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MANAGEMENT AND
COST ACCOUNTING
F01 Management and Cost Accounting 36029.indd 1 08/02/2023 08:04

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MANAGEMENT AND
COST ACCOUNTING
Eighth Edition
Alnoor Bhimani
London School of Economics and Political Science
Charles T. Horngren
Stanford University
Srikant M. Datar
Harvard University
Madhav V. Rajan
University of Chicago
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Original edition, entitled Cost Accounting, published by Prentice-Hall Inc., Upper Saddle River, New Jersey, USA © 1999
by Prentice-Hall, Inc.
First edition published in Great Britain under the Prentice-Hall Europe imprint in 1999 (print)
Second edition published in 2002 (print)
Third edition published 2005 (print)
Fourth edition published 2008 (print)
Fifth edition published in 2012 (print and electronic)
Sixth edition published in 2015 (print and electronic)
Seventh edition published in 2019 (print and electronic)
Eighth edition published 2023 (print and electronic)
© Prentice Hall Europe 1999 (print)
© Pearson Education Limited 2002, 2005, 2008 (print)
© Pearson Education Limited 2012, 2015, 2019, 2023 (print and electronic)
The rights of Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar and Madhav V. Rajan to be identified as authors of this
work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
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ISBN: 978-1-292-43602-9 (print)
978-1-292-43603-6 (PDF)
978-1-292-43604-3 (ePub)
British Library Cataloguing-in-Publication Data

A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data

Names: Bhimani, Alnoor, author. | Horngren, Charles T., 1926-2011. | Datar,
Srikant M., author.
Title: Management and cost accounting / Alnoor Bhimani, London School of
Economics and Political Science, Charles T. Horngren, Stanford
University, Srikant M. Datar, Harvard University, Madhav V. Rajan,
University of Chicago.
Description: Eighth Edition. | Hoboken, NJ : Pearson, 2023. | Revised
edition of the authors’ Management and cost accounting, [2018] |
Identifiers: LCCN 2022054700 (print) | LCCN 2022054701 (ebook) | ISBN
9781292436029 (paperback) | ISBN 9781292436036 (ebook) | ISBN
9781292436043 (epub)
Subjects: LCSH: Cost accounting. | Managerial accounting.
Classification: LCC HF5686.C8 B464 2023 (print) | LCC HF5686.C8 (ebook) |
DDC 657/.42--dc23/eng/20221110
LC record available at https://lccn.loc.gov/2022054700
LC ebook record available at https://lccn.loc.gov/2022054701
10 9 8 7 6 5 4 3 2 1
27 26 25 24 23
Cover design: Michelle Morgan, At The Pop, Ltd.
Cover image: Johner Images / Alamy Stock Photo
Print edition typeset in 10/12 pt Sabon MT Pro by Straive
Print edition printed and bound in Slovakia by Neografia
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION

In memory of Charles T. Horngren 1926–2011
Chuck Horngren revolutionised cost and management accounting. He loved
new ideas and introduced many new concepts. He had the unique gift of
explaining these concepts in simple and creative ways. He epitomised
excellence and never tired of details, whether it was finding exactly the right
word or working and reworking assignment materials.
He combined his great intellect with genuine humility and warmth and a
human touch that inspired others to do their best. He taught us many lessons
about life through his amazing discipline, his ability to make everyone feel
welcome, and his love of family.
It was a great privilege, pleasure, and honour to have known Chuck Horngren.
Few individuals will have the enormous influence that Chuck had on the
accounting profession. Fewer still will be able to do it with the class and style
that was his hallmark. He was unique, special and amazing in many, many
ways and, at once, a role model, teacher, mentor and friend.
He is deeply missed.
Alnoor Bhimani
London School of Economics and Political Science
Srikant M. Datar
Harvard University
Madhav V. Rajan
University of Chicago
AB: For all women who bring balance to the world

SD: Swati, Radhika, Gayatri, Sidharth
MVR: Gayathri, Sanjana, Anupama

BRIEF CONTENTS
Contents ix
Guide to the case studies xvi
Preface xix
Authors’ acknowledgements xxii
PART I Management and cost accounting fundamentals
1 The manager and management accounting 2

2 An introduction to cost terms and purposes 33
3 Job costing 59
4 Process costing 90
5 Cost allocation 128
6 Cost allocation: joint-cost situations 157
7 Income effects of alternative stock-costing methods 183
Part I Case study problems 212
PART II Accounting information for decision making
8 Cost–volume–profit analysis 220

9 Determining how costs behave 247
10 Relevant information for decision making 287
11 Activity-based costing 318
12 Pricing issues and customer profitability analysis 351
13 Capital investment decisions 387
Part II Case study problems 417
PART III Planning and budgetary control systems
14 Motivation, budgets and responsibility accounting 422

15 Flexible budgets, variances and management control: I 459
16 Flexible budgets, variances and management control: II 490
17 Measuring yield, mix and quantity effects 524
Part III Case study problems 549

viii Brief contents
PART IV Management control systems and performance issues
18 Control systems and transfer pricing 556

19 Control systems and performance measurement 585
Part IV Case study problems 615
PART V Strategy, quality, time and emerging issues
20 Strategy, the balanced scorecard and quality 622

21 Accounting, time and efficiency 660
22 Emerging issues: digitalisation and sustainability 702
Part V Case study problems 725
Appendix A: Solutions to selected exercises 741

Glossary 807
Index 820
Publisher’s acknowledgements 831
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CONTENTS
Guide to the case studies xvi The many meanings of product costs 48
Preface xix Classification of costs 48
Authors’ acknowledgements xxii Summary 49
References 50
Assessment material 51
PART I
CHAPTER 3
Management and cost accounting Job costing 59
fundamentals The building block concept of costing systems 60
Job-costing and process-costing systems 60
Job costing in service organisations using actual
costing 62
CHAPTER 1 Normal costing 64
The manager and management Job costing in manufacturing 66
accounting 2 An illustration of a job-costing system in
manufacturing 68
Management accounting, financial accounting and
Budgeted indirect costs and end-of-period
cost accounting 3
adjustments 76
Accounting systems and management controls 8
Costs, benefits and context 12
• Concepts in action: Better job costing through
big data and data analytics 77
Value creation 13
Summary 80
• Concepts in action: How the Internet of Things, References 81
artificial intelligence and big data make the
unknown visible at Rolls-Royce 17
Digitalisation and management accounting 18
Summary 21 CHAPTER 4
Appendix: Professional ethics 22 Process costing 90
References and further reading 23
Assessment material 25 Illustrating process costing 91
Case 1: Process costing with no opening or closing
work-in-progress stock 92
CHAPTER 2 Case 2: Process costing with no opening but a closing
An introduction to cost terms work-in-progress stock 93
and purposes 33 Case 3: Process costing with both some opening and
some closing work-in-progress stock 97
Costs in general 34 Weighted-average method 98
Direct costs and indirect costs 35 First-in, first-out method 101
Cost drivers and cost management 36 Comparison of weighted-average and
Cost behaviour patterns: variable costs and FIFO methods 104
fixed costs 37 Standard-costing method of process costing 105
Total costs and unit costs 40 Transferred-in costs in process costing 109
• Concepts in action: Reducing fixed costs and • Concepts in action: Hybrid costing for Adidas
managing profit growth at Porsche 41 customised 3D printed shoes 110
Financial statements, business sectors and the Hybrid-costing systems 115
recognition of costs 43 Summary 116

x Contents
Appendix: Operation costing 117 Effect on financial statements 198

Reference 120 Summary 200
Assessment material 121 Appendix: Breakeven points in variable and
absorption costing 200
CHAPTER 5
Cost allocation 128
Purposes of cost allocation 129 PART I Case study problems 212

Cost allocation and costing systems 130 101 The European Savings Bank 212
Indirect-cost pools and cost allocation 131 102 The ethical dilemma at Northlake 214
Allocating costs from one department to another 133 103 Electronic Boards plc 216
Allocating costs of support departments 137
Support department cost-allocation methods 137
Allocating common costs 143
Cost-allocation bases and cost hierarchies 144
PART II
Is the product-costing system broken? 146
Accounting information for decision
Summary 146
making
CHAPTER 6 CHAPTER 8
Cost allocation: joint-cost situations 157 Cost–volume–profit analysis 220
Meaning of joint products and by-products terms 158 Revenue drivers and cost drivers 221
Why allocate joint costs? 159 CVP assumptions 222
Approaches to allocating joint costs 160 The breakeven point 222
• Concepts in action: Big Data joint products and The PV graph 226
by-products create new business opportunities 162 Impact of income taxes 227
• Concepts in action: Chicken processing: costing Sensitivity analysis and uncertainty 228
on the disassembly line 168
• Concepts in action: Can cost–volume–profit
No allocation of joint costs 168 analysis help Whole Foods escape the ‘whole
Irrelevance of joint costs for decision making 169 paycheck’ trap? 229
Accounting for by-products 171 Cost planning and CVP 230
Summary 174 Effects of revenue mix on profit 232
References and further reading 174 Not-for-profit organisations and CVP 233
Assessment material 175 Contribution margin and gross margin 233
Summary 235
CHAPTER 7 Appendix: Decision models and uncertainty 235
Reference and further reading 238
Income effects of alternative
stock-costing methods 183
PART A: Stock-costing methods 184 CHAPTER 9

Variable costing and absorption costing 184 Determining how costs behave 247
Comparison of variable costing and absorption
costing 188 General issues in estimating cost functions 248
Performance measures and absorption costing 194 The cause-and-effect criterion in choosing
• Concepts in action: Can ESPN avoid the cost drivers 251
cord-cutting ‘death spiral’? 196 Cost estimation approaches 251
PART B: Denominator-level concepts and Steps in estimating a cost function 253
absorption costing 196 Evaluating and choosing cost drivers 258
Alternative denominator-level concepts 196 Cost drivers and activity-based costing 260

Contents xi
• Concepts in action: Activity-based costing ABC and department-costing systems 336

and cost estimation 260 Implementing ABC systems 337
Big data, machine learning and cost analysis 261 • Concepts in action: Do banks provide ‘free’
Non-linearity and cost functions 262 services? 338
Learning curves and non-linear cost functions 263 ABC and the organisational context 339
• Concepts in action: Learning curves and the Summary 341
falling price of renewable energy 267 References and further reading 341
Summary 268 Assessment material 342
Appendix: Regression analysis 269
References and further reading 278 CHAPTER 12
Assessment material 279 Pricing issues and customer
profitability analysis 351
CHAPTER 10
Major influences on pricing 352
Relevant information for decision Costing and pricing for the short run 353
making 287 Costing and pricing for the long run 355
Information and the decision process 288 • Concepts in action: Pricing and digitalisation
at H&M 358
The concept of relevance 289
Target costing for target pricing 358
An illustration of relevance: choosing output
levels 291 Achieving the target cost per unit for Provalue 362
Outsourcing and make-or-buy decisions 293 Cost-plus pricing 364
• Concepts in action: Costs, outsourcing • Concepts in action: Target pricing for the Indian
and politics 294 car market 364
Opportunity costs, outsourcing and capacity Life-cycle product budgeting and costing 367
constraints 297 Customer profitability analysis 371
• Concepts in action: Outsourcing versus automation Customer revenues 371
at Nike 300 Customer costs 372
Product-mix decisions under capacity constraints 301 Customer profitability profiles 374
• Concepts in action: Slashing cost at LEGO 302 • Concepts in action: Zara uses target pricing to
Customer profitability and relevant costs 302 become the world’s largest fashion retailer 377
Irrelevance of past costs and equipment-replacement Summary 377
decisions 305 References and further reading 378
Summary 307 Assessment material 379
Appendix: Linear programming 307
References and further reading 311 CHAPTER 13
Assessment material 312 Capital investment decisions 387
Stages of capital budgeting 388

CHAPTER 11
Activity-based costing 318
• Concepts in action: Capital budgeting for
sustainability at Johnson & Johnson 391
Undercosting and overcosting 319 Discounted cash flow methods 392
Costing system at Plastim Limited 320 Sensitivity analysis 397
Refining a costing system 323 Relevant cash flows in discounted cash
flow analysis 398
Activity-based costing systems 324
Payback method 400
Implementing activity-based costing 328
Accounting rate of return method 402
Comparing alternative costing systems 333
Managing the project 403
• Concepts in action: Mayo Clinic uses time-driven Income tax factors 404
activity-based costing to reduce costs and improve
care 334 Capital budgeting and inflation 405
From activity-based costing to activity-based Summary 406
management 334 References and further reading 407

xii Contents
PART II Case study problems 417 An illustration of journal entries using standard costs 477
201 Permaclean Products plc 417 Benchmarking and variance analysis 478
Summary 480
PART III
CHAPTER 16
Planning and budgetary control
Flexible budgets, variances
systems
and management control: II 490
Planning of variable- and fixed-overhead costs 491

