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Kenneth W. Boyd. Cost Accounting For Dummies
Cost Accounting For Dummies® To view this book's Cheat Sheet, simply go to www.dummies.com and search for “Cost Accounting For Dummies 2nd Edition Cheat Sheet” in the Search box. Table of Contents
List of Tables
List of Illustrations
Guide
Pages
Introduction
About This Book
Foolish Assumptions
Icons Used in This Book
Beyond the Book
Where to Go from Here
Understanding the Fundamentals of Costs
So You Want to Know about Cost Accounting
Comparing Accounting Methods
Considering your shareholders
Mulling over creditors
Addressing concerns of regulators
Using management accounting
Fitting in cost accounting
Using Cost Accounting to Your Advantage
Starting with cost-benefit analysis
Planning your work: Budgeting
Controlling your costs
Setting a price
Pricing and competition
Increasing a price
Changing prices after more analysis
Improving going forward
Using the accrual method of accounting
Deciding on relevance
Demanding quality
Brushing Up on Cost Accounting Basics
Understanding the Big Four Terms
Comparing direct and indirect costs
Allocating indirect costs
Deciding on direct versus indirect costs
Mulling over fixed and variable costs
Kicking around fixed costs
Computing variable costs
Fitting the costs together
Covering Costs in Different Industries
Reviewing manufacturing costs
Considering costs for retailers
Adding up costs for e-commerce firms
Maintaining a website
Ensuring product fulfillment
Getting buyers interested
Finding costs most companies incur
Why Are You Spending? Cost Drivers
Pushing equipment too hard and relevant range
Previewing inventoriable costs
Following the Rules of the Cost Accounting Road
Understanding generally accepted accounting principles (GAAP)
Considering the needs of stakeholders
Mulling over consistency
Deciding on accrual basis or cash basis
Installing the cash basis
Moving to the accrual method
Finishing with conservatism
Using Cost-Volume-Profit Analysis to Plan Your Business Results
Understanding How Cost-Volume-Profit Analysis Works
Calculating the breakeven point
The breakpoint formula
A case in point (breakeven point, that is)
Financial losses: The crash of your cash
Contribution margin: Covering fixed costs
Lowering the breakeven point to reach profitability sooner
Target net income: Setting the profit goal
Lower profits and margin of safety
Contribution margin versus gross margin
Using operating leverage
Assessing e-commerce businesses
Reviewing how e-commerce works
Applying the CVP formula
Timing is everything when it comes to costs
Using Cost-Volume-Profit Analysis to Make Savvy Business Decisions
Deciding to advertise
Lowering your price without losing your profit
Combining the results of two products
Applying breakeven point to two products
Applying target net income to two products
Adjusting product sales to reach target net income
Costing and pricing a new product
Starting with your product idea
Designing the new product
Estimating sales
Using CVP tools
The Tax Man Cometh, the Profits Goeth
Understanding pre-tax dollars
Adjusting target net income for income taxes
Estimating Costs with Job Costing
Understanding How Job Costing Works
Cost objects: The sponges that absorb money
Charging customers for direct and indirect costs
Implementing job costing in manufacturing: An example
Computing direct costs
Calculating indirect costs
Presenting total job costs
Deciding on costing for IT consulting projects
Determining project needs
Plugging in job costing
MULLING OVER FIXED COSTS AND VARIABLE COSTS
SEPARATING DIRECT COSTS AND INDIRECT COSTS
Taking a Closer Look at Indirect Costs using Normal Costing
Budgeting for indirect costs
Following a normal job costing system
Computing direct costs and indirect costs
Introducing the job cost sheet
Following the Flow of Costs through a Manufacturing System
Control starts with control accounts
Explaining the debit and credit process
Walking through a manufacturing cost example
Applying the methodology to other control accounts
More Activity, More Cost: Activity-Based Costing
Avoiding the Slippery Peanut Butter Costing Slope
Recognizing a single indirect cost allocation
A fly in the peanut butter: Dealing with different levels of client activity
Missing the mark: Undercosting and overcosting
Discussing product-cost cross-subsidization
Underallocating or overallocating messes up pricing
Designing an Activity-Based Costing System
Refining your approach
Grouping costs using a cost hierarchy
Testing your ABC design
Dealing with direct costs
Diving into the cost pools
Applying indirect costs using a cost allocation base
Allocate and celebrate: Assigning the cost allocation rates to the products
Using Activity-Based Costing to Compute Total Cost, Profit, and Sale Price
Allocating indirect costs evenly by product
Analyzing and reallocating cost activities
Changing allocations to cost pools
Changing prices after ABC
Implementing ABC Costing for a Business Pivot
Deciding whether to pivot
Mulling over a pivot example
Using ABC Costing for a New Business Model
Considering sunk costs
Reviewing food and labor costs
Allocating new overhead costs
Applying ABC costing to overhead costs
Evaluating your results
Planning and Control
What’s the Plan, Stan? Budgeting for a Better Bottom Line
Brushing Up on Budgeting Basics
Seeing the master budget and its component parts
Why budgeting is important
Considering the costs and benefits of data collection
Choosing your dashboard
Planning to gather information
Leveraging AI and data analytics for effective budgeting
Understanding artificial intelligence
Automating with software tools
Applying data analytics
Planning strategically
