20751nam a22002417a 4500005001700000008004100017020001800058040001800076082002000094100002500114245008200139250001200221260003200233300003900265500067400304504159610097850534201693965000332035965000432039265000312043570000192046670000242048520260305151249.0260216b |||||||| |||| 00| 0 eng d a9789363863835 cAIMIT LIBRARY 21a657.42bFARK aFarmer, Karen Congo. aCost accounting /cBy Karen Congo Farmer, Amy J Fredin and Pankaj Kumar Baag. a1st ed. aNew Delhi :bWiley ,c2024. axxviii,18-35,KF-4P. ;bPBc28.3 cm aThis book helps students develop the critical thinking skill set needed to understand costing concepts. Through storytelling, students develop a deeper understanding of cost accounting fundamentals, allowing them to apply their knowledge to modern business scenarios and develop the competencies and decision-making skills needed to become the future accounting professional. It focuses on strengthening the coverage by including new and updated materials. Throughout the book, students work through a variety of assignments and integrated cases that leverage market-leading technology, helping them to make informed business decisions and think critically about data. a1 Cost Accounting Has Purpose 1.1 Companies Know Their Purpose: Do You Know Yours? Purpose Is Meaningful Company Strategy: Turning Purpose into Action Your Own Strategy Measures, Targets, and Results on the Balanced Scorecard 1.2 The Purpose of Cost Accounting Data Analytics in Action: Data Analytics Isn’t New Big Picture Thinking and Decision-Making Using Data Analytics to Problem-Solve Data Analytics in Action: Keeping Score The Value Chain 1.3 What Guides Our Purpose? The Importance of Ethics in Business Governing Bodies Within Accounting Appendix 1A: Why You Should Learn How to Learn Your Role as a Lifelong Learner Fixed versus Growth Mindset Purposeful Pedagogy How This Text Can Help You Learn 2 Refresher on Cost Terms 2.1 Overview of Cost Using Financial Statements to Interpret Revenues and Expenses Costs versus Expenses: Let’s Get Specific Opportunity Costs and Sunk Costs 2.2 Costs for Service Providers, Merchandisers, and Manufacturers Service Providers Data Analytics in Action: Cutting Corners Merchandisers Manufacturers 2.3 Defining and Assigning Costs Product and Period Costs Manufacturing and Nonmanufacturing Costs The Cost Object, Direct Costs, and Indirect Costs Prime Costs and Conversion Costs 2.4 Variable and Fixed Costs and the Relevant Range Variable Costs Managing Variable Costs Data Analytics in Action: It’s a Snap! Fixed Costs Managing Fixed Costs Relevant Range and Costs of Capacity Fixed Costs on a Per-Unit Basis: Be Careful 2.5 Tracing Product Costs from the Balance Sheet to the Income Statement Inventoriable Costs Raw Materials Inventory on the Balance Sheet Work-in-Process Inventory on the Balance Sheet Finished Goods Inventory on the Balance Sheet Cost of Goods Manufactured Cost of Goods Sold 2.6 Comparing Gross Margin and Contribution Margin Income Statements Gross Margin versus Contribution Margin Full Costs 3 Cost Behavior and Cost Estimation 3.1 The Basics of Cost Behavior Selecting Cost Drivers Data Analytics in Action: Counting Cars The Relevant Range, and Costs Within It 3.2 Estimating Costs Is Crucial: Here’s How Account Analysis Method High-Low Method Data Analytics in Action: Scatter to Avoid Slacking? Excel Tutorial: The Scatter Plot 3.3 Sophisticated Cost Estimation with Regression Overview of the Regression Method Excel Tutorial: Regression Analysis Evaluating Regression Output Assumptions of Regression Multiple Regression 3.4 When Costs Are Nonlinear: The Learning Curve Applying the Learning Curve Learning Curve Impacts on Costs and Prices 4 Cost-Volume-Profit Analysis 4.1 Contribution Margin and the Break-Even Sales Point Data Analytics in Action: Consuming Coffee and Trends Contribution Margin Number of Sales in Units to Break Even Sales in Dollars to Break Even What Happens After Break-Even Analysis? 