Developing budgeted variable-overhead rates 492
CHAPTER 14 Variable-overhead cost variances 493
Motivation, budgets and responsibility Developing budgeted fixed-overhead rates 497
accounting 422 Fixed-overhead cost variances 498
Production-volume variance 498
Major features of budgets 423
Integrated analysis of overhead cost variances 500
Roles of budgets 424
Different purposes of manufacturing overhead cost
Types of budget 428
analysis 501
Financial planning models 437
Journal entries for overhead costs and variances 503
• Concepts in action: P.F. Chang’s and internet-based • Concepts in action: Variance analysis and
budgeting 438
standard costing: helping Sandoz manage overhead
Kaizen budgeting 438 costs 505
Activity-based budgeting 438 Engineered, discretionary and infrastructure costs 505
Budgeting and responsibility accounting 440 Financial and non-financial performance measures 506
Responsibility and controllability 441 Actual, normal and standard costing 507
Summary 443 Activity-based costing and variance analysis 510
Appendix: The cash budget 443 Summary 514
References and further reading 449 Reference and further reading 515
Assessment material 450 Assessment material 516
CHAPTER 15 CHAPTER 17
Flexible budgets, variances and Measuring yield, mix and quantity
management control: I 459
effects 524
Static budgets and flexible budgets 460
Input variances 525
Static-budget variances 461
Direct materials yield and mix variances 525
Steps in developing a flexible budget 462
Direct manufacturing labour yield and mix variances 530
Flexible-budget variances and sales-volume
Revenue and sales variances 532
variances 463
Variance analysis for multiple products 533
Price variances and efficiency variances for inputs 465
Summary 540
Impact of stocks 471
• Concepts in action: Starbucks maintains a focus on
direct-cost variances 471
Management uses of variances 472
• Concepts in action: Chipotle’s required focus PART III Case study problems 549
on material cost variances 474 301 Zeros plc 549
Flexible budgeting and activity-based costing 475 302 Instrumental Ltd 551

Contents xiii
Summary 605
PART IV References and further reading 605
Management control systems and
performance issues
PART IV Case study problems 615
401 BBR plc 615
CHAPTER 18
Control systems and transfer pricing 556
PART V
Management control systems 557
Evaluating management control systems 557 Strategy, quality, time and emerging
Organisational structure and decentralisation 558 issues
Choices about responsibility centres 561
Transfer pricing 561
An illustration of transfer pricing 562
Market-based transfer prices 565 CHAPTER 20
Cost-based transfer prices 566 Strategy, the balanced scorecard
Negotiated transfer prices 569
and quality 622
A general guideline for transfer-pricing situations 569
Transfer pricing and tax considerations 570 Strategy and strategic management accounting 623
• Concepts in action: The European Commission • Concepts in action: Strategic renewal at Puma 625
thinks Apple’s transfer price arrangements are The balanced scorecard 626
unfair 572 Quality improvement and reengineering at
Summary 572 Chipset 626
References and further reading 573 The four perspectives of the balanced scorecard 627
Assessment material 574 Aligning the balanced scorecard to strategy 628
Features of a good balanced scorecard 630
CHAPTER 19 Evaluating the success of a strategy 632
Control systems and performance • Concepts in action: Barclays turns to the balanced
scorecard 632
measurement 585
Costs of quality under the balanced scorecard 635
Financial and non-financial performance The internal-business-process perspective: analysing
measures 586 quality problems 640
Different performance measures 587 The learning-and-growth perspective: quality
• Concepts in action: Running pharmas can prove improvements 642
challenging and CEO compensation can fall! 593 • Concepts in action: Does Mercedes really stand for
Alternative definitions of investment 593 quality? What about Toyota? 645
Alternative performance measures 594 Summary 646
Choosing targeted levels of performance and References and further reading 647
timing of feedback 597 Assessment material 649
Distinction between managers and organisational
units 598 CHAPTER 21
• Concepts in action: Performance measurement
Accounting, time and efficiency 660
at Unilever 600
Performance measures at the individual activity Just-in-time systems 661
level 601 Major features of JIT production systems 661
Environmental and ethical responsibilities 602 • Concepts in action: Just-in-time live-concert
Strategy and levers of control 603 recordings 663

xiv Contents
Enterprise resource planning (ERP) systems 665 The digitalised enterprise control loop 708
• Concepts in action: How big data and machine Management accounting and
learning helps with stock management 666 sustainability 709
Backflush costing 666 Context and communication remain key 715
Managing goods for sale in retail organisations 674 • Concepts in action: Corporates that prioritise
Challenges in estimating stock-related costs sustainability 715
and their effects 679 Alternative definitions of investment 716
Just-in-time purchasing 681 Summary 717
Stock costs and their management in manufacturing References and further reading 717
organisations 684 Assessment material 719
Theory of constraints 686
Balanced scorecards and time-based measures 688 PART V Case study problems 725
Summary 689 501 High-Tech Limited 725
References and further reading 690 502 Tanner Pharmaceuticals and the price of a
Assessment material 691 new drug 732
503 Osram 736
CHAPTER 22
Emerging issues: digitalisation and Appendix A: Solutions to selected
sustainability 702 exercises 741
Glossary 807
Digitalisation is changing data 703 Index 820
Digital technologies are changing accounting 705 Publisher’s acknowledgements 831

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GUIDE TO THE CASE STUDIES
Profit/loss measurement
Behaviour/organisation
Transfer pricing system

Manufacturing/service
Country/area of origin
Activity-based costing
Management control
Environmental issues
Market assessment/
competitor analysis
Balanced scorecard
Tableau de bord
Costing system
Strategic issues
measurement
Case number
Ethical issues
Performance
Case details
Profitability
Short/long
Budgeting
Cash flow
Variance
system
Pricing
factors
ROI
PART 1
The European Savings Bank:
Europe
short
Legal and ethical issues

101
SS
●
involved in software piracy.
The ethical dilemma at
Canada
Northlake: How far does the
mid
notion of ‘different costs for

●
●
102
different purposes’ extend?

Electronic Boards plc: Design
of costing systems for a firm
short
N/A
operating in a high-tech
M
●
●
environment. Simplistic vs
103
complex costing.
PART II
Permaclean Products
plc: Analysis of costs and
price-demand information
mid
UK
M
●
using past sales data to make
201
decisions on product pricing.

PART III
Zeros plc: Use of ROI
to measure divisional
performance. Use of
mid
UK
M
●
costing systems to produce ●

301
meaningful profit statements.

Instrumental Ltd: Analysis
of budgeted vs actual
performance for different
mid
UK
M
organisational functions.
●
Considers strategic vs
302
operational issues.

Guide to the case studies xvii
Profit/loss measurement
Behaviour/organisation
Transfer pricing system

Manufacturing/service
Country/area of origin
Activity-based costing
Management control
Environmental issues
Market assessment/
competitor analysis
Balanced scorecard
Tableau de bord
Costing system
Strategic issues
measurement
Case number
Ethical issues
Performance
Case details
Profitability
Short/long
Budgeting
Cash flow
Variance
system
Pricing
factors
ROI
PART IV
BBR plc: Transfer-pricing
problem where divisional
mid
UK
M
interests are pitted against
●
401
total corporate profitability.

PART V
High-Tech Ltd: Importance of
UK/France
strategy and cost allocation
M & SS
long
within the IT manufacturing

●
●
industry. Considers just-in-
501
time inventory systems.

Tanner Pharmaceuticals
and the price of a new drug:
mid/long
USA
Issues of pharmaceutical
●
●
drug prices in the light of
502
competitive strategy.
Osram: Analysis of potential
mid/long
savings made by newer, more
Germany
efficient consumables as
M
●
●
opposed to traditionally used
503
ones.

PREFACE
Accounting influences our lives. Whether or not one uses accounting information, accounting
alters our social, economic and physical environment. And of course, it impacts organisations
and altering what we do and the decisions we make. Corporate action regarding new product
developments, pricing strategy, staff recruitment and salary levels are usually directly influenced
by accounting information. At times, accounting motivates certain types of managerial
behaviours and discourages others. This book is about understanding the preparation and use of
management and cost accounting information, taking account of how it influences decisions.
But accounting is not a pre-given in form or process and in this sense accounting is also
continuously being reshaped by its context. The book therefore also extensively discusses how
different factors alter accounting techniques and processes.
As we’ll see in Chapter 1, management accounting is concerned with providing managers with
financial and other types of information so they can pursue diverse goals. Cost accounting, which
is sometimes used interchangeably with management accounting, is more concerned with
information on the acquisition and consumption of resources. We want to address issues relating
to the design, use and role of accounting information in the management of organisational
activities. We will do this by balancing technical detail with enterprise insight so we can focus on
how to best support management action.
Management and cost accounting is a dynamic discipline which differs across firms, nations,
industrial settings and management functions. It entails the application of different techniques,
which must constantly adapt given the fast pace of changes facing enterprises today. Consequently,
the book covers a comprehensive suite of techniques and areas including job costing and process
costing, cost–volume–profit relationships, capital investment decisions, budgetary control and
responsibility accounting. It looks also at quality costing, throughput issues, non-financial
performance measures and strategic analysis. But we are especially concerned with the forces
that impact these management accounting practices right now. So all these techniques are
discussed in the context of changes witnessed by organisations on an ongoing basis. We argue
that the most significant force affecting firms today is technological change and innovation.
Digital technologies are rapidly impacting business models and organisational processes and
they are doing so in a deep and extensive way. This new edition of the book is thus packed with
coverage on how organisations are being digitally transformed and what this implies for
management accountants. We look at numerous illustrations of companies using ‘big data’ and
analytics as they draw insights from digitised data. We consider how the ‘Internet of Things’,
robotics, artificial intelligence and other digital innovations are impacting management
accounting information deployment. Aside from the digitalisation of enterprises, we consider
also the relevance of sustainability and environmental concerns which influence how firms deploy
management accounting information.
New to the 8th edition

To ensure currency and coverage of modern applications of management accounting, we have
added new material in this edition. Environmental issues have been of concern to organisations
for decades but the past few years have demonstrated much more active engagement by business
in this light. We have therefore introduced across several chapters, discussions and illustrations
of companies which have extensively invested in sustainability initiatives and indicators of their
performance in this domain. Chapter 1 discusses why this has become such a priority for many

xx Preface
enterprises and subsequent chapters provide numerous illustrations of how companies approach
sustainability factors affecting their pursuits and activities. Chapter 22 in particular reflects the
significance of sustainability issues tied to management accounting with a new title for the whole
chapter and wide-ranging content revisions and new coverage areas. Technological changes and
digitalisation have likewise evolved and altered organisational functions and processes in the very
recent past. The rise of increasingly advanced digital applications such as blockchain systems,
the Internet of Things, smart contracts and artificial intelligence are altering not only what
management accountants must report on but the very mechanisms of reporting and the growing
divisions between machine versus human decision making. This is reshaping the work and roles
played by management accounting in organisations. The impact of digital technologies is fast
transforming the field and most chapters discuss aspects of the nature and forms of such changes.
From Chapter 1 through, especially to Chapter 22, we identify how the digital technologies are
altering the substance of management accounting and the relevance of conventional as well as
new accounting and control tools deployed by firms.
Also included in this edition are novel illustrations and survey results of management accounting
mechanisms and corporate concerns. We have tried to ensure the inclusion of company-relevant
examples and illustrations of changing management and cost accounting practices. While general
aspects of different topics and issues are extensively covered, we also discuss situational and
organisational adaptations of generic techniques to ensure that you understand the applicability
of management accounting approaches. To achieve this, we have numerous case studies used by
many business schools across the globe. We ensure that the reality of enterprise management is
reflected in the book and so, rather than accord a separate chapter to consider strategic,
organisational and behavioural aspects of management accounting, we integrate this throughout
chapters in the book. We further cover global themes that are of relevance to managers in modern
enterprises in terms of corporate responsibility and ethical issues.
We draw comfort in observing that other management accounting writers try to use our
approach of practical examples, case studies and coverage of research findings, while also sharing
our preference for the format and structure adopted here. We sharpen this by providing the very
latest in corporate examples, survey findings and case studies. This ensures that you gain
familiarity with concepts that are of relevance and concern to enterprises today.
Deciding on the sequence of chapters in a management and cost accounting textbook that
spans introductory through to relatively detailed analysis of material is a challenge we have met
successfully. Professors tend to have a preferred way of organising their course material. The five-
part structure of this book and the sequencing of chapters have been designed to facilitate
flexibility and diversity in the teaching of different topic areas and the use of the text for a range
of courses and levels. An outline of the coverage and component chapters of each part is given in
the part openers.
Assessment material
This book includes a high quantity and broad range of assessment material to further facilitate
the use of the text on a diverse range of courses:
● Review questions: These short questions encourage students to review and/or critically discuss
their understanding of the main topics and issues covered in each chapter, either individually
or in a group.
● Exercises: These comprehensive questions are graded and grouped by their level of difficulty:
basic, intermediate and advanced. Each question is preceded by a note of its topic coverage
and an indication of the time it should take to complete. Where appropriate, the exercises
include questions taken from examinations of several professional accountancy bodies. Fully
worked solutions to a selection of exercises in each chapter (identified by an asterisk) are
provided in Appendix A.

