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The flow of costs through the accounts. . . . . . . . . . . . .
Accounting for materials . . . . . . . . . . . . . . . . . . . . .
Accounting for direct labour cost. . . . . . . . . . . . . . .
Accounting for overhead. . . . . . . . . . . . . . . . . . . . . .
Accounting for actual overhead costs. . . . . . . . . . .
Accounting for finished goods . . . . . . . . . . . . . . . . .
Accounting for cost of goods sold . . . . . . . . . . . . . .
Accounting for non-manufacturing costs . . . . . . . .
Appendix 4a journal entries associated with
job-order costing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix 4b support department cost allocation. . . . .
Types of departments. . . . . . . . . . . . . . . . . . . . . . . . . . .
Methods of support department cost allocation. . .
CHAPTER 5
PROCESS COSTING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Characteristics of process manufacturing . . . . . . . . . . 177
Types of processes . . . . . . . . . . . . . . . . . . . . . . . . . . 177
How costs flow through the accounts in
process costing. . . . . . . . . . . . . . . . . . . . . . . . . . 179
Accumulating costs in the production report . . . . . 181
Service and manufacturing firms. . . . . . . . . . . . . . . 181
The impact of work in process inventories on
process costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182
Equivalent units of production. . . . . . . . . . . . . . . . . 182
Two methods of treating beginning
work-in-process inventory. . . . . . . . . . . . . . . . . 185
Weighted average costing. . . . . . . . . . . . . . . . . . . . . . . . 186
Overview of the weighted average method . . . . . . . 187
Five steps in preparing a production report . . . . . . 188
Production report . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Evaluation of the weighted average method. . . . . . 192
Multiple inputs and multiple departments. . . . . . . . . . 192
Non-uniform incurrence of manufacturing inputs. . . 192
Multiple departments. . . . . . . . . . . . . . . . . . . . . . . . 195
Appendix 5a production report – first-in, first-out costing. . . 197
Differences between the first-in, first-out and
weighted average methods. . . . . . . . . . . . . . . . . . . . . . . 197
Example of the first-in, first-out method . . . . . . . . 198
CHAPTER 6
ACTIVITY-BASED COSTING. . . . . . . . . . . . . . . . . . . . . . 223
Limitations of functional-based cost accounting
systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .225
Non-unit-related overhead costs. . . . . . . . . . . . . . . 226
Product diversity. . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
Illustrating the failure of unit-based overhead
rates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228
Illustrating relationships: product diversity and
product costing accuracy . . . . . . . . . . . . . . . . . . 233
Activity-based product costing. . . . . . . . . . . . . . . . . . . . 235
Identifying activities and their attributes. . . . . . . . . 236
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
CONTENTS vii
135 Assigning costs to activities . . . . . . . . . . . . . . . . . . . 238
136 Assigning costs to products . . . . . . . . . . . . . . . . . . . 240
137
CHAPTER 7
137
MASTER BUDGET AND BEHAVIOURAL ISSUES . . . . . 257
138
Description of budgeting. . . . . . . . . . . . . . . . . . . . . . . . . 259
139
Budgeting and planning and control . . . . . . . . . . . . 259
140
Benefits of budgeting . . . . . . . . . . . . . . . . . . . . . . . . 261
143
The master budget . . . . . . . . . . . . . . . . . . . . . . . . . . 262
Preparing the operating budget. . . . . . . . . . . . . . . . . . . 264
144
Sales budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265
146
Production budget. . . . . . . . . . . . . . . . . . . . . . . . . . . 268
147
Direct materials purchases budget. . . . . . . . . . . . . 270
148
Direct labour budget. . . . . . . . . . . . . . . . . . . . . . . . . 272
Overhead budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . 273
Ending finished goods inventory budget . . . . . . . . . 274
Cost of goods sold budget. . . . . . . . . . . . . . . . . . . . . 275
Selling and administrative expenses budget . . . . . 276
Preparing the financial budget. . . . . . . . . . . . . . . . . . . . 277
Cash budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278
Budgeted income statement . . . . . . . . . . . . . . . . . . 285
Budgeted balance sheet. . . . . . . . . . . . . . . . . . . . . . 286
Not-for-profit budgets . . . . . . . . . . . . . . . . . . . . . . . 288
Budgets and behavioural issues . . . . . . . . . . . . . . . . . . 290
Frequent feedback on performance. . . . . . . . . . . . .290
Monetary and non-monetary incentives . . . . . . . . . 290
Participative budgeting. . . . . . . . . . . . . . . . . . . . . . . 291
Realistic standards . . . . . . . . . . . . . . . . . . . . . . . . . . 293
Controllability of costs . . . . . . . . . . . . . . . . . . . . . . . 293
Multiple measures of performance. . . . . . . . . . . . . 293
CHAPTER 8
STANDARD COSTING: A MANAGERIAL
CONTROL TOOL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315
Unit standards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317
How standards are developed . . . . . . . . . . . . . . . . . 317
Types of standards. . . . . . . . . . . . . . . . . . . . . . . . . . . 318
Why standard cost systems are adopted. . . . . . . . . 319
Standard product costs. . . . . . . . . . . . . . . . . . . . . . . . . . 322
Variance analysis: a general description. . . . . . . . . . . . 324
Price and usage variances . . . . . . . . . . . . . . . . . . . . 325
The decision to investigate. . . . . . . . . . . . . . . . . . . . 326
Variance analysis: materials. . . . . . . . . . . . . . . . . . . . . . 328
Direct materials variances. . . . . . . . . . . . . . . . . . . . 329
Using materials variance information. . . . . . . . . . . 331
Variance analysis: direct labour. . . . . . . . . . . . . . . . . . . 333
Direct labour variances. . . . . . . . . . . . . . . . . . . . . . . 334
Using labour variance information. . . . . . . . . . . . . .336
Appendix 8a accounting for variances. . . . . . . . . . . . . . 337
Entries for direct materials variances. . . . . . . . . . . 338
Entries for direct labour variances . . . . . . . . . . . . . 338
Disposition of materials and labour variances. . . . 339
 viii CONTENTS

CHAPTER 9 Common fixed expenses. . . . . . . . . . . . . . . . . . . . . . 414

FLEXIBLE BUDGETS AND OVERHEAD ANALYSIS . . . 357 Preparing segmented income statements . . . . . . . 414
Using budgets for performance evaluation. . . . . . . . . . 359 Break-even point in units and in sales dollars . . . . . . . 417
Static budgets versus flexible budgets . . . . . . . . . . 359 Using operating income in cost–volume–profit
Static budgets and performance reports . . . . . . . . 360 analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 418
Variable overhead analysis. . . . . . . . . . . . . . . . . . . . . . . 365 Break-even point in units . . . . . . . . . . . . . . . . . . . . . 420
Total variable overhead variance . . . . . . . . . . . . . . . 366 Break-even point in sales dollars . . . . . . . . . . . . . . 422
Comparison of the variable overhead spending Units and sales dollars needed to achieve a
variance with the price variances of target income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426
materials and labour. . . . . . . . . . . . . . . . . . . . . . 368 Units to be sold to achieve a target income. . . . . . .426
Responsibility for the variable overhead Sales revenue to achieve a target income. . . . . . . . 428
spending variance. . . . . . . . . . . . . . . . . . . . . . . . 369 Graphs of cost–volume–profit relationships. . . . . . . . . 429
Responsibility for the variable overhead The profit–volume graph. . . . . . . . . . . . . . . . . . . . . . 430
efficiency variance. . . . . . . . . . . . . . . . . . . . . . . . 369 The cost–volume–profit graph . . . . . . . . . . . . . . . . . 431
A performance report for the variable overhead Assumptions of cost–volume–profit analysis . . . . . 432
spending and efficiency variances. . . . . . . . . . . 370 Illustrating relationships among CVP variables. . . 433
Fixed overhead analysis . . . . . . . . . . . . . . . . . . . . . . . . . 371 Multiple-product analysis. . . . . . . . . . . . . . . . . . . . . . . . 435
Total fixed overhead variances. . . . . . . . . . . . . . . . . 372 Break-even point in units . . . . . . . . . . . . . . . . . . . . . 436
Responsibility for the fixed overhead spending Break-even point in sales dollars . . . . . . . . . . . . . . 438
variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374 Cost–volume–profit analysis and risk and
Analysis of the fixed overhead spending uncertainty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442
variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 Introducing risk and uncertainty . . . . . . . . . . . . . . . 445
Responsibility for the fixed overhead volume Sensitivity analysis and cost–volume–profit . . . . . . 450
variance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
Analysis of the volume variance. . . . . . . . . . . . . . . . 375 MAKING THE CONNECTION 480
Activity-based budgeting. . . . . . . . . . . . . . . . . . . . . . . . . 376
Static activity budgets. . . . . . . . . . . . . . . . . . . . . . . . 376 CHAPTER 11
Activity flexible budgeting. . . . . . . . . . . . . . . . . . . . . 377 SHORT-RUN DECISION MAKING:
RELEVANT COSTING . . . . . . . . . . . . . . . . . . . . . . . . . . . 483
MAKING THE CONNECTION 402 Short-run decision making. . . . . . . . . . . . . . . . . . . . . . . 485
The decision-making model. . . . . . . . . . . . . . . . . . . 485
CHAPTER 10 Step 1: Recognise and define the problem . . . . . . . 486
COST–VOLUME–PROFIT ANALYSIS: Step 2: Identify the alternatives as possible
A MANAGERIAL PLANNING TOOL . . . . . . . . . . . . . . . . 405 solutions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 486
Measuring the performance of profit centres by Step 3: Identify the costs and benefits associated
using variable and absorption income statements. . . . 407 with each feasible alternative. . . . . . . . . . . . . . . 487
Absorption costing. . . . . . . . . . . . . . . . . . . . . . . . . . . 407 Step 4: Estimate the relevant costs and benefits
Variable costing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 for each feasible alternative. . . . . . . . . . . . . . . . 487
Comparison of variable and absorption Step 5: Assess qualitative factors . . . . . . . . . . . . . . 488
costing methods . . . . . . . . . . . . . . . . . . . . . . . . . 407 Step 6: Make the decision. . . . . . . . . . . . . . . . . . . . . 490
Inventory valuation . . . . . . . . . . . . . . . . . . . . . . . . . . 408 Relevant costs defined . . . . . . . . . . . . . . . . . . . . . . . 490
Income statements using variable and Cost behaviour and relevant costs. . . . . . . . . . . . . . 493
absorption costing. . . . . . . . . . . . . . . . . . . . . . . . 410 Some common relevant cost applications. . . . . . . . . . . 493
Production, sales and income relationships. . . . . . 412 Make-or-buy decisions. . . . . . . . . . . . . . . . . . . . . . . 494
Evaluating profit-centre managers . . . . . . . . . . . . . 413 Special-order decisions . . . . . . . . . . . . . . . . . . . . . . 497
Segmented income statements using variable Keep-or-drop decisions . . . . . . . . . . . . . . . . . . . . . . 500
costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 414 Further processing of joint products. . . . . . . . . . . . 504
Direct fixed expenses . . . . . . . . . . . . . . . . . . . . . . . . 414 Product mix decisions. . . . . . . . . . . . . . . . . . . . . . . . . . . 506

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 CONTENTS ix

Product mix decision illustrated . . . . . . . . . . . . . . . 507 CHAPTER 13

Multiple constrained resources. . . . . . . . . . . . . . . . 509 PERFORMANCE EVALUATION,
The use of costs in pricing decisions. . . . . . . . . . . . . . . 510 DECENTRALISATION, TRANSFER PRICING
Cost-based pricing . . . . . . . . . . . . . . . . . . . . . . . . . . 510 AND REWARDS SYSTEMS. . . . . . . . . . . . . . . . . . . . . . . 579
Decentralisation and responsibility centres . . . . . . . . . 581
CHAPTER 12 Reasons for decentralisation . . . . . . . . . . . . . . . . . . 582
LONG-RUN DECISION MAKING. . . . . . . . . . . . . . . . . . . 529 Divisions in the decentralised firm . . . . . . . . . . . . . 583
Types of capital investment decisions. . . . . . . . . . . . . . 531 Measuring the performance of investment
Independent and mutually exclusive projects. . . . . 531 centres by using return on investment . . . . . . . . . . . . . 588
Making capital investment decisions. . . . . . . . . . . . 531 Return on investment . . . . . . . . . . . . . . . . . . . . . . . . 588
Non-discounting models: payback period and Margin and turnover . . . . . . . . . . . . . . . . . . . . . . . . . 588
accounting rate of return . . . . . . . . . . . . . . . . . . . . . . . . 533 Advantages of the return on investment
Payback period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 533 measure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591
Accounting rate of return . . . . . . . . . . . . . . . . . . . . . 536 Disadvantages of the return on investment
Discounting models: the net present value measure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 593
method. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537 Measuring the performance of investment
Net present value defined. . . . . . . . . . . . . . . . . . . . . 537 centres by using residual income and economic
Net present value illustrated . . . . . . . . . . . . . . . . . . 538 value added . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595
Illustrating relationships: NPV, discount Residual income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 595
rates and cash flows. . . . . . . . . . . . . . . . . . . . . . 540 Economic value added . . . . . . . . . . . . . . . . . . . . . . . 598
Internal rate of return. . . . . . . . . . . . . . . . . . . . . . . . . . . 541 Transfer pricing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
Internal rate of return defined. . . . . . . . . . . . . . . . . 541 Impact of transfer pricing on divisions and
Internal rate of return illustrated: the firm as a whole . . . . . . . . . . . . . . . . . . . . . . . 601
multiple-period setting with uniform
cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .542 CHAPTER 14
Internal rate of return illustrated: multiple-period RESOURCE MANAGEMENT: ACTIVITY-BASED
setting with uneven cash flows. . . . . . . . . . . . . . . . 543 MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 621
Post-audit of capital projects. . . . . . . . . . . . . . . . . . . . . 545 Activity-based management: customer profitability
Post-audit illustrated . . . . . . . . . . . . . . . . . . . . . . . . 545 analysis, supplier performance indices and quality
Post-audit benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 546 management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 623
Post-audit limitations. . . . . . . . . . . . . . . . . . . . . . . . 547 Activity-based management of customer
Mutually exclusive projects. . . . . . . . . . . . . . . . . . . . . . . 547 costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625
Net present value compared with internal Activity-based management
rate of return. . . . . . . . . . . . . . . . . . . . . . . . . . . . 547 of supplier costing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629
NPV analysis for mutually exclusive projects Supplier costing methodology . . . . . . . . . . . . . . . . . 629
illustrated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 Activity-based management:
Special considerations for advanced process value analysis. . . . . . . . . . . . . . . . . . . . . . . . . . .631
manufacturing environments. . . . . . . . . . . . . . . 550 Driver analysis: the search for root causes. . . . . . . 632
Appendix 12a present value concepts . . . . . . . . . . . . . . 553 Activity analysis: identifying and assessing
Future value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554 value content. . . . . . . . . . . . . . . . . . . . . . . . . . . . 633
Present value. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 554 Activity performance measurement . . . . . . . . . . . . 638
Present value of an uneven series of Quality cost management and reporting. . . . . . . . . . . . 639
cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 Quality cost management. . . . . . . . . . . . . . . . . . . . . 640
Present value of a uniform series of cash flows. . . . 555 Quality-related activities. . . . . . . . . . . . . . . . . . . . . . 640
Appendix 12b present value tables . . . . . . . . . . . . . . . . 556 Reporting quality cost management . . . . . . . . . . . . 642

