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You get things like • Intelligent Response Technology Connect Accounting’s redesigned student interface for our end-of-chapter assessment content that: • Improves answer acceptance to reduce student frustration with formatting issues (such as rounding); • Provides a general journal application that looks and feels more like what you would find in a general ledger software package; and • For select questions, provides an expanded table that guides students through the process of solving the problem LearnSmart™ Adaptive learning system is designed to help students learn faster, study more efficiently, and retain more knowledge for greater success • Guided Examples Narrated and animated, step-by-step walkthroughs of algorithmic versions of assigned exercises, allowing the student to identify and review or reinforcement on what you covered in class, Guided Examples provide immediate feedback and focus on the areas where students need it the most • Interactive Presentations teach each chapter’s core learning objectives and concepts through a multimedia presentation, bringing the text content to life Interactive Presentations harness the full power of technology to truly engage and appeal to all learning styles Ideal in all class formats—online, face to-face or hybrid • Media-Rich E-book allows students to highlight, take notes, and bookmark important spots in the text, making reviewing for quizzes and tests easier than ever Connect Plus Accounting gives you a complete digital solution that allows you to access your course materials from any computer, any time If Connect Plus Accounting sounds good to you, start a three-week FREE TRIAL today! 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Noreen Brewer Garrison Just ask your instructor for the course’s Connect Course URL At the course home page, click the “Register Now” button, type in your e-mail address, and click “Start Free Trial.” It’s that simple to begin using Connect Plus Accounting today ISBN 978-0-07-802542-6 MHID 0-07-802542-7 90000 Third Edition Noreen Brewer EAN Managerial Accounting for Managers MD DALIM #1213488 10/17/12 CYAN MAG YELO BLK • Managerial Accounting for Managers Studying anytime, anywhere online has never been easier 780078 025426 www.mhhe.com Garrison Find more at www.downloadslide.com ® Get Connected accounting The integrated solutions for Noreen’s Managerial Accounting for Managers 3e have been proven to help you achieve your course goals of improving student readiness, enhancing student engagement, and increasing their comprehension of content Known for its engaging style, the Noreen solution employs the use of current companies, LearnSmart, and instant feedback on practice problems to help students engage with course materials, comprehend the content, and achieve higher outcomes in the course PROVEN EFFECTIVE Interactive Presentations Connect Accounting’s Interactive Presentations teach each chapter’s core learning objectives and concepts through an engaging, hands-on presentation, bringing the text content to life Interactive Presentations harness the full power of technology to truly engage and appeal to all learning styles Interactive Presentations are ideal in all class formats—online, face-to-face, or hybrid McGraw-Hill’s adaptive learning component, LearnSmart, provides assignable modules that help students master core concepts and come to class more prepared In addition, Interactive Presentations deliver learning objectives in an interactive environment, giving students access to course-critical content anytime, anywhere Finally, our new Intelligent Response Technology-based content offers students an intelligent homework experience that helps them stay focused on learning instead of navigating the technology Intelligent Response Technology FEATURES McGraw-Hill LearnSmart™ is an adaptive learning program that identifies what an individual student knows and doesn’t know LearnSmart’s adaptive learning path helps students learn faster, study more efficiently, and retain more knowledge LearnSmart™ Intelligent Response Technology (IRT) is Connect Accounting’s new student interface for end-of-chapter assessment content Intelligent Response Technology provides a general journal application that looks and feels more like what you would find in a general ledger software package, improves answer acceptance to reduce student frustration with formatting issues (such as rounding), and, for select questions, provides an expanded table that guides students through the process of solving the problem Find more at www.downloadslide.com ® Get Connected accounting The integrated solutions for Noreen’s Managerial Accounting for Managers 3e have been proven to help you achieve your course goals of improving student readiness, enhancing student engagement, and increasing their comprehension of content Known for its engaging style, the Noreen solution employs the use of current companies, LearnSmart, and instant feedback on practice problems to help students engage with course materials, comprehend the content, and achieve higher outcomes in the course PROVEN EFFECTIVE Interactive Presentations Connect Accounting’s Interactive Presentations teach each chapter’s core learning objectives and concepts through an engaging, hands-on presentation, bringing the text content to life Interactive Presentations harness the full power of technology to truly engage and appeal to all learning styles Interactive Presentations are ideal in all class formats—online, face-to-face, or hybrid McGraw-Hill’s adaptive learning component, LearnSmart, provides assignable modules that help students master core concepts and come to class more prepared In addition, Interactive Presentations deliver learning objectives in an interactive environment, giving students access to course-critical content anytime, anywhere Finally, our new Intelligent Response Technology-based content offers students an intelligent homework experience that helps them stay focused on learning instead of navigating the technology Intelligent Response Technology FEATURES McGraw-Hill LearnSmart™ is an adaptive learning program that identifies what an individual student knows and doesn’t know LearnSmart’s adaptive learning path helps students learn faster, study more efficiently, and retain more knowledge LearnSmart™ Intelligent Response Technology (IRT) is Connect Accounting’s new student interface for end-of-chapter assessment content Intelligent Response Technology provides a general journal application that looks and feels more like what you would find in a general ledger software package, improves answer acceptance to reduce student frustration with formatting issues (such as rounding), and, for select questions, provides an expanded table that guides students through the process of solving the problem Find more at www.downloadslide.com Get Engaged eBooks Connect Plus includes a media-rich eBook that allows you to share your notes with your students