Catalogue


Activity-based costing : making it work for small and mid-sized companies /
Douglas T. Hicks.
edition
2nd ed.
imprint
New York : John Wiley, c1999.
description
xix, 357 p. : ill. ; 24 cm.
ISBN
0471249599 (cloth : alk. paper)
format(s)
Book
Holdings
More Details
imprint
New York : John Wiley, c1999.
isbn
0471249599 (cloth : alk. paper)
general note
Includes index.
Series statement taken from book jacket.
catalogue key
3533128
A Look Inside
About the Author
Author Affiliation
Douglas T. Hicks, CPA, CMC, is a Senior Managing Consultant at BKD, LLP, the nation's eighth largest accounting and consulting firm, and Team Leader of their Decision Costing Services practice. Before entering consulting in 1985, he spent fifteen years in public accounting at Ernst & Young, and in industry with Hayes-Albion Corporation and Kelsey-Hayes Company. Hicks is a member of the American Institute of CPAs, the Michigan Association of CPAs, the Institute of Management Accountants, and the Institute of Management Consultants. He is also the author of Activity-Based Costing for Small and Mid-Sized Businesses: An Implementation Guide, published by Wiley.
Excerpts
Flap Copy
Looking for a practical, proven method to gain that crucial competitive edge for your company? It's as simple as ABC. Activity-based costing (ABC) is a decision support tool that gives you that needed edge through a greater understanding of your product and process costs. In Activity-Based Costing: Making It Work for Small and Mid-Sized Companies, practicing accountant Douglas T. Hicks guides you through the process of adopting ABC and using it to improve the quality of your business's decisions. Traditionally, cost accounting methods have been designed to determine the inventory value and cost of sales for an entire organization-seldom providing accurate or relevant information for individual products or services. However, with ABC, businesses can now see dramatic improvements in both accuracy and relevance when measuring product and process costs. Decisions based on this improved cost information will guide the business to an improved competitive position, both domestically and globally. If your company has between twenty and five hundred employees, it can greatly benefit from ABC without an overhaul of its current cost information systems. Using an approach developed while solving problems for small and midsized companies, Douglas Hicks helps you sharpen your competitive edge while emphasizing the "total package" of cost information-not just its computational aspects-and steers you clear of the dangers encountered by measuring costs using generally accepted accounting principles. The result is a reader-accessible, comprehensive narrative covering every ABC element, including clearly defined instructions for building a cost accumulation and distribution model for any size business. In this indispensable reference, Mr. Hicks discusses the logic of ABC and its cost flow-down steps, then clearly demonstrates the most appropriate ways for your business to change to multiple costing rates and bases. The ABC system is used to perform "what if" analyses, while several case studies are presented on developing cost flowdown structures. And by simply outlining the relationship between decision costing and long-term contracts, he easily illustrates which small and mid-sized businesses can benefit the most from ABC. Owners, managers, controllers, accountants, and any executive involved with small and mid-sized companies will appreciate this book's practical, down-to-earth ABC methods. Its tested and proven theories and methods will help businesses of any size profit, by basing their decisions on facts, not fantasies. Activity-based costing is no longer an option when striving for the competitive edge in business-it is now a requirement. Even educators will find ways to incorporate ABC into existing cost accounting courses with this insightful and timely book.
