giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso

giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso giáo trình Managerial accounting tools for business decision makring 7th by weygandt kimmel kieso

W e y ga ndt   |   K im m el   |   Ki eso Managerial Accounting Tools for Business Decision Making Seventh Edition INTE R NATIONAL ST U DENT V E R SION Using Check out with this book? Whether you want to check your understanding of the material you just read or need to prepare for a test, ORION will help you use your study time most effectively Helping you learn by learning about you.™ Step - Begin Making it easy to figure figure out out where whereto tostart! start! First, try a few questions to get an idea of where you stand WileyPLUS with ORION TRIAL VERSION Step - Practice Making it easy to learn new things! B i Begin ORION gives you feedback on your performance, and you pick where to practice or study Step - Maintain Making it easy to remember everything you learn! ORION provides a number of views into your overall proficiency so you can quickly review the things you might have forgotten before a quiz or exam / WileyPLUS with ORION Practice Maintain International Student Version MANAGERIAL ACCOUNTING TOOLS FOR BUSINESS DECISION MAKING SEVENTH EDITION Jerry J Weygandt PhD, CPA University of Wisconsin—Madison Madison, Wisconsin Paul D Kimmel PhD, CPA University of Wisconsin—Milwaukee Milwaukee, Wisconsin Donald E Kieso PhD, CPA Northern Illinois University DeKalb, Illinois DEDICATED TO the Wiley sales representatives who sell our books and service our adopters in a professional and ethical manner, and to Enid, Merlynn, and Donna Copyright © 2015, 2012 John Wiley & Sons Singapore Pte Ltd Cover image from © Lee Yiu Tung/Shutterstock Founded in 1807, John Wiley & Sons, Inc has been a valued source of knowledge and understanding for more than 200 years, helping people around the world meet their needs and fulfill their aspirations Our company is built on a foundation of principles that include responsibility to the communities we serve and where we live and work In 2008, we launched a Corporate Citizenship Initiative, a global effort to address the environmental, social, economic, and ethical challenges we face in our business Among the issues we are addressing are carbon impact, paper specifications and procurement, ethical conduct within our business and among our vendors, and community and charitable support For more information, please visit our website: www.wiley.com/go/citizenship All rights reserved This book is authorized for sale in Europe, Asia, Africa and the Middle East only and may not be exported outside of these territories Exportation from or importation of this book to another region without the Publisher’s authorization is illegal and is a violation of the Publisher’s rights The Publisher may take legal action to enforce its rights The Publisher may recover damages and costs, including but not limited to lost profits and attorney’s fees, in the event legal action is required No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, website www.copyright com Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, website http://www.wiley.com/go/permissions ISBN: 978-1-118-95773-8 Printed in Asia 10 Author Commitment Kimmel Jerry Weygandt Paul JERRY J WEYGANDT, PhD, CPA, is Arthur Andersen Alumni Emeritus Professor of Accounting at the University of Wisconsin— Madison He holds a Ph.D in accounting from the University of Illinois Articles by Professor Weygandt have appeared in the Accounting Review, Journal of Accounting Research, Accounting Horizons, Journal of Accountancy, and other academic and professional journals These articles have examined such financial reporting issues as accounting for price-level adjustments, pensions, convertible securities, stock option contracts, and interim reports Professor Weygandt is author of other accounting and financial reporting books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Wisconsin Society of Certified Public Accountants He has served on numerous committees of the American Accounting Association and as a member of the editorial board of the Accounting Review; he also has served as President and Secretary-Treasurer of the American Accounting Association In addition, he has been actively involved with the American Institute of Certified Public Accountants and has been a member of the Accounting Standards Executive Committee (AcSEC) of that organization He has served on the FASB task force that examined the reporting issues related to accounting for income taxes and served as a trustee of the Financial Accounting Foundation Professor Weygandt has received the Chancellor’s Award for Excellence in Teaching and the Beta Gamma Sigma Dean’s Teaching Award He is on the board of directors of M & I Bank of Southern Wisconsin He is the recipient of the Wisconsin Institute of CPA’s Outstanding Educator’s Award and the Lifetime Achievement Award In 2001 he received the American Accounting Association’s Outstanding Educator Award PAUL D KIMMEL, PhD, CPA, received his bachelor’s degree from the University of Minnesota and his doctorate in accounting from the University of Wisconsin He is an Associate Professor at the University of Wisconsin—Milwaukee, and has public accounting experience with Deloitte & Touche (Minneapolis) He was the recipient of the UWM School of Business Advisory Council Teaching Award, the Reggie Taite Excellence in Teaching Award, and a three-time winner of the Outstanding Teaching Assistant Award at the University of Wisconsin He is also a recipient of the Elijah Watts Sells Award for Honorary Distinction for his results on the CPA exam He is a member of the American Accounting Association and the Institute of Management Accountants and has published articles in Accounting Review, Accounting Horizons, Advances in Management Accounting, Managerial Finance, Issues in Accounting Education, Journal of Accounting Education, as well as other journals His research interests include accounting for financial instruments and innovation in accounting education He has published papers and given numerous talks on incorporating critical thinking into accounting education, and helped prepare a catalog of critical thinking resources for the Federated Schools of Accountancy Don Kieso DONALD E KIESO, PhD, CPA, received his bachelor’s degree from Aurora University and his doctorate in accounting from the University of Illinois He has served as chairman of the Department of Accountancy and is currently the KPMG Emeritus Professor of Accountancy at Northern Illinois University He has public accounting experience with Price Waterhouse & Co (San Francisco and Chicago) and Arthur Andersen & Co (Chicago) and research experience with the Research Division of the American Institute of Certified Public Accountants (New York) He has done post doctorate work as a Visiting Scholar at the University of California at Berkeley and is a recipient of NIU’s Teaching Excellence Award and four Golden Apple Teaching Awards Professor Kieso is the author of other accounting and business books and is a member of the American Accounting Association, the American Institute of Certified Public Accountants, and the Illinois CPA Society He has served as a member of the Board of Directors of the Illinois CPA Society, then AACSB’s Accounting Accreditation Committees, the State of Illinois Comptroller’s Commission, as SecretaryTreasurer of the Federation of Schools of Accountancy, and as Secretary-Treasurer of the American Accounting Association Professor Kieso is currently serving on the Board of Trustees and Executive Committee of Aurora University, as a member of the Board of Directors of Kishwaukee Community Hospital, and as Treasurer and Director of Valley West Community Hospital From 1989 to 1993 he served as a charter member of the national Accounting Education Change Commission He is the recipient of the Outstanding Accounting Educator Award from the Illinois CPA Society, the FSA’s Joseph A Silvoso Award of Merit, the NIU Foundation’s Humanitarian Award for Service to Higher Education, a Distinguished Service Award from the Illinois CPA Society, and in 2003 an honorary doctorate from Aurora University Personalized Practice Based on cognitive science, WileyPLUS with ORION is a personalized, adaptive learning experience that gives students the practice they need to build