MAKING THE CONNECTION 577

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 x CONTENTS

CHAPTER 15 Psychological empowerment. . . . . . . . . . . . . . . . . . 735

INVENTORY MANAGEMENT AND SCHEDULING. . . . . 661 Organisational goal commitment theory. . . . . . . . . 736
Decision making for inventory management . . . . . . . . 663 Motivational theory . . . . . . . . . . . . . . . . . . . . . . . . . . 737
Inventory-related costs. . . . . . . . . . . . . . . . . . . . . . . 663 Meaningfulness of financial measures . . . . . . . . . . 738
Economic order quantity: the traditional Characteristics required for a successful SPMS . . 740
inventory model. . . . . . . . . . . . . . . . . . . . . . . . . . 664 The Balanced Scorecard – basic concepts . . . . . . . . . . 742
The economic order quantity . . . . . . . . . . . . . . . . . . 666 The role of performance measures. . . . . . . . . . . . . 745
Reorder point. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 667 Linking performance measures to strategy . . . . . . 747
Economic order quantity and inventory The four perspectives and performance
­management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 669 measures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 752
Just-in-time approach to inventory management. . . . 669 Implementation problems . . . . . . . . . . . . . . . . . . . . 777
Just-in-time purchasing and production Societal values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 777
approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670
Comparing just-in-time and traditional CHAPTER 17
inventory approaches . . . . . . . . . . . . . . . . . . . . . 672 ENVIRONMENTAL AND SOCIAL MANAGEMENT
Limitations of the just-in-time approach . . . . . . . . 673 ACCOUNTING: ITS CONTRIBUTION TO BUSINESS
Lean production versus JIT production. . . . . . . . . . 674 SUSTAINABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 799
Additional cost management practices. . . . . . . . . . . . . 677 Sustainability and business sustainability. . . . . . . . . . . 801
Kaizen costing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 677 Six phases of sustainability. . . . . . . . . . . . . . . . . . . . . . . 803
Target costing and life cycle costing . . . . . . . . . . . . 681 Why and how do firms become sustainable
Decision making for restricted resource and businesses?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 804
inventory scheduling. . . . . . . . . . . . . . . . . . . . . . . . . . . . 685 Measuring cost savings through sustainability
Production scheduling of products or services. . . .686 strategies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807
Measuring savings in water usage. . . . . . . . . . . . . . 809
CHAPTER 16 Measuring savings in energy consumption. . . . . . . 812
STRATEGY – STRATEGIC MANAGEMENT AND Measuring savings in solid and liquid waste
PERFORMANCE SYSTEMS. . . . . . . . . . . . . . . . . . . . . . . 713 ­management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 816
Defining strategy, levels of strategy and how Activity-based working (ABW) . . . . . . . . . . . . . . . . . . . . 819
strategies are formulated and implemented . . . . . . . . 715 Environmental and social management
Defining strategy and levels of strategy . . . . . . . . . 715 accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831
How strategies are formulated and Environmental cost management . . . . . . . . . . . . . . 834
implemented. . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 Environmental control activities. . . . . . . . . . . . . . . . 836
How and why organisations choose their Environmental failure activities. . . . . . . . . . . . . . . . 836
strategy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721 EMA data for an integrated sustainability
How an organisation chooses a strategy. . . . . . . . . 721 report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 841
Why an organisation chooses a strategy. . . . . . . . . 722 Using EMA to prepare GRI reports and assess risk. . . 844
Types of pricing strategies and associated strategic The Sustainability Balanced Scorecard. . . . . . . . . . . . . 849
goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 726 Glossary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 871
The role of strategy and the strategic Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881
management processes . . . . . . . . . . . . . . . . . . . . . . . . . 731

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 xi

PREFACE
Management accounting is one of the two major streams of accounting. The first stream is financial accounting,
which has traditionally focused on preparing the financial accounts and reports for external reporting and
for ratio analysis, which are often used by external users for decision making. Management accounting
traditionally involves the provision of product costs, budgeting and variance analysis to support management
with the tools to undertake their three management roles: planning, controlling and decision making. The
scope of management accounting information has broadened to include non-financial data and to capture
information beyond the organisation’s internal processes.
Additionally, information is now sought from management accounting systems to aid not only the
formulation of the organisation’s strategies (including its sustainability strategy) but also the development of
an environmental management accounting system that enables data collection. This data allows organisations
to disclose environment, social and governance (ESG) information that facilitates the reporting of ESG
risk management, as now required by the Australian Stock Exchange through its third revisions of its
eight Corporate Governance Principles and Recommendations. In particular, Guideline 7.4 requires listed
companies to report environmental and social risk exposures and therefore introduces an additional role for
management accounting.
This second Asia–Pacific edition of the internationally successful Mowen, Hansen and Heitger text
continues to add contemporary topics and techniques, as well as examples of these techniques’ uses relevant
in the Asia–Pacific region. Such information provides academics and students in our region with access to
information about real organisational operations through ‘Experience managerial decisions’ examples, ‘Food
for thought, examples featuring Nestlé, and general examples linked to discussions throughout the textbook.
These descriptions of, and examples related to, the manufacturing, retail or service sectors within our region
show students relevant, real-life organisations using management accounting techniques. There are a number
of notable changes outlined below that are incorporated into this second edition. Academics and students
should receive benefits from these changes.
This edition retains its structure of a sequence of earlier chapters and sections that are designed to
enlighten students by making available the information they require to gain knowledge about techniques, as
well as the wisdom about how to use them. Additionally, there has been a reorganisation of later chapters to
reflect a grouping and sequencing of chapters for advanced management accounting topics. This reorganisation
has added two chapters on advanced management accounting topics. The use of themes allows the course
convenor to use a broad focus across the five chapters for a Master of Professional Accounting course for, say,
up to a five-week period. Consequently, the use of a common theme for the grouping of topics content for these
chapters is suitable for a management accounting course for a Master of Professional Accounting program as
well as for a second undergraduate management accounting course. Finally, course convenors of advanced
undergraduate courses may use the common theme in each chapter to spread the chapter contents across more
than one week to allow a deeper learning of the topics within the theme.
The intention is to use chapters as a series of ‘staircases’ to knowledge and wisdom. The Staircase exercises
in each chapter are symbolic of the interrelationships among the chapters; they are meant to encourage
students to link the current chapter (stair/step) to subsequent chapters (stairs). Making the connection sections
are strategically placed to enable students to look back at earlier topics, comparing and contrasting them as
they journey through the book. The text’s cover reflects both this structure and the way in which management
accounting information is interconnected throughout the organisation. Visualising the interrelationships
among chapters will show students that people at different levels of management, and in many different

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 xii PREFACE

industries, need access to different types and formats of management accounting information. The different
chapters of the textbook provide information and tools that may be linked in different ways and involve people
from different positions of the organisation, depending upon the decision maker’s needs.
The Asia–Pacific edition authors have found that students are confronted with information overload when
they start a management accounting course. One reason for this is that management accounting categorises or
classifies the same costs into different categories in each week of the course, because each category is focused
on producing specific-purpose reports. Students are often familiar with the compliance format for external
reporting from their prior studies of financial accounting, which uses absorption costing. Another challenge to
students has been reconciling the treatment and classification of direct and indirect production costs to calculate
absorption costing profit compared to variable costing profit. A further source of information overload is the
combination of the traditional indirect cost allocation with activity-based indirect cost allocation within one
chapter, and the concurrent discussion of the application of these differences for topics in sequential chapters.
Students who are learning the underlying concepts and application of the tools tend to feel overwhelmed by the
added comparison layer of traditional and activity-based approaches within sequential chapters.
The structure of this book differs from the US version, as well as other textbooks available in Australia,
in that it introduces students to the underlying concepts and applications of management accounting tools
based on the traditional allocation approach and absorption costing method, an approach that is consistent
with how they have been taught within financial accounting courses. Activity-based costing is introduced
as a separate chapter, and a further chapter contains information about the use of activity-based costing to
manage activities. Activity-based management topics are now grouped by activity themes into two chapters.
Resources management for activities is the focus of one chapter. These activity themes include customer costing
and activity-based management of supplier costing, product and environmental quality management and cycle
time management. The other chapter has a theme of inventory management and inventory scheduling. Inventory
management includes lean production, kaizen costing, target costing and life cycle costing as additional activity-
cost management practices, while inventory scheduling is linked to the Theory of Constraints (TOC) and short-
term manufacturing scheduling decisions to overcome bottlenecks in the production processes.
Similarly, the chapter about issues of performance evaluation encompasses the impact of decentralisation
and transfer pricing on the appropriateness and usefulness of traditional rewards systems. The second new
chapter provides more in-depth information about types and roles of strategies, the use of strategic management
processes, an illustration of how strategy maps may aid in efficiency performance and the achievement of growth
performance strategies outcomes using a multidimensional performance measurement and management system,
such as the balanced scorecard. Finally, the contents of the business sustainability chapter have been enhanced
to provide information about how environmental and social management accounting contributes to business
sustainability, including the association between environmental and social management accounting and the
Global Reporting Initiative (GRI) reporting. This chapter also includes information about the recognition of the
phases of sustainability, the use of activity-based working to reduce energy costs and the use of the Sustainability
Balanced Scorecard (SBSC) as a management process and strategic performance measurement system. Working
examples of cost savings through decreased resource consumption by using eco-efficient processes are included
throughout the Staircase exercises in each chapter.

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 xiii

ABOUT THE AUTHORS

Dr Maryanne M. Mowen is Associate Professor Emerita of Accounting at Oklahoma State University.
She currently teaches online classes in cost and management accounting for Oklahoma State University.
She received her PhD from Arizona State University. Dr Mowen brings an interdisciplinary perspective to
teaching and writing in cost and management accounting, with degrees in history and economics. She has
taught classes in ethics and the impact of the Sarbanes-Oxley Act on accountants. Her scholarly research is in
the areas of management accounting, behavioural decision theory, and compliance with the Sarbanes-Oxley
Act. She has published articles in journals such as Decision Science, The Journal of Economics and Psychology
and The Journal of Management Accounting Research. Dr Mowen has served as a consultant to mid-sized
and Fortune 100 companies and works with corporate controllers on management accounting issues. She
is a member of the Northern New Mexico chapter of SCORE and serves as a mentor, assisting small and
start-up businesses. Outside the classroom, she enjoys hiking, travelling, reading mysteries and working out
crossword puzzles.

Dr Don R. Hansen is Professor Emeritus of Accounting at Oklahoma State University. He received his PhD
from the University of Arizona in 1977. He has an undergraduate degree in mathematics from Brigham Young
University. Dr Hansen’s research interests include activity-based costing and mathematical modelling. He
has published articles in both accounting and engineering journals, including The Accounting Review, The
Journal of Management Accounting Research, Accounting Horizons and Accounting, Organizations and
Society. He has served on the editorial board of The Accounting Review. His outside interests include family,
church activities, reading, movies and watching sports.

Dr Dan L. Heitger is Professor of Accounting and Co-Director of the Center for Business Excellence at Miami
University. He received his PhD from Michigan State University and his undergraduate degree in accounting
from Indiana University. He actively works with executives and students of all levels in developing and teaching
courses in managerial and cost accounting, business sustainability, risk management and business reporting.
He co-founded an organisation that provides executive education for large international organisations.
Dr Heitger’s interactions with business professionals, through executive education and the Center, allow him
to bring a current and real-world perspective to his writing. His published research focuses on managerial
accounting and risk management issues and has appeared in Harvard Business Review, Behavioral Research in
Accounting, Accounting Horizons, Issues in Accounting Education, Journal of Accountancy and Management
Accounting Quarterly. His outside interests include hiking with his family in the National Park system.

Professor John S. Sands is a Professor of Accounting at the University of Southern Queensland. He holds two
bachelor’s degrees (one in accounting and the other in management), a Master of Philosophy and a PhD. John is
a fellow of CPA Australia. Currently, John is the inaugural chair of AFAANZ Management Accounting Special
Interest Group (SIG8), a member of the Asia–Pacific EMAN Steering Committee and a Tertiary Education
Quality and Standards Agency (TEQSA) Expert. In addition to teaching, his academic role also involves
being an external peer reviewer of accounting learning standards within the assessment group ‘Achievement
Matters’. John has been a director of undergraduate programs and Assistant Dean of learning and teaching.
John has produced over 30 peer-reviewed journal publications and has served in a guest editorial role for
special issues of the Journal of Accounting and Organizational Change, Issues in Social and Environmental
Accounting and the Australian Research Journal.

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 xiv ABOUT THE AUTHORS

Dr Lanita Winata is a senior lecturer at Griffith University. Lanita completed her PhD at Griffith University and
her MBA at Western Michigan University, USA. Lanita has many years’ teaching experience across different
universities and countries. In addition, she has supervised the completion of many PhD theses. Her teaching and
research interests incorporate performance management, culture, leadership, corporate governance, management
operation research and information and communications technology (ICT). Her works have been published in a
number of peer-reviewed journals, including the British Accounting Review, International Journal of Hospitality
Management, Journal of Business Review, International Journal of Business Research, Contemporary Management
Research and Journal of Academy of Business and Economics. Lanita also has many years’ working experience as
a certified public accountant. As a partner of a CPA International firm, she has extensive experience in auditing
and management consulting.