Full Text Reviews
Appeared in Choice on 1999-03-01:
Hicks has written a spirited, commonsense contribution to the accounting literature based on the major premise that activity-based costing (ABC) is a beautifully simple, adaptable process. He deftly presents the shortcomings of generally accepted accounting principles (GAAP) as a basis for costing products, with criticisms of depreciation accounting and the failure to recognize value-added expenses. The author illustrates the fallacy of arbitrary cut-offs with a baseball analogy. Not identified, however, is a major flaw in traditional cost accounting that is predicated on labor intensive manufacturing processes, which are now outdated. Furthermore, this reviewer disagrees with the contention that GAAP is balance sheet focused. Rooted in societal preoccupation with earnings, accounting principles concentrate on fair presentation of earnings, frequently to the detriment of useful balance sheets (e.g., LIFO, income tax accounting, and pension accounting). Balance sheets include unrealistically low inventories and large unidentifiable deferred tax and pension liabilities. Hicks provides a very useful model tool-box for activity-based costing, two real-life scenarios, and step-by-step instructions for developing a spreadsheet-based cost accumulation and distribution model. Overall, a superb, in-depth summary of this commonly misunderstood concept that small business owners will surely embrace. Undergraduate and graduate accounting and finance students as well as practitioners. J. F. Phillips; Southern Connecticut State University
Reviews
This item was reviewed in:
Choice, March 1999
To find out how to look for other reviews, please see our guides to finding book reviews in the Sciences or Social Sciences and Humanities.
Summaries
Main Description
* A practical, cost-effective guide to ABC for small to medium companies. * Identifies the key cost related issues in organizations and shows how to develop a cost-flow structure that reflects the organization's cost behavior. * Feature an ongoing case study throughout the book documents the model-building process. * Provides a spreadsheet model blueprint that details data flows. * Shows how a cost model of an organization can be developed using basic spreadsheet software on a PC.
Main Description
A practical, cost-effective guide to ABC for small to medium companies. Identifies the key cost related issues in organizations and shows how to develop a cost-flow structure that reflects the organization2s cost behavior. Feature an ongoing case study throughout the book documents the model-building process. Provides a spreadsheet model blueprint that details data flows. Shows how a cost model of an organization can be developed using basic spreadsheet software on a PC.
Long Description
Looking for a practical, proven method to gain that crucial competitive edge for your company? It2s as simple as ABC. Activity-based costing (ABC) is a decision support tool that gives you that needed edge through a greater under-standing of your product and process costs. In Activity-Based Costing: Making It Work for Small and Mid-Sized Companies, practicing accountant Douglas T. Hicks guides you through the process of adopting ABC and using it to improve the quality of your business2s decisions. Traditionally, cost accounting methods have been designed to determine the inventory value and cost of sales for an entire organization- seldom providing accurate or relevant information for individual products or services. However, with ABC, businesses can now see dramatic improvements in both accu-racy and relevance when measuring product and process costs. Decisions based on this improved cost information will guide the business to an improved competitive position, both domestically and globally. If your company has between twenty and five hundred employees, it can greatly benefit from ABC without an overhaul of its current cost information systems. Using an approach developed while solving problems for small and mid-sized companies, Douglas Hicks helps you sharpen your competitive edge while emphasizing the "total package" of cost information-not just its com-putational aspects-and steers you clear of the dangers encountered by measuring costs using generally accepted accounting principles. The result is a reader-accessible, comprehensive narrative covering every ABC element, including clearly defined instructions for building a cost accumulation and distribution model for any size business. In this indispensable reference, Mr. Hicks discusses the logic of ABC and its cost flow-down steps, then clearly demonstrates the most appropriate ways for your business to change to multiple costing rates and bases. The ABC system is used to perform "what if" analyses, while several case studies are presented on developing cost flow-down structures. And by simply outlining the relationship between decision costing and long-term contracts, he easily illustrates which small and mid-sized businesses can benefit the most from ABC. Owners, managers, controllers, accountants, and any executive involved with small and mid-sized companies will appreciate this book2s practical, down-to-earth ABC methods. Its tested and proven theories and methods will help businesses of any size profit, by basing their decisions on facts, not fantasies. Activity-based costing is no longer an option when striving for the competi-tive edge in business-it is now a requirement. Even educators will find ways to incorporate ABC into existing cost accounting courses with this insightful and timely book. Incorporating activity-based costing concepts into your business without relying on the usual complex ABC jargon can be a daunting task-even for the most experienced accountant. In Activity-Based Costing: Making It Work for Small and Mid-Sized Companies, professional accountant Douglas T. Hicks shows you how to sharpen your competitive edge while bringing you the "total package" of cost information-not just the computational elements. Using an approach developed while solving problems for small and mid-sized companies, Mr. Hicks has created a reader-friendly, comprehensive narrative covering every aspect of the ABC industry, including step-by-step instructions for building a cost accumulation and distribution model for any size business. With examples taken from Fortune 1000 companies, readers will find a wealth of information on ABC features, including: The logic behind ABC and its cost flow-down steps How to get the maximum benefits from ABC for your small or mid-sized business Case studies on emerging cost flow-down structures The most appropriate ways to change to multiple costing
Bowker Data Service Summary
Douglas Hicks explains how to implement activity-based costing, offering tips for installation, plus the outline of a method that reforms cost accounting using traditional concepts.