Your students can insert and review their own notes, highlight the text, search for specific information, and interact with media resources Using an eBook with Connect Plus gives your students a complete digital solution that allows them to access their materials from any computer Lecture Capture Make your classes available anytime, anywhere With simple, one-click recording, students can search for a word or phrase and be taken to the exact place in your lecture that they need to review Find more at www.downloadslide.com Get Engaged eBooks Connect Plus includes a media-rich eBook that allows you to share your notes with your students Your students can insert and review their own notes, highlight the text, search for specific information, and interact with media resources Using an eBook with Connect Plus gives your students a complete digital solution that allows them to access their materials from any computer Lecture Capture Make your classes available anytime, anywhere With simple, one-click recording, students can search for a word or phrase and be taken to the exact place in your lecture that they need to review Rev.Confirming Pages Find more at www.downloadslide.com Managerial Accounting for Managers nor25427_fm_i-xxxii.indd i 19/10/12 11:23 AM Rev.Confirming Pages Find more at www.downloadslide.com nor25427_fm_i-xxxii.indd ii 19/10/12 11:24 AM Rev.Confirming Pages Find more at www.downloadslide.com Managerial Accounting for Managers Third Edition Eric W Noreen, Ph.D., CMA Professor Emeritus University of Washington Peter C Brewer, Ph.D., CPA Miami University—Oxford, Ohio Ray H Garrison, D.B.A., CPA Professor Emeritus Brigham Young University nor25427_fm_i-xxxii.indd iii 19/10/12 11:25 AM Rev.Confirming Pages Find more at www.downloadslide.com MANAGERIAL ACCOUNTING FOR MANAGERS Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020 Copyright © 2014 by The McGraw-Hill Companies, Inc All rights reserved Printed in the United States of America Previous editions © 2011 and 2008 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other of electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper DOW/DOW ISBN 978-0-07-802542-6 MHID 0-07-802542-7 Senior Vice President, Products & Markets: Kurt L Strand Vice President, Content Production & Technology Services: Kimberly Meriwether David Director: Tim Vertovec Brand Manager: Donna M Dillon Executive Director of Development: Ann Torbert Development Editor II: Katie Jones Director of Digital Content: Patricia Plumb Digital Development Editor: Julie Hankins Senior Marketing Manager: Michelle Heaster Content Project Manager: Pat Frederickson Senior Buyer: Carol A Bielski Lead Designer: Matthew Baldwin Cover Designer: Laurie Entringer Cover Image: © Getty Images Content Licensing Specialist: Joanne Mennemeier Photo Researcher: Poyee Oster Media Project Manager: Ron Nelms Typeface: 10.5/12 Times Roman Compositor: Laserwords Private Limited Printer: R R Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page Library of Congress Cataloging-in-Publication Data Noreen, Eric W Managerial accounting for managers / Eric W Noreen, Peter C Brewer, Ray H Garrison — 3rd ed p cm Includes index ISBN 978-0-07-802542-6 (alk paper) — ISBN 0-07-802542-7 (alk paper) Managerial accounting I Brewer, Peter C II Garrison, Ray H III Title HF5657.4.N668 2014 658.15’11 dc23 2012034089 The Internet addresses listed in the text were accurate at the time of publication The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill, and McGraw-Hill does not guarantee the accuracy of the information presented at these sites www.mhhe.com nor25427_fm_i-xxxii.indd iv 19/10/12 11:26 AM Rev.Confirming Pages Find more at www.downloadslide.com Dedication To our families and to our many colleagues who use this book —Eric W Noreen, Peter C Brewer, and Ray H Garrison nor25427_fm_i-xxxii.indd v 19/10/12 11:26 AM Confirming Pages Find more at www.downloadslide.com Index CMA; see Certified Management Accountant (CMA) Coca-Cola, 204, 506, 570 Code of conduct, for management accountants, 15–16 Columbia Pictures, 135 Commission; see Sales commissions Committed fixed costs, 28, 46 Common cost arbitrarily dividing, among segments, 178–179 defined, 41, 46, 172 as indirect cost, 41 from traceable costs, 173 Common fixed cost arbitrarily dividing, among segments, 178–179 defined, 172, 184 traceable cost vs 173 Compaq, 561 Comparative format, for product-line analysis, 267 Comparative income statements, 267, 268 Compensation, balanced scorecard and, 516–517 Compensation, for managers, 373 Competition, as influence on prices, 558 Compound interest, 353, 356 Conco Food Service, 204 Condé Nast Publications, 269 ConMed, 169 Constrained resource contribution margin per unit of, 273–275 elevating the constraint, 276 managing constraints, 275–277 multiple constraints, 277 relaxing the constraint, 276 utilization of, 273–277 Constraints; see also Bottleneck; Theory of Constraints (TOC) Boeing example, 277 defined, 12, 19, 273, 283 managing, 275–277 multiple, 277 relative profitability and, 571–574 relaxing/elevating, 276 utilization of constrained resources, 273–277 Contingent budgets, 368 Continuous budget, 370–371, 394; see also Perpetual budget Contribution approach; see also Joint product costs and contribution approach advantages of, 170–171 comparison to traditional approach, 39–40 defined, 40, 47 nor25427_idx_585-600.indd 587 segmented income statements and, 172–173 variable costing and, 170–171 Contribution format income statement about, 40 variable costing and, 164–166 Contribution margin contribution margin ratio (CM ratio) and, 77–79 cost-volume-profit (CVP) analysis and, 72–74 defined, 40, 47, 72 per unit of constrained resource, 273–275 Contribution margin ratio (CM ratio), 77–79, 97 Control, 369, 394 Controlling business majors and, defined, 3, 19 in managerial accounting, 3–4 Conversion cost, 24, 25, 47 Corporate governance, 14 Corporate scandals, 14 Corporate social responsibility (CSR), 17–18, 19 Cost analysis, illustration of, 265–267 Cost behavior; see also entries for specific types defined, 25, 47 diagnosing, with a scattergraph plot, 32–35 fixed cost, 27–28, 30 linearity assumption and relevant range, 28–30 mixed cost, 30–39 operations drive costs, 34 predicting, cost classification for, 25–31 variable cost, 26–27, 30 Cost centers defined, 518 performance measurement and, 501 performance reports in, 427–428 Cost classifications; see also individual kinds of costs for assigning costs to cost objects, 40–41 for decision making, 41–43 manufacturing, 22–23 nonmanufacturing, 23 for predicting cost behavior, 25–31 summary of, 43 Cost cutting; see Lean Production Cost drivers activity base as, 26 defined, 124, 138, 206 example, 206 multiple, flexible budgets with, 428–429 Cost flows inventoriable costs, 24 job-order costing and, 126–130 587 Cost object assigning costs to, 40–41 assigning overhead costs to, 215–218 cost classifications for, 40–41 defined, 40, 47 Cost of capital defined, 314, 334 as screening device, 