Managerial Accounting

Front Cover......Page 1
Title Page......Page 4
Copyright......Page 5
Contents......Page 8
Preface......Page 16
About the Authors......Page 30
CHAPTER 1 The Changing Business Environment: A Manager's Perspective......Page 33
DECISION POINT A MANAGER'S FOCUS WAL-MART STORES, INC.......Page 34
Management Accounting and Financial Accounting: A Comparison......Page 35
Management Accounting and the Management Process......Page 36
Value Chain Analysis......Page 42
Primary Processes and Support Services......Page 43
Managers and Value Chain Analysis......Page 44
Continuous Improvement......Page 46
Management Tools for Continuous Improvement......Page 47
Achieving Continuous Improvement......Page 48
Using Performance Measures in the Management Process......Page 50
The Balanced Scorecard......Page 51
Standards of Ethical Conduct......Page 53
A LOOK BACK AT WAL-MART STORES, INC.......Page 56
STOP & REVIEW......Page 58
CHAPTER ASSIGNMENTS......Page 60
CHAPTER 2 Cost Concepts and Cost Allocation......Page 75
DECISION POINT A MANAGER'S FOCUS THE HERSHEY COMPANY......Page 76
Cost Classifications and Their Uses......Page 77
Cost Traceability......Page 78
Cost Classifications for Financial Reporting......Page 79
Income Statement and Accounting for Inventories......Page 81
Statement of Cost of Goods Manufactured......Page 82
Cost of Goods Sold and a Manufacturer's Income Statement......Page 84
Document Flows and Cost Flows Through the Inventory Accounts......Page 85
The Manufacturing Cost Flow......Page 87
Elements of Product Costs......Page 89
Computing Product Unit Cost......Page 90
Product Cost Measurement Methods......Page 91
Computing Service Unit Cost......Page 93
Allocating the Costs of Overhead......Page 94
Allocating Overhead: The Traditional Approach......Page 96
Allocating Overhead: The ABC Approach......Page 98
A LOOK BACK AT THE HERSHEY COMPANY......Page 100
STOP & REVIEW......Page 102
CHAPTER ASSIGNMENTS......Page 105
CHAPTER 3 Costing Systems: Job Order Costing......Page 121
DECISION POINT A MANAGER'S FOCUS COLD STONE CREAMERY, INC......Page 122
Communicating......Page 123
Product Costing Systems......Page 124
Job Order Costing in a Manufacturing Company......Page 126
Materials......Page 127
Overhead......Page 129
Sold Units......Page 130
Reconciliation of Overhead Costs......Page 131
A Manufacturer's Job Order Cost Card and the Computation of Unit Cost......Page 132
Job Order Costing in a Service Organization......Page 133
A LOOK BACK AT COLD STONE CREAMERY, INC.......Page 136
STOP & REVIEW......Page 138
CHAPTER ASSIGNMENTS......Page 140
CHAPTER 4 Costing Systems: Process Costing......Page 159
DECISION POINT A MANAGER'S FOCUS DEAN FOODS......Page 160
The Process Costing System......Page 161
Patterns of Product Flows and Cost Flow Methods......Page 162
Cost Flows Through the Work in Process Inventory Accounts......Page 163
Computing Equivalent Production......Page 164
Equivalent Production for Direct Materials......Page 165
Summary of Equivalent Production......Page 166
Accounting for Units......Page 167
Assigning Costs......Page 170
Process Costing for Two or More Production Departments......Page 172
Accounting for Units......Page 174
Assigning Costs......Page 176
A LOOK BACK AT DEAN FOODS......Page 179
STOP & REVIEW......Page 182
CHAPTER ASSIGNMENTS......Page 184
CHAPTER 5 Value-Based Systems: ABM and Lean......Page 197
DECISION POINT A MANAGER'S FOCUS LA-Z-BOY, INC.......Page 198
Value-Based Systems and Management......Page 199
Value Chains and Supply Chains......Page 200
Process Value Analysis......Page 201
Activity-Based Management......Page 202
Activity-Based Costing......Page 203
The Cost Hierarchy and the Bill of Activities......Page 204
