Normal Job-Costing System in Manufacturing 111
General Ledger 112
Explanations of Transactions 113
Subsidiary Ledgers 114
Budgeted Indirect Costs and End-of-Accounting-Year
Adjustments 117
Underallocated and Overallocated Direct Costs 118
Adjusted Allocation-Rate Approach 118
Proration Approach 119
Write-Off to Cost of Goods Sold Approach 121
Choice Among Approaches 121
Variations from Normal Costing: A Service-Sector
Example 122
Problem for Self-Study 123 | Decision Points 125 | Terms to
Learn 126 | Assignment Material 126 | Questions 126 |
Exercises 127 | Problems 132 | Collaborative Learning
Problem 137
5 Activity-Based Costing and Activity-
Based Management 138
LG Electronics Reduces Costs and Inefficiencies Through
Activity-Based Costing
Broad Averaging and Its Consequences 139
Undercosting and Overcosting 140
Product-Cost Cross-Subsidization 140
Simple Costing System at Plastim Corporation 141
Design, Manufacturing, and Distribution
Processes 141
Simple Costing System Using a Single Indirect-Cost
Pool 142
Applying the Five-Step Decision-Making Process at
Plastim 144
Refining a Costing System 145
Reasons for Refining a Costing System 145
Guidelines for Refining a Costing System 146
Activity-Based Costing Systems 146
Plastim’s ABC System 146
Cost Hierarchies 149
Implementing Activity-Based Costing 150
Implementing ABC at Plastim 150
Comparing Alternative Costing Systems 153
Considerations in Implementing Activity-Based-
Costing Systems 154
Concepts in Action: Successfully Championing ABC
Using ABC Systems for Improving Cost Management
and Profitability 156
Pricing and Product-Mix Decisions 156
Cost Reduction and Process Improvement
Decisions 156
Design Decisions 157
Planning and Managing Activities 158
Activity-Based Costing and Department Costing
Systems 158
ABC in Service and Merchandising Companies 159
Concepts in Action: Time-Driven Activity-Based
Costing at Charles Schwab
Problem for Self-Study 160 | Decision Points 163 | Terms to
Learn 164 | Assignment Material 164 | Questions 164 |
Exercises 165 | Problems 172 | Collaborative Learning
Problem 181
6 Master Budget and Responsibility
Accounting 182
“Scrimping” at the Ritz: Master Budgets
Budgets and the Budgeting Cycle 184
Strategic Plans and Operating Plans 184
Budgeting Cycle and Master Budget 185
Advantages of Budgets 185
Coordination and Communication 185
Framework for Judging Performance and Facilitating
Learning 186
Motivating Managers and Other Employees 186
Challenges in Administering Budgets 187
Developing an Operating Budget 187
Time Coverage of Budgets 187
Steps in Preparing an Operating Budget 188
Financial Planning Models and Sensitivity Analysis 197
Concepts in Action: Web-Enabled Budgeting and
Hendrick Motorsports
Budgeting and Responsibility Accounting 199