COLIN DRURY - MIM

1 COLIN DRURYM anagement and Cost Accounting,eighth editionThe eighth edition of COLIN DRURY sManagement and Cost Accountingtext is accompanied bythe following dedicated digital support resources: Dedicated instructor resourcesonly available to lecturers, who can register for accesseither at or by speaking to their local Cengage Learningrepresentative. Replacing the former , which hosted the onlinestudent resources,Cengage Learning sCourseMatebrings course concepts to life with interactive learning,study and exam preparation tools which support the printed textbook. Students canaccess this using theunique personal access card included in the front of the book,and lecturers can access it by registering by speaking totheir local Cengage Learning representative. Cengage Learning sAplia, an online homework solution dedicated to improving learning byincreasing student effort and engagement.

2 A demo is available at Instructorscan find out more about accessing Aplia by speaking to their local Cengage Learningrepresentative, and on the recommendation of their instructor, students can purchase accessto Aplia at Instructor ResourcesThis includes the following resources for lecturers: Instructor s Manual which includes answers to IM Review Problems in the text ExamView Testbank provides over 1800 questions PowerPoint slides to use in your teaching Case Study Teaching Notes to accompany the Case Studies on CourseMate Downloadable figures and tables from the book to use in your teachingCourseMateCourseMate offers lecturers and students a range of interactive teaching and learning toolstailored to the eighth edition, including: Case Studies Quizzes Beat the Clock Q&A games PowerPoint slides Interactive ebook Learning Notes Outline solutions to Real World Viewquestions Glossary Accounting and Finance definitions Crossword puzzles and flashcards Guide to Excel Useful weblinksThe lecturer view on CourseMate also gives lecturers access to the integrated EngagementTracker, a first-of-its-kind tool to assess their students preparation and Learning s Aplia is a fully tailored online homework solution, dedicated to improvinglearning by increasing student effort and engagement.

3 Aplia has been used by more than1 million students at over 1,300 institutions worldwide, and offers automatically graded assign-ments and detailed explanations for every question, to help students stay focussed, alert andthinking critically. A demo is available at accounting features include: Embedded eBook An easy-to-use course management system Personalized customer support Automatically graded chapter assignments with instant detailed feedbackCOLINDRURYMANAGEMENTANDCOSTACCOU NTINGEIGHTH EDITIONA ustralia Brazil Japan Korea Mexico Singapore Spain United Kingdom United StatesManagement and Cost AccountingEighth EditionColin DruryPublishing Director: Linden HarrisPublisher: Brendan GeorgeDevelopment Editor: Annabel AinscowEditorial Assistant: Lauren DarbyProduction Editor: Lucy ArthyProduction Controller: Eyvett DavisMarketing Manager: Amanda CheungTypesetter: Integra, IndiaCover design: Design DeluxeText design: Design Deluxe , COLIN DruryALL RIGHTS RESERVED.

4 No part of this work covered by the copyright hereinmay be reproduced, transmitted, stored or used in any form or by any meansgraphic, electronic, or mechanical, including but not limited to photocopying,recording, scanning, digitizing, taping, Web distribution, informationnetworks, or information storage and retrieval systems, except as permittedunder Sectionorof theUnited States Copyright Act, orapplicable copyright law of another jurisdiction, without the prior writtenpermission of the the publisher has taken all reasonable care in the preparation of thisbook, the publisher makes no representation, express or implied, with regardto the accuracy of the information contained in this book and cannot acceptany legal responsibility or liability for any errors or omissions from the bookor the consequences and services that are referred to in this book may be eithertrademarks and/or registered trademarks of their respective owners.

5 Thepublishers and author/s make no claim to these trademarks. The publisherdoes not endorse, and accepts no responsibility or liability for, incorrect ordefamatory content contained in hyperlinked product information and technology permission to use material from this text or product,and for permission Library Cataloguing-in-Publication DataA catalogue record for this book is available from the British :----Cengage Learning EMEAC heriton House, North Way, Andover, Hampshire, SPBE, United KingdomCengage Learning products are represented in Canada by NelsonEducation your lifelong learning solutions, your next print book, e-book or e-chapter in China by RR Donnelley1 2 3 4 5 6 7 8 9 10 14 13 12 BRIEFCONTENTSPART ONEI ntroduction to management and costaccounting21 Introduction to management accounting42An introduction to cost terms and concepts23 PART TWOCost accumulation for inventoryvaluation and profit measurement423 Cost assignment444 Accounting entries for a job costing system805 Process costing1026 Joint and by-product costing1297 Income effects of alternative cost accumulationsystems146 PART THREEI nformation for decision-making1668 Cost volume profit analysis1689 Measuring relevant costs and revenues fordecision-making19410 Pricing decisions and profitability analysis22711 Activity-based costing25112 Decision-making under conditions of risk anduncertainty27813 Capital investment decisions: appraisalmethods30014 Capital investment decisions.