315, 318, 319 Cost of goods manufactured, 126, 138 Cost of goods sold defined, 132 direct method of determining, 132–133 indirect method of determining, 133–134 Cost overruns, 86 Cost-plus pricing defined, 554, 563 limitations of, 560 Cost pools, 205–207; see also Activity cost pools Costs; see also Cost classifications; entries for specific cost types after-tax, 360–361, 364 charging, by behavior, 546–549 defined, 22 driving of, by operations, 34 out-of-pocket, 316, 334 terms, summary of, 25 Cost structure CVP considered in, 87–90 defined, 25, 47, 87 operating leverage and, 88–90 profit stability and, 87–88 Cost-volume-profit (CVP) analysis assumptions of, 93–94 basics of, 71–83 book publishing/risk management example, 83 break-even analysis, 85–86, 91–93 concept applications, 79–83 contribution margin, 72–74 contribution margin ratio (CM ratio) and, 77–79 cost structure, choosing, 87–90 defined, 71 in equation form, 74–75 equation method, 83 fixed cost, sales price, and sales volume, change in, 81 formula method, 84 in graphic form, 75–77 Major League Baseball example, 70 margin of safety, 86–87 sales commissions, structuring, 90–93 sales mix, 91–93 selling price, change in, 82–83 target profit analysis, 83–85 variable and absorption costing and, 170–171 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com 588 Index Cost-volume-profit (CVP) analysis—Cont variable cost, fixed cost, and sales volume, change in, 82 variable costs and sales volume, change in, 80–81 Cost-volume-profit (CVP) graph, 75–77, 97 Crayola, 277 Credit Suisse First Boston, 506 Crown Castle International, 516 CSR; see Corporate social responsibility (CSR) Culp, 561 Cummins Engine, 561 Curves, 21 Curvilinear costs, 29 Customer intimacy, Customer-level activities, 207, 231 Customer margin, 220–221 Customer profitability report, 218–221 Customers, unprofitable, 577 Customer value propositions, CVP; see Cost-volume-profit (CVP) analysis D Dadas, Nick, 116 Daihatsu Motors, 561 Decentralization, 500–501 Decentralized organization, 500, 518 Decision making; see also Differential analysis; Relevant costs; entries for specific decision types absorption costing and, 171 business majors and, cost classifications for, 41–43 decision examples, defined, 3, 19 investment decisions; see Capital budgeting decisions in managerial accounting, 3, 4–5 segmented income statements and, 177 segment margin in, 132 sell or process further decisions, 279–281 variable costing and, 171 volume trade-off, 574–575 Decremental costs, 41–42 Degree of operating leverage, 89–90, 97 Delivery cycle time, 508, 519 Dell Inc., 263, 452 Deloitte, 17 Delta Airlines, 558 Delta Dental of Kansas, 516 Demand, elasticity/inelasticity of, 555–556 DeMartini, Robert, 369 Denominator activity, 487, 492 Department of Transportation, 558 Dependent variable, 32, 47 Depreciation, real or economic, 262 nor25427_idx_585-600.indd 588 Depreciation deduction, 361–362 Depreciation tax shield, 361–362, 364 Deromedi, Roger K., 574 “Different costs for different purposes,” 43, 260 Differential analysis activity-based costing and, 281 allocated fixed costs and, 267–269 comparative format, 267 constrained resource and, 273–277 contribution approach, 278–281 cost analysis and, 265–267 cost concepts for decision making, 259–265 defined, 259 Dell customer service example, 263 joint product costs, 278–281 make or buy decision, 269–271 massaging the numbers example, 258 opportunity cost, 272 product lines and, adding and dropping, 265–269 relevant costs, 281 relevant costs and benefits, 259–263 special orders, 272–273 total approach and, reconciling, 263–265 Differential cost; see also Avoidable cost as cost classification for decision making, 41–43 defined, 41, 47 Differential revenue, 41–42, 47 Direct cost, 41, 47 Direct costing, 162; see also Variable costing Direct labor defined, 22, 25, 47 measuring costs, 120–121 in summary of cost terms, 25 touch labor, 22, 25 Direct labor budget, 381–382, 394 Direct labor cost, 26n, 120–121 Direct labor-hours (DLH), 122–123, 207 Direct labor standards, 455 Direct labor variances, standard costs and, 462–465 Direct material purchases, 460 Direct materials about, 22 cost classifications and, 43 defined, 22, 47 job-order costing and, 127–128 measuring costs, 119 in summary of cost terms, 25 Direct materials budget, 379–381, 394 Direct materials cost, 119 Direct materials standards, 454–455 Direct materials variances, standard costs and, 458–462 Direct method, of determining cost of goods sold, 132–133 Disbursements section, of cash budget, 385–389 Discounted cash flows internal rate of return method, 317–319 net present value method, 311–316, 319–323 time value of money and, 310 Discounted value, 352 Discounting, 354, 356 Discount rate; see also Internal rate of return choosing, 314–315 cost of capital when using net present value method, 318 defined, 354, 356 Discretionary fixed costs about, 28 committed fixed costs vs., 28 defined, 28, 47 Disney Corporation, 172 Disney World, 172 Divisional autonomy, 539 Divisional comparison, residual income and, 508 DLH; see Direct labor-hours (DLH) Dun and Bradstreet, 506 DuPont, 22, 504 Duration driver, 206, 231 E Earnings before interest and taxes (EBIT), 502 Ease of adjustment codes, 249–250, 254 EBIT; see Earnings before interest and taxes (EBIT) Economic (real) depreciation, 262 Economic Value Added (EVA®), 505–506, 519 Egger, Stefan, 27 E.I du Pont de Nemours and Company, 504 Elastic demand, 555–556 Elasticity of demand; see Price elasticity of demand Elevating the constraint, 276, 283 Eli Lilly and Company, 4, 17, 506 Emirates airline, 277 Ending finished goods inventory budget, 383–384, 394 Engineering approach, to cost analysis, 32, 47 Enron, 14 Enterprise risk management, 9–10, 19 Equation form, CVP relationships in, 74–75 Equation method, in target profit analysis, 83 Ernst & Young, 18 Errors, forecasting, 417 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com Index Estée Lauder, 316 Ethan Allen, 22 Ethics, importance of, 14–17 Excel; see Microsoft Excel Excessive materials usage, 461 External reports activity-based costing and, 227 financial accounting and, segmented financial information in, 179–180 F Factory burden, 23 Factory overhead, 23 Fairchild Semiconductor, 204 FASB; see Financial Accounting Standards Board (FASB) Federal Express (FedEx), 4, 5, 326, 452 Federated Mogul, 506 FIFO, 168n Financial accounting defined, 2, 19 external reports and, managerial accounting vs., 2–3 Financial Accounting Standards Board (FASB), 179n Financial statements; see Income statements Financing section, of cash budget, 385–389 Finished goods, 126, 138 Firestone, 453 First-stage allocation in activity-based costing, 212, 231 to activity cost pools, 248 Fisher Scientific International, 204 Fixed cost behavior, 27 Fixed costs, 25; see also entries for specific types allocated, 267–269 change in sales price, sales volume, and, 81 sales volume and, 79–80 variable cost, sales volume, and, 82 charging costs by behavior, 547 in cost