proficiency on topics while using their study time most effectively The adaptive engine is powered by hundreds of unique questions per chapter, giving students endless opportunities for practice throughout the course Review and Practice A new section in the text and in WileyPLUS offers students more opportunities for self-guided practice In the text, the new Review and Practice section includes: • • • • • In WileyPLUS, the new practice assignments include several Do ITs, Brief Exercises, Exercises, and Problems, giving students the opportunity to check their work or see the answer and solution after their final attempt Learning Objectives Review Glossary Review Practice Multiple-Choice Questions and Solutions Practice Exercises and Solutions Practice Problem and Solution What’s New? WileyPLUS with ORION WileyPLUS with Orion is an adaptive study and practice tool that helps students build proficiency in course topics Over 3,500 new questions are available for practice and review Updated Content and Design We scrutinized all chapter material to find new ways to engage students and help them learn accounting concepts Up-to-date coverage and new discussions of important managerial accounting topics include Chapter 1, sustainable business, and Chapter 14, sustainable income and statement of comprehensive income Homework problems were updated in all chapters A new learning objective structure helps students practice their understanding of concepts with DO IT! exercises: (all available on the Book Companion Site) before they move on to different topics in other learning objectives Coupled with a new interior design and revised infographics, the new outcomes-oriented approach motivates students and helps them make the best use of their time WileyPLUS Videos Over 150 videos are available in WileyPLUS More than 80 of the videos are new to the Seventh Edition The videos walk students through relevant homework problems and solutions, review important concepts, provide overviews of Excel skills, and explore topics in a real-world context Student Practice and Solutions New practice opportunities with solutions are integrated throughout the textbook and WileyPLUS course Each textbook chapter now provides students with a Review and Practice section that includes learning objective summaries and both practice exercises and problems with solutions Also, each learning objective module in the textbook is followed by a DO IT! exercise with an accompanying solution which are available on the Book Companion Site In WileyPLUS, two brief exercises, two DO IT! exercises, two exercises, and a new problem are available for practice with each chapter All of the questions are algorithmic, providing students with multiple opportunities for advanced practice Real World Context: Feature Stories and Comprehensive Problems New feature stories frame chapter topics in a real-world company example Also, the feature stories now closely correlate with the Using the Decision Tools problem at the end of each chapter and with the managerial accounting video series In WileyPLUS, real-world Insight boxes now have questions that can be assigned as homework Excel A continuing Excel tutorial is available on the Book Companion Site for students New Excel skill videos help students understand Excel features they can apply in their accounting studies New Excel “What If?” templates help students apply their understanding of Excel and consider the effects of changes in one value on a spreadsheet with other values on a spreadsheet More information about the Seventh Edition is available on the book’s website at www.wiley.com/college/weygandt v Table of Contents Managerial Accounting LO 1: Identify the features of managerial accounting and the functions of management Comparing Managerial and Financial Accounting Management Functions Organizational Structure LO 2: Describe the classes of manufacturing costs and the differences between product and period costs Manufacturing Costs Product Versus Period Costs Illustration of Cost Concepts LO 3: Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer Income Statement Cost of Goods Manufactured Cost of Goods Manufactured Schedule 10 Balance Sheet 10 LO 4: Discuss trends in managerial accounting 11 Service Industries 11 Focus on the Value Chain 12 Balanced Scorecard 13 Business Ethics 14 Corporate Social Responsibility 15 Job Order Costing 32 LO 1: Describe cost systems and the flow of costs in a job order system 33 Process Cost System 33 Job Order Cost System 33 Job Order Cost Flow 34 Accumulating Manufacturing Costs 35 LO 2: Use a job cost sheet to assign costs to work in process 36 Raw Materials Costs 37 Factory Labor Costs 39 LO 3: Demonstrate how to determine and use the predetermined overhead rate 40 LO 4: Prepare entries for manufacturing and service jobs completed and sold 43 Assigning Costs to Finished Goods 43 Assigning Costs to Cost of Goods Sold 44 Summary of Job Order Cost Flows 44 vi Job Order Costing for Service Companies 46 Advantages and Disadvantages of Job Order Costing 47 LO 5: Distinguish between under- and overapplied manufacturing overhead 47 Under- or Overapplied Manufacturing Overhead 48 Process Costing 66 LO 1: Discuss the uses of a process cost system and how it compares to a job order system 66 Uses of Process Cost Systems 66 Process Costing for Service Companies 67 Similarities and Differences Between Job Order Cost and Process Cost Systems 68 LO 2: Explain the flow of costs in a process cost system and the journal entries to assign manufacturing costs 69 Process Cost Flow 69 Assigning Manufacturing Costs—Journal Entries 70 LO 3: Compute equivalent units 71 Weighted-Average Method 72 Refinements on the Weighted-Average Method 72 LO 4: Complete the four steps to prepare a production cost report 73 Compute the Physical Unit Flow (Step 1) 74 Compute the Equivalent Units of Production (Step 2) 75 Compute Unit Production Costs (Step 3) 75 Prepare a Cost Reconciliation Schedule (Step 4) 76 Preparing the Production Cost Report 77 Costing Systems—Final Comments 77 LO *5: APPENDIX 3A: Compute equivalent units using the FIFO method 80 Equivalent Units Under FIFO 80 Comprehensive Example 81 FIFO and Weighted-Average 85 Activity-Based Costing 103 LO 1: Discuss the difference between traditional costing and activity-based costing 104 Traditional Costing Systems 104 Illustration of a Traditional Costing System 104 The Need for a New Approach 105 Activity-Based Costing 105 www.downloadslide.net I-2 Company Index PriceWaterhouseCoopers, 46 Procter & Gamble, 8, 209 Q Quad Graphics, 33 R Reebok, 142 S Safeway, 477 SAP, 13 Sara Lee, Schering-Plough, 14 Seattle Seahawks, 66 Sherwin Williams, 67 Siebel Systems, 327 Siemens AG, 338 Smart Balance, 206 Snap Fitness, 207–208 Southwest, 141 Starbucks, 15, 358, 374–375 Sunbeam, 212 T Target Corporation, 501–502 Tecumseh Products Company, 423 3M, 176 Tiffany & Co., 477 Time Warner, 247, 279 Toyota, 13, 15, 241 Trek, 215, 247 Tribeca Grand Hotel, 315, 335–336 U U-Haul, 144 Unilever, 209, 372 United Airlines, 141, 175, 372 United States Steel Corp., 147 USX, 67 V Versace, 240 W Wal–Mart Stores, Inc., 14, 372, 462, 477, 501–502, 505 Walt Disney, 247 Wenonah Canoe, Whirlpool, 473 Whole Foods Market, 170, 182–183 X Xerox, XM Satellite Radio Holdings, 286 Y Yahoo!, 466 Z Zappos.com, 244, 253–254 www.downloadslide.net Subject Index A ABC, see Activity-based costing ABM (activity-based management), 114–115 Absorption costing: deciding when to use, 189–191 defined, 183 example of, 183–189 variable costing vs., 183–191 Absorption-cost pricing, 254–256 Accounting See also Managerial accounting; Responsibility accounting accrual, 398, 429–431 and budgeting, 277 cash, 398, 429–431, 440–444 cost, 33 financial, Accounting equation, 445 Accounts payable, 291, 433–434 Accounts receivable, 291, 432–433 Accounts receivable turnover, 474–475, 482 Accrual accounting, 429–431 cash accounting vs., 398 and net income, 429–431, 440–444 Accumulated depreciation, 291 Accumulating manufacturing costs, 34–36, 45 factory labor, 35–36 in job order and process cost systems, 68 overhead, 36 raw materials, 35 Acid-test (quick) ratios, 474, 482 Activity(-ies), 106 batch-level, 111, 113 classification of, 111–113 coordination of, 277 in cost behavior analysis, 141 facility-level, 112, 113 financing, 426–427, 435, 444–445 identification/classification of, 108 investing, 426–427, 435, 444–445 noncash, 427–428, 