Preface xxi
Case study problems

At the end of each of the five parts are problem-based illustrative cases. Each is more substantive
and typically more demanding than the end-of-chapter exercises, integrating topics from several
chapters in each of the core parts of the text, allowing you to apply your understanding of
accounting concepts, issues and techniques within a broader organisational context, and to
develop your critical thinking and analytical skills. The questions which follow the case material
include some aspects suitable for group discussion/assignment.
Glossary
This comprises an alphabetical listing of all the key terms, including a concise definition, so
allowing revision of all the key concepts and techniques in the text.
Academic supplements
Academics and lecturers who adopt this text are provided with a range of additional materials to
assist in the preparation and delivery of courses. These include:
● complete, downloadable Instructor’s Manual with teaching ideas and solutions to end-of-
chapter exercises not given in the text;
● suggested teaching notes to all case study problems;
● editable PowerPoint slides, organised by chapter, allowing you to provide a lecture or seminar
presentation (and/or to print handouts). These incorporate colourful graphics, outlines of
chapter material, text exhibits, additional examples and graphical explanations of difficult
topics;
● solutions to additional questions and spreadsheet problems.
This text is supported by its own MyLab Accounting which is an environment that gives unlimited
opportunities for practice and assessment using a range of questions, and which provides timely
feedback. Updates to MyLab Accounting include alignment of the questions to match new
content in the book and the addition of over 100 exercises that are new to this edition to improve
coverage across the most important topics. In addition to the useful self-study suggestions in the
Study Plan, and the vast range of exercises (over 800) to select from, a better mix of questions has
been incorporated into MyLab Accounting for this edition, allowing teaching staff to better test
students’ performance using a greater variety of question types. Finally, four new short videos
explaining essential concepts can be used within teaching to consolidate your students’
understanding or support self-study and revision.
For access to MyLab Accounting, students need both a course ID and an access card (see the
advert on the inside front cover of the book).
Alnoor Bhimani
Srikant Datar
Madhav Rajan
November 2022
Lecturer Resources
For password-protected online resources tailored to
support the use of this textbook in teaching, please log in
as an educator on our website www.pearson.com and search
for this textbook, where you will find a tab providing
instructor resources.

AUTHORS’
ACKNOWLEDGEMENTS
We are indebted to many individuals for their ideas and assistance. Our primary thanks go to the
many academics and practitioners who have advanced our knowledge of management and cost
accounting. Aside from the many individuals in North America who have contributed in one way
or another, we would like to thank the many educators who have provided material for inclusion
in the text, or who have painstakingly commented on chapters in draft form, or have otherwise
helped the review process. We also thank the team at Pearson for their extensive support
throughout.
Finally, we would like to thank the following professional accountancy bodies for their assis-
tance and permission to reproduce copyright material:
The Association of Chartered Certified Accountants
The Institute of Chartered Accountants in England and Wales
The Institute of Chartered Accountants of Scotland
The Chartered Institute of Management Accountants
The Institute of Chartered Accountants in Ireland

PART I
Management and cost
accounting fundamentals
The first part of the book is intended to provide an introduction to fundamental
concepts and ideas in management and cost accounting. Chapter 1 considers the
role of accounting and accountants in organisations. Chapters 2–7 discuss relevant
technical and broader organisational issues in the design and functioning of cost
systems. Specifically, Chapter 2 provides an introduction to costing terminology and
its aims. Chapters 3 and 4 discuss what might be considered ends of a continuum
in costing systems: job order costing and process costing. Chapter 5 addresses
fundamental cost allocation issues while Chapter 6 deals with joint-costing situations.
The final chapter in this part discusses absorption costing and variable costing as two
distinct approaches to stock costing.
Chapter 1 The manager and management accounting 2

Chapter 2 An introduction to cost terms and purposes 33
Chapter 3 Job costing 59
Chapter 4 Process costing 90
Chapter 5 Cost allocation 128
Chapter 6 Cost allocation: joint-cost situations 157
Chapter 7 Income effects of alternative stock-costing methods 183
Part I Case study problems 212
M01 Management and Cost Accounting 36029.indd 1 07/02/2023 10:10

CHAPTER 1
The manager and management
accounting
Former accountants have headed many large companies across the world,
including PepsiCo, Coca-Cola, BT, Siemens, 3i, Shell, Rolls-Royce, Voda- Learning objectives
fone, Burger King, Royal Bank of Scotland, Asda and Nike. Finance lead-
ers’ roles in organisations change continuously. More than half of Chief After studying this chapter, you
Executive Officers (CEOs) of FTSE 100 (a share index of the 100 companies should be able to:
listed on the London Stock Exchange with the highest market value) have
● Differentiate management
a background in accounting or financial management (Global Accounting
accounting from financial
Network, 2022) and 30% of Fortune 500 (the 500 largest US industrial
accounting
corporations by revenue) CEOs spend the first four years of their careers
developing a strong foundation in finance. In the financial sector, almost a ● Recognise the growing role
quarter of CEOs previously held the role of CFO (Amato, 2022). The rapid of strategy in management
rise of accounting and finance executives is unrivalled by other corporate accounting processes
roles. This is partially because they help guide companies at the most sen- ● Identify five broad purposes of
ior level, offering strong analytical skills, organisational acumen, a dedica- accounting systems
tion to continuous improvement and widening stakeholder engagement. ● Understand how accounting can
Across virtually all organisations, accountants’ duties involve man- influence planning, control and
agement planning, control and decision making, although the enterprise decision making
context determines the specific accounting and financial management
● Distinguish between the score-
responsibilities they must deliver on. The demands on accounting and
keeping, attention-directing and
finance professionals always differ and there is no one-size-fits-all in
problem-solving functions of
management accounting. Recently, many accountants have broadened
management accounting
their activities to include risk management, business strategy, sustaina-
bility objectives and digital transformation roles. CPA Canada, a national ● Recognise that economic benefits,
organisation representing the Canadian accounting profession, with costs as well as contextual and
210,000 qualified members, considers that its members must be ‘broad- organisational process issues are
minded, forward-thinking professionals who undertake appropriate analy- relevant to accounting systems
sis, exercise good judgment, communicate effectively and act to protect design and operation
the public interest’ (CPA Canada 2022). Managers in all companies, ● Assess how companies add value
whether small or large, must understand how revenues and costs behave ● Understand why digitalisation is
or they risk losing control of the performance of their firms. But this is management accounting’s key
not sufficient and managers’ use of management accounting information challenge today
must go beyond this to include making decisions about research and
development, production planning, budgeting, pricing, and the products
or services to offer customers. Strategic action in enterprises is increas-
ingly informed by management accounting input.

Management accounting, financial accounting and cost accounting 3
How managerial activities and decisions link to accounting intelligence continuously evolves. This
book addresses questions such as: What types of decisions do managers make? How can accounting
help managers make these decisions? Are managerial needs proactively being met by management
accounting solutions? In this first chapter, we look at some dimensions of the role of management
accounting in modern enterprises, why management accounting is subject to continual change and
what digital technologies imply for the field. A consideration of these issues will give us a framework
for studying the succeeding chapters.
Management accounting, financial accounting and cost accounting

A distinction is often made in practice between management accounting and financial accounting.
Management accounting measures, analyses and reports financial information and non-financial
information that are intended primarily to assist managers in fulfilling the goals of the organisa-
tion. A management accounting system is an important facet of overall organisational control,
as is discussed later in this book. CIMA Global sees management accounting as an integral part
of management. It considers management accounting as combining accounting, finance and
management with leading-edge techniques that drive successful businesses. Individual managers
often require the information in an accounting system to be presented or reported differently.
Consider, for example, sales order information. A sales manager at Porsche may be interested in
the total amount of sales in Euros to determine the commissions payable to salespeople. A distri-
bution manager at Porsche may be interested in the sales order quantities by geographic region
and by customer-requested delivery dates to ensure vehicles get delivered to customers on time.
A manufacturing manager at Porsche may be interested in the quantities of various products and
their desired delivery dates so that they can develop an effective production schedule. To simul-
taneously serve the needs of all three managers, Porsche creates a database consisting of small,
detailed bits of information that can be used for multiple purposes. For instance, the sales order
database will contain detailed information about a product, its selling price, quantity ordered,
and delivery details (place and date) for each sales order. The database stores information in a
way that allows different managers to access the information they need.
Many managers now use data analytic techniques to gain insights into the data they collect.
This is popularly referred to as ‘big data’ and is associated with machine learning and artificial
intelligence. The most common application of machine learning and artificial intelligence is in
making predictions. For example, using historical purchase data and other characteristics of a
customer, a company like Netflix predicts which movie a particular customer might like and
recommends that movie to the customer. Netflix then obtains feedback on whether the customer
liked the movie or not and incorporates this feedback into the model, improving and refining it.
In this sense the machine learns from its correct and incorrect predictions and is seen as acting
intelligently. The vast quantity and variety of data have led to the development of many new
prediction techniques.
Professional management accountants apply the principles of accounting and financial man-
agement to create, protect, preserve and increase value for the shareholder of for-profit and not-
for-profit enterprises in the public and private sectors. They might engage in the identification,
generation, presentation, interpretation and use of relevant information relevant to:
● develop, communicate and implement strategies
● plan long-, medium- and short-term operations
● determine capital structure and fund that structure
● design reward strategies for executives and shareholders
● coordinate design, operations and marketing decisions and evaluate performance

4 Chapter 1 The manager and management accounting
● control operations and ensure the efficient use of resources

● measure and report financial and non-financial information to stakeholders
● implement corporate governance procedures, risk management and internal controls
● explore the potential for managerial and organisational value creation.
Management accounting information and reports do not have to follow set principles or rules.
The key questions are always: (1) how will this information help managers do their jobs better;
(2) do the benefits of producing this information exceed the costs; and (3) does the information
recognise what is specific about the organisational context?
Financial accounting and management accounting have different goals. Financial accounting
focuses on external reporting that is directed by authoritative guidelines. Organisations are
required to follow these guidelines in their financial reports to outside parties. Financial account-
ing is guided by prescribed accounting standards. Principles define the set of revenue and cost
measurement rules and the types of items that are classified as assets, liabilities or owners’ equity
in balance sheets which form the standards applicable. Sources of authority for accounting regu-
lation differ across countries. In Spain, for instance, the Instituto de Contabilidad y Auditoria de
Cuentas (ICAC) has been appointed by the government for this purpose. In the UK, the Financial
Reporting Council (FRC) has the authority to issue accounting standards. The FRC’s regulator
views its objective to ‘regulate auditors, accountants and actuaries’ and to ‘set the UK’s corporate
governance and stewardship codes’ (FRC, 2022). Its work is aimed at ‘investors and others who
rely on company reports, audit and high-quality risk management’.
In France, the Autorité des Normes Comptable (ANC), a public body, oversees accounting
legislation, whereas in Denmark, the Føreningen af Statsautoriserede Revisører (FSR), a pro-
fessional accounting body, oversees the setting of accounting standards. Other bodies which are
concerned with accounting standards include: in Australia, the Australian Accounting Standards
Board (AASB); in China, the China Accounting Standards Committee (CASC); and in South
Africa, the South Africa Accounting Standards Board. While conceptions of how accounting
information should be reported can have a high degree of national specificity, across the world
over 140 national jurisdictions use International Financial Reporting Standards (IFRS) which are
issued by the IFRS Foundation and the International Accounting Standards Board (IASB).
In contrast to adhering to financial reporting standards, management accounting is not
restricted by accounting principles. For example, a car manufacturer may present a particular
estimated ‘value’ of a brand name (say, the Volvo brand name) in its internal financial reports for
marketing managers, although doing so does not have to accord with the legal framework within
which externally oriented financial reports can be prepared in Sweden.
While the work of management accountants and financial accountants tends to be
organisation-specific, some broad differences generally exist. They may be categorised as follows:
● Regulations. Management accounting reports are generally prepared for internal use and no
external regulations govern their preparation. Conversely, financial accounting reports are gen-
erally required to be prepared according to accounting regulations and guidelines imposed by
law and the accounting profession.
● Range and detail of information. Management accounting reports may encompass financial,
non-financial and qualitative information which may be very detailed or highly aggregated.
Financial accounting is usually broad-based, lacking detail and intended to provide an overview
of the position and performance of an organisation over a time period. It tends to focus on
financial information.
● Reporting interval. Management accounting reports may be produced frequently – on an
hourly, daily or weekly basis, possibly to span several years. The interval covered by manage-
ment accounting information will be dictated by the decision-making and control needs of the
information users. Conversely, financial accounting reports are produced annually. Some large
companies also produce semi-annual and quarterly reports.