Just-in-Time (JIT)......Page 207
Accounting for Product Costs in a JIT Operating Environment......Page 209
Backflush Costing......Page 211
Comparison of ABM and Lean......Page 215
A LOOK BACK AT LA-Z-BOY, INC.......Page 216
STOP & REVIEW......Page 219
CHAPTER ASSIGNMENTS......Page 221
CHAPTER 6 Cost Behavior Analysis......Page 237
DECISION POINT A MANAGER'S FOCUS FLICKR......Page 238
The Behavior of Costs......Page 239
The Scatter Diagram Method......Page 245
The High-Low Method......Page 246
Contribution Margin Income Statements......Page 248
Cost-Volume-Profit Analysis......Page 249
Breakeven Analysis......Page 251
Using an Equation to Determine the Breakeven Point......Page 252
The Breakeven Point for Multiple Products......Page 253
Applying C-V-P to Target Profits......Page 256
A LOOK BACK AT FLICKR......Page 259
STOP & REVIEW......Page 262
CHAPTER ASSIGNMENTS......Page 264
CHAPTER 7 The Budgeting Process......Page 279
DECISION POINT A MANAGER'S FOCUS FRAMERICA CORPORATION......Page 280
Advantages of Budgeting......Page 281
Budgeting Basics......Page 282
Preparation of a Master Budget......Page 284
Budget Procedures......Page 287
The Sales Budget......Page 288
The Production Budget......Page 289
The Direct Materials Purchases Budget......Page 290
The Overhead Budget......Page 292
The Selling and Administrative Expense Budget......Page 293
The Cost of Goods Manufactured Budget......Page 294
The Budgeted Income Statement......Page 296
The Cash Budget......Page 297
The Budgeted Balance Sheet......Page 300
A LOOK BACK AT FRAMERICA CORPORATION......Page 302
STOP & REVIEW......Page 305
CHAPTER ASSIGNMENTS......Page 307
CHAPTER 8 Performance Management and Evaluation......Page 331
DECISION POINT A MANAGER'S FOCUS VAIL RESORTS......Page 332
Other Measurement Issues......Page 333
The Balanced Scorecard and Management......Page 334
Responsibility Accounting......Page 336
Types of Responsibility Centers......Page 337
Organizational Structure and Performance Management......Page 339
Evaluating Cost Center Performance Using Flexible Budgeting......Page 341
Evaluating Profit Center Performance Using Variable Costing......Page 342
Return on Investment......Page 344
Residual Income......Page 346
Economic Value Added......Page 347
The Importance of Multiple Performance Measures......Page 349
Linking Goals, Performance Objectives, Measures, and Performance Targets......Page 350
The Coordination of Goals......Page 351
A LOOK BACK AT VAIL RESORTS......Page 354
STOP & REVIEW......Page 357
CHAPTER ASSIGNMENTS......Page 359
CHAPTER 9 Standard Costing and Variance Analysis......Page 375
DECISION POINT   A MANAGER'S FOCUS iROBOT CORPORATION 345......Page 376
Standard Costs and Managers......Page 377
Standard Direct Labor Cost......Page 378
Standard Overhead Cost......Page 379
Total Standard Unit Cost......Page 380
The Role of Flexible Budgets in Variance Analysis......Page 381
Using Variance Analysis to Control Costs......Page 383
Computing Direct Materials Variances......Page 386
Analyzing and Correcting Direct Materials Variances......Page 388
Computing Direct Labor Variances......Page 389
Analyzing and Correcting Direct Labor Variances......Page 391
Using a Flexible Budget to Analyze Overhead Variances......Page 392
Computing Overhead Variances......Page 393
Analyzing and Correcting Overhead Variances......Page 398
Using Cost Variances to Evaluate Managers' Performance......Page 400
A LOOK BACK AT iROBOT CORPORATION......Page 402
STOP & REVIEW......Page 407
CHAPTER ASSIGNMENTS......Page 409
CHAPTER 10 Short-Run Decision Analysis......Page 423
DECISION POINT A MANAGER'S FOCUS BANK OF AMERICA......Page 424
Incremental Analysis for Short-Run Decisions......Page 425