432–434 non-value-added, 113–114 operating, 426–427, 431–434, 436, 438–444 product-level, 112, 113 in statement of cash flows, 426–428 unit-level, 111, 113 value-added, 112 and variable/fixed costs, 141, 142 Activity bases, 41 Activity-based costing (ABC), 13, 103–121 and activity-based management, 114–115 activity-based overhead rates, 109 benefits of, 111–115 classification of activity levels in, 111–112 and cost control, 112–114 cost drivers in, 108 and cost pools, 108, 111–112 and incremental analysis, 212–213 limitations of, 115 and overhead costs, 108–110, 362 in service industries, 116–118 traditional costing vs., 104–107 unit costs under, 110–111 when to use, 115 Activity-based management (ABM), 114–115 Activity-based overhead rates, 109 Activity cost pools, 106, 108 Activity flowcharts, 113–114 Activity index, 141 for flexible budgets, 318, 322 relevant range of, 143–144 for static budgets, 317 Actual cost (in total variance), 364 Adjusted trial balances, 428 Administrative expenses, see Selling and administrative expenses After-tax total contribution margin, 258–259 Airline industry, 175 Analysis See also Cost-volume-profit; Financial statement analysis break-even, 151–153, 172 comparative, 466 cost behavior, 141–147 and effective budgeting, 277–278 incremental, 209–222, 252 regression, 146 risk, 408 sensitivity, 408 Annual rate of return method, 411–412 Annuities, A-9 discounting, A-14 future value of, A-4–A-6 present value of, A-9–A-11, A-17 Assets: current, 432–433, 473 fixed, 436 long-term, 427 noncurrent, 435, 444–445 operating, 333–335 plant, 432 return on, 477–478, 482 total, 470, 480–482 Asset turnover, 477, 482 Assigning manufacturing costs, 35–45, 69–71 to cost of goods sold, 44, 71 of factory labor, 39–40, 70 to finished goods, 43–44, 71 in job order costing, 36–40, 47, 69 of manufacturing overhead, 40–43, 71 to next department, 71 in process costing, 34, 68–71 of raw materials, 37–39, 70 Audit committees, 14 Auto loans, A-17 Automation: and activity base for overhead, 41 and cost structure, 179–180, 182–183 and CVP analysis, 174 and fixed costs, 142 and the value chain, 13 Automobile industry, 241, 372 Available-for-sale securities, 485 Available funds, 399 Average collection period, 475 Awareness of operations, management’s, 277 B Balanced scorecard, 13–14, 372–374 defined, 372 perspectives employed with, 372–374 I-3 www.downloadslide.net I-4 Subject Index Balanced Scorecard Institute, 394 Balance sheet(s), 10–11 budgeted, 290–292 comparative, 429 horizontal analysis of, 468 in job order costing, 48 and statement of cash flows, 426, 436 vertical analysis of, 470 Banks, 372, 466 Base period, horizontal analysis, 467 Batches, 33 Batch-level activities, 111, 113 Before-tax total contribution margin, 258–259 Beginning work in process inventory, Behavior: and budgeting, 278–279 and equipment retention/ replacement, 218–219 and performance evaluations, 326–327 Boards of directors, 3, 14 Bonds, present value of, A-11–A-13 Bondholders, 466 Bonds payable, 435, 444 Book value, 218 Borrowers, liquidity of, 466 Bottlenecks, 13 Break-even analysis, 151–153 contribution margin technique for, 152 and CVP analysis, 151–153, 172 and CVP graph, 152–153 defined, 151 equation for, 151 Break-even point, 149 on CVP graph, 152–153 defined, 149, 151 formula for, 172 identifying, 151 in sales dollars, 151 in sales units, 152 Budget(s), 277 See also Budgeting and budgeted income statement, 286–287 cash, 287–292 defined, 277 direct labor, 284–285 direct materials, 283–284 financial, 281, 287 flexible, 315, 318–324, 330 government, 294 manufacturing overhead, 285–286 master, 280–281, 317 merchandise purchases, 292–293 operating, 280–281, 284 production, 282–283 sales, 281–282 selling and administrative expense, 286 standards vs., 359–360 static, 317–318 Budgetary control, 315– defined, 315–316 with flexible budgets, 318–324 with static budget reports, 317–318 Budgetary planning, 276–297 budgeted balance sheet, 290–292 budgeting essentials, 277–281 cash budget, 287–292 direct labor budget, 284–285 direct material budget, 283–284 financial budgets, 287 manufacturing overhead budget, 285–286 in nonmanufacturing companies, 292–294 production budget, 282–283 sales budget, 281–282 selling and administrative expense budget, 286 Budgetary slack, 279 Budget committees, 278 Budgeted balance sheet, 290–292 Budgeted income statement, 286–287 Budgeting, 277–281 See also Capital budgeting and accounting, 277 benefits of, 277 effective, 277–278 human behavior affected by, 278–279 length of budget period, 278 long-range planning vs., 280 and master budget, 280–281 for merchandisers, 292–293 for nonmanufacturing companies, 292–294 for not-for-profit organizations, 293–294 process of, 278 responsibility accounting vs., 324 for service enterprises, 293 Budget period, 278 Budget reports, 315–316 flexible, 323–324 for responsibility accounting, 327–330 static, 317–318 Buffett, Warren, 465, 486 Buildings: on budgeted balance sheet, 291 on statement of cash flows, 435, 444 Burden, see Manufacturing overhead Businesses See also Service companies manufacturing, 209 nonmanufacturing, 292–294 standards for, 358–359 virtual, 252 Business calculators, see Financial calculators Business environment, CVP analysis in, 173–174 Business ethics, 14 C Calculators, see Financial calculators Capacity, 213, 248–249, 362 Capital: cost of, 403 working, 473 Capital budgeting, 397–414 annual rate of return method used in, 411–412 authorization process, 398 and cash flow information, 398–399 cash payback technique used in, 399–400 computing time and present values in, A-14–A-15 defined, 398 evaluation process for, 398–399 and free cash flow, 436–437 intangible benefits in, 405–406 internal rate of return method used in, 409–410 with mutually exclusive projects, 407–408 net present value method used in, 400–405, 410 and post-audits, 408–409 and risk analysis, 408 Carpenter, Jake Burton, Cash See also Net cash in budgeted balance sheet, 291 liquidity of, 474 net change in, 436, 445 Cash accounting, 398, 429–431, 438–444 Cash budget, 287–292 Cash disbursements section (cash budget), 288 Cash flow(s) See also Statement of cash flows and capital budgeting, 398–399 for company evaluation, 436–438 discounted cash flow techniques, 400–405 equal, 402, 409 free, 436–438 inflows, 398 net annual, 399 in net present value method, 404 of not-for-profit organizations, 293–294 outflows, 398, 427, 435, 436, 444 predicting, 426 unequal, 402–403, 410 Cash flow numbers, 398 Cash inflows, 398 Cash outflows, 398, 427, 435, 436, 444 www.downloadslide.net Subject Index Cash payback technique, 399–400 Cash payments, 438–444 Cash receipts, 440–441 Cash receipts section (cash budget), 288 CEO (chief executive officer), 4, 14 CFO (chief financial officer), 4, 14 Charges: material loading, 244–246 in time-and-materials pricing, 246–247 Chemical industry, 372 Chief executive officer (CEO), 4, 14 Chief financial officer (CFO), 4, 14 Cichanowski, Mike, CM, see Contribution margin COLAs (cost of living adjustments), 361 Collections: average collection period, 475 schedule of expected, 289 Common-size analysis, see Vertical analysis Common stock, 479 on budgeted balance sheet, 291 issuance of, for cash, 436 on statement of cash flows, 445 Common stockholders’ equity, return on, 478, 482 Companies, see Businesses Comparative analysis, 466 Comparative balance sheets, 426, 429 Comparisons, 466–467, 473 Competence, B-1 Competitive markets, pricing in, 240–241 Composition (current assets), 473 Compounding periods, A-3–A-4, A-17 Compound interest, A-2–A-4 Comprehensive income, 482–486 Computer systems industry, 372 Confidentiality, B-1–B-2 Conflict resolution, B-2 Constraints, theory of, 13, 179 Continuous 12-month budgets, 278 Continuous improvement, 114 Contribution margin (CM), 148, 171, 177 per unit, 149, 178–179 ratios, 149–150, 152, 172, 180 and tax rates, 258–259 of unprofitable segments/ products, 220 weighted-average, 175–178 Control(s) See also Budgetary control and activity-based costing, 112–114 with budgets, 277 cost, 251 internal, 14 Control accounts, 36–37, 44 Controllable costs, 326, 330–333 Controllable margin, 331, 333–335 Controllable revenues, 325–326, 331, 332 Controllable variance, 370, 378–379 Controller, Controlling, as management function, Conversion costs, 73, 76, 83 Corporate social responsibility, 15 Cost(s), 5–8 See also specific types of ABC implementation, 115 in CVP