Dr Sophia Su is an Associate Professor in the Department of Accounting and Corporate Governance at Macquarie
University. She holds a bachelor’s degree in professional accounting along with the First Class Honours award
and a PhD in Accounting from Macquarie University. Her teaching experience spans over 10 years, and she
has taught both financial and management accounting courses across different universities. Sophia’s research
areas include management control systems, environmental management accounting, organisational life cycle
and employee organisational commitment. Her research papers have been published in over 20 ABDC ranked
peer-reviewed academic journals, including Management Accounting Research; Accounting, Auditing &
Accountability Journal; Australasian Journal of Environmental Management and Financial Accountability and
Management. Sophia has supervised a number of PhD and Masters projects by research students in the field of
management accounting. In addition to teaching and research, Sophia serves as the Undergraduate Program
Director at Macquarie University.

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 xv

ACKNOWLEDGEMENTS
John Sands This book has become a reality through the dedicated contributions of a number of people. First,
I wish to thank Lynette Hardman for her dedicated research for the first edition. Second, our thanks go to
Dr Kirsten Rae for her valuable contribution to many chapters. Third, we appreciate Rosalie Adriano, Head
of Business Excellence, Finance & Control, Nestlé Oceania, for her advice regarding the ‘Food for thought’
boxes throughout the text; Blake Read from Beach Burrito Company; and the other businesses featured in the
‘Experience managerial decisions’ sections at the start of each chapter. Fourth, we express our appreciation
to the reviewers named below for their time and valued feedback. Finally, but most importantly, a special
thanks to our families, for releasing us to complete this book, and to many people at Cengage Learning for their
professional support and patience.

Lanita Winata I dedicate this book to my parents, Els and Jahja Winata, for their initial support and
encouragement, which made this book possible. I would like to express my gratefulness to Dr Kirsty Rae
for her dedicated research to help the accomplishment of this edition. Also, I would like to thank Cengage
Learning staff, who have given all support to make the publication happen. Finally, I appreciate my family for
standing beside me throughout my career and the writing of this book.

Sophia Su I would like to take this opportunity to express my greatest gratitude to my husband, Travis
Donovan, who supported and encouraged me throughout this project in spite of all the time it took me away
from him. I would also like to thank the reviewers for their constructive feedback provided, which I believe
has helped to improve significantly this second edition.

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
xvi

Guide to the text

As you read this text you will find a number of features in every
chapter to enhance your study of managerial accounting and help
you understand how the theory is applied in the real world.

CHAPTER OPENING FEATURES

Identify the key concepts that the chapter will cover Gain an insight into how managerial accounting
with the Learning outcomes/objectives at the start theories relate to the real world through the
of each chapter. Experience Managerial Decisions vignette at
the beginning of each chapter.
1

2 MANAGERIAL ACCOUNTING

EXPERIENCE MANAGERIAL DECISIONS

WITH COSTUMES.COM.AU
The greatest benefit of managerial accounting is also its biggest challenge – to provide managers
with information that improves decisions and creates organisational value. This information helps
inform managers about the impact of various strategic and operational decisions on key non-financial
performance measures and their eventual impact on the organisation’s financial performance. The
information is challenging to prepare and analyse because it requires an understanding of all value chain
components that affect the organisation, including research and development, production, marketing,
distribution and customer service.
Since its inception in 2009, Costumes.com.au has blended the right managerial accounting
information and an innovative business model to provide costumes to customers in Australia and New
Zealand. Using the Internet and marketing creativity, Costumes.com.au serves a market of millions of
After studying Chapter 1, Australian and New Zealand consumers each year.
you should be able to:
‘Using the Internet and marketing creativity, Costumes.com.au serves a market of
LO1 explain the meaning of millions of Australian and New Zealand consumers each year.’

1
managerial accounting
INTRODUCTION LO2 explain the differences between Costumes.com.au measures key performance indicators to guide its decision making. This might
TO MANAGERIAL managerial accounting and include, for example, managerial accountants analysing measures of customer satisfaction, average
ACCOUNTING financial accounting time between order placement and costume arrival for each shipping method and the profitability
of individual customer (or costume!) types. As customer trends change, competitors emerge and
LO3 identify and explain the current
focus of managerial accounting technological advances occur, Costumes.com.au’s managerial accounting information will need to be
adapted to provide crucial insight into the company’s performance and how its strategy should evolve to
LO4 describe the role of managerial remain Australasia’s leading Internet costume retailer.
accountants in an organisation
LO5 explain the importance of
ethical behaviour for managers
and managerial accountants
LO6 identify three forms of
certification available to
managerial accountants.

BK-CLA-MOWEN_HANSEN_2E-180133-Chp01.indd 1 7/16/18 8:20 PM

BK-CLA-MOWEN_HANSEN_2E-180133-Chp01.indd 2 7/16/18 8:20 PM

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 Part of this process can be observed by comparing UnitingCare’s strategic plan 2014–2017 with
the actual results stated in the 2017 Annual Report. The results of their 2017 Annual Report
show that UnitingCare had significant success in achieving many aspects of its three-part
2014–2017 strategic plan. First, there was a more than 20 per cent increase in the number of
people receiving their Home Care Packages. Second, UnitingCare received more than $440million
MANAGERIAL ACCOUNTING

in additional funding from grants in the 2017 financial year. The third strategic objective
has been successful through introducing mentoring and staff coaching programs, as well as if they cannot be traced to the cost object of interest (e.g. unit of product). The manuf
mobilising volunteers. More than 50 Griffith University volunteers made a huge impact on
GUIDEa TO
overhead cost category contains wideTHE
varietyTEXT xvii of manufacturing o
of items. Examples
those who needed UnitingCare’s services9. The purpose of matching an organisation’s planned costs include depreciation on plant buildings and equipment, janitorial and maintenanc
performance with its actual performance is to identify both positive and negative attributes of plant supervision, materials handling, power for plant utilities and plant property rates
52 MANAGERIAL
performance. That is, where the organisation has performed better than planned, managers The important thing to remember is that all costs in the factory are classified a
may ACCOUNTING
consider whether any of these improvements may be replicated in other parts of the organisation, materials, direct labour or manufacturing overhead. No product cost can be omitt
and where performance was worse than expected, managers may need to investigate whether classification, no matter how far removed you might think it is from the actual produ
a product. Earlier we mentioned that indirect materials and indirect labour are incl
remedial action needs to be taken.
C O U R S E MAT E E XP RE S S
overhead. In manufacturing, the glue used in furniture or toys is an example of indirect m
Decision making as is the cost of oil to grease baking sheets for3producing cookies.
CHAPTER
Express
The Coursemate Express website contains:

decision making FEATURES WITHIN CHAPTERS

The process of choosing among competing alternatives is called decision making. This managerial
function is intertwined with planning and control in that a manager cannot successfully plan or
Total product cost
Visit http://login.cengagebrain.com and use the
worksheets and75
COST •BEHAVIOUR
• revision quizzes
templates
the process of The total product costaccess
equals the sum videos and animations direct labour and manuf
of direct materials,
choosing among supervision
control the organisation’s actions without making costs
decisions amounted
regarding to $320
competing 000 for anywith
codealternatives.
that comes level
this of output
book for 12between 20 000
months’ access and 50• 000
to the
overhead: • a chapter glossary and flashcards for key terms
competing For instance, if BMW were to contemplate thewhipper snippers
possibility processed.
of offering Thus,
a car that runssupervision
on petrol
resources andandis a fixed
study cost
tools for and
this can be expressed as:
chapter.
alternatives Total product cost = Direct
andmaterials
more! + Direct labour + Manufacturing overhead
Supervision (e.g.
hydrogen, its ultimate decision would be improved if information about the alternatives cost = $320 000
Take the role ofpetrol
a managerial
versus hydrogenaccountant by solving
versus hybrid combinations of these two fuel options) Build your
wasassumes
gathered knowledge
and The unit ofproduct
managerial accounting
cost equals total product cost divided by the number of units prod
Strictly speaking, this equation that the fixed costs are $320
SU MMA
000 for all levels
RY
(as if
practical problems with the
made available You Decide
to managers. feature.
One of the major
theroles
line of the managerial
extends concepts
accounting
to the vertical axis inbypractical
as information
indicated ways,inwith
the dashed portion 3.1). Staircase
Exhibitthe
Per-unit product cost boxes
Although
=
Total product cost
system is to supply information that facilitates decision
this making.
assumption LO1
is not true, it is harmless Explain the meaning
if the operating of cost and
decisions arehow costs are
confined • selling costsNumber
to the relevant are theofcosts
unitsofproduced
marketing and distributi
range.
and Staircase
assigned to Icons,
products and which
services interlink between goods chapters.
and services and administrative costs are the
Staircase 2.1 shows how to calculate total product cost and per-unit product cost.
• Cost is the cash or cash-equivalent value sacrificed for costs of organising and running a company.
Can fixed costs change? Of course, but this possibility does not make them variable.
goods and services that are expected to bring a current • Both selling and administrative costs are period costs
YOU What constitutes managerial accounting
They areinformation?
fixed at a new higher (or lower) rate. Going back to Kuller Mower, suppose that the
DECIDE or future benefit to the organisation.
Suppose you are a Costco Australia executive at company
the company’sgives a raise NSW
Lidcombe, to the assembly
offices and youdepartment
STAIRCASE
have
• Managers supervisor.
use cost Instead
CALCULATING
information ofPRODUCT
to determine$320the000 COST
per year, the Prepare
INLO3
TOTAL AND PER income
UNITstatements for manufacturing
salary is $340 000 per year. The cost
been chosen to decide whether or not the company should continue its policy of sourcing its finest of of
cost 2.1
supervision
objects suchwithin
coffee the relevant
as products, projects, range is $340 000 per service organisations
plants and
WHY:
from Rwanda. year. However, supervision cost is still fixed with respect to the number of whipper snippers
customers. STAIRCASE 2.3, 2.4, 2.5, 2.6, 2.7, 2.8
product costs are essential to management control and decision making. Managers use produc
produced. • Direct costs are traced to cost objects based on cause- • The cost of within
goods manufacturing
manufactured (COGM) represents th
14 What
MANAGERIAL types of information should you consider as you decide how best to structure and
ACCOUNTING costs to create budgets and analyses. product costs can then be contrast
and-effect relationships. total product cost of goods completed during the perio
analyse this important, long-term strategic decision? with period costs incurred outside of manufacturing.
What about the do relationship between
Discretionary fixed costs and committed fixed costs
• Indirect (i.e. overhead) costs are allocated to cost objects
INFORMATION:
and transferred to finished goods inventory. The cost
What challenges you expect to face time
inBy and product
making
their
life cycles? The rate of
this decision?
nature, fixed costs are difficult
technological
based on assumed relationships and convenience. of goods sold (COGs) represents the cost of goods tha
innovation has increased for many industries and the life of a particular product to canchange quickly – that is why they are considered fixed.
be quite BlueDenim Company makes blue jeans. Last wereweek, direct materials
sold during the period(denim, thread, zippers
and, therefore, an
transferre
What constitutes managerial accounting informationTwo is growing
types of considerably
fixed costs as
areorganisations
commonlyLO2must make thediscretionary
Define
recognised: variousrivets)
costs costing
offixed
manufacturing
costs and committed fixed
short. Managers must be able to respond quickly and decisively to changing market conditions $48 000 were put into production. Direct goods
from finished labourinventory
of $30 000 to(50
costworkers
of goods× 40 hour
sold.
decisions that include the global consequences ofcosts.
their actions, as well as fixed
Discretionary the impact
costsonare
an increasingly
fixed products
costs and
that providing
can be services
changed or as well
avoided as the
relatively easily
and will rely on managerial accounting information to accomplish this. $15 per hour) was incurred. Overhead equalled $72 000.there
For a retailer, By the
discretionary is endCOGM,
fixed
no of theand
week, BlueDenim
COGs ha
equals the
large number of vocal, well-informed and powerful
at stakeholders.
management’s Stakeholders include the company’s
discretion. For example,costs of sellingisand
advertising administration
amanufactured
discretionary fixed
3 000 pairscost. Advertising
of jeans. costs
beginning inventory plus net purchases minus ending
customers, suppliers, employees, regulators, politicians, lawmakers and local community members.
cost depends on the decision by management to2.1,
STAIRCASE purchase
2.2 Required:
print, radio or video advertising. This fixed costs that
Efficiency
Generally speaking, managerial accounting information can be financial in nature, such as sales revenue
cost might depend on the size of the ad or theare
• products
or cost of sales, or non-financial in nature, such as the number of quality defects or the percentage of
number of times
goods that it runs,
1areCalculate
either but it does not depend
purchased
inventory.
product cost for• last
the totalor For
can be changed
on manufacturing
week. and merchandising firms, cost of
relatively easily
Improving
manufacturing efficiency isare
plants that also a vital
inspected the number
forconcern.
compliance Both of units
financial
with human produced
rightsand and
non-financial
policies. One sold.
of the Management
produced
measures
most of can2raw
by converting easily decide
materials
Calculate the to
throughincrease
cost the
of use
one or decrease
pair of jeansgoods soldproduced
that was is subtracted from sales revenue to arrive
last week.
at management’s
dollarsof spent Trends in costsofover
on advertising. labour andand
indirect manufacturing resources, such as gross margin. In addition, for manufacturing firms, co
Learn about the various aspects of multinational
efficiency are needed. Cost is a critical measure
As
efficiency.
another example, suppose that,plant,
just
time
land and
before a new Solution:
machinery.
season, services
an are tasks
Australian performed
rugby league of
team, goods
discretion
manufactured must first be calculated before
measures of productivity changes can provide important measures of the efficacy of continuous >>
food-and-beverage producer Nestle’s business with
improvement decisions. For these efficiency themeasures
Unicorns,towas be of forced to costs
value, make must a for abe
customer
decision involving
properly 1 performed costs
or activities
discretionary by a customer
when they realised calculating cost of goods sold.
usingmanufactured
an organisation’s products or facilities. • service firms do not calculate gross margin because
the Food for Thought feature.9defined,
Hanks, G. F.measured and teams
(1995). Excellence assigned. Furthermore,
in action.
thatproduction
William Sporting
Management Accounting, ofp.output
February,
for the entirechanges
35.
Goods
season)should
musthad
with the
already
be related to the inputs 500 footballs (of the 900 footballs needed
Direct materials
• product costs are those costs, both direct and indirect,
team’s former logo, rather than itslabour
current one. The Unicorns’
$ 48 000
they do not purchase or produce inventory for sale
required, and the overall financial effect of productivity be calculated. Direct 30 000
of acquiring a product in a merchandising business and, as a result, do not have a cost of goods sold (i.e.
directors had to decide whether to play the entire season, orOverhead only half of the season, with the 72 000
and preparing it for sale, or of producing a product in a inventory expense).
outdated logo on the balls. In the end, the directors decided to
manufacturing business. product
give
Total the 500
costs are
product existing balls away
costclassified • All firms$150
next000
subtract selling and administrative
FOOD FOR to high schools. In this case, the $50 000 additional
on thecost to produce another 500 balls with theexpense
Nestlé is the world’s largest food and beverage business, employing moreasthan inventory
280 000 balance sheet and
2 per-unit then expensed
product as 000/3000
cost = $150 = $50 to arrive at net income.
THOUGHT new with
logosales
is aofdiscretionary
more than $110 cost,
billionbecause
incost it1867,
of In
goodscould
sold be changed
on the income(i.e. avoided)
statement whenrelatively
the easily.
BK-CLA-MOWEN_HANSEN_2E-180133-Chp01.indd 6
people in 456 factories in 84 countries,
infant mortality was high, and Henri The $50developed
Nestlé 000 is a discretionary
a milk-based food
Test yourself in hypothetical managerial accounting
costforthat
2008.
is entirely
inventory
babies is sold.fixed
unable because
7/16/18 8:20 PM the Unicorns directors needed

