Instructor’s Manual to accompany ACCOUNTING FOR DECISION MAKING & CONTROL EIGHTH EDITION JEROLD L ZIMMERMAN WILLIAM E SIMON GRADUATE SCHOOL OF BUSINESS ADMINISTRATION UNIVERSITY OF ROCHESTER © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized For sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter CONTENTS PREFACE ii PART I: USING THE TEXT Suggested Course Outlines iii Chapter Teaching Suggestions vii Suggested Assignment Problems & Cases Alphabetical Listing of Problems and Cases PART II: SOLUTIONS TO PROBLEMS AND CASES Introduction xxv xxxiii 1-1 The Nature of Costs 2-1 Opportunity Cost of Capital and Capital Budgeting 3-1 Organizational Architecture 4-1 Responsibility Accounting and Transfer Pricing 5-1 Budgeting 6-1 Cost Allocation: Theory 7-1 Cost Allocation: Practices 8-1 Absorption Cost Systems 9-1 10 Criticisms of Absorption Cost Systems: Incentive to Over-produce 10-1 11 Criticisms of Absorption Cost Systems: Inaccurate Product Costs 11-1 12 Standard Costs: Direct Labor and Materials 12-1 13 Overhead and Marketing Variances 13-1 14 Management Accounting in a Changing Environment 14-1 ii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter PREFACE This Instructor’s Manual for Accounting for Decision Making & Control contains three parts The first part describes how the text can be used in a variety of courses: a seven week executive MBA, a quarter-length course, and a semester-length course Sample class outlines are provided for each type of course The first part also contains detailed chapter-by-chapter teaching summaries (including suggested problems and cases) of how I teach each chapter, what topics to emphasize, and the strategy for presenting the subject matter Also included is a classification of the end-of-chapter problems and cases by level of difficulty and degree of classroom discussion generated, and an alphabetical index to all problems and cases The second part of this Instructor’s Manual contains detailed solutions to the endof-chapter problems and cases Many of these problems developed out of discussions with students in actual situations at their companies, or are based on my consulting experience All of the problems have been used on exams and have been taught in class several times However, no amount of prior usage can guarantee that a bright student will not see a new interpretation or solution Thought-provoking problems have this characteristic I am very interested in receiving feedback on the problems and cases, as well as the text Please e-mail me at jerry.zimmerman@simon.rochester.edu The third part of this Manual is a test bank, including solutions Producing good exam problems and solutions is difficult Textbook authors are always welcome recipients and grateful acknowledgers of such material iii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter PART I: USING THE TEXT Suggested Course Outlines Quarter, Semester, and Executive Courses Accounting for Decision Making & Control can be used in quarter- and semesterlength introductory MBA managerial accounting courses and 7-8 week executive MBA courses The following three tables suggest course outlines for quarter, semester, and executive MBA courses None of the outlines cover capital budgeting (Chapter 3) Quarter-length courses Table presents a ten-week quarter course The text contains too much material to cover it all comfortably in a ten week quarter course Chapter on capital budgeting, and all the appendices must be omitted This allows time for covering the crucial problems and a few supplemental cases, but limited opportunity for outside readings Semester-length courses Table presents a thirteen-week semester course A semester format gives the instructor added flexibility for covering Chapter on capital budgeting, appendices, outside readings, additional topics, or cases Depending on the instructor’s interest and program demands, the book complements additional topics on ethics, international examples, new manufacturing advances, quality management, sigma, ABC and ABM, balanced score card, lean manufacturing, etc These topics fit naturally toward the end of the course after developing the underlying framework and an understanding of the evolution of costing systems Executive MBA courses Table presents the outline for a seven-week executive course The book works well with executive MBA students In a seven week, one-day-a-week setting with three hours of lectures per week, the course is fast paced Executive students, having encountered similar situations, find the problems very realistic, and are especially receptive to integrating the accounting, economics, and organizational aspects of the material However, much of the material must be pared back Delete all of the appendices, Chapter on capital budgeting, and Chapters 12 and 13 on standard