analysis, 172 and equivalent units computations, 85 in financial statements, 8–12 of morale, 212 Cost accounting, 33 Cost accounting systems, 33, 77–79 absorption costing, 183–191 activity-based, see Activity-based costing changes in, 115 and cost-plus pricing, 241–244 defined, 33 job order costing, see Job order cost systems operations costing, 77 process costing, see Process cost systems standard, 375–377 target costing, 240–241 traditional, 104–111, 116 variable, see Variable costing Cost-based transfer price, 250–252 Cost behavior analysis, 141–147 fixed costs in, 142 and identification of variable and fixed costs, 147 mixed costs in, 144–146 relevant range in, 143–144 variable costs in, 141–142 Cost centers, 330, 331 Cost control, 251 Cost determination, Cost drivers, 106–108 Cost flows: and job order costing, 34–47, 68 and process costing, 68, 69 Costing and costing systems, see Cost accounting systems Cost of capital, 403 Cost of goods manufactured, 8–11 Cost of goods manufactured schedule, 8, 10–11, 47–48 Cost of goods purchased, Cost of goods sold, 44, 49, 71, 371 Cost of living adjustments (COLAs), 361 Cost of transfer to cost of goods sold, 71 Cost of transfer to finished goods, 71 I-5 Cost of transfer to next department, 71 Cost-plus pricing, 46, 241–244 Cost pools: and ABC, 107, 111–112 activity, 106, 107 allocating overhead to, 108 overhead, 106 Cost reconciliation schedule, 76, 84–85 Cost structures, 179–181 and automation, 179–180, 182–183 and break-even point, 180 and contribution margin ratio, 180 and margin of safety ratio, 181 and operating leverage, 181 Cost-volume-profit (CVP) analysis, 147–157, 170–191 absorption vs variable costing in, 183–191 assumptions of, 148 and break-even analysis, 151–153, 172 and business environment, 173–174 components of, 147–148 computations in, 172–173 concepts in, 171–172 cost structure and operating leverage in, 179–181 margin of safety in, 155–156, 173 and sales mix, 175–179 and target net income, 154–156, 172 and variances, 371 Cost-volume-profit (CVP) graph, 152–156 Cost-volume-profit (CVP) income statement, 147–150 and contribution margin per unit, 149 and contribution margin ratio, 149–150 variances on, 371 Credibility, B-2 Credits, from manufacturing costs, 36 Credit balance, 48 Creditors, 466 Cruise industry, 397 Current assets, 432–433, 473 Current liability, 433–434 Current ratio, 473, 482 Curvilinear relationship (of cost and activity), 143 Customer perspective (balanced scorecard), 372–373 Cutoff rate, 403 CVP analysis, see Cost-volume-profit analysis CVP (cost-volume profit) graph, 152–155 CVP income statement, see Costvolume-profit income statement www.downloadslide.net I-6 Subject Index D Data entry (for job order costing), 47 Days in inventory, 474–475 Debits, from manufacturing costs, 36 Debit balance, 48 Debt to assets ratio, 480–482 Decentralization, 325 Decision-making process, 210–212 as capital budgeting consideration, 399 make-or-buy decisions, 209, 213–215 sell-or-process-further decision, 215–218 Defects, 121 Degree of operating leverage, 181 Departmental overhead costs (report), 316 Depreciation, accumulated, 291 Depreciation expense, 431–432, 443 Differential analysis, see Incremental analysis Direct fixed costs, 331 Directing, as management function, 3 Direct labor, 5, 104, 361 Direct labor budget, 284–285 Direct labor price standard (direct labor rate standard), 361 Direct labor quantity standard (direct labor efficiency standard), 361 Direct labor variances, 368–369 Direct materials, 5, 361 Direct materials budget, 283–284 Direct materials price standard, 359 Direct materials quantity standard, 360–362 Direct materials variances, 364–366 Direct method (statement of cash flows), 429, 438–445 Discontinued operations, 483–484 Discounts (on selling price), 173–174 Discounted cash flow techniques: comparing, 410 defined, 409 internal rate of return method, 409–410 net present value method, 400–409, 410 Discounting, A-7, A-11, A-14 Discounting the future amount, A-7 Discount rate, 401, 403 Dividends, 426, 436, 445, 478 Documentation, cost system, 68 Dot-com bubble, 465 Dun & Bradstreet, 466 Dunlap, Al “Chainsaw,” 212 E Early warning system, budgeting as, 277 Earned revenues, 431 Earnings See also Retained earnings statements retained, 291, 435, 444 Earnings per share (EPS), 479, 482 Emphasis (of budgeting vs long-range planning), 280 Employees: efficiency of, 369 misallocation of, 369 skilled, 369 Ending work in process inventory, Enterprise resource planning (ERP) software systems, 13 EPS (earnings per share), 479, 482 Equal Employment Opportunity Act, 358 Equipment: on budgeted balance sheet, 291 disposal of plant assets, 432, 443 incremental analysis for, 218–219 replacement of, 218–219 retention of, 218–219 on statement of cash flows, 435, 444 Equity: stockholders’, 427, 470, 478, 482 trading on the, 478 Equivalent units of production, 72–73, 80–86 for conversion costs, 83 FIFO method computation, 80–86 for materials, 83 for process cost reports, 75 weighted-average method computation, 71–73, 85–86 ERP (enterprise resource planning) software systems, 13 Ethics: business, 14 and competence, B-1 and confidentiality, B-2–B-2 and conflict resolution, B-2 and credibility, B-2 and IMA, B-1–B-2 and incentives, 14 and integrity, B-2 and make-or-buy decisions, 215 principles of, B-1 and standards, B-1–B-2 Evaluation process (capital budgeting), 397–399 Excess capacity, 249 Expected input and output, service revenue from, 293 Expenses: in accrual accounting, 431 depreciation, 431–432, 443 operating, 442 prepaid, 433 selling and administrative, 255, 286, 316, 317 F Facility-level activities, 112, 113 Factory labor costs: accumulating, 35–36 assigning, 39–40, 70 Factory overhead, see Manufacturing overhead Fair Labor Standards Act, 358 FASB (Financial Accounting Standards Board), 429 Favorable variances, 363, 371 Feedback, 327 FIFO method, see First-in, first-out method Financial accounting, Financial Accounting Standards Board (FASB), 15, 429, 484 Financial budgets, 281, 288 Financial calculators, A-16–A-18 applications of, A-17–A-18 and compounding period, A-17 keys on, A-16 minus signs on, A-16 plus signs on, A-16 present value function on, A-16–A-17 rounding on, A-17 Financial information, 210 Financial measures, 374 Financial perspective (balanced scorecard), 372, 374 Financial statement(s) See also specific statements cost of goods manufactured, 8–11 cost of goods manufactured schedule, 8, 10–11, 47–48 job cost data on, 47–50 management’s responsibility for, 14 manufacturing costs reflected in, 8–11 standard costs and variances on, 371 Financial statement analysis, 465–490 horizontal analysis, 466–472 need for, 466 ratio analysis, 472–482 sustainable income, 482–488 tools for, 466–467 vertical analysis, 470–472 Financing activities, 426–428 in direct method, 444–445 in indirect method, 435–436 net cash provided by, 435–436, 444–445 Financing section (cash budget), 288 Finished goods: assigning costs to, 43–44 transfer to, 71 Finished goods inventory, 44, 291 www.downloadslide.net Subject Index First-in, first-out (FIFO) method, 80–86 and cost reconciliation schedule, 84–85 and equivalent units of production, 80–86 and physical unit flow, 82–83 and production cost report, 77, 86 and unit production costs, 83–84 weighted-average method vs., 85–86 Fixed assets, 436 Fixed costs: in break-even analysis, 152 computing, with high-low method, 145–147 and controllable margin, 334–335 in cost behavior analysis, 142 on CVP graph, 153 in flexible budgets, 322–323 identifying, with cost behavior analysis, 147 in incremental analysis, 212, 213 overhead, 285–286 per unit, 243–244 in responsibility accounting, 331 static budget for, 318 Flexible budget(s), 315, 318–324 budgetary control with, 318–324 case study, 321–323 for cost centers, 331 development of, 321 performance evaluations with, 323–324 reasons to use, 318–321 Flexible budget reports, 323–324 Flowcharts, activity, 113–114 Forecasts: sales, 278, 281 Free cash flows, 436–438 Full costing, see Absorption costing Full-cost pricing, 244, 254 Full disclosure principle, 428 Future value: of annuities, A-4–A-6 of single amounts, A-2–A-4 G Generally accepted accounting practices (GAAP): and absorption-cost pricing, 254–256 and accrual accounting, 431 net income measured under, 189 Globalization, 252 Global Reporting Initiative, 15 Government budgets, 294 Graham, Benjamin, 465 Growth, 247 H Hardy, Renee