Management and Cost Accounting

Citation

Drury, C., & Tayles, M. (2023). Management and Cost Accounting (12th ed.). Cengage Learning.

Chapter Summary

The book runs to 26 chapters in six parts and about 900 pages. Cengage describes it as a text that blends theory and practice and covers what students need for a management accounting career and for professional examinations. The parts move from cost concepts, through cost accumulation and decision information, to planning and control, strategic and digital topics, and a closing addendum of quantitative methods.

Part 1, Chapters 1–2: Introduction to MA; An introduction to cost terms and concepts

The role of management accounting, followed by the vocabulary of costs used in everything that follows.

Part 2, Chapters 3–6: Cost assignment; Process costing; Joint and by-product costing; Income effects of alternative cost accumulation systems

Cost accumulation for inventory valuation and profit measurement. The last chapter of the part compares how different cost accumulation systems affect reported income.

Part 3, Chapters 7–13: Cost-volume-profit analysis; Measuring relevant costs and revenues for decision-making; Pricing decisions and profitability analysis; Activity-based costing; Decision-making under conditions of risk and uncertainty; Capital investment decisions: appraisal methods; Capital investment decisions: the impact of capital rationing, taxation, inflation and risk

The information-for-decisions part, and the largest. It covers short-term decisions and pricing, activity-based costing, decisions under risk and uncertainty, and two chapters on investment appraisal, the second extending the methods to rationing, taxation, inflation and risk.

Part 4, Chapters 14–19: Management control systems; The budgeting process; Standard costing and variance analysis 1; Standard costing and variance analysis 2: further aspects; Divisional financial performance; Transfer pricing in divisionalized companies

Information for planning, control and performance measurement: control systems, budgeting, standard costing and variances in two chapters, and the financial performance of divisions, including transfer pricing.

Part 5, Chapters 20–24: Strategic performance management; Strategic cost management and value creation; Management accounting – current technologies and data analytics; Sustainability and environmental management accounting; Overview and challenges for the future

Strategic performance and cost management, digitalisation, sustainability and the future of the subject. Cengage names data analytics and environmental management accounting as new chapters in this edition, with expanded coverage of strategic performance and cost management, value creation and quality management.

Part 6, Chapters 25–26: Cost estimation and cost behaviour; Quantitative models for the planning and control of inventories

An addendum on the application of quantitative methods to management accounting.

Key Concepts

Parts 1–2: Cost Terms and Cost Accumulation

• Cost assignment: allocating costs to cost objects.
• Process costing, joint and by-product costing: costing for continuous production and for multiple outputs.
• Alternative cost accumulation systems: how the choice of system affects reported income.

Part 3: Information for Decision-Making

• Relevant costs and revenues: the items that should influence a particular decision.
• Activity-based costing: costing through activities, treated in its own chapter.
• Decision-making under risk and uncertainty: decision methods when outcomes are not certain.
• Capital investment appraisal: appraisal methods, then rationing, taxation, inflation and risk.

Parts 4–6: Control, Strategy and Quantitative Methods

• Standard costing and variance analysis: standards and variances, in two chapters.
• Transfer pricing: pricing between divisions of a divisionalised company.
• Strategic performance management: performance measurement linked to strategy.
• Environmental management accounting: the new chapter on sustainability.
• Cost estimation and cost behaviour: the quantitative addendum.

Critical Analysis

Strengths

• Structure by purpose. The parts are named for what the information is for: inventory valuation and profit measurement, decisions, planning and control, and strategic performance. A reader can find the relevant technique by asking what the information is needed for.
• Depth in decision and investment topics. Decision-making under risk and uncertainty has its own chapter and capital investment has two; by comparison, Horngren's contents list has a single capital budgeting chapter.
• Examination orientation. Cengage says every chapter includes an "Employability Skills" question and review problems from accounting examination bodies, and the author biography says Drury's textbooks have been widely recommended by the main professional accounting bodies for their examinations.
• Updated for digital and sustainability topics. The 12th edition adds chapters on data analytics and on environmental management accounting.
• Long continuity. The text was first published in 1985; Colin Drury died in 2019, and Mike Tayles continues to revise it.

Limitations

• Size. At 896 pages the book exceeds a single module, and readers must select chapters.
• Quantitative tools come last. Cost estimation and cost behaviour are placed in a closing addendum, eighteen chapters after cost-volume-profit analysis, so readers who need them early must jump ahead.
• Examination framing. The review problems come from accounting examination bodies and the book is written with professional syllabuses in mind, so readers on a degree course with no professional aims may find it more than they need.
• Cost accumulation before decisions. Part 2 comes before the decision chapters. A course that starts from decisions will use the parts in a different order.

Where It Fits in the Course

Drury and Tayles are a comprehensive second-level text in this management accounting course. Two gentler books come first: OpenStax's Principles of Accounting, Volume 2: Managerial Accounting, a free introduction from cost concepts to budgeting and capital investment, and Seal and Rohde's Management Accounting, a UK and European adaptation of Garrison and Noreen.

Datar and Rajan's Horngren's Cost Accounting is the main alternative at the same level. It is US-oriented, framed around "different costs for different purposes", and presented in 24 chapters, whereas Drury and Tayles give separate chapters to decisions under risk and to capital investment and add an examination-oriented set of review problems. Merchant and Van der Stede's Management Control Systems is a graduate text that goes deeper into the Part 4 topics of control, divisional performance and transfer pricing. Atrill and McLaney's Management Accounting for Decision Makers is a further alternative.

How to Use This Book

The book is for undergraduates in the later years of accounting, finance and business degrees, for students preparing for professional examinations, and for master's students who need a thorough reference. An introductory course in accounting is the natural preparation.

A practical reading plan:

• Core: Parts 1 and 3 (cost terms, CVP, relevant costs, pricing and investment), then Part 4 (budgeting, standard costing, divisional performance) for a control course.
• Part 2: read it when the course covers product costing and inventory valuation; it can follow Part 3 if the course starts from decisions.
• Part 5: choose chapters by interest; Chapters 22 and 23 cover the new data analytics and sustainability material.
• Part 6: use as reference, and read Chapter 25 when cost behaviour is needed.

Work the worked examples by hand, then attempt the review problems; those set by examination bodies indicate the standard expected in professional papers. The publisher also offers a companion website with Learning Notes, and a MindTap platform.