costs and variances iv © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter TABLE 1: Ten-Week Quarter Course (Two 90 minute lectures per week) (No coverage of Material in Appendices) Class No Chapter Topic 1 Introduction 2 Nature of Costs Nature of Costs 4 Organizational Architecture 5 Responsibility Accounting and Transfer Pricing Responsibility Accounting and Transfer Pricing Budgets and Budgeting Budgets and Budgeting Cost Allocation: Theory 10 Cost Allocation: Practices 11 MIDTERM 12 9Absorption Cost Systems 13 9Absorption Cost Systems 14 10Criticisms of Absorption Cost Systems: Incentive to Overproduce 15 11Criticisms of Absorption Cost Systems: Inaccurate Product Costs 16 12Standard Costs: Direct Labor and Materials 17 12Standard Costs: Direct Labor and Materials 18 13Overhead and Marketing Variances 19 14Management Accounting in a Changing Environment 20 14Management Accounting in a Changing Environment Notes: Each class can present some of the material in the chapter and cover 2-3 homework problems Assigning a longer case every 2-3 weeks also breaks up the pace of the course and allows the students to apply the concepts to longer, more difficult problems This format does not allow much time for outside readings To read and understand the chapter and work 2-3 problems requires about 5-6 hours of preparation time per class v © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter TABLE 2: Thirteen-Week Semester Course (Two 90 minute lectures per week) Week Chapter 1 Introduction Nature of Costs 2 Nature of Costs Appendix: Estimating Fixed and Variable Costs 3 Opportunity Cost of Capital and Capital Budgeting 4 Organizational Architecture Responsibility Accounting and Transfer Pricing 5 Responsibility Accounting and Transfer Pricing Budgets and Budgeting 6 Budgets and Budgeting Cost Allocation: Theory 7 Cost Allocation: Theory Cost Allocation: Practices Appendix — Reciprocal Method for Allocating Service Department Costs 9 Topic MIDTERM Absorption Cost Systems Absorption Cost Systems Appendix — Process Costing 10 10Criticisms of Absorption Cost Systems: Incentive to Overproduce 11Criticisms of Absorption Cost Systems: Inaccurate Product Costs 11 12Standard Costs: Direct Labor and Materials 12 13Overhead and Marketing Variances Outside readings & cases (new manufacturing systems, ABC, Target costing, etc.) 13 14 Management Accounting in a Changing Environment Outside readings & cases (new manufacturing systems, TQM, JIT, ABM, etc.) Notes: Each class can present some of the material in the chapter and cover 2-3 homework problems Assigning a longer case to be handed in every 2-3 weeks also breaks up the pace of the course and allows the students to apply the concepts to longer, more difficult problems The semester format allows time for outside readings to supplement the text Chapter on capital budgeting is not covered, Chapter 14 can be increased to two weeks and a capstone case added vi © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter TABLE 3: Seven-Week Executive MBA Course (3 hours of lecture per week) (No coverage of Material in Appendices) Week Chapter Topic 1 Introduction Nature of Costs Organizational Architecture Responsibility Accounting and Transfer Pricing 6Budgets and Budgeting 7Cost Allocation: Theory 8Cost Allocation: Practices 9Absorption Cost Systems 10Criticisms of Absorption Cost Systems: Incentive to Overproduce 11 Criticisms of Absorption Cost Systems: Inaccurate Product Costs 14 Management Accounting in a Changing Environment Notes: The fast paced coverage of the material works especially well with executives, most of whom have confronted work situations similar to the assignments They relate quite well to the end-ofchapter material and there are usually lively class discussions In fact, many of the problems in the text resulted from discussions with executive students outside of class describing a job experience This course works best if the students have had a microeconomics course There is no midterm exam This format requires that the appendices be omitted If it is necessary to cover standard costs and variances, assign Chapter 12 on direct labor and material standards Standard costs can be added to the first half of lecture number Very little outside reading should be used unless it is optional Reading the chapters and working a few homework problems each week will quickly consume the student’s available study time vii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Chapter Teaching Suggestions My teaching approach is to require the students not only to read the assigned chapter, but also to prepare and submit a few problems at the beginning of class This not only provides a foundation for constructive class discussion, but also ensures that students not fall behind Throughout the course I emphasize that students of managerial accounting will develop the very valuable skill of knowing how to take a diverse set of facts and figures and reduce them to a cogent financial analysis They will become more skilled in constructing spreadsheets and doing financial analysis I remind them of the oft-heard analogy, ―Accounting is the language of business.