● Time period. Management accounting reports may include historical and current information,
but also often provide information on expected future performance and activities. Financial
accounting reports provide information on the performance and position of an organisation
for the past period. They tend to be backward-looking.
Exhibit 1.1 outlines the major differences between management accounting and financial account-
ing. Note, however, that reports such as balance sheets, income statements and statements of cash
flows are common to both management accounting and financial accounting.
Cost accounting measures and reports financial and non-financial information related to the
organisation’s acquisition or use of resources. It provides information for both management
accounting and financial accounting. For example, calculating the cost of a product is a cost
accounting function that meets both the financial accountant’s stock-valuation needs and the
management accountant’s decision-making needs (such as deciding how to price products and
choosing which products to promote). However, today most accounting professionals take the
perspective that cost information is part of the management accounting information collected
to make management decisions. Thus, the distinction between management accounting and cost
accounting is not so clear-cut, and we often use these terms interchangeably in the book.
A central task of managers is cost management. We use the term cost management to describe
the actions managers undertake in the short-run and long-run planning and control of costs that
increase value for customers and lower the costs of products and services. An important com-
ponent of cost management is the recognition that prior management decisions often commit
the organisation to the subsequent incurrence of costs. Consider the costs of handling materials
in a production plant. Decisions about plant layout and the extent of physical movement of
Major differences between management and financial

Exhibit 1.1 accounting
Management Accounting Financial Accounting
Purpose of Help managers make Communicate an organisation’s financial

information decisions to fulfil an position to investors, banks, regulators and
organisation’s goals other outside parties
Primary users Managers of the External users such as investors, banks,
organisation regulators and suppliers
Focus and emphasis Future-oriented (budget for Past-oriented (reports on 2023
2024 prepared in 2023) performance prepared in 2024)
Rules of measure- Internal measures and Financial statements must be prepared
ment and reporting reports do not have to in accordance with relevant accounting
follow relevant accounting standards and be certified by external,
standards but are based on independent auditors
cost-benefit analyses
Time span and type Varies from hourly Annual and quarterly financial reports,
of reports information to 15 to 20 primarily on the company as a whole
years, with financial and
non-financial reports on
products, departments,
territories, and strategies
Behavioural Designed to influence the Primarily reports economic events but also
implications behaviour of managers and influences behaviour because manager’s
other employees compensation is often based on reported
financial results

materials required for production are usually made before production begins. These decisions
greatly influence the level of day-to-day materials handling costs once production begins. For
this reason, cost management has a broad focus. It typically includes the continuous reduction of
costs and encompasses the whole life cycle of the product from product conception to deletion.
Cost management is often carried out as a key part of general management strategies and their
implementation. Examples include enhanced customer satisfaction programmes, quality initia-
tives and more efficient supplier relationships management via the internet. In other words, cost
management is not only about reducing costs. Cost management also includes making decisions
to incur additional costs with the goal of enhancing revenues and profits. Whether or not to enter
new markets, implement new organisational processes, and change product designs are also cost
management decisions. Information from accounting systems helps managers to manage costs,
but the information and the accounting systems themselves are not cost management.
Ultimately, management accounting’s primary purpose is to enhance value creation within
both private and public sector organisations. The management accountant must make use of a
sound body of knowledge, as well as abide by ethical guidelines (discussed in the appendix of
this chapter). Of particular relevance is the growing contribution which management accountants
make to strategic financial management information production and analysis and to strategic
management action itself.
Strategic decisions and management accounting

Many organisations seek to be more expansionist, entrepreneurial, risk taking and innovative
as a conscious move away from inwardly focused management techniques. Entirely new markets
are emerging for products and services and avant-garde innovative firms are reaping significant
benefits through innovative management approaches and a growing focus on action through
focused strategic information.
A company’s strategy specifies how the organisation matches its own capabilities with the
opportunities in the marketplace. In other words, strategy describes how an organisation creates
value for its customers while distinguishing itself from its competitors. A business might be thought
to follow one of two broad strategies (we consider this further in Chapter 20). Some companies,
such as EasyJet and Carrefour, follow a cost leadership strategy. They profit and grow by providing
quality products or services at low prices and by judiciously managing their costs. Other compa-
nies, such as Apple and Bang & Olufsen, follow a product differentiation strategy. They generate
profits and growth by offering differentiated or unique products or services that appeal to their cus-
tomers and are often priced higher than the less popular products or services of their competitors.
Deciding between these strategies is a critical part of what managers do. Management account-
ants work closely with managers in various departments to formulate strategies by providing
information about the sources of competitive advantage, such as (1) the company’s cost, produc-
tivity or efficiency advantage relative to competitors; or (2) the premium prices a company can
charge over its costs from distinctive product or service features.
Management accounting information helps managers focus on strategic issues by answering
questions such as the following:
● Who are our most important customers, and what critical capability do we have to be compet-
itive and deliver value to our customers? After Amazon’s success selling books online, man-
agement accountants at Waterstones, a British book retailer, outlined the costs and benefits
of several alternative approaches for enhancing the company’s information technology infra-
structure and developing the capability to sell books online. A similar cost–benefit analysis
led Toyota to build flexible computer-integrated manufacturing plants that enable it to use the
same equipment efficiently to produce a variety of cars in response to changing customer tastes.
● What is the bargaining power of our customers? Kellogg Company, for example, uses the rep-
utation of its brand to reduce the bargaining power of its customers and charge higher prices
for its cereals.

● What is the bargaining power of our suppliers? Management accountants at Dell Computers
consider the significant bargaining power of Intel, its supplier of microprocessors, and Micro-
soft, its supplier of operating system software, when considering how much it must pay to
acquire these products.
● What substitute products exist in the marketplace, and how do they differ from our product
in terms of features, price, cost and quality? Hewlett-Packard, for example, designs, costs
and prices new printers after comparing the functionality and quality of its printers to other
printers available in the marketplace.
● Will adequate cash be available to fund the strategy, or will additional funds need to be
raised? Tesla CEO Elon Musk’s bid to buy Twitter with a $46.5 billion takeover offer in April
2022 included debt and equity commitment letters filed with the US Securities and Exchange
Commission.
Research reveals that companies that emphasise creating long-term value for shareholders are
likely to outperform those that focus on preserving shareholder value in the short term. Compa-
nies whose primary focus is on internal control and value preservation do not increase their stock
market valuations as effectively as those that look outside for opportunities to create value. Out-
performers in business are those with the strategic and external awareness to evolve and change
when the need arises. Studies have also revealed that performance-based pay, focusing on highly
tangible near-term measurable variables damages the creation of longer-term shareholder value.
Management accounting information is called upon not only to help managers make balanced
decisions in the face of organisational challenges and the opportunities their environments bring,
but increasingly also to monitor and evaluate strategic progress.
The trend for professional institutes of management accounting has been to reorient the field
towards strategic management information preparation and analysis and the actual participation
of management accountants in such activities. Operational accounting techniques and issues
continue to be relevant, but their roles are being recast in the context of their contributions and
relationships with organisation-wide financial management and strategic concerns.
The shift towards managerial and strategic engagement rather than just acting as providers of
largely financial information about enterprises allows management accountants to align their work
to the changing business and organisational landscape. The beginning of the millennium has seen
a radical shift in the economic context in which companies operate. Early in the twentieth century,
the Ford Motor Company demonstrated the ability of mass production to lower the price of a
product by 60% or more. This enabled consumption to move its focus away from elite consumers
to the masses. Today, another transformation is taking place away from mass consumption to a
focus on individuals. Consumers, in many sectors, are building platforms, tools and relationships
which enable a high degree of personalisation. Companies such as Amazon, eBay, Apple, YouTube
and Meta fall into this new category. Digital interactive technologies allow consumers greater
self-determination. A smartphone allows the user to define the experience desired from the device
at very low cost. Assets, information, relationships and management are now ‘distributed’ as the
internet, mobile computing, wireless broadband and new software applications have been created.
As products and technology offer different experiences to the consumer, management accountants
need to adapt to understand, control and manage attendant cost structures.
Many established management accounting concepts that were developed to serve traditional
industrial and service sectors continue to find usage across many enterprises, but the manner in
which they are deployed is being reshaped. Many firms are pursuing digital transformation initi-
atives, which can involve the use of different technologies such as cloud computing, the Internet
of Things, big data and artificial intelligence (AI). Consider Virgin Holidays, which uses AI to test its
email marketing approach. In one campaign, the company tested different subject lines and text
within emails to work out what was most effective. This enabled insights into how best to promote
holidays including questioning whether a big promotion (such as 50% off) requires the message
to lead in any communications sent. The AI-generated insights revealed that the best results came
from emails that had messages like ‘Book before Monday’ or offered a getaway from stress at

work or bad weather in London instead of a specific sales message. Saul Lopes who led the AI
project at Virgin Holidays notes that ‘The AI took away all of the bullsh*t and we are no longer
led by human ego or human bias but by numbers and results’ (Digitalfix, 2018). Consider also the
Lloyds Banking Group’s use of big data analytics to better understand its retail and commercial
activities and to develop strategy and pricing approaches. One application has been the use of
big data analytics to explore the integrated customer information, marketing and digital aspects
of the bank. Rajput (2020) reports that, ‘24% of the bank’s income came from leads generated
by the analytics system. The bank has also been able to establish a new product strategy using
customer data from the analytics system. It has also been able to manage costs, detect potentially
fraudulent activities, and build credit risk models.’
Organisations like Rolls-Royce (see ‘Concepts in action’ box below), Virgin Holidays and Lloyds
as well as smaller enterprises can use data analytics especially as more and more digital technologies
are invested into by enterprises to inform planning decisions, manage costs, unravel insights and
generally improve decision-making activities. These are all tasks at the forefront of management
accountants’ raison d’être given their concern to measure, analyse and report both financial and
non-financial information intended to assist managers to identify and pursue enterprise strategies.
Accounting systems and management controls

What are the objectives of accounting systems? Is Renault’s management control system more
effective than Audi’s? Is Nestlé’s more helpful in planning than Cadbury’s? Is Equinor’s superior
to BP’s? This section provides an overview of the broad purposes of accounting and management
control systems, illustrating the role of accounting information.
The major purposes of accounting systems

The accounting system is among the most significant quantitative information system in almost
every organisation. This system aims to provide information for five broad purposes:
● Purpose 1: Formulating overall strategies and plans. This includes new product development
and investment in both tangible (equipment) and intangible (brands, patents or people) assets,
and frequently involves special-purpose reports. Increasingly, many organisations seek market-,
supplier- and customer-based information for determining longer-term strategic action.
● Purpose 2: Resource allocation decisions such as product and customer emphasis and pricing.
This frequently involves reports on the profitability of products or services, brand categories,
customers, distribution channels, and so on.
● Purpose 3: Cost planning and cost control of operations and activities. This involves reports on
revenues, costs, assets, and the liabilities of divisions, plants and other areas of responsibility.
● Purpose 4: Performance measurement and evaluation of people. This includes comparisons of
actual results with planned results. It can be based on financial or non-financial measures.
● Purpose 5: Meeting external regulatory and legal reporting requirements where they exist.
Regulations and statutes often prescribe the accounting methods to be followed. Financial
reports are provided by some organisations to shareholders who are making decisions to buy,
hold or sell company shares. These reports ordinarily attempt to adhere to authoritatively
determined guidelines and procedures which exist in many countries.
Each of the purposes stated here may require a different presentation or reporting method.
Accountants combine or adjust the method and data to answer the questions posed by different
internal or external users.
The nature of management-oriented accounting information alters in line with changes in the
business environment. Over the past decade, many enterprises have experienced a shift from a tra-
ditional monitoring and control perspective to a more business- and support-oriented focus. This

requires a broad-based understanding of the business, with management accountants working

alongside managers, as partners within cross-functional teams rather than in a separate account-
ing function. Some present-day key influences on changes in accounting information include:
● an increased pace of change in the business world
● shorter product life cycles and competitive advantages
● organisational responses to infrequent events such as pandemics and wars
● a requirement for more strategic action by management
● digital transformation of companies and new business models
● the outsourcing of non-value-added but necessary services
● increased uncertainty and the explicit recognition of risk
● novel forms of reward structures
● increased regulatory activity and altered financial reporting requirements
● more complex business transactions
● increased focus on customer satisfaction
● new ethics of enterprise governance
● the rise of intellectual capital
● enhancing knowledge management processes.
In this book we consider the accounting information implications of many of these developments.
Planning and control