Planning How to Plan: Factors That Impact Your Budgeting Process
Experience counts
Timing is everything
People get you headed in the right direction
COMPANY GOALS, EMPLOYEE COMPENSATION
Sales projections pay off
The Nuts and Bolts (and Washers) of Budgeting
Understanding the budgeting financials
Source of funds
Using the balance sheet
Working with the income statement
Analyzing the statement of cash flows
Reviewing revenue and production budgets
Applying the revenue formula
Using the inventory formula
Assessing cost of goods sold
Budgeting with Cash Accounting or Accrual Accounting
Cash basis accounting: Using your checkbook to budget
I accrue, you accrue, we all accrue with accrual accounting
Budgeting to Produce the Income Statement and Balance Sheet
The well-balanced balance sheet
The incredible income statement
Constant Change: Variance Analysis
Variance Analysis and Budgeting
Using management by exception to recognize large variances
Seeing the problem in using a static budget
Operating with operating income
Understanding favorable and unfavorable variances
Opting for a flexible budget
Handling fixed cost in a flexible budget
Reviewing the components of a flexible budget
Investigating budget variances
Seeing the cause of a flexible budget variance
Considering reasons for a sales volume variance
Analyzing in Material Price and Efficiency Variances
Applying price variances to direct materials
Applying efficiency variances to direct materials
Looking at budgeted input quantity
Laying out reasons for price and efficiency variances
Implementing price variances for direct labor
Sizing up efficiency variances for direct labor
Using Your Findings to Make Decisions
Following up on variances
Researching the relevant
No waffling on the impact of defective products
Picking a minimum dollar amount or percentage
Moving on to continuous improvement and benchmarking
Judging the effectiveness of your employees
EVALUATING THE PURCHASING MANAGER
Tying supply chain concepts to variance analysis
Attaching ABC costing concepts to variance analysis
Applying a flexible budget
Putting price and efficiency variances together
Focusing on Overhead Costs
Using Cost Allocation to Minimize Overhead
Paying for the Security Guard: Fixed Overhead Costs
Planning fixed overhead costs
Scheduling your fixed overhead costs
Considering capacity needs
Allocating fixed overhead costs
Computing a cost allocation rate
Applying actual costs and the static budget
Calculating flexible budget variances
Using production volume variances
Assessing potential causes of fixed overhead variances
Those Vexing Variable Manufacturing Costs
Working with variable overhead costs
Considering variable overhead in planning
Figuring budgeted costs and activity levels
Adding in actual costs and activity levels
Implementing variance analysis
Comparing the use of the term flexible budget variance
Computing spending variance and efficiency variance
Finding the reasons for a variable overhead variance
What’s on the Shelf? Inventory Costing
Working with Inventoriable Costs
Using the matching principle to calculate profit on sale
Checking out inventoriable costs
Working with non-inventoriable costs
Erring on the conservative side
Costing Methods for Inventory
Using the first-in, first-out (FIFO) method
Accounting with the last-in, first-out (LIFO) method
Weighing the merits of weighted-average cost
Considering specific identification method
Analyzing profit using FIFO and LIFO
Using Variable and Absorption Costing to Allocate Fixed Manufacturing Costs
Defining period costs and product costs
Applying variable and absorption costing
Relating Capacity Issues to Inventory
Reviewing theoretical and practical capacity
Understanding capacity issues for e-commerce firms
Communicating with customers
Managing an increase in demand
Giving yourself an inventory cushion
Doing business through dropshipping
Using normal and master-budget capacity
Choosing a capacity level
Costing your product
Pricing decisions and capacity
Capacity levels and employee evaluation
Focusing on uncertainty
Making Decisions
Cost Drivers and Cost Estimation Methods
Working with Cost Behavior
Understanding linear and nonlinear cost functions
Discovering how cost drivers determine total costs
Considering Cost Estimation Methods
Walking through the industrial engineering method
Agreeing on the conference method
Reviewing the account analysis method
Checking out the quantitative analysis method
Introducing the high-low method
Computing the slope co-efficient
Finding the constant in the cost function
Estimating the cost function
Choosing a cost estimation method
Deciding between two cost drivers
Juggling cost hierarchies and cost estimation issues
Exploring Nonlinear Cost Functions
Changing cost functions and slope co-efficients
Understanding the impact of quantity discounts
Assessing the Impact of Learning Curves
Considering how AI and Data Analytics Impact Learning Curves
Reviewing AI and data analytics
Throwing in the learning curve
Simplifying a procedure
Finding and using better data
Making Smart Business Decisions with Relevant Information
Navigating the Geography of Relevance
Introducing the decision model
YOUR HOW-TO BOOK: AN OPERATIONS MANUAL
Applying a model to an equipment decision
Determining alternatives
Considering depreciation
Coming to conclusions
Connecting your decision to the balance sheet
Understanding IT purchasing issues
Defining the problem
Gathering information
Forecasting costs and making assumptions
Analyzing and selecting an alternative
Implementing the decision and evaluating outcomes
Considering relevant qualitative factors in decision-making
Special Orders Don’t Upset Us, Do They?