Back Cover Copy
Looking for a practical, proven method to gain that crucial competitive edge for your company? It''s as simple as ABC. Activity-based costing (ABC) is a decision support tool that gives you that needed edge through a greater under-standing of your product and process costs. In Activity-Based Costing: Making It Work for Small and Mid-Sized Companies, practicing accountant Douglas T. Hicks guides you through the process of adopting ABC and using it to improve the quality of your business''s decisions. Traditionally, cost accounting methods have been designed to determine the inventory value and cost of sales for an entire organization- seldom providing accurate or relevant information for individual products or services. However, with ABC, businesses can now see dramatic improvements in both accu-racy and relevance when measuring product and process costs. Decisions based on this improved cost information will guide the business to an improved competitive position, both domestically and globally. If your company has between twenty and five hundred employees, it can greatly benefit from ABC without an overhaul of its current cost information systems. Using an approach developed while solving problems for small and mid-sized companies, Douglas Hicks helps you sharpen your competitive edge while emphasizing the "total package" of cost information-not just its com-putational aspects-and steers you clear of the dangers encountered by measuring costs using generally accepted accounting principles. The result is a reader-accessible, comprehensive narrative covering every ABC element, including clearly defined instructions for building a cost accumulation and distribution model for any size business. In this indispensable reference, Mr. Hicks discusses the logic of ABC and its cost flow-down steps, then clearly demonstrates the most appropriate ways for your business to change to multiple costing rates and bases. The ABC system is used to perform "what if" analyses, while several case studies are presented on developing cost flow-down structures. And by simply outlining the relationship between decision costing and long-term contracts, he easily illustrates which small and mid-sized businesses can benefit the most from ABC. Owners, managers, controllers, accountants, and any executive involved with small and mid-sized companies will appreciate this book''s practical, down-to-earth ABC methods. Its tested and proven theories and methods will help businesses of any size profit, by basing their decisions on facts, not fantasies. Activity-based costing is no longer an option when striving for the competi-tive edge in business-it is now a requirement. Even educators will find ways to incorporate ABC into existing cost accounting courses with this insightful and timely book. Incorporating activity-based costing concepts into your business without relying on the usual complex ABC jargon can be a daunting task-even for the most experienced accountant. In Activity-Based Costing: Making It Work for Small and Mid-Sized Companies, professional accountant Douglas T. Hicks shows you how to sharpen your competitive edge while bringing you the "total package" of cost information-not just the computational elements. Using an approach developed while solving problems for small and mid-sized companies, Mr. Hicks has created a reader-friendly, comprehensive narrative covering every aspect of the ABC industry, including step-by-step instructions for building a cost accumulation and distribution model for any size business. With examples taken from Fortune 1000 companies, readers will find a wealth of information on ABC features, including: The logic behind ABC and its cost flow-down steps How to get the maximum benefits from ABC for your small or mid-sized business Case studies on emerging cost flow-down structures The most appropriate ways to change to multiple costing rates and bases Using ABC to perform "what if" analyses The danger of measuring costs using generally accepted accounting principles Applying decision costing and long-term contracts to your business If your company is looking to dramatically improve its current cost information systems, this book is a must-read. You can have that crucial competitive edge. Activity-Based Costing: Making It Work for Small and Mid-Sized Companies will show you how.