4.2 Cost-Volume-Profit (CVP) Analysis It’s Graphic: Understanding CVP Relationships The Relevant Range: Quite Relevant Margin of Safety 4.3 Break-Even with Target Profit and Taxes Modifying the Break-Even to Include Target Profit Modifying the Break-Even to Include Target Profit After-Tax 4.4 Break-Even with Multiple Products Data Analytics in Action: Big Data for Bigger Sales 4.5 Operating Leverage and Sensitivity Analysis Sensitivity Analysis Shows the Effects of Operating Leverage Using the Degree of Operating Leverage Multiplier 4.6 CVP Analysis for Service and Nonprofit Organizations Data Analytics in Action: More Service, Fewer Costs 5 Relevant Costs for the Decision-Maker 5.1 Decision-Making Made Easier Data Analytics in Action: Don’t Succumb to Analysis Paralysis 5.2 What Are Relevant Costs and Relevant Information? How Relevant Information Supports Decision-Making Sunk Costs The Total Cost Approach versus the Relevant Cost Approach 5.3 Management Decisions Requiring Use of Relevant Costs Insource versus Outsource Keep versus Drop Excel Tutorial: Goal Seek Product-Mix Decisions Data Analytics in Action: Tasty, Fast, or Both? Excel Tutorial: Solver Special Orders 5.4 Decision-Making and Opportunity Costs 5.5 Fixed Costs and Decision-Making Direct Fixed Costs Common Fixed Costs Allocated Fixed Costs 6 Mastering the Master Budget 6.1 Why Budget? Budgeting and Behavior Modification Data Analytics in Action: Budgeting Made Fun? Types of Budgets Budgeting and Ethical Considerations 6.2 The Master Budget Revisiting the Strategic Planning Process Organizational Structure and Responsibility Centers The Master Budget Inputs and Outputs Follow-Up and Feedback 6.3 The Operating Budget and the Budgeted Income Statement Sales Forecast: It All Starts Here Production Budget Direct Materials Purchases Budget Direct Labor Budget Manufacturing Overhead Budget Cost of Goods Sold and Cost of Goods Manufactured Budgets Selling, General, and Administrative Expenses Budget Non-Operating Expenses Budget 6.4 The Financial Budget and the Budgeted Balance Sheet Budgeted Inventory Balance Cash Receipts, Cash Collections, and the Budgeted Accounts Receivable Balance Data Analytics in Action: Banks Expedite Loan Collections Cash Disbursements and Budgeted Accounts Payable Balance Budgeted Cash Balance 6.5 Budgeting in Retail and Service Organizations Budgeting for Retailers Budgeting for Service Providers and Nonprofit Organizations 7 Capital Budgeting Choices and Decisions 7.1 Capital Budgeting: The Point and the Context Data Analytics in Action: Using Data to Scout a Location The Circle of Life of Businesses Return on Investment (ROI) 7.2 Elements of Capital Budgeting Decisions Timelines Time Value of Money Cash Flows: Lump Sums and Annuities Discount Rate Tax Rate Depreciation Tax Shield: Yes You Can! Data Analytics in Action: Data Informs Decision-Making 7.3 Tools to Evaluate Capital Budgeting Choices Net Present Value (NPV): A Powerful Machine Internal Rate of Return (IRR) Payback Period Accounting Rate of Return (ARR) Profitability Index 7.4 Sensitivity Analysis 7.5 Making the Decision 7.6 The Follow-Up Post-Investment Audit Performance Evaluation Time Value of Money Tables 8 Job Costing Visualized 8.1 Job Costing: An Overview Defining Jobs and Job Costing Revisiting Product Costs Actual versus Normal Costing Data Analytics in Action: Is It Hot in Here? How Job Costing Is Organized 8.2 Actual and Applied Manufacturing Overhead Accounting for Actual and Applied Manufacturing Overhead Calculating Applied Manufacturing Overhead Budgeting Manufacturing Overhead for a Specific Job 8.3 Putting It Together: Costing Jobs and Units Cost Flows, Accounts, and Journal Entries Year-End Adjustments Income Statement Impacts of Job Costing 8.4 Job Costing and Decision-Making Job Costing’s Impacts on Decisions Data Analytics in Action: Information or Invasion? Ethical Considerations Related to Job Costing 8.5 Job Costing in Service Organizations 9 Activity-Based Costing 9.1 Traditional Job Costing and ABC Compared Drawbacks of Traditional Costing The Advantage of Activity-Based Costing A