Mangement Accounting for Decision Makers

585 Pages·2015·10.53 MB·English

by  Peter Atrill

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EIGHTH EDITION

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Peter Atrill and
Eddie McLaney
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Pearson Education Limited
Edinburgh Gate
Harlow CM20 2JE
United Kingdom
Tel: [phone]
Web: www.pearson.com/uk
First published 1995 by Prentice Hall Europe (print)
Second edition published 1999 by Prentice Hall Europe (print)
Third edition published 2002 by Pearson Education Limited (print)
Fourth edition published 2005 (print)
Fifth edition published 2007 (print)
Sixth edition published 2009 (print)
Seventh edition published 2012 (print and electronic)
Eighth edition published 2015 (print and electronic)
© Prentice Hall Europe 1995, 1999 (print)
© Pearson Education Limited 2002, 2005, 2007, 2009 (print)
© Pearson Education Limited 2012, 2015 (print and electronic)
The rights of Peter Atrill and Edward John McLaney to be identified as authors of this work have
been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
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ISBN: 978-1-292-07243-2 (print)
978-1-292-07246-3 (pdf)
978-1-292-07251-7 (eText)
British Library Cataloguing-in-Publication Data
A catalogue record for the print edition is available from the British Library
Library of Congress Cataloging-in-Publication Data
Atrill, Peter.
Management accounting for decision makers / Peter Atrill and Eddie McLaney. -- 8th edition.
pages cm
Includes bibliographical references and index.
ISBN 978-1-292-07243-2
1. Managerial accounting. 2. Decision making. I. McLaney, E. J. II. Title.
HF5657.4.A873 2015
658.15′11--dc23
2014048754
10 9 8 7 6 5 4 3 2 1
19 18 17 16 15
Front cover image © Getty Images
Print edition typeset in 9.25/13pt Helvetica Neue LT Pro by 35
Print edition printed in Slovakia by Neografia
NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION
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Brief Contents
Preface xvii
How to use this book x ix
Acknowledgements xxi
1 I ntroduction to management accounting 1
2 R elevant costs and benefits for decision making 41
3 C ost–volume–profit analysis 60
4 F ull costing 99
5 C osting and cost management in a competitive environment 143
6 B udgeting 183
7 A ccounting for control 2 26
8 M aking capital investment decisions 267
9 P erformance evaluation and pricing in a competitive
environment 3 27
10 M easuring divisional performance 377
11 M anaging working capital 4 22
Appendix A G lossary of key terms 473
Appendix B S olutions to self-assessment questions 481
Appendix C S olutions to review questions 492
Appendix D S olutions to selected exercises 501
Appendix E P resent value table 5 39
Index 541
BRIEF CONTENTS v
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Contents
Preface x vii
How to use this book xix
Acknowledgements xxi
1 Introduction to management accounting 1
Introduction 1
Learning outcomes 1
What is the purpose of a business? 2
How are businesses organised? 3
How are businesses managed? 6
Establish mission, vision and objectives 7
Undertake a position analysis 9
Identify and assess the strategic options 1 0
Select strategic options and formulate plans 10
Perform, review and control 11
The changing business landscape 11
What is the financial objective of a business? 12
Balancing risk and return 14
What is management accounting? 16
How useful is management accounting information? 1 8
Providing a service 18
Further qualities 19
Weighing up the costs and benefits 2 0
Management accounting as an information system 2 3
It’s just a phase 24
What information do managers need? 26
Reporting non-financial information 27
Influencing managers’ behaviour 28
Reaping the benefits of IT 29
From bean counter to team member 3 0
Reasons to be ethical 30
Management accounting and financial accounting 3 2
Not-for-profit organisations 3 4
Summary 36
Key terms 3 8
References 3 8
Further reading 3 8
CONTENTS vii
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Review questions 3 9
Exercises 3 9
2 Relevant costs and benefits for decision making 4 1
Introduction 4 1
Learning outcomes 4 1
Cost–benefit analysis 4 2
What is meant by ‘cost’? 43
Relevant costs: opportunity and outlay costs 4 5
Sunk costs and committed costs 50
Non-measurable costs and benefits 51
Self-assessment question 2.1 52
Summary 53
Key terms 5 3
Further reading 5 3
Review questions 5 4
Exercises 5 4
3 Cost–volume–profit analysis 6 0
Introduction 6 0
Learning outcomes 6 0
Cost behaviour 6 1
Fixed cost 6 1
Variable cost 6 3
Semi-fixed (semi-variable) cost 64
Analysing semi-fixed (semi-variable) costs 6 4
Finding the break-even point 66
Contribution 7 1
Contribution margin ratio 72
Margin of safety 7 2
Achieving a target profit 74
Operating gearing and its effect on profit 75
Profit–volume charts 7 7
The economist’s view of the break-even chart 78
Failing to break even 79
Weaknesses of break-even analysis 80
Using contribution to make decisions: marginal analysis 83
Pricing/assessing opportunities to enter contracts 8 4
The most efficient use of scarce resources 85
Make-or-buy decisions 87
Closing or continuation decisions 90
Self-assessment question 3.1 91
Summary 92
Key terms 9 3
Further reading 9 3
Review questions 9 4
Exercises 9 4
viii CONTENTS
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4 Full costing 9 9
Introduction 9 9
Learning outcomes 9 9
What is full costing? 100
Why do managers want to know the full cost? 100
Single-product businesses 1 02
Process-costing problems 1 03
Multi-product businesses 1 05
Direct and indirect cost 105
Job costing 1 07
Full (absorption) costing and the behaviour of cost 108
The problem of indirect cost 1 09
Overheads as service renderers 109
Job costing: a worked example 1 10
Selecting a basis for charging overheads 1 14
Segmenting the overheads 116
Dealing with overheads on a cost centre basis 117
Batch costing 1 26
Non-manufacturing overheads 1 28
Full (absorption) costing and estimation errors 128
Full (absorption) costing and relevant costs 130
Full (absorption) costing versus variable costing 1 30
Which method is better? 133
Self-assessment question 4.1 134
Summary 1 35
Key terms 1 37
Reference 1 37
Further reading 1 37
Review questions 1 37
Exercises 1 38
5 Costing and cost management in a competitive
environment 143
Introduction 1 43
Learning outcomes 1 43
Cost determination in the changed business environment 144
Costing and pricing: the traditional way 1 44
Costing and pricing: the new environment 1 44
Cost management systems 1 45
The problem of overheads 146
Taking a closer look 146
Activity-based costing 1 47
Attributing overheads 1 48
Benefits of ABC 149
ABC versus the traditional approach 1 49
ABC and service industries 151
CONTENTS ix
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