6 The impact ofcapital rationing, taxation, inflation and risk329 PART FOURI nformation for planning, control andperformance measurement35615 The budgeting process35816 Management control systems39317 Standard costing and variance analysis 142318 Standard costing and variance analysis 2:further aspects45819 Divisional financial performance measures48420 Transfer pricing in divisionalized companies509 PART FIVES trategic cost management andstrategic management accounting54021 Strategic cost management54222 Strategic management accounting578 PART SIXThe application of quantitative methodsto management accounting60623 Cost estimation and cost behaviour60824 Quantitative models for the planning and controlof inventories63225 The application of linear programming tomanagement accounting655vCONTENTSP refacexiiiAbout the authorxixAcknowledgementsxxWalk through tourxxivPART ONEI ntroduction to management andcost accounting21 Introduction to managementaccounting4 The users of accounting information5 Differences between management accounting andfinancial accounting6 The decision-making process7 The impact of the changing business environment onmanagement

7 Accounting9 Focus on customer satisfaction and newmanagement approaches13 Management accounting and ethical behaviour14 International convergence of managementaccounting practices15 Functions of management accounting16A brief historical review of managementaccounting17 Summary of the contents of this book18 Guidelines for using this book19 Summary19 Key terms and concepts20 Key examination points21 Assessment material21 Review questions222 An introduction to cost terms andconcepts23 Cost objects23 Manufacturing, merchandising and serviceorganizations24 Direct and indirect costs24 Period and product costs27 Cost behaviour29 Relevant and irrelevant costs and revenues32 Avoidable and unavoidable costs32 Sunk costs33 Opportunity costs33 Incremental and marginal costs35 The cost and management accounting informationsystem36 Summary36 Key terms and concepts37 Recommended reading38 Key examination points38 Assessment material38 Review questions39 Review problems39 PART TWOCost accumulation for inventoryvaluation and profitmeasurement423 Cost assignment44 Assignment of direct and indirect costs45 Different costs for different purposes46 Cost-benefit issues and cost systems design47 Assigning direct costs to cost objects48 Plant-wide (blanket)

8 Overhead rates49 The two-stage allocation process50An illustration of the two-stage process for atraditional costing system52An illustration of the two-stage process for an ABCsystem57 Extracting relevant costs for decision-making60 Budgeted overhead rates60 Under- and over-recovery of overheads62 Non-manufacturing overheads63viCost assignment in non-manufacturingorganizations63 The indirect cost assignment process65 Summary65 Appendix : Inter-service departmentreallocations67 Key terms and concepts71 Recommended readings72 Key examination points72 Assessment material73 Review questions73 Review problems734 Accounting entries for a job costingsystem80 Materials recording procedure81 Pricing the issues of materials82 Control accounts83 Recording the purchase of raw materials84 Recording the issue of materials87 Accounting procedure for labour costs87 Accounting procedure for manufacturingoverheads89 Non-manufacturing overheads90 Accounting procedures for jobs completed andproducts sold91 costing profit and loss account91 Job-order costing in service organizations91 Interlocking accounting92 Accounting entries for a jit manufacturing system93 Summary95 Key terms and concepts96 Recommended reading97 Key examination points97 Assessment material97 Review questions97 Review problems985 Process costing102

9 Flow of production and costs in a process costingsystem102 Process costing when all output is fullycomplete104 Process costing with ending work in progresspartially complete109 Beginning and ending work in progress ofuncompleted units112 Partially completed output and losses inprocess117 Process costing in service organizations117 Batch/operating costing118 Summary118 Appendix : Losses in process and partiallycompleted units119 Key terms and concepts123 Key examination points123 Assessment material123 Review questions123 Review problems1246 Joint and by-product costing129 Joint products and by-products129 Methods of allocating joint costs131 Irrelevance of joint cost allocations fordecision-making136 Accounting for by-products137 Summary139 Key terms and concepts140 Recommended reading140 Key examination points140 Assessment material140 Review questions141 Review problems1417 Income effects of alternative costaccumulation systems146 External and internal reporting147 Variable costing148 absorption costing150 Variable costing and absorption costing .

10 Acomparison of their impact on profit151 Some arguments in support of variable costing152 Some arguments in support of absorption costing154 Alternative denominator level measures155 Summary157 Appendix : Derivation of the profit function for anabsorption costing system158 Key terms and concepts160 Key examination points160 Assessment material160 Review questions160 Review problems161 PART THREEI nformation fordecision-making1668 Cost volume profit analysis168 Curvilinear cvp relationships169 Linear cvp relationships170 CONTENTSviiA numerical approach to cost volume profitanalysis172 The profit volume ratio173 Relevant range174 Margin of safety174 Constructing the break-even chart174 Alternative presentation of cost volume profitanalysis176 Multi-product cost volume profit analysis178 Operating leverage180 Cost volume profit analysis assumptions183 The impact of information technology184 Separation of semi-variable costs184 Summary185 Key terms and concepts186 Key examination points186 Assessment material187 Review questions187 Review problems1879 Measuring relevant