classification for predicting cost behavior, 27–28, 30 defined, 27, 47 relevant range and, 29 in service department charges, 549–550 traceable and common, 172–173 Fixed overhead variances, 490–491 Flexible budget activity variances in, 422–423 characteristics of, 418 defined, 418, 433 errors in, 429–430 forecasting errors, 417 how they work, 421–422 nor25427_idx_585-600.indd 589 with multiple cost drivers, 428–429 performance report and combining activity and revenue spending variances, 425–427 in cost centers, 427–428 in nonprofit organizations, 427 reasons for using, 418 revenue variances in, 423–425 spending variances in, 423–425 standards costs and, 455–456 static planning budget and, 418–421 variances in, 422–428 Flow of costs; see Cost flows Flynn, David, 377 Ford Motor Company, 22, 277, 328, 561 Forecaster (web-based budgeting program), 392 Forecasting errors, 417 Forecasts biasing, 373 of errors, 417 Formula method, in target profit analysis, 84 Fox Sports Network, 70 France, 26n Future cost, 259–260 Future value, 353–354 G GAAP; see Generally accepted accounting principles (GAAP) Gap, 464 Genentech, 17 General Electric, 513 Generally accepted accounting principles (GAAP), 3, 168n, 179n, 227 General management, 23 General Mills, 203 General Motors (GM), 4, 172, 277, 417, 501 Georgia-Pacific, 506 Gerdau Acominas, 516 Germany, 26n Global Crossing, 14 GM; see General Motors (GM) Gold, Harry, 554 Goodrich, Google, Graphic analysis, of fixed overhead variances, 490–491 Graphic form, CVP relationships in, 75–77 Graphics in balanced scorecard reports, 517 CVP relationships and, 75–77 of fixed overhead variances, 490–491 Great Embroidery LLC, 10 Greenleaf Book Group, 83 Gross margin, 39 Guidant Corporation, 506 589 H Haddad, Joe, 116 Hallmark, 117 Harlem Children’s Zone, 24 Harvard Medical School Hospital, 31 Health care activity-based costing example, 226 ConMed surgical device maker’s lean manufacturing, 169 cost behavior example, 32–35 National Health Service (NHS; United Kingdom), 12 process improvements, 226 reducing health-damaging behaviors, 125 standard costs for hospitals, 453 HealthSouth, 14 Heavin, Gary, 21 Hendrick Motorsports, 392 Herald Metal and Plastic Works, 389 Hershey Foods, 506 Hewlett-Packard, 5, 22 High-low method; see also Least-squares regression method for analyzing mixed costs, 35–37 defined, 47 purpose of, 32 Hilton Hotels, 516 Honda, 328, 514 Hospitals; see Health care Hubbard, Graham, 517 Human factors, in budgets, 372–373 Human resource managers, Hurdle rate, 318 Husky Injection Molding, 506 Hyatt Hotel, 500 Hypertherm, 382 I IBM, 161 Ideal standards, 453–454, 475 Idle capacity, 156, 205n, 535–536 IFRS; see International Financial Reporting Standards (IFRS) IMA; see Institute of Management Accountants (IMA) Income statements; see also Contribution format income statement; Segmented income statements absorption costing, 166–167 budgeted, 389 contribution format, 40, 164–166 cost of goods sold, 132–134 external reporting perspective, 179–180 job-order costing and, 132–135 multiple predetermined overhead rates, 134–135 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com 590 Index Income statements—Cont segmented, 172–179 traditional format, 39–40 variable costing and, 164–166 Income tax, capital budgeting decisions and after-tax costs, 360–361 depreciation tax shield, 361–362 example, 363–364 Incremental analysis, 80, 97 Incremental cost defined, 41, 47 differential cost vs., 41–42 profitability index and, 571–574 Incremental-cost approach, in decision making, 321, 322; see also Differential cost Incremental profit, 571–574 Independent variable, 32, 47 Indirect cost assigning to cost object, cost classification and, 41 defined, 41, 47 manufacturing overhead as, 121 Indirect labor, 22, 47, 120 Indirect manufacturing cost, 23 Indirect materials defined, 22, 47 job-order costing example, 127–128 Indirect method, of determining cost of goods sold, 133–134 Inelastic demand, 555–556 Ingersoll Rand, 516 Initial investment, 330–331 Inspection time, 509 Institute of Management Accountants (IMA), 7; see also Certified Management Accountant (CMA) management accountant salary, Statement of Ethical Professional Practice, 15–16 Intangible benefits, 323–324 Intercontinental Hotels Group, 427 Interest compound, 353, 356 mathematics of, 352–353 Intermediate product, 279 Internal rate of return, 317, 334 Internal rate of return method; see also Discount rate cost of capital as a screening tool, 318 discounted cash flows and, 317–319 illustrated, 317 net present value method compared to, 318–319 preference decisions and, 325 salvage value and other cash flows, 317 using, 318 nor25427_idx_585-600.indd 590 International aspects of transfer pricing, 539 International Financial Reporting Standards (IFRS), 3, 168n International uses of standard costs, 470–471 Internet, shopping on, 173 Intuit, 513 Inventoriable costs, 24, 47; see also Product costs Inventories, 169 Inventory purchases, 379 Investment center defined, 501, 519 performance evaluation—return on investment, 501–505 Investment decisions; see Capital budgeting decisions Investment required, 326 Investments original, recovery of, 313–314 postaudit of, 331–332 ranking of projects, 324–326 iPhones, 90 Isolation of variances, 462 Isuzu Motors, 561 ITT, 277 ITT Automotive, 562 example, 118–126 income statement and, 132–135 indirect materials cost, 127–128 job cost sheet, 119–120, 124 labor cost, 128–129 low-cost labor example, 121 manufacturing overhead, applying, 122–123, 129–130 manufacturing overhead cost, 129 normal cost system, 123 overhead application, 122–123 overview, 117–118 predetermined overhead rates, 121–122, 134–135 predetermined rate, need for, 123–124 in service companies, 135 small business example, 116 underapplied/overapplied overhead, 130–132 unit costs, 125–126 Johnson & Johnson, 17 Joint cost, 279, 283 Joint product costs and contribution approach, 278 allocation problems, 279 sell or process further decisions, 279–281 Joint products, 279, 283 Just-in-time (JIT) production, 11 J K J&B Wholesale, 204 Jaguar, 514–515 Japan, 26n, 470–471 J.C Penney, 506 J Crew, 503 Jeep, 310 JIT; see Just-in-time (JIT) production Job, 117, 135 Job cost sheet about, 119–120 defined, 119, 138 illustrated, 120, 124 labor cost flows, 128–129 manufacturing overhead cost flows, 129 movie example, 135 raw materials cost flows, 128 Job-order costing allocation base defined, 122 for overhead costs, 124–125 bicycling vacations example, 118 cost flows, 126–130 defined, 117, 138 direct labor cost, 120–121 direct materials cost, 119, 127–128 entrepreneurial example, 116 every job is unique, 126 Kansas City Power & Light, 506 Kaplan, Robert, 516–517 Karafil, Brad and Carole, 34 KB Home, 22 Kelly Blue Book (www.kbb.com), 262 KeyCorp, 516 KFC, 316 Kohl’s, 91 Komatsu, 562 Korea East-West Power, 516 KPMG, 17 Kraft Foods Inc., 574 Kroger, 4, 172 L Labor; see entries for specific types of labor Labor costs defined, 22, 47 IBM example, 161 job-order costing example, 128–129 