pnnci management accounting a south african perspective

Transcription

1 pnnci management accounting a south african perspective Edited by SHELLEY-ANNE ROOS i CAROL CAIRNEY RICHARD CHIVAKA HENDRIK FOURIE DEWALD JOUBERT AHMED MOHAMMADALI HAJI. APPIE PIENAAR LILLA STACK JONATHAN STRENG I GARYSWARTZ JOHN WILLIAMS OXFORD UNIVERSITY PRESS SOUTHERN AFRICA

2 Siritents Foreword Preface List of contributors xiii xiv xv CHAPTER I INTRODUCTION TO MANAGEMENT ACCOUNTING 1 Learning objectives Introduction Management accounting Financial accounting versus management accounting Levels of management information Modern management accounting 5 References 6 CHAPTER 2 COST CLASSIFICATION 7 Carol Cairney (updated by ) Learning objectives Introduction Cost behaviour Assignment Relevance Function Timing Summary 28 Conclusion 28 Basic questions 29 Long questions 31 References 36 CHAPTER 3 COST ESTIMATION 37 Carol Cairney (updated by ) Learning objectives Introduction Cost drivers Scatter graph High-low method Least squares regression Factors affecting the accuracy of cost estimation Other means of estimating costs and predicting cost behaviour Summary 53 Conclusion 54 VI

3 Contents Appendix 3.1: Learning curves 55 Basic questions 67 Long questions 69 References 73 CHAPTER 4 COST-VOLUME-PROFIT RELATIONSHIPS 75 ]ohn Williams Learning objectives Introduction CVP analysis - the accountant's and economist's models Break-even analysis Sensitivity analysis Break-even analysis with multiple products CVP analysis assumptions and limitations Summary 93 Conclusion 93 Basic questions 94 Long questions 95 References 100 CHAPTER 5 ABSORPTION VERSUS VARIABLE COSTING 101 Dewald Joubert, Ahmed Mohammadali Haji and Hendrik Fourie Learning objectives Introduction Cost accounting concepts The impact on profit if inventory levels change Strengths and weakness of absorption and variable costing Summary 122 Conclusion.' 122 Basic questions 124 Long questions 126 References 132 Advanced reading: Integration section: Chapters 1 to Integrated question 135 CHAPTER 6 OVERHEAD ALLOCATION 139 Carol Cairney (updated by ) Learning objectives Introduction Volume- and value-based techniques Allocation of support service department costs Activity-based costing (ABC) Activity-based management and activity-based budgeting 167 vn

4 PRINCIPLES OF MANAGEMENT ACCOUNTING 6.6 Summary 167 Conclusion 168 Basic questions 169 Long questions 173 References 183 CHAPTER 7 JOB COSTING 185 Lilla Stack and John Williams Learning objectives -.-:..' introduction Job-costing objectives The elements of cost in a job-costing system Integrating the costing and financial accounting systems Summary 200 Conclusion 200 Basic questions 201 Long questions 203 References 207 CHAPTER 8 PROCESS COSTING 209 Lilla Stack and John Williams Learning objectives Introduction Calculations in a process costing system Consecutive processes Decision-making Summary 236 Conclusion 237 Basic questions 238 Long questions 242 References 245 CHAPTER 9 JOINT AND BY-PRODUCT COSTING 247 Lilla Stack and John Williams Learning objectives Introduction Cost accounting treatment of joint costs Joint costs and International Accounting Standards Joint costs in relation to decision-making Summary 257 Conclusion 258 Basic questions 258 Long questions 261 References 266 Vlll