‖ Developing the understanding of accounting and how to communicate via financial analysis is akin to learning a foreign language, and similarly requires constant practice The daily assignments provide this discipline Chapter Introduction Chapter summarizes the course and contains a number of important concepts, including: internal versus external accounting; the trade-off between using the accounting system for decision making versus using it for control; single versus multiple accounting systems; the role of the controller; and economic Darwinism A good way to begin the first lecture is to hand out a copy of the Vortec problem statement (Chapter 1, section F) and give the students five minutes to sketch out the solution Then ask them, how many would accept the special order? This is a good way to generate class discussion the first day By following the text’s analysis of Vortec in Chapter 1, several questions naturally arise, including: • What additional information is required? • What is the difference between variable and average costs? • How the incentives of various managers to accept the order differ? Vortec is a good ice breaker which allows the students to see that the accounting costs are being used for a variety of purposes; in particular, they are being used for both decision making and control Since the trade-off between decision making and control is an important organizing feature of the text, it is useful to introduce this key pedagogy early in the course (Point out that Chapter elaborates on decision making and Chapters and describe the general issues involving control.) I also like to reinforce the multiple roles of accounting using Figure 1-1 Finally, it is important to spend a few minutes discussing the importance of Economic Darwinism Many of the topics we discuss (cost allocations, budgeting, product costing) have survived in competitive industries for long periods of time For the average firm, these accounting procedures must be yielding benefits at least as large as their costs This does not mean that these procedures are cost beneficial for every firm Nor does it mean viii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter that these accounting systems operate at zero costs (including the costs of dysfunctional decision making) Chapter The Nature of Costs I begin this lecture by defining opportunity costs, ―The sacrifice forgone from a specific decision.‖ Students find this definition too abstract to have much meaning Plan on spending 20 - 30 minutes giving examples and working through text problems A good example to use to illustrate opportunity costs is: ―How you decide what to this Saturday night?‖ First you think about the opportunities (movie, concert, watching TV, studying managerial accounting) (The last gets a good laugh.) Then you think about what you give up if you a particular activity You forgo cash in some cases as well as the opportunity to something else If your managerial accounting final exam is on Monday, going to a concert precludes studying for the final If you fail the final and have to repeat the course in the summer, this can impose large costs, especially if you are unable to get a good summer internship This simple example illustrates all the key points of opportunity costs: • opportunity costs involve both pecuniary and non-pecuniary considerations, • • opportunity costs are forward looking, opportunity costs vary with the opportunity set (e.g., which movies are playing and when assignments are due) Two problems in the text are very good at driving home the concept of opportunity costs: P2-9 Emrich Processing P2-26 Eastern University Parking Emrich (P2-9) always generates a 15 minute discussion Ask the students what cost of the remaining acid should be considered in setting the price for the new contract Possible answers will be $700, $500, $0, and -$400 The correct answer is -$400 In this case opportunity costs are negative because the firm can avoid the disposal costs This then leads into a question of what price to charge Since we don’t know the customer’s demand curve, we can’t set a price, but the discussion helps illustrate the relation between costs and pricing (a point that arises throughout the course) Appendix A discusses the relation between costs and pricing Eastern University Parking (P2-26) can generate as much as 20 to 30 minutes of discussion Parking is a universal problem on all campuses, and hence, this problem hits a strong emotional nerve Most students initially overlook the opportunity cost of land in setting the parking fees and will discuss other problems with the parking system for five minutes or so before someone hits on the problem of how land is being valued It isn’t And this creates the bias towards surface lots Once everyone understands this, then ask, ―Why has the University systematically priced its land at zero?