Lawson, 170 High-inventory turnover, 477 High-low method, 145–147 Horizontal (trend) analysis, 466–472 of balance sheets, 668 of income statements, 668–669 of retained earnings statements, 679–670 Hotel business, flexible budgeting in, 315 Hsieh, Tony, 239 Human behavior, see Behavior Hurdle rate, 403 I Ideal standards, 360 IMA, see Institute of Management Accountants IMA Statement of Ethical Professional Practice, 14, B-1–B-2 Incentives, 14 Income See also Net income comprehensive, 482–483, 485 from discontinued operations, 483–484 other comprehensive, 484 residual, 337–338 sustainable, 482–486 target net, 154–156, 172 Income (margin) measure, 334 Income statement(s), 8–9, 316, 429 budgeted, 286–287 CVP, 147–150, 371 horizontal analysis of, 468–469 in job order costing, 48 operating activities on, 427, 438 statement of cash flows vs., 426 variances disclosed on, 371 vertical analysis of, 470–472 Income tax payable, 434, 443–444 Incremental analysis, 209–221 and activity-based costing, 212 approach used in, 210–212 defined, 210 for elimination of unprofitable segments, 219–221 for equipment retention/ replacement, 218–219 for make-or-buy decision, 213–215 for outsourcing, 252 qualitative factors in, 212 for sell-or-process-further decision, 215–218 with special orders, 213 types of, 212 in virtual companies, 252 Incremental overhead costs, 212 Independence (of capital projects), 399 Indirect fixed costs, 331 Indirect labor, Indirect manufacturing costs, see Manufacturing overhead Indirect materials, Indirect method (statement of cash flows), 429–436 I-7 direct method vs., 429 investing and financing activities, cash from, 435–436 and net change in cash, 436 operating activities, net cash from, 431–434 Industry averages, 466, 473 In process inventories, 121 Institute of Management Accountants (IMA), 14, 30, B-1–B-2 Intangible benefits (net present value method), 405–406 Integrity, B-2 Intercompany comparisons, 466, 467, 473 Interest, A-1–A-6 cash payments for, 443 compound, A-2–A-4 simple, A-2 Interest coverage (times interest earned), 481, 482 Interest rates, A-1 Internal audit staff, Internal controls, 14 Internal process perspective (balanced scorecard), 373, 374 Internal rate of return (IRR), 409–410 Internal rate of return method, 409–410 advantages of, 411–412 decision rule for, 410, 411 net present value method vs., 410 Internal sales See also Transfer pricing International accounting standards, 473 Internet, 152 Intracompany comparisons, 466–467, 473 Inventoriable costs, see Product cost(s) Inventory(-ies): beginning work in process, days in, 476 in direct materials budgets, 283–284 ending work in process, finished goods, 44, 291 of merchandising and manufacturing companies, 10–11 and net income, 433 perpetual inventory systems, 33 in process, 121 product costs as, in production budgets, 283 raw materials, 35, 291 work in process, 36–37, 42 Inventory methods: just-in-time, 13 periodic, 8, perpetual, 33 www.downloadslide.net I-8 Subject Index Inventory turnover, 475–476, 482 formula for, 482 high, 477 Investing activities, 426–427 in direct method, 444–445 in indirect method, 435 net cash provided by, 434–435, 444–445 Investment(s): and interest, A-2–A-3 short-term, 474 Investment centers, 328, 332–336 IRR (internal rate of return), 409–410 J JIT (just-in-time) inventory method, 13 JIT (just-in-time) processing, 119–121 Jobs: in job order cost systems, 33 in time-and-materials pricing, 246–247 Job cost sheets, 36–37 Job order cost systems, 32–49, 77 accumulating costs in, 34–36, 44 advantages and disadvantages of, 47 assigning costs in, 36–40, 43–44 and cost accounting systems, 33–34 features of, 33–34 flow of costs in, 34–47 journal entries in, 375–377 ledger accounts in, 377 manufacturing costs, 35–43 manufacturing overhead costs, 40–43 process costing vs., 33, 34, 66–69 recording of costs in, 33, 34 reporting job cost data, 47–49 for service companies, 46–47 standard cost, 375–377 Joint costs, 217–218 Joint products, 217–218 Journal entries, 70–71, 375–377 Just-in-case philosophy, 119 Just-in-time (JIT) inventory method, 13 Just-in-time (JIT) processing, 119–121 L Labor: direct, 5, 104, 284–285, 361 indirect, and variable costs, 142 Labor costs: direct, 104, 361 factory, 35–36, 39–40, 70 in time-and-material pricing, 244–246 Labor price variances (LPVs), 367, 369 Labor quantity variances, 367, 369 Labor reports, 316 Labor variances, 364, 367–370 Land, 435, 444 Leadership in Energy and Efficient Design (LEED) Certification, 103 Lean manufacturing, 12 Learning and growth perspective (balanced scorecard), 373, 374 Ledgers, 36, 377 LEED (Leadership in Energy and Efficient Design) Certification, 103 Leverage, 478 Leveraging, 478 Liability(-ies): current, 432–434 long-term, 427 noncurrent, 435, 444–445 total, 470 Limited resources, 178–179, 407 Lin, Alfred, 239 Linear cost assumption, 143, 144 Line positions, Linkages (in balanced scorecard approach), 372–373 Liquidity, 466 of accounts receivable, 474–475 of borrower, 466 of cash, 474 immediate, 474 short-term, 474 Liquidity ratios, 473–476 accounts receivable turnover, 474–475 acid-test ratio, 474 average collection period, 475 current ratio, 473 days in inventory, 476 inventory turnover, 476 summary of, 482 Loans, 466, A-17–A-18 Long-range planning, 280 Long-term assets, 427 Long-term creditors, 466 Long-term liabilities, 427 Long term notes, A-11–A-13 Losses, 484 Lowry, Adam, 209 Low-volume enterprises, 477 LPVs (labor price variances), 367, 369 M Machine hours, 41, 71, 104 Machine time used, 71 McKenna, Erin, 276 Mackey, John, 170 Make-or-buy decision: incremental analysis for, 213–215 opportunity cost in, 214–215 and outsourcing, 209 Management (managers): awareness of operations, 277 decision-making process of, 210–212 decisions of, 114–115 and financial statements, 14 functions of, 2–3 in participative budgeting, 278–279 Management, activity-based, 114–115 Management by exception, 326 Managerial accounting, 1–4 activities of, current trends in, 11–15 defined, financial accounting vs., Manufacturing, lean, 12 merchandising vs., Manufacturing companies: financial statements for, 8, 10–11 outsourcing by, 209 Manufacturing costs, 5–8 See also Manufacturing overhead accumulating, 34–36, 44, 68 assigning, see Assigning manufacturing costs calculating, for absorption-cost pricing, 255 direct labor, direct materials, in financial statements, 8–11 in job order costing, 35–43, 68 in process costing, 68, 70–71 in static budget, 318 total, 9, 75–76 Manufacturing costs incurred in the prior period, Manufacturing overhead, 5–6 accumulating costs of, 36 assigning costs of, 40–43, 71 over-/underapplied, 48–50 standard rate per unit, 362 in year-end balance, 49–50 Manufacturing overhead budget, 285–286 Manufacturing overhead variances, 369–370 Margin (income) measure, 334 Margin of safety, 155–156, 173 Margin of safety ratio, 155, 173, 181 Market-based transfer price, 252 Market niche, 241 Markup, 241–243 for absorption-cost pricing, 254 for variable-cost pricing, 256 Master budgets, 280–281, 317 Material(s) See also Raw materials direct, 5, 361 equivalent units of production, 83 indirect, pricing, 244–247 www.downloadslide.net Subject Index Materiality, 326 Material loading charge, 244–247 Materials price variance (MPV), 365–366 Materials quantity variance, 365–366 Materials requisition slips, 37–39, 70 Materials variances, 363–366 Matrix, variance analysis, 366, 368 MBA calculators, see Financial calculators Merchandise purchases budget, 292–293 Merchandisers, 292–293 Merchandising, Merchandising companies, 8, 10–11 Minimum rate of return, 337 Minimum transfer price, 248–249 Minus signs (in time value of money problems), A-16 Misallocation of workers, 369 Mixed costs, 144–146 Money, time value of, see Time value of money Moody’s, 466 Morale, cost of, 212 Mortgage loans, calculating, A-18 Motivation, 277, 327 MPV (materials price variance), 365–366 Mutually exclusive projects, 407–408 N Negotiated transfer prices, 248–250 with excess capacity, 249 with no excess capacity, 248–249 variable costs in, 250 Net annual cash flow, 400 Net cash: from financing activities, 435–436, 444–445 from investing activities, 435–436, 444–445 from operating activities, 426, 431–434, 436, 438–444 Net change in cash, 436, 445 Net income and absorption vs variable costing, 183–189 and contribution margin, 175–176 as percentage of sales dollars, 472 as performance measure, 426 per share, 