www.freebookslides.com www.freebookslides.com introduction TO MANAGERIAL ACCOUNTING 8TH EDITION PETER C BREWER, Ph.D Wake Forest University RAY H GARRISON, D.B.A., CPA Professor Emeritus Brigham Young University ERIC W NOREEN, Ph.D., CMA Professor Emeritus University of Washington Accounting Circle Professor of Accounting Temple University www.freebookslides.com INTRODUCTION TO MANAGERIAL ACCOUNTING, EIGHTH EDITION Published by McGraw-Hill Education, Penn Plaza, New York, NY 10121 Copyright © 2019 by McGraw-Hill Education All rights reserved Printed in the United States of America Previous editions © 2016, 2013, and 2010 No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning Some ancillaries, including electronic and print components, may not be available to customers outside the United States This book is printed on acid-free paper DOW 21 20 19 18 ISBN 978-1-259-91706-6 MHID 1-259-91706-1 Portfolio Manager: Pat Plumb Product Developer: Erin Quinones and Danielle Andries Marketing Manager: Zach Rudin Content Project Managers: Pat Frederickson and Angela Norris Buyer: Laura Fuller Design: Egzon Shaqiri Content Licensing Specialist: Beth Thole Cover Image: © Solomin Andrey/Shutterstock Compositor: SPi Global All credits appearing on page or at the end of the book are considered to be an extension of the copyright page Library of Congress Cataloging-in-Publication Data Names: Brewer, Peter C., author | Garrison, Ray H., author | Noreen, Eric W., author Title: Introduction to managerial accounting / Peter C Brewer, Lecturer, Wake Forest University, Ray H Garrison, Professor Emeritus, Brigham Young University, Eric Noreen, Professor Emeritus, University of Washington Description: 8th Edition | Dubuque : McGraw-Hill Education, [2019] | Revised edition of the authors’ Introduction to managerial accounting, [2016] Identifiers: LCCN 2017040497 | ISBN 9781259917066 (alk paper) Subjects: LCSH: Managerial accounting Classification: LCC HF5657.4 F65 2019 | DDC 658.15/11—dc23 LC record available at https://lccn.loc.gov/2017040497 The Internet addresses listed in the text were accurate at the time of publication The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites mheducation.com/highered www.freebookslides.com DEDICATION To our families and to our many colleagues who use this book www.freebookslides.com About the Authors Peter C Brewer is a lecturer in the Department of Accountancy at Wake Forest University Prior to joining the faculty at Wake Forest, he was an accounting professor at Miami University for 19 years He holds a BS degree in accounting from Penn State University, an MS degree in accounting from the University of Virginia, and a PhD from the University of Tennessee He has published more than 40 articles in a variety of journals including: Management Accounting Research; the Journal of Information Systems; Cost Management; Strategic Finance; the Journal of Accountancy; Issues in Accounting Education; and the Journal of Business Logistics Professor Brewer has served on the editorial boards of the Journal of Accounting Education and Issues in Accounting Education His article “Putting Strategy into the Balanced Scorecard” won the 2003 International Federation of Accountants’ Articles of Merit competition, and his articles “Using Six Sigma to Improve the Finance Function” and “Lean Accounting: What’s It All About?” were awarded the Institute of Management Accountants’ Lybrand Gold and Silver Medals in 2005 and 2006 He has received Miami University’s Richard T Farmer School of Business Teaching Excellence Award Prior to joining the faculty at Miami University, Professor Brewer was employed as an auditor for Touche Ross in the firm’s Philadelphia office He also worked as an internal audit manager for the Board of Pensions of the Presbyterian Church (U.S.A.) iv www.freebookslides.com Eric W Noreen Ray H Garrison is emeritus professor of accounting at Brigham Young University, Provo, Utah He received his BS and MS degrees from Brigham Young University and his DBA degree from Indiana University As a certified public accountant, Professor Garrison has been involved in management consulting work with both national and regional accounting firms He has published articles in The Accounting Review, Management Accounting, and other professional journals Innovation in the classroom has earned Professor Garrison the Karl G Maeser Distinguished Teaching Award from Brigham Young University has taught at INSEAD in France and the Hong Kong Institute of Science and Technology and is emeritus professor of accounting at the University of Washington Currently, he is the Accounting Circle Professor of Accounting, Fox School of Business, Temple University He received his BA degree from the University of Washington and MBA and PhD degrees from Stanford University A Certified Management Accountant, he was awarded a Certificate of Distinguished Performance by the Institute of Certified Management Accountants Professor Noreen has served as associate editor of The Accounting Review and the Journal of Accounting and Economics He has numerous articles in academic journals including: the Journal of Accounting Research; The Accounting Review; the Journal of Accounting and Economics; Accounting Horizons; Accounting, Organizations and Society; Contemporary Accounting Research; the Journal of Management Accounting Research; and the Review of Accounting Studies Professor Noreen has won a number of awards from students for his teaching v www.freebookslides.com Pointing Students in the Right Direction “Why I need to learn Managerial Accounting?” Brewer’s Introduction to Managerial Accounting has earned a reputation as the most accessible and readable book on the market Its manageable chapters and clear presentation point students toward understanding just as the needle of a compass provides direction to travelers However, the book’s authors also understand that everyone’s destinations are different Some students will become accountants, while others are destined for careers in management, marketing, or finance Not only does the Brewer text teach students managerial accounting concepts in a clear and concise way, but it also asks students to consider how the concepts they’re learning will apply to the real world situations they will eventually confront in their careers This combination of conceptual understanding and the ability to apply that knowledge directs students toward success, whatever their final destination happens to be vi Here’s how your colleagues have described Brewer’s Introduction to Managerial Accounting: Great, readable text with streamlined coverage the number of chapters combined with the readability make this a lean, up-to-date product Timothy Griffin, Hillsborough Community College A simplified managerial accounting book Dan O’Brien, Madison College A book with an appropriate level of coverage for students who may not all be majoring in accounting This book has enough detail for accounting majors, with coverage that still keeps the interest and understanding of non-majors Dawn McKinley, Harper Community College This is a thorough text that offers many well-structured exercises throughout Eric Weinstein, Suffolk Community College The textbook is very good, with the Foundational 15 being my favorite feature The Review Problems are also very thorough and serves as an outstanding study tool for students to use independently The writing flows very well If a student takes the time to read each chapter thoroughly, there is no excuse not to well in the Managerial Accounting Course Randall Williams, Catawba Valley Community College I really like the content and think it will be beneficial for all students I especially like the highlighting of important concepts in the text, and the Guided examples that explain how to solve problems Diane Tanner, University of Northern Florida www.freebookslides.com CONFIDENCE AT THE CORE Your students want a text that is concise and that presents material in a clear and readable manner Introduction to Managerial Accounting keeps the material accessible while avoiding advanced topics related to cost accounting Students’ biggest concern is whether they can solve the end-of-chapter problems after reading the chapter Market research indicates that Brewer/Garrison/ Noreen helps students apply what they’ve learned better than any other managerial accounting text on the market Additionally, the key supplements are written and continually revised to ensure that students and instructors will work with clear, well-written supplements that employ consistent terminology Author Pete Brewer examined each and every end of chapter question in Connect to guarantee accuracy and consistency RELEVANCE AND DECISION MAKING All students who pass through your class need to know how accounting information is used to make business decisions, especially if they plan to be future managers That’s why Brewer, Garrison, and Noreen make decision making a pivotal component of Introduction to Managerial Accounting In every chapter you’ll find the following key features that are designed to teach your students how to use accounting information: Each chapter opens with a Decision Feature vignette that uses real-world examples to show how accounting information is used to make everyday business decisions; Decision Point boxes within the chapters help students to develop analytical, critical thinking, and problemsolving skills; and end-of-chapter Building Your Skills cases challenge students’ decision-making skills A CONTEMPORARY APPROACH TO LEARNING Today’s students rely on technology more than ever as a learning tool, and Introduction to Managerial Accounting offers the finest technology package of any text on the market From study aids like narrated, animated Guided Examples to online grading and course management, our technology assets have one thing in common: they make your class time more productive, more stimulating, and more rewarding for you and your students McGraw-Hill Connect is an online assignment and assessment solution that connects students with the tools and resources they’ll need to be successful These resources include an online, media-rich, searchable version of the text in addition to access to Connect, giving students a convenient way to access everything they need to succeed in their course vii www.freebookslides.com BREWER / GARRISON / NOREEN’S Introduction to Managerial Accounting is full of pedagogy designed to make studying productive and hassle-free On the following pages, you’ll see the kind of engaging, helpful pedagogical features that have made Brewer one of the best-selling Managerial Accounting texts on the market NEW* INTEGRATION EXERCISES Confirming Pages We have added 12 new exercises located in the back of the text and in Connect that integrate learning objectives across chapters These exercises will increase the students’ level of interest in the course because they forge the connections A simple method for understanding Weber Light Aircraft computed its variable set of learning objectives, students begin to see how it across chapters Rathercosting than seeing each how chapter as an isolated net operating income for each month is to focus on the contribution margin per aircraft sold, which is computed as follows: all fits together to provide greater managerial insight and more effective planning, controlling, and decision making The integration exercises are also tailor-made for flipping the classroom because they offer challenging questions that require students to work in teams to derive solutions that synthesize what they have learned throughout the semester 286 Chapter Contribution Margin per Aircraft Sold Selling price per aircraft Variable cost of goods sold per aircraft Variable selling and administrative expense per aircraft Contribution margin per aircraft $100,000 $25,000 10,000 35,000 $ 65,000 NEW* CONCEPT OVERVIEW VIDEOS The variable costing net operating income for each period can always be computed by multiplying the number of units sold by the contribution margin per unit and then subtracting total fixed expenses For Weber Light Aircraft these computations would appear as follows: New for the 8th edition of Brewer, the Concept Overview Videos cover each learning objective through narrated, animated presentations Formerly called Interactive Presentations, each Concept Overview Video has been enhanced for improved accessibility, and includes both the visual animations and transcripts to accommodate all types of learners The Concept Overview Videos also pause frequently to check for comprehension with assignable, auto-graded Knowledge Check questions Confirming Pages Number of aircraft sold Contribution margin per aircraft Total contribution margin Total fixed expenses Net operating income (loss) January February March × $ 65,000 $ 65,000 90,000 $(25,000) × $ 65,000 $ 65,000 90,000 $(25,000) × $ 65,000 $325,000 90,000 $235,000 Notice, January and February have the same net operating loss This occurs because one aircraft was sold in each month and, as previously mentioned, the selling price per aircraft, variable costs per aircraft, and total monthly fixed