TAILIEUCHUNG - Lecture Accounting for decision making and control (8/e): Chapter 2 - Jerold L. Zimmerman

Chapter 2 - The nature of costs. The topics discussed in this chapter are: Opportunity costs, cost variation, cost–volume–profit analysis, opportunity costs versus accounting costs, cost estimation, costs and the pricing decision. | The Nature of Costs Chapter Two Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Opportunity Costs - Defined Opportunity set: Set of alternative actions available to decision maker Opportunity cost: Benefits forgone by choosing one alternative from the opportunity set rather than the best non-selected alternative Example Opportunity Set = {A, B, C} Alternative Benefits Opportunity Cost A $108,000 $107,000 = Alternative B B $107,000 $108,000 = Alternative A C $106,500 $108,000 = Alternative A 2- Opportunity Costs - Characteristics Opportunity costs: include tangible and intangible benefits measured in cash equivalents rely on estimates of future benefits useful for decision making Accounting expenses: costs consumed to generate revenues rely on historical costs of resources actually expended designed to match expenses to revenues useful for control See opportunity cost examples 2- Sunk Costs and Opportunity Costs Sunk Costs: Costs which were incurred in the past and cannot be changed no matter what future action is taken. Sunk costs are totally irrelevant for decision making and are excluded from opportunity costs. Sunk costs might be useful for control purposes. 2- Relevant Costs and Opportunity Costs Often the term “relevant cost” described as “expected future costs that will differ under alternatives.” Opportunity costs is a well-defined, fundamental concept in economics that encompasses “relevant cost.” Thus only “opportunity cost” will be used in the text. 2- The Costs of SOX – the Sarbanes-Oxley Act of 2002 The Public Company Accounting Reform and Investor Protection Act Direct costs of compliance expected to grow to $8 billion in 2005 Other costs include Increases as large as 50% in director’s fees and premiums for directors and officer insurance policies Innovative projects are being abandoned due to risk and/or delayed due to time spent on compliance 2- Cost Variation – Definitions Fixed Costs:

• Kế toán - Kiểm toán
• Accounting for decision making
• Decision making
• Nature of costs
• Opportunity costs
• Cost variation
• Operating leverage
• Organizational architecture
• Generic budgeting systems
• Decision control
• Cost allocation
• Pervasiveness of cost allocations
• External financial reports
• Death spiral
• Internal services
• Absorption cost systems
• Job order costing
• Allocating overhead to jobs
• Criticisms of absorption cost systems
• Variable costing
• Inaccurate product costs
• Standard costs
• Direct labor
• Target costing
• Marketing variances
• Budget volume estimates
• Flexible overhead budget
• Self interested behavior
• Team production
• Decision rights
• Management accounting
• Business strategy
• Competitive forces
• Responsibility accounting
• Transfer pricing
• Profit center
• Investment centers
• Financial accounting
• Lecture Financial accounting
• Accounting information
• Accounting systems
• External financial reporting
• Ethical obligations
• Decision making in accounting
• Ethical reasoning
• Cognitive processes
• Ethical decision making
• Organizational ethics
• Corporate governance
• Professional judgment in accounting
• Incremental analysis
• Decision making process
• Financial statements
• Making business decision
• Business decision tool
• Lecture Accounting
• The impact of accounting disclosures on individual investors’ decision making
• Vietnam Stock Market
• The Vietnam stock market
• Vietnam Stock Exchange
• Accounting information groups
• The investors' decision making
• Product management
• Cost control
• Performance evaluation
• External reports
• Opportunity cost
• Opportunity cost of capital
• Capital budgeting
• Interest rate fundamentals
• Accounting for partnerships
• Partnership agreement
• Analyzing receivables
• Managerial accounting
• Costs for decision making
• Payroll accounting
• Pay period
• Payroll taxes