There are many definitions of planning and control. Study the left side of Exhibit 1.2, which uses
planning and control at The Sporting News (SN) as an illustration. We define planning (the top
box) as choosing goals, predicting results under various ways of achieving those goals, and then
deciding how to attain the desired goals. For example, one goal of SN may be to increase operating
profit. Three main alternatives are considered to achieve this goal:
1 Change the price per newspaper.
2 Change the rate per page charged to advertisers.
3 Reduce labour costs by having fewer workers at SN’s printing facility.
Assume that the editor, Bérangère Saunier, increases advertising rates by 4% to €5200 per page
for March 2023. She budgets advertising revenue to be €4 160 000 (€5200 × 800) pages predicted
to be sold in March 2023. A budget is the quantitative expression of a plan of action and an aid
to the coordination and implementation of the plan.
Control (the bottom box in Exhibit 1.2) covers both the action that implements the plan-
ning decision and deciding on performance evaluation and the related feedback that will help
future decision making. With our SN example, the action would include communicating the new
advertising-rate schedule to SN’s marketing sales representatives and advertisers. The performance
evaluation provides feedback on the actual results.
During March 2023, SN sells advertising, sends out invoices and receives payments. These
invoices and receipts are recorded in the accounting system. Exhibit 1.3 shows the March 2023
advertising revenue performance report for SN. This report indicates that 760 pages of advertising
(40 pages less than the budgeted 800 pages) were sold in March 2023. The average rate per page
was €5080 compared with the budgeted €5200 rate, yielding actual advertising revenue in March
2023 of €3 860 800. The actual advertising revenue in March 2023 is €299 200 less than the budg-
eted €4 160 000. Understanding the reasons for any difference between actual results and budgeted
results is an important part of management by exception, which is the practice of concentrating
on areas not operating as expected (such as a cost overrun on a project) and placing less attention

Exhibit 1.2 How accounting facilitates planning and control
Management decisions Management

at accounting
The Sporting News system
Planning Budgets Financial

• Increase advertising • Expected advertising representation
rates by 4% pages sold, rates per of plans
page, and revenue
Control Accounting system

Recording
• Source documents
transactions and
Action (invoices to advertisers
Feedback
classifying
• Implement a 4% and payments received)
them in
increase in advertising • Recording in general
accounting
rates and subsidiary ledgers
records
Performance
evaluation
• Advertising revenues Performance reports Reports of
5.4% lower than actions
• Actual advertising pages comparing
budgeted sold, average rate per budgets with
page, and revenue actual results
on areas operating as expected. The term variance in Exhibit 1.3 refers to the difference between
the actual results and the budgeted amounts.
The performance report in Exhibit 1.3 could spur investigation. For example, did other newspapers
experience a comparable decline in advertising revenue? Did the marketing department make suffi-
cient efforts to convince advertisers that, even with the new rate of €5200 per page, advertising in the
SN was a good buy? Why was the actual average rate per page €5080 instead of the budgeted rate of
€5200? Did some sales representatives offer discounted rates? Did a major advertiser threaten to trans-
fer its advertising to another newspaper unless it was given a large rate-per-page reduction? Answers
to these questions could prompt Saunier to take subsequent actions, including, for example, pushing
marketing personnel to renew efforts to promote advertising by existing and potential advertisers.
Planning and control for sustainability is equally challenging. What should SN do about energy
consumption in its printing presses, recycling of newsprint, and pollution prevention? Among the
uncertainties managers’ face is whether customers will reward SN for these actions by being more
loyal and whether investors will react favourably to managers spending resources on sustainabil-
ity. Information to gauge customer and investor sentiment is not easy to obtain. Predicting how
sustainability efforts might pay off in the long run is far from certain. Even as managers make
Advertising revenue performance report at The Sporting News

Exhibit 1.3 for March 2023
Actual results Budgeted amounts Variance
Advertising pages sold 760 800 40 unfavourable

Average rate per page €5 080 €5 200 €120 unfavourable
Advertising revenue €3 860 800 €4 160 000 €299 200 unfavourable

decisions, the sustainability landscape will doubtlessly change with respect to environmental
regulations and societal expectations, requiring managers to learn and adapt (we consider sus-
tainability issues further in Chapter 22).
A well-conceived plan includes enough flexibility so that managers can seize opportunities
unforeseen at the time the plan is formulated. In no case should control mean that managers cling
to a pre-existing plan when unfolding events indicate that actions not encompassed by the original
plan would offer the best results to the company. Planning and control are so strongly intertwined
that managers do not spend time drawing artificially rigid distinctions between them. Unless oth-
erwise stated, we use control in its broadest sense to denote the entire management process of both
planning and control. For example, instead of referring to a management planning and control
system, we will refer to a management control system. Similarly, we will often refer to the control
purpose of accounting instead of the awkward planning and control purpose of accounting.
Do not underestimate the role of individuals and groups in management control systems. Both
accountants and managers should always remember that management control systems are not
confined to technical matters such as the type of computer system used and the frequency with
which reports are prepared. Management control is primarily a human activity that tends to focus
on how to help individuals do their jobs better. For example, it is often better for managers to
discuss personally with underperforming workers how to improve performance, rather than just
sending those workers a report highlighting their underperformance.
Moreover, do not view accounting’s intended roles as being shared by all organisations. Account-
ing practice tends to be informed by technical considerations but is always indicative of many
organisational, social and political processes that are specific to the enterprise context. Thus, two
equally profitable companies of the same size within the same industry and having comparable
accounting systems at their disposition may exhibit very different uses and purposes served by these
accounting systems. This is because, although accounting systems may be designed with similar
aims in mind, users of accounting information will perceive different possibilities and priorities as
to the roles accounting can play within their organisations. Do not be surprised to see accounting
systems in practice being used in ways that reflect the preferences and idiosyncrasies of their users
rather than the predefined functions identified by accounting information system designers.
Feedback: a major key

Exhibit 1.2 shows a feedback loop from control back to planning. Feedback involves managers
examining past performance and systematically exploring alternative ways to improve future
performance. It can lead to a variety of responses, including the following:
Use of feedback Example

● Tracking growth ● Unilever monitors the attainment of its ‘Path to Growth’ sales and operating
margin targets.
● Searching for alternative ● Mbarara University Hospital compares internal processing versus third-party
means of operating managing (outsourcing) of its accounts receivable operations.

● Changing methods for ● Lombard Odier & Cie, a Swiss private banking institution, whose success is
making decisions built on customised confidential client service, provides tailor-made financial
information to customers after assessing client preferences in terms of
communication mode and format.
● Making predictions ● Siemens adopts a team-based new product development process with input from
both manufacturing and marketing, following an analysis of information flows.

● Changing operations ● Land Rover reduces scrap, obsolescence and lost material and improves stock
turns after establishing innovative supplier relationships.

● Changing the reward ● Convent, Germany’s leading producer of crisps and salted snacks, has
system established data-recording links with customers to minimise use of its shelf
space while maximising return for both retailers and Convent alike.

Scorekeeping, attention-directing and problem-solving functions

Traditionally management accountants have tried to perform different functions which for sim-
plicity can be categorised as: scorekeeping, attention directing and problem solving. Scorekeeping
refers to the accumulation of data and the reporting of reliable results to all levels of management.
Examples are the recording of sales, purchases of materials, and payroll payments. This task is
increasingly undertaken by digital systems such a Robotic Process Automation (RPA). Attention
directing is a second function which seeks to make visible both opportunities and problems on
which managers need to focus. Examples are highlighting rapidly growing markets where the com-
pany may be underfunding its investment and highlighting products with higher-than-expected
rework rates or customer-return rates. Big data analytics and the use of machine learning deployed
in a growing number of organisations can trigger prompts for managers that relate to trends of
possible relevance which may not be picked up by humans. Attention directing should focus on
all opportunities to add value to an organisation including cost-reduction possibilities, product
pricing and operational changes. Problem solving refers to the comparative analysis undertaken
to identify the best alternatives in relation to the organisation’s goals. An example is comparing
the financial advantages of leasing a fleet of vehicles rather than owning those vehicles. Many
problems can be solved by machines where the intelligence is actioned by-passing the need for
human intervention.
Accountants serving the scorekeeping function accumulate data and report the results to all
levels of management. Accountants serving this function are responsible for the reliability of
the reported information. The scorekeeping function in many organisations requires processing
numerous data items (millions of items in some cases). Computerised information systems are
used by these organisations to automate scorekeeping tasks so that they are executed as flawlessly
as possible.
Many organisations that automate scorekeeping have management accountants concentrating
solely on the attention-directing or problem-solving function. However, as we have suggested, the
adoption of technologies such as AI and the cloud is disrupting traditional roles and functions.
In other words, these three functions (scorekeeping, attention-directing and problem-solving)
that traditionally determined the management accountant’s activities remain essential but are
being carried out with differing levels of human input. This is altering the world of management
accounting practice.
Costs, benefits and context

This book regards management accounting as encompassing the assessment of costs, benefits
and context. That is, one criterion for choosing among alternative accounting systems is how well
they are perceived to help achieve organisational goals in relation to the costs of those systems
and the context within which they are to operate. Many studies indicate that the functioning of
management accounting systems is affected as much by behavioural, cultural and social factors
as by technical ones. This book makes clear that the utilisation of management accounting infor-
mation can depend on the behaviour, attitudes and personal characteristics of people rather than
just the technical merits of accounting systems. At times, resistance to management accounting
change may be reflective of incompatibilities between the new system and the norms or habits of
employees in the organisation.
Managers can be regarded as customers of information system output. They need information
to serve their managerial needs. As a customer, a manager may buy a more elaborate management
accounting system when its perceived expected benefits exceed its perceived expected costs and
only after due consideration of contextual factors is undertaken. Although the benefits may take
many forms, managers take decisions to attain both personal and organisational goals. Consider
the installation of a company’s first budgeting system. Previously, the company might have used

Value creation 13
some historical record-keeping mechanism and may have undertaken little formal planning. A
major benefit of installing the budgeting system is that managers will be compelled to plan more
formally. They may make different, more profitable decisions than if they had continued operating
with the historical mechanism. So we might say that the expected benefits exceed the expected
costs of the new budgeting system. These costs could include investments in computer hardware
and software, training people, and the ongoing operating costs of maintaining the system. But it
must be ensured that, the technically superior system should mirror with the values and inclina-
tions of the intended users. The characteristics of the system have to align with the management
style of its users and the ethos of the organisation using it.
Attempting to measure the costs of a new accounting system and working out its likely benefits
is seldom easy. When we then include the behavioural characteristics of people to see if they tally
with the technical aspects of the system, the whole exercise becomes even more complex. This is
because we cannot assume people are rational economic actors. One accounting application may
work well in one enterprise but may falter in another. Some organisations will face key barriers
in implementing new accounting systems whereas others will not. There may be differences in the
enthusiasm senior managers have towards altered accounting systems input. Managers generally
tend to differ in how they view the usefulness of accounting information. In other words, account-
ing systems do not produce the same results wherever they exist. There are differences across
organisations in the patterns and processes of adoption and in how extensively managers want to
rely on accounting information. Some managers work on the basis of tacit perceptions matter most
and others prefer hard numbers and formal explicit information. Certain organisations such as
Amazon, Capital One, Barclays Bank and Coca-Cola ‘compete on analytics’. These firms rely to a
great extent on both qualitative and quantitative information in making decisions. Their managers
seek out formalised data input to guide their decisions. The analytical nature of the information
systems they use echoes their analytical managerial style of action. Clearly, organisational context
is important to consider in the adoption of an accounting system. But just as organisational char-
acteristics are of significance, so too is country context in the design of management accounting
systems and in understanding differences in the ways in which accounting gets used. Harrison and
McKinnon (2007, p. 114) reflecting on much research evidence state that: ‘Individuals crossing
national and cultural borders to work require an understanding of the differences in management
control practices they are likely to encounter, and sensitivity to the cultural underpinnings of those
practices’. Thus a better understanding of context can help you determine how an accounting
information system might be used in an organisation. Context is all-important to consider as there
are technical factors, personal characteristics, industry dimensions and enduring cultural mores
and national forces which influence the usage of financial information in organisations.
We have argued that assessing context and process issues can be helpful in choosing and design-
ing accounting information systems and in considering how they will be used. Differences in the
choice and use of accounting systems in organisations exist and are caused by many factors. In
this book, you will be encouraged to think about both the economic aspects of management
accounting as well as the organisational and social context in which accounting systems are
deployed. The cost–benefit–context approach provides a solid point for analysing how, why and
with what effects accounting is used in an enterprise.
Value creation
The design of a management accounting system should be guided by the challenges facing man-
agers. Management accounting can play a principal role in helping managers focus on key themes
of planning and control. We highlight the following here:
1 Customer focus. Customers are pivotal to the success of an organisation. The number of organ-
isations aiming to be ‘customer-driven’ is large and increasing. For example, Amazon regards

itself as the most customer-centric company in the world. The challenge facing Amazon man-
agers is to continue investing sufficient (but not excessive) resources in customer satisfaction
such that profitable customers are attracted and retained. We discuss this theme in Chapter 12,
where we address customer performance measures and customer-profitability analysis.
2 Value-chain and supply-chain analysis. The value chain is the sequence of business functions
(see Exhibit 1.4) in which utility (usefulness) is added to the products or services of an
organisation. These functions are as follows:
● Research and development (R&D) – the generation of, and experimentation with, ideas related
to new products, services or processes.
● Design of products, services or processes – the detailed planning and engineering of products,
services or processes.
● Production – the coordination and assembly of resources to produce a product or deliver a
service.
● Marketing – the manner by which individuals or groups (a) learn about and value the attrib-
utes of products or services, and (b) purchase those products or services.