expenses remain constant HELPFUL HINT 294 Chapter When students prepare variable costing income statements they often mistakenly assume that variable selling and administrative expense is a product cost The confusion arises because variable selling and administrative expense isfixed included in the calculation of contribution Under absorption costing, manufacturing overhead costsmarappear to be variable gin; however, is not a product cost Variable sellingsold, and administrative expense is always a withitrespect to the number of units but they are not For example, in January, the period cost and the total amount of this expense included in the income statement is always absorption unit product cost at Weber Light Aircraft is $95,000, but the variable porderived by multiplying the variable selling and administrative expense per unit by the number of tion of this cost is only $25,000 The fixed overhead costs of $70,000 are commingled units sold—not the number of units produced ✓ CONCEPT CHECK with variable production costs, thereby obscuring the impact of fixed overhead costs on profits Because absorption unit product costs are stated on a per unit basis, managers may mistakenly believe that if another unit is produced, it will cost the company $95,000 But of course it would not The cost of producing another unit would be only Smith Company produces and sells one product for $40 per unit The company $25,000 Misinterpreting absorption unit product costs as variable can lead to many has no beginning inventories Its variable manufacturing cost per unit is $18 and including inappropriate pricing the problems, variable selling and administrative expense per unitdecisions is $4 The and fixeddecisions manufac- to drop products thatoverhead are in fact turing and profitable fixed selling and administrative expense total $80,000 and DECISION POINT bre17061_ch07_280-331.indd 286 HELPFUL HINT Helpful Hint boxes are found several times throughout each chapter and highlight a variety of common mistakes, key points, and “pulling it all together” insights for students $20,000, respectively If Smith Company produces 8,000 units and sells 7,500 units during the year, then its net operating income under variable costing would be a $65,000 b $41,250 c $40,000 d $35,000 The Pricing Decision Each year Webb Company produces and sells 20,000 units of its only product The selling price for this product is $100 per unit and its direct materials, direct labor, and variable manufacturing overhead costs per unit are $25, $15, and $10, respectively Webb’s annual fixed manufacturing overhead expenses and fixed selling and administrative expenses are $400,000 and $150,000, respectively It does not have any variable selling and administrative expenses 09/22/17 increase 03:06 PM The company’s marketing manager believes a 10% price would lead to a 20% decline in the number of units sold He claims that if the level of production stays at 20,000 units his price hike will increase gross margins and net operating income by $40,000 Would you support the price increase? Do you think it will increase profits? INCOME STATEMENTS CONTRIBUTION APPROACH board “VerySEGMENTED good conversation startersAND in aTHE classroom or discussion In the remainder of the chapter, we’ll learn how to use the contribution approach to consetting.” LEARNING OBJECTIVE 7–4 Prepare a segmented income statement that differentiates traceable fixed costs from common fixed costs and use it to make decisions viii struct income statements for business segments These segmented income statements are RandallofWilliams, Catawba College useful for analyzing the profitability segments, making decisions,Community and measuring the performance of segment managers Traceable and Common Fixed Costs and the Segment Margin You need to understand three new terms to prepare segmented income statements using the contribution approach—traceable fixed cost, common fixed cost, and segment margin A traceable fixed cost of a segment is a fixed cost that is incurred because of the existence of the segment—if the segment had never existed, the fixed cost would not have been incurred; and if the segment were eliminated, the fixed cost would disappear Examples of traceable fixed costs include the following: DECISION POINT The Decision Point feature fosters critical thinking and decisionmaking skills by providing realworld business scenarios that require the resolution of a business issue The suggested solution is located at the end of the chapter www.freebookslides.com Activity Cost Pools and (Activity Measures) Estimated Overhead Cost Expected Activity Deluxe Tourist Total POWERFUL PEDAGOGY Labor-related (direct labor-hours) Machine setups (setups) Production orders (orders) General factory (machine-hours) 169 Activity-Based Costing $ 33,000 120,000 70,000 150,000 $373,000 1,000 20 15 10,000 9,000 80 35 10,000 10,000 100 50 20,000 a Are the traditional unit product costs for the two products the same or different? Explain b Are the ABC unit product costs for the two products the same or different? Explain c Which method, the traditional direct labor-based costing system or the ABC costing system, apparently provides more accurate costs? Explain THE FOUNDATIONAL 15 Each chapter contains one Foundational 15 exercise that includes 15 “building-block” questions related to one concise set of data These exercises can be used for in-class discussion or as homework assignments They are found before the Exercises and are available in Connect THE FOUNDATIONAL 15 Greenwood Company manufactures two products—14,000 units of Product Y and 6,000 units of Product Z The company uses a plantwide overhead rate based on direct labor-hours It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools The following additional information is available for the company as a whole and for Products Y and Z: Activity Cost Pool Activity Measure Machining Machine setups Production design General factory Activity Measure Machining Number of setups Number of products Direct labor-hours CHAPTER OUTLINE Each chapter opens with an outline that provides direction to the student about the road they can expect to traverse throughout the chapter The A Look Back/A Look at This Chapter/A Look Ahead feature reminds students what they have learned in previous chapters, what they can expect to learn in the current chapter, and how the topics will build on each other in chapters to come Estimated Overhead Cost Machine-hours Number of setups Number of products Direct labor-hours $200,000 $100,000 $84,000 $300,000 LO4–1, LO4–2, LO4–3, LO4–4 