to feed from their mothers, and for to purchase

people whothe wereadditional footballs
old or infirm. scenarios as you read the text, with the Concept Q&A.
Rapid regardless
developmentof the number of games played (the driver for
followed and within five years Nestlé Milk was being football
soldcost).
around the world. Nestlé soon diversified into
other areas, including condensed milk and chocolate products.
In 1905, Nestlé merged with the Anglo-Swiss Condensed Milk Company, and the new venture was
known simply as Nestlé. Nestlé then continued to Consider
develop through product
the cost innovation
of a wedding and acquisitions.
reception. What costs are fixed? What costs are variable? What CONCEPT
Nestlé’s headquarters are in Switzerland but the
Americas; Europe, the Middle East and North Africa;
company’s
output
and
Often,
measure
theAsia,
structure
did youcomprises
Oceania
number andisAfrica.
of guests
three zones:
use in classifying
Oceania is afor
the as fixed or variable?
the costs
sub-
theBK-CLA-MOWEN_HANSEN_2E-180133-Chp02.indd
output measure a wedding reception.
40 The cost of food and drinks varies
Q&A
zone and is made up of the three regions: Australia, withNew Zealandof and
the number theThe
guests. Pacific Islands.
relevant The
range forPacific
a wedding might be the approximate size – perhaps small
Islands region is made up of four countries: two that (lessare
thanFrench speaking
100 guests), medium(French Polynesia
(100–200 andorNew
guests) large (200+ guests). Within a relevant range, fixed costs
Caledonia) and two that are English speaking (Papua mightNew Guinea
include and
rental of Fiji).
the facility, flowers and the cake.
Nestlé products have been available in Oceania since the 1880s; the trademark was registered in
New Zealand in 1885 and by 1906 Australia had become Nestlé’s second-largest export market. Nestlé
set up a business in Australia in 1908 and established a nationwide sales and distribution network, with
BK-CLA-MOWEN_HANSEN_2E-180133-Chp02.indd 52
manufacturing plants throughout Australia and New Zealand. The invention of MILO in 1934 stands out
as a great Australian achievement – the product of Australian ingenuity and distinctive Nestlé technology.
Nowadays, the brand is sold in 30 countries with worldwide sales of more than $550 million. In 1999, the
Oceania sub-zone of Nestlé was created, with its headquarters in Australia.22 Making the connections are discrete features at the
Nestlé has traded in the Pacific Islands for nearly 40 years, and in 1980 declared the Pacific Islands
as a market in its own right. The region adds up to a surprising 6.5 million people, and outstanding
end of chapters 9, 10 and 12 that make connections
Explore the real-world ethical issues faced by
achievements have been made there. The Pacific Islands market started with exporting noodles to between the preceding chapters as well as concepts
managerial accountants in the Ethical decisions boxes.
Papua New Guinea in the late 1970s; Nestlé commenced manufacturing
BK-CLA-MOWEN_HANSEN_2E-180133-Chp03.indd 75 in Lae in 1987 and is now one

of PNG’s major manufacturers. In 2014, further investment in the Lae factory increased capacity to meet
in other chapters in the book. 22/08/18 7:23 PM

36 MANAGERIAL ACCOUNTING
the growing demand from the consumers.23 In 1984, Nestlé established a joint venture company with CJ
Patel in Fiji, now known as Nestlé (Fiji) Ltd. Since 1992, the turnover of the company has grown by five
times, mainly through exports to Australia, New Zealand, Papua New Guinea, New Caledonia, French
ETHICAL Tracking
Polynesiacosts can also
and other actIsland
Pacific as an states.
early 24warning system for unauthorised activity and possible ethical MAKING THE
DECISIONS problems. For example, the Australian National Rugby League (NRL) club the Canterbury Bulldogs CONNECTION was found
to perpetrate salary cap breaches amounting to $81 965 in 2016. This practice is against the rules of the sport >>
and it cost the club more than $61 474 in fines.6 The reason the fine was so low was because the Bulldogs
22 Information about Nestlé history obtained from http://www.nestle.com.au/aboutus/history (accessed 17 March 2014).
I N T E G R AT I V E E X E R C I S E ( C H A P T E R S 6 – 9 )
increased
23 Interview their
with level
Eugene of corporate
david, governance
Managing director and
of Nestlé discovered
Pacific Islands, bythe wrong-doing
Business Advantage,early, and reported their choices, budgeting and
Cost system Required:
breach
24 April tohttp://www.businessadvantagepng.com/interview-eugene-david-nestle-pacific-islands/
2013. the authorities. The Bulldogs’ new governance structure led to more accurate(accessed and comprehensive
variance
9 June 2014) analyses for Sacred Heart 1 Using the current cost system, calculate the

data tracking regarding the contracts of individual players and bookkeeping systems, which alertedHospital the club 2
hospital-wide rate based on number of patients.
Calculate the amount of nursing costs that the
Chapters Objectives Staircases
accountants to the problem, and they have alerted the National Rugby League to a potential problem, thus current cost system assigns to the ER and to the
6–9 LO6 . 1 6.2 OR.
reducing the fines that they would have incurred if the breach was later discovered by the authorities. Thus, we LO6 . 2 6.3 3 Using the results from requirement 2, calculate
the cost per OR nursing hour under the current
can see that tracking costs can serve many different and important purposes. LO7 . 4 8.1
cost system.
LO8 . 1 8.3
After discussion with several experienced nurses,
LO8 . 3 8.4
Jack Bauer (SHH’s accountant) decided that assigning
LO8 . 4 8.5 nursing costs to the two service lines based on the
BK-CLA-MOWEN_HANSEN_2E-180133-Chp01.indd 14 7/16/18 8:20 PM
LO8 . 5 8.6 number of times that nurses must check patients’

Other categories of cost LO9 . 1

The purpose of this integrated exercise is to

vital signs might more closely match the underlying
use of costly hospital resources. Therefore, for
comparative purposes, Jack decided to develop a
In addition to being categorised as either direct or indirect, costs often are analysed with respect
demonstrate how a change in the cost system’s
allocation base can result in significantly different
second cost system on his computer that assigns
total nursing costs to the ER and OR based on the
to their behaviour patterns, or the way in which a cost changes when the level of the reportedoutput
costs for control purposes (e.g. the cost of
number of times nurses check patients’ vital signs.
various service lines), as well as significantly different
changes. budgeted costs for planning purposes (e.g. flexible
This system is referred to as the ‘vital-signs costing
system’. The earlier table also shows data for vital
budgets and variance analyses).
signs checks for lines.
Variable cost The two cost systems 4 Using the vital-signs costing system, calculate
the hospital-wide rate based on the number of
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
Sacred Heart Hospital (SHH) faces skyrocketing
vital signs checks.
variable costs A variable cost is one that increases in total as output increases, and decreases in total as output
nursing costs, all of which relate to its two biggest
5 Calculate the amount of nursing costs that the
nursing service lines: the Emergency Room (ER) and
costs that, in total, decreases. For example, the denim used in making jeans is a variable cost. As thethecompany Operating Room (OR). The hospital’s current cost vital-signs costing system assigns to the ER and
to the OR.
system assigns total nursing costs to the ER and OR
vary in direct makes more jeans, it needs more denim. based on the number of patients serviced by each 6 Using the results from requirement 5, calculate
the cost per OR nursing hour under the vital-
proportion to line. Total hospital annual nursing costs for these two
signs costing system.
lines are expected to equal $300 000. The table below
xviii GUIDE TO THE TEXT

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CHAPTER 1
INTROdUCTION TO MANAGERIAL ACCOUNTING 23

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you will find several tools to Review your understanding of the key chapter topics
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S UMMARY S U M M A RY O F IM P O R TA N T E Q U AT IO N S
LO1 Explain the meaning of managerial accounting • The nature of managerial accounting information
• Managerial accounting information is used to identify systems may depend on the strategic position of the
problems, solve problems and evaluate performance. firm: Process costs
4.1 = Unit costs
• Managerial accounting information helps managers in • cost leadership strategy Output
planning, controlling and decision making. • product differentiation strategy
• Planning is the detailed formulation of action to achieve • lean accounting. Estimated annual overhead
4.2 Predetermined overhead rate =
a particular end. Estimated annual activity level
• Controlling is the monitoring of a plan’s implementation. LO4 Describe the role of managerial accountants in an
• decision making is choosing among competing alternatives. organisation
4.3 Allocated overhead = Predetermined overhead rate × Actual activity level CHAPTER 4
• They are responsible for identifying, collecting,
JOB-ORDER COSTING 157
LO2 Explain the differences between managerial measuring, analysing, preparing, interpreting and
4.4 Total normal product costs = Actual direct materials + Actual direct labour + Allocated overhead
accounting and financial accounting communicating information.
• Managerial accounting is: • They must be sensitive to the information needs of
4.5 Overhead variance = Actual overhead – Allocated overhead
• intended for internal users
• not subject to rules for external financial reporting
managers.
• They serve as staff members of the organisation and are
DIS C U S S IO N Q U E S T IO N S
(e.g. AASB and ASIC regulations) part of the management team. 1 What are job-order costing cost
4.6 Adjusted and ofprocess
goods soldcosting? What cost
= Unadjusted 12 of goods
What is an ±overhead
sold Overheadvariance?
variance How is it accounted for
• subjective types of firms use job-order costing? Process costing? typically?
• able to use both financial and non-financial measures LO5 Explain the importance of ethical behaviour for 2 Give some
(Note:examples
Allocated of service>firms
overhead Actual that might use
overhead 13 Is theoverhead
means Overallocated cost of a; subtract
job related fromtoCOGS;
the price charged?
of performance managers and managerial accountants job-order costing,
Allocated and explain <why
overhead it is overhead
Actual used in those Explain.
means Underallocated overhead; add to COGS)
• able to give a broader, interdisciplinary perspective. • A strong ethical sense is needed to resist efforts to firms. 14 If a company decides to increase advertising expense
• Financial accounting is: change economic information that may present an 3 What is normal costing? How does it differ from by $25 000, how will that affect the predetermined
Estimated department overhead
• directed toward external users untrue picture of the firm’s performance. actual costing? 4.7 Departmental overhead rate = overhead rate? Eventual cost of goods sold?
• Many firms have a written code of ethics or code of Estimated departmental activity level
• subject to externally imposed rules (e.g. AASB and 4 Why are actual overhead rates seldom used in 15 How can a departmental overhead system be
ASIC regulations) conduct. practice? converted to a plant-wide overhead system?
• able to provide audited, objective financial • The CIMA has a code of ethics for managerial 5 Explain how overhead is assigned to production when 16 (Appendix 4B) Describe the difference between
information. accountants. a predetermined overhead rate is used. production and support departments.
R E VIE W P R O B L E M S
Consolidate
LO3
your understanding,
Identify and explain the current focus of LO6 withIdentify three Staircase
theforms of certification available to Test your knowledge
6
with the Discussion Questions
What is underallocated overhead? When Cost of
Goods Sold is adjusted for underallocated overhead,
17 (Appendix 4B) Assume that a company has decided
not to allocate any support department costs to
managerial accountants
Exercises thatfocus
managerial accounting
• It supports management build onvalue,
on customer and total link toCertificate
• The the inknowledge
Management Accounting serves and Multiple Choice Questions, Exercises and Problems.
I. Job will
departmental
7
cost using plant-wide
the cost increase or decrease? Why?
overheadoverhead?
What is overallocated
and
rates When Cost of Goods Direct labour
Direct materials
production departments. Describe the likely
of the managers of the production departments.
cost:
$730behaviour
000