● Distribution – the mechanism by which products or services are delivered to the customer.
● Customer service – the support activities provided to customers.
Senior managers (including those from individual parts of the value chain) are responsible for
deciding the organisation’s overall strategy, how resources are to be obtained and used, and
how rewards are to be given. This task covers the entire value chain. IKEA, the Swedish home
furnishings retailer, focuses on analysing its value-added chain in order to reduce its costs while
enhancing perceived value by the customer: unassembled furniture is profitably sold direct
from the warehouse to customers who prize easy assembly instructions and familyoriented
showrooms. Such efforts have helped IKEA attain the stature of a number 1 brand in Europe
and Africa according to various rankings.
To implement their corporate strategies, companies such as Sony and Unilever use customer
relationship management (CRM) to integrate people and technology in all business functions and
deepen relationships with customers, partners, and distributors. CRM initiatives use technology
to coordinate all customer-facing activities (such as marketing, sales calls, distribution and after-
sales support) and the design and production activities necessary to get products to customers.
Accounting offers a major mechanism for helping managers to administer each of the busi-
ness functions presented in Exhibit 1.4 and to coordinate their activities within the framework
of the organisation as a whole. This book extensively discusses how accounting aims to assist
managers in these tasks. Do not interpret Exhibit 1.4 as implying that managers should proceed
sequentially through the value chain. There are important gains to be realised (in terms of, say,
Exhibit 1.4 The value chain of business functions
Research Product/service/ Customer

and Production Marketing Distribution
process design service
development
Management accounting

Value creation 15
Exhibit 1.5 Supply chain for a cola bottling company
Suppliers of
Manufacturer Bottling Distribution Retail Final
cola-concentrate
of concentrate company company company consumer
ingredients
Suppliers of
non-concentrate
materials/services
cost, quality, and the speed with which new products are developed) from having the individual
parts of the value chain work concurrently.
The term supply chain describes the flow of goods, services, and information from cra-
dle to grave, regardless of whether those activities occur in the same organisation or other
organisations. Consider the beverage products of Coca-Cola or Pepsi. Many companies play
a role in bringing these products to the final consumers. Exhibit 1.5 presents an overview of
the supply chain. Cost management emphasises integrating and coordinating activities across
all companies in the supply chain as well as across each business function in an individual
company’s value chain. To illustrate, both Coca-Cola and Pepsi bottling companies work with
their suppliers (such as glass and can companies and sugar manufacturers) to reduce their
materials-handling costs.
We discuss this theme in Chapter 15 on variance analysis, Chapter 12 on target costing and
Chapter 21 on just-in-time (JIT) and supply-chain analysis.
3 Key success factors. These operational factors directly affect the economic viability of the
organisation. Customers are demanding ever-improving levels of performance regarding
several (or even all) of the following:
● Cost. Organisations are under continuous pressure to reduce the cost of their products or
the services they sell to customers. To calculate and manage the cost of products, manag-
ers must understand activities, such as setting up machines or distributing products, that
cause costs to arise as well as monitor the marketplace to determine the prices customers
are willing to pay for the products. Management accounting information helps managers
calculate a target cost for a product by subtracting from the ‘target price’ the operating
income per unit of product that the company wants to earn. To achieve the target cost,
managers have to find ways to eliminate some activities (such as rework) and reduce the
costs of performing other activities in all value-chain functions – from initial R&D to
customer service.
● Quality. Customers expect higher levels of quality and are less tolerant of low quality than
in the past. Total quality management (TQM) is an integrative philosophy of management for
continuously improving the quality of products and processes. Managers who implement
TQM believe that every person in the value chain is responsible for delivering products
and services that exceed customers’ expectations. Using TQM, companies, for example,
Toyota, design products to meet customer needs and wants, to make these products with
zero (or very few) defects and waste, and to minimise inventories. Managers use manage-
ment accounting information to evaluate the costs and revenue benefits of TQM initiatives.
● Time. Time has many components, including the time taken to develop and bring new prod-
ucts to market, the speed at which an organisation responds to customer requests, and the
reliability with which promised delivery dates are met. Organisations are under pressure to
complete activities faster and to meet promised delivery dates more reliably than in the past

in order to increase customer satisfaction. The increasing pace of technological innovation

has led to shorter product life cycles and more rapid introduction of new products. To make
new product development decisions, managers need to understand the costs and benefits of
bringing products to market faster. Customer-response time – the speed at which an organ-
isation responds to customer requests – is tied to customer satisfaction. Organisations can
use management accounting to assess what is needed to meet promised delivery dates and
reduce delivery times.
● Innovation. There is now a heightened perception that a continuing flow of innovative prod-
ucts or services is a prerequisite for the ongoing success of most organisations. Managers
attempt to continually track their performance on the chosen key success factors vis-à-vis
competitors. This tracking of companies outside their own organisation alerts managers
to changes in the external environment that their own customers are also observing and
evaluating. We discuss this theme in Chapter 11 on using activity-based costing to guide cost
reductions; in Chapter 12 on target costing; in Chapter 20 on cost of quality reports, bottle-
necks and manufacturing lead time and Chapter 20 on strategic management accounting.
● Sustainability. Companies are increasingly applying the key success factors of cost and
efficiency, quality, time, and innovation to promote sustainability – the development and
implementation of strategies to achieve long-term financial, social and environmental goals.
An organisation may seek to make its operations sustainable by being more transparent and
ethically sourcing its materials, being waste-conscious in its use of packaging and diverting
landfill waste at their products’ end-of-life and using environmentally conscious manufac-
turing practices and also opting for shipping means that negate the carbon footprint. Com-
panies can also prioritise sustainable office design and move to renewable energy suppliers.
There is a growing drive by many firms to incorporate sustainability into their decision
making. For instance, Osram is a German global high-tech company in semiconductor manu-
facturing. It has products serving a range of applications, including automobiles, smartphones,
and lighting solutions. Osram publishes a detailed sustainability annual report with the help of
management accountants to enable its commitment to corporate sustainability to be assessed.
It has for instance highlighted management and supply chain issues which are hurdles to its tar-
get of climate neutrality by 2030. This focuses managerial attention on sustainability priorities
aside from financial ones for external stakeholders to monitor. Another enterprise, Ørsted, is
a Danish renewable energy company that relied mainly on fossil fuels for its operations with
just 15% of the energy coming from renewable sources. The company recently committed to
totally stop using coal by 2025. It also sold its oil and gas business to concentrate on renew-
able energy and already generates 85% of the energy the company distributes to clients from
sustainable sources.
Why is sustainability of increasing importance to companies? There are several reasons:
Investors care about sustainability and often make investment decisions based on not only a
company’s financial performance but also its social and environmental performance. Also,
many firms are realising that sustainability goals attract and inspire both employees and cus-
tomers who seek out products of companies with good sustainability records and avoid deal-
ing with enterprises that have poor sustainability records. There is also a growth of civil and
activist non-governmental organisations that monitor the sustainability performance of firms.
They sometimes call out on social media and even take legal action against those that violate
environmental regulations.
4 Continuous improvement and benchmarking. Continuous improvement by competitors creates
a never-ending search for higher levels of performance within many organisations. Phrases such
as the following capture this theme:
‘A journey with no end’,

‘We are running harder just to stand still’,
‘If you’re not going forward, you’re going backwards’.

Value creation 17
To compete, many companies concentrate on continually improving different aspects of

their own operations. Naturally, different industries will focus on improving different opera-
tional factors. For example, airlines seek to improve the percentage of their flights that arrive
on time. Internet companies want to improve the percentage of each 24-hour period that
customers can access their online systems without delay. Sumitomo Electric Industries, the
Japanese manufacturer of electric wire and cable, has daily meetings so that all employees
maintain a continuous focus on cost reduction. Continuous improvement targets are often set
by benchmarking or measuring the quality of products, services and activities of the company
against the best-known levels of performance found in competing companies. Many companies
within industry groups exchange information for the purpose of performance benchmarking.
We discuss this theme in the sections in Chapter 14 on kaizen budgeting, Chapter 15 on con-
tinuous improvement and standard costs, and Chapter 9 on learning curves.
Over time, the emphasis placed on conventional strategies and organisational aims change
and new priorities emerge. For instance, the global economic crisis, which began in 2008, altered
the role of finance specialists in the eyes of governmental regulators and financial markets.
There were calls for more accountability and transparency, and enterprises that have survived
have responded positively to these demands. As noted above, demands expressed today stress
enterprises moving towards models of functioning that are more sustainable and which show
evidence of higher standards of corporate responsibility. Compliance requirements naturally
need to be balanced with the need for high organisational performance and maintaining global
competitiveness and so firms have to balance the various demands placed on them. Changes in
markets, societal structures and norms and in the general business environment in which firms
operate have always been of concern to practising management accountants. Ongoing global
and business environment changes will continue to impact management accounting practices.
An important global shift in evidence is the digitalisation of enterprises. We now explore the
huge implication this has for management accounting.
How the Internet of Things, artificial intelligence and big data make the
Concepts in action unknown visible at Rolls-Royce
In 2018, Rolls-Royce received more than 70 trillion data points from its in-service fleet, which it used to develop
engines that are ‘connected, contextually aware and comprehending’, according to Caroline Gorski, Director of the
global ecosystem at Rolls-Royce’s R 2 Data Labs. Samuels (2018) explains that the R 2 Data Labs team has 200 data
architects, engineers, scientists and specialist managers to help the company produce over £250 million in value,
through engine health-monitoring activities per year and growing. The team of internal and external talent Gorski
has put together homes in on four technologies: first, on the industrial Internet of Things (IoT), which refers to the
idea of billions of objects being connected to the internet to enable companies make things more visible and to cut
costs. IoT technology, according to Deloitte, takes inputs from the physical world, uses digital technologies to derive
insights from those inputs, and then makes outputs available for use back in the world. Additionally, autonomy and
sensing, blockchain and quantum computing, and artificial intelligence (AI) and advanced analytics are part of the
technological data generating focus of the R 2 Data Labs. During that data utilisation process, the team moves from an
ideas phase through to the ‘minimum viable product’ creation, requiring rapid iteration where there is collaboration
with customers (internal or external) and the application of design thinking so business opportunities can be detected.
One example of the application of data relates to the Engine Network. This is, as Samuels (2018) explains, a tool
enabling Rolls-Royce to ‘extract IoT sensor data from engines and health-monitoring systems, and to combine those
records into a social network for the individuals who develop and use an engine’. Consequently, engineers at the
company and private jet management companies can use the data obtained to analyse engine performance. There
also exists an ‘AI-based recommendation engine that presents issues proactively to engineers, so they are aware of
issues before a problem exists’. Ultimately, for Gorski, ‘this proactive approach creates enormous benefits for our
service community and for the end customers that buy our jets’. Gorski likewise gives the example of the R 2 Data

Labs deploying IoT sensors for tracking ship performance.