Expected Activity 10,000 200 12,000 Product Y Product Z 8,000 40 9,000 2,000 160 3,000 MHs setups products DLHs What is the company’s plantwide overhead rate? Using the plantwide overhead rate, how much manufacturing overhead cost is allocated to Product Y? How much is allocated to Product Z? What is the activity rate for the Machining activity cost pool? What is the activity rate for the Machine Setups activity cost pool? What is the activity rate for the Product Design activity cost pool? What is the activity rate for the General Factory activity cost pool? Which of the four activities is a batch-level activity? Why? Which of the four activities is a product-level activity? Why? Using the ABC system, how much total manufacturing overhead cost would be assigned Rev.Confirming Pages to Product Y? 10 Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Z? 11 Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product Y? What percentage is allocated to Product Z? 12 Using the ABC system, what percentage of the Machining costs is assigned to Product Y? What percentage is assigned to Product Z? Are these percentages similar to those obtained in question 11? Why? A LOOK BACK A LOOK AT THIS CHAPTER A LOOK AHEAD Chapter defined many of the terms that are used to classify costs in an organization Its central theme was that organizations should classify their costs differently depending on the needs of management This chapter explains how job-order costing systems can be used to assign manufacturing costs to individual jobs It illustrates how one plantwide predetermined overhead rate or multiple predetermined overhead rates can be used to apply overhead costs to jobs Chapter explains how job-order costing systems can be used to determine the value of ending inventories and cost of goods sold for external reporting purposes bre17061_ch04_146-183.indd 169 09/08/17 07:40 PM Job-Order Costing: Calculating Unit Product Costs CHAPTER OUTLINE Job-Order Costing—An Overview Job-Order Costing—A Managerial Perspective Job-Order Costing—An Example • Choosing an Allocation Base—A Key to Job Cost Accuracy • Measuring Direct Materials Cost Job-Order Costing Using Multiple Predetermined Overhead Rates • Job Cost Sheet • Measuring Direct Labor Cost • Computing Predetermined Overhead Rates • Multiple Predetermined Overhead Rates—A Departmental Approach • Multiple Predetermined Overhead Rates—An Activity-Based Approach • Applying Manufacturing Overhead Job-Order Costing—An External Reporting Perspective • Manufacturing Overhead—A Closer Look • Overhead Application and the Income Statement • The Need for a Predetermined Rate • Job Cost Sheets: A Subsidiary Ledger • Computation of Total Job Costs and Unit Product Costs Job-Order Costing in Service Companies bre17061_ch02_062-095.indd 62 10/28/17 08:10 PM ix www.freebookslides.com 712 Index cost-volume-profit (CVP) relationships—Cont variable costing and, 292–293 variable expense ratio and, 225–227 creditors, 660 Crossfire Company, 317–318 cumulative net cash flows, 510n current ratio, 666 customer intimacy, 10, 12 customer value propositions, 10, 12 CVP see cost-volume-profit (CVP) relationships cybersecurity, 512 Deacon Company, 380 debt management, ratio analysis of, 670–672, 686, 688–689 debt-to-equity ratio, 671 decentralized organizations, 466–504 advantages and disadvantages of, 468–469 definition of, 468 responsibility accounting and, 469–470 decision making, 4–5 activity-based costing and relevant costs in, 535 on adding/dropping product lines and other segments, 515–519, 542, 547–548, 549–550 capital budgeting and, 562–613 cost classifications for, 38–40 decentralization and, 468–469 definition of, differential analysis and, 506–561 job-order costing and, 88 key concepts in, 508–510 least-cost decisions, 578–579 make or buy decisions, 520–523 qualitative aspects of, 507 segmented income statements and, 300 sell or process further decisions, 531–534 on special orders, 523–524 total cost and differential cost approaches in, 512–515 variable costing in, 293–294 on volume trade-offs, 525–531 decremental costs, 38–39 deferred costs, 289–291 degree of operating leverage, 239–240 delivery cycle time, 479 Deloitte, 15 Delphi Automotive, 519 Delta Airlines, 616 denominator activity, 441–442, 452 Denton Company, 323–324 departmental approach, to overhead application, 74–77 departmental overhead rates assigning to products, 149 predetermined, 90–91 dependent variables, 266 depreciation, 511 charges, adding to direct income, 619–620, 628 detective controls, 13 Dexter Corporation, 307–309, 311–313 Dickson Company, 74–76 Diego Company, 313–314 differential analysis, 506–561 activity-based costing and relevant costs in, 535 on adding/dropping product lines and other segments, 515–519, 542, 547–548, 549–550 in Excel, 538–540 identifying relevant costs/benefits for, 510–512 on joint product costs and sell or process further decisions, 531–534 key concepts in decision making and, 508–510 on make or buy decisions, 520–523 on special orders, 523–524 total cost and differential cost approaches in, 512–515 on volume trade-offs, 525–531 differential cost approach, 512–515 differential costs, 38–39, 508–509 differential revenue, 38–39, 508 direct costs, 26–27 identifying, 50–51 materials, 66 direct exchange transactions, 617n direct labor, 28 as base in activity-based costing, 156 measuring costs, 67–68 standard costs, 402–403 variances, 428–429 variances, standard costs–, 410–412, 427 direct labor budgets, 349–350, 368, 372–373 estimates and assumptions for, 339 direct materials, 27–28 costs, measuring, 66 standard costs, 402 variances, 429–430 variances, standard costs and, 406–409 direct materials budgets, 347–349, 370, 373 estimates and assumptions for, 339 integrating with other budgets, 383–384 direct method, 618–619, 654–657 discounted value, 606 discounting cash flows, 565, 607–608 discount rates, 608 discretionary fixed costs, 33–34 dividend payout ratio, 676, 677 dividend yield ratio, 676–677 divisional comparisons, 477–478 Dixon Company, 78–79 Dolce & Gabbana, 27 www.freebookslides.com Index Double Diamond Skis, 192–297 double-entry bookkeeping, 616 Dow Chemical, 289 downstream costs, 302–303 Down Under Products, Ltd., 367 Dumaine, Brian, 467 Dun and Bradstreet, 475 DuPont, 27, 473, 674 earnings per share, 675 earnings quality, 634–635 economic depreciation, 511 Economic Value Added (EVA), 475 EDGAR database, 677, 679 E.I du Pont de Nemours and Company, 27, 473, 674 elevating constraints, 529–530 Eli Lilly, 4, 15, 475 employee morale, 521n employee wellness, 486 ending finished