managing, in a difficult economy, 382 Labor efficiency variance, 463–464, 475 Labor rate variance, 458, 464–465, 475 Lampe, Scott, 392 Leadership skills, 13–14 Lean accounting, 510 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com Index Lean operating performance measures, 510 Lean Production defined, 11, 19 variable and absorption costing and, 168–169 Lean supply chain management, 11 Lean thinking, 11 Least-cost decisions, 321–322 Least-squares regression analysis, 32 Least-squares regression method, 35; see also High-low method about, 37–39 computations for, 64–66 defined, 47, 64 Microsoft Excel and, 64–65 Levi Strauss, 117 LIFO, 168n Limited Brands, 464 Linear cost behavior, 33, 47 Linearity assumption, 28–30 Linear programming, 277 L.L Bean, 310 Los Angeles Angels, 70 Lowe’s, 204 “Loyalty” programs, 577 LSG SkyChefs, 117 Lumpiness, of projects, 325n, 572n Luxfer Gas Cylinders, 516 M Machine-hours (MH), 122, 207 Majestic Ocean Kayaking, 30 Major League Baseball, 70 Make or buy decision defined, 269, 283 example, 270–271 outsourcing, 270, 271 strategic aspects of, 269–270 Managed fixed costs, 28; see also Discretionary fixed costs Management accountants, 1, 15–16 Management by exception defined, 452, 475 standard costs and, 452–453 variance analysis and, 469–470 Management compensation balanced scorecard tied to, 516–517 budgeting and, 373 Management reports, 218–221 Managerial accounting budgeting, 4–5 careers and, 5–8 Certified Management Accountant (CMA), 7–8 controlling, 3–4 corporate social responsibility and, 17–18 creating value through values, nor25427_idx_585-600.indd 591 defined, 2–5, 19 enterprise risk management, 9–10 ethics in business and, 14–17 financial vs., 2–3 leadership skills, 13–14 measurement skills, 13 pay in, planning, process management skills, 11–12 skills for success, 8–14 strategic management skills, 8–9 Managerial implications, of profitability index, 576–577 Manufacturing costs; see also Nonmanufacturing costs activity-based costing and, 205 direct labor, 22 direct materials, 22 manufacturing overhead, 23 in summary of cost terms, 25 Manufacturing cycle efficiency (MCE), 509–511, 519 Manufacturing overhead; see also Variable manufacturing overhead standards about, 121–122 applying, 122–123, 129–130 defined, 23, 25, 47 example, 123 as indirect cost, 121 in summary of cost terms, 25 underapplied/overapplied, 130–132, 138, 491–492 Manufacturing overhead budget, 382–383, 395 Manufacturing overhead cost, 129 Manufacturing overhead variances, variable, 465–467 Marconi Telecommunications Company, 228 Margin, 502, 519 Marginal cost, 41–42; see also Variable costing Marginal costing, 162 Marginal revenue, 41–42 Margin of safety, 86–87, 97 Marketing managers, 5–6 Market price, 538–539, 541 Markup, 554, 563; see also Profitmaximizing price Markup percentage, 559–560 Marriott International, 427 Marriott Vacation Club International, 516 Master budget budgeted balance sheet, 390–392 budgeted income statement, 389 cash budget, 374, 385–389 defined, 369, 374, 395 direct labor budget, 381–382 direct materials budget, 379–381 591 ending finished goods inventory budget, 383–384 inventory purchases, 379 labor cost management, 382 manufacturing overhead budget, 382–383 merchandise purchases budget, 379 mismatched cash flows, 386 new inspections pinch cash flows, 389 overview, 374 preparing, 375–392 production budget, 377–379 sales budget, 374, 376–377 sales risk management and, 377 selling and administrative expense budget, 384–385 web-based, 392 Master budget interrelationships, 374 Matching principle, 23 Materials price variance defined, 461, 475 examples, 459–460, 461–462 formulas for, 461 isolation of variances, 462 responsibility for, 462 in standard cost variance analysis, 458 Materials quantity variance defined, 475 example, 459, 460–461 Materials requisition form, 119, 138 Materials variances, subtlety in, 467–469 Mathematics of interest, 352–353 Matsushita Electric, 562 Mattel, McDonald’s, 453 MCE; see Manufacturing cycle efficiency (MCE) Measurement skills, 13 Meijer, 464 Merchandise purchases budget, 379, 395 Merchandising company, 379 Merck & Co., 310 Metro de Madrid, 516 Microsoft, 17, 505 Microsoft Excel, 38 least-squares regression computations and, 64–65 moving beyond, to the web, 392 Minimum required rate of return, 314 Mitsubishi Kasei, 562 Mixed cost behavior, 31 Mixed costs, 25 analysis of, 31–39 in cost classification for predicting cost behavior, 30–31 defined, 30, 47 Zipcar example, 39 Mobistar, 516 Monster Cable, 277 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com 592 Index Morben-Eeftink, Tracy, 30 Moreno, Arturo, 70 Motivation, residual income and, 507–508 Move time, 509 Multiple constraints, 277 Multiple predetermined overhead rates, 134–135, 138 Multiproduct break-even analysis, 92, 93 N Nabisco, 574 National City Bank, 17 National Federation of Coffee Growers of Colombia, 516 National Health Service (NHS; United Kingdom), 12 National Semiconductor, 277 Nature Way Cosmetics, 41–42 NEC; see Nippon Electronics Company (NEC) Negative net present value, 314; see also Net present value method Negotiated transfer price buying division highest acceptable transfer price, 535 defined, 534, 541 evaluation of, 537–538 no outside supplier, 537 range of acceptable transfer prices, 534 selling division with idle capacity, 535–536 lowest acceptable transfer price, 535 with no idle capacity, 536 with some idle capacity, 536–537 Net operating income, 170–171, 502, 519 Net present value, 311–312, 334; see also Negative net present value; Positive net present value Net present value method cash flows emphasis, 312–313 cost of capital as screening tool, 315, 318, 319 defined, 311 discount rate, choosing, 314–315 expanding, 319–323 extended example of, 315–316 illustrated, 311–312 internal rate of return method compared to, 318–319 preference decisions and, 325–326 recovery of original investment, 313–314 simplifying assumptions, 314 New Balance, 369 NGO; see Nongovernmental organization NHS; see National Health Service (NHS; United Kingdom) Nike, 464 nor25427_idx_585-600.indd 592 Nippodenso, 562 Nippon Electronics Company (NEC), 471, 562 Nissan, 562 Nongovernment organization (NGO), 17 Nonmanufacturing costs, 23, 25, 204 Nonprofit organizations, performance reports in, 427 Non-value-added activities, 509–510 Non-value-added time, 509 Nordstrom, Normal cost system, 123, 138 Norton, David, 516–517 Novamex, 377 Nucor Corporation, 418 O Office Depot, 464 Olin, 506 Olympus, 562 OMG Center for Collaborative Learning, 430 1n(), 555n2 Operating assets, 502, 519 Operating departments, 546, 550 Operating leverage danger of high degree of, 90 defined, 88, 97 degree of, 89–90 Operating performance measures delivery cycle time, 508 lean accounting, 510 manufacturing cycle efficiency (MCE), 509–511 throughput (manufacturing cycle) time, 509 Operational excellence, 9, 511 Operations managers, Operations Workforce Optimization (OWO), 464 Opportunity cost decision making and, 42–43 decision making (differential analysis) and, 272 defined, 42, 47 examples, 42–43 Opportunity rate of return, 319 Order-filling costs, 23 Order-getting costs, 23 Organization-sustaining activities, 207, 231 Organization-sustaining costs, 205 Original investment, recovery of, 313–314 Out-of-pocket costs, 316, 334 Outside market, 538 Outsourcing, 270, 271 Overapplied overhead defined, 138 in job-order costing, 130–132 in standard costing system, 491–492 Overhead; see also Manufacturing overhead activity-based costing and, 204 IBM example, 161 summary of, 132 underapplied/overapplied, 138 Overhead application defined, 122, 138 in job-order costing, 122–123 in a standard cost system, 488 underapplied or overapplied, 491–492 Overhead cost, 122; see also Manufacturing overhead allocation base for, 124–125 assigning to activity cost pools, 211–214 to cost objects, 215–218 to products, 247–249 underapplied/overapplied, 130–132 Overhead rates, predetermined capacity and, 153–156 computing, in job-order costing, 121–122 defined, 138 multiple, 134–135, 138 overhead analysis in a standard costing system and, 486–492 plantwide, 138 Overhead variances fixed, 490–491 reconciling with underapplied or overapplied overhead, 491–492 variable manufacturing, standard costs and, 465–467 P P&G; see Procter & Gamble (P&G) Paladino, Robert, 512 Panasonic, 22 Participative budget, 371–372, 395 Pauli, George, 10 Payback method defined, 326–327 evaluation of, 327 extended example of, 328–329 illustrated, 326–327 payback period, 326 uneven cash flows and, 329 Payback period, 334 PepsiCo, 172 Peregrine Outfitters, 204 Performance measurement, in decentralized organizations; see also Decentralization; individual entries balanced scorecard, 511–517 decentralization in organizations, 500–501 investment center performance, 501–505 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com Index operating performance measures, 508–511 residual income, 505–506 responsibility accounting and, 501 return on investment, 501–505 Sony example, 499 Performance reports combining activity and revenue and spending variances, 425–427 in cost centers, 427–428 defined, 5, 19 errors and, 429–430 in nonprofit organizations, 427 Period costs defined, 47 product costs vs 23–24 in summary of cost terms, 25 in traditional format income statement, 39–40 Perpetual budget, 370–371, 395; see also Continuous budget PetroHawk Energy, 316 Pfizer, 4, 271 Pioneer Corporation, 269, 570 Pizza Hut, 310, 316 Planning in budgeting, 369 business majors and, defined, 3, 19, 369, 395 in managerial accounting, Planning budget, 418, 433 Plantwide overhead rate, 134, 138 Positive net present value, 314; see also Net present value method Postaudit defined, 331, 334 of investment projects, 331–332 PPMC; see Providence Portland Medical Center (PPMC) Practical standards, 454, 475 Pratt and Whitney Canada, 277 Predatory pricing, 554n Predetermined lump-sum amounts, 549 Predetermined overhead rates capacity and, 153–156 computing, 121–122 defined, 122, 138 job-order costing and, 121–122 multiple, 134–135, 138 need for, 123–124 overhead analysis in a standard costing system and, 486–492 in variable manufacturing overhead statements, 455 Preference decisions defined, 310, 334 internal rate of return method and, 325 net present value method and, 325–326 ranking of investment projects, 324–326 nor25427_idx_585-600.indd 593 Present value computation of, 353–354 concept of, 352–355 defined, 356 future value and, 353–354 mathematics of interest, 352–353 of a series of cash flows, 354–355 Present value tables, 358–359 Press, Jim, 17 Pretoria Academic Hospital, 277 Price; see Selling price Price discrimination, 554n Price elasticity of demand about, 555–556 defined, 555, 563 Prices, influenced by competition, 558 Price standards, 452 Price variance, 457, 475 Pricing absorption costing approach to cost-plus pricing, 558–561 economists’ approach to, 555–558 markup percentage, 559–560 price elasticity of demand and, 555–556 profit-maximizing price, 556–558 target costing, 561–563 target selling price, 558–559 Prime cost, 24, 25, 47 Process improvements, targeting, 226 Process management business functions making up value chain, 11 cost-cutting example, 11 Lean Production, 11 lean supply chain management example, 11 Theory of Constraints (TOC), 12 Process management skills, 11–12 Process time, 509 Procter & Gamble (P&G), 3, 4, 17, 277, 304 Product costs defined, 23–24, 48 inventoriable costs, 24 period costs vs., 23–24 in summary of cost classifications, 25 in traditional format income statement, 39–40 Production budget, 377–379, 395 Production order, 119 Product leadership, Product-level activities, 207, 231 Product lines, differential analysis and, 265–269 Product margin computed using the traditional cost system, 221–226 defined, 218–221 Product profitability report, 218–221 593 Products, assigning overhead costs to, 247–249 Product “touches,” 11 Professional certification, 7–8 Profitability analysis absolute profitability, 570 managerial implications, 576–577 relative profitability, 571–574 volume trade-off decisions, 574–575 Profitability index defined, 571, 578 managerial implications, 576–577 project, 325–326, 334 relative profitability and, 571–574 Profit center, 501, 519 Profit equation, 78n Profit-maximizing price, 556–558 Profit planning, 369; see also Budgeting Profit stability, cost structure and, 87–88 Project profitability index, 325–326, 334 Providence Portland Medical Center (PPMC), 226 Purdey, 126 Q Quaker Oats, 506 Quantity standards, 452 Quantity variance, 457, 475 Queue time, 509 Qwest, 25 R Range of acceptable transfer prices, 534, 541 Ranking decisions, 325 Rate of return, 314–315 Rationing decisions, 325 Raw materials defined, 22, 48, 126, 138 as direct materials, 22 in job-order costing, 126, 127 in manufacturing costs, 22 RCA; see Resource Consumption Accounting (RCA) Real (economic) depreciation, 262 Real options, 324 Receipts section, of cash budget, 385–389 Reebok, 41 Regression line, 37–39 Reichheld, Fred, 513 Relative profitability, 571–574, 578 Relaxing the constraint, 276, 283 Relevant benefits defined, 259, 283 identified, 260–263 identifying, 259–260 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com 594 Relevant costs; see also Avoidable cost activity-based costing and, 281 defined, 259, 283 executive perks example, 260 identifying, 259–263 isolating, 265 Relevant range in cost behavior, 28–30 curvilinear costs and, 29 defined, 28, 48 fixed costs and, 29 linearity assumption and, 28–30 more than one, 35 Renault, 121 Rent, as fixed cost, 27–28 Required rate of return, 314 Residual income defined, 505, 519 divisional comparison and, 508 Economic Value Added (EVA®), 505–506 motivation and, 507–508 return on investment (ROI) and, 506–508 Resource Consumption Accounting (RCA), 156 Responsibility accounting in decentralized organizations, 501 defined, 370, 395 in framework of budgeting, 370 Responsibility center, 501, 519 Responsibility for the variance, 459 Return on investment (ROI) criticisms