Incremental Analysis for Outsourcing Decisions......Page 428
Incremental Analysis for Special Order Decisions......Page 430
Incremental Analysis for Segment Profitability Decisions......Page 433
Incremental Analysis for Sales Mix Decisions......Page 435
Incremental Analysis for Sell or Process- Further Decisions......Page 438
A LOOK BACK AT   BANK OF AMERICA......Page 441
STOP & REVIEW......Page 444
CHAPTER ASSIGNMENTS......Page 446
CHAPTER 11 Capital Investment Analysis......Page 463
DECISION POINT A MANAGER'S FOCUS AIR PRODUCTS AND CHEMICALS INC.......Page 464
Capital Investment Analysis......Page 465
Capital Investment Analysis in the Management Process......Page 466
Cost of Capital......Page 468
Ranking Capital Investment Proposals......Page 469
Expected Benefits from a Capital Investment......Page 470
Depreciation Expense and Income Taxes......Page 471
Disposal or Residual Values......Page 472
Interest......Page 473
Present Value......Page 474
Present Value of an Ordinary Annuity......Page 475
The Net Present Value Method Illustrated......Page 477
The Payback Period Method......Page 480
The Accounting Rate-of-Return Method......Page 481
A LOOK BACK AT AIR PRODUCTS AND CHEMICALS INC.......Page 483
STOP & REVIEW......Page 485
CHAPTER ASSIGNMENTS......Page 487
CHAPTER 12 Pricing Decisions, Including Target Costing and Transfer Pricing......Page 501
DECISION POINT A MANAGER'S FOCUS LAB 126......Page 502
Pricing Policy Objectives......Page 503
External and Internal Pricing Factors......Page 504
Total Revenue and Total Cost Curves......Page 506
Auction-Based Pricing......Page 508
Cost-Based Pricing Methods......Page 509
Gross Margin Pricing......Page 510
Return on Assets Pricing......Page 511
Summary of Cost-Based Pricing Methods......Page 512
Pricing Services......Page 513
Factors Affecting Cost-Based Pricing Methods......Page 514
Differences Between Cost-Based Pricing and Target Costing......Page 516
Target Costing Analysis in an Activity-Based Management Environment......Page 518
Transfer Pricing......Page 520
Developing a Transfer Price......Page 521
Using Transfer Prices to Measure Performance......Page 522
A LOOK BACK AT LAB......Page 524
STOP & REVIEW......Page 527
CHAPTER ASSIGNMENTS......Page 529
CHAPTER 13 Quality Management and Measurement......Page 547
DECISION POINT   A MANAGER'S FOCUS AMAZON .COM......Page 548
Managers' Use of MIS......Page 549
Financial Measures of Quality......Page 551
Nonfinancial Measures of Quality......Page 552
Measuring Service Quality......Page 556
Evaluating the Costs of Quality......Page 557
Evaluating Nonfinancial Measures of Quality......Page 560
The Evolving Concept of Quality......Page 561
Recognition of Quality......Page 563
A LOOK BACK AT AMAZON.COM......Page 565
STOP & REVIEW......Page 567
CHAPTER ASSIGNMENTS......Page 569
CHAPTER 14 Financial Analysis of Performance......Page 585
DECISION POINT   A MANAGER'S FOCUS STARBUCKS CORPORATION 555......Page 586
Financial Performance Measurement: Creditors' and Investors' Objectives......Page 587
Standards of Comparison......Page 588
Sources of Information......Page 590
Executive Compensation......Page 592
Horizontal Analysis......Page 594
Trend Analysis......Page 597
Vertical Analysis......Page 598
Ratio Analysis......Page 600
Evaluating Liquidity......Page 602
Evaluating Profitability......Page 604
Evaluating Long-Term Solvency......Page 605
Evaluating the Adequacy of Cash Flows......Page 606
Evaluating Market Strength......Page 608
A LOOK BACK AT STARBUCKS CORPORATION......Page 609
STOP & REVIEW......Page 614
CHAPTER ASSIGNMENTS......Page 616
APPENDIX A Present Value Tables......Page 635
ENDNOTES......Page 639
COMPANY INDEX......Page 641
SUBJECT INDEX......Page 643