479 and sell-or-process-further decisions, 216 on statement of cash flows, 429–431 target, 154–156, 172 and unprofitable segments/ products, 219–221 Net present value (NPV), 401 Net present value method, 401–405 assumptions of, 404 for equal annual cash flows, 402 example, 404–405 intangible benefits in, 405–406 internal rate of return method vs., 410 with mutually exclusive projects, 407–408 and post-auditing, 408–409 and risk analysis, 408 for unequal annual cash flows, 402–403 No excess capacity, 248–249 Noncash activities: changes of, 432–434 on statement of cash flows, 427–428 Noncontrollable costs, 325–326, 331 Noncurrent assets, 435–436, 444–445 Noncurrent liabilities, 435–436, 444–445 Nonfinancial information, 210 Nonfinancial measures, 372–374 Nonmanufacturing companies, 292–294 merchandisers, 292–293 not-for-profit organizations, 293–294 service enterprises, 293 Non-value-added activities, 113–114 Normal capacity, 362 Normal range, 143–144 Normal standards, 360 Notes (on statements of cash flow), 428 Notes, long-term, A-11–A-13 Not-for-profit organizations, 293–294 NPV (net present value), 401 See also Net present value method O Onward (Howard Schultz), 358 Operating activities, 426–427 in direct method, 438–444 in indirect method, 431–434 net cash provided by, 431–434, 436, 438–444 Operating assets, 333–334 Operating budgets, 281, 284 Operating expenses, 442 Operating leverage, 181 Operations costing, 77–78 Opportunity costs, 211 in make-or-buy decision, 215 and no excess capacity, 248 Orders: accepting, at special prices, 213 incremental analysis for, 213 Organizational structure, 3–4, 277 Organization charts, Other comprehensive income, 484 Outsourcing: and cost structure, 179, 180 by manufacturers, 209 and transfer pricing, 252 I-9 Overapplied overhead, 48–50 Overhead See also Manufacturing overhead assigning, to products, 108–110 departmental overhead costs, 316 and direct labor, 104 inefficient use of, 370 in job order costing, 47 manufacturing overhead budget, 285–286 overapplied and underapplied, 48–50 Overhead controllable variance, 370, 378–379 Overhead costs: and ABC, 112–114 assigning, to products, 109–110 departmental, 316 incremental, 212 in service industries, 116–118 Overhead cost pools, 106, 107 Overhead rates: activity-based, 109 computing, 109 predetermined, 40–43, 44, 104, 362 Overhead variance, 369–370, 378–379 Overhead volume variance, 370, 379 Overspending, 294 P Participative budgeting, 278–279 Payback period, 400 Payments: cash, 438–444 schedule of expected, 288–290 Payout ratio, 480, 482 P-E (price-earnings ratio), 479–480, 482 People, planet, profit, see Triple bottom line Percentage change (in vertical analysis), 470 Percentage of sales dollars, net income as, 472 Performance evaluation, 326–327 with flexible budgets, 323–324 principles of, 326–327 and residual income, 337–338 with static budgets, 318–320 Performance measures, 13–14, 85–86, 332 Period costs, Periodic inventory system, Perpetual inventory systems, 33 Pharmaceutical industry, 240 Physical unit(s), 74–75 and FIFO method, 82–83 in process costing, 74, 82–83 Planning See also Budgetary planning and budgeting, 277 as management function, www.downloadslide.net I-10 Subject Index Plant assets, disposal of, 432, 443 Plus signs (in time value of money problems), A-16 Post-audits, 408–409 Practical range, 143–144 Predetermined overhead rates, 40–43, 44, 104, 362 Preferred dividends, 478 Preferred stock, 478 Prepaid expenses, 433 Present value, A-7 See also Net present value method of annuities, A-9–A-11, A-17 calculator functions for, A-13, A-15 in capital budgeting decisions, A-14–A-15 of long-term notes/bonds, A-11–A-13 of single amounts, A-7–A-9 of single sums, A-16–A-17 variables affecting, A-7 Present value (PV) key, A-13, A-15 Price-earnings (P-E) ratio, 479–480, 482 Price takers, 240 Pricing, 239–260 absorption-cost, 254–256 in competitive markets, 240–241 cost-plus costing, 46, 241–244 and equivalent units computations, 86 full-cost, 244, 254 for services, 244–247 target costing, 241 time-and-material, 244–247 transfer, see Transfer pricing variable-cost, 244, 256–257 Principal, A-1 Process cost systems, 33, 66–86 assigning manufacturing costs in, 69–71 cost reconciliation schedule, preparation of, 76 equivalent units of production, computation of, 71–73, 75, 80–86 and flow of costs, 68, 69 job order costing vs., 33, 34, 66–69 operations costing, 77–78 physical unit flow, computation of, 74–75 preparing production cost report, 77 and production cost report, 73–77 for service companies, 67 unit production costs, computation of, 75–76 uses of, 66–67 Product cost(s), as inventory, in manufacturing costs, overhead as, 109–110 period costs vs., for service industries, 11–12 Production budget, 282–283 Production cost reports: and FIFO method, 85, 86 in process costing, 73–78, 85, 86 Production department, 366, 369–370 Product-level activities, 112, 113 Profitability, 466 of capital projects, 400 Profitability index, 407–408 Profitability ratios, 472, 476–480, 482 asset turnover, 477 earnings per share, 479 payout ratio, 480, 482 price-earnings ratio, 479–480 profit margin, 476–477 return on assets, 477–478 return on common stockholders’ equity, 478 summary of, 482 Profit centers, 330–332 Profit margin, 476–477, 482 Proportions, 472 “Pull approach,” 120 Purchasing department, 366 “Push approach,” 119 PV (present value) key, A-13, A-15 Q Quick ratios, 474, 482 R Rates, 472 Rate of return on sales, see Profit margin Ratio(s), 472 accounts receivable turnover, 474–475, 482 acid-test, 474, 482 asset turnover, 477, 482 average collection period, 475 current, 473, 482 days in inventory, 476 debt to assets ratio, 480–482 earnings per share, 479, 482 inventory turnover, 475–476, 482 liquidity, 473–476, 482 margin of safety, 155–156, 173, 181 payout, 480–481, 482 price-earnings, 479–480, 482 profitability, 472, 476–477, 482 profit margin, 476–477, 482 quick, 474, 482 return on assets, 477–478, 482 return on common stockholders’ equity, 478, 482 solvency, 476–477, 480–482 summary of, 482 times interest earned, 481, 482 working capital, 473 Ratio analysis, 466, 472–482 with liquidity ratios, 473–476 with profitability ratios, 476–480 with solvency ratios, 480–482 Raw materials, accumulating costs of, 35–36 assigning costs of, 37–39, 70–71 in direct materials standards, 361 Raw materials inventory, 35–36, 291 Receivables, liquidity of, 474–475 Reconciliation method, see Indirect method (statement of cash flows) Regional banking industry, 372 Regression analysis, 146 Regulations, 358 See also Standards Relevant costs, 211 in elimination of unprofitable segments/products, 219–221 for equipment retention/ replacement, 218–219 in make-or-buy decisions, 213–215 in sell-or-process-further decision, 215–218 in special orders, 213 Relevant range: of activity index, 143–144 in cost behavior analysis, 143–144 Reporting: determining costs vs., performance evaluation, 326–327 Required rate of return, 401, 403 Research (for effective budgeting), 277–278 Residual income, 337–338 Resources: ERP software systems, 13 limited, 178–179, 407 Responsibility accounting, 324–335 See also Responsibility centers budgeting vs., 324 conditions for, 324–325 with controllable vs noncontrollable revenues and costs, 325–326 for investment centers, 332–335 performance evaluation in, 326–327 reporting system for, 328–329 responsibility centers, 330–332 Responsibility centers, 330–332 behavior affecting, 326–327 cost centers, 328, 403 investment centers, 332–335 profit centers, 330–332 Responsibility reporting system, 328–329 for investment centers, 333–334 for profit centers, 331–332 Retained earnings: on budgeted balance sheet, 291 on statement of cash flows, 435, 444–445 Retained earnings statements: horizontal analysis of, 469–470 statement of cash flows vs., 426 www.downloadslide.net Subject Index Return on assets, 477–478, 482 Return on common stockholders’ equity, 478, 482 Return on investment (ROI), 332–333 and absorption-cost pricing, 254–257 and cost-plus pricing, 242–243 disadvantage of, 337 improvement of, 334–335 judgmental factors in, 334 with positive or zero net present value, 401 residual income vs., 337–338 and variable-cost pricing, 256–257 Revenues: controllable, 325, 331, 332 earned, 431 service, 293 Risk (in capital budgeting), 399 Risk analysis, 408 ROI, see Return on investment Rounding, A-17 Ryan, Eric, 209 S Safety: margin of, 155–156, 