MANAGERIAL A C C O U NT I NG S e c on d E dition MANAGERIAL AC C O U N T I N G S e c on d Edition RAMJI BALAKRISHNAN The University of Iowa K S I VA R A M A K R I S H N A N Rice University G E O F F R E Y B S P R I N K L E Indiana University John Wiley & Sons, Inc Vice President and Executive Publisher: Senior Acquisitions Editor: Marketing Manager: Production Editor: Photo Editor: George Hoffman Michael McDonald Karolina Zarychta Honsa Rocky Buckley Sheena Goldstein Cover photo: © Greg Epperson/Shutterstock Copyright © 2012 by John Wiley & Sons, Inc All rights reserved 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 Sections 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 percopy 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 07030-5774, (201) 748-6011, fax (201) 748-6008, website http://www.wiley.com/go/permissions To order books or for customer service, please call 1(800)-CALL-WILEY (225-5945) Printed in the United States of America ISBN 978-1-118-38538-8 Printed and bound by Walsworth Print Group 10 Dedication Ramji Balakrishnan To my parents, Usha, Vasu and Uma K Sivaramakrishnan To my father, my sisters Viji and Parvathi, my wife Devika, my daughter Vidya, and in loving memory of my mother Geoffrey B Sprinkle To Shari, Jason, Jack, and Scott About the Authors Ramji Balakrishnan is the Harry B Carlson-KPMG Professor of Accounting at the University of Iowa Ramji has a B.Sc in Statistics from the University of Madras in 1977, an MBA from the Indian Institute of Management, Ahmedabad, in 1979, and a Ph.D from Columbia University in 1986 He is a Certified Management Accountant and is a recipient of the Robert Beyer Bronze Medal A top-rated teacher, he has taught managerial accounting at the undergraduate, graduate and doctoral levels He joined the University of Iowa in 1986 and has been there since except for a year at Georgia State University He has published widely in top-tier journals, with several of his papers being recognized as “Outstanding Contributions.” He serves on several editorial boards and is the Editor of the Journal of Management Accounting Research A sought after speaker, he has delivered workshops in Asia, Europe and North America He was the President of the Management Accounting Section of the American Accounting Association for 2005-2006 Konduru “Shiva” Sivaramakrishnan is the Henry Gardiner Symonds Professor in Accounting at the Jesse H Jones Graduate School of Business, Rice University He received his B Tech in Engineering from the Indian Institute of Technology, Madras in 1977, an MBA from Xavier Institute, Jamshedpur, India, in 1982, and a Ph.D in Accounting and Information Systems from the Kellogg Graduate School of Management at Northwestern University in 1989 Prior to his current position, he has held tenured faculty positions at Carnegie Mellon University, Texas A&M University, and the University of Houston Most recently, he held the Peggy Pittman Eminent Scholar Chair at the Mays Business School, Texas A&M University Dr Sivaramakrishnan has significant research and teaching accomplishments His research has appeared in premier journals such as The Accounting Review, Journal of Accounting Research, Contemporary Accounting Research, Management Science, Journal of Management Accounting Research, Accounting Horizons, Journal of Accounting and Economics, and Review of Financial Studies He has won numerous awards for teaching excellence at both undergraduate and graduate levels Geoffrey B Sprinkle Geoffrey B Sprinkle is a Professor of Accounting and Whirlpool Corporation Faculty Fellow at the Kelley School of Business at Indiana University Geoff received his B.S in Accounting and Master of Accountancy degrees from Arizona State University and his Ph.D from The University of Iowa He earned the Gold Medal in the state of Arizona on the May, 1989 CPA exam and the Elijah Watts Sells award nationally Geoff teaches in the areas of cost and managerial accounting and has received numerous teaching awards His work has appeared in journals such as The Accounting Review, The American Economic Review, Accounting, Organizations and Society, Behavioral Research in Accounting, Games and Economic Behavior, the Journal of Management Accounting Research, and Issues in Accounting Education ... as The Accounting Review, Journal of Accounting Research, Contemporary Accounting Research, Management Science, Journal of Management Accounting Research, Accounting Horizons, Journal of Accounting. .. areas of cost and managerial accounting and has received numerous teaching awards His work has appeared in journals such as The Accounting Review, The American Economic Review, Accounting, Organizations... MANAGERIAL A C C O U NT I NG S e c on d E dition MANAGERIAL AC C O U N T I N G S e c on d Edition RAMJI BALAKRISHNAN The University of Iowa K S I VA