Cost Accounting | ly “ i i | , ie EE ne ieae Cc t Ac counting TRABITIONS® AND IUNGOVATIGONS 5 ease Timeless Tradition. Priceless Innovation ~» Relevant Pe tke See enn a Reorer Reliable anc Flexible or eee en 24-D2ky i iMC RIT a Part) Overview 1 Chapter 1 Invoducsion to Com amd Managemees Accounting i Gil asiwrss Anweonmers 2 ‘Chapser'2mreduetion 10 Goat Mansgemene Systems Part Z Systems and Methods of Product Gesting 75 Chapter 3 Organizational Gon Flows a Chapeer 4 Acviy-tased Cont Sjsters fo Managerial — 130 Chapoer $ jal Order Costing 172 Chapter 6 Process Coming 218 Chapter 7 Special Production ewes: Lant Units andl Accrtion 20 Chapter 8 tuplememing Quatry Concejas 12 Chapter 9 Cast Allocation for Jinn Prochacts amd Ry-Proskaces HE Chapter 10 Sundaad Coming | 340, Part 3 Planning and Controlling 441 a Chapter 11. Atsveption Vara Casing axel Cast-Vidls-Pret Anadis 442 Chapter 12 Kelevans Costing 405 Chapter 13. The Master Budget 550 Chapter 14 Cupeal Buckling 6) Chapoer 15 Financial Marayemem — $60 Part 4 Beckson Making Chapeer 16 tecoeative leveniory and Proslucton Mosageement Techniques Chapter 17 Emerpag Managers Practewn 42 Chapter 18. Kespomsbiliy Accounting and Transfer Pricing sn Decensraliresd Snganieations THs Part Evaluating Performance aS Ghapuer 19° Mewsuring Sor Run Oryanirational Perfomance Ghapeer 20 Measuring Lang Aeon and Noefinsncal Crganizatienal Pefoonaene sR Chapter 21 Rewsrling Posumnance IE Appendix A: Present Vahue Tables 8.1 Glasary G1 Avior take 1+ Organizational bndlex 1-4 Subject inden 1% Copyrighted Material aearieg Clseceies Intruscinge ABN ANERC tome § Imerodhaction ta Gost Accouating 5 Reliionstip of Financial and Mangement Accounins fo Cot Accouraing Minagement and Cost Accouring Standards [hice for Management Accountant Proteessoma ‘The Global Environment of Masiness 9 Onpinizatioeal Sanaue 1 Core Competencies 19 Nes Bote: Fncing Gove Gompatonett IF Onpinizaioeal Cxmstrains. 2 Onpinizational Cxfture 20 Rraonentsl Comvarainns 22 Responses to Competition 22 en ene: Les Cotte Move? 22 Rule oF Acconnttong ie Oryanixations 4 New ote: Lass Ton teams Adare Profits 27 Riesineg ABN ANHED! Reaik 6 Clsypuer Summary Key Terms 30 Queena Evwercies 32 ce) Beal Check 37 CHAPTER 2 INTRODUCTION TO COST MANAGEMENTS YSTEMS 40 earning Ofgestites Potrxdacing Medowc, Dee th Copyrighted Mate: Introduction to Management Information and Ceateal Siygteme az Defining 4 Cost Management System ( Mow Hote: A Liste Pai how tor 8 (Peters) 8g Gals ae 47 Designing a Cost Management System 4 Onganteasional (eon, Structure, and Cultuce 48 Organizational Mission and Core Compescneics |S Compeckine Ervecament ane Stewegiex 52 Mews Hote: How Oo You Raise Profs without Rating Prices? 52 Mowe Note: Can 3 Dae Sune Among me Gokains? 55 Alements af a Cont Management Systcaa 5S Motivational Elements i Mews Mote: What's in bor Me? 57 News Note: Shest Me the Misney! SS Infcemasional Hlemems 58 Reporting Blemems:: 6) MS tmplementaiioa (1 ‘Rectang Merona, Ine, 62 Chapter ammary 63 Appendie—Cast Maneagewenit System Chascepa! esiges Principles 64 oy Terms 6 Gestians Buerctes aes os Rely Chek 72 PART 2 SYSTEMS AND METHODS OF PRODUCT COSTING 75 CHAPTER a ORGANIZATIONAL COST FLOWS 78 Lesermineg Obeiees 7 niernticing, Wiscionstee Film fag 77 (Cost Classifications wa dee Financial Statements 75 ‘The Comversiom Process 79 Rass Verse Manuicniners/Sanke Companies: BD Mapafactueess venus Service