Better Cost with Activity-Based Costing Data Analytics in Action: A Sweet Outcome 9.2 The Cost Hierarchy, Activities, and Cost Drivers Identifying Activities as Cost Pools Cost Drivers The Cost Hierarchy 9.3 Using Activity-Based Costing for Product Costing Step 1: Identify Direct Costs Step 2: Identify Activities and Cost Drivers Step 3: Calculate Cost Driver Rates and Assign MOH Step 4: Record MOH Costs 9.4 Decision-Making Outcomes, Including Time-Driven Activity-Based Costing (TDABC) Impacts of Activity-Based Costing on Product and Service Costs Who Should Use Activity-Based Costing? Broader Outcomes of Using Activity-Based Costing Time-Driven Activity-Based Costing: A Time-Saving Alternative Data Analytics in Action: An Impressive By-Product 10 Variance Analysis and Standard Costing 10.1 A Variety of Purposes for Budgets and Variance Analysis Motivate and Benchmark Plan and Control Evaluate Performance and Troubleshoot Data Analytics in Action: Process Improvements at Nike 10.2 Master Budget and Flexible Budget Variances Limitations of the Master Budget The Flexible Budget 10.3 Standard Costing The Purpose of Standard Costing Setting and Updating Standards Data Analytics in Action: A New Way of Checking Out the Competition’s Standards 10.4 Direct Materials and Direct Labor Variances Overview of Production Variances Direct Materials Variances Direct Labor Variances 10.5 Variable-MOH and Fixed-MOH with Journal Entries Variable-MOH: Price and Efficiency Variances Data Analytics in Action: Calculate All the Variances Fixed-MOH: Price and Volume Variances Journal Entries to Close Variances 10.6 Sales Variances Master Budget Sales Variance: Sales Price Variance and Simplified Sales Activity Variance Comprehensive Sales Activity Variance: Sales Mix Variance and Sales Quantity Variance Sales Quantity Variance: Market Size Variance and Market Share 11 Process Costing 11.1 Process Costing: An Overview Data Analytics in Action: Data Mining for Mining Data Job Costing versus Process Costing The Importance of Determining WIP Inventory Correctly The Steps of Process Costing 11.2 Step 1: Verify Physical Units in the Period and Identify Degree of Completion No Beginning or Ending WIP Inventory With Only Ending WIP Inventory With Beginning and Ending WIP Inventory 11.3 Step 2: Determine Status of Physical Units and Convert to Equivalent Units Using the FIFO Method to Determine Status of Physical Units Using the Weighted-Average Method to Determine Status of Physical Units 11.4 Steps 3 and 4: Account for Costs and Calculate Cost per Equivalent Unit Using the FIFO Method to Calculate Cost per Equivalent Unit Using the Weighted-Average Method to Calculate Cost per Equivalent Unit 11.5 Step 5: Assign Costs to WIP Inventory and FG Inventory with Journal Entries Assigning Costs Using the FIFO Method with Corresponding Journal Entries Assigning Costs Using the Weighted-Average Method with Corresponding Journal Entries Applications of Determining Product Costs 11.6 Costs Transferred-In from Another Department Transferred-In Costs Using the FIFO Method Transferred-In Costs Using the Weighted-Average Method 11.7 Operation Costing 12 Absorption versus Variable Costing 12.1 Absorption Costing: An Overview The Purpose of Absorption Costing and How It Works Management Decision-Making and Absorption Costing Data Analytics in Action: This Machine Is Learning! Balance Sheet and Income Statement Impacts of Absorption Costing 12.2 Variable Costing: An Overview The Purpose of Variable Costing and How It Works Balance Sheet and Income Statement Impacts of Variable Costing 12.3 Side-by-Side: Comparing Absorption Costing and Variable Costing The Two Methods Compared: Inventory Costs and Balance Sheet Impacts The Two Methods Compared: COGS, Operating Income, and Income Statement Impacts 12.4 Determining Denominator Volumes for Fixed-MOH Managing Capacity Denominator Volume Choices Further Outcomes of Denominator Decisions 13 Data Analytics 13.1 Big Data? Data Analytics? Challenges and Opportunities Overview of