Deciding between Outsourcing and In-house Production
Weighing opportunity costs
Contemplating the carrying cost of inventory
Maximizing Profit When Capacity Is Limited
Managing capacity and product mix
Analyzing customer profit and capacity
Job costing versus process costing
THE IDEAL CUSTOMER
Relevant cost and revenue
Making Smart Pricing Decisions: Figuring Total Costs
Understanding Influences on Prices
Customers
Competitors
Suppliers
Special orders
Pricing for Profits Down the Road
Reviewing market-based and cost-based pricing
Aiming at the target: Target costing
It’s elementary, Dr. Watson: Gathering information from many sources
Implementing target cost and target pricing
Thinking about design decisions and cost
Arriving at a Reasonable Profit
Using cost-plus pricing
Reducing your markup
Computing a target rate of return on investment
Weighing other issues with cost-plus pricing
Using product life-cycle budgeting
MORE TIME, MORE FINANCIAL RISK
Assessing the risks of your product’s life cycle
Considering pricing strategies and life cycles
Pricing decisions and regulation
Circling with the vultures
Managing IT product costs and pricing
Cutting off old systems
Installing new equipment and training
Breaking down costs
Managing the unexpected
Allocating Costs and Resources
Analysis Methods to Improve Profitability
Processing Cost Allocation
Why bother? Purposes of cost allocation
Justifying cost allocation decisions
Implementing Cost Allocation
Using cost hierarchy to allocate costs
Allocating tricky corporate costs
Thinking about allocation methods for corporate cost
Considering pooling corporate costs
ESTIMATING A PRODUCT’S LITIGATION RISK
Allocating corporate costs to divisions
Keeping track of customer revenues and costs
Boning up on profit analysis
Breaking down purchase discounts
Isolating customer costs
Going Over Sales Mix and Sales Quantity Variances
Remembering variances and contribution margin
Getting the story about sales mix variance
Connecting sales mix to contribution margin
Introducing the sales mix variance
Calculating sales quantity variance
Behind the Scenes: Accounting for Support Costs and Common Costs
Not Everyone Generates Revenue: Support Costs
Introducing single rate cost allocation method
Figuring out the cost allocation rate
Pulling apart the single rate cost allocation
Looking at actual results
Checking out dual rate cost allocations
Using practical capacity to determine cost allocation rates
Budgeting with practical capacity and single rate allocations
Considering practical capacity and dual rate allocations
Is using practical capacity practical?
Going Over Variance Analysis and Department Costs
Choosing budgeted versus actual rate of usage
Looking once more at practical capacity
PASSING THE COST ALLOCATION BUCK
Gaining or losing allocated fixed costs
Implications for the rate of usage selected
Allocating to multiple departments
Kicking around the direct allocation method
Moving to the step-down allocation method
Exchanging services: the reciprocal method
Focusing on Common Costs
Mulling over stand-alone cost allocation
Stepping up to incremental cost allocation
Making a Commitment: Contracts
Contracting with the government
Thinking about reasonable and fair costs
Joint Costs, Separable Costs, and Using Up the Leftovers
Working with Joint Costs
Explaining joint cost terms
Figuring a product’s total cost
Setting the sales value of a byproduct
Appreciating the importance of allocating joint costs
Considering joint cost allocation methods
The sales value at splitoff method
The physical measure method
Continuing Production: Computing Separable Costs After Splitoff
Exploring the net realizable value method
Computing total costs and per-unit amounts
Mulling over issues with the NRV method
Introducing the constant gross margin percentage NRV method
Starting with total gross margin percentage
Calculating goods available for sale by product
Figuring out joint cost allocations
Verifying the gross margin percentage
Reducing separable costs
Choosing a Joint Cost Allocation Method
Making the case for sales value at splitoff
Falling back to other joint costing methods
Deciding to sell or process further
Holding a Garage Sale: Making the Most of Byproducts
Tracing Similar Products with Process Costing
Process Costing: Presenting the Basic Approach
Leading off with direct material costs
Following up with conversion costs
Sitting on the Factory Floor: Dealing with Work in Process
Using Equivalent Units to Compare Apples to Apples
Counting the units for equivalent units
Hunting down the total costs of production
Deriving direct material costs
Figuring out labor and overhead costs
Putting units and costs together
Laying out physical units and total costs
Computing equivalent units
Seeing different percentages of completion
Let’s get physical: Physical units
Going over equivalent units
Putting in costs
Using the Weighted Average Method for Process Costing
Handling beginning work in process
Continuing with equivalent units
Introducing the First In, First Out Method of Process Costing
Comparing Processing Costing Methods
Mulling over weighted average and FIFO methods
Kicking around inventory costing methods
Checking on standard costs and process costing
Debating transferred-in costs
Considering Quality Issues
What a Waste! Getting the Most from Spoilage, Scrap, and Reworked Products
Accounting for Waste
Determining the inspection point
Understanding spoilage and scrap
Differentiating normal or abnormal spoilage
KEEP YOUR THINKING CAP ON!