Commpanics th Stiges of Production 5E Cost Reactions bi Changes in Agttvity Separating Mixed Costs 87a Copyrighted Material Components of Fradhact Cost 95) Direct Motenal 90 Binet Labor 9 News Note: Shomng Concer tor Sumgters 1 Overhead News Haw Farms Seo High-Wagn Germany in Mew Light 55 News Note: Stadum Saueere Play Accurmlation and Allocation of Overhomd Why Overhead Cones Ave ASrxcaed 9% Presietcrmined Cwechead ites 9% Accunmulation of Product Costs—Actual Cast System Ut ‘Cost of Goods Manufactured and Sold 12 Accumulation of Product Costs—Normal Cast System 105 Revising Whceswsty Fit & Bly WS ‘apser Summary Bebe Plantwtae renaas Departmental Oeste ‘Applicacon Rates 107 ey Toys SAtuniow Sratepios 110 Demonstnarion Probie 112 Quen Barcus Us Profsows Coe Realty Check 12 ‘CHAPTER 4 ACTIVITY BASED COST SYSTEMS FOR MANAGEMENT 130 earning (Cbgeetives 13 neataciony Carri Cospasranis A Activity Hased Management 142 alue-Aukdoo serie Nor-Valioe- Adil! Activities 18 News Note: Saving Suppliers fr Compete Aetiselage 133 Munifacturing Cycke Piicieney 135, Cast Brive Analysis 16 Actiehy-Hased Costing (1 Mews Mane: Papieg me Postman 2 ‘Teostep Allocation 142 Acwny. fase Costing Hhisraned 14 Short-term and Loe Herm Varihbe Goets 148 NirtouePasest Cine 146 Deiermining Whether ABC ki Appropriate 147 Wah Product Vuresy and Proust Complenky 147 Web Lick of Commenality im Guerbend Casts 146! With Problems. in Curent Cost Allocations 19 Wh Changes in Timers Enviroment 148 Hews Nowe: Measuring Customers 0 Manage Protes 150) (Crithchans.of Activity Mased Costing — 15 Copyrighted Mate: Aerisitigy Carrier Compeotion 152 Chapter Summary 152 icy Terms 155 Scion Semeien 154 reraantrtue Problem 1 Questions 155 Brercies 158 Problems 10 Gases 168 eatiey Chock CHAPTER 5 JOB GADER COSTING 172 earning Obyectioes 372 rivostaciny Aber Kill Marine 178 Methods of Product Costing 174 Conaing Systemes 17H Naluarioe Metbous 17% Mews iota: Pustereg around Bute Got Gita 175 Job Onder Casting System 17% Job Onder Costing: Detaits aed Bocuments 177 Museviad Regist; 17H Jo Gur Cont Steet 179 Breployer Time Sheets 179 Ovehead IRE Mews Noia: High Tech is High Gvothoad Iz Complctinn of Prodsetinn 158 Joh Order Costing and Teshaology 153 Mews Moto: Misgis Maca! Manutacutin Going “Sat for oPAs 1s Job Order Costing [Mustration 1 Job Onder Contig Using Stamard Comte 157 Job Order Comting to Assist Masagers 150 Custven Seite An Hlteation of Jub Chasing nermation 10 Mesnitinns thiatweorks 198 Reon Adee df Marine 192 Chup Seamimary 198 Key Teruas 1984 Sedation Srtien 1M Pemamstearnnr Prem 194 Ouinnenss 197 Beers Hie Proteome 3M tuaws 211 Foaliy Check 214 ‘CHAPTER 6 PROCESS COSTING 218Learning Olpeesices 218 Trareduciny Euvwita Camulles & Art 216 Introduction 1s Process Costing — 22) The Resneraton 220 The Beoewninstor 221 Equivalene Unite of Production — 222 ‘Weighted Average and FIFO Process Costing Meshods 222 FUP Caleubations and Cost Assignments 224 News Mone: Crating is a Tirew-Siap: Process 128 Weoghied Average Method 227 FIFO Methat 289 Process Costing ina Multidepartment Setting 23% Frocess Costing with Standard Cases 255 Hybrid Costing Symtoms 2s ‘Hews Mate: Computer Techniques tor Gar Precuction 29 Revisiting Lumims Candles & Ar 255) CDoapter Semone 2H Aipentii—Abernatice Colcwlarions of Wiighied Anwage sual AIRC? Methods 241 Ker Terme Bi Soluoion Stewie NE Pemansinarias Prodi i5 ‘Questor 206 Everciies 46 Probleme EL Gee 5 ear Check 288 CHAPTER 7 SPECIAL PRODUCTION SSUES: LOST UNITS ANC ACCRETION 260 tearing Obiriues 36) arecdkcing Geir Blvirie Compe 61 Loss of Unite 252 Mowa Nate: Closing wo Curtain a Contaminants 242 Types of Lose Units 253 Accounting for Lose Unite 35 Mhustestions of Lost Unity 266 Shuasian Normal Less Gmiy: Last Ocurs Threnugheaa Fenduction Process (Comings? 