giáo trình Introduction to managerial accounting 7th by brewer garrision noreen

giáo trình Introduction to managerial accounting 7th by brewer garrision noreen giáo trình Introduction to managerial accounting 7th by brewer garrision noreen giáo trình Introduction to managerial accounting 7th by brewer garrision noreen giáo trình Introduction to managerial accounting 7th by brewer garrision noreen giáo trình Introduction to managerial accounting 7th by brewer garrision noreen giáo trình Introduction to managerial accounting 7th by brewer garrision noreen

introduction TO MANAGERIAL ACCOUNTING 7TH EDITION Peter C Brewer Lecturer, Wake Forest University Ray H Garrison Professor Emeritus, Brigham Young University Eric W Noreen Professor Emeritus, University of Washington INTRODUCTION TO MANAGERIAL ACCOUNTING, SEVENTH EDITION Published by McGraw-Hill Education, Penn Plaza, New York, NY 10121 Copyright © 2016 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous editions © 2013, 2010, 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 of McGraw-Hill Education, including, but not limited to, in any network or other 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 978-0-07-802579-2 MHID 0-07-802579-6 Senior Vice President, Products & Markets: Kurt L Strand Vice President, General Manager, Products & Markets: Marty Lange Vice President, Content Design & Delivery: Kimberly Meriwether David Managing Director: Tim Vertovec Marketing Director: Brad Parkins Brand Manager: Nichole Pullen Director, Product Development: Rose Koos Director of Digital Content: Patricia Plumb Lead Product Developer: Ann Torbert Product Developer: Danielle Andries Digital Product Developer: Kevin Moran Digital Product Analyst: Xin Lin Director, Content Design & Delivery: Linda Avenarius Program Manager: Daryl Horrocks Content Project Managers: Pat Frederickson, Brian Nacik, and Angela Norris Buyer: Debra Sylvester Design: Srdj Savanovic Content Licensing Specialists: Lori Hancock and Rita Hingten Cover Image: © PixelEmbargo/Getty Images 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 Brewer, Peter C Introduction to managerial accounting / Peter C Brewer, Professor, Miami University, Ray H Garrison, Professor Emeritus, Brigham Young University, Eric W Noreen, Professor Emeritus, University of Washington —7th edition pages cm ISBN 978-0-07-802579-2 (alk paper) Managerial accounting I Garrison, Ray H II Noreen, Eric W III Title HF5657.4.F65 2016 658.15'11—dc23 2014037058 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 Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites www.mhhe.com DEDICATION To our families and to our colleagues who use this book —Peter C Brewer, Ray H Garrison, and Eric W Noreen About the Authors Peter C Brewer is a Lecturer in the Department of Accountancy at Wake Forest University Prior to joining the faculty at Wake Forest, he was an accounting professor at Miami University for 19 years He holds a BS degree in accounting from Penn State University, an MS degree in accounting from the University of Virginia, and a PhD from the University of Tennessee He has published 40 articles in a variety of journals including Management Accounting Research; the Journal of Information Systems; Cost Management; Strategic Finance; the Journal of Accountancy; Issues in Accounting Education; and the Journal of Business Logistics Professor Brewer has served as a member of the editorial boards of the Journal of Accounting Education and Issues in Accounting Education His article “Putting Strategy into the Balanced Scorecard” won the 2003 International Federation of Accountants’ Articles of Merit competition, and his articles “Using Six Sigma to Improve the Finance Function” and “Lean Accounting: What’s It All About?” were awarded the Institute of Management Accountants’ Lybrand Gold and Silver Medals in 2005 and 2006 He has received Miami University’s Richard T Farmer School of Business Teaching Excellence Award Prior to joining the faculty at Miami University, Professor Brewer was employed as an auditor for Touche Ross in the firm’s Philadelphia office He also worked as an internal audit manager for the Board of Pensions of the Presbyterian Church (U.S.A.) iv Eric W Noreen has taught at Ray H Garrison is emeritus professor of accounting at Brigham Young University, Provo, Utah He received his BS and MS degrees from Brigham Young University and his DBA degree from Indiana University As a certified public accountant, Professor Garrison has been involved in management consulting work with both national and regional accounting firms He has published articles in The Accounting Review, Management Accounting, and other professional journals Innovation in the classroom has earned Professor Garrison the Karl G Maeser Distinguished Teaching Award from Brigham Young University INSEAD in France and the Hong Kong Institute of Science and Technology and is emeritus professor of accounting at the University of Washington Currently, he is the Accounting Circle Professor of Accounting, Fox School of Business, Temple University He received his BA degree from the University of Washington and MBA and PhD degrees from Stanford University A Certified Management Accountant, he was awarded a Certificate of Distinguished Performance by the Institute of Certified Management Accountants Professor Noreen has served as associate editor of The Accounting Review and the Journal of Accounting and Economics He has numerous articles in academic journals including: the Journal of Accounting Research; The Accounting Review; the Journal of Accounting and Economics; Accounting Horizons; Accounting, Organizations and Society; Contemporary Accounting Research; the Journal of Management Accounting Research; and the Review of Accounting Studies Professor Noreen has won a number of awards from students for his teaching v Pointing Students in the Right Direction “Why I need to learn Managerial Accounting?” Brewer’s Introduction to Managerial Accounting has earned a reputation as the most accessible and readable book on the market Its manageable chapters and clear presentation point students toward understanding just as the needle of a compass provides direction to travelers However, the book’s authors also understand that everyone’s destinations are different Some students will become accountants, while others are destined for careers in management, marketing, or finance Not only does the Brewer text teach students managerial accounting concepts in a clear and concise way, but it also asks students to consider how the concepts they’re learning will apply to the real world situations they will eventually confront in their careers This combination of conceptual understanding and the ability to apply that knowledge directs students toward success, whatever their final destination happens to be Here’s how your colleagues have described Brewer’s Introduction to Managerial Accounting: “The best introductory managerial accounting book on the market Plain and simple.” —Paige Paulsen, Salt Lake Community College “This is an excellent, high quality text that uses state-of-the-art technologies to enhance the learning experience for students.” —Olen L Greer, Missouri State University “It is the best textbook for introductory managerial accounting to date It is concise, well-written and well-organized With an abundance in real-world flavors, students will see the material as interesting and relevant.” —Minwoo Lee, Western Kentucky University “This is a well organized and written textbook It is easy to read and provides excellent illustrations The coverage is clear and presented very well.” —Gloria Stuart, Georgia Southern University Brewer’s Introduction to Managerial Accounting is an excellent managerial accounting text that is written with the student in mind The practical examples, review problems, helpful hints and incorporation of the Excel application all serve to motivate the student to learn the topic —Blair Arthur William, Slippery Rock University “The best resource to making your job in the classroom easier If students read the text and utilize the supplements, they are going to learn Managerial Accounting easier and faster than with any other text.” —Tom Hrubec, Franklin University “. .  excellent depth and breadth of topic coverage that will prepare the students for their advanced business and accounting classes The textbook will also lay the foundation to ensure the students have the ability to successfully apply managerial accounting concepts in their full-time professional jobs!” —Michael Hammond, Missouri State University “I would describe this text as very well written and organized Topics covered have been updated nicely to reflect most current business trends I would say this book is very student and professor friendly!” —Matthew Muller, Adirondack Community College vi Introduction to Managerial Accounting, 7th edition, by BREWER/GARRISON/NOREEN empowers your students by offering: CONCISE COVERAGE Your students want a text that is concise and that presents material in a clear and readable manner Introduction to Managerial Accounting keeps the material accessible while avoiding advanced topics related to cost accounting Students’ biggest concern is whether they can solve the end-of-chapter problems after reading the chapter Market research indicates that Brewer/Garrison/Noreen helps students apply what they’ve learned better than any other managerial accounting text on the market Additionally, the key supplements are written by the authors ensuring that students and instructors will work with clear, well-written supplements that employ consistent terminology DECISION-MAKING FOCUS All students who pass through your class need