goods inventory budgets, 351, 352 engineering approach to cost analysis, 265 enterprise risk management, 12–14 equipment replacement decisions, 564 salvage value in, 585 equipment selection decisions, 564 equity accounts, basic equation for, 616 equity multiplier, 671 equivalent units, 191 cost computation for, 195–196 equivalent units of production, 192–193 Esterl, Mike, 659 Ethan Allen, 28 ethics, 9–10, 328 budgeting and, 379, 388–389 capital budgeting and, 604–605 codes of, 11 cost classification and, 61 differential analysis and, 557–559 financial statement analysis and, 695–696 flexible budgets and, 437–438 evacuation planning, 16 Evans, Michael, 563 Excel activity-based costing in, 166–169 beginning balance sheet in, 341–342 budgeting assumptions in, 342 capital budgeting and, 590–592 cash budgets in, 355 cost-volume-profit relationships in, 249–250 differential analysis and, 538–540 direct labor budgets in, 349 direct materials budgets in, 348 ending finished goods inventory budgets in, 352 flexible budgets and, 423–424 income statements using, 48–49 job-order costing in, 83–85 least-squares regression method in, 269–272 manufacturing overhead budgets in, 350 master budgets and, 364–366 net present value analysis in, 570–571 performance measurement and, 490–491 process costing in, 203–204 production budgets in, 346 sales budgets in, 344 segment reporting in, 311–313 selling and administrative expense budgets in, 352 standard cost systems in, 453–464 exception, management by, 392 expansion decisions, 564 expense accounts, direct method and, 655–656 external reporting, job-order costing and, 78–79 extrinsic incentives, 17–18 ExxonMobil, 186 Facebook, 573 facility-level activities, 152 favorable variances, 406, 408 Federal Mogul, 475 FedEx, 4, Feintzeig, Rachel, 486 Ferguson & Son Manufacturing Company, 386–387 FIFO method of process costing, 191 Fifth Avenue, Manhattan, 27 financial accounting compared with managerial accounting, 2–3 cost classification in, 26 definition of, 2–3 Financial Accounting Standards Board (FASB), 304n Financial Fitness Group, 486 financial information, segmented, 305 financial leverage, 670 financial statement analysis, 658–697 accounts receivable turnover, 667–668 acid-test/quick ratio, 666–667 book value per share, 677 common-size statements, 663–665 comparative and common-size forms, 660–665 current ratio, 666 debt-to-equity ratio, 671 dividend payout and yield ratios, 676–677 dollar and percentage changes n, 661–663 earnings per share, 675 equity multiplier, 671 gross margin percentage, 672 inventory turnover, 668 limitations of, 660 713 www.freebookslides.com 714 Index financial statement analysis—Cont net profit margin percentage, 673 operating cycle, 668–669 price-earnings ratio, 676 ratio analysis of asset management, 667–670 ratio analysis of debt management, 670–672 ratio analysis of liquidity, 665–667 ratio analysis of market performance, 675–677 ratio analysis of profitability, 672–674 return on equity, 674 return on total assets, 673–674 sources of ratios in, 679 summary of ratios in, 677–678 times interest earned ratio, 670–671 total asset turnover, 669–670 working capital, 665–666 financial statements see also statement of cash flows analysis of, 658–697 common-size, 663–665 comparing across companies, 660 cost classifications for, 29–31 income, 40–42 financing activities, 618, 630–631 financing section of cash budgets, 353–357 finished goods, 29–30 FireEye, Inc., 512 Firestone, 401 Fitbit, 520 Five Guys Holding, 675 fixed costs, 33–35 allocated, 518–519 common, 294, 295 sales volume and, 229 traceable, 294, 295–296, 298 fixed overhead analysis, 444–445 fixed overhead variances, 444–445 relations among, 449 flexible budgets benefits of, 391 characteristics of, 393 in Excel, 423–424 general model for standard cost variance analysis, 405–406 how they work, 396 with multiple cost drivers, 399–400, 426–427, 429, 432–433 on-call scheduling and, 396–397 standard costs–direct materials variances and, 406–409 standard costs in, 401–404 static planning budgets vs., 393–396 variance analysis cycle and, 392–393 variances in, 397–399 Ford Motor Company, 4, 27, 289 Fore Corporation, 604–605 free cash flow, 634, 644 computing, 645–646 full cost method, 282 Fung, Esther, 68 future value, 607 gains, adjusting for, 621–622, 629 Gap, 396–397 Gartner Inc., 512 Genentech, 15 generally accepted accounting principles (GAAP), 304, 617–618, 656 General Mills, 186 General Motors, 5, 28, 281, 295, 469 George Caloz & Frères, 274–275 Georgia-Pacific, 475 Global Rescue, 16 goodness of fit, 270 Goodrich, Google, 12, 573 Gottfried, Miriam, 672 graphic analysis, of fixed overhead variances, 444–445 Greenwood Company, 169–170 gross cash flows, 622–625 gross margin percentage, 672 Grunberg, Sven, 573 Hagerty, James R., 289, 521 Haglund Department Store, 503–504 Hallmark, 64 Hampton Freeze, 339–352 Hard Rock Mining Company, 275 Harper Company, 570–572 harper Ferry Company, 577–578 Harvard Medical School Hospital, 265 Heartland Payment Systems, 512 Heaton Company, 321–322 Henkel AG, 289 Hershey Foods, 475 Hewlett-Packard, 5, 27, 520 High Country, Inc., 322 high-low method, 265, 267–269, 272 Hoi Chong Transport, Ltd., 274 Home Depot, 40 home remodeling, ROI on, 472 Honda, 4, 484 hops, k399 horizontal analysis, 660, 661–663 Husky Injection Molding, 475 Ida Sidha Karya Company, 314–315 IKEA, 158 www.freebookslides.com Index incentives, 281 balanced scorecard and, 486 extrinsic, 17–18 return on investment and, 477, 478 simple rate of return method and, 585 income statements adjusting for gains/losses in, 621–622 companywide, 304–305 contribution format, 42 in Excel, 48–49 fixed manufacturing overhead in, 283 overhead application and, 78 traditional, cost classifications for, 40–42 transaction analysis and, 462–464 incremental analysis, 229 incremental costs, 38–39, 508 independent variables, 266 indirect costs, 27 identifying, 50–51, 56–60 manufacturing overhead, 68–69 indirect labor, 28 indirect materials, 28 indirect method, 618–622 direct method compared with, 654–655 information systems security, 13, 14 inspection time, 479 Instacart Inc., 240 Institute of Management Accountants (IMA), 7, code of ethics, 9–10, 11 Ethics Helpline, 10 integration, budgeting and, 334 interest, mathematics of, 606–607 interest payments, in cash budgets, 355–357 internal business process performance, 496–497, 500–501 internal rate of return method, 564, 565, 569, 575–580, 593 compared with net present value method, 576–577 illustrated, 575–576 net present value and, 597 payback period and, 600–601 in preference