‖ ―Are the administrators dumb?‖ Most students are willing to stop here and say yes But prompt them by asking, ix © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter ―What are the organizational consequences of including land costs in parking fees?‖ The solution describes the organizational issues This problem illustrates dramatically how accounting costs have both decision making and organizational implications Mastich Counters (P2-28) is a great problem for student discussion, especially for executive students because it involves primarily a human resources question that they have all encountered – should firms adopt a take-it or lose-it policy for vacation accruals? At this point I usually compare opportunity and accounting costs The key point is that most accounting costs are historical in nature and hence backward-, not forward-looking The final point to emphasize is that estimating opportunity costs is itself a costly process Much analysis is usually required to define the opportunity set and to estimate the benefits forgone from each alternative Because opportunity costs are costly to estimate, proxies are often used, such as accounting costs After introducing opportunity costs, I spend the rest of the time on cost variability and review total, average, fixed, variable, and marginal costs Students will remember these terms from their economics course, and are reassured when told that we simplify the economics treatment by assuming cost curves are straight lines, thus eliminating derivatives from this course This discussion is very important because it is one of the first times in the curriculum that two courses are integrated with and build on each other A good break-even problem is Amy’s Boards (P2-44), which illustrates that the snow boards are a variable cost before they are purchased, but become a fixed cost once purchased In later chapters, students have difficulty knowing how to handle fixed costs Amy’s Boards provides a simple, intuitive example of how fixed costs arise from making the capacity decision Another good problem, especially if the students have had a finance course is Candice (P2-34) It is a simple breakeven problem whether the question asks to find the breakeven of two alternative technologies, one has high fixed costs and low variable costs and the other technology is the opposite To select the optimum technology depends on expected volume, which is not given So the first punch line is the optimum technology is based on profit maximization, not breakeven The second punch line is that the firm’s operating leverage arises from prior firm-value-maximizing decisions x © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems & Cases This table contains a listing of the best problems in each chapter Problems and cases are classified as ―basic problems,‖ ―more challenging problems,‖ and ―extensions to text.‖ Basic problems review the essential material in the text in a straightforward fashion More challenging problems go beyond the basic material and require the student to exercise some judgment and conduct some analysis These problems are either more unstructured or require some further application of topics covered in the text Extensions to the text are problems that introduce new topics not discussed in the text xxv © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems Chapter Introduction Basic Problems P1-1 P1-2 P1-4 P1-6 P1-8 More Challenging Problems Extensions to Text MBA Students P1-3 U.S and Japanese Tax Laws P1-4 Managers Need Accounting One Cost System Isn't Enough P1-5 Budgeting Information Using Accounting for Planning P1-7 Parkview Hospital Golf Specialties Montana Pen Suggested Assignment Problems Chapter Nature of Costs Basic Problems P2-1 Darien Industries P2-2 Negative Opportunity Costs P2-4 Silky Smooth Lotions P2-5 J P Max Dept Stores P2-6 Vintage Cellars P2-7 ETB P2-8 Taylor Chemicals P2-15 Measer P2-16 Affording a Hybrid P2-19 MedView P2-20 Manufacturing Cost Classification P2-24 Exotic Roses P2-33 Littleton Imaging More Challenging Problems P2-3 NPR P2-9 Emrich* P2-10 Gas Prices* P2-12 Volume and Profits P2-13 American Cinema P2-17 Easton Diagnostics P2-21 Australian Shipping* P2-22 iGen3 P2-25 Oppenheimer Visuals P2-26 Eastern University Parking* P2-29 Optometry Practice P2-31 News.com P2-34 Candice Company P2-35 Mat Machinery P2-36 Cost Behavior Patterns P2-37 Royal Holland Line P2-38 Roberts