Controller's Guide to Costing

Controller's Guide to Costing is a comprehensive source for all issues related to cost accounting, detailing aspects of creating costing systems, how cost accounting systems work, interpreting the results, and how the resulting information can be used, including:

• Provides an overview of various costing methodologies.
• Written in easy to understand language—from one controller to another.
• Includes information on application, implementation, reporting, problems that can arise, and example case studies.

Preface.

About the Author.

1 Job Costing.

Nature of Job Costing.

Advantages and Disadvantages of Job Costing.

Job Costing Data Flow.

Control Point Issues.

2 Process Costing.

Nature of Process Costing.

Process Costing Data Flow, Weighted Average Method.

Process Costing Data Flow, Standard Costing Method.

Process Costing Data Flow, the FIFO Method.

Advantages and Disadvantages of Process Costing.

3 Direct Costing.

Definition of Direct Costing.

Uses of Direct Costing.

Problems with Direct Costing.

Using Direct Costing for Cost Control.

Impact of Direct Costing on Reported Financial Results.

Impact of Direct Costing on Inventory Valuation.

Case Study.

4 Standard Costing.

Purpose of Standard Costs.

Problems with Standard Costs.

Formulation of Standard Costs.

Standard Costs for Pricing.

Standard Costs for Budgeting.

Standard Costs for Inventory.

Standard Cost Entry.

5 LIFO, FIFO, and Average Costing.

Last-In First-Out Method.

First-In First-Out Method.

Average Costing Method.

6 Throughput Costing.

Throughput Definitions.

Throughput Model.

Throughput Accounting and Volume Purchasing Decisions.

Throughput Accounting and Capital Budgeting Decisions.

Throughput Accounting and Outsourcing Decisions.

Throughput Accounting and Unprofitable Products.

Throughput and Traditional Accounting Compared.

Problems with the Throughput Model.

Reporting with the Throughput Model.

Systemic Changes Required for Acceptance of the Throughput Model.

7 Joint and By-Product Costing.

Nature of Joint Costs.

Reasoning Behind Joint and By-Product Costing.

Joint Cost Allocation Methods.

Pricing of Joint Products and By-Products.

8 Activity-Based Costing.

Shortcomings of Traditional Cost Allocation Systems.

Overview of Activity-Based Costing.

Problems with Activity-Based Costing.

Implementing an Activity-Based Costing System.

Bill of Activities.

Uses of Activity-Based Costing.

Activity-Based Management.

Role of the Cost Accountant in an ABC System.

Case Study.

9 Target Costing.

Description of Target Costing.

Problems with Target Costing.

Cost Accountant’s Role in a Target Costing Environment.

Impact of Target Costing on Profitability.

Target Costing Data Flow.

Most Useful Situations for Target Costing.

Target Costing Control Points.

Implementing a Target Costing System.

Case Study.

10 Costing Systems Summary.

Brief Review of Costing Systems.

Applications of Costing Systems.

Index.

STEVEN M. BRAGG, CPA, CMA, CIA, CPIM, has been the CFO or controller of four companies, as well as a consulting manager at Ernst & Young and auditor at Deloitte & Touche. He received a master's degree from Bentley College, an MBA from Babson College, and a bachelor's degree in economics from the University of Maine. Mr. Bragg resides in Centennial, Colorado. He has written over twenty books, including Accounting Best Practices, Accounting Reference Desktop, and Controllership: The Work of the Managerial Accountant, all from Wiley. The modern corporate controller has many duties, including budgeting, tax planning, dealing with auditors, creating financial statements, and monitoring control systems. All are important, but at the core of the controller's job is a thorough understanding of a company's cost structure. Without this knowledge base, the controller is much less capable of predicting expenses, recommending operational changes, or evaluating the performance of business units. Controller's Guide to Costing covers every major costing methodology: the traditional job and process costing concepts, as well as direct costing, standard costing, and several inventory layering techniques.

Written by bestselling author Steven Bragg, who shares his decades of experience as a CFO for several major corporations, Controller's Guide to Costing provides a comprehensive, one-stop resource for controllers, treasurers, accountants, financial analysis personnel, and auditors. Accessible and easy to understand, this seminal work also addresses more specialized costing methodologies, such as throughput accounting for bottleneck analysis, target costing for new product decision-making, and activity-based costing for more precise cost application. These costing methodologies often vary considerably from each other in their purposes, so the book includes a costing systems summary that identifies which technique to use for different objectives. In addition, specific recommendations are made regarding such key management decisions as outsourcing, cost reduction analysis, scrap costing, and capacity utilization.

Controller's Guide to Costing examines control point issues associated with a costing system, with great focus on the advantages and disadvantages of each costing methodology, key terminology, and the flow of data through the system, including specific journal entries where applicable. It also addresses additional topics where they are relevant to a specific costing methodology, such as the impact of direct costing on reported financial results, the formulation of standard costs, the use of throughput accounting for capital budgeting decisions, joint cost allocation methods, and using a bill of activities within an activity-based costing system. Case studies elucidate key costing concepts wherever necessary.

By condensing a broad range of costing information into one comprehensive reference, Controller's Guide to Costing allows controllers to gain a solid understanding of every major costing methodology quickly and easily. However, this thorough book goes further to provide controllers with a wide array of costing tools to analyze and resolve many key management issues that will help them always retain their competitive edge in their field.

" Steven Bragg has again developed a useful and helpful book to assist in doing the difficult job of controller. Controller's Guide to Costing is an excellent handbook to understanding and implementing job costing. "
—Gail W. Sevier, Member/Manager Marrs, Sevier & Company, LLC

A one-stop reference to cost accounting

A controller's job is multifaceted. But in order to do all aspects of the job effectively, a controller needs to have in-depth knowledge of the very core of the job: the company's cost structure. Enlightening controllers on the numerous, diverse costing methodologies, Controller's Guide to Costing provides a comprehensive resource on all issues relating to cost accounting.

Written in an easy-to-understand language—from one controller to another—Controller's Guide to Costing details the aspects of creating costing systems, how cost accounting systems work, how to interpret the results, and how the resulting information can be used. This complete overview also covers application, implementation, reporting, pitfalls to avoid, and the impact on reported financial results, as well as case studies to further explain concepts wherever necessary.

Controller's Guide to Costing provides controllers, treasurers, accounting and financial analysis personnel, and auditors with a one-stop source to all their cost accounting questions.