5 Contents Advanced reading: Integration section: Chapters 6 to Integrated question 268 CHAPTER 10 RELEVANT INFORMATION FOR DECISION-MAKING 273 Dewald Joubert, Ahmed Mohammadali Haji and Hendrik Fourie Learning objectives Introduction Understanding the concept of relevance Decisions under conditions of certainty Applying the concept of relevance to basic cost elements Decisions under conditions of uncertainty The pricing decision Summary 305 Conclusion 305 Basic questions 306 Long questions 308 References, 314 CHAPTER 11 DECISION-MAKING UNDER OPERATIONAL CONSTRAINTS Appie Pienaar Learning objectives Introduction Limiting factors Make-or-buy decisions and scarce resources Limiting factors and shadow prices Linear programming: the graphical method Shadow prices and linear programming Linear programming: the simplex method Linear programming in practice Summary 335 Conclusion 336 Basic questions 336 Long questions 339 References 343 CHAPTER 12 BUDGETS, PLANNING AND CONTROL 345 Appie Pienaar Learning objectives Introduction Objectives of budgets Strategic, tactical and operational budgets Responsibility for the budget Determining the principal budgeting factor The sequence in budget preparation 349 IX

6 PRINCIPLES OF MANAGEMENT ACCOUNTING 12.7 Production and related budgets Cash budgets The master budget The role of ratio analysis and KPIs in the budgeting process Alternative approaches to budgeting Budgeting and probability theory Preparing projections using historical data Projecting sales Budgetary control Fixed and flexed budgets Preparing a flexed budget Impact of budgeting on the motivation of managers Participation and performance evaluation Negotiated style of budgeting Continuous feedback on performance The role of the management accountant in the budget process Beyond Budgeting Summary 369 Conclusion 369 Basic questions 370 Long questions 371 References 374 CHAPTER 13 STANDARD COSTING 375 Jonathan Streng, Hendrik Fourie and Gary Swartz Learning objectives Introduction Standards and the interrelationship between standards and budgets Standard costing and inventory valuation Determination of cost standards : Calculation of variances Reconciliation of actual profit to standard profit Investigation of variances Interpretation of variances Possible causes of variances Planning and operating variances Revision of standards Accounting entries Balances in the variance accounts Criticisms of standard costing Variance analysis in modern mechanised environments Standard costing in service organisations Standard costing and benchmarking * Summary 416 Conclusion 416

7 Contents Appendix 13.1: Advanced standard costing concepts 417 Basic questions 428 Long questions 430 References 440 Advanced reading: Integration section: Chapters 10 to Integrated question 442 CHAPTER 14 PERFORMANCE MANAGEMENT 449 Learning objectives Introduction Responsibility accounting Centralised and decentralised organisational structures Financial performance measures Value-based,management Multidimensional performance measures Agreeing on targets and rewarding performance Not-for-profit and public sector organisations Summary 473 Conclusion 474 Basic questions 475 Long questions 478 References ; 486 CHAPTER 15 TRANSFER PRICING 487 Learning objectives Introduction Decentralisation and transfer pricing Principles of transfer pricing Market price-based transfer prices Cost-based transfer prices Negotiated transfer prices Resolving transfer pricing problems Transfer of self-constructed assets International transfers Strategic and ethical considerations Summary 500 Conclusion 501 Appendix 15.1: Determining transfer prices in perfect and imperfect markets 502 Basic questions 509 Long questions 511 References 517 XI

8 PRINCIPLES OF MANAGEMENT ACCOUNTING CHAPTER 16 CONTEMPORARY MANAGEMENT ACCOUNTING CONCEPTS 519 Richard Chivaka and Learning objectives Introduction Theory of Constraints ' Materials requirement planning (MRP) Enterprise resource planning (ERP) " ''Just-in-time systems Benchmarking Summary 532 Conclusion 533 Basic questions 534 Long questions 538 References 542 CHAPTER 17 COMPETITIVE ADVANTAGE 543 Richard Chivaka and Learning objectives Introduction Porter's generic strategies Activity-based management Total quality management Target costing Life-cycle costing Supply chain management Value chain analysis Summary 560 Conclusion 561 Basic questions 562 Long questions 563 References 567 Advanced reading: Integration section: Chapters 14 to Integrated question 571 Suggested solutions to integration section questions 577 Integration section: Chapters 1 to Integration section: Chapters 6 to Integration section: Chapters 10 to Integration section: Chapters 14 to xii Glossary 595 Index 603