Machining P2-39 Doral Rentals P2-41 Happy Feet P2-42 Digital Convert P2-43 APC Electronics Extensions to Text P2-11 P2-14 P2-18 P2-23 P2-27 P2-28 P2-30 P2-32 P2-40 P2-44 P2-45 C2-1 C2-2 C2-3 Penury Company Home Auto Parts* Spa Salon Adapt, Inc GRC Mastich Counters* JLE Electronics Kinsley & Sons Fuller Aerosols Amy’s Boards* Blue Sage Mountain Old Turkey Mash* Mowerson Division Puttmaster *Problem generates much classroom discussion xxvi © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems (cont.) Chapter Basic Problems More Challenging Problems Opportunity Cost of Capital and Capital Budgeting P3-1 P3-2 P3-3 P3-4 P3-7 P3-9 P3-10 P3-11 P3-13 P3-16 P3-17 P3-19 P3-24 IRR Accelerated Depreciation Jasper, Inc Just One, Inc Northern Sun, Inc Lottery Mr Jones’ Retirement NPV vs Payback New Car South American Mining House Mortgage Toledo Stadium Housing Markets P3-5 P3-8 P3-12 P3-14 P3-15 P3-18 P3-20 P3-21 P3-22 P3-25 P3-27 Organizational Architecture P4-1 P4-2 P4-3 P4-4 P4-6 Empowerment Pay for Performance Course Packets Allied Van Lines University Physician Compensation American InterConnect I Vanderschmidt’s Sales Commisions Formula 409 Theory X – Theory Y P4-5 P4-12 P4-14 P4-15 P4-16 P4-17 P4-18 P4-19 P4-7 P4-9 P4-10 P4-11 P4-13 Equity Corp Ab Landlord Clean Tooth National Taxpayers Union Federal Dam Project Flower City Grocery PQR Coal Student Loan Program Geico Mortgage Department Dakota Mining Voluntary Financial Disclosure Pratt & Whitney American InterConnect II Tipping* White’s Department Store Coase Farm Rothwell Inc Gong-Fen* Extensions to Text P3-6 P3-23 P3-26 P3-28 P4-8 P4-20 P4-21 C4-1 C4-2 Declining Market, Inc Depreciation Tax Shield Electric Generator Overland Steel Raises International Computer Co Repro Corporation* Christian Children’s Fund Woodhaven Service* *Problem generates much classroom discussion xxvii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems (cont.) Chapter Basic Problems Responsibility Accounting and Transfer Pricing P5-1 P5-2 P5-3 P5-4 P5-7 P5-9 P5-15 P5-16 P5-22 Budgeting P6-1 P6-4 P6-5 P6-6 P6-8 P6-9 P6-11 P6-12 P6-13 P6-14 P6-16 P6-19 P6-28 Canadian Subsidiary Phipps Electronics Sunder Properties Economic Earnings ICB, Intl Microelectronics CJ Equity Partners* Sunstar Appliances Evergreen Nursery and Landscape More Challenging Problems P5-6 P5-11 P5-13 P5-17 P5-18 P5-19 P5-20 P5-23 P5-25 P5-27 C5-2 G Bennett Stewart* P6-2 Budget Lapsing P6-7 DMP Consultants P6-10 Federal Insurance P6-15 Coating Department P6-17 Marketing Plan P6-20 Feder Purchasing Department P6-21 Access.Com P6-22 Videx P6-23 New York Fashions P6-25 Adrian Power P6-27 Madigan Modems P6-29 Troika Toys C6-1 Metal Press Cogen Beckett Automotive Group Stale-Mart* R&D Inc Flat Images Premier Brands Transfer Price Company Infantino Toyota* Serviflow Executive Inn* Investment Banks Golf World* Potter-Bowen* International Telecon* Panrude Airfreight Webb & Drye* Spa Ariana Picture Maker City Hospital Nursing* Brehm Vineyards M&S Mortgage Cellular First Artisans Shirtcraft Extensions to Text P5-5 P5-8 P5-10 P5-12 P5-14 P5-21 P5-24 P5-26 C5-1 C5-3 Performance Technologies Shop and Save* US Copiers* University Lab Testing WBG* Easton Electronics* XBT Keyboards Wujo Celtex* Royal Resort & Casino* P6-3 P6-18 P6-24 P6-26 C6-2 Ice Storm* Veriplex* Madden International* Republic Insurance* Scion* *Problem generates much classroom discussion xxviii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems (cont.) Chapter Basic Problems More Challenging Problems Extensions to Text Cost Allocations: Theory P7-1 P7-2 P7-7 P7-8 P7-9 P7-10 P7-11 P7-12 P7-13 P7-14 P7-17 P7-19 P7-20 P7-26 MRI Fair allocations Wasley Hallsite Imaging Jolsen International Winterton Group National Training Institute Encryption, Inc.* Ball Brothers Purchasing Dept Telstar Electronics Vorma World Imports Painting Department Plastic Chairs P7-3 P7-4 P7-5 P7-6 P7-16 P7-22 P7-23 P7-27 P7-28 C7-1 Slawson Corporate Jet* Massey Electronics Avid Pharmaceuticals Fuentes Systems Taylor Connect Economic Experts* Woodley Furniture* Tramsmation Phonetex* P7-15 P7-18 P7-21 P7-24 P7-25 P7-29 P7-30 C7-2 Diagnostic Imaging Software Bio Labs* Scanners Plus* Finsys Allied Adhesives Symmertic Inc* BFR Ship Building* Durango Plastics* Cost Allocations: Practices P8-2 P8-3 P8-5 P8-6 P8-7 P8-8 P8-14 P8-22 P8-23 P8-25 P8-28 Outback Opals Rose Hospital Fidelity Bank Joint Products, Inc Donovan Steel Murray Hill’s Untimely Demise Vigdor Wood Products Littleton Medical Center Aurora Medical Center Barry’s Fashions Columbine Granite P8-1 P8-4 P8-11 P8-12 P8-13 P8-15 P8-16 P8-18 P8-19 P8-21 P8-24 P8-27 P8-30 C8-1 Step Down Mystic Herbals WWWeb Marketing* ITI Technology Metro Blood Bank Advanced Micro Processors Jason Rocks Doe Company RBB Brands* Beckett Manufacturing Grove City Broadcasting* Thompson