2607 Ssawution) 2—Nermal Spredaye Only: Spotlage Disterminest at Final tespoction Poon im Prius Proves (Descrete) 238 Sieuasion $—Nisemll Speilage: Only: Sevag Determined Daring Pooskection Process (Discrete) 20 Seustion-+—-Abnoemal Shrinkage (Contiasnus or Discrete Some Normal Shrinkage ‘Cominmcusd 270 Defective Units 274 Copyrighted Mate: Copyrighted Material « efects/Spoitage tn Jems Ornker Costing ‘Generali Aaticipaicd oc MI fotos 7M Spesilcally Keni with a Panicular ji 278 Abnoetmal Spwilage 277 Accretion 77 ‘Consrolling Quabity ts Minimiee Lost Onits 20 ewes Mone: anaiaing Root Chee DI ews None: Keaging an “Eye” cei Things 282 Reianiag General electric Gownpamy BRE Chgpner Summary — 2 Key Terms 284 Selatan Sraegiecs 2 Pemnaresrations Fem 285 Questions 47 Exercises 28 Pridieas 2H Cue 357 Boatity Check 206 CHAPTER 8 IMELEMENTING QUALITY CONCEPTS 362 Learning Ofywerices 52 rumsahacing Solectron Corporation $05 ‘What is Quality 404 ews Note: Packard Bol io End Cperatans in tha Utes Sites Prockiction View of Quilay) x05 ‘Consumer View of Qualiyy Ki ews Note: Undo-caver iP a Hoi Sy—Hu Chocks 12 Sie WBethops Are Horpleg Benchmarking Total Quality Management 510 ‘The Quilry Sysem 311 Employee Involvement AIL Frockct/Senioe Impeorerment 411 News Note: Suggestions are Powec 312 The Quality Gost 33 Types of Quality Costs 315 Mews Mote: CDC Tacs Used a Aitck huss Pocbiems 417 Measuring the Cost af Quality 317 ‘Chaining Laformation feo Ue Cast Management System 821 ‘Quality as an Oryantzational Culture 422 Mewes Hote: Gating Right Pexivces Potts 125 evteaing Solvcieon Carporarion 4% Chapter Susamany 325 Appenstix—fnersational Quealiy Surnatordy 4266 Key Terms 327 Salunion Stategies 328a Copyrighted Material Demortnation Poser 32H ‘Ghorcions. 328 Eerie 30 Probems AH oity Cocke A5T CHAPTER S COST ALLOCATION FOR JOINT PRODUCTS AND BYPROOUCTS M2 arta Ooctces: 342 ‘Fotrcein Boe RBnd Bf Camiperny 33. Outpuss alfa Joint Process 561 Mana tena: Can You Babuiee n? 45 The Joiat Precess 5 Management Decisions Regarding Rint Peacesses Allocations of Jodat Cant 350 Whiypseal Measire Alston 350) Meneary Measure Allocation 351 ‘Accounting for By-Products and Serap 557 Net Realizable Value Apgwesuch) 387 Reahsed! Valor Appanch 358 By-Products or Serap in Job Order Contin 360) News Noth: Get ined of Tes? 351 Joint Corie in Sorsice and Not-for-Profit ‘Organizations 32 evant Beton Beef Company Hb Chaprer Suinmary 388 Key Terms. 8 Sialufion Snaigges 461 Dewarstention Problem 64 Questions 68 Erercies 306 ee) tae 7 Realty Check 8 CHAPTER STANDARD COSTING 390 esirming Cljectices 38 Inemaicing Commence Bartcorp 381 Development of a Standard Cost Sytem 32 Maveril Stanaacls “383 New Mol: Chat Prowione Maes for Coat Comtrel 33 aber Standards 354 Overhead Seaman 88 Variance Compatachons 387 Material and Lahoe Varlance Computations 4) Muscral Vanaeces Se Poi of Purchase Manesial Variance Model 30 Labor Variances 392 Overhead Varianees 592 Mews Mote: Tea Fised Gam Graberge 373, Variable Overhead 34 Func Overlieadl 395 ‘Alemative Cueshesd Vallance Approaches 306 Standard Cost System Journal Entsies 305 ‘Why Standard Cost Systems Are Used 0 ‘Clerical Effieney 401 Motivation 4OE hamming st Coens HR Nant Mote: Cootoing Doms by Dge —s03 Tcision Making 404 Werformance Eeakuaion 66 ews Hote: Wich Stanci Coatig Speen? 