managerial accountants.
presented invaluethe Staircase and customerBoxes • The in thein Public
chapter. Excel icons on selected Exercises and Problems link
quality management and time-based competition. Sold is adjusted for overallocated
Lindberg Company uses a normal job-order costing system. overhead, will the Assembly Would
(5000 this
hoursbe@good
$12 or
per bad?
hr) Explain why allocation
$ 60 000
• Information about chain activities Certificate Accounting serves and is
There are cost increase or decrease?
two departments, AssemblyWhy? and Finishing, would correct this type of behaviour.
160 MANAGERIAL ACCOUNTING required for those who practise public accounting. Finishing (400 hours @ $12 per hr) $ 4 800
sacrifice (such as post-purchase costs) is collected and
to downloadable Templates found on the CourseMate
8 which
through Suppose
mostthat jobsyou andSelected
pass. a friend decide
budgeted to set
andup a lawn Machine 18 (Appendix 4B) Why is it important to identify and use
made available. • The Certificate in Internal Auditing serves internal hours used:
actual datamowing
for the service
past year next summer. Describe the source
follow: causal factors to allocate support department costs?
• Activity-based management is a major innovative auditors. Assembly CHAPTER 100
4 factors
documents that you would need to account for your 19 (Appendix 4B) Identify some possible causal
S TAIRCAS E E X E RCIS E S
response to the demand for more accurate and relevant Express website.activities. Assembly Finishing Finishingfor the following support COSTING 1 200 157
departments:
JOB-ORDER
managerial accounting information. Budgeted
9 overhead
Why might a company decide $330 to000use departmental
$1 000 000 a
Units produced Cafeteria 10 000
overhead rates instead of a110
Actual overhead plant-wide
000 overhead
520 000rate? b Custodial services
SE4.22 Predetermined overhead rate, Cutting Sewing Total Lindberg uses a plant-wide predetermined overhead
10 activity
What is the role of materials 150requisition forms c Laundry
overhead allocation Department Department Expected
in ahours)
(direct labour
DIS C U S S IO N Q U E S T IO N S
job-order costing system? Time sheets?
000 25 000
rate based on direct labour hours (DLH) to assign overhead
d Receiving, shipping and storage
Overhead $240 000 $350 000 $590 000 to jobs.
LO2 1
Expected Predetermined
What arehours
machine job-orderoverhead
costing rates?
and
25 000process costing?
125 000 What 12 What e Maintenance
is an overhead variance? How is it accounted for
Direct labour 31 200 100 000 131 200 f Human resources
11 types
CarverofCompany uses a plant-wide overhead
firms use job-order costing? Process costing?Required: rate typically?
STAIRCASE 4.1 hours Duringbased
the year, several jobs were completed. Data
on direct labour ofcost. Suppose that might
duringuse the g the Accounting
13Compute
Is costpredetermined
of a job relatedoverhead
to the price
2 Give some
pertainingyear,
to one
examples
such raises
job, Job
service firms that 1 the rate.charged?
At the beginning of the year, Ilberg Company estimated the
BK-CLA-MOWEN_HANSEN_2E-180133-Chp01.indd 23
Machine hours 150 000 – 150 000
7/16/18 8:20 PM Carver
job-order costing, and its330,
wage follow:
explain rate
whyforitdirect
is used in those 2 20Using
labour. (Appendix 4B) Explain the difference between the
Explain.
following costs: the predetermined rate, compute the per-unit
How would that affect overhead allocated? The total direct
14manufacturing
If methoddecides
a company and thetosequential
increase method. expense
Hallett uses departmental overhead rates. In the firms. cost for Job 330. (Note:advertising
Round the unit
cost ofisjobs?
Overhead $416 000 cutting department, overhead is allocated on the basis of 3 What normal costing? How does it differ from cost byto $25 000, howcent.)
the nearest will that affect the predetermined
Direct labour cost 520 000 machine hours. In the sewing department, overhead is actual costing? overhead rate? Eventual cost of goods sold?
allocated on the basis of direct labour hours. Actual data for 4 Why are actual overhead rates seldom used in 15 How can a departmental overhead system be
Ilberg uses normal costing and allocates overhead on
the basis of direct labour cost. (Direct labour cost is equal
the month of June are as follows:
5
practice?
M U LT IP L E -C H O IC E Q U E S T IO N S
Explain how overhead is assigned to production when
converted to a plant-wide overhead system?
16 (Appendix 4B) Describe the difference between
to total direct labour hours worked multiplied by the wage Cutting Sewing Total
4.1 Which of the following
a predetermined statements
overhead is true?
rate is used. 4.2 The ending balance
production and supportof which of the following accounts
departments.
Department Department
rate.) For the month of December, direct labour cost was 6 a Job-order costing is used
What is underallocated overhead? When Cost of only in manufacturing is calculated
17 (Appendix 4B)byAssume
summing thatthe totals of the
a company hasopen
decided
$43 700. Overhead $20 610 $35 750 $56 360
Goodsfirms.
Sold is adjusted for underallocated overhead, (unfinished)
not to allocate job-order
any supportcost sheets?
department costs to
Direct labour 2 800 8 600 11 400 BK-CLA-MOWEN_HANSEN_2E-180133-Chp04.indd 154
b the
will Process costing or
cost increase is used only for
decrease? Why?services. a Raw Materials
production departments. Describe the likely behaviour
22/08/18 7:27 PM
Required: hours
7 c Job-order costing is simpler to
What is overallocated overhead? When Cost of Goods use than bof the Overhead
managers Control
of the production departments.
1 Calculate the predetermined overhead rate for Machine hours 13 640 – 13 640 Sold isprocess
adjusted costing because theoverhead,
for overallocated recordkeeping will the cWouldWork in Process
this be good or bad? Explain why allocation
the year. requirements
cost increase are less.Why?
or decrease? dwouldFinished Goods
correct this type of behaviour.
2 Calculate the overhead allocated to production in 162 MANAGERIAL ACCOUNTING
8 d
SupposeThethatjob-order
you and cost sheetdecide
a friend is subsidiary
to set up to the
a lawn 18 e Cost 4B)
(Appendix of Goods
Why isSoldit important to identify and use
December. SE4.24 Predetermined departmental Work in Process Account.Describe the source
mowing service next summer. causal factors to allocate support department costs?
overhead rates, allocating overhead to e All of the
documents thatabove are true.
you would need to account for your 19 (Appendix 4B) Identify some possible causal factors
SE4.23 Overhead variance (over- or
production activities. E XE R C IS E S for the following support departments:
underallocated), closing to Cost of
LO2 9 Why might a company decide to use departmental a Cafeteria
Goods Sold b usesCustodial services
Ex4.29 overhead
Job-order ratescosting
instead ofversusa plant-wide overhead rate?
process Debion normal costing and allocates overhead on
STAIRCASE 4.3 10 What is the role of materials requisition forms the basis of c directLaundry
labour hours. For the month of March,
LO2 costing
Refer to the information on Hallett Company above. in a job-order costing system? Time sheets? direct labourd hours Receiving, shipping and storage
were 7600.
STAIRCASE 4.2 LO1 Predetermined overhead rates? e Maintenance
At the end of the year, Ilberg Company provided the Required: 11 Carver Company uses a plant-wide overhead rate
Required: f Human resources
a Hospital services
following actual information: 1 Calculate the predetermined overhead rates for the b Custombased onmaking
cabinet direct labour
BK-CLA-MOWEN_HANSEN_2E-180133-Chp04.indd 157 cost. Suppose that during the 1 Calculate
g the predetermined overhead rate for
Accounting 22/08/18 7:27 PM
Overhead $423 600 cutting and sewing departments. year, Carver raises its wage rate for direct labour.
c Toy manufacturing 20Debion.
(Appendix 4B) Explain the difference between the
Direct labour cost 532 000 2 Calculate the overhead allocated to production in d Soft-drink would that affect overhead allocated? The total 2
Howbottling Calculate
directthe overhead
method allocated
and the to production
sequential method. in
each department for the month of June. e Aircraftcost of jobs?
manufacturing (e.g. Airbus A350s) March.
Ilberg uses normal costing and allocates overhead 616 MANAGERIAL ACCOUNTING
3 By how much has each department’s overhead been f Personal computer assembly
at the rate of 80 per cent of direct labour cost. At the end
overallocated? Underallocated? g Furniture making (e.g. computer desks sold at discount
Ex4.32 Calculating the predetermined
of the year, Cost of Goods Sold (before adjusting for any
stores) overhead rate, allocating overhead to
overhead variance) was $1 890 000. SE4.25 Convert departmental data to M U LT IP L E -C H Oproduction,
IC E Q Ureconciling
E S T IO Noverhead
S at
plant-wide data, plant-wide overhead
h Custom furniture making PROBLEMS
Required: i Dental services
4.1 Which of the following statements is true? the4.2endThe ofending
the year,
balanceadjusting cost
of which of the of accounts
following
1 Calculate the overhead variance for the year.
rate, allocate overhead to production j Paper manufacturing
P13.26aReturn Job-order costing is used only
on investment, andin manufacturing goods sold
For the for under-
is calculated
coming by(Year
year and
summing overallocated
the totals of CEO
4), KiElectronics’ the open
plans
k Nut and bolt firms.
manufacturing to install a(unfinished)
overhead job-order
JIT purchasing cost sheets? system.
and manufacturing
2 Dispose of the overhead variance by adjusting Cost of LO2 investment
l Auto repair
b
decisions
Process costing is used only for services. a Rawinventories
Materials will be reduced by 70 per
Goods Sold. She estimates that
STAIRCASE 4.4 mLO2,
Architectural services costing is simpler to use than LO2 b theOverhead
Use the following information for SE4.24 and SE4.25: 3 c Job-order cent during first year Control
of JIT operations, producing a 20
Refer to the information on Hallett Company above. Now, n Landscape design process services
costing because the recordkeeping At the
per cent c
beginning Work
reduction in in
of the Process
year,
the Horvath
average Company
operating estimated
assets of the
At the beginning of the year, Hallett Company estimated the
assume that Hallett has decided to use a plant-wide o Torch manufacturing
requirements are less. the dwhichFinished
following:
company, Goods unchanged without the JIT
would remain
following:
overhead rate based on direct labour hours. d The job-order cost sheet is subsidiary to the e also
system. She Cost of Goodsthat
estimates Sold
sales and operating income
Required: Overhead $486 400
Leslie Blandings, Work in Process
division Account.
manager of ShortWaves Ltd, was will be restored to Year 1 levels because of simultaneous
Identify each Direct labour hours 95 000
e of
debating the
these
All
merits ofof types
the of businesses
above
a new are true.
product
as either job- reductions in operating expenses and selling prices. Lower
– a weather radio that
order or process costing. Horvath
selling pricesuses
willnormal costing and allocates
allow KiElectronics to expandoverhead
its marketon
would put out a warning if the district in which the listener
the basis
share. of direct
(Note: Roundlabour hours. For
all numbers the month
to two decimalofplaces.)
January,
lived should experience a severe
Ex4.30 Job-order costing versus process thunderstorm or cyclone
alert. direct labour hours were 7830. By the end of the year,
costing Required:
Horvath showed the following actual amounts:
The budgeted income of the division was $725 000 with
BK-CLA-MOWEN_HANSEN_2E-180133-Chp04.indd 160 22/08/18 7:27 PM
LO1
operating assets of $3 625 000. The proposed investment 1 Compute the ROI, margin and turnover for Years 1, 2
Overhead $476 100
awould add
Motor income
vehicle of $640 000 and would require an
manufacturing and 3.
Direct labour hours 93 500
badditional investment in equipment of $4 000 000. The
Dental services 2 Suppose that in Year 4 the sales and operating
cminimum required
Motor vehicle return 157
repair
BK-CLA-MOWEN_HANSEN_2E-180133-Chp04.indd on investment for the company incomethat
Assume were achieved at
unadjusted Year
Cost of 1Goods
level (as
Soldexpected),
for Horvath 22/08/18 7:27 PM

is 12 per cent. (Note:

d Costume making Round all numbers to two decimal was $707but 000.
inventories remained at the same level as in Year
places.) 3. Compute the expected ROI, margin and turnover.
Required: Required:
Explain why the ROI increased over the Year 3 level.
Required:
For each of the given types of industries, give an example 13 Suppose that
Calculate the sales and net
the predetermined operating
overhead rateincome
for for
1 a firm
of Compute the ROI
that would use of the:
job-order costing. Then, give an Year 4 remained the same as in Year 3 but inventory
Horvath.
example a of adivision if the
firm that radio
would project
use is not
process undertaken.
costing. 2 reductions
Calculate were
the achieved
overhead as projected.
allocated Compute
to production in
b radio project alone. the ROI, (margin
January. and turnover.
Note: Round Explaindollar.)
to the nearest why the ROI
Ex4.31 Calculating theproject
predetermined
Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned,
overhead
c or duplicated,
division
rate,
in whole
if the radio
allocating
or in part.
is undertaken. WCN34 02-200-202
exceededthe
Calculate thetotal
Year allocated
3 level. overhead for the year.
2 Compute the residual income overhead
of the: to Assume
Was that all
overhead expectations
over- for Year 4 By
or underallocated? werehowrealised.
much?
production
a division if the radio project is not undertaken. 4 Compute adjusted
Calculate the expected
CostROI, margin
of Goods and
Sold turnover.
after adjusting
b radio project alone. Explain
for why the ROI
the overhead increased over the Year 3 level.
variance.
LO2
c division if the radio project is undertaken.
At
3 the Do
beginning of thethat
you suppose year,Leslie
Debion Company
will decide toestimated the
invest in the
P13.28 Return on investment for multiple
following:
new radio? Why, or why not? investments, residual income
 xix

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Add the digital files of graphs, tables, Use the chapter-by-chapter PowerPoint
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tests and exams for your students. Deliver these through our LMS and in your classroom.

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xx GUIDE TO THE TEXT

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 1

After studying Chapter 1,

you should be able to:

LO1 explain the meaning of

1
managerial accounting
INTRODUCTION LO2 explain the differences between
TO MANAGERIAL managerial accounting and
ACCOUNTING financial accounting
LO3 identify and explain the current
focus of managerial accounting
LO4 describe the role of managerial
accountants in an organisation
LO5 explain the importance of
ethical behaviour for managers
and managerial accountants
LO6 identify three forms of
certification available to
managerial accountants.

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
2 MANAGERIAL ACCOUNTING

EXPERIENCE MANAGERIAL DECISIONS

WITH COSTUMES.COM.AU
The greatest benefit of managerial accounting is also its biggest challenge – to provide managers
with information that improves decisions and creates organisational value. This information helps
inform managers about the impact of various strategic and operational decisions on key non-financial
performance measures and their eventual impact on the organisation’s financial performance. The
information is challenging to prepare and analyse because it requires an understanding of all value chain
components that affect the organisation, including research and development, production, marketing,
distribution and customer service.
Since its inception in 2009, Costumes.com.au has blended the right managerial accounting
information and an innovative business model to provide costumes to customers in Australia and New
Zealand. Using the Internet and marketing creativity, Costumes.com.au serves a market of millions of
Australian and New Zealand consumers each year.

‘Using the Internet and marketing creativity, Costumes.com.au serves a market of

millions of Australian and New Zealand consumers each year.’

Costumes.com.au measures key performance indicators to guide its decision making. This might
include, for example, managerial accountants analysing measures of customer satisfaction, average
time between order placement and costume arrival for each shipping method and the profitability
of individual customer (or costume!) types. As customer trends change, competitors emerge and
technological advances occur, Costumes.com.au’s managerial accounting information will need to be
adapted to provide crucial insight into the company’s performance and how its strategy should evolve to
remain Australasia’s leading Internet costume retailer.