Instruments* IVAX Carlos Sanguine Winery* P8-9 P8-10 P8-17 P8-20 P8-26 P8-29 C8-2 Enzymes Sunder Toys Ferguson Metals Karsten Mills* Tariffs Inc Jones Consortium* Wyatt Oil* *Problem generates much classroom discussion xxix © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems (cont.) Chapter Absorption Cost Systems 10 Criticisms of Absorption Cost Systems: Incentive to Over-produce Basic Problems More Challenging Problems P9-1 P9-2 P9-3 P9-5 P9-6 P9-7 P9-8 P9-9 P9-10 P9-11 P9-13 P9-14 P9-15 P9-23 P9-25 Equivalent Units (appendix) IPX Packaging Densain Water Pool Scrubbers Thermalloy Lys Wheels Ware Paper Box DeJure Scents Chemtrex (appendix) Media Designs Rick’s Bags Unknown Company Wellington Bartolotta Company Frames, Inc P9-4 P9-12 P9-16 P9-17 P9-19 P9-20 P9-22 P9-24 P9-27 P9-28 P9-30 MacGiver Brass* Simple Plant Advanced Medical Dead Eye Putters DigiEar Specialized Surgical Instrument Jacklin Stampings Kitchen Rite* Mutual Fund Company* Amalfi Texts Magic Floor P10-1 P10-2 P10-3 P10-4 P10-6 P10-7 P10-9 P10-10 P10-12 P10-13 Federal Mixing Xerox Varilux Zipp Cards Zeflax Bottles Alliance Tooling CLIC Lighters Medford Mug Company Mystic Mugs Avant Designs P10-5 TransPacific Bank* P10-8 Aspen View P10-11 Kothari Inc.* P10-14 Taylor Chains P10-15 Conner Coffees* P10-16 Kathy’s Mats P10-18 DIM P10-21 Blauvelt Products P10-22 UniCom P10-23 Sants Brake Co Extensions toText P9-18 P9-21 P9-26 P9-29 C9-1 C9-2 Welding Robots* Pebble Beach Sandals Hurst Mats* Pyramid Products* Heath Metal Products* Portable Phones, Inc.* P10-17 Navisky P10-19 Easton Plant P10-20 Weststar Applicances C10-1 Joon* *Problem generates much classroom discussion xxx © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems (cont.) Chapter 11 Criticisms of Absorption Cost Systems: Inaccurate Product Costs Basic Problems P11-1 P11-2 P11-3 P11-4 P11-5 P11-15 P11-18 Maui Seminar GAMMA ABC & Volume Changes Milan Pasta Implementing ABC Toby Manufacturing Hospital Admission Office 12 Standard Costs: Direct P12-1 Medical Instruments Labor and Materials P12-2 Mickles Ltd P12-5 AN7-X1 P12-6 Changing Standards* P12-7 Standard Cost Systems P12-8 Smythe and Yves P12-9 Healing Touch P12-10 Marian Health Care System P12-11 Zinc Faucets P12-12 Howard Binding P12-14 Flower City Cartridges P12-15 Great Southern Furniture P12-17 Jillian Soups More Challenging Problems Extensions to Text P11-6 Astin Car Stereos* P11-7 DVDS P11-8 True Cost Manufacturing, Inc.* P11-12 Rextera* P11-13 CB Medical Technologies P11-14 Wedig Diagnostics P11-16 Kay Enterprises P11-21 Brickley Chains C11-1 Tilist Golf C11-3 DynaGolf* P11-9 Friendly Grocer* P11-10 Houston Milling P11-11 Sanchez Gadgets* P11-17 Goodstone Tires* P11-19 ABC and Taxes P11-20 Familia Insurance Company* C11-2 SnapOn Fasteners* P12-3 Alexander Products P12-4 Oaks Auto Supply P12-13 Fast Fax P12-16 Cibo Leathers P12-18 JLT Chemicals P12-20 Starling Coatings C12-2 Rust Belt Mufflers* P12-19 Julene Inc C12-1 Domingo Cigars* *Problem generates much classroom discussion xxxi © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Suggested Assignment Problems (cont.) Chapter Basic Problems More Challenging Problems Extensions to Text 13 Overhead and Marketing Variances P13-1 P13-2 P13-4 P13-5 P13-7 P13-11 P13-12 P13-14 P13-16 P13-17 P13-18 P13-20 On-Call Purchasing Department* Logical Solutions Oneida Metal Printers, Inc Commando Force Wine Distributors Turow Trailers* Artco Planters Shady Tree Manufacturing Ultrasonic MRI Department P13-3 P13-6 P13-8 P13-9 P13-10 P13-15 P13-19 P13-21 Spectra Inc.* Beanie Babies Galt Electric Motors Western Sugar* Soldering Department Betterton Corporation Megan Corp Anpax, Inc P13-13 Auden Manufacturing P13-22 Mopart Division* C13-1 Lancaster Chamber Orchestra* 14 Management Accounting in a Changing Environment P14-1 P14-3 P14-4 P14-6 P14-7 P14-10 British Airways Fiedler International Guest Watches* Old Town Roasters The Pottery Store TQM at Stowbrdidge Div P14-2 Chateau Napa P14-5 Applying TQM in Manufacturing versus Administration* P14-9 Stirling Acquisition* P14-11 Warren City Parts* P14-14 Tagway 4000* P14-8 Software Development, Inc.