tailieunhanh - Managerial accounting - Theory (Second edition): Part 2

(BQ) Continued part 1, part 2 of the document Managerial accounting - Theory (Second edition) has contents: Activity-based costing and management, performance evaluation in decentralized organizations, strategic planning and control, job costing, process costing,. and other contents. Invite you to refer. | Module III PLANNING AND CONTROL OVER THE LONG TERM MAXIMIZING PROFIT We devote Module III Chapters 9-13 to long-term decisions. In the long term costs associated with property equipment and salaried personnel the costs of capacity resources which are fixed in the short term become controllable and relevant. Accordingly long-term decisions focus on matching the supply and demand of these capacity resources and making the most effective use of capacity resources. It is often difficult however to estimate the controllable capacity costs related to equipment space and personnel. This difficulty arises because products and customers share capacity resources that is such costs are not directly traceable to individual products and customers. In the language of Chapter 2 capacity costs are indirect costs. As a practical solution firms use cost allocations to approximate the long-term change in capacity costs. Chapter 9 provides an integrated discussion of the various demands for cost allocations within an organization. We first examine how and why firms make frequent use of cost allocations to estimate the costs that are relevant for long-term decisions. We then present and discuss other reasons for allocations reporting income to external parties such as shareholders and the IRS justifying cost-based reimbursements and influencing behavior within the organization. In Chapter 10 we take a close look at the use of allocations for decision making. We focus particularly on activity-based costing ABC and illustrate how ABC can lead to better decisions by refining estimates of controllable capacity costs. We also discuss how ABC systems facilitate activity-based management enabling firms to optimize their products customers and resources. Despite their widespread use allocations have two limitations 1 They do not consider the time value of money and 2 they do not consider the lumpy nature of capacity resources. These limitations are of particular concern .