The company couples IoT-derived data with contextual data
derived from the broader market environment, which has
allowed the team to produce a fuel-efficiency guidance por-
tal for crews who sail Rolls-Royce-powered ships. The result
according to Samuels, is that ‘The captains piloting ours ships
can have real-time messaging from us that tells how to save
fuel, how to sail efficiently and how to deal with challenging
sea conditions.’
Emerging digital technologies can help large and small
enterprises manage business costs and enhance process
efficiency. Through connection devices, cost savings can
accrue across resource inputs and lead to insights about improving products and activities in ways organisations
have been unable to in the past. Although IoT and associated technologies are evolving, they are increasingly
being used by firms and shaping our lives. One study by logistics company DHL and IT specialists Cisco predicts
that IoT will save businesses close to £1 trillion in productivity costs alone (cited by infisim.com). The management
accounting implications of digital technologies such as IoT for firms are very real.
Sources: Samuels, M. (2018) ‘Successful IoT deployment: The Rolls-Royce approach’ (www.zdnet.com/article/successful-iot-deployment-the-rolls-royce-
approach/); ‘The Internet of Things: Moving from cost savings to revenue generation’ (www2.deloitte.com/us/en/pages/finance/articles/cfo-insights-
internet-of-things-cost-savings-revenue-generation.html); ‘How to reduce business costs with the Internet of Things (IoT)’ (www.infisim.com/
reduce-business-costs-internet-things-iot/); www.bernardmarr.com/default.asp.
Digitalisation and management accounting

The most significant challenge facing accountants today is to address the impact of digitalisation.
For many enterprises, digitalisation is the process by which they become digital businesses,
where the use of digital technologies changes the business model and provides new revenue
and value-producing possibilities. What do digital technologies do? They enable businesses
to convert physical analog text into digitised formats. Consequently, firms alter their business
models and activities by digitalising their processes. Digital transformations ultimately move
enterprises into new modes of operations with all areas of business integrating digital enablers.
These digital technologies have the power to self-transform and branch out to other economic
sectors triggering further productivity increases. So while accounting information has always
been about enabling decision-making, digitalisation is forcing a massive alteration as to what
management accounting needs to achieve. The focus used to be mainly on what present and
past economic transactions and business outcomes meant for managerial action. But digital-
isation is changing the essence of accounting expertise in several ways. It is first moving away
from what has taken place to what likely will occur because information can be premised on
activities that precede financial activities. In other words, management accountants must play a
role in unravelling what is happening now, to a large degree by exploring big data, to determine
the coming shape of financial transactions. Secondly, executive action can increasingly be auto-
piloted such that financial objectives are pursued based on machine-based decisions and action
rather than through necessary human input. For the management accountant this is important
as the assessment of accounting information undertaken by non-human agents does not require
management accounting expertise input as traditionally sourced and human users of accounting
information will also have changed requirements (see Exhibit 1.6). Thirdly, we have been used
to seeing accounting capturing value creation as products or resources pass through the value
chain. But we are now seeing more and more situations where accounting itself becomes part
of the products being reported on. Information-emitting tags make products those things that

Digitalisation and management accounting 19
are reported on as well as the things that provide the accounting information! In effect then, the
accounting function is becoming much more complex than it has been and digitalisation is what
is driving this complexity.
Two points in relation to digital technologies specifically need highlighting at this stage:
● Digital disruption and cognitive business. Digital technologies are impacting many industries
and enabling new business models. Robotics and automation, for example, are replacing repet-
itive human tasks and changing the way decisions are made. The rise of cognitive business,
powered by the extreme growth of data and machine learning power and accessibility, provides
new insights which, if harnessed, can directly shape decision making. It is therefore the case
that accounting professionals need to upskill, so they can play a role in assessing and imple-
menting emerging digital technology-driven approaches to management accounting supporting
decision making.
● Data availability. The huge volumes of structured and unstructured data (not organised in
a predefined manner) that has become available to firms has created both opportunities and
challenges in aiding data-backed decisions and insights. Management accountants must under-
stand the different sources of data that now exists and recognise their potential utility. That is,
they need to be able to know how such data can provide insights that shape decisions. More-
over, given that the cost of information production is falling as the volume of data grows, it is
becoming impossible to ignore the power of data analytics to support financial planning and
management action.
No aspect of business today remains untouched by digital technologies, and new possibilities
for organisations have emerged in relation to altering the speed of enterprise operations, the
flexibility of their decision making, their strategic positioning and the reframing of achievable
economic efficiencies (Bhimani and Wilcocks 2014; Bhimani 2021).
What emerging technologies are there today which management accountants should be aware
of? Here are some that the business community has highlighted:
● Artificial intelligence (AI) and robotics. AI can be thought of as the simulation of human
intelligence processes by machines. It can increase the effectiveness of human decision making
and enhance the advice financial professionals give to other business executives. Robotics is
a field that involves the conception, design, manufacture and operation of robots. Robots
are programmable machines that can undertake a series of actions. Typically, robots interact
with the physical world via sensors; they are programmable and can be autonomous or semi-
autonomous. Robots are now increasingly engaging in accounting tasks, which reduces the risk
of human error and can remain in operation on a 24/7 basis. Robotics today enables highly
valuable input into decision making that is rooted in accounting analyses.
● Blockchain is an accounting technology that can be described as a ‘distributed ledger’, which
records transactions continuously such that the transacting parties leave a permanent record
that remains verifiable. It provides full visibility on past transactions, which cannot be altered
by any one participant vastly reducing the possibility of fraud.
● Big data and analytics make possible the provision of insights drawn from large amounts of
data. Data is valuable to all organisations and more and more is invested into leveraging data
for greater decision-making capacity. The physical world is being rapidly digitised via con-
nected devices and the physical world itself is becoming a sort of information system via the
Internet of Things (IoT), where sensorised objects and people (customers, machines, vehicles,
etc.) increase multiple-fold the volume of available data. Management accountants form part-
nerships with other units of their enterprises to make sure that the data analyses they engage in
are cross-functional and continuously relevant to strategic and operational decisions. Finance
professionals are called upon to be more predictive and to assist in making decisions based on
qualitative and quantitative data that link in to budgeting, internal control, risk management
and strategic action.

● The cloud refers to services where information and files are kept on servers connected to the
Internet. The cloud enables enterprises to store, access and share resources at lower costs and
with greater flexibility. Cloud computing permits enterprises to obtain practically real-time
information with different organisational systems of information being fully integrated and
on-line. This allows management accountants to focus on financial management information
provision for decision-making and control purposes from different sources at lower costs and
faster.
It can be expected that as organisational structures, priorities and modes of operations
change, so pressures mount for management accounting systems to alter their information
focus. Factors like digitalisation, accountability and corporate responsibility, operational
complexity, customer responsiveness, product life-cycle concerns, strategic management, sus-
tainability concerns, and novel business models will continue to change what is expected of
management accounting.
Consider for instance the use of top brands using non-fungible tokens (NFTs) which are
online assets that double as certificates of ownership. NFTs have been much used for tokenising
digital items such as art or texts or videos, but increasingly they are used for physical items such
as cars, rugs, books, clothing etc. The market for NFTs was $40 billion in 2021 with sales in
2022 achieving near this level on a monthly basis (Kalkine Media, 2022). Luxury fashion house
Prada has schemes for customers who want something even more exclusive than its normal
range of clothing and accessories. As Boukis (2022) reports, one scheme allows customers who
buy one of only 100 black and white button-down shirts by Cassius Hirst, son of renowned
British artist Damien, to receive an NFT such that this becomes bundled into the product pur-
chase experience. Likewise, Gucci has some sales of digital products sold for more than the
real-world equivalent (one digital bag sold for US$4115 as opposed to the physical equivalent
of US$3,400). NFTs can be resold and therefore offer a trading avenue aside from the product
purchase element. Nike bought NFT pioneer RTFKT Studios in 2021. RTFKT made its name
with a collection of Manga-style 3D NFT characters called CloneX that now trade for tens of
thousands of US dollars. As Boukis (2022) explains: ‘CloneX owners were airdropped NFTs
of mystery digital boxes known as Mnlths. The Mnlths had Nike swooshes on the side and
quickly started selling for upwards of US$10,000 (£7944) on NFT marketplaces, even though
nobody knew what they contained. In April 2022, Nike announced that owners could “burn”
them to unlock a pair of digital sneakers known as CryptoKicks, plus a vial that allows users
to customise them, and another mystery box called Mnlth 2. A pair of CryptoKicks has since
reportedly sold for US$134,000.’ By mid-November 2022, the market for NFTs shrunk and
values had dropped markedly. Justin Bieber’s purchase of a Bored Ape NFT for $1.3 million
was valued at about 5% of that price.
The survival of the management accounting profession will depend on the perceived relevance
of what the field can contribute to organisations. The changing managerial demands on manage-
ment accounting are exciting to study and engage with. It is intended that this book will help you
think about operational, technological and wider organisational and strategic issues of concern
to management accountants. What is to be borne in mind throughout is that the workings of any
management accounting system must take account the peculiarities and contextual characteristics
of the enterprise. Management accounting systems across enterprises sometimes can appear to
be similar but their organisational context lends high differentiation in their operations such that
organisational specificity can never be ignored.

Summary 21
Exhibit 1.6 Executive decisions and action versus machine action
Machine
action
Economic
transactions
Accounting
data
Financial
information
Executive decisions
Summary
The following points are linked to the chapter’s learning objectives.
1 Management accounting is used to provide future-oriented information to help managers (internal users) make
decisions and pursue an organisation’s goals. Financial accounting is used to develop reports for external users on
past financial performance using authoritative guidelines.
2 Strategy concerns affect management accounting processes.
3 Accounting systems are intended to provide information for five broad purposes: (a) formulating overall strat-
egies and long-range plans, (b) resource allocation decisions such as product and customer emphasis, (c) cost
planning and cost control, (d) performance measurement, and (e) meeting external regulatory and legal reporting
obligations.
4 Accounting influences planning, control and decision making through budgets and other financial benchmarks,
its systematic recording of actual results and its role in performance evaluation.
5 In most organisations, management accountants perform scorekeeping, attention-directing and problem-solving
functions.
6 Economic benefits and costs in the design, implementation and use of accounting systems need to be assessed in
the light of organisational context and process issues. Assessing costs, benefits and context is important to under-
standing management accounting processes.
7 Companies add value through research and development (R&D), design of products and processes, production,
marketing, distribution and customer service. Customers want companies to deliver performance through cost
and efficiency, quality, timeliness and innovation.
8 Technologies have always impacted management accounting practices. Today, digitalisation presents management
accounting with its most important challenge.

Appendix
Professional ethics
Ethical guidelines
Professional accounting organisations representing management accountants exist in many coun-
tries. For example, CIMA in the UK provides a programme leading to membership of the insti-
tute. Membership signals that the holder has passed the admission criteria and demonstrated the
competence of technical knowledge required by the CIMA to become a chartered management
accountant. To become a CIMA member, students complete examinations on operational, man-
agement and strategic aspects of the field and must show professional competence in management
accounting (see www.cimaglobal.com for more information).
Management accounting topics are also covered by several other professional bodies. The sylla-
bus for the examinations of the Association of Chartered Certified Accountants (ACCA) includes
a variety of examinations, practical work experience and knowledge of ethics requirements (see
www.accaglobal.com). Other accounting bodies include the Institute of Chartered Accountants
in England and Wales (ICAEW) (see www.icaew.co.uk) and the Institute for Chartered Account-
ants of Scotland (ICAS) (see www.icas.org.uk). These institutes have requirements that cover
proficiency in general management topics as well as professional accounting and ethics topics.
Professional accounting organisations play an important role in promoting a high standard
of ethics. CIMA has issued a code of ethics for its members. Exhibit 1.7 presents a summary of
CIMA’s ‘fundamental principles’.
Typical ethical challenges

Ethical issues can confront management accountants in many ways. The following examples are
illustrative.
Exhibit 1.7 Summary of CIMA’s Code of Ethics
To achieve the objectives of the profession, accountants have to observe the following fundamental
principles:
● Integrity. Being straightforward, honest and truthful in all professional and business
relationships. You should not be associated with any information that you believe contains a
materially false or misleading statement, or which is misleading by omission.
● Objectivity. Not allowing bias, conflict of interest or the influence of other people to override
your professional judgement.
● Professional competence and due care. An ongoing commitment to your level of professional
knowledge and skill. Base this on current developments in practice, legislation and techniques.
Those working under your authority must also have the appropriate training and supervision.
● Confidentiality. You should not disclose professional information unless you have specific
permission or a legal or professional duty to do so.
● Professional behaviour. To comply with relevant laws and regulations. You must also avoid any
action that could negatively affect the reputation of the profession.
Source: www.cimaglobal.com/Professionalism/Ethics/CIMAs-code-at-a-glance/

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until the City Mothers of Los Angeles—nine of ’em—adopted him.
City Mother Mrs. Bret Harte Harris, one of the nine, is so sure their
protégé is worth troubling about, she has voluntarily set about seeking a
position for him that will help him to secure the wherewithal and the time to
pursue his studies. All the other City Mothers are lending first aid.
This adoption scheme is just one of a thousand humanitarian acts which
the City Mothers’ bureau of Los Angeles has put into effect in its effort to
aid the young people of the city in any way within its power.
Conductor Fights Hobos.

This is the story of how L. G. Moyer, conductor, of Fairbury, Neb.,
cleaned up a bunch of hobos and compelled several of them to seek local
physicians for repairs:
When Passenger No. 8 pulled out for the East, probably fifty “sons of
rest” attempted to ride out, but part of them were forced to get off while the
others hid and made their get-away. The first section of ninety-four, of which
Moyer was conductor, was due out for Council Bluffs at six o’clock, but did
not start until eleven o’clock.
About twenty-five hobos got in a box car. The train stopped at the main-
line switch, and Moyer got in the car and ordered the tramps out. They
offered resistance, and he cleaned up the bunch with an iron brake rod in a
very short time.
The tramps had given the train crews all kinds of grief recently. Every
outgoing crew has had trouble ridding the train from ten to one hundred of
these passengers. This last bunch are bitter toward Moyer, and declare they
will remain here until they kill him.
Takes Hikes Barefooted.