* P14-12 Secure Servers Inc P14-13 Kollel Hospital* C14-1 Global Oil* C14-2 Productivity Measures *Problem generates much classroom discussion xxxii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter ALPHABETICAL LISTING OF PROBLEMS AND CASES (H DENOTES HEALTH CARE RELATED PROBLEM; S DENOTES SERVICE INDUSTRY RELATED PROBLEM) Problem/Case Title Title Chapter/Problem/ Aspen View Astin Car Stereos Auden Manufacturing Aurora Medical Center (H) Australian Shipping (S) Avant Designs (S) Avid Pharmaceuticals (H) Case Number A Ab Landlord (S) ABC & Volume Changes ABC and Taxes Accelerated Depreciation Access.Com (S) Adapt, Inc (S) Adrian Power Advanced Medical (H) Advanced Micro Processors Affording a Hybrid Alexander Products Alliance Tooling Allied Adhesives Allied Van Lines Amalfi Texts American Cinema (S) American InterConnect I (S) American InterConnect II (S) Amy’s Boards (S) AN7-X1 Anpax, Inc APC Electronics Applying TQM in Artco Planters Artisans Shirtcraft Problem/Case Ch 3, P3-8 Ch 11, P11-17 Ch 11, P11-3 Ch 3, P3-2 Ch 6, P6-12 Ch 2, P2-23 Ch 6, P6-16 Ch 8, P8-16 Ch 2, P2-17 Ch 12, P12-3 Ch 10, P10-8 C 7, P7-22 Ch 4, P4-4 Ch 9, P9-27 Ch 2, P2-14 Ch 4, P4-8 Ch 4, P4-16 Ch 2, P2-44 Ch 12, P12-5 Ch 13, P13-22 Ch 2, P2-43 Ch 14, P14-5 Ch 13, P13-17 Ch 6, Case 6-1 Ch 10, P10-9 P10-8 P11-6 P13-13 P8-23 P2-21 P10-13 P7-6 B Case Number Ball Brothers Purchasing Dept Barry’s Fashions (S) Bartolotta Company Beanie Babies (S) Beckett Automotive Group (S) Beckett Manufacturing Betterton Corporation BFR Ship Building Bio Labs (H) Blauvelt Products Blue Sage Mountain (S) Brehm Vineyards Brickley Chains British Airways (S) Budget Lapsing Budgeting P7-13 P8-25 P9-23 P13-6 P5-13 P8-21 P13-15 P7-27 P7-18 P10-21 P2-45 P6-25 P11-21 P14-1 P6-4 P1-5 Canadian Subsidiary P5-1 xxxiii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Candice Company Carlos Sanguine Winery CB Medical Technologies Cellular First Celtex Changing Standards Chateau Napa Chemtrex (appendix) Christian Children’s Fund (S) Cibo Leathers City Hospital Nursing (H) CJ Equity Partners (S) Clean Tooth CLIC Lighters Coase Farm (S) Coating Department Cogen Columbine Granite Commando Force (S) Conner Coffees Corporate Jet (S) Cost Behavior Patterns Course Packets P2-34 C8-1 P11-13 P6-29 C5-1 P12-6 P14-2 P9-10 C4-1 P12-16 P6-23 P5-15 P3-12 P10-9 P4-17 P6-8 P5-11 P8-28 P13-11 P10-15 P7-4 P2-36 P4-3 DMP Consultants (S) Doe Company Domingo Cigars Donovan Steel Doral Rentals (S) Durango Plastics DVDS DynaGolf E Eastern University Parking (S) Easton Diagnostics Easton Electronics Easton Plant Economic Earnings Electric Generator Empowerment Emrich (S) Encryption, Inc Enzymes Equity Corp Equivalent Units (appendix) ETB Evergreen Nursery and Landscape (S) Executive Inn (S) Exotic Roses D Dakota Mining Darien Industries Dead Eye Putters Declining Market, Inc DeJure Scents Densain Water (S) Depreciation Tax Shield Diagnostic Imaging Software DigiEar (H) Digital Convert DIM P6-5 P8-18 C12-1 P8-7 P2-39 C7-2 P11-7 C11-3 P3-27 P2-1 P9-17 P3-6 P9-9 P9-3 P3-23 P7-15 P9-19 P2-42 P10-18 P2-26 P2-17 P5-21 P10-19 P5-4 P3-26 P4-1 P2-9 P7-12 P8-9 P3-5 P9-1 P2-7 P5-22 C5-2 P2-24 F Fair allocations Familia Insurance Company (S) Fast Fax Feder Purchasing Department (S) Federal Dam Project Federal Insurance (S) Federal Mixing Ferguson Metals P7-2 P11-20 P12-13 P6-11 P3-15 P6-6 P10-1 P8-17 xxxiv © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Fidelity Bank (S) Fiedler International (S) FinSys (S) Flat Images Flower City Cartridges Flower City Grocery Formula 409 Frames, Inc Friendly Grocer (S) Fuentes Systems Fuller Aerosols P8-5 P14-3 P7-24 P5-19 P12-14 P3-18 P4-11 P9-25 P11-9 P7-16 P2-40 Housing Markets Houston Milling Howard Binding Hurst Mats I P6-1 P13-8 P11-2 P2-10 P3-22 C14-1 P1-6 P6-7 P4-19 P11-17 P2-27 P12-15 P8-24 P14-4 J ICB, Intl (S) Ice Storm iGen3 Implementing ABC Infantino Toyota (S) International Computer Co International Telecon Investment Banks (S) IPX Packaging IRR ITI Technology IVAX G G Bennett Stewart Galt Electric Motors GAMMA Gas Prices Geico Global Oil Golf Specialties Golf World Gong-Fen (S) Goodstone Tires GRC Great Southern Furniture (S) Grove City Broadcasting (S) Guest Watches J P Max Dept Stores (S) Jacklin Stampings Jason Rocks Jasper, Inc Jillian Soups JLE Electronics JLT Chemicals Joint Products, Inc Jolsen International Jones Consortium (S) Joon Julene Inc H Hallsite Imaging Happy Feet Healing Touch Heath Metal Products Home Auto Parts Hospital Admission Office (H) House Mortgage (S) P7-8 P2-41 P12-9 C9-1 P2-14 P11-18 P3-17 P3-24 P11-10 P12-12 P9-26 P5-7 P6-3 P2-22 P11-5 P5-25 P4-20 P6-15 P6-2 P9-2 P3-1 P8-12 P8-30 P2-5 P9-22 P8-16 P3-3 P12-17 P2-30 P12-18 P8-6 P7-9 P8-29 C10-1 P12-19 K Karsten Mills P8-20 xxxv © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Kathy’s Mats Kay Enterprises Kinsley & Sons (S) Kitchen Rite Kollel Hospital Kothari Inc P10-16 P11-16 P2-32 P9-24 P14-13 P10-11 Metal Press Metro Blood Bank (H) Mickles Ltd Microelectronics Milan Pasta Montana Pen Mopart Division Mortgage Department (S) Mowerson Division Mr Jones’ Retirement MRI MRI Department Murray Hill’s Untimely Demise Mutual Fund Company (S) Mystic Herbals Mystic Mugs L Lancaster Chamber Orchestra (S) Littleton Imaging Littleton Medical Center Logical Solutions (S) Lottery Lys Wheels C13-1 P2-33 P8-22 P13-4 P3-9 P9-7 P5-6 P8-13 P12-2 P5-9 P11-4 P1-8 P13-22 P3-25 C2-2 P3-10 P7-1 P13-20 P8-8 P9-27 P8-4 P10-12 M M&S Mortgage (S) MacGiver Brass Madden International Madigan Modems