4h Considerations iin Hstablishing Stamdaeds 405 Apprapeistenres 405 amainabliny 05 ‘Changes in Standards Usage £8 Une of foal Stanibondls anid Theeoritead Capcity 406 Adjusting: Sacelands 407 Price Vanance faased an Purchises versus on Usage 40 Decline in Direct Labse 408 Conversion Cast as an tlement in Standard Casting 40% evicting Commerce Harcamp 430) Ghgpter Stir: ALL ApproutieMex ama Yok Varies 412 ey Termes AN Sohn Steger. 7 Dowmomstmarion Problem 20 Questions 42h Brercies 422 Prohems 428 Gas ‘Realty Check 458 PART 3 PLANNING AND CONTROLLING —4r Inuecatacing, Torringgeon Supyity Go 448 An Overview of Alsarption and Variable Costing 443 Copyrighted MaterialAbsorption snd Variable Casting Uhustrations 446 Maven Moai: Using Goce as th Wal inc Dewrmnwee 457 Comparison of the Two Approaches 450 Definition and Uses of CVP Analysis 451 The Break-Pren Point 451 Mews Hote: Managing CP information 452 Mews Hote: Moves 455 Formula Approach ts Breakeven (54 Using Cost-Veslume-Profit Analysis 55 Feed Amount of Prot 456 ‘Varable Amount of Profit 458 The Income Statement Appeascts 460 Incremental Analysis for Shortltun Changes 461 CVP Analysis in x Multiproduct Evironment 403 (Mews Mote: Rationats ler Activity Antec Gostnig Analysis, #4 Margin of Safety 455 Operating Leverage 467 ‘ow Nove: Busting the Heaptaty Trans 4 Underlying Assumptions of CYP Analysis 6 Quality and Costs 470 Sevisiting Torrinpion Supply Co. 21 ‘Chapter Summary 472 Affremdix—Cirgbhic Aporoaches fo Heaberen 479 Kev Terme 477 Sauron Srasegies 478 Demonstration Problen 45) ‘Swesitons 48 Exercises 981 Problems 4 Sisxs 491 Fray Chock 93 CHAPTER 12 RELEVANT COSTING 498 Lacerta Digests 49 Tiivonhachig PriceeaterhiecsCiperd 499) The concept ot Rekevance so Awexiation with Decision 50 Troparance 1 Devision Saher 30) Beaseg on the Future $01 Nese Mabe: Hal Cave Assent SATB Are Saveualy Sick 502 Stemk Cases 502 Relevant Costs for Specific Decisions 54 Copyrighted Mate: Copyrighted Material Ousourcing Becisians 504 Seater Rosurces Decisions 508 Ales Mis Decisions 510 Mews Mata: Tt A BPs of Marketing S11 etre Moti; Gara Pewctons Salty Patnete ce Cat Posted 514 Special Onder Pacisions: 516 Prodoct Line Decisions $18 Mees Note: Firing Comores to ieamane Poot 50 Reeskining PreenterbaueCongers 52 [Caplee Stammary 521 Apgresdi—damear Prgremiminy 522 Key Werms 50 Sedition Serer 528 Demsunstrarion Proflem — 519 Quentome 530 Roercines 931 Problems 530 Cues 8. Rowling Chock — S48 CHAPTER 19 THE MASTER AUOGET 550 Leaning Objections 7 nrc The 400N Company 551 The Budgeting Process 552 ews Mote: Replacing a Wun ard a Payor wit Falsvant Com 388 Mews Mate: The Balunced Soorscand an Oil Baws Soman 554 The aiaster Budget 556 The Master Rudget tiasirated 5) Sales Dane 559 Prmluction Buys 560 Purchases Badges 3 ees Nowe: Primaron Procueton Budgwts Fenemel Bd 362 Dive Lalor Badges. 