Cost allocation, Direct costs, Absorption costing

Abstract Reviews the book "Interim Financial Reporting," by James W. Edwards, Geraldine F. Dominiak and Thomas V. Hedges.

Abstract Oftentimes ordinary methods of programming will serve the needs of managerial analysis so that the special techniques of integer programming are unlikely to contribute much. The difficulties of performing systematic sensitivity analyses on integer models further limit the advantages of the model. Finally, when optimal solutions to the linear and integer programs are materially different, the adverse consequences of indiscriminately using integer programming solutions were illustrated.

Abstract This article focuses on a study which illustrated how sensitivity analysis can serve as an aid in improving the basis for management decision making. Freedom from uncertainty is a luxury rarely enjoyed by the contemporary manager. In a society characterized by change, uncertainty is an established and accepted fact of life. Sensitivity analysis is a study to determine how possible changes or errors in parameter values affect model outputs. The prime function of sensitivity analysis may be said to be to facilitate a better understanding of risk. Specifically, sensitivity analysis tests the responsiveness of model results to possible variations in parameter values, and thereby offers valuable information for appraising the relative risk among alternative courses of action. Implicitly or explicitly, managers have actively employed sensitivity tests for appraising relative risk of alternative courses of action from the earliest stages of business development.

Abstract This article discusses the controversy over accounting for leases. The current controversy over accounting for leases highlights once again the necessity for accelerated research in basic accounting theory. Some opponents of lease capitalization have argued that lease contracts involve executory, equally unperformed services; hence, they are not recordable according to the prevailing conception of an accounting transaction. There is, however, no persuasive rationale for the exclusion of this class of commitments. Indeed, the decision to exclude the financial effects of such commitments from the accounts is contrary to accepted concepts of assets and liabilities widely held by accountants today. As with any other reporting problem, the ultimate decision to accept or reject a proposed solution should be based on its expected contribution toward making accounting statements more meaningful. If lease capitalization is judged to be consistent with sound accounting theory, then its rejection can be validly based only on the magnitude of the probable error in its calculation.

Abstract This overview was prepared for students enrolled in the Graduate Seminar in Accounting Theory at Tulane University, New Orleans, Louisiana, in the Fall semester of 1964. It includes, (1) a point of view on the uniformity problem, (2) the course of research recommended to the seminar participants, and (3) an annotated bibliography arranged chronologically. Perhaps other instructors will find it helpful in discussing this urgent and complex problem. During the past few years, there has been a resurging interest in promulgating a well-conceived, authoritative set of accounting principles for business enterprises. The American Institute's current research program and the establishment of the U.S. Accounting Principles Board are promising steps toward the eventual realization of this worthy and, therefore, elusive goal. The stated purpose of the Institute's research program is to determine appropriate practice and to narrow the areas of difference and inconsistency in practice. Indeed, it would be difficult for any accountant to deny the merits of this objective. However, some very serious obstacles deter its effective implementation.

Abstract In response to the increasing significance of corporate information in the present economy, accountants have demonstrated an active interest in developing a cohesive and useful framework to guide the selection, measurement, and communication of information for published corporate accounting reports. Despite some notable contributions, especially over the past three decades, most qualified observers would undoubtedly agree that such a framework or theory has not been satisfactorily developed. The emerging philosophy of accounting research characterized by a commitment to a scientific attitude has enhanced greatly the potential for accounting theory. The essential purposes of this paper is to demonstrate that objectives for published corporate accounting reports should be an integral part of the development of corporate accounting theory formation. It also proposes a methodology for the development of objectives for published corporate accounting reports. The paper also tries to employ the proposed methodology in the logical development of basic objectives for published corporate accounting reports.

Abstract The article develops a frame of reference which emphasizes the fact that a firm, in functioning as a system within the parameters determined by its environment, itself functions as an element in a higher level system, namely, the economy, wherein it interacts and interrelates with other elements and so takes part in the process of determining the very parameters within which it must function internally. The first section of the article briefly presents the informational viewpoint and lays the groundwork for looking at the firm and its embedding in the economy from this viewpoint. The second section describes some of the salient informational interdependencies both internal to the firm and between the firm and its environment, highlighting thereby the role of accounting information as seen from the proposed frame of reference. Information plays an essential role in the functioning of purposeful, decision-making elements and flows of information among such elements are basic to all social systems.

Abstract This article aims to examine how relative differences in key financial variables among buyers and sellers affect the valuation of aggregate and hence the benefits arising from the merger to buyer's and seller's stockholders as well as the implications for merger strategy which buyer and seller might adopt. It also aims to carry out the foregoing analyses as of the time the merger transaction takes place and also over a specified planning horizon. A major conclusion of this article is that when two firms, experiencing unequal growth rates, merge on the basis of an exchange of shares, their combined value in the market will be less than the sum of the market values of the individual companies, as a result of a bias in the valuation models commonly used in security analysis. The specific source of this bias is the underestimate of the growth rate in combined earnings that results from typical forecasting methods. Another major conclusion is that although there is a valuation loss in total, the stockholders of the firm with the smaller of the two growth rates can experience valuation gains over a period of time at the expense of the other firm's stockholders. It would follow from this that a firm will always find it to the advantage of its stockholders to acquire or merge with firms experiencing higher growth rates than its own, provided these stockholders are willing to hold their stocks for a period of time, the minimum length of which would depend upon the relative sizes and growth rates of the merging firms.

Abstract The article focuses on the importance of information measurement for decision making in corporate. To perform this function effectively, accountants must understand the close bond between information and decision-making, for example, information systems should be subject to much the same type of cost-benefit evaluation as are other segments or aspects of organizational activity. The theoretical basis for such measurements is contained in information economics, a subject of recent vintage closely related to statistical decision theory. It is analyses in article that how reliable the prediction must be before it has some value for the decision-maker, and how its value and the cost of obtaining it can be jointly considered in the attempt to choose the best among several potentially available predictions of different reliability. The illustrative problem is described briefly in the article, which state the objectives of the analysis contained in further argument. The problem is thoroughly discussed with illustrative tables and calculations by the author.