to know how accounting information is used to make business decisions, especially if they plan to be future managers That’s why Brewer, Garrison, and Noreen make decision making a pivotal component of Introduction to Managerial Accounting In every chapter you’ll find the following key features that are designed to teach your students how to use accounting information: Each chapter opens with a Decision Feature vignette that uses real-world examples to show how accounting information is used to make everyday business decisions; Decision Point boxes within the chapters help students to develop analytical, critical thinking, and problem-solving skills; and end-of-chapter Building Your Skills cases challenge students’ decision-making skills A CONTEMPORARY APPROACH TO LEARNING Today’s students rely on technology more than ever as a learning tool, and Introduction to Managerial Accounting offers the finest technology package of any text on the market From study aids like narrated, animated Guided Examples to online grading and course management, our technology assets have one thing in common: they make your class time more productive, more stimulating, and more rewarding for you and your students McGraw-Hill Connect® Accounting is an online assignment and assessment solution that connects students with the tools and resources they’ll need to achieve success, including Connect Accounting provides an online, media-rich, searchable version of the text in addition to access to Connect, giving students a convenient way to access everything they need to succeed in their course The Connect library provides your students with a variety of multimedia aids to help them learn managerial accounting includes quizzes, audio and visual lecture presentations, and course-related videos Students also can download an iPad® app for LearnSmart®, an adaptive tool that helps students learn faster, study more efficiently, and retain more knowledge “The book’s number one feature is the real world examples it incorporates in each chapter.” —Meghna Singhvi, Florida International University vii BREWER / GARRISON / NOREEN’S Introduction to Managerial Accounting is full of pedagogy designed to make studying productive and hassle-free On the following pages, you’ll see the kind of engaging, helpful pedagogical features that have made Brewer one of the best-selling Managerial Accounting texts on the market APPLYING EXCEL applying excel LO4–2, LO4–3, LO4–4, LO4–5 Available with McGraw-Hill’s Connect Accounting This exciting end-of-chapter feature links the  power of Excel with managerial accounting concepts by illustrating how Excel functionality can be used to better understand accounting data Applying Excel goes beyond plugging numbers into a template by providing students with an opportunity to build their own Excel worksheets and formulas Students are then asked “what if” questions in which they analyze not only how related pieces of accounting data affect each other but why they Applying Excel immediately precedes the Exercises in eleven of the thirteen chapters in the book and is also integrated with McGraw-Hill Connect Accounting, allowing students to practice their skills online with algorithmically generated datasets and to watch animated, narrated tutorials on how to use formulas in Excel The Excel worksheet form that appears below is to be used to recreate the extended example on pages 171–173 Download the workbook containing this form in the Connect Library On the website you will also receive instructions about how to use this worksheet form You should proceed to the requirements below only after completing your worksheet Required: Untitled-1 178 Check your worksheet by changing the beginning work in process inventory to 100 units, the units started into production during the period to 2,500 units, and the units in ending work in process inventory to 200 units, keeping all of the other data the same as in the original example If your worksheet is operating properly, the cost per equivalent unit for materials should now be $152.50 and 10/21/14 4:18 PM “An excellent pedagogical feature that helps further reinforce students’ knowledge of key concepts in the text book, while strengthening students’ Excel skills that are so important in the work place This will further enhance an already excellent text.” —Marianne L James, California State University, Los Angeles “[Applying Excel is] an excellent way for students to programmatically develop spreadsheet skills without having to be taught spreadsheet techniques by the instructor A significant associated benefit is that students gain more exposure to the dynamics of accounting information by working with what-if scenarios.” —Earl Godfrey, Gardner–Webb University viii POWERFUL NEW PEDAGOGY HELPFUL HINT HELPFUL HINT You need to perform separate equivalent units of production calculations for each manufacturing cost category, such as materials and conversion When using the weighted-average method to compute equivalent units of production for a cost category you should ignore the completion percentage for the units in beginning inventory The units transferred to the next department plus the units in ending work in process inventory multiplied by their percentage completion equals the equivalent units of production Helpful Hint boxes are found several times throughout each chapter and highlight a variety of common mistakes, key points, and “pulling it all together” insights for students THE FOUNDATIONAL 15 the foundational 15 Available with McGraw-Hill’s Connect Accounting Each chapter now contains one Foundational 15 exercise that includes 15 “building-block” questions related to one concise set of data These exercises can be used for in-class discussion or as homework assignments They are found before the Exercises and are available in Connect Accounting Clopack Company manufactures one product that goes through one processing department called Mixing All raw materials are introduced at the start of work in the Mixing Department The company uses the weighted-average method to account for units and costs Its Work in Process T-account for the Mixing Department for June follows (all forthcoming questions pertain to June): bre25796_ch04_160-189.indd 168 19/09/14 8:16 PM Work in Process—Mixing Department June balance Materials Direct labor Overhead June 30 balance 28,000 LO4–1, LO4–2, LO4–3, LO4–4, LO4–5 Completed and transferred to Finished Goods ? 120,000 79,500 97,000 ? The June work in process inventory consisted of 5,000 pounds with $16,000 in materials cost and $12,000 in conversion cost The June work in process inventory was 100% complete with respect to materials and 50% complete with respect to conversion During June, 37,500 pounds were started into production The June 30 work in process inventory consisted of 8,000 pounds that were 100% complete with respect to materials and 40% complete with respect to conversion Required: Prepare the journal entries to record the raw materials used in production and the direct labor cost incurred Prepare the journal entry to record the overhead cost applied to production How many units were completed and transferred to finished goods during the period? Untitled-2 179 TAKE TWO Take Two is a new end-of-chapter feature that provides a set of alternate numbers for selected exercises These alternate numbers can be plugged into the exercise, thereby providing instructors an option to work out the same exercise more than once during class and students an option for additional practice when completing their homework The Take Two alternate solutions can be found in the instructor’s solutions manual 10/21/14 4:20 PM TAKE TWO Estimated direct labor-hours = 50,000 ix www.downloadslide.net 634 Chapter 13 comparing Lydex’s performance to its major competitors The company’s financial statements for the last two years are as follows: Lydex Company Comparative Balance Sheet This Year Last Year Assets Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses $ 960,000 2,700,000 3,900,000 240,000 $ 1,260,000 300,000 1,800,000 2,400,000 180,000 Total current assets Plant and equipment, net 7,800,000 9,300,000 5,940,000 8,940,000 Total assets $17,100,000 $14,880,000 Liabilities and Stockholders’ Equity Liabilities: Current liabilities Note payable, 10% $ 3,900,000 3,600,000 $ 2,760,000 3,000,000 Total liabilities 7,500,000 5,760,000 Stockholders’ equity: Common stock, $78 par value Retained earnings 7,800,000 1,800,000 7,800,000 1,320,000 Total stockholders’ equity 9,600,000 9,120,000 Total liabilities and stockholders’ equity $17,100,000 $14,880,000 Lydex Company Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year Last Year $15,750,000 12,600,000 3,150,000 1,590,000 1,560,000 360,000 1,200,000 360,000 840,000 360,000 480,000 1,320,000 $ 1,800,000 $12,480,000 9,900,000 2,580,000 1,560,000 1,020,000 300,000 720,000 216,000 504,000 252,000 252,000 1,068,000 $ 1,320,000 To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Company’s industry: Current ratio Acid-test ratio Average collection period Average sale period Return on assets Debt-to-equity ratio Times interest earned ratio Price-earnings ratio 2.3 1.2 30 days 60 days 9.5% 0.65 5.7 10 www.downloadslide.net Financial Statement Analysis Required: You decide first to assess the company’s performance in terms of debt management and profitability Compute the following for both this year and last year: a The times interest earned ratio b The debt-to-equity ratio c The gross margin percentage d The return on total assets (Total assets at the beginning of last year were $12,960,000.) e The return on equity (Stockholders’ equity at the beginning of last year totaled $9,048,000 There has been