562 Greta Madt 363 Selling send Adminitrative Huccts 564 Capital ger 568 Cash Bodket 564 Haacciend Petancial Safer Conca Comments 575 essing The HON Company 577 Adapter Sumeuary 578 ‘Appere—The Baudget Mamas 57% Reese 319 Station Stanggace 57 Pemmursnation: Prem $81® Copyrighted Material Questions, $8 vert 5H, Probie S00 Cao 498 Beaiey check 48 (CHAPTER 14 CAPITAL BUDGETING 600 omen Obycnires* 608, nomena Amwezore cimm 5 Use of Cash Flows in Capital Budgeting ‘Cash Flows tiusteared (sts Tine: Lies 8 Panbuce Pesiodd ibd ‘Mawes Nate: Coa! Kinzie Sam: Pass Sen Money 65 Discouating Future Cash Flows 65 Discouated Cash Flow Methods 607 Net Prosi Vika Mbethen! 6417 Prcitatiiny index 66 hema Rite of Heawen 6H8 The Bilect of Deproclation on AfterTax Cath Plows G12 Asmmpdions and Limitztions of Methods 615 ‘The Hrvestment Decision 615, athe Activity Worthy Of dp Knees? 615 ‘Which Awets Cin Boe Use for the Acineiny? 697 (OF the Available Assets for Bach Activity, Which 1s the Best hnecsioerst 617 Nw Mate: Hectrnony: Whit Wor? 617 (Of the “Frew tnvesements for all Wank Artic fn Which Gres Showkd the Company mee? 618. Ranking Multiple Capisal Projects 62) Mubiple Prajects—Uigial Lives, Constant Cash Hows, Unesqual Ievesimenis 62 Muliple Projects—tinequal Lives, Constant bue Unequal Cash Flows, Urweual Investments GEE Muliple Projecte—Hxual Lives, Equal lovestments, Uereaal Cah Flows fk ‘Ranking Projects Under Capital Rationing 625 ‘Compensating for Risk kn Capital Profoct ‘evaluaion 627 Mews Hote: Adrertisng—ow Much le Enough? 628 Jodgmersal Meioxd 68 Rid-Adeed Discount bese Method 628 Senmiory Anais 620 Postinwesoment Audit 651 evesting Amazon coms 652 Chir Stownsary OE Appenaiic t=Time Vahie of Moiey 634 Copyrighted Mate: Afpromiix S—Accomnting Bate of Return 638 ‘Key Terms 636 Soliton Straenies 657 Demonstration Problem — 638 ‘Questions 639 Bverches 610 Problems 68 Comes 5s ‘Rowling Check 656 CHAPTER 15 FINANCIAL MANAGEMENT $60. Learning Objectives S60 “Iraraacig Lu Teraiegies G1 Cost Comal Syrtenis it Coat Vaderstanding 663 Mews Moto: Finding Vatun i Sharing 0s Mews Noto: Fa Tine..Feal Money $86 Cent Conainwent 65 Maw Mota: Wine Raglan tre Cast of Fagus? Cost Avoidance and Restle 68h “er Mews Mote: Accounting ter the Aceoueing Function Gi) ‘Committed Fixed Costs 671 Piseretionary Gants 672 aadgetiong Discretionary Coste 673 Measuring Rerefis fren Discretiinary Cats Controlling Discretionary Costs 677 Comal Using Enginvened Costs a7) Comarct Using the Badger 670 Activity Hased Budgeting, 682 Cash Management tssmes G8 om ‘Whit Variables Influence the Optimal Level of Cash? 634 ‘Wha Are the Soumes of Cash? 684 ‘What Variables Influence the Coast of Carrying Cash Aecesitigg Cuceme Tecbwalagies —686 Chapter Summary 6 Abtrence—Presrame wd Zor Be Burkett Key fers 659 Solution Somangies 650) Bemonsinnlionr Profle at Questions «1 feorcnes 605 Prbloms 628 times 78 Featty Check 706 PART 4 DECISION MAKING 709 CHAPTER 16 INNOVATIVE INVENTORY AND PRODUCTION MANAGEMENT TECHNIQUES 710 or aeLearning Onectwes 790 Inemadicine Abcam Price. TAL lnmportant Sets of Relationships te the Value Chain 7 Buying or Producing and Carrying laventory 715 Purchasing Fechalgues 7) leformatons Fchnodogy ara Purchasing 715 Aches ws Aatieliag andl Eanporrcing Puccaieis 706 Mews Mot: VencorManaged imamcey 716 Ievenivey Cameying Cas THT Linderstanding and Managing Production Activities and Comes Peinhic Iafe Qyeles 717 Jostin-Time Systems 723, Mews Hote: Woaeable Computer Givns ‘Warkors Just in Tine Hep 73 Design for Manufartrabelty 739 Flewbie Manulacourieg Sysicens and Cranyiuner legeanee Msnilscoiieg 235: Theory of Constraints 740) Arcsin Alcramder ol Gn, 748 Osaptcr Sicmmaary 748 Apprenates— BQ wind Relat Kaen 744 Key Terms 747 Soliton Stepies 8 Prememstratons Prony 1984 Question: 75% Bwrcies 75 Problems 756 fen 198 fealty CBee 760 CHAPTER 47 EMERGING MANAGEMENT PRACTICES 762 Eoarning OBjeanes 762 urodtciing CarPoint 763 The Changiag Workplace 761 Theiss Process Neengincering od Downaizing doc Mescnicing 7 iw Hote: In gh Tech Maha. fs ExtorBe Eaten 707 ‘Worklonce Diversny toes Monet Weta Ue Whee Le? 77. Enterprise Resource Panag Systems (ERE) 771 ‘ea Hota: B62 weg ERP 74 Seestegie Aitances 775 Mews Hote: Coll Phone Compatticn Ange pa Nam Sxaimgy 770 Open Rook Management 777 Games People Pay 7H Motivating Empoycen TH Copyrighted Mate: Copyrighted Material ews Mose: Leamirg by Eatnng 71 Innpiconcenatin Challenges 781 Environmental Management Systems 742 Revisiting CarPuint 784 aprer Sunwear 738 Key Teves. Te ‘Quessons 7H Exercises 737 cases 79 Nesniy Check 794 ‘CHAPTER 18, RESPONSIBILITY ACCOUNTING ANC TRANSFER PRICING IN DECENTRALIZED ORGANIZATIONS 796 Levering Odniccines 7% roreaducinge Abbest linbaratarsy 797 Decentralization 7 Advariinges of Deconiraticnion 709 Disadvantages of Decesaraienion B00 Rexpeineibilty Acconentiog Sysicnm HI Haske Types of Responsibility Centers 8 Cost Centers 80k fRevenine Germers i Profit Geniers 8 Investment Cereers 810, Pacedo and Real Microprofit Centers S11 Service Department Cost Allocation 6 Reasons for Serve Depamonieen Cost Allicatinm SEZ Allncation: Bases 814 Methods of Allexacing Service Depanmini Gosis S14 Service Department Cost Allocation tlustration —I6 Direct Meshod Allocation 17 Step Method allocation S18 Algebraic Meshod Allecanon 819 ‘Transfer Pricing 825 Comp ase Traneter Prices RDI ‘Markea Bases! Transfer Prices a2? ‘Negcristed Tnsler Prices 827 ‘Daal Pricing SO esting a Transter Pricing System REE (Mews Mate: Dual Prong Pd ‘Transfer Prices for Service Departments 55 Setting Service Tunafer Prices B90 Adwantages and Disadvantages of Service Transfer Prices £40 Advantages of Service Transler Prices 88 Disadvantages of Sevvice Trundle Pris -Aht ‘Teanafer Prices in Muttnational Settings 552 own Neto: Gut the Trantor Pree Fight! 435fa Copyrighted Material Rectuting Aes? Daboniories 884 ‘Chapier Summary 834 Key Terms 8% Solution Sieategies 43 Domicaeranion Problem — #37 Quenois BH Buri 53 Prolikins 44 ass ae ‘Rosy Check 952 ARTS EVALUATING PERFORMANCE 888 cKAPTER 19 MEASURING SHORT AUN GRTANIZATIONAL FEREORMUNCE 658 earning Objects 858 auroctucing Wincor 87 ‘Organizational Roles of Performance Measures 8% Information for Evaluating Capital Market Performance 89 Information fe Uvabuating Organizational Learang nd Change Hk Newt Note; The Dotto Skie of Sears 851 Informacion foe Uvabuanieyg Prohuce/Subunit Performance 2 [Designing a System of Performance Measurement 562 Sebecing Perfomance Measures 82 Multiple Performance Mexsmes B63 Awareness of and Paricipation in Perfomance Measures Mews Note: Puting Balance iia the Scorecard Bi Apprcpriate Tools for Rerformance 865 eed foe Feedback 866 ‘Truditional Shorter Pinancial Performance Measures 8 Divisienal Profits Bi Cah fom sie Fewam oa Invesiment 80 Resichal focome #74 concent Value Added 575 Limiasions of Return on Investment, Residsal Income: srl Foonomi: Valor Added 876) ‘Mews Note: Bet, fhe Bird's Hos the Had 77 Revisiting Wachouia 57S chepter Simiiary 78 Fey Terme 57% Solution Strategies 879 Demoteimanios Probes BH ‘Questions 51 ‘Eeovcioes BAZ Copyrighted Mate: JM