Data Big Data and Data Analytics in Cost Accounting Challenges and Opportunities Data Analytics in Action: Meeting the Challenges 13.2 Sourcing and Storing Data The Role of Data Analytics in Decision-Making Data Sources and Data Storage The Cost of Data and Its Ethical Considerations Data Analytics in Action: When Data Is Especially Costly 13.3 Categories of Data Analytics Techniques Overview of Data Analytics Categories Descriptive Analytics Diagnostic Analytics Predictive Analytics Prescriptive Analytics Data Analytics in Action: Price Check on Aisle 13.4 Your Role in Solving Business Problems with Data Analytics Data Analytics Outcomes in Cost Accounting Being Career-Ready 14 Support Department Costing 14.1 Support Department Costing: An Overview Types of Support Departments and Their Costs Allocating Support Department Costs Data Analytics in Action: Keep or Drop? Cost Allocation Bases for Support Departments 14.2 Methods of Allocating Support Department Costs The Direct Method Illustrated The Step Method Illustrated The Reciprocal Method Illustrated Excel Tutorial: The Reciprocal Method Comparing the Three Allocation Methods Data Analytics in Action: This Call May Be Analyzed 14.3 Allocating Common Costs and Bundled Revenues Stand-Alone Cost Allocation Method Incremental Cost Allocation Method Allocating Revenue from Sales of Bundled Products/Services 15 Joint Costs and Decision-Making 15.1 Joint Costs—Description and Illustration 15.2 Methods of Allocating Joint Costs Sales Value at Split-Off Method Net Realizable Value (NRV) Method Physical Quantities Method Choosing an Allocation Method 15.3 Joint Costs and Decision-Making: Should We Sell or Process Further? Relevance of Joint Costs to Sell-or-Process-Further Decisions Sell-or-Process-Further Decision Factors Data Analytics in Action: More Fresh Options Decision-Making and Performance Evaluation 15.4 A Decision: How Should We Account for By-Products and Scrap? By-Products Revisited Data Analytics in Action: Analysis Reduces Waste The Production Method The Sales Method: By-Products and Scrap Recognized at Time of Sale Production Method versus Sales Method 16 The Art and Science of Pricing to Optimize Revenue 16.1 Pricing: Art + Science + Psychology Truths About Pricing Consider the Context: Customers, Costs, and Competitors 16.2 Special-Order Pricing: Be Opportunistic Lowest Acceptable Special-Order Price Relationship to Relevant Costs for the Decision-Maker 16.3 Cost-Plus Pricing: If You Can Sell the Plus, Charge It Overview of the Cost-Plus Method The Calculation: A Starting Point Data Analytics in Action: Buy it Again? Using Data to Set Prices Comparing Special-Order Pricing to Cost-Plus Pricing 16.4 Target Costing for Target Pricing—Backward but Brilliant Steps to Implement Target Costing for Target Pricing The Value in Value Engineering Data Analytics in Action: Ensuring the Value of Business Activities 16.5 Consumers and Pricing Practices Consumer Perceptions and Pricing Other Pricing Practices: Fair or Illegal? Data Analytics in Action: No Free Parking 17 Management Control Systems and Transfer Pricing 17.1 The Need for an Effective Management Control System Centralized versus Decentralized Organizations Goal Congruence Components of a Management Control System 17.2 How Responsibility Centers Work Characteristics of Responsibility Centers Cost Centers Revenue Centers Profit Centers Investment Centers Data Analytics in Action: Data Analytics Hits It Out of the Park! 17.3 How to Measure Performance of Investment Centers Return on Investment (ROI) and Its Components Residual Income (RI) Economic Value Added (EVA) 17.4 Transfer Pricing: An Overview The Genesis of Transfer Pricing Determining the Optimal Transfer Price Range How Companies Set Transfer Prices Management and Transfer Pricing Transfer Pricing in Multinational Companies 18 Business Strategy, Performance Measurement, and the Balanced Scorecard 18.1 An Overview of Business Strategy The Strategic Planning Process A Closer Look at Business Strategy 18.2 Performance