no change in common stock over the last two years.) f Is the company’s financial leverage positive or negative? Explain You decide next to assess the company’s stock market performance Assume that Lydex’s stock price at the end of this year is $72 per share and that at the end of last year it was $40 For both this year and last year, compute: a The earnings per share b The dividend yield ratio c The dividend payout ratio d The price-earnings ratio How investors regard Lydex Company as compared to other companies in the industry? Explain e The book value per share of common stock Does the difference between market value per share and book value per share suggest that the stock at its current price is a bargain? Explain You decide, finally, to assess the company’s liquidity and asset management For both this year and last year, compute: a Working capital b The current ratio c The acid-test ratio d The average collection period (The accounts receivable at the beginning of last year totaled $1,560,000.) e The average sale period (The inventory at the beginning of last year totaled $1,920,000.) f The operating cycle g The total asset turnover (The total assets at the beginning of last year totaled $14,500,000.) Prepare a brief memo that summarizes how Lydex is performing relative to its competitors PROBLEM 13–16A Common-Size Financial Statements [LO13–1] Refer to the financial statement data for Lydex Company given in Problem 13–15 Required: For both this year and last year: Present the balance sheet in common-size format Present the income statement in common-size format down through net income Comment on the results of your analysis PROBLEM 13–17A Interpretation of Financial Ratios [LO13–2, LO13–3, LO13–5, LO13–6] Pecunious Products, Inc.’s financial results for the past three years are summarized below: Sales trend Current ratio Acid-test ratio Accounts receivable turnover Inventory turnover Dividend yield Dividend payout ratio Return on total assets Return on equity Dividends paid per share* Year Year Year 128.0 2.5 0.8 9.4 6.5 7.1% 40% 12.5% 14.0% $1.50 115.0 2.3 0.9 10.6 7.2 6.5% 50% 11.0% 10.0% $1.50 100.0 2.2 1.1 12.5 8.0 5.8% 60% 9.5% 7.8% $1.50 *There have been no changes in common stock outstanding over the three-year period a b c d Your boss has asked you to review these results and then answer the following questions: Is it becoming easier for the company to pay its bills as they come due? Are customers paying their accounts at least as fast now as they were in Year 1? Is the total of the accounts receivable increasing, decreasing, or remaining constant? Is the level of inventory increasing, decreasing, or remaining constant? 635 www.downloadslide.net 636 Chapter 13 e f g h Is the market price of the company’s stock going up or down? Is the earnings per share increasing or decreasing? Is the price-earning ratio going up or down? Is the company employing financial leverage to the advantage of the common stockholders? Required: Provide answers to each of the questions raised by your boss PROBLEM 13–18A Common-Size Statements and Financial Ratios for a Loan Application [LO13–1, LO13–2, LO13–3, LO13–4] Paul Sabin organized Sabin Electronics 10 years ago to produce and sell several electronic devices on which he had secured patents Although the company has been fairly profitable, it is now experiencing a severe cash shortage For this reason, it is requesting a $500,000 long-term loan from Gulfport State Bank, $100,000 of which will be used to bolster the Cash account and $400,000 of which will be used to modernize equipment The company’s financial statements for the two most recent years follow: Sabin Electronics Comparative Balance Sheet This Year Last Year Current assets: Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets $ 70,000 480,000 950,000 20,000 1,520,000 1,480,000 $3,000,000 $ 150,000 18,000 300,000 600,000 22,000 1,090,000 1,370,000 $2,460,000 Liabilities and Stockholders’ Equity Liabilities: Current liabilities Bonds payable, 12% $ 800,000 600,000 $ 430,000 600,000 Total liabilities 1,400,000 1,030,000 Stockholders’ equity: Common stock, $15 par Retained earnings 750,000 850,000 750,000 680,000 Total stockholders’ equity Total liabilities and equity 1,600,000 $3,000,000 1,430,000 $2,460,000 Assets Sabin Electronics Comparative Income Statement and Reconciliation Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year Last Year $5,000,000 3,875,000 1,125,000 653,000 472,000 72,000 400,000 120,000 280,000 110,000 170,000 680,000 $ 850,000 $4,350,000 3,450,000 900,000 548,000 352,000 72,000 280,000 84,000 196,000 95,000 101,000 579,000 $ 680,000 www.downloadslide.net Financial Statement Analysis During the past year, the company introduced several new product lines and raised the selling prices on a number of old product lines in order to improve its profit margin The company also hired a new sales manager, who has expanded sales into several new territories Sales terms are 2/10, n/30 All sales are on account Required: To assist in approaching the bank about the loan, Paul has asked you to compute the following ratios for both this year and last year: a The amount of working capital b The current ratio c The acid-test ratio d The average collection period (The accounts receivable at the beginning of last year totaled $250,000.) e The average sale period (The inventory at the beginning of last year totaled $500,000.) f The operating cycle g The total asset turnover (The total assets at the beginning of last year were $2,420,000.) h The debt-to-equity ratio i The times interest earned ratio j The equity multiplier (The total stockholders’ equity at the beginning of last year totaled $1,420,000.) For both this year and last year: a Present the balance sheet in common-size format b Present the income statement in common-size format down through net income Paul Sabin has also gathered the following financial data and ratios that are typical of companies in the electronics industry: Current ratio Acid-test ratio Average collection period Average sale period Debt-to-equity ratio Times interest earned ratio 2.5 1.3 18 days 60 days 0.90 6.0 Comment on the results of your analysis in (1) and (2) above and compare Sabin Electronics’ performance to the benchmarks from the electronics industry Do you think that the company is likely to get its loan application approved? PROBLEM 13–19A Financial Ratios for Assessing Profitability and Market Performance [LO13–2] Refer to the financial statements and other data in Problem 13–18 Assume that Paul Sabin has asked you to assess his company’s profitability and stock market performance Required: You decide first to assess the company’s stock market performance For both this year and last year, compute: a The earnings per share There has been no change in common stock over the last two years b The dividend yield ratio The company’s stock is currently selling for $40 per share; last year it sold for $36 per share c The dividend payout ratio d The price-earnings ratio How investors regard Sabin Electronics as compared to other companies in the industry if the industry norm for the price-earnings ratio is 12? Explain e The book value per share of common stock Does the difference between market value and book value suggest that the stock is overpriced? Explain You decide next to assess the company’s profitability Compute the following for both this year and last year: a The gross margin percentage b The net profit margin percentage c The return on total assets (Total assets at the beginning of last year were $2,300,000.) 637 www.downloadslide.net 638 Chapter 13 d The return on equity (Stockholders’ equity at the beginning of last year was $1,329,000.) e Is the company’s financial leverage positive or negative? Explain Comment on the company’s profit performance and stock market performance over the two-year period building your skills ETHICS CHALLENGE [LO13–2, LO13–4] Venice InLine, Inc., was founded by Russ Perez to produce a specialized in-line skate he had designed for doing aerial tricks Up to this point, Russ has financed the company with his own savings and with cash generated by his business However, Russ now faces a cash crisis In the year just ended, an acute shortage of high-impact roller bearings developed just as the company was beginning production for the Christmas season Russ had been assured by his suppliers that the roller bearings would be delivered in time to make Christmas shipments, but the suppliers were unable to fully deliver on this promise As a consequence, Venice InLine had large stocks of unfinished skates at the end of the year and was unable to fill all of the orders that had come in from retailers for the Christmas season Consequently, sales were below expectations for the year, and Russ does not have enough cash to pay his creditors Well before the accounts payable were due, Russ visited a local bank and inquired about obtaining a loan The loan officer at the bank assured Russ that there should not be any problem getting a loan to pay off his accounts payable—providing that on his most recent financial statements the current ratio was above 2.0, the acid-test ratio was above 1.0, and net operating income was at least four times the interest on the proposed loan Russ promised to return later with a copy of his financial statements Russ would like to apply for a $80,000 six-month loan bearing an interest rate of 10% per year The unaudited financial reports of the company appear below: Venice InLine, Inc Comparative Balance Sheet As of December 31 (dollars in thousands) This Year Last Year Current assets: Cash Accounts receivable, net Inventory Prepaid expenses $ 70 50 160 10 $150 40 100 12 Total current assets Property and equipment 290 270 302 180 Total assets $560 $482 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable Accrued liabilities $154 10 $ 90 10 Total current liabilities Long-term liabilities 164 - 100 - Total liabilities 164 100 Stockholders’ equity: Common stock and additional paid-in capital Retained earnings 100 296 100 282 Assets Total stockholders’ equity 396 382 Total liabilities and stockholders’ equity $560 $482 www.downloadslide.net Financial Statement Analysis Venice InLine, Inc Income Statement For the Year Ended December 31 (dollars in thousands) This Year Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses: Selling expenses Administrative expenses Total selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income $420 290 130 42 68 110 20 20 $ 14 Required: Based on the unaudited financial statements and the statement made by the loan officer, would the company qualify for the loan? Last year Russ purchased and installed new, more efficient equipment to replace an older plastic injection molding machine Russ had originally planned to sell the old machine but found that it is still needed whenever the plastic injection molding process is a bottleneck When Russ discussed his cash flow problems with his brother-in-law, he suggested to Russ that the old machine be sold or at least reclassified as inventory on the balance sheet because it could be readily sold At present, the machine is carried in the Property and Equipment account and could be sold for its net book value of $45,000 The bank does not require audited financial statements What advice would you give to Russ concerning the machine? ANALYTICAL THINKING [LO13–2, LO13–3, LO13–4, LO13–5, LO13–6] Incomplete financial statements for Pepper Industries follow: Pepper Industries Balance Sheet March 31 Current assets: Cash Accounts receivable, net Inventory $ ?  ? ?  Total current assets Plant and equipment, net Total assets $ Liabilities: Current liabilities Bonds payable, 10% $ 320,000 ?  Total liabilities ?  Stockholders’ equity: Common stock, $5 par value Retained earnings ? ?  ?  Total stockholders’ equity Total liabilities and stockholders equity ? ?  ?  $ ?  639 www.downloadslide.net 640 Chapter 13 Pepper Industries Income Statement For the Year Ended March 31 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (30%) Net income a b c d The following additional information is available about the company: All sales during the year were on account There was no change in the number of shares of common stock outstanding during the year The interest expense on the income statement relates to the bonds payable; the amount of bonds outstanding did not change during the year Selected balances at the beginning of the current year were Accounts receivable Inventory Total assets e $4,200,000  ?  ?  ?  ? 80,000 ?  ?  $ ?   $270,000 $360,000 $1,800,000 Selected financial ratios computed from the statements above for the current year are Earnings per share Debt-to-equity ratio Accounts receivable turnover Current ratio Return on total assets Times interest earned ratio Acid-test ratio Inventory turnover $2.30 0.875 14.0 2.75 18.0% 6.75 1.25 6.5 Required: Compute the missing amounts on the company’s financial statements (Hint: What’s the difference between the acid-test ratio and the current ratio?) TEAMWORK IN ACTION [LO13–1, LO13–2, LO13–3, LO13–4, LO13–5, LO13–6] Obtain the most recent annual report or SEC filing 10-K of a publicly traded company that interests you It may be a local company or it may be a company in an industry that you would like to know more about Using the annual report, compute as many of the financial ratios covered in this chapter as you can for at least the past two years This may pose some difficulties—particularly because companies often use different terms for many income statement and balance sheet items than were shown in the chapter Nevertheless, the best that you can After you have computed the financial ratios, summarize the company’s performance for the current year Has it improved, gotten worse, or remained about the same? Do the ratios indicate any potential problems or any areas that have shown significant improvement? What recommendations, if any, would you make to a bank about extending short-term credit to this company? What recommendations, if any, would you make to an insurance company about extending long-term credit to this company? What recommendations, if any, would you make to an investor about buying or selling this company’s stock? www.downloadslide.net PHOTO CREDITS Design Element (bell): © DNY59/Getty Images, (contract): © Dzmitry Stankevich/Getty Images; (scale): © PhotoDisc/Getty Images Chapter Opener Image: © PixelEmbargo/Getty Images Chapter Page 293: © Sandee Noreen; p 309: © Ryan McVay/Getty Images; p 313: © Eric Noreen Frontmatter Chapter Page iv: © Peter C Brewer; p v(top): © Ray H Garrison, (bottom): © Eric W Noreen; p x: © Courtesy of University Tees, Inc.; p xi: © Rob Melnychuk/Getty Images Page 349: © Michael Sears/MCT/Newscom; p 356: © Francisco Cruz/Purestock/Superstock; p 360: © Woods Wheatcroft/Getty Images; p 369: © Rob Melnychuk/Getty Images Prologue Page 11: © Irene Alastruey/Author’s Image/Punchstock; p 12: © Imagestate Media (John Foxx)/Imagestate; p 16: © Miguel Medina/AFP/Getty Images Chapter Page 23: © Purestock/SuperStock; p 26: © Digital Vision/ PunchStock; p 27: © Patrick Kane/AP 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Cardy/Stringer/Getty Images Chapter 12 Page 557: © Randy Allbritton/Getty Images; p 559: © McGraw-Hill Education Jill Braaten, photographer; p 577: © Photodisc/Getty Images Chapter 13 Page 601: © Mary Altaffer/AP Images; p 615: © Jack Hollingsworth/Getty Images Chapter Page 243: Bloomberg/Getty Images; p 253: © Photodisc/ Getty Images; p 257: © TRBfoto/Getty Images; p 266: © Duncan Smith/Getty Images 641 www.downloadslide.net INDEX Note: Page numbers followed by n refer to footnotes A Abbott Laboratories, 4, 13 Abercrombie & Fitch, 360 Absorption costing See also Job-order costing cost of goods sold, 250 defined, 68, 244 income statement, 249–250, 266 selling and administrative expenses, 245–246, 248 variable costing compared with, 245–253, 266 example, 245 income statement preparation, 247–250 net operating income reconciliation, 251–253 selling and administrative expenses, 245–246, 248 Weber Light Aircraft example, 246–255 Accident rate, 431 Account analysis, 35 Accounting majors, 6–8 Accounting period choosing budget period, 295 period costs, 27, 28 Accounts receivable turnover, 609–610, 621 Accumulated Depreciation, adjustments in indirect method of preparing statement of cash flows, 561–562, 570 Acid-test (quick) ratio, 608–609, 621 Activities See also Activity-based costing (ABC) computing activity rates, 130–131 defined, 124 examples of, 124 hierarchy of, 125–126, 128 Activity base, 29 Activity cost pools, 124–125, 128, 131 Activity measure, 125 Activity rates, 125, 130–131 Activity-based costing (ABC), 76, 120–141 activity cost pools, 124–125, 128, 131 activity rates, 125, 130–131 in budgeting process, 310 Comtek Inc example, 128–134 defined, 123 design example, 127–128 direct labor-hours as base, 130 evaluation, 123, 134–137 extent of use, 135 hierarchy of activities, 125–126, 128 manufacturing overhead in, 123–125, 133 modifying, 136–137 overview, 124 product costs, 131–132, 133 in service companies, 133–134, 137 shifting overhead cost, 133 targeting process improvements, 134 Activity-based management, 134 Adams, Susan, 94n Add/drop decision, 465–468 allocated fixed costs in, 467–468 comparative approach, 467 contribution approach, 468 cost analysis, 465–467 quantifying, 467 Adidas, 294 Administrative costs, 26 Aéropostale, 611 Airbus, 25 Alcoa, 564 Aldrich, Lester, 71n 642 Allocation base defined, 73 inappropriate, 264 for overhead cost, 75–76 segmented income statement, 264 Almanac of Business and Industrial Financial Ratios, 622 AMA Annual Statement Studies, 622 Amazon.com, 512, 577 American Express, 417, 435 Anchoring bias, 17 Annuities, 550–551, 555 Apple Inc., 4, 11, 25, 559 APS, 138 Arnold, Eric, 77n Arnst, Catherine, 23n Asset management ratios, 609–612 accounts receivable turnover, 609–610, 621 inventory turnover, 610–611, 621 operating cycle, 611, 621 total asset turnover, 612, 621 Astore, Giuliano, 69, 69n AT&T, 511 Audi, Tamara, 320n Average collection period, 609–611, 621 Average sale period, 610–611, 621 Avoidable costs, 458 B Bain & Company, 435 Balance sheets See also Financial statement analysis adjustments in indirect method of preparing statement of cash flows, 562, 564–567, 569, 570, 571–572 basic equations, 558n beginning, in budgeting process, 301–302 budgeted, 318–320 common-size, 606 comparative, 603 inventory in job-order costing, 77–78 Balanced scorecard, 432–437 common characteristics, 432–435 company strategy and, 432, 433, 435–437 defined, 432 examples of performance measures on, 433–434 individual/personal, 435 tying compensation to, 437 Bally’s Total Fitness, 210 Batch-level activities, 126, 128 Bausch & Lomb, 424 Baxter International, 13 Bays, Brad, 161n Bean (L L.), 512 BearingPoint, 435 Bechtel International, 68 Beck, Melinda, 430n Becker, Steve, 211 Benchmarking, 134 Best Buy, 424 BestSportsApparel.com, 351 Beverage Tasting Institute of Chicago, 421 Bible, Lynn, 576n Bidwell, Chuck, 615 Bill of materials, 70 Blue Ridge Brewery, 211 BMW, 435 The Body Shop, 433 Boeing Co., 5, 68, 256, 479 Boise Cascade, 424 Bolt Bus, 472 Bombardier Learjet, 26 Bonuses, in budgeting process, 297 Book value per share, 620, 621 Boonyanumwat, Nirachara, 138n Bottlenecks, 474, 475–476, 478 Botts, William, 457 Boyle, Matthew, 27n, 523n BP, Break-even analysis, 206–208 