INDEX
A
Accounting systems
manufacturing accounting and cost system, 107, 129
Accounting/statistical standards, 1
Activity-based costing (ABC), 132
capital investment, impact on, 295
controlling manufacturing expense, 132, 147
used in budgeting, 157
American Institute of Certified Public Accountants (AICPA) Committee on Terminology
depreciation defined, 313
Analysis
correlation, 40
end use, 42
expense variances in manufacturing, 157–158
product line, 42
time series, 40
Annual plan
advertising budget, 92
marketing expense budget, 96
Anticipation surveys, 46
Area concentration banking, 220
Assets
appraisal and appraisal records, 314
depreciation reserve, 314
fixed
investment in, 278
loss or gain on, 314
fixed planning and control of, 278–280
fully depreciated, 314
B
Benchmarking, 13
general and administrative expenses, 205
in the planning and control of R&D, 193
Bill of materials (BOM), 137
Budgeting
budgetary control measures, 159
cash budget
length of budget period, 220
relation to other budgets, 219
cash budget relation to other budgets, 219
communication of budgetary information, 159
flexibility in standards, 159
for control of G&A expenses, 197
general and administrative expenses, 205
indirect labor, 159
manufacturing expense budget, 149, 156
process for the planning and control of R&D expenses, 177, 184
Business plan
sales planning as the basis of, 35–36
Capital asset pricing model (CAPM), 353
Capital budget, 177
Cash flows
consolidated statement of, 333
discounted cash flow methods of valuation, 286, 291
managing liabilities, 318, 330
planning and control of
accelerating cash receipts, 220–221
administration of cash receipts, 220
controller vs. the treasurer, duties of the, 208
estimating cash receipts, 214, 219
internal cash receipt procedures, 222
internal control, 226
internal control of cash receipts, 221–222
misappropriating cash, methods of, 223, 225
objectives of, 207
Collection of accounts receivables
altered payment methods, 244
collection techniques, 242, 244
measurement of accounts receivable, 245
shrinking the cycle, 244
Competition
benchmarking, 13
global, 18
Control function
accounting/statistical control, 1–2
benchmarking, 13
collection management, 243, 245
customer margin analysis, 241–242
general and administrative expenses, 194, 206
granting credit to customers, 239–241
marketing expenses, 73
measurement of accounts receivable, 245–246
performance measures, 11
preplanning manufacturing expense, 156
reporting unfavorable trends, 156
sales analysis, 32
stage-gate system, 193
Controller
business cycle forecasting, 47
compared with treasurer, 208
customer credit level, 241
customer margin analysis, 241
fixed assets, thirteen functions in control and planning of, 279–280
general and administrative expenses, 194
influence on decisions in manufacturing expense budget, 134, 138–139, 142
influence on R&D activities, 193
manufacturing expense budget, 130, 141, 161
planning and control of sales, 29
R&D budgeting assistance, 185
reporting function in inventory control, 253, 255
sales forecasting, 26
shareholders equity, 344
Cost accounting
storing and allocating costs, 147, 149
Cost estimation methods
engineering method, 143
judgement method, 142
linear regression method, 145–146
scattergraph method, 143
Costs, 73
employee-related manufacturing costs, 148
equipment-related manufacturing costs, 148
incentives to reduce, 158
indirect production costs, 147–148
inventory costs, 252
materials-related manufacturing costs, 148
occupancy-related manufacturing costs, 148
Cost-volume-profit relationship, 181
Customer
credit granting process, 239, 241
Cyclical indicators, 46
Dividends
reinvestment programs, 364, 366
Dow Jones Industrials, 353
E
Econometric models, 46
Equipment
capital expenditure proposals, 282
cost of automation, 295
depreciation, 313
lease versus buy, 308
records and recording, 308
Executive opinion composites, 41
Expenses
formulating the expense account structure, 131
manufacturing
distinguishing characteristics, 130
F
Financial Accounting Standards Board (FASB), 318
alternative methods of accounting, 173
software development costs, 175
Statement No.2, 175
Statement of Cash Flows, 219
Financial statements
accounting treatment of research and development costs, 173
consolidated balance sheets, 333
consolidated statement of cash flows, 333
consolidated statements of income and retained earnings, 333
Forecasting
business cycle, the, 44
information sources, 42
judgmental methods, 39
mathematical statistical methods, 39
methods, 46
sales, 39
Fraud
prevention, 221
G
General and administrative expenses (G&A), 194
Generally accepted accounting principals (GAAP)
impact on capital budget, 300, 302
shareholders equity, 345
Gross national product (GNP), 42
H
Hurdle rate. See also capital budget
Hurdle rates
cost of capital, 292
multiple, 293
single rate, 292
value of, 291
I
Industrial Research Institute, Inc., 178
Inflation, 294
Institute of management accounting (IMA), 175
Internal controls
in research and development, 176
management of liabilities, 343
Inventory
budgeting for finished goods, 273, 276
budgeting for raw materials, 267, 272
budgeting for work-in-process, 272–273
controller reporting function in, 253, 255
costs and benefits of carrying inventory, 251, 253
just-in-time, 328
material just-in-time manufacturing systems, 256, 261
material requirements planning systems, 255–256
Inventory management, 251
Investments
capital assets, 278
accounting control of, 304
activity-based costing, 295
board of directors approval, 297
classifying and ranking proposed capital projects, 296
evaluating projects, methods of, 283, 291