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 CHAPTER 1
Introduction to managerial accounting 3

THE MEANING OF MANAGERIAL ACCOUNTING LO1

What do we mean by managerial accounting? Quite simply, managerial accounting is the managerial
provision of accounting information for a company’s internal users. It is the firm’s internal accounting
accounting system and is designed to support the information needs of managers. Unlike the provision
financial accounting, managerial accounting is not bound by any formal criteria such as general of accounting
information for a
accounting standards of any country. Managerial accounting has three broad objectives:
company’s internal
1 to provide information for planning the organisation’s actions
users
2 to provide information for controlling the organisation’s actions
3 to provide information for making effective decisions.
Using recent examples from many companies in both the for-profit and not-for-profit
sectors, this textbook explains how all manufacturing (e.g. aircraft producer Boeing Australia, a
subsidiary of Boeing Corporation), merchandising (e.g. clothing retailer Guess, which has stores
in Queensland, New South Wales and Western Australia) and service (e.g. healthcare provider
Ramsay Health Care1) organisations use managerial accounting information and concepts.
People in all types of positions, from corporate presidents to graphic designers to hospital
administrators, can improve their managerial skills by being well-grounded in the basic concepts
and use of managerial accounting information for planning, controlling and decision making.
Furthermore, thousands of companies increasingly release to the public (i.e. suppliers,
regulators, employees, human rights organisations, environmental groups, customers etc.) very
large quantities of managerial accounting information that traditionally either did not exist or
was released only internally. This information is released through optional reports known as
corporate sustainability reports (e.g. Starbucks, McDonald’s), social responsibility reports (e.g.
Apple, Westpac Group), or citizenship reports (e.g. BHP Billiton). The release of these reports
often occurs because firms want to manage their reputation by preparing and releasing such
information themselves, rather than having Internet bloggers, newspapers and pay television
news networks publish their own estimates of such information. Some leading companies (e.g.
National Australia Bank, Stockland) have even moved so far as to combine their sustainability
report with their annual report, thereby resulting in a single, integrated report containing both
traditional financial accounting information as well as managerial accounting information.2
The exciting reality is that the importance and scope of managerial accounting information
is growing rapidly around the globe. As a result, the demand for businesspeople who possess
the ability to create, understand, use and communicate managerial accounting information
continues to grow. Integrated reporting is expected to make financial statements more relevant
in the current complex, changing business environment.3 This development in the components
that now need to be included in an integrated report means that accountants need to consider
new, relevant, cost-effective sources for developing relevant information that is useful to a variety
of users (stakeholders), rather than just the traditional reporting for current investors. In a recent
study, CPA Australia reports that Australian companies are more likely to produce an integrated

1
Ramsay Health Care is one of the world’s largest private hospital operators with over 150 hospitals located across five countries –
Australia, England, France, Indonesia and Malaysia – employing more than 60 000 staff and admitting almost 3 million patients each
year. Source: Ramsay Health Care. http://www.ramsayhealth.com/About-Us (accessed 15 November 2017)
2
R. Alembakis. (n.d.). Australian companies weigh in on Integrated Reporting pilot. http://www.thesustainabilityreport.com.au/
australian-companies-weigh-in-on-integrated-reporting-pilot/ (accessed 6 August 2014).
3
Source: CA ANZ Integrated Reporting. https://www.charteredaccountantsanz.com/member-services/technical/business-issues/
sustainability/integrated-reporting (accessed 16 November 2017).

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
 4 MANAGERIAL ACCOUNTING

report, which is an initiative of the International Integrated Reporting Council to create a robust
framework for the mainstream use of Integrated Reporting and the Sustainability Reporting
Guidelines (G4) released by the Global Reporting Initiative (GRI).4 G4 led to the development of
updated GRI standards within their GRI Reporting Framework. GRI standards were released on
19 October, 2016, and supersede the G4 Guidelines.5 The three universal and three specific topic-
specific GRI standards were required for all reports or other materials published on or after 1 July
2018. This increasing need for providing integrated reporting means that management accountants
must develop reports that provide dynamic and complex information that suit the needs of a
variety of stakeholders. In fact, according to a CPA report on stakeholders’ information needs,
many stakeholders require ‘on-demand’, current information.6 These stakeholders report that they
may seek to have the company’s accountants provide individual reports to them based on their
specific needs. This shows that it is important for management accountants to seek to develop new,
cost-effective ways to provide current, relevant information for each specific stakeholder group.

Information needs of managers and other users

Managerial accounting information is needed by a number of individuals. In particular, managers
and empowered workers need comprehensive, up-to-date information for the following activities:
• planning
• controlling
• decision making.

Planning
The detailed formulation of action to achieve a particular end is the management activity
planning called planning. Planning requires setting objectives and identifying methods to achieve those
a management objectives. For example, a not-for-profit organisation may plan to meet the needs of more people
activity that in the community. For instance, UnitingCare Queensland is a not-for-profit organisation whose
involves the strategic plan for 2014–2017 involves (1) increasing the number of people choosing their services,
detailed
(2) being financially secure and (3) having dynamic staffing for a dynamic organisation. The
formulation of
action to achieve a environment for care services is a very competitive industry, with operators including large
particular end multinational for-profit firms to small business operators and other not-for-profit organisations.
The results of their 2017 Annual Report indicate that UnitingCare has achieved some success in
each aspect of its three-part 2014–2017 strategic plan.7
Organisations like UnitingCare Queensland may be able to increase the number of people
receiving care by ensuring that they provide the kind of care that people in the community need
at an affordable price. Services must be provided at an affordable price to increase the number
of people receiving care because most of these services are to sick and elderly people, those
with disabilities or children. Those receiving care are usually unable to earn large amounts of

4
CPA Australia in association with The Global Reporting Initiative (GRI) (2013), Sustainability reporting: practices, performance and
potential, Victoria: Australia, p. 2.
5
Global Reporting; Initiative. n.d. G4 Sustainability Reporting Guidelines. https://www.globalreporting.org/information/g4/Pages/
default.aspx, accessed 1 June 2018; The future of reporting, https://www.globalreporting.org/standards.
6
CPA Australia (2017). An exploration of the information needs of selected stakeholders of integrated reporting. https://www.
cpaaustralia.com.au/professional-resources/esg/integrated-reporting (accessed 16 November 2017).
7
UnitingCare Strategic Plan 2014–2017. http://unitingcareqld.com.au/docs/default-source/UnitingCare-Queensland/person-
centred-care-and-service-at-unitingcare-queensland-strategic-plan-2014-2017?sfvrsn=0 (accessed 17 November 2017)

Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-202
Another random document with
no related content on Scribd:
kiinnitystä vastaan taloon. Hovimarsalkka otti hienon lyijykynän ja
merkitsi ylös taskukirjansa lehdelle laihalla, hienolla, Valkosella,
kapealla kädellään.

"Herraseni, tämä tekee 27,000 kruunua yhteensä ja sittenkin

joutuisin tekemisiin neljäntoista henkilön kanssa… Ette tiedä ketään
liikemiestä, joka hyvää vakuutta vastaan, hyvää vakuutta tietysti, ja
kuudella prosentilla, alle ei tule kysymykseenkään, tahtoisi ottaa
koko summan?"

Minä punastuin ja kurkkuni tuntui ahtaalta kun sanoin:

"Kyllä, minä tunnen erään, joka tarvitsee nämä rahat varsin hyvin,
erään, joka ilman niitä ehkä piankin on paljaan taivaan alla
vaimoineen ja lapsineen, erään, jolla ei enää ole mitään vakuutta
tarjottavana, mutta joka, jos nämä rahat saisi, olisi pelastettu, ja
varmasti maksaisi ne takaisin."

"Ta ta ta! Sellaiseen kauppaan ei nähkääs kukaan ihminen rupea,

ystäväiseni. Pyydän anteeksi että olen häirinnyt. Hyvästi!"

"Hyvästi!"

Ovessa käänsi hän taas vanhan petolinnunnaamansa minuun päin

ja kysyi rumasti hymyillen:

"Kuulkaapas, sanokaa minulle, kuka nyt taas on liisterissä tässä

viheliäisessä luolassa?"

Minä olin kiihtynyt ja epätoivoissani, ja mistään väliä pitämättä

minä melkein huusin:
 "Minä itse, herra hovimarsalkka! Olkaa hyvä ja katselkaa nyt oikein
tarpeeksenne pulaan joutunutta lähimmäisraukkaa, jos se teitä
huvittaa, niinkuin näyttää!"

Ukko ojensi vartaloaan.

"Mitä lajia! Mitä sanotte? Te itsekö? Ja sen sanotte te noin

suoraan!
Ajatelkaas, jos puhuisin siitä jollekin!"

"Oh, sitä minä en pelkää. Voitte kyllä olla saita ja sydämetön,

mutta sen verran gentlemanni te toki sentään olette, herra
hovimarsalkka", huudahdin minä, menettäen kaiken malttini hänen
pilkalliset, vanhat kasvonsa nähdessäni.

Ukko kiipesi uudestaan sisään, istui nojatuoliin, jonka äsken oli

jättänyt ja alkoi sormiensa välissä hypistellä kultaista
nuuskarasiaansa.

"Katsoppas vaan! Kuinka se olikaan? Minäkö olen saita, minä? Ja

sydämetön? Niinhän se oli? Mutta herra sentään suvaitsee pitää
vanhaa hovimarsalkkaa hieman toki gentlemannina. Se oli kiltisti
tehty!"

Minä häpesin ja pyysin anteeksi.

"No niin! No niin! 'Saita ja sydämetön!' Katsoppas vaan! No koska

herra tahtoo saada nuo viisikymmentätuhatta kruunua?"

"Saa… saadako ne? Herra hovimarsalkka ei varmaankaan

kuullut…"
 "… että te ette aio antaa mitään vakuutta. Kyllä kuulin Jumala
paratkoon, mutta tyydytään pieneen velkakirjaan. Sopiiko neljän
päivän perästä? Saan rahat silloin."

Olin kuin pilvistä pudonnut ja tulin tuskin kiittäneeksi.

Neljän päivän perästä tuli hän itse tuomaan minulle rahat.

Vapisevalla kädellä kirjotin minä velkakirjan vuoden päästä
lunastettavaksi ja aioin rientää alas konttoriin saadakseni sen
todistetuksi.

"Mihin nyt, herraseni?"

"Todistajat, herra hovim…"

"Kas vaan, onhan siinä sinetti, tiemmä."

Sitte otti hän velkakirjansa, katseli sinettiä ja ivaili:

"N.J. lehtiköynnöksen keskellä. Katsoppas vaan! Yksinkertainen ja

aistikas! Siisti, mutta hiton vaatimaton. Vaakunakilpi, jota ehkä voisi
väärentää tai jäljitellä. Hyvää huomenta, herrasen!!"

En tiennyt, pitikö minun lyödä häntä vai suudella hänen pelastavia

käsiään. Valitsin keskitien, seurasin häntä syvään kumarrellen ovelle
ja rukoilin hänelle Jumalan siunausta.

Ilo ja riemu! Vaara oli ohi, liike seisoi varmempana kuin koskaan
ennen, ja vuoden päästä minä jätin hovimarsalkalle hänen rahansa
takasin, hänen oman toivomuksensa mukaan kiinnityksissä
lähiseudulla ja kuuteen prosenttiin, ei äyriäkään alle. Ainoastaan
vuosikoron maksoin puhtaassa rahassa, kolmetuhatta kruunua
kuuden prosentin mukaan, ei äyriäkään alle.
 Maksu tapahtui minun kodissani ja juuri kuin se oli suoritettu,
tunkeutui korviimme heikko lapsenääni.

"Pientä herrasväkeä vai?" arveli hovimarsalkka.

"Niin, pieni tyttö, vasta viikon vanha."

"Katsoppas vaan. Vai niin. Hm… hm… Kuulkaapas herraseni,

teidän piirissänne tuollaiset pikku vieraat kai kastetaan varsin pian,
vai?"

"Ky…y…llä. Olimme ajatelleet tuorstaina, mutta…"

"Jaha. Tuorstaina! Silloin minulla juuri on asiaa kaupunkiin.

Suokaa anteeksi, ukolla on omituiset päähänpistonsa. En ole
sellaisessa tilaisuudessa ollut pitkiin aikoihin. Vanhoja tuttaviahan nyt
ollaan. Tokkohan olisi mahdollista saada olla mukana?"

"Herra hovimarsalkka… en löydä sanoja… liian suuri kunnia…

hm…"

En ole muuten juuri mikään kumartelija, mutta vaikka luulen silloin

pokkuroineeni ja kumarrelleeni varsin runsaasti, en voi sitä katua
vielä tänäkään päivänä. Nähkääs, yhdestä hovimarsalkasta minä viis
välitän, mutta tuo vanha vääräsäärihän oli nostanut minut jaloilleni ja
pelastanut onnellisen kotini!

Hänelle annettiin tieto, että toimituksen piti tapahtua kello neljä ja

lyönnilleen olivat hänen vaununsa portilla. Hanna kyllä arveli, että se
oli hauskaa muiden rouvien vuoksi, mutta oli hirmuisen hämillään, ja
sitte ei hän oikein tietänyt millä tavoin puettuna piti luulla hänen
tulevan. Mies, joka kutsui konsulia ja tukkukauppiasta "herra" ja
"herraseni", voi epäilemättä tulla ristiäisiin metsästyssaappaissa.
 Mutta ei, hänellä oli täysi hovipuku, hän tervehti kohteliaasti
kaikkia ja kutsui Hannaa "rouva konsulinnaksi", niin että hän kyllä
tavat tunsi kun vaan tahtoi.

Pappi oli pudottaa käsikirjansa kun sai nähdä tuon vanhan kopean
hovimarsalkan, joka ei koko kaupungissa seurustellut kenenkään
muun kanssa kuin maaherran, kummina minun luonani, ja
Nålköpingin rouvat olivat niellä ukon katseillaan.

Tyttö kastettiin Katriksi ja hänen pitäisi nyt keväällä päästä edes.

Hovimarsalkka kilisti lasia vaimoni kanssa ja pyysi saada

lähemmin katsella pienokaista. Kun Hanna toi hänet, katseli hän
lasta pitkän aikaa ja hänen vanhat silmänsä näyttivät sumenevan.

"Minä olen vanha, lapseton leskimies, enkä tuollaisista

pikkaraisista juuri paljoakaan ymmärrä; mutta saanko minä, rouva
konsulinna?"

Ei Hanna ymmärtänyt, mitä hän tahtoi, mutta hän tiesi, mitä ukko
oli meille tehnyt, ja ettei meidän talossamme juuri ollut mitään, mitä
hän ei saisi.

Silloin otti hän Katrin ja suuteli häntä keskelle suuta, enkä tahdo
tulla autuaaksi, jollei tuon vanhan ukkorähjän silmissä kiiltänyt kaksi
suurta kyyneltä, kun hän sitte taas suoristi vartalonsa.

"Merkillistä, hän maistuu aivan tuoreelta voilta", sanoi hän.