of, 505 defined, 501, 519 elements of, 504 formula, 501–502 J Crew example, 503 markup percentage and, 559–560 net operating income, 502 residual income vs., 506–508 understanding, 502–505 Revenue, 419 Revenue variances, 423–427, 433 Ricoh Corporation, 516 Risk; see also Enterprise risk management examples of, 9–10 identifying and controlling, 9–10 Risk management, 460 Rite Aid, 14, 316 Ritz-Carlton, 9, 427 ROI; see Return on investment (ROI) Rolls-Royce, Royal Canadian Mounted Police, 516 Royal Caribbean Cruises, 332 R2, 64–66 nor25427_idx_585-600.indd 594 Index S Saab, Safeway, 172 Sales budget defined, 374, 395 in the master budget, 376–377 Sales commissions, 90–93 Sales mix break-even analysis and, 91–93 defined, 91, 97 shifting, Walmart example, 91 Sales price, change in, 81 Sales risk management, 377 Sales volume, change in fixed cost, sales price, and, 81 fixed cost and, 79–80 variable cost, fixed cost, and, 82 variable cost and, 80–81 Salvage value, 317 Sammons, Mary, 316 Scattergraph method, of cost analysis cost behavior diagnosis with, 32–35 illustrated, 33, 34, 35 Schneider Electric, 451 Screening decisions capital budgeting and, 310, 319 defined, 310, 334 Screening device, cost of capital as, 315, 318, 319 Seagate Technologies, 26, 203 Sears, 5, 453 Seattle Opera Company, 427 SEC; see Securities and Exchange Commission (SEC) Second-stage allocation, in activity-based costing, 215–218, 231 Securities and Exchange Commission (SEC), 260 Segment, 3, 19, 162, 184 Segment discontinuations, 269 Segmented costs, 177–179 Segmented financial information, in external reports, 179–180 Segmented income statements common mistakes in, 177–179 contribution approach and, 172–173 decision making and, 177 example, 174–177 levels of, 174–177 Segmented profitability, 180 Segment margin, 172–173, 184 Self-imposed budget, 371–372, 395 Sell GmbH, 277 Selling, general, and administrative (SG&A) costs, 23 Selling and administrative costs, 23, 25 Selling and administrative expense budget, 384–385, 395 Selling and administrative expenses, 24, 163 Selling costs, 23, 25, 48 Selling price; see also Target selling price art sculpture example, 554 change in, 82–83 establishing, 556–558 legal restrictions on, 554n optimal markup, 556–558 Sell or process further decisions, 279–281, 283 Semivariable cost, 30 Series, of cash flows, 354 Serono, 516 Service companies, job-order costing in, 135 Service department, 546, 550 Service department charges actual or budgeted costs, 547 allocating fixed costs, 549–550 charging costs by behavior, 546–549 example, 547–549 fixed costs, 547, 549–550 guidelines for charges, 547–549 service department, defined, 546 variable costs, 546–547 Setups, 276n SG&A; see Selling, general, and administrative (SG&A) costs Sharp, 562 Shenyang Aircraft Corporation, 270 Shenzhen Hepalink, 460 Shidoni Foundry, 554 Silicon Valley Bank, 506 Simple rate of return, 334 Simple rate of return method about, 329–331 criticisms of, 331 defined, 329 Simplifying assumptions, 314 Skill-based volunteerism, 18 Skills, for managers, 8–14 Smith & Hawken, 173 Smoke Jazz and Supper Club, 10 Social responsibility, corporate, 17–18 Sony, 22, 499 Southwest Airlines, 4, 9, 17, 31, 452, 511 Special orders, 272–273, 283 Specpan, 323 Spending variances defined, 424, 433 flexible budget variances and, 423–425 revenue variance and, in performance report, 425–427 Split-off point, 279, 283 Sporthotel Theresa, 27 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com Index Sports4Kids, 24 Sprint, 506 Sprint Nextel, 516 Standard, 452 Standard cost card, 453, 475 Standard costing system, overhead application, 488 Standard cost per unit, 455, 475 Standard costs, 451; see also individual entries advantages of, 471 direct labor standards, 455 direct labor variances, 462–465 direct materials standards, 454–455 direct materials variances, 458–462 evaluation of controls based on, 471–472 flexible budgets and, 455–456 ideal standards, 453–454 international uses of, 470–471 management by exception, 452, 469–470 materials variances, subtlety in, 467–469 practical standards, 454 price standards, 452 problems with, 471–472 quantity standards, 452 setting, 453–454 standard, defined, 452 standard cost card, 453 variable manufacturing overhead standards, 455 variable manufacturing overhead variances, 465–467 variance analysis, 469–470 variance analysis cycle, 452–453 variances, 453 who uses, 453 Standard cost system budget variance, 488–489 fixed overhead analysis, cautions in, 491 graphic analysis of fixed overhead variances, 490–491 overhead application in, 488 overhead variances and underapplied or overapplied, reconciling overhead, 491–492 volume variance, 489–490 Standard cost variance analysis, model for, 457–458 Standard hours allowed, 458 Standard hours per unit, 455, 475 Standard price per unit, 454–455, 475 Standard quantity allowed, 458, 475 Standard quantity allowed for the actual output, 458 Standard quantity per unit, 454–455, 475 Standard rate per hour, 455, 475 Starbucks, 17 nor25427_idx_585-600.indd 595 Statement of Ethical Professional Practice (IMA), 15–16 Static planning budget deficiencies of, 418–421 defined, 418 errors and, 429–430 Statistical control chart, 470 Step-variable costs, 29–30 Strategic management skills, 8–9 Strategy, 8, 19 Suboptimization, 534, 539, 541 Sunk cost as decision-making concept, 259 defined, 43, 48, 259, 283 example, 43 Surowiecki, James, 14 Susan G Komen Breast Cancer Foundation, 18 Sustainable Investment Research Analyst Network (SIRAN), 517 Sysco Foods, 204 T Taco Bell, 316 Tangible benefits, 323 Target, 91 Target costing defined, 561, 563 example, 562–563 reasons for using, 562 Target profit analysis break-even analysis and, 85–86 defined, 83, 97 equation method in, 83 formula method in, 84 in terms of sales dollars, 84–85 Target selling price, setting, 558–559 Tennessee Valley Authority (TVA), 516 Tesco, 11 Texas Instruments, 22, 277, 562 Theory of Constraints (TOC), 11; see also Constraints defined, 12, 19 example, 12 variable costing and, 171 3M Company, 17, 180 Throughput (manufacturing cycle) time, 509, 519 Time ticket, 120–121, 138 Time value of money, 310 TOC; see Theory of Constraints (TOC) Total and differential approaches, reconciling, 263–265 Total-cost approach, for comparing competing projects, 319–321 “Touches,” 11 595 Touch labor, 22; see also Direct labor Towers Watson, 516 Toyoda, Akio, 17 Toyota Motor Corporation, 17, 22, 117, 328, 452, 562 Toys “R” Us, 464, 506 Traceable fixed costs common fixed costs and, 172–173 defined, 172, 184 identifying, 173 inappropriate methods for assigning, 178 segment margin and, 172–173 Trade-off decisions, 574–575 Traditional cost system activity-based costing vs., 206–207 product margin computed using, 221–226 Traditional format income statement, 39–40 Traditional product costs, activity-based costing vs., 222–226 Transaction driver, 206, 231 Transfer price, 533, 534, 541 Transfer pricing buying division, highest acceptable transfer price, 535 defined, 533, 