Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 2 Beyond the Book 3 Where to Go from Here 3 Part 1: Understanding the Fundamentals of Costs 5 Chapter 1: So You Want to Know about Cost Accounting 7 Comparing Accounting Methods 8 Considering your shareholders 8 Mulling over creditors 9 Addressing concerns of regulators 9 Using management accounting 9 Fitting in cost accounting 10 Using Cost Accounting to Your Advantage 11 Starting with cost-benefit analysis 11 Planning your work: Budgeting 12 Controlling your costs 12 Setting a price 13 Improving going forward 14 Chapter 2: Brushing Up on Cost Accounting Basics 17 Understanding the Big Four Terms 17 Comparing direct and indirect costs 18 Mulling over fixed and variable costs 20 Fitting the costs together 21 Covering Costs in Different Industries 22 Reviewing manufacturing costs 22 Considering costs for retailers 23 Adding up costs for e-commerce firms 23 Finding costs most companies incur 24 Why Are You Spending? Cost Drivers 25 Pushing equipment too hard and relevant range 25 Previewing inventoriable costs 26 Following the Rules of the Cost Accounting Road 27 Understanding generally accepted accounting principles (GAAP) 27 Deciding on accrual basis or cash basis 29 Finishing with conservatism 30 Chapter 3: Using Cost-Volume-Profit Analysis to Plan Your Business Results 31 Understanding How Cost-Volume-Profit Analysis Works 32 Calculating the breakeven point 32 Financial losses: The crash of your cash 34 Contribution margin: Covering fixed costs 35 Lowering the breakeven point to reach profitability sooner 36 Target net income: Setting the profit goal 37 Using operating leverage 38 Assessing e-commerce businesses 40 Timing is everything when it comes to costs 41 Using Cost-Volume-Profit Analysis to Make Savvy Business Decisions 42 Deciding to advertise 43 Lowering your price without losing your profit 44 Combining the results of two products 45 Costing and pricing a new product 48 The Tax Man Cometh, the Profits Goeth 51 Understanding pre-tax dollars 51 Adjusting target net income for income taxes 52 Chapter 4: Estimating Costs with Job Costing 53 Understanding How Job Costing Works 54 Cost objects: The sponges that absorb money 55 Charging customers for direct and indirect costs 56 Implementing job costing in manufacturing: An example 57 Deciding on costing for IT consulting projects 61 Taking a Closer Look at Indirect Costs using Normal Costing 64 Budgeting for indirect costs 65 Following a normal job costing system 66 Following the Flow of Costs through a Manufacturing System 67 Control starts with control accounts 67 Explaining the debit and credit process 68 Walking through a manufacturing cost example 70 Applying the methodology to other control accounts 73 Chapter 5: More Activity, More Cost: Activity-Based Costing 75 Avoiding the Slippery Peanut Butter Costing Slope 76 Recognizing a single indirect cost allocation 77 A fly in the peanut butter: Dealing with different levels of client activity 77 Missing the mark: Undercosting and overcosting 79 Designing an Activity-Based Costing System 81 Refining your approach 81 Grouping costs using a cost hierarchy 82 Testing your ABC design 83 Using Activity-Based Costing to Compute Total Cost, Profit, and Sale Price 87 Allocating indirect costs evenly by product 88 Analyzing and reallocating cost activities 88 Changing allocations to cost pools 89 Changing prices after ABC 90 Implementing ABC Costing for a Business Pivot 91 Deciding whether to pivot 92 Mulling over a pivot example 93 Using ABC Costing for a New Business Model 94 Considering sunk costs 94 Reviewing food and labor costs 95 Allocating new overhead costs 95 Applying ABC costing to overhead costs 96 Evaluating your results 98 Part 2: Planning and Control 99 Chapter 6: What''s the Plan, Stan? Budgeting for a Better Bottom Line 101 Brushing Up on Budgeting Basics 102 Seeing the master budget and its component parts 102 Why budgeting is important 103 Considering the costs and benefits of data collection 104 Leveraging AI and data analytics for effective budgeting 106 Planning strategically 107 Planning How to Plan: Factors That Impact Your Budgeting