BAE) NOWFINANE! ORGANATICINAL PERFORMANCE 890 Uesirtng Obgections SIS froxhicng WMC Lite? 9 Vision and Mission Statements 99) Hews Blots: Wihot a Vision Seaterars Ones Sit) Selecion af Nanfinancl Measures 04 ‘ew Rete: What Grace Okt | Make? us ‘ews Mote: Measure Wha You Want ia Manage S$ Establishment of Comparison Ihises 505 Use of Mulaple Measures 907 Usling a Blalanced Scorecard for Measuriout Performance 911 ‘ews Mote: Balancing me Gry 916 saves WMC Lowe 918 hyper Summary — O18 Appernite Io Develaplng Compréwusice Fogormance ticasors 949 Appenelte 2 Perfireiimce Measurement Ass dd Cot Drowns 920 ‘ey Terms 920 Solano Sraegies 922 Derncestration Problem — 922 Questions 923 Pwereties 924 Problems 935 Reaticy Check 927 CHABTER 21 AEWSREING PERFORMANCE S79 Lesreing Obywcrins 908 erent Morita Hath Sets 039 Compensation Strategy 950 ‘News tone: Shouid GEG Help Sat Thee Cum Pay? O58Pay-for-Performance Plans 982 ‘ews Mote: Hew Fashion Tren Europe: Waratle Pay 932 ‘Cherelaion with Crganizatioeul Goals 998 Appropriate Tae Horton 983 Subunit Mission 958) ‘Camsidercion of Bnployce Age 8% Balawce Geoup and tndivichal enetes O85 Maragememt Ownership 995 Considerations in Seming Performance Measures 95 Bepree of Conard over Peeformance Quiet 96 Nees Mite: Paying the Bead of Dreriors 98 Racentves Retaive to Onganizational Level 987 Performance Flins and Feedback 857 Worker Compensation 258 Worle Pit and Pertoemance Links 955 Promoting Overall Suevess 939 Nonfinancial Incemives 48 Managerial Compensation 910) Notfor Profit and Gevernmental Compensation 942 ‘Tax Implications of Compensation Ekements Fringr Hens 993 Defoned Compensizon Si Copyrighted Mate: Copyrighted Material Fthical Considerations of Cenapensation +4 Ongicarstional Gowemance 94S Bole ot Capital Sarees 9S Compensanion Daomnwials 946 Meirg Note Wins Wold Puts Tink? 947 Global Compensation 993. Revesting Merit Hiab Sestoms 934 Chapter Shimomary 950 Ker Terms 951 Souris Siranggies 951 Shoe O52 Exercinr 954 Gs 87 Baily Check 950waldvVHo Introduction to Cost and Management Accounting in a Global Business Environment LEARNING OBJECTIVES After completing this chapter, you should be able to answer the following questions: o How do financial and management accounting relate to each other? How does cost accounting relate to financial and management accounting? What is the role of a code of ethics in guiding the behaviors of an organization's global workforce? What factors have influenced the globalization of businesses and why have these factors been significant? What are the primary factors and constraints that influence an organization's strategy and why are these factors important? El How does an organization’s competitive environment impact its strategy and how might an organization respond to competition? @ How does the accounting function impact an organization's ability to successfully achieve its strategic goals and objectives? Why is a company segment's mission affected by product life cycle? @ What is the value chain and why is it important in managing a business?INTRODUCING De a CS | he Netherlands-based bank, ABN AMRO, was formed in 1990 when Algemene Bank Nederland merged with Amsterdam-Rotterdam Bank. Following the merger, ABN AMRO has established itself as a global bank with operations in 76 countries and territories including the United States, where the bank has a 16% share of the Midwest market. ABN AMRO's