541 divisional autonomy, 539 international aspects of, 539 negotiated transfer price; see Negotiated transfer price no outside supplier, 537 range of acceptable transfer prices, 534 selling division with idle capacity, 535–536 lowest acceptable transfer price, 535 with no idle capacity, 535, 536 with some idle capacity, 536–537 suboptimization, 539 transfers at the cost to the selling division, 538 at market price, 538–539 Trial-and-error process, 317 Tri-Con Global Restaurants, Inc., 310 Trippetti, Debora, 118 Tupperware, 506 Turnover, 502, 519 Tyco International, 14 U Unadjusted rate of return, 329 Uncertain cash flows, 323–324 Underapplied overhead defined, 138 in job-order costing, 130–132 in standard costing system, 491–492 Uneven cash flows, 329 Unit costs, computation of, 125–126 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com 596 Index United Airlines, 12, 173, 216, 277 United Electrical Controls, 277 United Food and Commercial Workers Union, 464 United Kingdom, 12, 470–471 United States, 471 United States Air Force Logistics Command, 277 United States Navy Transportation Corps, 277 United States Postal Service, 506, 516 Unit-level activities, 206, 231 Unit product cost, 125–126 University Tees, 116 Unprofitable customers, 577 UPS, 18 U.S Army, 377 V Vail Resorts, 12 Value, creating through values, Value-added time, 509–510 Value chain, 11, 19, 269 Vanilla Bicycles, Variable cost behavior, 27 Variable costing; see also Absorption costing absorption costing vs., 162–163 advantages of, 170–171 comparative income effects and absorption costing, 169 contribution format income statement, 164–166 defined, 162, 184 example, 164–166 IBM example, 161 Lean Production and, 168–169 overview, 162 reconciliation with absorption costing income, 167–169 nor25427_idx_585-600.indd 596 selling and administrative expenses, 163 Theory of Constraints (TOC), 171 Variable costs activity based (cost drivers), 26 change in fixed cost, sales volume, and, 82 sales volume and, 80–81 charging by cost behavior, 546–549 in cost classification for predicting cost behavior, 26–27, 30 defined, 26, 48 hotel food costs example, 27 linearity assumption, relevant range, and, 29–30 profit-maximizing markup on, 556–558 in service department charges, 546–547 step-variable and, 29–30 in summary of cost classifications, 25 Variable expense ratio, 79, 97 Variable manufacturing overhead standards, 455 Variable manufacturing overhead variances, standard costs and, 465–467 Variable overhead efficiency variance, 465–466, 476 Variable overhead rate variance, 458, 466, 476 Variance analysis management by exception, 469–470 price and quantity variances, 457–458 standard general model for, 457–458 Variance analysis cycle, 452–453 Variances; see also Standard costs; specific types of variances defined, 453 flexible budget, 422–428 isolation of, 462 responsibility for, 462 VBT Bicycling Vacations, 118 Vertical integration, 269, 283 Victoria Pappas Collection, 174 Virtuoso, Vizio Inc., 26 Volume trade-off decisions, 574–575 Volume variance, 489–490, 492 Volunteerism, skill-based, 18 Volvo, 514 W Wait time, 509–511 Walmart, 9, 91 Washington Trails Association (WTA), 386 Watlow Electric Manufacturing Company, 510 Web-based budgeting system, 392 Wellness scorecard, 516 Western River Expeditions, 207 White, Sacha, White Grizzly Adventures, 34 Wing, Kennard T., 430 W.L Gore, Wm Wrigley Jr Co., 574 Women’s World of Fitness, 21 Working capital, 312, 334 Work in process, 126, 138 WorldCom, 14 Wyndham Hotels and Resorts, 427 X Xu Ji Electric Company, 208 Y YUM! Brands, 316 Z Zipcar, 39 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com nor25427_idx_585-600.indd 597 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com nor25427_idx_585-600.indd 598 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com nor25427_idx_585-600.indd 599 27/09/12 10:05 AM Confirming Pages Find more at www.downloadslide.com nor25427_idx_585-600.indd 600 27/09/12 10:05 AM Find more at www.downloadslide.com Third Edition With Connect Plus® Accounting for Managerial Accounting for Managers, 3e you receive the most advanced study tools as well as a fully integrated, media-rich E-book What kind of study tools? You get things like • Intelligent Response Technology Connect Accounting’s redesigned student interface for our end-of-chapter assessment content that: • Improves answer acceptance to reduce student frustration with formatting issues (such as rounding); • Provides a general journal application that looks and feels more like what you would find in a general ledger software package; and • For select questions, provides an expanded table that guides students through the process of solving the problem LearnSmart™ Adaptive learning system is designed to help students learn faster, study more efficiently, and retain more knowledge for greater success • Guided Examples Narrated and animated, step-by-step walkthroughs of algorithmic versions of assigned exercises, allowing the student to identify and review or reinforcement on what you covered in class, Guided Examples provide immediate feedback and focus on the areas where students need it the most • Interactive Presentations teach each chapter’s core learning objectives and concepts through a multimedia presentation, bringing the text content to life Interactive Presentations harness the full power of technology to truly engage and appeal to all learning styles Ideal in all class formats—online, face to-face or hybrid • Media-Rich E-book allows students to highlight, take notes, and bookmark important spots in the text, making reviewing for quizzes and tests easier than ever Connect Plus Accounting gives you a complete digital solution that allows you to access your course materials from any computer, any time If Connect Plus Accounting sounds good to you, start a three-week FREE TRIAL today! How? Noreen Brewer Garrison Just ask your instructor for the course’s Connect Course URL At the course home page, click the “Register Now” button, type in your e-mail address, and click “Start Free Trial.” It’s that simple to begin using Connect Plus Accounting today ISBN 978-0-07-802542-6 MHID 0-07-802542-7 90000 Third Edition Noreen Brewer EAN Managerial Accounting for Managers MD DALIM #1213488 10/17/12 CYAN MAG YELO BLK • Managerial Accounting for Managers Studying anytime, anywhere online has never been easier 780078 025426 www.mhhe.com Garrison ... Future Manager with Noreen/ Brewer/ Garrison In Managerial Accounting for Managers, the authors have crafted a streamlined managerial accounting book that is perfect for nonaccounting majors who... to succeed In its third edition, Managerial Accounting for Managers continues to adhere to three core standards: FOCUS Noreen/ Brewer/ Garrison pinpoints the key managerial concepts students will... www.downloadslide.com Noreen s Powerful Pedagogy Managerial Accounting for Managers is full of pedagogy designed to make studying productive and hassle-free Chapter Managerial Accounting and Cost Concepts