Process 108 Experience counts 109 Timing is everything 109 People get you headed in the right direction 110 Sales projections pay off 111 The Nuts and Bolts (and Washers) of Budgeting 112 Understanding the budgeting financials 113 Reviewing revenue and production budgets 116 Budgeting with Cash Accounting or Accrual Accounting 119 Cash basis accounting: Using your checkbook to budget 119 I accrue, you accrue, we all accrue with accrual accounting 121 Budgeting to Produce the Income Statement and Balance Sheet 122 The well-balanced balance sheet 122 The incredible income statement 123 Chapter 7: Constant Change: Variance Analysis 125 Variance Analysis and Budgeting 126 Using management by exception to recognize large variances 126 Seeing the problem in using a static budget 127 Opting for a flexible budget 131 Investigating budget variances 134 Analyzing in Material Price and Efficiency Variances 135 Applying price variances to direct materials 136 Applying efficiency variances to direct materials 137 Implementing price variances for direct labor 139 Sizing up efficiency variances for direct labor 139 Using Your Findings to Make Decisions 140 Following up on variances 141 Judging the effectiveness of your employees 143 Tying supply chain concepts to variance analysis 145 Attaching ABC costing concepts to variance analysis 145 Chapter 8: Focusing on Overhead Costs 149 Using Cost Allocation to Minimize Overhead 150 Paying for the Security Guard: Fixed Overhead Costs 151 Planning fixed overhead costs 151 Allocating fixed overhead costs 152 Assessing potential causes of fixed overhead variances 155 Those Vexing Variable Manufacturing Costs 156 Working with variable overhead costs 156 Implementing variance analysis 159 Finding the reasons for a variable overhead variance 161 Chapter 9: What''s on the Shelf? Inventory Costing 163 Working with Inventoriable Costs 164 Using the matching principle to calculate profit on sale 164 Erring on the conservative side 166 Costing Methods for Inventory 166 Using the first-in, first-out (FIFO) method 168 Accounting with the last-in, first-out (LIFO) method 169 Weighing the merits of weighted-average cost 170 Considering specific identification method 171 Analyzing profit using FIFO and LIFO 171 Using Variable and Absorption Costing to Allocate Fixed Manufacturing Costs 173 Defining period costs and product costs 174 Applying variable and absorption costing 175 Relating Capacity Issues to Inventory 177 Reviewing theoretical and practical capacity 178 Understanding capacity issues for e-commerce firms 179 Using normal and master-budget capacity 181 Choosing a capacity level 182 Part 3: Making Decisions 185 Chapter 10: Cost Drivers and Cost Estimation Methods 187 Working with Cost Behavior 188 Understanding linear and nonlinear cost functions 188 Discovering how cost drivers determine total costs 189 Considering Cost Estimation Methods 190 Walking through the industrial engineering method 190 Agreeing on the conference method 191 Reviewing the account analysis method 191 Checking out the quantitative analysis method 192 Choosing a cost estimation method 196 Exploring Nonlinear Cost Functions 197 Changing cost functions and slope co-efficients 198 Understanding the impact of quantity discounts 198 Assessing the Impact of Learning Curves 198 Considering how AI and Data Analytics Impact Learning Curves 200 Reviewing AI and data analytics 200 Throwing in the learning curve 200 Simplifying a procedure 201 Finding and using better data 201 Chapter 11: Making Smart Business Decisions with Relevant Information 203 Navigating the Geography of Relevance 204 Introducing the decision model 205 Applying a model to an equipment decision 206 Understanding IT purchasing issues 208 Considering relevant qualitative factors in decision-making 210 Special Orders Don''t Upset Us, Do They? 211 Deciding between Outsourcing and In-house Production 213 Weighing opportunity costs 217 Contemplating the carrying cost of inventory 218 Maximizing Profit When Capacity Is Limited 220 Managing capacity and product mix 220 Analyzing customer profit and capacity 222 Chapter 12: Making Smart Pricing Decisions: Figuring Tot.