decisions, 582 International Financial Reporting Standards (IFRS), 304, 617–618, 656 International SOS, 16 intrinsic motivation, 17 inventoriable costs, 29–30 inventory absorption vs variable costing, 289–291 management, 291 inventory purchases budgets, 346–347 inventory turnover ratio, 668 investing activities, 618, 629 investment centers, 469 residual income, 474–478 return on investment of, 470–474 investments postaudits of, 585–586 preference decisions on, 581–583, 594, 596 recovery of original, 572–573 uncertain cash flows and, 580–581 Jaguar, 484, 485 Jargon, Julie, 675 J C Penney, 295, 475 job cost sheets, 67, 70–71, 78–79 direct labor costs in, 67–68 job-order costing, 62–95, 186 computing predetermined overhead rates, 68–69 definition of, 64 direct materials costs in, 66 example of, 65–72 in Excel, 83–85 external reporting perspective on, 78–79 job cost sheets in, 67 managerial perspective on, 73–74 with multiple predetermined overhead rates, 74–77 overview of, 64–65 process costing compared with, 186–187 in service companies, 79–80 Johns Hopkins University, 14 Johnson & Johnson, 15 joint costs, 531–534 joint products, 531–534 Jorgansen Lighting, Inc., 315 Kaler, Eric, 25 Kansas City Power & Light, 475 Kaplan, Robert, 486 Kapner, Suzanne, 295, 586, 622 KB Home, 28 Kellogg’s, 186 Kesmodel, David, 575 Kid Rock, 217 Koenig, Keith, 521 Koh, Yoree, 529 Kohl’s, 232 KPMG, 15 Kroger Company, 4, 295, 615, 616 Kubota, Yoko, 349 labor budgets, 373 labor costs, in process costing, 187–189 see also direct labor labor efficiency variances, 405–406, 411–412 labor rate variance, 410–411 715 www.freebookslides.com 716 Index Lamar Company, 588–589 Landro, Laura, 14 Lasser Company, 449–450 layoffs, employee morale and, 521n leadership perspective, 17–18 Lean Production, 16–17 lease/buy decisions, 564, 601 least-squares regression method, 265 Lee, Min-Jeong, 617 Levi Strauss, 64 liability accounts, basic equation for, 616 LIFO, 289n linear cost behavior, 266–267 linearity assumption, 34–35 liquidity ratio analysis, 665–667, 685–686, 689 Live Nation Entertainment (LNE), 217 L L Bean, 564 losses, adjusting for, 621–622, 629 Lost Peak, 492–493 Lowe’s, 40 LSG SkyChefs, 64 Lynch Company, 316 Macy’s, 586 Majestic Ocean Kayaking, 36 make or buy decisions, 520–523, 542–543, 545–546, 552–553, 556–557 opportunity costs in, 523 strategy and, 520 Maker’s Mark, 467 management control systems, 468 managerial accounting career importance of, 5–8 compared with financial accounting, 2–3 controlling in, 3, corporate social responsibility perspective on, 14–15 cost classification in, 26–61 decision making in, 3, 4–5 definition of, enterprise risk management perspective on, 12–14 ethics in, 9–10, 11 leadership perspective on, 17–18 planning in, 3–4 process management perspective on, 15–17 strategic perspective on, 10, 12 managers and management activity-based, 160 by exception, 392 job-order costing and, 73–74 as stakeholders, 660 Manatee Players, manufacturing and overhead budgets, 368 estimates and assumptions for, 339 manufacturing costs see absorption costing; job-order costing; standard costs; variable costs manufacturing costs, classification of, 27–28 manufacturing cycle efficiency (MCE), 479–481 manufacturing cycle time, 479 manufacturing overhead, 28, 70–71 applying, 70 fixed, in absorption vs variable costing, 283 predetermined rates for, 68–69 standard costs, 403 manufacturing overhead budgets, 350–351, 368, 372–373 manufacturing overhead variances, 412–415 marginal costs, 38 marginal revenue, 38 margin of safety, 235–236 margins, 471–472, 474 Marielle, Segarra, 281 market performance, ratio analysis of, 675–677, 687, 688, 694–695 Marston, Gregg, 65 Martinez Company, 49–50 Mason, Richard, 634n Mason Paper Company, 498–499 Massimo Dutti, 27 master budgets, 332–389 assumptions in, 338, 339, 342–343 beginning balance sheet in, 341–342 the big picture in, 338–339 budgeted balance sheets, 358–360 budgeted income statements, 357–358 budget period selection for, 335 cash budgets, 338, 352–357 definition of, 337 direct labor budgets, 349–350 direct materials budgets, 347–349 ending finished goods inventory budgets, 351, 352 estimates and assumptions for, 338–339 in Excel, 364–366 inventory purchases budgets, 346–347 manufacturing overhead budgets, 350–351 overview of, 337–338 production budgets, 345–346 responsibility accounting and, 335 sales budgets, 338, 343–345 self-imposed, 335–336 selling and administrative expense budgets, 351–352 materials costs, in process costing, 187–189 materials price variance, 407–408 materials quantity variances, 405–406, 408 materials requisition forms, 66 materials variances, 415–426 direct materials-standard costs variances, 406–409 price, 407–408 quantity, 405–406, 408 www.freebookslides.com Index Matheson Electronics, 605 Mattel, Mayo Clinic, 34 McDonald’s Corporation, 401, 662–663, 675 MCE see manufacturing cycle efficiency (MCE) McMillan, Robert, 305 Megan’s Classic Cream Soda, 189–190 merchandise purchases budgets, 346 Merchant, Kenneth A., 334 Merck & Co., 564 Meredith Corporation, 486 Miami University, 63 MicroDrive Corporation, 440–446 Microsoft, 15, 677 Midwest Consulting Group, 501 Midwest Farms, Inc., 584 Milden Company, 276–277 Millard Corporation, 327 Mills, John, 634n mixed costs, 36–37 analyzing, 265–272 high-low method for, 265, 267–269, 272 least-squares regression method for, 265, 269–272 Mondelez International, 190 Monga, Vipal, 398 Montvale Burger Grill, 472–473 Morganton Company, 366–367 Morrisey & Brown, Ltd., 275–276 motivation extrinsic, 17–18 intrinsic, 17 residual income and, 476–477 Mountain Goat Cycles, 520–523, 524, 526–528 move time, 479 Mulligan Corporation, 681–683 multiple predetermined overhead rates, 74–77 applying, 92–93 plantwide rates vs., 94 service industry use of, 93–94 total job costs and unit products using, 86–87 Music Teachers, Inc., 329–331 Mynor Corporation, 362–363 Nalley’s, 187 National Health Service, 525–526 Natural Cosmetics, Inc., 39 Navistar International, 40 Nestlé, 190, 575, 659 net cash direct method for determining, 618–619, 654–657, 656 provided by operating activities, 618–619 net cash flows, cumulative, 510n net income cumulative, 510n direct method and, 655 net cash and, 656 net operating expenses, in variable vs absorption costing, 283 net operating income cash flows vs., in capital budgeting, 564–565 definition of, 470 variable costing and, 293 variables in, 228 net present value, 597–598 analysis problems, 601–604 uncertain cash flows and, 599 net present value method, 564, 565, 569–575, 593 compared with internal rate of