In keeping with the shifts in the U.S. and world economy, this edition makes great use of merchandising and service sector examples, with corresponding de-emphasis of traditional manufacturing settings. For example, Chapter 10 illustrates linear cost functions in the context of payments for cloud computing services. Chapter 11 describes revenue management using big-data analytics at a company investing in loans. Chapter 21 highlights inventory management in retail organizations and uses an example based on a seller of sunglasses. Chapter 22 incorporates a running example that looks at capital budgeting in the context of a transportation company. Several Concepts in Action boxes focus on the merchandising and service sectors, including achieving cost leadership at Costco (Chapter 1), reducing fixed costs at Lyft (Chapter 2), using activity-based costing to reduce the costs of health care delivery at the Mayo Clinic (Chapter 5), developing Internet-based budgeting at P.F. Chang’s (Chapter 6), and analyzing operating income performance at Buffalo Wild Wings (Chapter 13).
This edition places significant emphasis on sustainability as one of the critical managerial challenges of the coming decades. Many managers are promoting the development and implementation of strategies to achieve long-term financial, social, and environmental performance as key imperatives. We highlight this in Chapter 1 and return to the theme in several subsequent chapters. Chapter 13 discusses the benefits to companies from measuring social and environmental performance and how such measures can be incorporated in a balanced scorecard. Chapter 24 provides several examples of companies that mandate disclosures and evaluate managers on environmental and social metrics. A variety of chapters, including Chapters 2, 6, 10, 14, and 22, contain material that stress themes of recognizing and accounting for environmental costs; energy independence; setting stretch targets to motivate greater carbon reductions; using cost analysis, carbon tax, and cap-and-trade auctions to reduce environmental footprints; and constructing “green” homes in a cost-effective manner.
We discuss the role of accounting concepts and systems in fostering and supporting innovation and entrepreneurial activities in firms. In particular, we discuss the challenges posed by recognizing R&D costs as period expenses even though the benefits of innovation accrue in later periods. In Chapter 6, we describe how companies budget for innovation expenses and develop measures to monitor success of the innovation efforts delinked from operational performance in the current period. Chapter 12 presents the importance of nonfinancial measures when making decisions about innovation. Chapter 14 stresses that innovation starts with understanding customer needs while Chapter 20 discusses process innovations for improving quality.
The pace of change in organizations continues to be rapid. The 17th edition of Cost Accounting reflects changes occurring in the role of cost accounting in organizations.