Eugene Willard, of Chelsea, Mass., easily is the champion barefoot
walker of the United States. A dozen years ago Willard decided to take up
barefoot pedestrianism as a pastime, and has kept at it ever since. Of course,
he occasionally gets out his shoes, brushes off the dust which has
accumulated on them, and puts them on, but he doesn’t keep them on any
longer than is absolutely necessary.
“Barefoot Gene,” as he is known in his home city, has made some long
barefoot walks. One of those was between Philadelphia, Pa., and St. Louis,
Mo., and at another time he covered the entire distance between Savannah,
Ga., and Tampa, Fla. He has under consideration a barefoot walk between
Boston, Mass., and El Paso, Texas.
In Prison Twenty-one Years, Weds.

After serving twenty-one years in the Joliet Penitentiary, William Roach,
paroled last week, is on his honeymoon. Roach was sent up for murder.
Toward the latter part of his sentence he became a “trusty.” As trusty he was
allowed to visit the town. On one of his visits he met Hannah Edwards, who
worked in the restaurant owned by her mother, Mrs. William Edwards.
Although Roach never knew that he would be free, he was unable to keep
from falling in love. Once a week he saw Hannah, and then the authorities
decided that he had been in prison long enough. Roach was paroled. He
came back to Chicago, and went to his old home in Wilmette. And then he
returned to Joliet for Hannah. They were married by the Reverend T. de Witt
Tanner.
Shot Stealing Bread for Starving Family.

Shot twice through the body as he was attempting to steal a loaf of bread
from the rear gallery of the home of Joseph Haseman, John Reou, of New
Orleans, La., was rushed to the Charity Hospital. From his hospital cot he
explained the motive for the attempted theft.
“My eight children were crying all night for food,” he said. “I listened to
their sobs until I could not bear their suffering any longer. So I went out to
steal them a loaf of bread.”
Haseman, who is a street-car conductor, did the shooting. He has been
arrested. The police say the case is the most pitiful that has come under their
notice in several years. The charge against Reou will probably be dropped.
One of the bullets Haseman fired at the father of eight hungry children
struck him in the right arm and another in the left side. Neither of the
wounds is considered serious.
Reou, now broken in health and spirits, married twenty-one years ago. He
has always borne a good reputation, which is vouched for by several
members of the police department who know him and by friends and former
employers. Recently he lost his position as a clerk in a grocery store because
his eyesight was failing and his health was broken. He tried many times to
get work, and failed. Gradually the small sum saved by him and his wife was
gone.
His oldest daughter, Julia, aged twenty, got a position which pays her six
dollars a week. Charles, his oldest son, aged sixteen, took a position as office
boy, and earns two and one-half dollars a week. Olivia, another daughter,
aged twelve, receives a half dollar a week for helping a dressmaker. The
house they live in costs them twelve dollars per month.
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The Nick Carter Stories
ISSUED EVERY SATURDAY BEAUTIFUL COLORED COVERS
When it comes to detective stories worth while, the Nick Carter Stories
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731—Under Desperation’s Spur.
732—The Connecting Link.
733—The Abduction Syndicate.
738—A Plot Within a Plot.
739—The Dead Accomplice.
746—The Secret Entrance.
747—The Cavern Mystery.
748—The Disappearing Fortune.
749—A Voice from the Past.
752—The Spider’s Web.
753—The Man With a Crutch.
754—The Rajah’s Regalia.
755—Saved from Death.
756—The Man Inside.
757—Out for Vengeance.
758—The Poisons of Exili.
759—The Antique Vial.
760—The House of Slumber.
761—A Double Identity.
762—“The Mocker’s” Stratagem.
763—The Man that Came Back.
764—The Tracks in the Snow.
765—The Babbington Case.
766—The Masters of Millions.
767—The Blue Stain.
768—The Lost Clew.
770—The Turn of a Card.
771—A Message in the Dust.
772—A Royal Flush.
774—The Great Buddha Beryl.
775—The Vanishing Heiress.
776—The Unfinished Letter.
777—A Difficult Trail.
782—A Woman’s Stratagem.
783—The Cliff Castle Affair.
784—A Prisoner of the Tomb.
785—A Resourceful Foe.
789—The Great Hotel Tragedies.
795—Zanoni, the Transfigured.
796—The Lure of Gold.
797—The Man With a Chest.
798—A Shadowed Life.
799—The Secret Agent.
800—A Plot for a Crown.
801—The Red Button.
802—Up Against It.
803—The Gold Certificate.
804—Jack Wise’s Hurry Call.
805—Nick Carter’s Ocean Chase.
807—Nick Carter’s Advertisement.
808—The Kregoff Necklace.
811—Nick Carter and the Nihilists.
812—Nick Carter and the Convict Gang.
813—Nick Carter and the Guilty Governor.
814—The Triangled Coin.
815—Ninety-nine—and One.
816—Coin Number 77.
NEW SERIES
NICK CARTER STORIES
1—The Man from Nowhere.
2—The Face at the Window.
3—A Fight for a Million.
4—Nick Carter’s Land Office.
5—Nick Carter and the Professor.
6—Nick Carter as a Mill Hand.
7—A Single Clew.
8—The Emerald Snake.
9—The Currie Outfit.
10—Nick Carter and the Kidnapped Heiress.
11—Nick Carter Strikes Oil.
12—Nick Carter’s Hunt for a Treasure.
13—A Mystery of the Highway.
14—The Silent Passenger.
15—Jack Dreen’s Secret.
16—Nick Carter’s Pipe Line Case.
17—Nick Carter and the Gold Thieves.
18—Nick Carter’s Auto Chase.
19—The Corrigan Inheritance.
20—The Keen Eye of Denton.
21—The Spider’s Parlor.
22—Nick Carter’s Quick Guess.
23—Nick Carter and the Murderess.
24—Nick Carter and the Pay Car.
25—The Stolen Antique.
26—The Crook League.
27—An English Cracksman.
28—Nick Carter’s Still Hunt.
29—Nick Carter’s Electric Shock.
30—Nick Carter and the Stolen Duchess.
31—The Purple Spot.
32—The Stolen Groom.
33—The Inverted Cross.
34—Nick Carter and Keno McCall.
35—Nick Carter’s Death Trap.
36—Nick Carter’s Siamese Puzzle.
37—The Man Outside.
38—The Death Chamber.
39—The Wind and the Wire.
40—Nick Carter’s Three Cornered Chase.
41—Dazaar, the Arch-Fiend.
42—The Queen of the Seven.
43—Crossed Wires.
44—A Crimson Clew.
45—The Third Man.
46—The Sign of the Dagger.
47—The Devil Worshipers.
48—The Cross of Daggers.
49—At Risk of Life.
50—The Deeper Game.
51—The Code Message.
52—The Last of the Seven.
53—Ten-Ichi, the Wonderful.
54—The Secret Order of Associated Crooks.
55—The Golden Hair Clew.
56—Back From the Dead.
57—Through Dark Ways.
58—When Aces Were Trumps.
59—The Gambler’s Last Hand.
60—The Murder at Linden Fells.
61—A Game for Millions.
62—Under Cover.
63—The Last Call.
64—Mercedes Danton’s Double.
65—The Millionaire’s Nemesis.
66—A Princess of the Underworld.
67—The Crook’s Blind.
68—The Fatal Hour.
69—Blood Money.
70—A Queen of Her Kind.
71—Isabel Benton’s Trump Card.
72—A Princess of Hades.
73—A Prince of Plotters.
74—The Crook’s Double.
75—For Life and Honor.
76—A Compact With Dazaar.
77—In the Shadow of Dazaar.
78—The Crime of a Money King.
79—Birds of Prey.
80—The Unknown Dead.
81—The Severed Hand.
82—The Terrible Game of Millions.
83—A Dead Man’s Power.
84—The Secrets of an Old House.
85—The Wolf Within.
86—The Yellow Coupon.
87—Tn the Toils.
88—The Stolen Radium.
89—A Crime in Paradise.
90—Behind Prison Bars.
91—The Blind Man’s Daughter.
92—On the Brink of Ruin.
93—Letter of Fire.
94—The $100,000 Kiss.
95—Outlaws of the Militia.
96—The Opium-Runners.
97—In Record Time.
98—The Wag-Nuk Clew.
99—The Middle Link.
100—The Crystal Maze.
101—A New Serpent in Eden.
102—The Auburn Sensation.
103—A Dying Chance.
104—The Gargoni Girdle.
105—Twice in Jeopardy.
106—The Ghost Launch.
107—Up in the Air.
108—The Girl Prisoner.
109—The Red Plague.
110—The Arson Trust.
111—The King of the Firebugs.
112—“Lifter’s” of the Lofts.
113—French Jimmie and His Forty Tiheves.
114—The Death Plot.
115—The Evil Formula.
116—The Blue Button.
117—The Deadly Parallel.
118—The Vivisectionists.
119—The Stolen Brain.
120—An Uncanny Revenge.
121—The Call of Death.
122—The Suicide.
123—Half a Million Ransom.
124—The Girl Kidnapper.
125—The Pirate Yacht.
126—The Crime of the White Band.
127—Found in the Jungle.
128—Six Men in a Loop.
129—The Jewels of Wat Chang.
130—The Crime in the Tower.
131—The Fatal Message.
132—Broken Bars.
133—Won by Magic.
134—The Secret of Shangore.
135—Straight to the Goal.
136—The Man They Held Back.
137—The Seal of Gijon.
138—The Traitors of the Tropics.
139—The Pressing Peril.
140—The Melting-Pot.
141—The Duplicate Night.
142—The Edge of a Crime.
143—The Sultan’s Pearls.
144—The Clew of the White Collar.
145—An Unsolved Mystery.
146—Paying the Price.
147—On Death’s Trail.
148—The Mark of Cain.
Dated July 17th, 1915.
149—A Network of Crime.
Dated July 24th, 1915.
150—The House of Fear.
Dated July 31st, 1915.
151—The Mystery of the Crossed Needles.
Dated August 7th, 1915.
152—The Forced Crime.
153—The Doom of Sang Tu.
Dated August 21st, 1915.
154—The Mask of Death.
155—The Gordon Elopement.
Dated Sept. 4th, 1915.
156—Blood Will Tell.
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Management and Cost Accounting, 8th

Edition Alnoor Bhimani

Management and Cost Accounting 11th Edition Mike Tayles

Cost and Management Accounting-I Mohammed Hanif

Management and Cost Accounting Student Manual 11th

Cost Accounting 15th Edition, (Ebook PDF)

Horngren’s Cost Accounting 16th Edition, (Ebook PDF)

Loose Leaf for Cost Management: A Strategic Emphasis

Horngren’s Cost Accounting – Ebook PDF Version

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British Library Cataloguing-in-Publication Data

Library of Congress Cataloging-in-Publication Data

F01 Management and Cost Accounting 36029.indd 4 08/02/2023 08:04

AB: For all women who bring balance to the world

F01 Management and Cost Accounting 36029.indd 5 08/02/2023 08:04

PART I Management and cost accounting fundamentals

1 The manager and management accounting 2

PART II Accounting information for decision making

8 Cost–volume–profit analysis 220

PART III Planning and budgetary control systems

14 Motivation, budgets and responsibility accounting 422

F01 Management and Cost Accounting 36029.indd 7 08/02/2023 08:04

PART IV Management control systems and performance issues

18 Control systems and transfer pricing 556

PART V Strategy, quality, time and emerging issues

20 Strategy, the balanced scorecard and quality 622

Appendix A: Solutions to selected exercises 741

F01 Management and Cost Accounting 36029.indd 8 08/02/2023 08:04

F01 Management and Cost Accounting 36029.indd 9 08/02/2023 08:04

Appendix: Operation costing 117 Effect on financial statements 198

Purposes of cost allocation 129 PART I Case study problems 212

PART A: Stock-costing methods 184 CHAPTER 9

F01 Management and Cost Accounting 36029.indd 10 08/02/2023 08:04

• Concepts in action: Activity-based costing ABC and department-costing systems 336

Stages of capital budgeting 388

F01 Management and Cost Accounting 36029.indd 11 08/02/2023 08:04

Planning of variable- and fixed-overhead costs 491

F01 Management and Cost Accounting 36029.indd 12 08/02/2023 08:04

F01 Management and Cost Accounting 36029.indd 13 08/02/2023 08:04

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Transfer pricing system

Legal and ethical issues

notion of ‘different costs for

different purposes’ extend?

decisions on product pricing.

costing systems to produce ●

meaningful profit statements.