return method, 576–577 definition of, 569 expanding, 577–580 extended example of, 574–575 illustrated, 569–572 least-cost decisions in, 578–579 in preference decisions, 582–583 project comparison using, 596–597 recovery of original investment in, 572–573 simple rate of return and, 595 total-cost approach in, 577–578 net profit margin percentage, 673 newspaper circulars, 232 Next Generation Sort Aisle, 580 Nicas, Jack, 673 no layoffs policies, 521n noncash balance sheet accounts, analysis of net changes in, 620–621, 628–629 nonmanufacturing costs, 29 non–value-added activities, 479–480 Nooksack Expeditions, 32, 33 Nordstrom, 12, 149, 565 normal costing, 70, 71 actual vs., 284 Norton, David, 486 Norton Company, 379 Nova Company, 276 Novex Company, 480–481 Nucor Corporation, 391 number of units produced, 284 Oak Harbor Woodworks, 512–515 O’Brien Company, 327–328 Old Rip Van Winkle Distillery, 467 Olin, 475 on-call scheduling, 396–397 On Point Promos, 63 717 www.freebookslides.com 718 Index operating activities, 618, 628–629 direct method for, 654–657 direct or indirect method for, 618–619 net cash from, 643, 645 operating assets, 470–471 operating cycle, 668–669 operating leverage, 239–240 operating performance measurement, 479–481 delivery cycle time, 479 manufacturing cycle efficiency, 479–481 throughput/manufacturing cycle time, 479 operational excellence, 10, 12, 482 operation costing, 198 opportunity costs, 39, 509–510 in make or buy decisions, 523 Optoro, 345 Oracle, 520 Oslo Company, 250 out-of-pocket costs, 575 overapplied overhead, 78, 446 overhead see also activity-based costing (ABC) assigning costs to products, 148–151 computing predetermined, 68–69 multiple predetermined rates of, 74–77 overapplied and underapplied, 78, 446 plantwide rate of, 73–74, 148–149 predetermined rate for, 68–69, 440–446 in process costing, 187–189 shifting costs of, 158–159 variances, applying, 449–450 variances, variable, 427 overhead application, 70, 86 income statements and, 78 of predetermined overhead rates, 90–92 overhead efficiency variances, 406 overhead rate analysis, 440–446 overstock.com, 291 Panera Bread Company, 635 Papa John’s, 188, 509 Parker Products, Inc., 317 participative budgets, 335–336 payback method, 564, 565, 566–569, 593 computing, 596 evaluation of, 566–567 extended example of, 567–568 simple rate of return and, 598–599 uneven cash flows and, 568–569 payback period, 566 internal rate of return method and, 600–601 simple rate of return and, 598–599, 600–601 uneven cash flows and, 568–569 Pearl Products Limited, 370 Pegasus Airlines, 551 Pepper Industries, 696–697 PepsiCo, 294 performance measurement, 466–504 balanced scorecard, 482–487 Excel and, 490–491 operating, 479–481 perverse effects of, 501–502 residual income, 474–478 responsibility accounting and, 469–470 return on investment, 470–474 performance reports, performance reviews, 13, 14 period costs, 29, 30–31 in income statements, 41 perpetual budgets, 335 Pfizer, physical safeguards, 13, 14 Piedmont Company, 316 Piedmont Fasteners Corporation, 263 Pipeline Unlimited, 240–241 Pittman Company, 263–264 planning, 3–4 budgets in, 334 definition of, planning budgets, 393–396, 427–428 plantwide overhead rates, 73–74, 86 assigning to product costs, 148–149 multiple predetermined rates vs., 94 predetermined, 90–92 service industry use of, 93–94 varying, 88–89 PNC Bank, 15 postaudits, 585–586 Precision Manufacturing Inc., 175–176 predetermined overhead rates, 68–69, 71–72, 449–450 computing, 86, 89 departmental, 89–90 multiple, 74–77 preference decisions, 564, 581–583, 594, 596, 599 present value, 606–612 computing, 607–608 mathematics of interest and, 606–607 of series of cash flows, 608–609 table of, 612 preventive controls, 13 price-earnings ratio, 676 price standards, 401 price variances, 405 pricing decisions, 294 prime costs, 28 Prior, Anna, 400 www.freebookslides.com Index process costing, 184–215, 186 concepts for costing computations in, 191–192 cost flows in, 187–190 definition of, 186 in Excel, 203–204 job-order costing compared with, 186–187 labor costs in, 188, 189–190 materials costs in, 188, 189 operation costing in, 198 overhead costs in, 188, 189 weighted-average method in, 192–198 processing departments, 187 process management perspective, 15–17 process performance measures, 492 internal, 496–497, 500–501 process time, 479, 480 Procter & Gamble (P&G), 3–4, 15, 185, 659 product costs, 29–30 in activity-based costing, 148–151 computation of total and unit, 72 computing in activity-based costing, 157–158 in income statements, 41 overhead costs in, 148–151 production budgets, 345–346, 370, 372 estimates and assumptions for, 339 integrating with other budgets, 383–384 productivity, employee wellness and, 486 product leadership, 10, 12 product-level activities, 152 product lines, decisions about adding/dropping, 515–519, 542, 547–548, 549–550 professional certification, 7–8 profit cost structure and stability of, 237–238 target profit analysis, 234–235 utilizing constrained resources to maximize, 526–528 profitability, ratio analysis of, 672–674, 686, 688–689, 694–695 profitability index, 582–583 profit centers, 469 ProphetMax, Inc., 297–304 Quaker Oats, 475 quantity standards, 401 quantity variances, 405 queue time, 479 quick ratio, 666–667 QVC, 291 R2, 270 Ramon Company, 278 Ramsey, Mike, 289 Raner, Harris & Chan, 320 ratio analysis asset management, 667–670, 686 comprehensive, 690–692 debt management, 670–672, 686, 688–689 effects of transactions on ratios and, 689–690 interpretation of ratios in, 692–693 liquidity, 665–667, 685–686, 689 for a loan application, 693–694 market performance, 675–677, 687, 688, 694–695 profitability, 672–674, 686, 688–689, 694–695 sources for, 679 summary of, 677–678 ratios, as starting point of analysis, 660 Ravenna Company, 641–642 raw materials, 27–28, 29–30 real depreciation, 511 reconciliations, 13, 14 records, in risk management, 13, 14 regression lines, 269 relaxing constraints, 529–530 released costs, 289–291 relevant benefits, 508 identifying, 510–512 relevant costs, 508 activity-based costing and, 535 analysis of, 549 identifying, 510–512, 541, 547 reasons for isolating, 514 relevant range, 34–35 residual income, 474–478 definition of, 474 divisional comparison and, 477–478 equation for, 474 evaluating new investments using, 496 motivation and, 476–477 return on investment and, 488–489, 493–494, 499–500 resource allocation, 334 resources, constrained, 525–528, 543–544 responsibility accounting, 335, 469–470 responsibility centers, 469 return on equity, 674 return on investment (ROI), 