Book Description

Managerial Accounting Basics

Managerial accounting, also called management accounting, is a field of accounting that provides economic and financial information for managers and other internal users. The activities that are part of managerial accounting (and the chapters in which they are discussed in this textbook) are as follows.

1. Explaining manufacturing and nonmanufacturing costs and how they are reported in the financial statements (Chapter 1).
2. Computing the cost of providing a service or manufacturing a product (Chapters 2, 3, and 4).
3. Determining the behavior of costs and expenses as activity levels change and analyzing cost–volume–profit relationships within a company (Chapters 5 and 6).
4. Accumulating and presenting data for management decision making (Chapter 7).
5. Determining prices for external and internal transactions (Chapter 8).
6. Assisting management in profit planning and formalizing these plans in the form of budgets (Chapter 9).
7. Providing a basis for controlling costs and expenses by comparing actual results with planned objectives and standard costs (Chapters 10 and 11).
8. Accumulating and presenting data for capital expenditure decisions (Chapter 12).

Managerial accounting applies to all types of businesses—service, merchandising, and manufacturing. It also applies to all forms of business organizations— proprietorships, partnerships, and corporations. Not-for-profit entities as well as profit-oriented enterprises need managerial accounting.

In the past, managerial accountants were primarily engaged in cost accounting— collecting and reporting costs to management. Recently that role has changed significantly. First, as the business environment has become more automated, methods to determine the amount and type of cost in a product have changed. Second, managerial accountants are now held responsible for strategic cost management; that is, they assist in evaluating how well the company is employing its resources. As a result, managerial accountants now serve as team members alongside personnel from production, marketing, and engineering when the company makes critical strategic decisions.

Opportunities for managerial accountants to advance within the company are considerable. Financial executives must have a background that includes an understanding of managerial accounting concepts. Whatever your position in the company—marketing, sales, or production, knowledge of managerial accounting greatly improves your opportunities for advancement. As the CEO of Microsoft noted: “If you’re supposed to be making money in business and supposed to be satisfying customers and building market share, there are numbers that characterize those things. And if somebody can’t sort of speak to me quantitatively about it, then I’m nervous.”

Brief Contents
Cost Concepts for Decision Makers
1 Managerial Accounting 2
2 Job Order Costing 54
3 Process Costing 98
4 Activity-Based Costing 150
Decision-Making Concepts
5 Cost-Volume-Profit 202
6 Cost-Volume-Profit Analysis: Additional Issues 242
7 Incremental Analysis 296
8 Pricing 336
Planning and Control Concepts
9 Budgetary Planning 386
10 Budgetary Control and Responsibility Accounting 434
11 Standard Costs and Balanced Scorecard 492
12 Planning for Capital Investments 542
Performance Evaluation Concepts
13 Statement of Cash Flows 582
14 Financial Statement Analysis 644