break-even chart/cost-volume-profit (CVP) graph, 197–199 break-even in dollar sales, 207–208 break-even point, 194–195 equation method, 206 formula method, 207 multiproduct, 216–218 sales mix and, 216–218 segmented income statements in, 262–263 Brewer, Peter C., 137n, 437n Brosnahan, Jan, 431n Brown, Erika, 121n Budget variance, 399–400 Budgeted balance sheet, 318–320 Budgeted income statement, 317–318 Budgets and budgeting advantages, 294 budget, defined, 3, 294 budget period, 295 capital budgets See Capital budgeting in executing strategy, 294 fixed budgets See Master budgets flexible budgets See Flexible budgets human factors in, 296–297 master budgets See Master budgets responsibility accounting, 295 self-imposed budget, 296 Burger King, 616 Burritt, Chris, 27n Burrows, Peter, 423n, 559n Business majors, 5–6 Business process, 14–15 C Calabro, Lori, 437n Calvin Klein, 123 Campbell Soup, 25 Capital budgeting, 510–534 cash flows versus net operating income, 512–513 defined, 512 internal rate of return method, 527 net present value method, 518–526, 527–528 payback method, 514–517 postaudit of investment projects, 530 preference decisions/ranking projects, 512, 526–527 present value concepts, 548–551 annuities, 550–551, 555 compound interest, 548 computation of present value, 549–550 future value, 549 series of cash flows, 550–551, 555 time value of money, 513 simple rate of return method, 513, 528–530 time value of money, 513, 548–551 typical decisions, 512 Capitalism and Freedom (Friedman), 21 Career issues, 5–8 accounting majors, 6–8 www.downloadslide.net Index Career issues—Cont business majors, 5–6 networking opportunities, pay levels, professional certification, Caroline’s Desserts, 610 Cash budget, 297, 299, 313–317 Cash equivalents, 559 Cash flow See also Statement of cash flows in capital budgeting decisions, 512–514 mismatched cash flows, 313–314 payback method, 514–517 Caterpillar, 13 Cendrowski, Scott, 417n Certified Management Accountant (CMA), Certified Public Accountant (CPA), Cessna Aircraft, 356 Chain of command, 14–15 Choi, Kunhee, 134n Chrysler, 243 Cintas, Cisco Systems, 11 CIT Group, 601 Citigroup, 601 Civil War Trust (CWT), 293 Clearing account, 82 CM ratio (contribution margin ratio), 199–202 Coca-Cola, 424 Cognitive bias, 16, 17 Columbia Pictures, 93 Commission structure, 215 Committed fixed costs, 31 Common costs, 25, 265 Common fixed costs defined, 256–257 traceable fixed costs as, 258 Common-size financial statements, 602, 605–607 Companywide income statements, 265–266 Comparative income effects, absorption costing versus variable costing, 253 Compensation balanced scorecard and, 437 bonuses, 297 commission structure, 215 pay levels in management accounting, Compound interest, 548 ConAgra Foods, 367 Confirmation bias, 17 Conmed, 253 Constrained resources, 474–479 bottlenecks, 474, 475–476, 478 constraint, defined, 474 contribution margin per unit of constrained resource, 475–477 managing constraints, 477–478 relaxing (elevating) constraints, 477–478 Continuous budgets, 295 Contribution approach absorption approach compared with, 266 add/drop decision, 468 contribution format income statement, 42–43 defined, 42 joint product costs, 479–483 segmented income statements, 256–261 sell or process further decision, 480–483 Contribution format income statement, 41, 42–43 absorption format versus, 249–250, 266 add/drop decision, 468 segment reporting format, 260 variable costing contribution format, 247–248 Contribution margin (CM), 42–43 in contribution format income statement, 41, 42–43, 247–248 in cost-volume-profit (CVP) relationships, 193–195, 215 defined, 42 per unit of constrained resource, 475–477 sales commission structure and, 215 Contribution margin ratio (CM ratio), 199–202 Controlling defined, 3–4, 294 managerial accounting and business majors, Conversion cost, 28, 169 Coppertone, 162 Corporate social responsibility (CSR), 13–14 Cost behavior cost classifications for predicting, 24, 29–34 fixed cost, 30–32 linearity assumption, 32–33 mixed costs, 24, 33–40 See also Mixed costs relevant range, 32–33 variable cost, 29–30 defined, 29 Cost centers, 419 Cost classifications, 22–48 for cost objects, 24–25 direct cost, 24 indirect cost, 25 for decision making, 24, 43–44, 458–464 differential cost and revenue, 43–44, 458, 459, 462–464 opportunity cost, 44, 459, 471–472 relevant costs and benefits, 458–459, 460–462, 464 sunk cost, 44, 458–459 for manufacturing companies, 24, 25–26 manufacturing costs, 25–26 nonmanufacturing costs, 26, 83 overview, 24 for predicting cost behavior, 24, 29–34 fixed cost, 30–32 linearity assumption, 32–33, 37 mixed costs, 24, 33–40 See also Mixed costs relevant range, 32–33 variable cost, 29–30 for preparing financial statements, 24, 27–28 contribution format income statement, 41, 42–43, 247–248, 260 conversion cost, 28 overview, 24, 28 period costs, 27, 28 prime cost, 28 product costs, 27, 28 traditional format income statement, 41–42 Cost drivers defined, 29 flexible budgets with multiple, 357–358 job-order costing, 75–76 Cost objects, 24–25 defined, 24 direct cost, 24 indirect cost, 25 Cost of capital, 520, 522–523 Cost of goods manufactured cost flows, 83–84 defined, 78 schedule of, 87–88 Cost of goods sold under absorption costing, 250 cost flows, 84–86 schedule of, 87–88 Cost per equivalent unit, 171–172 Cost reconciliation report, 173 Cost structure, 29, 212–215 operating leverage and, 213–214, 215 and profit stability, 212–213 Coster, Helen, 514n 643 Costume Specialists, 295 Cost-volume-profit (CVP) graph, 197–199 Cost-volume-profit (CVP) relationships, 190–222 Acoustic Concepts example, 192–211 applications, 201–206 assumptions, 192 break-even analysis, 194–195, 206–208 contribution margin, 193–195, 215 contribution margin ratio (CM ratio), 199–202 cost structure and, 212–215 operating leverage, 213–214, 215 profit stability, 212–213 key factors, 192 margin of safety, 210–211 relationships in equation form, 196–197 relationships in graphic form, 197–199 sales commission structure, 215 sales mix, 216–218 target profit analysis, 209–210 variable costing and, 203–204, 205, 254–255 Covel, Simona, 459n, 610n Craft, Matthew, 191n Creditors, as stakeholders, 602 Current ratio, 608, 621 Customer value propositions, 11 CVP See Cost-volume-profit (CVP) relationships D Darley, Adrian, 601 Dassault Aviation, 356 Day-by-the-hour, 431 Debt management ratios, 613–614 debt-to-equity ratio, 614, 621 equity multiplier, 614, 621 times interest earned ratio, 613, 621 Debt-to-equity ratio, 614, 621 Decentralized organization, 418–419 advantages and disadvantages, 418–419 defined, 418 Decision making, 456–486 adding and dropping product lines, 465–468 capital budgeting analysis in See Capital budgeting cost concepts, 24, 43–44, 458–464 differential costs and revenues, 43–44, 458, 459, 462–464 opportunity cost, 44, 459, 471–472 relevant costs and benefits, 458–459, 460–462, 464 sunk cost, 44, 458–459 total versus differential approaches, 462–464 defined, 3, 4–5 examples of decisions, joint product costs and contribution approach, 479–483 make or buy decision, 469–471 managerial accounting and business majors, postaudit of investment projects, 530 segmented income statements in, 261–262 special orders, 472–473 utilization of constrained resource, 474–479 variable costing in support of, 255–256 Degree of operating leverage, 213–214, 215 Delivery cycle time, 429 Deloitte, 13 Delta Airlines, 558 DeMartini, Robert, 294 Denominator activity, 398 Denrell, Jerker, 21n Departmental overhead rates, 123 Dependent variable defined, 37 in scattergraph plot analysis, 36–37 Desroches, Denis, 135n Deutsche Telekom, 601 Differential cost in decision making, 459, 462–464 www.downloadslide.net 644 Index Differential cost—Cont defined, 43–44, 458 Differential revenue in decision making, 459, 462–464 defined, 43–44, 458 Direct cost, 24 Direct costing See Variable costing Direct exchange transactions, 559n Direct labor, 29n in activity-based costing (ABC), 130 defined, 26 in job-order costing, 72 in process costing, 165 setting direct labor standards, 360–361 Direct labor budget, 299, 308–309 Direct labor variances, 367–370 journal entries to record variances, 410 labor efficiency variance, 363, 368–370, 411 labor rate variance, 363, 368, 369–370, 411 Direct materials, 25–26 in job-order costing, 70, 79 in process costing, 163–165 setting direct materials standards, 359–360 Direct materials budget, 299, 307–308 Direct materials variances, 364–367 journal entries to record, 410 materials price variance, 363, 365, 411 materials quantity variance, 363, 366, 373–374, 411 quantity of materials purchased/used, 373–374 Direct method, of preparing statement of cash flows, 560, 596–598 Discontinuing operations See Add/drop decision Discount rate, 518, 549–550 Discounting, 549–550 Discretionary fixed costs, 31 Disney World, 256 Dividend payout ratio, 619, 621 Dividend yield ratio, 619–620, 621 Dodes, Rachel, 360n Doquilo, Jesse James, 167n Dumaine, Brian, 421n Dun and Bradstreet, 424 Duncan, David, 293n DuPont, 25, 422, 617 DuPont analysis, 422, 617 E Earnings per share, 618, 621 Earnings quality, 576 Economic Value Added (EVA), 424–425 EDGAR, Securities and Exchange Commission, 620, 622 Egger, Stefan, 30n E.I du Pont de Nemours and Company, 25, 422, 617 Einhorn, Bruce, 215n Elevating (relaxing) the constraint, 477–478 Eli Lilly and Company, 4, 13, 424 Emirates airline, 479 Ending finished goods inventory budget, 310–311 Engardio, Pete, 253n Engineering approach to cost analysis, 35–36 Enos, Michael, 94 Enterprise risk management perspective, 12–13 Equity multiplier, 614, 621 Equivalent units, 168 Equivalent units of production, 166–173 defined, 168 FIFO method, 168 visual