Measurement Guides Performance Congruent Outcomes: Linking Business Strategy to Employees’ Objectives The Performance Measurement Process Traits of Financial Performance Measures Traits of Nonfinancial Performance Measures 18.3 Using the Balanced Scorecard to Assess Company Performance Balancing the Four Perspectives Linking Business Strategy to the Balanced Scorecard Data Analytics in Action: New Measures and Targets Evaluating Success Company Index (Online ) Subject Index (Online ) Review of Key Formulas KF-1 rAbout the Author Karen Congo Farmer Raised on a farm in southwestern Ontario, Canada, I learned from an early age the value of hospitality, music, seasons, finishing a job, and telling a good story. McMaster University introduced me to a professor who inspired a love of accounting. She was authentic and warm—a role model for my future teaching. As an auditor at Ernst & Young, I earned my CPA designation and experienced business and networking firsthand. Next, I held a dual role at the beautiful Western University: Accountant by day in Financial Services, and accounting lecturer in the evening. Soon enough, I became a full-time lecturer. In addition, a 10+ year instructor role with CPA Ontario, preparing students for their professional exams, was pivotal to my development. Amy J Fredin My story begins in a small town in western Minnesota, where I grew up with music and sports, camping and boating, family time and fierce friendships. I studied music and accounting at the College of St. Benedict and from there worked in public accounting and obtained my CPA. I then went back to school for my MBA at St. Cloud State University. While completing that degree, I started teaching in the accounting program at Alexandria Technical College. It was there that my love for teaching began. Five years later, my story moves to Nebraska, where I pursued a PhD in accounting at the University of Nebraska—Lincoln (go Big Red!). After I completed that degree, St. Cloud State invited me back, this time to join the Accounting Department as a faculty member. In my more than a dozen years so far at SCSU, I have enjoyed teaching, researching, working with students and colleagues, leading case discussions in executive training programs, and connecting with employers in the community. Pankaj Kumar Baag During my school years, I traveled extensively across India. Once I completed my degree in Physics (honors), I embarked on a career in the BFSI sector, which took me across international borders. It was in this role that I received rigorous training in credit appraisal, gaining a thorough understanding of financial and management accounting. This knowledge spurred me to pursue further qualifications, leading me to earn my CAIIB, M.Com, M.FM, and several postgraduate diplomas over the course of 10 years. This educational journey ultimately inspired me to shift to academia as a full-time professor. I earned my PhD from IIM Calcutta and subsequently joined the faculty at IIM Kozhikode. Over the past decade, I’ve co-authored seven books, authored numerous research papers, working papers, and case studies, which have earned me several awards at international conferences and in journals. I’ve supervised and continue to supervise PhD candidates and Master’s students on their theses. My expertise also led me to teach management accounting to PGP and EPGP students at IIM Kozhikode for over 10 years. Additionally, I teach a variety of subjects, including Commercial Banking, Microfinance, Project Finance, Entrepreneurial Finance, Investment Banking, and Fintech at IIM Kozhikode. I’ve been involved in several management development programs, which often require a deep understanding of management accounting. For the past seven years, I’ve coordinated the Business Project Plan core course for the EPGP at IIMK, where practical application of management accounting is essential. aCost- volume-profit analysis aVariance analysis and standard costing aSupport department costing aFredin, Amy J. aBaag, Pankaj Kumar.