Table of Contents
Prefacep. xv
Activity-Based Costing: The First Decadep. 1
Pre-ABC Erap. 1
Primary Purpose of Cost Informationp. 2
Dawn of the ABC Erap. 3
ABC at Small and Mid-Sized Businessesp. 4
Strange Case of Ace Manufacturingp. 7
Ace Manufacturingp. 7
Changing to Multiple Overhead Ratesp. 9
Changing to Multiple Overhead Basesp. 10
Segregating "Throughput"-Driven Costsp. 12
Identifying Product Line Costsp. 12
Summaryp. 14
What Is Activity-Based Costingp. 16
ABC at Small and Mid-Sized Businessesp. 18
An Activity-Based Modelp. 21
Three Keys to Effective ABCp. 21
Which Small and Mid-Sized Businesses Are Most at Risk?p. 21
Is ABC Worth the Required Investment?p. 26
Summaryp. 27
Deadly Virus of Generally Accepted Accounting Principles: Determining True Economic Costsp. 28
Accounting and Astronomyp. 28
Accounting and Baseballp. 30
Accounting Periods and Generally Accepted Accounting Principlesp. 30
Impact of Astronomy and Baseball on GAAPp. 32
Retroactive/Prospective Balance Sheet Modificationsp. 32
Expenses That Are Investmentsp. 34
Depreciationp. 38
Nonannual Cost Cyclesp. 45
Expenses That Are Not Incurredp. 46
Death Spiralp. 47
Summaryp. 49
Logic of Activity-Based Costingp. 50
Designing the Activity-Based Cost Flowp. 51
Throughput or Direct Costsp. 51
Service and Operations Support Activitiesp. 53
Throughput or Material Support Activitiesp. 54
Market or Customer Support Activitiesp. 56
Product or Product-Line Support Activitiesp. 59
Value-Adding or Direct Activitiesp. 61
Event or Transaction Activitiesp. 62
General and Administrative Activitiesp. 64
Assigning Costs to Activitiesp. 65
Assigning Costs Among Activitiesp. 67
"Cafeteria Line" of Activity Center Costsp. 70
Assigning Activity Costs to Jobs/Productsp. 71
Completion of Cost Flow-Down Step 3p. 74
Activity-Based Cost Accumulationp. 76
Summaryp. 77
Case Study: Acme Distributorsp. 78
Developing an ABC Structure--Service and Support Activitiesp. 79
Developing an ABC Structure--Operating Activitiesp. 81
Developing an ABC Structure--Assigning Costs to Cost Objectivesp. 86
Determining Customer Profitabilityp. 92
The Structure vs. the Numbersp. 98
Summaryp. 109
Decision Costing: The Real Reason for Activity-Based Costsp. 110
Pricing Decisionsp. 111
Core Business Pricingp. 112
Special Order Pricingp. 119
Strategic/Product-Line Pricingp. 121
Long-Term Contractsp. 124
Capital Expenditure Decisionsp. 128
Outsourcing (Make/Buy) Decisionsp. 133
Other Decision Situationsp. 134
Summaryp. 135
Activity-Based Costing Model Toolboxp. 136
Operating Labor Demand/Supply Equationp. 136
Screensp. 142
The ABC Perspectivep. 148
Weighted Events and Transactionsp. 151
Consumption Unitsp. 159
Labor-Based Cost Accumulation and Distributionp. 164
Piece-Rate Cost Accumulation and Distributionp. 167
Machine Hour/Cycle Time Distributionp. 168
Line/Cell Time Cost Distributionp. 170
Production Manpower Poolp. 175
Internal Costsp. 177
Summaryp. 179
Developing Cost Flow-Down Structures: Case Studiesp. 180
Sunshine Flowers, Inc.p. 181
Discussionp. 184
Road Shows, Inc.p. 189
Discussionp. 192
Summaryp. 200
Building a Cost Accumulation and Distribution Modelp. 201
Cost Model Structure--Generalp. 203
Cost Model Structure--Bottom Upp. 204
Cost Model Structure--Top Downp. 214