perspective, 170 weighted-average method, 168–172 Estee Lauder, 523 Esterl, Mike, 531n Ethan Allen, 26 Ethics perspective, 9–11 Extrinsic incentives, 16–17 ExxonMobil, 162 F Facebook, 521 Facility-level activities, 126, 128 Fast Wrap, 94 Federal Mogul, 424 FedEx, FIFO method, 168 Financial accounting defined, managerial accounting compared with, 2–3 overview, Financial Accounting Standards Board (FASB), companywide and segmented reporting, 265–266 Financial leverage, 613 Financial statement analysis, 600–626 horizontal/trend analysis, 602, 603–605 limitations, 602 ratio analysis See Ratio analysis stakeholders, 602 vertical/common-size analysis, 602, 605–607 Financial statements balance sheets See Balance sheets common-size/vertical analysis, 602, 605–607 cost classifications for preparing, 24, 27–28 contribution format income statement, 41, 42–43, 247–248, 260 conversion cost, 28 period costs, 27, 28 prime cost, 28 product costs, 27, 28 traditional format income statement, 41–42 income statements See Income statements statement of cash flows See Statement of cash flows trend/horizontal analysis, 602, 603–605 Financing activities Apparel, Inc example, 571–572 defined, 560 key concepts, 567–568 Finished goods, defined, 78 Firestone, 358 First time through percentage, 431 5S audit, 431 Fixed costs, 24, 30–32 See also Mixed costs in budgeting process, 310 in cost-volume-profit (CVP) relationships, 202–203, 204, 205 pitfalls of allocation, 402–403, 467–468, 479–480, 481 and relevant range, 32, 33 Fletcher, June, 525n Flexible budgets, 348–379 actual activity as basis, 354 characteristics, 351 defined, 351 with multiple cost drivers, 357–358 revenue variances, 355 Rick’s Hairstyling example, 354–358 spending variances, 356, 362, 364, 467 standard costs in See Standard costing systems static planning budgets compared with, 351–354 variance analysis cycle, 350–351 Ford, 25, 512 Four Seasons Dallas, 574 Four Seasons Maui, 574 Four Seasons San Francisco, 574 France Telecom, 601 Free cash flow, 576 FreeEdger, 622 Friedman, Milton, 21 Frito-Lay, 511 Future value, 549 G Gallo, Angela, 437n Gap, 369 Garrison, Ray, 137n Genentech, 13 General Electric, 435 General Mills, 121, 162 General Motors, 4, 243, 256, 419 Generally accepted accounting principles (GAAP) companywide and segmented reporting, 265–266 preparing statement of cash flows, 559–568, 598 Georgia-Pacific, 170, 424 Goodrich, Google, 11, 521 Gore (W L.), 11 Gout, Bill, 167n Graham, Jefferson, 40n Great Embroidery LLC, 12 Green, Laurie, 430 Greenleaf Book Group, 206 Greenpeace International, 15 Greyhound, 472 Gross cash flows from operating activities, 560, 564– 567, 596–598 Gross margin percentage, 615–616, 621 Groupthink bias, 17 Grunberg, Sven, 521n Guarino, Jennifer, 615 Gulfstream Aerospace, 356 H Haddad, Joe, 67n Hallmark, 68 Han, Seungheon, 134n Hanesbrands, 360 Hardy, John W., 498 Harvard Medical School Hospital, 35 Hatch, Toby, 135n Hershey Foods, 424 Hewlett-Packard, 4, 25 High-low method of cost analysis, 37–39 Holmes, Elizabeth, 360n, 611n Home Depot, 41 Honda, 435 Hoover’s Online, 622 Horizontal analysis, 602, 603–605 Hudson, Kris, 574n Hulme (J W.) Company, 615 Human factors, in budgeting process, 296–297 Husky Injection Molding, 424–425 Hyatt Hotel, 418 Hypertherm Inc., 309 I Ignis Asset Management, 601 Incentives balanced scorecard and, 435, 437 bonus plans, 297 extrinsic, 16–17 residual income, 425–427 sales commissions, 215 Income statements See also Financial statement analysis absorption costing, 249–250, 266 adjustments in indirect method of preparing statement of cash flows, 563–564, 569, 571 basic equations, 558n budgeted, 317–318 common-size, 607 companywide reporting, 265–266 comparative, 604 contribution format See Contribution format income statement external reporting perspective, 265–266 segmented reporting, 256–265, 266 in break-even analysis, 262–263 common mistakes, 264–265 contribution approach, 256–261 in decision making, 261–262 levels of, 259–261 ProphetMax, Inc example, 258–263 traditional format, 41–42 www.downloadslide.net Index Income taxes, net present value method and, 527–528 Incremental analysis, 203, 472–473 Incremental (differential) cost, 43–44 Independent variable defined, 37 in scattergraph plot analysis, 36–37 Indirect cost, 25 in job-order costing, 72 Indirect labor, defined, 26 Indirect materials, 26, 79 Indirect method of preparing statement of cash flows, 560–564, 568–574, 596–598 three-step process for adjustments, 561–564 Industrial Motion Inc., 459 Industry Norms & Key Business Ratios, 622 Injury rate, 431 Inspection time, 429 Institute of Management Accountants (IMA), 6–8 networking opportunities, pay levels in management accounting, Statement of Ethical Professional Practice, 9–11 Intermediate products, 479 Internal rate of return method, 527 International Financial Reporting Standards (IFRS) companywide and segmented reporting, 265–266 preparing statement of cash flows, 559–568, 598 Intrinsic motivation, 16 Intuit, 435 Inventoriable costs, 27 Inventory in job-order costing, 77–78 types for manufacturing operations, 77–78 Inventory turnover, 610–611, 621 Investing activities Apparel, Inc example, 571 defined, 560 key concepts, 567–568 Investment centers See also Capital budgeting defined, 419 residual income, 424–428 return on investment (ROI), 420–424, 427 J J C Penney, 360, 425 J W Hulme Company, 615 Jaguar, 435–436 Jargon, Julie, 615n Job cost sheet, 70–71 Job-order costing, 66–98 cost drivers, 75–76 cost of goods manufactured, 78, 83–84, 87–88 cost of goods sold, 84–86, 87–88 defined, 68 flow of costs, 77–86, 82 general model of cost flows, 92, 93 inventory types, 77–78 job cost sheet, 70–71 labor cost, 70–72, 80 manufacturing overhead, 72–76, 80–83, 89–93 applying manufacturing overhead, 73, 81–83, 89–92 choice of allocation base, 75–76 clearing account, 82 computing predetermined overhead rates, 72–73 multiple predetermined overhead rates, 92–93 need for predetermined rate, 74–75 overapplied/underapplied computation, 89–91 overapplied/underapplied disposition, 91–92 summary of concepts, 91 materials cost, 70–71 direct materials cost, 70, 78–79 indirect materials, 79 purchase and issue of materials, 78–79 nonmanufacturing costs, 83 overview, 68 process costing compared with, 162–166 in service companies, 93–94 summary of cost flows, 78, 86, 93 unit cost computation, 76 Yost Precision Machining example, 69–77 Johnson & Johnson, 13 Joint costs, 479–483 Joint products, 479–483 defined, 479 joint cost, 479–480, 481 pitfalls of allocation, 479–480, 481 sell or process further decisions, 480–483 split-off point, 479, 480–483 Jones Apparel Group, 360 Journal entries job-order costing, 85 process costing, 165–166 to record variances in standard costing systems, 410–411 JPMorgan Chase, 601 Just-in-time production (JIT), 15 K Kahneman, Daniel, 20n Kane, Yukari Iwatani, 559n Kang, Stephanie, 294n Kansas City Power & Light, 425 Kaplan, Robert, 437 KB Home, 26 Kellogg’s, 162 Kennedy, Frances, 431n KFC, 523 Kharif, Olga, 216n Kim, Yong-Woo, 134n Kimes, Mina, 121n Kohn, Alfie, 21 Kowitt, Beth, 170n Kozlowski, Eric, 459 KPMG, 13 The Kroger Company, 4, 256, 557, 558 L L L Bean, 512 Labor efficiency variance, 363, 368–370, 411 Labor rate variance, 363, 368, 369–370, 411 Lakewood, California, 320 Lauricella, Tom, 601n Lawson, Raef, 135n Leadership, 16–17 cognitive bias, 16, 17 extrinsic incentives, 16–17 intrinsic motivation, 16 Lean Production defined, 15 impact on inventory, 253 inventory control in, 369 at Louis Vuitton, 16 performance measures, 431 Leap, Terry, 14n Least-cost decisions, 524–525 Least-squares regression method of cost analysis, 39–40 Lee, Louise, 257n Leverage financial, 613 operating, 213–214, 215 Levi Strauss, 68 Lighthizer, James, 293n Limited Brands, 369 Linear cost behavior, 32–33, 37 Liquidity ratios, 607–609 acid-test (quick) ratio, 608–609, 621 current ratio, 608, 621 working capital, 607–608, 621 Lobb, Annelena, 601n Los Angeles Angels, 191 645 Loughry, Misty L., 14n Louis Vuitton, 16 Lovallo, Dan, 20n Lowe’s, 41, 567 LSG SkyChefs, 68 Lunney, Elizabeth, 314n Lunsford, J Lynn, 479n M Macy’s Department Stores, 564 Maidenform Brands, 360 Majestic Ocean Kayaking, 33 Make or buy decision, 469–471 defined, 469 example, 469–470 outsourcing tasks versus jobs, 470 quantifying, 471 Makers’ Mark, 421 Maltby, Emily, 351n Management by exception, 350 Managerial accounting career issues, 5–8 accounting majors, 6–8 business majors, 5–6 networking opportunities, pay levels, professional certification, corporate social responsibility perspective, 13–14 defined, enterprise risk management perspective, 12–13 ethics perspective, 9–11 financial accounting compared with, 2–3 leadership perspective, 16–17 overview, pillars of, 3–5, process management perspective, 14–15 strategic management perspective, 11–12 Manufacturing companies activity-based costing (ABC) See Activity-based costing (ABC) cost classifications, 24, 25–26 manufacturing costs, 25–26 nonmanufacturing costs, 26, 83 job-order costing in See Job-order costing master budgets, 297–320 budgeted balance sheet, 318–319 budgeted income statement, 317–318 cash budget, 297, 299, 313–317 direct labor budget, 299, 308–309 direct materials budget, 299, 307–308 ending finished goods inventory budget, 310–311 manufacturing overhead budget, 299, 309–310 production budget, 299, 305–306 selling and administrative expense budget, 299, 311–312 Manufacturing costs, 25–26 absorption costing See Absorption costing job-order costing See Job-order costing standard costing systems See Standard costing systems variable costing See Variable costing Manufacturing cycle efficiency (MCE), 430–431 Manufacturing overhead in activity-based costing (ABC), 