Muut hienot herrat, jotka ovat menneet kihloihin tyttärieni kanssa

ja heitä suudelleet, ovat lausuneet, että se on maistunut
"taivaalliselta". Ketä tässä uskoo? Kyllä minä puolestani arvelen että
hovimarsalkka enemmän tiesi voista kuin vävyni taivaasta.
 Sitte pyysi hän yksityisesti saada puhella Hannan kanssa ja
tultuaan siniseen kamariin, otti hän povestaan elinkorkokirjan ja
sanoi:

"Hyvä rouva konsulinna. Onni voi ihmeellisesti vaihdella tässä

maailmassa. Teillä ei koskaan ole ollut mitään kokemusta siitä, ei,
Jumala varjelkoon, tietysti ei, ja me toivomme, ett'ette koskaan tule
sitä kokemaan. Mutta kaikkien näiden uudenaikaisten aatteiden
joukossa, jotka enimmäkseen ovat vallan kelvottomia, on mielestäni
elinkorko vähimmin typerä joka tapauksessa. Siinä on joku ajatus.
Tohdinko pyytää teitä olemaan niin hyvä ja ottamaan tämän
pienokaiselle vanhalta, sydämettömältä saiturilta! Kirjaan ei ole
mitään kirjotettu, sillä kukapa voi tietää että hänen nimekseen juuri
piti tulla Katri? Mutta siellä lehtien välissä on alku ensimäiseen
pieneen panokseen. Ei, katsohan vaan! Enemmänkö torttua ja viiniä.
Kiitoksia paljon, nyt täytyy minun lähteä."

Nils Jönsson ei koskaan ketään mielistele, mutta häntä minä

seurasin alas vaunujen luo ja seisoin paljain päin ja parhaassa
hännystakissani ja kiedoin peiton hänen vanhojen, kapeiden
sääriensä ympäri.

"Kiitos, kiitos ystäväni! Pidän teistä. Suora ja hieno. Tohtii sanoa

suoraan päin naamaa. Katsoppas vaan! 'Saita ja sydämetön!' Kuinka
herra tietää, mitä minulle on tehty, ennenkuin minä sellaiseksi olen
tullut? — Se kuski roisto on taas antanut Ajaksin hieroa itseään
aisaa vastaan. Katsohan vaan! Katsohan vaan!"

Ajatuksiini vaipuneena jäin minä katselemaan poisvieriviä vaunuja.

Niiden omistajaa en nähnyt enää milloinkaan. Kuuden viikon perästä
avautuivat perhehaudan ruostuneet saranat vanhalle
hovimarsalkalle.
 Mutta Katrin kirjassa oli kannen ja ensimäisen lehden välissä
tasan kolmetuhatta kruunua, ei äyriäkään alle, ja sen verran hänellä
nyt on enemmän kuin muilla lapsilla, vaan senvuoksi, että hän käytti
tilaisuutta ja kitisi hiukan tuon vanhan herran meillä käydessä.
VIII.

Lapset.

Yksi asia on varma: ei koskaan tiedä kuinka äärettömän suuri

vanhempien rakkaus on ollut ennenkuin itse saa lapsia. Vanhempien
rakkaus on, kerran koetteeksi lausuakseni jotain runollista, laina
taivaasta, jota ei oikea velkamies koskaan säännöllisesti suorita
oikealle velkojalle. Ei koskaan elämässä saa isä tai äiti pojaltaan tai
tyttäreltään sitä hellyyttä, huolenpitoa ja rakkautta, mitä he ovat heille
tuhlanneet.

Lapsi kasvaa; kaikki harrastukset, kaikki ajatukset kääntyvät

eteenpäin, uuteen, houkuttelevaan, tietoon ja iloon, toiseen nuoreen,
liekehtivään sydämeen ja sitte piankin omaan kotiin. Vanhemmat,
nuo useinkin pitkiksi ajoiksi unohdetut, joita hyvin harvoin käydään
katsomassa, joille kirjotetaan yksi tai puoli sivua samaan aikaan kun
töhritään kuusitoista sivua täyteen tyttöhupakolle, jonka kanssa on
oltu tuttavia muutamia kuukausia, he saavat sen, mitä jää yli.

Mutta sitte tulee hetki, jolloin hän, jota rakastaa enemmän kuin
omaa elämäänsä, kalpeana ja vaikeroiden vaipuu vuoteelleen tuolla
makuuhuoneessa, häilyy elämän ja kuoleman välillä muutamia
tuskallisia, ijankaikkisen pitkiä hetkiä, ja opettaa miehen tuntemaan,
mitä merkitsee tuskassa vavista rakkainpansa puolesta tässä
maailmassa. Ja sitte kuuluu sieltä yht'äkkiä heikko, muiden korvissa
käheä ja rumakin kirkuna, mutta sinusta se kaikuu kuin ihanimmat
sävelet, ja sinä pidät sylissäsi pientä vierasta matkamiestä, joka
kuitenkin on osa omasta itsestäsi.

Hän tulee kostamaan noiden puoleksi unohdettujen vanhusten

puolesta, joille sinä olit kaikki kaikessa; tämä pikku olento tulee
viimeiseen ropoon asti, korkoineen ja koronkorkoineen vaatimaan
ulos kaiken sen hellyyden, alttiuden ja itsensäkieltäymyksen, minkä
sinä olet velkaa heille, jotka ehkä jo lepäävät kirkkotarhan mullassa.

Kellä on sellainen lapsuus ja nuoruus kuin minulla, ei helposti tule

haaveelliseksi ja luottelevaksi tunteissaan, mutta minä vakuutan että
rinnassani liikkui varsin suurenmoisia tunteita, kun ensi kerran pidin
esikoistani sylissäni.

Omituista ajatella, että juuri hän tulee käymään läpi tämän minun
käsikirjoitukseni, korjaamaan kielivirheet, pyöristelemään lauseita
siellä, täällä ja sitte koettamaan saada tämä painetuksi itse
Tukholmassa. Jollei hän, joka on lääketieteen tohtori ja oppinein
meistä kaikista, lopulta sentään arvele, että tämä on liian
yksinkertaista painettavaksi!

Olen aina koettanut olla niin huomaavainen aviomies kuin minun

sivistys-asteellani mieheltä voi vaatia, mutta koskaan en minä ole
Hannaa niin "kruusaillut" kuin tuon pojan syntymisen jälkeen. Hän
olisi voinut sanoa mitä tahansa, ja minä tunsin, etten olisi sanonut
häntä vastaan paitsi yhdessä asiassa, minkä olin saanut päähäni
heti kun kuulin että se oli poika.
 Niin huusi Hanna eräänä päivänä minut luokseen ja minä tulin ja
istuin niin sievästi sängyn laidalle ja tartuin hänen pikku käteensä
niin hienosti ja hellävaroin, kuin oikein olisimme olleet parempaa
väkeä molemmat.

"Kuule, Nils", sanoi hän, "oletko yhtään ajatellut miksi me hänet

kastamme?"

Minä tulin sekä punaiseksi että hämilleni.

"Niin, näes, Hanna, olenhan tuota kyllä tuuminut, mutta anna

kuulla ensin mitä sinä arvelet."

"Olen aina ollut niin ihastunut 'Albertiin'. Muutamissa hyvissä

kirjoissa, joita olen lukenut, on kaikista parhaimman nimi ollut Albert."

"Älä pahastu Hanna, sillä sinullahan on ollut enin vaivaa pojasta.

Mutta minusta olisi ollut oikein mieluista, jos olisit tahtonut nimittää
hänet 'Jöns', isäraukkani mukaan", sanoin minä.

Silloin tuli Hanna vallan hohtavan punaiseksi, kohosi kiivaasti

käsivartensa varaan ja sanoi:

"Se oli kauh… kaunis nimi… tarkotan, lyhyt… ja helppo…

sanoa…"

Rakas pikku vaimoni! Hän oli hirmuisesti pahoillaan Jöns nimestä,

sen kyllä huomasi, mutta rakkaus sai hänet heti myöntymään, ja
minulla oli suuri työ saada poika kastetuksi Albertiksi, sillä minulle oli
mahdotonta tehdä hänen mieltään vastaan.

Siitä tuli sukkela poika, kävi koulun läpi kuten tanssien, tuotti
meille, tietysti, kuten muutkin lapset, koko joukon levottomuutta
koulu-ajallaan, mutt'ei mitään varsinaista surua, ennenkuin hänen
piti valita elämän ura.

Virkamiehet harvoin tahtovat poikiaan samoille urille kuin he itse;

siellä he tuntevat kaikki loukkauskivet ja vaikeudet ja toivovat että
joku muu syrjä kruunun leipäkakusta olisi pehmeämpi.

Mutta ammatti- ja liikemiehet tahtovat kernaasti vanhimman

poikansa omalle uralleen, sillä siellä voivat he tasottaa polun heille,
ja hyvä liikenimi ei totisesti olekaan huonoin perintö.

Saada meidän Albertimme tiskin taakse näytti kuitenkin olevan

yhtä mahdotonta kuin viedä lehtori Wadenström varieteeta
katsomaan. Lääkäriksi hän tahtoi tulla, sitä ei voitu auttaa. Mamma
itki ja rukoili, ja minä olin niin vihainen, etten puhunut hänelle
montakaan sanaa koko kevätlukukaudella kun hän oli
kahdeksannella luokalla. Hän kärsi siitä niin että kalpeni ja laihtui, ja
kun hän tervehti aamuisin tai nousi pöydästä tai sanoi hyvää yötä,
niin katsoi hän minuun niin että se viilsi sydäntäni.

Minä rakastin ammattiani yli kaiken muun, lukuunottamatta kotiani,

ja minä olin niin loukattu Albertin ykspäisyydestä etten mennyt
koulullekaan sinä päivänä, jolloin Albert tuli ylioppilaaksi.

Sydämeni kuohui, ja jalkani tahtoivat väkisin viedä minut ulos

huoneesta, kun kuulin nuorten ylioppilaitten laulun ja näin Albertin
keskellä joukkoa, kun he marssivat alas Rantakadulle saamaan
lakkinsa Bengtssonin puodista. Mutta minä sanoin itselleni: "Pysy
lujana, Jönsson, äläkä anna oman lapsesi ratsastaa itseäsi
kumoon!"
 Mutta kun hän sitte koputti ovelleni ja epäröiden ja ujona astui
sisään valkonen lakki kädessä ja parhaat numerot kaikissa aineissa
ja katsoi minuun suuret siniset silmät täynnä kyyneliä, ja hänen
leukansa vapisi ja hän sanoi:

"Kiitos, rakas isä, siitä kasvatuksesta, minkä tähän asti olen

saanut!"

— Silloin oli Nils Jönssonin miehuus kokonaan lopussa. Minä

ulvoin kuin vanha mamseli, olin pusertaa pojan tärviölle, suutelin
häntä ja nyyhkytin:

"Oma, oma poikani! Tule Jumalan nimessä miksi tahdot, mutta

pidä aina, aina isästäsi!"

Ja sen hän kyllä on tehnyt tähän asti, ja lääketieteen tohtori hän

on ja kihloissa tuollaisen maalariryökynän kanssa, joka istuu
kansallismuseossa ja jäljentää tauluja eikä osaa laittaa kunnon
kastiketta edes. Ja minä, joka vihaan "kyvykkäitä" naisia, olen vallan
ihastunut häneen ja kirjottanut monta arkkia ja pyytänyt ja rukoillut
häntä tulemaan tänne kuuskymmenvuotispäiväksi.

Kun toinen poika oli syntynyt, sanoi Hanna, hiukan tultuaan

voimiinsa:

"Kuules, Nils, nyt sinä olet totuttanut minut pahaan tapaan saada
määrätä lasten nimet. Älä nyt suutu, jos pyydän saada kutsua
tämänkin pojan aivan niinkuin itse tahdon!"

Minun mielestäni se oli hiukan kovaa, mutta minä sanoin sentään:

"Sen sinä kernaasti saat tehdä, Hanna, kaikesta siitä vaivasta,

minkä tuo poika on sinulle tuottanut. Mikä hänen nimekseen sitte
tulee?"

"Ah, rakas Nils, se on kyllä vaan joutava päähänpisto, mutta etkö

tahtoisi tämän kerran, tämän ainoan kerran odottaa, kunnes papilta
kuulet nimen!"

Tämä mielestäni jo oli liikaa, mutta naiset ovat arkoja sellaisissa

asioissa, ja hän sai tahtonsa läpi. Mutta kun pappi alkoi lukea
käsikirjaansa ja jo ehti veteen asti, silloin ajattelin minä itsekseni: Jos
hän nyt sanoo Adalbert, Erengisle, Edmund tai Willehard, niin ei siitä
ikänä hyvää tule. Silloin sanoi kirkkoherra: "Minä kastan sinut Jöns
Lars Andreas Isän Jumalan…" j.n.e.

"Jöns Lars Andreas!" Isä, kauppa-Lassi ja isoisä Peltoniemessä!

"Herra saattakoon! Älkää nyt pusertako rouvaa kuoliaaksi!" sanoi

rouva Johansson, joka pikku Jönsin oli maailmaan auttanut, kun
minä heti toimituksen jälkeen syleilyllä kiitin Hannaani niistä nimistä,
jotka hän oli pojallemme antanut.

Häntä kutsuttiin Jönsiksi ja hänen koko nimensä oli niin muodoin

"Jöns Jönsson". Mutta voitteko ajatella että hän siitä huolimatta,
tultuaan kahdeksannelle luokalle, osotti palavaa halua tulla —
husaariupseeriksi.

Nyt jouduin minä vallan epätoivoon. Enkö minä häntäkään saisi

liikkeeseen? Ankaruus senjälkeen kuin Albertille olin ollut niin
myöntyväinen, oli mahdoton; minä vaikenin ja kärsin. Silloin tuli
poika, sillä Jönsillä on hellä sydän, eräänä päivänä luokseni
konttoriin ja sanoi:
 "Antakaa anteeksi kaikki suru, minkä olen teille tuottanut, isä! Minä
tahdon totella."

"Kuule nyt, Jöns", sanoin minä, "mikä oikeastaan vetää sinun

mieltäsi noihin siunattuihin husaareihin? Ethän sinä verenhimoinen
ole, ethän?"

"En, en millään muotoa, ja sodasta voimme kai toivoa saavamme

pysyä erillämme", arveli Jöns.

"Onko sinun mielestäsi sitte niin erinomaisen hienoa ja hupaista

tulla komennetuksi ja lähetetyksi milloin sinne milloin tänne kuten
järjetön luontokappale, sen sijaan että olisit oma herrasi oman tiskin
takana?"