global expansion was driven initially by mergers but more recently by innovative web- based delivery of products and services. By traditional measures (such as its $508 billion in as- sets and its capital position), ABN AMRO is the largest bank in Holland, the fourth largest in Europe, and the eighth largest in the world. ABN AMRO's core lending business is solid. Over half of ABN AMRO’s revenues come from Dutch clients—a very stable source of business that includes such companies as Royal Dutch Shell, Philips http://www.abnamro.com ABN AMRO formulated an identity statement in 1992 to reflect its corporate aspirations: “ABN AMRO Bank is a long-established, solid, multi-faceted bank of international reputation and standing. We will strive to fulfil the bank's ambition in being a frontrunner in value-added banking, both on a local and worldwide level. ...” The corporate values statement was formalized in 1997, although the values have been important priorities since the bank was established in the 1800s. The four values forming the basis of the bank's activities are integrity, teamwork, respect, and professionalism. Bank managers believe that the values need to be formalized even though they are and should be self-evident. The formalization provides external parties criteria by which the bank can be assessed. ABN AMRO perceives its corporate identity and values as the underlying tenets of the organization. Electronics, and Unilever. ‘Source: wwwrabnamro.comiprofile; Chis Costanzo, “ABN AMRO Says Web Wil Anchor is Expansion,” American Banker (December 8, 1989), p. 16 ABN AMRO is successfully pursuing a corporate identity as a “bank of international reputation and standing.” ABN AMRO was ranked as the filth largest commercial and savings bank and the seventy-third largest corporation in the 1999 Fortune Global 500. The corporation (with its foreign subsidiaries and affiliates) is com- prised of over 3,500 branches and offices in 76 countries and territories across five continents, Although international trade was once confined to extremely large com porations such as ABN AMRO, the explosion of World Wide Web usage has en- abled any business with the right infrastructure capabilities and the necessary funds for Web site development to market its products and services around the world. Organizations operating globally face three primary challenges. First, managers must understand factors influencing international business markets so they can iden- tify locations in which the company has the strengths and desire to compete. Se ‘ond, managers must devise a long-term plan to achieve organizational goals. Third, the company must devise information systems that keep operations consistent with its plans and goals. This chapter introduces cost accounting and describes the global environment of business, international market structures, trade agreements, e-commerce, and legal and ethical considerations, It addresses the importance of strategic planning and links strategy creation and implementation to the accounting information system. The chapter discussion applies equally well to large and small profit-seeking businesses, and most discussion is appropriate for not-for-profit and governmental entities. INTRODUCTION TO COST ACCOUNTING To manage a diverse, international banking organization, ABN AMRO’s leaders need monetary and nonmonetary information that helps them to analyze and solve