123–125, 133 See also Activity-based costing (ABC) defined, 26 departmental overhead rates, 123 in job-order costing, 72–77, 80–83, 89–93 See also Job-order costing applying overhead, 73, 81–83, 89–92 flow of costs, 72–77, 82 predetermined overhead rate, 72–75, 92–93 summary of concepts, 91 overapplied/underapplied job-order costing, 89–92 standard costing, 403 www.downloadslide.net 646 Index Manufacturing overhead—Cont plantwide overhead rate, 92–93, 122–123 in process costing, 163–166 standard costing systems predetermined overhead rates, 398–403 setting standards, 361 variances, 363, 370–372 variable overhead variances, 370–372 efficiency variance, 363, 371–372 rate variance, 363, 371–372 Manufacturing overhead budget, 299, 309–310 Margin of safety, 210–211 Margin, return on investment (ROI), 421–422 Marginal costing See Variable costing Market performance ratios, 618–620 book value per share, 620, 621 dividend payout ratio, 619, 621 dividend yield ratio, 619–620, 621 earnings per share, 618, 621 price-earnings ratio, 618–619, 621 Marston, Gregg, 69n Maskell, Brian, 431n Mason, Richard, 576n Master budgets, 297–320 beginning balance sheet, 301–302 big picture, 298–299 budget assumptions, 299, 302–303 budgeted balance sheet, 318–320 budgeted income statement, 317–318 cash budget, 297, 299, 313–317 deficiencies, 352–354 defined, 297 direct labor budget, 299, 308–309 direct materials budget, 299, 307–308 ending finished goods inventory budget, 310–311 Hampton Freeze example, 299–319 interrelationships, 298 manufacturing overhead budget, 299, 309–310 merchandise purchases budget, 306 as planning budgets, 351–354 preparation overview, 299–301 production budget, 299, 305–306 sales budget, 297, 299, 303–304 selling and administrative expense budget, 299, 311–312 Materials price variance, 363, 365, 411 Materials quantity variance, 363, 366, 373–374, 411 Materials requisition form, 70 Matlack, Carol, 356n Mattel, Maywood, California, 320 McCartney, Scott, 132n McDonald’s Corporation, 358, 604–605, 616 McGregor, Jean, 435n, 470n Measurement skills, 8–9 Megabus, 472 Meijer, 369 Merchandise purchases budget, 306 Merck & Co., 512 Mergent Bank and Finance Manual, 622 Mergent Industrial Manual, 622 Miami University, 67 Michaels, Daniel, 479n Microsoft, 13, 216, 423 Miller, John W., 164n Mills, John, 576n Mixed costs, 24, 33–40 analysis of, 35–40 account analysis, 35 engineering approach, 35–36 high-low method, 37–39 least-squares regression method, 39–40 scattergraph plots in, 36–37 defined, 33 fixed and variable elements, 33–34, 35 Morben-Eeftink, Tracy, 33, 33n Moreno, Arturo, 191 Move time, 429 Multiple predetermined overhead rate, 92–93 Multiproduct break-even analysis, 216–218 Murphy, Maxwell, 567n N Nalley’s, 163 National Basketball Association (NBA), 351 National Health Service (NHS), 474 Needleman, Sarah E., 12n, 295n, 351n Nestlé, 15 Net cash provided by operating activities, 560–564, 596–598 Net income direct method of adjusting to net cash, 560, 597–598 indirect method of adjusting to net cash, 560–564, 570–571, 596–598 Net operating income under absorption costing versus variable costing, 251–253 comparative income effects, 253 reasons for differences, 252, 255 in capital budgeting decisions, 512–514 cash flows versus, 512–514 defined, 420 in simple rate of return method, 513, 528–530 Net present value method, 518–526 cost of capital, 520, 522–523 discount rate, 518 expanding, 523–526 extended example, 522–523 income taxes and, 527–528 least-cost decisions, 524–525 net present value, defined, 518 recovery of original investment, 520–521 total-cost approach with, 523–526 Net profit margin percentage, 616, 621 New Balance, 294 Nike, 294, 369 Nonmanufacturing costs, 26, 83 Nontraceable costs, assigning among segments, 265 Nordstrom, 11, 123 Noreen, Eric, 136n, 137n Normal cost system, 74 Norton, David, 437 Nucor Corporation, 349 O Obama, Barack, 356 O’Connell, Vanessa, 369n Office Depot, 369 O’Hanlon, John, 424n Old Rip Van Winkle Distillery, 421 Olin, 425 On Point Promos, 67 On-time delivery percentage, 431 Operating activities Apparel, Inc example, 570–571 defined, 560 direct method, 560, 596–598 gross cash provided by, 560, 564–567, 596–598 indirect method, 560–564, 570–571, 596–598 key concepts, 567–568 net cash provided by, 560–564, 596–598 Operating assets, 420 Operating cycle, 611, 621 Operating leverage, 213–214, 215 Operating performance measures, 428–431 delivery cycle time, 429 Lean Production, 431 manufacturing cycle efficiency (MCE), 430–431 throughput (manufacturing cycle) time, 429–430 Operational excellence, 11, 432 Operations Workforce Optimization (OWO), 369 Opportunity cost in decision making, 44, 459, 471–472 defined, 44, 459 Optimism bias, 17 Organization-sustaining activities, 126 Out-of-pocket costs, 523 Outsourcing, 470 Overapplied overhead computing, 89–90 defined, 89 disposition, 91–92 Overhead application in job-order costing, 73, 74 pitfalls, 402–403, 467–468, 479–480, 481 in standard costing, 399, 403 P Paine, Lynn Sharpe, 20 Papa John’s, 417 Participative budgets, 296 Passariello, Christina, 16n Pauli, George, 12 Payback method, 514–517 defined, 514 evaluation, 514–517 extended example, 515–516 payback period, 514 uneven cash flows, 516–517 Peasnell, Ken, 424n Peers, Martin, 577n Penney (J C.), 360, 425 PepsiCo, 256 Performance measurement, 416–440 balanced scorecard, 432–437 in decentralized organizations, 418–419 operating performance measures, 428–431 residual income, 424–428 responsibility accounting, 295, 419 return on investment (ROI), 420–424 Performance reports, Period costs, 27, 28 Perlroth, Nicole, 210n Perpetual budgets, 295 PetroHawk Energy, 523 Pfeifer, Brian, 459 Pfizer, 4, 470 P&G (Procter & Gamble), 3–4, 13, 161, 170 Pizza Hut, 523 Planning See also Master budgets defined, 3, 294 managerial accounting and business majors, Planning budgets, 351–354 See also Master budgets deficiencies of, 352–354 defined, 351 flexible budgets compared with, 351–354 Rick’s Hairstyling example, 352–354 Plantwide overhead rate, 92–93, 122–123 Pleven, Liam, 71n PNC Bank, 13 Posey, Imogene, 158n Postaudit, 530 Predetermined overhead rates in activity-based costing (ABC), 130 defined, 73, 74 in job-order costing computing, 72–73 multiple, 92–93 overhead application, 73, 74 need for, 74–75 in standard costing systems, 398–403 budget variance, 399–400 cautions in fixed overhead analysis, 402–403 determination, 398–399 graphic analysis of fixed overhead variances, 402 overhead application, 399 reconciling overhead variances, 403 www.downloadslide.net Index underapplied/overapplied overhead, 403 volume variance, 400–401 Preference decisions, 512, 526–527 Present value, 548–551 of annuity, 550–551, 555 compound interest, 548 computation, 549–550 defined, 548 discounting, 549–550 of series of cash flows, 550–551 tables, 554–555 Press Ganey Associates, 430 Press, Jim, 11 Price decision, variable costing in support of, 256 Price standards defined, 359 price variances, 362–364 standard price per unit, 360 Price variances, 362–364, 365 Price-earnings ratio, 618–619, 621 Prime cost, 28 Process costing, 160–177 cost flows, 163–166 defined, 162 Double Diamond Skis example, 166–173 equivalent units of production method, 166–173 FIFO method, 168 weighted-average method, 168–173 job-order costing compared with, 162–166 journal entries, 165–166 overview of production process, 167 processing departments, 163 T-accounts, 164–165 Process management perspective, 14–15 Process time, 429 Processing departments, 163 Procter & Gamble (P&G), 3–4, 13, 161, 170 Product costs, 27, 28 in activity-based costing (ABC), 131–132, 133 Product leadership, 11–12 Product lines, add/drop decision making, 465–468 Production budget, 299, 305–306 Production orders, 70 Product-level activities, 126, 128 Product-sustaining activities, 126 Profit cost structure and stability of, 212–213 in cost-volume-profit (CVP) relationships See Costvolume-profit (CVP) relationships project profitability index, 526–527 target profit analysis, 209–210 Profit centers, 419 Profitability ratios, 615–617 gross margin percentage, 615–616, 621 net profit margin percentage, 616, 621 return on equity, 617, 621 return on total assets, 616–617, 621 Project profitability index, 526–527 Property, plant, and equipment, adjustments in indirect method of preparing statement of cash flows, 565–566, 571 Providence Regional Medical Center (PRMC), 23 Pulte Homes, 71 Purdey, 77 Q Quaker Oats, 425 Quality Service Associates Inc., 610 Quantity standards defined, 359 quantity variances, 362–364 standard quantity allowed, 363–364 standard quantity per unit, 359 Quantity variances, 362–364 materials quantity variance, 363, 366, 373–374, 411 Quick (acid-test) ratio, 608–609, 621 R Ramsey, Mike, 511n Ratanamanee, Wanida, 138n Ratio analysis, 607–622 asset management ratios, 609–612 accounts receivable turnover, 609–610, 621 inventory turnover, 610–611, 621 operating cycle, 611, 621 total asset turnover, 612, 621 debt management ratios, 613–614, 621 debt-to-equity ratio, 614, 621 equity multiplier, 614, 621 times interest earned ratio, 613, 621 liquidity ratios, 607–609 acid-test (quick) ratio, 608–609, 621 current ratio, 608, 621 working capital, 607–608, 621 market performance ratios, 618–620, 621 book value per share, 620, 621 dividend payout ratio, 619, 621 dividend yield ratio, 619–620, 621 earnings per share, 618, 621 price-earnings ratio, 618–619, 621 profitability ratios, 615–617, 621 gross margin percentage, 615–616, 621 net profit margin percentage, 616, 621 return on equity, 617, 621 return on total assets, 616–617, 621 sources of ratio data, 622 as starting point in financial statement analysis, 602 summary of ratios, 620–621 