"Oh, ei suinkaan, mitä itsenäisyyteen tulee niin…"

"No, hyvä luoja, univormuako, ja iloista elämää ja toveruuttako

sinun mielesi vaan tekee?"

"Niin, sitäkin, ja sitte… ja sitte en minä tiedä mitään ihanampaa

kuin vapaana ja iloisena kiitää eteenpäin komealla juoksijalla. Minä
rakastan hevosia nähkääs, isä… mutta älkäämme enää puhuko
siitä."

"Vai niin, järjetön luontokappaleko siis saisi määrätä poikani

elämän uran. Kuuleppas nyt, Jöns! Samana päivänä kun olet
lopettanut kauppakoulun ja vapaaehtoisena ollut vuoden jossakin
konttorissa Lyypekissä, seisoo hevonen sinua varten papan tallissa,
hevonen, jota ei kenenkään husariupseerin tarvitsisi hävetä."

"Onko se mahdollista, rakas, hyvä isä!" sanoi tuo lurjus ja

heittäytyi kaulaani.
 Mutta kun Jöns Lars Andreas palasi Lyypekistä, ei hän tahtonut
mitään ratsuhevosta, vaan ainoastaan uusia, ajanmukaisia laitoksia
konttoriin, ja kassanhoitajan ja kontrollilaitoksen puotiin ja ikkunat
suurennettaviksi maahan asti ja varastokirjan pidettäväksi toisella
tavalla. Niin, se on totta, hän tahtoi myöskin tyttären
kauppahuoneesta Levy & Sohn, jolla oli liikkeensä vastapäätä sitä
liikettä Lyypekissä, missä Jöns oli palvellut. Tästä viimeksimainitusta
emme äiti ja minä oikein olleet hyvillämme, mutta me ajattelimme
näin: Tapahtukoon Jumalan tahto; liike on vakavarainen ja tyttö voi
olla kylläkin hyvä ihminen, vaikka onkin saksalainen. Mutta kun Jöns
matkusti sinne tervehtimään ja kosimaan, olikin Rebekka Levy jo
kihloissa, niin että meidän Jönsimme nyt on naimisissa raatimies
Lundströmin tyttären kanssa täältä Nålköpingistä, ja häneen me
kaikki olemme ihastuneet. Hänen isänsä on minun paras ystäväni,
Hanna on vienyt tytön kasteelle, meidän tyttömme ovat hänen
koulutovereitaan, ja Jöns oli tanssinut hänen kanssaan franseesia jo
silloin kun yhdessä olivat käyneet tanssikoulussa. Niin että hänestä
me tiedämme mitä hän on, tahtomatta sillä mitenkään moittia
Saksan kansakuntaa ja sen naisia.

Nyt hoitaa Jöns melkein koko liikkeen, paremmin kuin minä itse
uuden ajan vaatimusten mukaan voisinkaan, ja tästä saa hän kiittää
kauppamiessivistystään, jonka hän on voinut itselleen hankkia paljon
mukavammin kuin minä sen vähän, minkä tiedän. Hän ottaa
haltuunsa toisen yksityispuolen liikkeestä toisensa perästä, ja minä
tunnen aina enemmän ja enemmän, kuinka minä tulen
tarpeettomaksi ja hyödyttömäksi tuolla alhaalla, kuinka toinen
toisensa perästä ne siteet irroittuvat, jotka kerran sitoivat minut
puotiin ja konttoriin. On ainoastaan yksi side, joka kasvaa
lujemmaksi vuosi vuodelta, ja se on rakkauden side liikkeen
vanhemman osakkaan ja hänen välillä, joka nyt johtaa tuolla
alhaalla.

Ainoa, mitä minulla on Jönsiä vastaan on se, että hän toisinaan on

kiivas. Ei kotona; hänen Emminsä saa tehdä ja sanoa mitä tahtoo. Ei
liikkeessäkään; ostaja saa seisoa ja lörpötellä kuinka paljo ja kuinka
pitkiä tyhmyyksiä tahansa ilman että Jönsin ystävällinen hymy
vähintäkään muuttuu. Mutta minä kerron teille pienen jutun, niin
ymmärrätte, mitä tarkotan.

Niin, se oli silloin kun Snusdala—Linkebo-rata piti vihittämän. Minä

olin, tietäähän sen: toimeenpaneva tirehtööri rautatieosakeyhtiön
johtokunnassa, ja vaikka sen itse sanon, jollen olisi oikein olan takaa
takonut, niin olisivat Linkebon tehtaat ja talon isännät vielä tänä
päivänä hevosilla saaneet laahata malmiansa ja viljaansa ulos
maailman markkinoille.

Vihkiäisissä piti tietysti olla juhlajuna ja lipuilla koristettu lokomotiivi

ja kukkaköynnöksiä kaikilla asemilla ja maaherra virkapuvussa ja
juhlapäivälliset Snusdalan tavaramakasiinissa, sillä koko
Snusdalassa ei ollut yhtään salia, joka olisi tarkotukseen kelvannut.
Ja paras kaikista oli, että itse kuningas tuli sinne ja söi meidän
kanssamme tavaramakasiinissa omassa korkeassa
majesteetissaan; mutta tavaramakasiiniksi ei suojusta kukaan
ihminen olisi voinut tuntea, sillä seinissä ei ollut käden levyistä alaa,
jota eivät Nålköpingin. Snusdalan ja Linkebon naiset olisi peittäneet
ikkuna- ja o vi verhoilla ja lipuilla ja kilvillä ja lehdillä ja kukilla; oli
näet heinäkuu. Ja pormestarin rouva oli tuonut sinne kuningas
Oskarin rintakuvan ja asettanut sen peräseinälle kahden suuren
maalatun likavesijohtoputken päälle; niitä käytetään Nålköpingissä
paljon jalustoiksi sekä kuninkaille että kukkaruukuille. Päivällinen
maksoi kolmekymmentä kruunua hengeltä ja rouva Lundin
kaupungintalolta oli tehnyt parastaan, ja keitti ja paistoi niin paljon
kuin jaksoi eräässä lautasuojuksessa ratapihalla.

No, siellä istuivat nyt kuninkaallinen majesteetti ja maaherra ja

pormestari ja minä ja muut johtokunnan jäsenet ja vanha parooni
Sviskonkärna samassa pöydässä peräseinän luona, ja sitte oli
makasiini aivan täynnä, pöytä pöydän vieressä niin että vahtimestarit
tuskin voivat pujotella läpi, sillä kaikkihan tahtoivat istua niin lähellä
hänen majesteettinsa pöytää kuin mahdollista.

Mutta makasiinin toiseen päätyyn jäi hiukan tyhjää ja silloin sanoi

pormestari minulle:

"Mitä me tuolla tyhjällä tilalla teemme? Naiset kyllä näkevät meidät

paremmin lasiruutujen läpi tavaratoimistosta."

"Kyllä tiedän, Trybom", sanoin minä, "vedetään köysi seinästä

toiseen ja annetaan köyhän kansan seisoa siellä takana armollista
kuningastaan katselemassa, niin paljo kuin sinne mahtuu."

Niin tehtiinkin, ja kansa käyttäytyi hyvin siivosti ja säädyllisesti. Ja

maaherra puhui kuninkaalle ja kuningas puhui läänille ja pormestari
radalle ja minun piti oikeastaan puhua osakkeita merkinneille
kunnille, mutta sen olin pyytänyt lääninsihteerin tekemään. Sitte
ojentaa kamariherra kuninkaalle pienen paketin, sitte antaa kuningas
lämpimällä kädellä pormestarille Pohjantähden ritarikunnan merkin ja
minulle Vaasan tähden.

Minä heitin silmäyksen ruudun taakse tavaratoimistoon ja siellä

seisoi Hanna ja pyyhki silmiään ja tytöt olivat punaisia kuin pioonit ja
nähtävästi peloissaan että minä käyttäytyisin jollakin tavoin tyhmästi,
mutta itse asiassa oli heidän laitansa kyllä sama kuin Itämaan
kolmen viisaan, että he iloitsivat kun he tähden näkivät. Istuessani ja
asettaessani tähteä rintaani huudetaan väkijoukosta:

"Maljasi Nisse! Lykkyä tykö!"

Ja kun minä katson sinne, seisoo veli Johannes köyden takana

keskellä väkijoukkoa, ja viittailee minulle pienellä sinisellä pullolla
jonka hän sitte laskee suulleen ja tyhjentää muutamin kelpo
siemauksin.

Minulla oli edessäni seitsemän viinilasia ja kolme pulloa ja

Johannes otti oman väkevänsä suoraan taskusta. Jumala jakaa
antimiaan niin eri tavalla tässä maailmassa, eikä Johannes
tietenkään pahaa tarkottanut. Mutta minä sekä harmistuin että
suutuin tavattomasti, varsinkin katsoen siihen, että hän oli paljo
enemmän liikutettu kun sellaisessakaan tilaisuudessa sopii hänen
alhaisessa asemassaan olevalle henkilölle.

Silloin kuuluu sieltä ääntä ja rähinää kansanjoukosta, ja minä näen

Jönsini, joka istui eräässä alemmassa pöydässä, ottavan
Johannesta niskasta kiinni ja — heittävän ulos kuin koiran. Kun minä
hetken perästä poikaa siitä läksytin, vastasi hän:

"Joll’ei hän heti olisi mennyt olisi syntynyt häväistys, ja minä pyysin
ensin häntä kauniisti, isä!"

Mutta Jöns näytti niin rajulta ja vihaiselta, että luulen että hän olisi
voinut vaikka lyödäkin omaa setäänsä.

Siihen aikaan oli Johanneksella pieni kruununtila, jonka olin

hänelle vuokrannut, mutta sitte piti minun lähettää hänet
Minnesotaan, sillä hän oli liian taipuvainen märkään, märkään ja
väkevään.

Ja sitte en ole vielä puhunut tytöistämme, jotka seisoivat

tavaratoimistossa äitinsä vieressä ja katselivat isää hänen — jollen
ota lukuun tuota Johanneksen juttua — elämänsä ylpeimpänä
päivänä. Heidän nimensä ovat Greta ja Anna, he ovat suurikasvuisia
ja vaaleaverisiä ja naimisissa molemmat. Gretalla on asessori
kuninkaallisen majesteetin ja valtakunnan Götan hovioikeudessa ja
hän asuu nyt Jönköpingissä. Anna kulki viisi ja puoli vuotta odottaen
erästä arkkitehtiä, joka asuu meidän omassa talossamme, ja jonka
asiat vielä tänäänkään eivät ole liian hyvällä kannalla. Sekä Greta
että Anna ovat kauniita naisia ja niin toisensa näköisiä kuin olisivat
he kaksosia. Taloustoimiin ovat he hyvin perehtyneet ja soittaapa
Greta hiukan, pianoakin niin että kohteliaammat vieraat jäävät saliin
ja koettavat näyttää huvitetuiltakin. Mutta kun Anna alkaa laulaa "Mä
neljäntoist' olin vuotias", hajaantuvat vieraat kernaasti sivuhuoneisiin,
sen olen huomannut.

Voidaan kai antaa anteeksi isälle, jos sanon, ettei sellaista

tyttöparia usein lasketa maailmaan meidän nykyisistä kodeistamme.
Sydämeltään puhtaina, katse kirkkaana ja mieli raittiina "kuin
kevätvirran juoksu", menivät he vihkituoliin suutelemattomina,
"hakkailemattomina" ilman kirjeitä ja kiharoita, jotka olisi pitänyt
polttaa. Siinä on kaksi nuorta rouvaa, jotka voivat matkustaa maan
ympäri tarvitsematta pelätä, että jostain nurkan takaa sukeltaisi esiin
mies, jonka katseen edessä heidän pitäisi luoda silmänsä alas tai
saada poskensa punastumaan. Asessori Rundqvist ja arkkitehti
Blom ovat saaneet heidät kokonaan niinkuin he ovat, ilman mitään
muistoja ja kokemuksia. No, asessori on mies, jolla on tulevaisuutta
ja jonkun verran omaisuuttakin, vaikka mikään Adonis hän ei ole,
koska silmät eivät oikein tahdo katsella samaan suuntaan ja tukka
on hiukan punaseen vivahtava. Mutta että Anna oli hiukan liian hyvä
arkkitehdille, tuumailimme sekä äiti että minä. Ei mitään tilauksia, ei
mitään käytännöllisyyttä mitä puutavaraan ja tiiliin ja takotöihin ja
rahteihin tulee, mutta piirustaa tavattoman hyvin, tosin enimmäkseen
sellaisia taloja, joita ei täällä Nålköpingissä rakenneta. No, herra
Jumala, kun Annamme kerran on tyytyväinen, niin vähätpä muusta.

Tytöillähän on oma tarkotuksensa tässä elämässä, mutta sydäntä

karvastelee, kun pitää laskea heidät pois kotoa. Kun pojat menevät
naimisiin on asia aivan toisenlainen, sen tiedän Jönsistä. Mies on
sentään aina mies ja määrää itse elämänsä suunnan useimmissa
tapauksissa. Jos vaimo pitää pystyssä hänen nimensä kunniaa eikä
tuhlaa yhteistä omaisuutta, niin muu kyllä menee. Mutta jättää oma
rakas tyttönsä vieraan miehen valtaan, kun tietää, minkälaisia
parhaatkin miehet ovat!

Sitte on meillä yhdeksäntoistavuotias Jenny, ja Katri,

rippikoululapsi ensi talvena, hän jota vanha hovimarsalkka suuteli ja
jolle antoi elinkoron. He ovat tummia ja hienoja ja näyttävät olevan
aivan toista rotua kuin vanhemmat sisaret. Jenny harrastaa, suureksi
harmikseni, "ajan suuria kysymyksiä" ja lukee aivan liian paljon ja
juttelee niin että tahtoo pää mennä ympäri, ja haluaa itselleen
paikkaa "saadakseen vaikutusalan ja tunteakseen itsensä
itsenäisemmäksi", vaikka hän sellaista ei ollenkaan tarvitsisi. Ensin
kun hän tuli seuraelämään täällä Nålköpingissä tulin minä oikein
pahoilleni siitä että hän yhtä mittaa tahtoi olla herrojen seurassa,
jutteli, nauroi, väitteli ja käveli heidän kanssaan sekä myöhään että
varhain. Mutta sitte sain minä kuulla, että hän on hirmuisen ilkeä ja
nenäkäs heille, pisteliäs ja härnäävä, niin että herrat pitävät häntä