foreign investments, 294
GAAP, 300
impact of, 278
inflation, 294
information gathering to support proposals, 283
information supporting, 282–283
lease versus buy decisions, 308
manufacturing environment, new, 295
mutually exclusive capital proposals, 308
postproject appraisals or audits, 304, 307
project authorization, 302
project evaluation, 282–286, 291
working capital, 307
controller's role in, 278
controls, 236
criteria for selecting, 234
instruments for, 235
reports to management, 237
restrictions, 235
Inventory
reduction of during economic contraction, 45
J
Just-in-time (JIT)
manufacturing systems, 256, 261
production techniques, 9
L
Liabilities
benefits from debt incurrence, 329
bond ratings, 333
credit agreements, illustrative provisions of, 319, 323
debt, risks of too much, 329
defined, 316
current, 317
long-term, 318
information on debt capacity, sources of, 329–330
leverage, 336
long-range financial plan, 337, 339
objectives of liability management, 316–317
planning the current, 324
standards for debt capacity, 330, 333
standards to measure and control current, 325
Lockbox system, 220
M
Management
equity, of shareholders, 344
shareholders equity, 348
Manufacturing, 130
allocating indirect production costs, 147, 149
batch size cost factors in cost control, 137–138
control of indirect labor cost, 158–159
cost center determination, 132
cost control through variance analysis, 146–147
cost estimation methods, 142–144
direct labor cost factors in cost control, 136–137
expenses
control of cost elements, 131
departmentalization of expenses, 132
responsibility for, 130
fixed and variable cost factors in cost control, 133–134
fixed costs
committed costs, 141
discretionary costs, 141
programmable costs, 141
JIT techniques and manufacturing expenses, 131, 156, 164
overhead factors in cost control, 139–141
planning and control of costs
direct material costs, 111, 116
general aspects of manufacturing, 106–107
manufacturing cost accounting, 107–108
manufacturing cost analysis, 109–110
manufacturing management problems, 108–109
types of cost systems, 110
standards to aid cost control, 132
time factors in cost control, 141
Marketing, 72
expenses, 72
planning and control of expenses, 72
advertising and sales promotion, 96, 100
analysis purpose and methods of, 75, 88
application, analysis by manner of, 76, 78–79
basic approach, 74
contribution margin approach, 77–78
control of expenses, 100
planning marketing expenses, 88
size of order, analysis by, 87
territory, analysis by, 79
N
National business publications
Business Week, 178
Fortune, 178
Planning Review, 178
O
Operating budget
R&D, 179
P
Performance measures, 11
Planning process
near-term plan development, 36
research and development budget, 177
sales management, 29
Plants (physical facilities)
records and recording, 308, 311
R
Ratios
accounts receivables, 245
balance sheet measurements
current ratio, 327
earnings per share, 348
quick ratio, 327
return on equity related to growth in earnings per share, 346
current debt to inventory, 328
current debt to net worth, 328
fixed assets to net worth, 282
minimum net working capital, 328
number of days payables on hand, 328
payout ratio, 346
percent return on net sales, 182
return on assets, 181
turnover of plant and equipment, 282
Research and development (R&D), 170
accounting treatment in financial statements, 173
categorization of R&D costs, 175
determining the total budget, 177
determining the effectiveness of the R&D effort, 189, 193
elements of R&D costs, 175
excludable expenses, 176
impact on corporate earnings, 171
information sources on R&D spending, 178
integration with other functions, 172
operating budgets, 179
organization of financial functions, 173
project risk, 183
project selection, 180
quantitative techniques for evaluation of, 181
relation to corporate objectives, 171
role of the financial executive, 176
system focus, 172
Risk analysis
R&D, 183
S
Sales
budget, 37
forecasting, 39
plan, 37
reports, 54
Sales analysis
deductions from sales, 32
Sales management function
analytical statements for, 28
benchmarking, 51
budgets and quotas, 28
controller's role in, 26
distribution problems, 27
expense budgets and standards, 28
forecasting variables, 25
marginal cost method effect on pricing, 66
market share, 41
organization problems, 27
periodic income and expense statements, 28
planning and control problems, 28
price problems, 27
product pricing policy, 55, 57
product problems, 26
return-on-assets-employed effect on pricing, 67
sales forecasting, 39
sales method problems, 27
sales reports, 54
total cost method effect on pricing, 64
Sales volumes
customer margins, 242
Securities and Exchange Commission (SEC), 178
form 10-K, 178
shareholders equity, 345
Shareholders equity
cost of equity, 351
dividend policy, 355, 357, 364, 366
growth in earnings per share, 348
growth of equity as a source of capital, 345–346
importance of, 344
return on, 346
weighted cost of capital, 353, 355
Standard & Poor's 500, 353
Standards
accounting/statistical, 3
as cost control, 4
managerial control of business
functions, 7
determining normal activity, 146–147
performance, 5
performance standards, 188
planning and control of manufacturing costs, 131–132, 149, 156
Statistical process control (SPC), 18
Stocks
accounting treatment of stock dividends, 366
preferred, 352
records and recording, 368
repurchase of common shares, 366–367
stock splits, 366
System focus, 172
T
Technology
electric invoice delivery, 245
Time series analysis, 39
Time series models, 46
Total quality management (TQM), 18
Trend, 156
monitoring and reporting R&D, 185