Management Accounting for Decision Makers

Citation

Atrill, P., & McLaney, E. (2021). Management Accounting for Decision Makers (10th ed.). Pearson.

Chapter Summary

The tenth edition has twelve chapters (about 632 pages) and five appendices: a glossary of key terms, solutions to self-assessment questions, solutions to critical review questions, solutions to selected exercises, and a present value table. Pearson describes the book as introducing management accounting concepts and methods from theory to practice, with a focus on their significance for real-life decision making, through real numerical accounting techniques, more exercises and real-world examples, many new to this edition. The chapters move from the nature of management accounting, through costing and decision analysis, to planning and control, investment and performance measurement.

Chapter 1: Introduction to Management Accounting

Explains what management accounting is and how it serves managers' needs for information in planning, controlling and decision making.

Chapter 2: Relevant Costs and Benefits for Decision Making

Introduces the principle that a decision should rest on costs and benefits that differ between the alternatives, and applies it to decisions that choose between courses of action.

Chapter 3: Cost–Volume–Profit Analysis

Examines how costs, revenue and profit respond to changes in the level of activity, including break-even analysis and related planning tools.

Chapter 4: Full Costing

Covers the calculation of the full cost of a product or service, including how overheads are attributed to cost units.

Chapter 5: Costing and Cost Management in a Competitive Environment

Looks at approaches to costing and managing costs when competition is strong, building on full costing with techniques designed to manage costs more closely.

Chapter 6: Budgeting

Treats budgets as plans for the coming period: their purposes, the way they are prepared and how they fit together.

Chapter 7: Accounting for Control

Shows how actual results are compared with budgets and standards, and how differences (variances) are used to control operations.

Chapter 8: Making Capital Investment Decisions

Presents methods of appraising long-term investments, including discounted cash flow methods such as net present value (a present value table is in the appendices).

Chapter 9: Managing Risk

Considers uncertainty and risk in decisions, particularly investment decisions, and how to take it into account.

Chapter 10: Strategic Management Accounting: Performance Evaluation and Pricing in a Competitive Environment

Links management accounting with strategy, covering performance evaluation and pricing when the business faces competitors.

Chapter 11: Measuring Divisional Performance

Deals with assessing the performance of the divisions of a larger business and their managers.

Chapter 12: Managing Working Capital

Closes the book with the management of the short-term assets and liabilities of a business.

Key Concepts

Chapters 1–5: Information, decisions and costing

• Management accounting: information for managers' planning, control and decisions.
• Relevant costs and benefits: only future differences between alternatives matter.
• Cost–volume–profit analysis: the link between activity, cost and profit.
• Full costing: attributing overheads to products or services.
• Costing in a competitive environment: managing costs under market pressure.

Chapters 6–9: Planning, control and investment

• Budgeting.
• Accounting for control: comparing actual with plan.
• Capital investment appraisal: net present value and related methods.
• Managing risk.

Chapters 10–12: Strategy, performance and working capital

• Strategic management accounting and pricing.
• Divisional performance measurement.
• Working capital management.

Critical Analysis

Strengths

• Numerical, step-by-step approach. The publisher stresses real numerical techniques and an increased number of exercises that encourage active learning; solutions to self-assessment questions, critical review questions and selected exercises are in the appendices.
• Decision-oriented organization. Relevant costs (Chapter 2) come before full costing (Chapter 4), so students first learn what information a decision needs and only then how costs are allocated.
• Real-world examples. Pearson says many examples are new to the tenth edition.
• Moderate length with a clear plan. Twelve chapters cover costing, planning, control, investment, performance and working capital in one volume.

Limitations

• Introductory level. The publisher positions it for management accounting modules on undergraduate and MBA courses; it is not a research-level or specialist treatment of any one topic.
• Overlap with a companion text. Its chapters on capital investment (8) and working capital (12) carry the same titles as chapters in the lead author's Financial Management for Decision Makers, so readers of both will meet some topics twice.
• Limited costing depth. Costing is covered in two chapters (4 and 5); readers who need the full range of costing systems will need a dedicated cost-accounting text.

Where It Fits in the Course

Within the management accounting course, this is an introductory text oriented to decisions. Seal and Rohde's Management Accounting and OpenStax's Principles of Accounting, Volume 2 are the other introductory texts; Drury and Tayles's Management and Cost Accounting and Datar and Rajan's Horngren's Cost Accounting cover costing in greater range and detail; Merchant and Van der Stede's Management Control Systems goes much further into control and incentives than Chapters 6, 7 and 11 here.

A sensible path is Atrill and McLaney first for decisions, budgeting and performance, then Drury and Tayles or Horngren for costing detail, and Merchant and Van der Stede for control. Its sibling, Atrill's Financial Management for Decision Makers, covers financing and the cost of capital, which this book does not.

How to Use This Book

The book suits students on management accounting modules in undergraduate and MBA programmes who have met basic financial accounting.

• Core: Chapters 1–3 and 6–7 for the basic tools; Chapter 8 for investment.
• Costing track: Chapters 4–5 for the allocation of overheads and cost management.
• Strategy and performance: Chapters 10–11 once the budgeting chapters are done.
• Practice: work the self-assessment and review questions after each chapter and check the appendix solutions; Pearson also offers a MyLab Accounting option.