173 Sales: and controllable margin, 334 on CVP graph, 152–153 internal See also Transfer pricing and margin of safety, 173 Sales budgets, 281–282 Sales department, 370 Sales dollars: break-even point in, 151, 176–178 for target net income, 154 Sales forecasts, 278, 281, 370 Sales mix, 175–179 and break-even analysis, 175–178 defined, 175 with limited resources, 178–179 Sales reports, 317 Sales units: break-even point in, 152, 175–176 for target net income, 154 Sarbanes-Oxley Act (SOX), 14 Schedules: cost of goods manufactured, 8, 9–11, 47–48 cost reconciliation, 76, 84–85 of expected payments and collections, 288–290 for statements of cash flows, 428, 444 Schultz, Howard, 358 Scrap reports, 316 Security(-ies): available-for-sale, 485 trading, 484 Securities and Exchange Commission (SEC), 463 Selling and administrative expenses, 255, 286, 318 Selling and administrative expense budget, 286 Selling expenses report, 316 Selling price See also Target selling price discounts on, 173–174 unit, 151 Sell-or-process-further decision, 215–218 for multiple products, 216–218 for single products, 215–216 Sensitivity analysis, 408 Service companies: activity-based costing in, 116–118 balanced scorecard approach in, 372 break-even and margin of safety in, 152, 155 budgeting in, 293, 321, 324 contribution margin in, 177 job order costing for, 46–47 operating leverage of, 181 process costing for, 67 product costing for, 11–12 standard costs in, 358 traditional costing in, 116 Service contracts, 46 Short-term creditors, 466 Short-term liquidity, 474 Significant variances, 371 Simple interest, A-2 Single amount: future value of, A-2–A-4 present value of, A-7–A-9 Single sum: discounting, A-14 present value of, A-16–A-17 Skilled workers, 369 Social responsibility, corporate, 15 Solvency, 466 Solvency ratios, 472, 480–482 debt to assets ratio, 480–481 summary of, 482 times interest earned, 481, 482 SOX (Sarbanes-Oxley Act), 14 Spending variance, 370 Split-off point, 217 Staff positions, Standards: budgets vs., 359–360 need for, 358–359 normal vs ideal, 360 Standard costs, 358–371 advantages of, 358–359 defined, 359 direct labor standards, 361 and direct labor variances, 367–369 direct materials standards, 360–361 and direct materials variances, 364–366 I-11 on financial statements, 371 ideal vs normal standards, 360 manufacturing overhead, 362 and manufacturing overhead variances, 369–370 and reporting variances, 370–371 setting, 360–363 and statement presentation of variances, 371 total standard cost per unit, 362–363 in total variance, 363–364 variances affecting, 363–366 Standard cost, job order cost accounting system, 375–377 journal entries, 375–377 ledger accounts, 377 Standard direct labor cost per unit, 361 Standard direct materials cost per unit, 362 Standard hours allowed, 369, 378 Standard manufacturing overhead rate per unit, 362 Standards of Ethical Professional Practice, B-1–B-2 Standard & Poor’s, 466 Standard predetermined overhead rate, 362–363 Statement of cash flows, 426–447 activity classifications in, 426–428 balance sheet vs., 426, 435 for company evaluation, 436–438 direct method, 429, 438–445 format of, 428 and free cash flows, 436–438 income statements vs., 426 indirect method, 429–436 noncash activities on, 427–428 preparation of, 429–436 retained earnings statements vs., 426 T-account method, 445–447 usefulness of, 426 Static budget(s), 317–318 See also Master budgets Static budget reports, 317–318 Stock(s) See also Common stock issuance of, for cash, 435 preferred, 478 on statement of cash flows, 444 Stockholders, 3, 466 Stockholders’ equity, 427, 470, 478, 482 Subsidiary ledger, 36 Sunk costs, 211, 217, 219 Supplementary schedules, 428 Suppliers: cash payments to, 441–442 CVP analysis and price changes from, 174 dependability of, 120 www.downloadslide.net I-12 Subject Index Sustainable business practices, 15 Sustainable income, 482–486 Swinmurn, Nick, 239 T T-account approach (statement of cash flows), 445–447 Target costs, 241 Target net income, 154–156, 172 Target selling price, 241–244 for absorption-cost pricing, 255 for variable-cost pricing, 257 Taxes: global differences in rates, 252, 258–259 income tax payable, 434, 443–444 Theory of constraints, 13, 179 Time (in time value of money), A-1 Time-and-material pricing, 244–247 Time periods: average collection, 475 base, 467 budget, 278 for budgeting vs long-range planning, 280 compounding, A-3, A-17 and discounting, A-11 payback, 400 in process cost systems, 33 Times interest earned, 481, 482 Time tickets, 39–40 Time value of money, A-1–A-19 and capital budgeting, 400 future value of an annuity, A-4–A-6 future value of a single amount, A-2–A-4 and incremental analysis, 212 and interest, A-1–A-6 present values, A-7–A-17 and use of financial calculators, A-16–A-18 TLV (total labor variance), 367–368 TMV (total materials variance), 364 Total assets, 470, 480–482 Total costs (on CVP graph), 153 Total costs accounted for, 76 Total cost of work in process, Total costs to be accounted for, 76 Total labor variance (TLV), 367–368 Total liabilities, 470 Total manufacturing costs, 9, 76 Total materials variance (TMV), 364 Total overhead variance, 369–370 Total quality management (TQM) systems, 13, 120–121 Total standard cost per unit, 362–363 Total units accounted for, 75 Total units to be accounted for, 74 Total variance, 363–364 TQM (total quality management) systems, 13, 120–121 Traceable costs, see Fixed costs Trading on the equity, 478 Trading securities, 484 Traditional costing: activity-based costing vs., 104–111 in service industries, 116 unit costs under, 110–111 Transfer prices, 247 Transfer pricing, 248–252 cost-based, 250–252 in global environment, 252, 258–259 market-based, 252 negotiated, 248–250 and outsourcing, 252 tax rates affecting, 252, 258–259 Treasurer, Trend analysis, see Horizontal analysis Triple bottom line (people, planet, profit): corporate social responsibility, 15 at Starbucks, 374–375 Turnover: asset, 477, 482 high-inventory, 477 inventory, 475–476, 482 receivables, 474–475, 482 U Underapplied overhead, 48–50 Unfavorable variances, 363–364, 371 Unionized workers, 369 Units completed, costing for, 76 Unit conversion cost, 75–76 Unit costs: with activity-based costing, 110–111 calculating, for variable-cost pricing, 256 in job order and process cost systems, 69 with traditional costing, 110–111 Units in process, costing for, 76 Unit-level activities, 111, 113 Unit materials cost, 75–76 Unit production costs: defined, 75 with FIFO method, 83–84 in process costing, 75–76, 83–84 Unit selling prices, 151 Units started and completed, 80 Unit variable costs, 151 Unprofitable segments, 219–221 Unskilled workers, 369 Unusual items, 483 V Value(s), adding, 2, 112–114 book, 219 future, A-2–A-6 measurement of, net present, 400–401 present, A-7–A-17 time value of money, A-1–A-19 Value-added activities, 112–114 Value chain, 12–13 Value investing, 465 Variable cost(s): computing, with high-low method, 145–147 and controllable margin, 334–335 in cost behavior analysis, 141–142, 147 on CVP graph, 153 in flexible budgets, 322–323 in incremental analysis, 212, 213 in negotiated transfer pricing, 250 overhead, 285–286 unit, 151 Variable costing See also specific topics, e.g.: Job costing absorption costing vs., 183–191 deciding when to use, 189–191 defined, 183 example of, 184–189 potential advantages of, 191 Variable cost per unit, 145 Variable-cost pricing, 244, 256–257 Variances: controllable, 370, 378–379 disclosing, 371 favorable, 364, 371 labor, 364, 367–370 and management by exception, 371 materials, 364–366 overhead, 369–370, 378–379 reporting, 370–371 spending, 370 in standard cost accounting systems, 375–377 total, 363–364 unfavorable, 363–364, 371 Vertical (common-size) analysis, 466, 470–472 of balance sheets, 470 of income statements, 470–472 Vertical growth, 247 Vice president of operations, Virtual companies, 252 Volatility (of earnings), 181 W Wages, 369 Weighted-average contribution margin, 175–178 Weighted-average method, 72–73, 85–86 Work force (for JIT), 120 Working capital, 473 Working capital ratio, 473 Work in process accounts, 68 Work in process inventory, 36–37, 42 Y Year-end balance, 49 www.downloadslide.net RAPID REVIEW Chapter Content MANAGERIAL ACCOUNTING (Chapter 1) COST-VOLUME-PROFIT (Chapters and 6) Characteristics of Managerial Accounting Types of Costs Primary users Internal users Reports Internal reports issued as needed