Rationing decisions, 512, 526–527 Raw materials cost management, 360 defined, 25, 77 in job-order costing, 77, 78–79 in process costing, 163–165 Reebok, 24 Reichheld, Fred, 435 Relaxing (elevating) the constraint, 477–478 Relevant benefits defined, 458 identifying, 458–459, 460–462 Relevant costs defined, 458 identifying, 458–459, 460–462 reason for isolating, 464 Relevant range, 32–33 Residual income, 424–428 defined, 424 divisional comparison, 427 Economic Value Added (EVA), 424–425 motivation and, 425–427 Responsibility accounting, 295, 419 Responsibility centers, 419 Retained earnings, adjustments in indirect method of preparing statement of cash flows, 566–567 Return on equity, 617, 621 Return on investment (ROI), 420–424 basic formula, 420 defined, 420 elements overview, 423 evaluation, 423–424, 427 net operating income, 420 operating assets, 420 in simple rate of return method, 513, 528–530 understanding, 421–423 Return on total assets, 616–617, 621 Revenue variances, 355 Reynolds Consumer Products, 162 Risk management controls to reduce business risk, 13 enterprise risk management perspective, 12–13 identifying business risks, 13 Rite Aid, 523 Ritz-Carlton, 11 647 Rolander, Niclas, 521n Rolex, 11–12 Rolls-Royce, Roth, Harold P., 158n Royal Caribbean Cruises, 531 S Saab, Safeway, 256 Sales budget, 297, 299, 303–304 Sales commissions, 215 Sales mix, 216–218 break-even analysis, 216–218 defined, 216 Sales volume break-even in dollar sales, 207–208 in cost-volume-profit (CVP) relationships, 202–205 target profit analysis in terms of dollar sales, 209 Sammons, Mary, 523 San Jose, California, 320 Sanchanta, Mariko, 11n Saritprit, Pieanpon, 138n SAS, 462 Scattergraph plots, diagnosing cost behavior with, 36–37 Schedule of cost of goods manufactured, 87–88 Schedule of cost of goods sold, 87–88 Schiffel, Lee, 8n Scott Paper, 162 Screening decisions, 512, 520 Seagate, 121 Sears, 4, 358, 564 Segarra, Marielle, 243n Segment(s) add/drop decision making, 465–468 defined, 3, 244 dividing common costs among, 265 divisional comparison and residual income, 427 example of segment reporting, 258 levels of business segments, 259–261 Segment margin, 257 Segmented income statements, 256–265, 266 in break-even analysis, 262–263 common mistakes assigning traceable costs among segments, 264 dividing common costs among segments, 265 omission of costs, 264 contribution approach, 256–261 in decision making, 261–262 levels of, 259–261 ProphetMax, Inc example, 258–263 Self-enhancement bias, 17 Self-imposed budgets, 296 Sell GmbH, 479 Sell or process further decisions, 480–483 Selling and administrative expense budget, 299, 311–312 Selling and administrative expenses, 26 in variable costing versus absorption costing, 245–246, 248 Selling costs, 26 Selling price, in cost-volume-profit (CVP) relationships, 204, 205–206 Service companies activity-based costing (ABC), 133–134, 137 job-order costing, 93–94 Shin, Sungwon, 134n Shirouzu, Norihiko, 11n Silicon Valley Bank, 425 Simple rate of return method, 513, 528–530 Six Flags, 419 Smith, Melanie R., 437n Smoke Jazz and Supper Club, 12 Snap Fitness, 210 Social media, 15, 521 Soderstrom, Naomi, 136n Sony, 26 Southwest Airlines, 4, 11, 13, 35, 432 www.downloadslide.net 648 Index Special orders, 472–473 defined, 472 incremental analysis, 472–473 quantifying impact of, 473 Specpan, 525 Spending variances, 356, 362, 364, 467 Split-off point, 479, 480–483 Spors, Kelly K., 610n Sporthotel Theresa, 30 Sprint, 425 Standard & Poor’s Industry Survey, 622 Standard cost card, 361 Standard cost per unit, 361 Standard costing systems, 358–374 Colonial Pewter Company example, 359–374 cost flows, 410–411 direct labor setting standards, 360–361 variances, 367–370, 410 direct materials setting standards, 359–360 variances, 364–367, 373–374, 410, 411 in flexible budgets, 361–362 general model for variance analysis, 362–364 journal entries to record variances, 410–411 manufacturing overhead predetermined overhead rates, 398–403 setting standards, 361 variances, 363, 370–372 nature of standards, 358–359 price standards, 359, 360 quantity standards, 359 standard cost card, 361 Standard hours allowed, 363–364 Standard hours per unit, 360, 361 Standard price per unit, 360 Standard quantity allowed, 363–364 Standard quantity per unit, 359 Standard rate per hour, 360 Standard rate per unit, 361 Staples, 511 Starbucks, 13 Statement of cash flows, 556–582 See also Financial statement analysis Apparel, Inc example, 568–574 basic equations, 558, 558n, 565–566 big picture, 573–574 defined, 558 financing activities, 566–567 Apparel, Inc example, 571–572 defined, 560 key concepts, 568 gross method of reporting, 564–567 interpreting, 575–577 earnings quality, 576 free cash flows, 576 specific circumstances of company, 575 investing activities, 564–566 Apparel, Inc example, 571 defined, 560 key concepts, 568 key concepts, 567–568 net cash provided by operating activities, 560–564, 596–598 operating activities, 560–564 Apparel, Inc example, 570–571 defined, 560 direct method, 560, 596–598 indirect method, 560–564, 570–571, 597–598 key concepts, 568 organizing, 559–560 T-accounts, 561–562, 565–566, 573, 574 Steel, Emily, 15n Steiner, Christopher, 12n, 206n Step-variable cost, 33 Stern, Stewart & Co., 424n Stockholders, as stakeholders, 602 Strategic management perspective, 11–12 Strategy balanced scorecard and, 432, 433, 435–437 defined, 11 role of budgets in, 294 Stratton, William O., 135n Subway, 25, 358 Sunk costs in decision making, 44, 458–459 defined, 44, 458 Suthummanon, Sakesun, 138n T T-accounts job-order costing, 86, 93 process costing, 164–165 statement of cash flows, 561–562, 565–566, 573, 574 Taco Bell, 45, 523 Takahashi, Yoshio, 11n Target profit analysis, 209–210 equation method, 208 formula method, 209 in terms of dollar sales, 209 Texas Instruments, 25 3M Company, 13, 266 Throughput (manufacturing cycle) time, 429–430 Time tickets, 72 Time value of money compound interest, 548 defined, 513 future value, 549 present value, 548–551 Times interest earned ratio, 613, 621 Tkaczyk, Christopher, 417n, 462n Total asset turnover, 612, 621 Total-cost approach differential approach versus, 462–464 net present value method versus, 523–526 Towers Perrin, 437n Towers Watson, 437 Toyota Motor Corporation, 11, 26, 68 Toys “R” Us, 369, 425 Traceable fixed costs assigning among segments, 264 as common costs, 258 defined, 256 identifying, 257 Traditional format income statement, 41–42 Treacy, Michael, 11n Trend analysis, 602, 603–605 Trend percentages, 604–605 Trippetti, Debora, 69 Tryphonides, Andrea, 601n Tuna, Cari, 309n Tupperware, 425 Turnover, return on investment (ROI), 421–422 U Under Armour, 29 Underapplied overhead computing, 89–90 defined, 89 disposition, 91–92 Unit product cost, 76 United Airlines, 258, 474 United Food and Commercial Workers Union, 369 United States Postal Service, 425 U.S Marine Corps, 134 Unit-level activities, 125, 126, 128 University Tees, 67 V Vail Resorts, 474 Value chains, 14–15 Van Winkle, Julian, III, 421 VanderMey, Anne, 25n, 472n Vanilla Bicycles, 12 Variable cost(s), 24, 29–30, 33 See also Mixed costs Variable costing absorption costing compared with, 245–253, 266 example, 245 income statement preparation, 247–250 net operating income reconciliation, 251–253 selling and administrative expenses, 245–246, 248 Weber Light Aircraft example, 246–255 advantages of using, 254–256 contribution format income statement, 247–248 in cost-volume-profit (CVP) relationships, 203–204, 205, 254–255 defined, 244 selling and administrative expenses in, 245–246 Variable expense ratio, 201–202 Variable manufacturing overhead variances, 370–372 efficiency variance, 363, 371–372 rate variance, 363, 371–372 Variable overhead efficiency variance, 363, 371–372 Variable overhead rate variance, 363, 371–372 Variance analysis budget variance, 399–400 direct labor variances, 367–370, 411 direct materials variances, 364–367, 411 journal entries to record variances, 410–411 price variances, 362–364 quantity variances, 362–364 revenue variances, 355 spending variances, 356, 362–364 variable manufacturing overhead variances, 370–372 variance analysis cycle, 350–351 volume variance, 400–401 VBT Bicycling Vacations, 69 Vegas Valley Angels, 457 Ventoro Institute LLC, 457 Vertical analysis, 602, 605–607 Vertical integration, 469 Vines of Mendoza, 514 Virtuoso, 11 Vivendi, 601 Volume variance, 400–401 Volvo, 435 W W L Gore, 11 Walmart, 11, 27 The Walt Disney Company, 558 The Walt Disney Corporation, 256 Washington Mutual, 601 Washington Trails Association (WTA), 313–314 Watlow Electric Manufacturing Company, 431 Weber, Joseph, 367n Weighted-average method, 168–173 applying costs, 172 cost per equivalent unit, 171–172 cost reconciliation report, 173 defined, 168 Wendy’s, 616 Westbrook Partners LLC, 574 Western River Expeditions, 127 White, Sacha, 12 Wiersema, Fred, 11n Wild Turkey, 421 Wilder, Coleen, 8n Wolf, Carol, 27n Work in process defined, 77–78 in job-order costing, 77–78, 79 Working capital, 513, 607–608, 621 Y Yum! Brands, Inc., 512, 523 Z Zimbalist, Andrew, 351 Ziobro, Paul, 616n Zipcar, 40 ... —Matthew Muller, Adirondack Community College vi Introduction to Managerial Accounting, 7th edition, by BREWER/ GARRISON /NOREEN empowers your students by offering: CONCISE COVERAGE Your students want... with the Brewer book help me to be a better teacher!” —Sheri Henson, Western Kentucky xii New to the 7th edition Faculty feedback helps us continue to improve Introduction to Managerial Accounting. .. used to make business decisions, especially if they plan to be future managers That’s why Brewer, Garrison, and Noreen make decision making a pivotal component of Introduction to Managerial Accounting