Summaryp. 219
Small-Time Manufacturing: Developing the Conceptual Modelp. 220
Venturing into Activity-Based Costingp. 221
Throughput or Direct Costsp. 222
Service and Operations Support Activitiesp. 222
Throughput or Material Support Activitiesp. 223
Market or Customer Support Activities and Product or Product-Line Support Activitiesp. 223
Value-Adding or Direct Activitiesp. 223
Event or Transaction Activitiesp. 225
General & Administrative Activitiesp. 225
Other Considerationsp. 225
Assigning Costs to Activitiesp. 226
Assigning Costs Among Activitiesp. 228
Assigning Activity Costs to Jobs/Productsp. 231
Summaryp. 231
Small-Time Manufacturing: Building the Cost Accumulation and Distribution Model, Part 1--Cost Accumulationp. 232
Operating Information and Resource Requirementsp. 233
Contract Activity Summaryp. 234
Operating Information and Resource Requirementsp. 234
Resource Conversionp. 237
Resource Conversionp. 237
Screensp. 237
Screenp. 239
Operating Manpower Demandp. 240
Operating Manpower/Demandp. 240
Automatically Variable Costsp. 243
Automatically Variable Costsp. 243
Operating Manpower Supplyp. 243
Operating Manpower/Hours Availablep. 245
Operating Manpower/Supplyp. 247
Operating Manpower/Costp. 249
Step Variable Costs--Support Staffp. 251
Support Staffp. 251
Fringe Benefits and Other Headcount-Driven Costsp. 253
Fringe Benefitsp. 253
Other Headcount-Driven Costsp. 255
Fixed Costs and Budgeted Costsp. 255
Fixed and Budgeted Costsp. 255
Total Cost Accumulationp. 258
Cost Accumulationp. 259
Summaryp. 263
Small-Time Manufacturing: Building the Cost Accumulation and Distribution Model, Part 2--Cost Distributionp. 264
Other Data and Cost Distributionp. 265
Square Footagep. 265
Automatic Distributionsp. 267
Activity Analysis Distributionsp. 267
Cost Distributionp. 270
Cost/Rate Reconciliationp. 274
Model Directoryp. 276
Model Completionp. 276
Summaryp. 278
Small-Time Manufacturing: Product Costingp. 279
Contract Costing Comparisonsp. 281
Contract Profitability Comparisonsp. 292
Contract Contribution Analysis: Eliminate Contract #04p. 295
Contract Contribution Analysis: Add Another Contract #10p. 300
Summaryp. 303
Small-Time Manufacturing: Discrete Event Simulation or "What If?" Analysisp. 305
p. 306
p. 312
p. 314
p. 316
Summaryp. 319
Small-Time Manufacturing: Multiyear Costing and Pricingp. 320
Small-Time Manufacturing's Opportunityp. 322
Establishing "Then Year" Costing Ratesp. 322
Multiyear Costing/Pricing Templatep. 324
Production Requirementsp. 324
Direct and Throughput Costsp. 332
Direct/Value-Adding Costsp. 333
General and Administrative Activitiesp. 337
Multiyear Program Pricingp. 337
Summaryp. 340
Impediments to Adopting Activity-Based Costing at the Small and Mid-Sized Organizationp. 342
Impediments to Attempting ABCp. 343
Perceived Lack of Resourcesp. 343
Entrepreneurial Egop. 344
Lack of Decision Costing Skillsp. 345
Desire to be a Settler, Not a Pioneerp. 345
Impediments to Succeeding with ABCp. 346
Desire to Be Taught, Not to Learnp. 346
Lack of Decision Costing Skillsp. 347
Employee Turnoverp. 347
Summaryp. 348
Making Activity-Based Costing Work at the Small and Mid-Sized Businessp. 349
Indexp. 355
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