Expiration date: A special kind of spoilage
Spoilage and process costing
Breaking out abnormal spoilage
Shifting to normal spoilage
Presenting normal spoilage methods
Choosing a method to cost normal spoilage
Reworking a product to recoup some profit
Applying Process Costing Methods to Spoilage
Weighing in on the weighted average costing method
Accounting for physical units
Attaching costs to equivalent units
Doing the FIFO Hokey Pokey: Put your first in first, take your first out first
Job Costing for Spoilage, Reworked Products, and Scrap
Making adjustments for normal and abnormal spoilage
Pinning the normal spoilage on all jobs
Posting the normal spoilage to one job
Dealing with abnormal spoilage
Reworking and selling a product
Accounting entries for initial production
Assigning rework to a specific job
Allocating rework to all jobs
Making allocation decisions about scrap
Making Smart Ordering Decisions
Considering the Costs of Inventory
Going through the ordering sequence
Taking a closer look at stockout costs
Calculating Inventory Quantity with the Economic Order Quantity Formula
Figuring a Favorable Reorder Point
Introducing safety stock: Creating a cushion
Computing safety stock
Evaluating Prediction Error
Calculating relevant total costs
Acting on a prediction error
Buying more and ignoring EOQ
Practicing Just-In-Time Purchasing
Kicking around JIT benefits and risks
Putting in a JIT purchasing system
Laying out purchasing costs
Pinning down stockout costs
Turning to customer returns
Adjusting total purchasing cost
SCM and Customer Demand Issues
Pulling apart the supply chain
Analyzing demand
Quality: Building a Better Mousetrap
Considering Quality Benefits and Costs
Listing the benefits of quality
Listing the costs of quality
Taking steps to ensure quality
Compiling a Cost of Quality Report
Putting Quality Practices in Place
Quality in job costing
Taking a spin through inventory
Customer Satisfaction: Measuring and Improving It
Customer satisfaction’s non-financial measurements
Is measuring customer satisfaction worth the effort?
Doing More in Less Time
Analyzing performance related to time
“WE HAVE CLEARANCE, CLARENCE.” “ROGER, ROGER.” “WHAT’S OUR VECTOR, VICTOR?”
Calculating average waiting time
Adding in manufacturing lead-time
Eliminating the Constraint of the Bottleneck
Fewer bottlenecks mean increased contribution margin
Clearing bottlenecks
The Part of Tens
Ten Common Costing Mistakes and How to Avoid Them
Pricing a Product Incorrectly
Listing Fixed Costs As Variable Costs
Labeling Period Costs As Product Costs
Misusing Target Net Income
Forgetting About Taxes
Assigning Costs to the Wrong Product
Not Reviewing Variances Correctly
Redlining: Pushing Production Activity Above Relevant Range
Ignoring the Timing of Costs
Not Implementing Activity-Based Costing
Ten Ways to Increase Profits Using Costing
Selling More Of The Right Products
Implementing Sales Mix Analysis to Increase Total Profits
Building a Higher Margin of Safety
Deciding How Much You Need: Production and Scheduling Issues
Who Does What: Handling Costs and Employee Issues
Reducing and Managing Scrap
Moving It off the Shelf: Inventory Issues
Effectively Taking Special Orders
Making Accurate Cost Allocations
Addressing the Issue of Spoilage
Index. A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
About the Author
Dedication
Author’s Acknowledgments
WILEY END USER LICENSE AGREEMENT