Magic Floor Managers Need Accounting Information Manufacturing Cost Classification Marian Health Care System (H) Marketing Plan Massey Electronics Mastich Counters Mat Machinery Maui Seminar MBA Students Measer Medford Mug Company Media Designs (S) Medical Instruments MedView (H) Megan Corp N P6-27 P9-4 P6-24 P6-19 P9-30 P1-4 P2-20 P12-10 P6-9 P7-5 P2-28 P2-35 P11-1 P1-1 P2-15 P10-10 P9-11 P12-1 P2-19 P13-19 National Taxpayers Union National Training Institute (S) Navisky Negative Opportunity Costs New Car New York Fashions (S) News.com (S) Northern Sun, Inc NPR NPV vs Payback P3-14 P7-11 P10-17 P2-2 P3-13 P6-14 P2-31 P3-7 P2-3 P3-11 O Oaks Auto Supply (S) Old Town Roasters (S) Old Turkey Mash On-Call (S) One Cost System Isn't Enough Oneida Metal P12-4 P14-6 C2-1 P13-1 P1-2 P13-5 xxxvi © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Oppenheimer Visuals Optometry Practice (H) Outback Opals Overland Steel P2-25 P2-29 P8-2 P3-28 RBB Brands Repro Corporation Republic Insurance (S) Rextera Rick’s Bags Roberts Machining Rose Hospital Rothwell Inc Royal Holland Line (S) Royal Resort & Casino (S) Rust Belt Mufflers P Painting Department Panrude Airfreight (S) Parkview Hospital Pay for Performance Pebble Beach Sandals Penury Company Performance Technologies Phipps Electronics Phonetex Picture Maker Plastic Chairs Pool Scrubbers Portable Phones, Inc Potter-Bowen (S) PQR Coal Pratt & Whitney Premier Brands Printers, Inc Productivity Measures Purchasing Department Puttmaster Pyramid Products P7-20 P6-17 P1-7 P4-2 P9-21 P2-11 P5-5 P5-2 C7-1 P6-22 P7-24 P9-5 C9-2 P6-10 P3-20 P4-12 P5-20 P13-7 C14-2 P13-2 C2-3 P9-29 S Sales Commisions Sanchez Gadgets (S) Sants Brake Co Scanners Plus Scion Secure Servers Inc Serviflow Shady Tree Manufacturing Shop and Save (S) Silky Smooth Lotions Simple Plant Slawson Smythe and Yves SnapOn Fasteners Software Development, Inc (S) Soldering Department South American Mining Spa Ariana (S) Spa Salon (S) Specialized Surgical Instrument Spectra Inc Stale-Mart (S) Standard Cost Systems Q R R&D Inc Raises P8-19 P4-21 P6-26 P11-12 P9-13 P2-38 P8-3 P4-18 P2-37 C5-3 C12-2 P5-18 P4-8 P4-10 P11-11 P10-23 P7-21 C6-2 P14-12 P5-27 P13-17 P5-8 P2-4 P9-12 P7-3 P12-8 C11-2 P14-8 P13-10 P3-16 P6-21 P2-18 P9-20 P13-3 P5-17 P12-7 xxxvii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Starling Coatings Step Down Stirling Acquisition Student Loan Program (S) Sunder Properties (S) Sunder Toys Sunstar Appliances Symmetric Inc P12-20 P8-1 P14-9 P3-21 P5-3 P8-10 P5-16 P7-29 University Lab Testing (H) University Physician Compensation (H) Unknown Company US Copiers Using Accounting for Planning V Vanderschmidt’s Varilux Veriplex Videx Vigdor Wood Products Vintage Cellars Volume and Profits Voluntary Financial Disclosure Vorma T Tagway 4000 Tariffs Inc Taylor Chains Taylor Chemicals Taylor Connect (S) Telstar Electronics The Pottery Store (S) Theory X – Theory Y Thermalloy Thompson Instruments Tilist Golf Tipping Toby Manufacturing Toledo Stadium TQM at Stowbrdidge Div Tramsmation Transfer Price Company TransPacific Bank (S) Troika Toys True Cost Manufacturing, Inc Turow Trailers P14-14 P8-26 P10-14 P2-8 P7-22 P7-14 P14-7 P4-13 P9-6 P8-27 C11-1 P4-15 P11-15 P3-19 P14-10 P7-26 P5-23 P10-5 P6-28 P11-8 P13-14 P4-9 P10-3 P6-18 P6-13 P8-14 P2-6 P2-12 P4-5 P7-17 W Ware Paper Box Warren City Parts Wasley WBG Webb & Drye (S) Wedig Diagnostics (H) Welding Robots Wellington Western Sugar Weststar Applicances White’s Department Store (S) Wine Distributors (S) Winterton Group (S) Woodhaven Service (S) Woodley Furniture World Imports (S) Wujo WWWeb Marketing (S) U U.S and Japanese Tax Laws Ultrasonic UniCom (S) P5-12 P4-6 P9-14 P5-10 P1-4 P1-3 P13-18 P10-22 P9-8 P14-11 P7-7 P5-14 P6-20 P11-14 P9-18 P9-15 P13-9 P10-20 P4-16 P13-12 P7-10 C4-2 P7-25 P7-19 P5-26 P8-11 xxxviii © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part Front Matter Wyatt Oil C8-2 X, Y, Z XBT Keyboards Xerox Zeflax Bottles Zinc Faucets Zipp Cards P5-24 P10-2 P10-6 P12-11 P10-4 xxxix © 2014 by McGraw-Hill Education This is proprietary material solely for authorized instructor use Not authorized for sale or distribution in any manner This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part ... that the accounting costs are being used for a variety of purposes; in particular, they are being used for both decision making and control Since the trade-off between decision making and control. .. decision management and decision control ABC is likely better for decision management, but worse for decision control As with budgeting, a trade-off must be made between decision management and. .. Separation of decision management and decision control Initiation - decision management Ratification - decision control Implementation - decision management Monitoring - decision control Hierarchies