Purpose Special purpose for a particular user Content Pertains to subunits, may be detailed, use of relevant data Verification No independent audits Variable costs Vary in total directly and proportionately with changes in activity level Fixed costs Remain the same in total regardless of change in activity level Mixed costs Contain both a fixed and a variable element CVP Income Statement Format Types of Manufacturing Costs Total Direct materials Raw materials directly associated with finished product Direct labor Work of employees directly associated with turning raw materials into finished product Manufacturing overhead Costs indirectly associated with manufacture of finished product JOB ORDER AND PROCESS COSTING (Chapters and 3) Sales Variable costs $xx xx xx xx $xx Contribution margin Fixed costs Net income Per Unit $xx xx $xx Unit contribution margin Unit selling price Unit variable costs Types of Accounting Systems Job order Costs are assigned to each unit or each batch of goods Process cost Costs are applied to similar products that are mass-produced in a continuous fashion Break-even point in units Fixed costs Unit contribution margin* Break-even point in dollars Fixed costs Contribution margin ratio* Job Order and Process Cost Flow Job Order Cost Flow Process Cost Flow Direct Materials Direct Labor Manufacturing Overhead Direct Materials Direct Labor Manufacturing Overhead Required sales in units for target net income Degree of operating leverage (Fixed costs Target net income) Contribution margin Unit contribution margin Net income *For multiple products, use weighted-average INCREMENTAL ANALYSIS (Chapter 7) Work in Process Inventory Job No 101 Job No 102 Job No 103 Work in Process Finished Goods Inventory Finished Goods Inventory Cost of Goods Sold Cost of Goods Sold Identify the relevant costs associated with each alternative Relevant costs are those costs and revenues that differ across alternatives Choose the alternative that maximizes net income Opportunity costs are those benefits that are given up when one alternative is chosen instead of another one Opportunity costs are relevant costs Sunk costs have already been incurred and will not be changed or avoided by any future decision Sunk costs are not relevant costs PRICING (Chapter 8) External Pricing ACTIVITY-BASED COSTING (Chapter 4) Identify and classify the activities involved in the manufacture of specific products and assign overhead to cost pools Markup percentage Desired ROI per unit Target selling price per unit Total unit cost Variable cost Opportunity cost Compute the activity-based overhead rate for each cost pool Allocate overhead costs to products using the overhead rates determined for each cost pool Total unit cost ( unitTotalcost Transfer Pricing Minimum transfer price Identify the cost driver that has a strong correlation to the costs accumulated in each cost pool Markup percentage ) www.downloadslide.net RAPID REVIEW Chapter Content BUDGETS (Chapter 9) Materials price variance AQ AP AQ SP Materials quantity variance Labor price variance AH AR AH SR Labor quantity variance Components of the Master Budget Sales Budget AQ SP SQ SP Hayes Co Budget Production Budget Direct Materials Budget Direct Labor Budget AH SR SH SR Rightride * Overhead controllable variance Actual overhead Overhead budgeted Manufacturing Overhead Budget Operating Budgets * Overhead volume variance Fixed overhead rate Normal capacity hours Standard hours allowed *Appendix coverage CAPITAL BUDGETING (Chapter 12) Selling and Administrative Expense Budget Annual Rate of Return Budgeted Income Statement Capital Expenditure Budget Cash Budget Annual rate of return Expected annual net income Average investment Cash payback period Cost of capital investment Annual cash inflow Cash Payback Budgeted Balance Sheet Financial Budgets Discounted Cash Flow Approaches Compute net present value (a dollar amount) If net present value is zero or positive, accept the proposal If net present value is negative, reject the proposal Types of Responsibility Centers Cost Profit Investment Expenses only Expenses and Revenues Expenses and Revenues and ROI Return on Investment Return on investment (ROI) Compute internal rate of return (a percentage) If internal rate of return is equal to or greater than the minimum required rate of return, accept the proposal If internal rate of return is less than the minimum rate, reject the proposal STATEMENT OF CASH FLOWS (Chapter 13) Investment center controllable margin Average investment center operating assets STANDARD COSTS (Chapter 11) Standard Cost Variances Materials price variance Labor price variance Overhead controllable variance Total materials variance Total labor variance Total overhead variance Materials quantity variance Labor quantity variance Overhead volume variance Linked process across perspectives: Customer Internal Process Cash flows from operating activities (indirect method) Net income Add: Losses on disposals of assets Amortization and depreciation Decreases in noncash current assets Increases in current liabilities Deduct: Gains on disposals of assets Increases in noncash current assets Decreases in current liabilities Net cash provided (used) by operating activities Cash flows from operating activities (direct method) Cash receipts (Examples: from sales of goods and services to customers, from receipts of interest and dividends on loans and investments) Cash payments (Examples: to suppliers, for operating expenses, for interest, for taxes) Cash provided (used) by operating activities Balanced Scorecard Financial Internal Rate of Return Net Present Value RESPONSIBILITY ACCOUNTING (Chapter 10) Learning and Growth $X X X X (X) (X) (X) $X $X (X) $X www.downloadslide.net RAPID REVIEW Chapter Content FINANCIAL STATEMENT ANALYSIS (Chapter 14) Ratio Formula Purpose or Use Current assets }}} Current liabilities Measures short-term debt-paying ability Cash 1 Short-term investments 1  Accounts receivable (net) }}}} Current liabilities Measures immediate short-term liquidity Liquidity Ratios Current ratio Acid-test (quick) ratio Accounts receivables turnover Inventory turnover Net credit sales }} }} Average net accounts receivable Cost of goods sold }}} Average inventory Measures liquidity of receivables Measures liquidity of inventory Profitability Ratios Net income } } Net sales Measures net income generated by each dollar of sales Asset turnover Net sales }}} Average total assets Measures how efficiently assets are used to generate sales Return on assets Net income }}} Average total assets Measures overall profitability of assets Net income Preferred dividends Return on common stockholders’ equity Measures profitability of stockholders’ investment Earnings per share (EPS) 10 Price-earnings (P-E) ratio 11 Payout ratio Profit margin Average common stockholders’ equity Net income Preferred dividends Weighted-average common shares outstanding Market price per share of stock }}}} Earnings per share Measures net income earned on each share of common stock Measures the ratio of the market price per share to earnings per share Cash dividends declared on common stock }} }}} } Net income Measures percentage of earnings distributed in the form of cash dividends Total liabilities } }} Total assets Measures percentage of total assets provided by creditors Net income Interest expense Income tax expense }} }}}} } Interest expense Measures ability to meet interest payments as they come due Net cash provided by operating activities Capital expenditures Cash dividends Measures the amount of cash generated during the current year that is available for the payment of additional dividends or for expansion Solvency Ratios 12 Debt to assets ratio 13 Times interest earned 14 Free cash flow www.downloadslide.net WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA ... have forgotten before a quiz or exam / WileyPLUS with ORION Practice Maintain International Student Version MANAGERIAL ACCOUNTING TOOLS FOR BUSINESS DECISION MAKING SEVENTH EDITION Jerry J Weygandt. .. in managerial accounting LEARNING OBJECTIVE Identify the features of managerial accounting and the functions of management Managerial accounting provides economic and financial information for. .. quantify information so you can make informed business decisions Comparing Managerial and Financial Accounting There are both similarities and differences between managerial and financial accounting