Test Bank for Cost Management 3rd Canadian Edition by Eldenburg

1 The Role of Accounting Information in Ethical Management Decision Making 2

Good Ethics Makes Good Business 3

Strategic Management and Decision Making 4

Levers of Control 8

Cost Accounting and Decision Making 10

Information Systems and Relevant Information in Management Decision Making 11

Business Risk 16

Decision-Making Biases 18

Quality of Management Decision Making 19

Ethical Decision Making 20

Appendix 1A Professional Conduct and Ethical Behaviour 23

Appendix 1B Steps for Better Thinking: A Decision-Making Process 23

Summary 25

2 Cost Concepts, Behaviour, and Estimation 40

When Cost Estimates Are Off Target 41

Cost Concepts and Terminology 42

Cost Behaviour 46

Cost Estimation Techniques 51

Estimating the Cost Function 54

Regression Analysis 58

Uses and Limitations of Cost Estimates 64

Appendix 2A Regression Analysis —Additional Topics 67

Multiple Regression Analysis 67

Regression Analysis Assumptions 69

Additional Regression Analysis Considerations 70

Appendix 2B Learning Curves 72

Summary 73

3 Cost-Volume-Profi t Analysis 94

Rising Commodity Prices Hurt Tim Hortons 95

Cost-Volume-Profi t Analysis 96

Performing CVP Analysis 98

Performing CVP Analyses with a Spreadsheet 102

Assumptions and Limitations of Cost-Volume-Profit Analysis 108

Margin of Safety and Degree of Operating Leverage 112

Analysis of Income Statement Formats 116

Appendix 3A Spreadsheet Formulas for Magik Bicycles Spreadsheet 119

Summary 120

4 Relevant Information for Decision Making 142

Should it Stay or Should it Go? 143

Relevant Information for Decision Making 144

Product Line and Business Segment (Keep or Drop) Decisions 146

Insource or Outsource (Make or Buy) Decisions 151

Special Orders 155

Product Emphasis Decisions 159

Methods for Relaxing Constraints 166

Quality of Operating Decisions 167

Appendix 4A Using Excel Solver for Product Emphasis and Constrained Resource Decisions 171

Summary 176

5 Job Costing 200

Bombardier: Custom Manufacturing 201

Product Costs and Cost Flows 202

Assigning Product Costs to Individual Goods or Services 205

Allocating Overhead 209

Uses and Limitations of Job Cost Information 218

Spoilage, Rework, and Scrap in Job Costing 223

Production Quality and Behaviour Implications 226

Summary 228

6 Process Costing 250

Fruit d’Or—Growing Business Through Innovation 251

Accounting for the Cost of Mass-Produced Goods 252

Process Costing Methods 254

Alternative Systems for Costing Mass Production 266

Accounting for Spoilage in Process Costing 273

Process Cost Information and Managers’ Incentives and Decisions 278

Summary 280

7 Activity-Based Costing and Management 298

The ABC’s of Better Cost Allocation 299

Activity-Based Costing (ABC) 300

ABC Cost Hierarchy 303

Assigning Costs Using an ABC System 305

Activity-Based Management 313

Other Multi-Pool, Multi-Driver Cost Accounting Systems 324

Multi-Pool, Multi-Driver Systems, Decision Making, and Incentives 329

Summary 331

8 Measuring and Assigning Support Department Costs 350

Helping Canada’s Universities and Colleges with Indirect Research Costs 351

Support Department Cost Allocation 352

The Process for Allocating Support Department Costs 354

The Direct Method of Allocation 358

The Step-Down Method of Allocation 360

The Reciprocal Method of Allocation 362

Single- Versus Dual-Rate Allocations 365

Support Cost Allocations, Information Quality, and Decision Making 370

Appendix 8A Using Solver to Calculate Simultaneous Equations for the Reciprocal Method 376

Summary 377

9 Joint Product and By-product Costing 400

Creating a Diversion: City of Hamilton Rethinks Its Waste 401

Joint Products and Costs 402

Allocating Joint Costs 402

Choosing an Appropriate Joint Cost Allocation Method 406

Processing a Joint Product Beyond the Split-off Point 408

Joint Products and By-products 411

Joint Product Costing with a Sales Mix 413

Uses and Limitations of Joint Cost Information 417

Summary 419

10 Static and Flexible Budgets 438

Going with the Budgeting Flow 439

Budgeting 440

Master Budgets 442

Developing a Cash Budget 449

Flexible Budgets 455

Budgets as Performance Benchmarks 459

Budgets, Incentives, and Rewards 462

Beyond Traditional Budgeting 465

Summary 470