470–474 changes in profits/assets and, 495–496 comparing performance using, 499 computing and interpreting, 494–495 criticisms of, 474 elements of, 473 evaluating new investments using, 496 formula for, 470 on home remodeling, 472 net operating income/operating assets and, 470–471 residual income and, 488–489, 493–494, 499–500 simple rate of return method and, 585 understanding, 471–474 719 www.freebookslides.com 720 Index return on total assets, 673–674 revenues, 393, 430 direct method and, 655–656 revenue variances, 397–398 Reynolds Consumer Products, 186 Rick’s Hairstyling, 393–396, 399–400 risk management see enterprise risk management risks, examples of business, 13 Ritz-Carlton, 12 robots, 68 Rockford Company, 637–640 Rock-Tenn Company, 188 ROI see return on investment (ROI) Rolander, Niclas, 573 Rolex, 12 Rolls-Royce, Rose Acre Farms, 575 Rosenbush, Steven, 481 Royal Lawncare Company, 315 Ryan Company, 77 Saab, Safeway, 295 salaries, sales budgets, 338, 343–345, 372 estimates and assumptions for, 339 integrating with other budgets, 383–384 sales commissions, structuring, 240–243 sales mix break-even analysis and, 241–243 definition of, 241 sales volume, 229–231 margin of safety, 235–236 operating leverage and, 239–240 target profit analysis and, 234–235 Salmon River Roods, 78 salvage value, 585 Samsung, 28, 617 Santa Maria Wool Cooperative, 531–534, 538–540 SAS, 507 scarcity, 467 scattergraph plots, 266–267 in Excel, 270–272 Scottie Sweater Company, 557–558 Scott Paper, 186 screening decisions, 564 cost of capital and, 572 Sears, 5, 401, 622 segmented income statements, 294–305, 309–310 arbitrary division of common costs in, 303–304 break-even analysis and, 300–302 common fixed costs, 295, 296 common mistakes in, 302–304 decision making and, 300 external reporting perspective on, 304–305 levels of, 297–300 omission of costs from, 302–303 segment margins, 295 traceable fixed costs in, 294–296, 298 segment margins, 295 segments arbitrarily dividing common costs among, 303–304 assigning traceable costs among, 303 decisions about adding/dropping, 515–519, 542, 547–548, 549–551 definition of, 3, 282 segregation of duties, 13, 14 self-imposed budgets, 335–336 selling, general, and administrative (SG&A) costs, 29 in absorption costing, 282 n variable costing, 286 in variable costing, 282 selling and administrative expense budgets, 351–352, 368–369 estimates and assumptions for, 339 selling costs, 29 sell or process further decisions, 531–534, 544, 546–547, 550–551, 555–556 service companies activity-based costing and, 162 job-order costing in, 64, 72, 79–80 setups, 530n Shannon Company, 316 Shilow Company, 381–383 Sierra Company, 319 Silicon Valley Bank, 475 Silver Company, 367 simple rate of return method, 583–585, 594–595 computing, 596 payback period and, 598–599, 600–601 Sisal Marketing Corporation, 477–478 Six Flags, 469 Somerville, MA, 159 Southside Pizzeria, 439–440 Southwest Airlines, 4–5, 12, 15, 265, 482 special order decisions, 523–524, 543, 551–552 spending variances, 398–399, 435 split-off point, 531 Sporthotel Theresa, 33 sports car financing, 581, 587 Sprint, 475 stability, profit, 237–238 stakeholders, 660 standard cost card, 403, 452 standard cost per unit, 403 standard costs, 401–404 www.freebookslides.com Index comprehensive variances, 450–451 cost flows, 459–461 direct labor, 402–403 direct labor variances and, 410–412 direct materials variances and, 406–409 in Excel, 453–464 general model for variance analysis, 405–406 practical vs ideal, 402 predetermined overhead rates and analysis and, 440–446 using in flexible budgets, 404 variable manufacturing overhead, 403–404 variable manufacturing overhead variances and, 412–415 standard hours allowed, 406 standard hours per unit, 402–403 standard price per unit, 402 standard quantity allowed (SQ), 406, 407 standard quantity per unit, 402 standard rate per hour, 403 standard rate per unit, 403 Starbucks, 15, 575 Starfax, Inc., 326 statement of cash flows, 614–657 considering relationships among numbers in, 633–635 considering specific circumstances in, 633 example of, 626–633 financing activities in, 618, 630–631 gross cash flows in, 622–625 indirect method in, 618–622 interpreting, 633–635 investing activities in, 618, 629 key concepts in, 617, 625–626 missing data from, 650 operating activities in, 618–619, 628–629 organization of, 617–618 preparing, 644–645, 645–647, 649–650, 651–654 seeing the big picture in, 631–633 understanding, 648–649 Statement of Ethical Professional Practice, 9–10, 11 static planning budgets, 393–396 step-variable costs, 34–35 Sterling Farm, 237–238 Stern, Stewart & Co., 475n Stevens, Laura, 345, 481, 580 stockholders, 660 strategy balanced scorecards and, 483, 484–486, 501 definition of, 10 make or buy decisions and, 520 strategic management perspective and, 10, 12 Subaru, 4, 529 Subway, 401 sunk costs, 39, 509 super glues, 289 Superior Markets, 554–555 suppliers, payments to, 622 supply chain management, 521 Suzhou Victory Precision Manufacture Company, 68 Sweeten Company, 85–86 Swinyard Corporation, 574–575 Takahashi, Yoshio, 529 Takata, Talley, Karen, 400 Tami’s Creations, Inc., 324–325 Tanaka, Sanette, 472 Target, 396–397 target profit analysis, 234–235 Teledex Company, 94–95 Texas Instruments, 27 3M, 15, 289 throughput time, 479, 480 times interest earned ratio, 670–671 time tickets, 67–68 time value of money, 565 Tommy Bahama, 27 total asset turnover, 669–670 total cost approach, 512–515 total-cost approach, 577–578 total job costs, 72, 86 multiple predetermined overhead rates for, 86–87 touch labor, 28 Toxaway Company, 325–326 Toyota Motor Corporation, 4, 28, 349 Toys R Us, 475 traceable fixed costs, 294 assigning among segments, 303 as fixed common costs, 298 identifying, 295–296 transaction analysis, 462–464 transactions, classifying, 643, 647–648 Treacy, Michael, 12n trend analysis, 660, 661–663 trend percentages, 662–663, 687 TufStuff, Inc., 559–561 Tupperware, 475 turnover, 471–472, 474 accounts receivable, 667–668 inventory, 668 total asset, 669–670 uncertain cash flows, 580–581, 593–594, 596 net present value analysis and, 599 underapplied overhead, 78, 446 Under Armour, 31 unfavorable variances, 406, 408 721 www.freebookslides.com 722 Index unit costs impact of variances on, 433–434 in process costing, 191 United Airlines, 296, 525 United Parcel Service, 345, 481, 580 United States Postal Service, 475 unit-level activities, 151–152 unit product costs, 72, 86 calculating, 81–82 computing, 88 multiple predetermined overhead rates for, 86–87 University of Minnesota, 25 University Tees, 63 upstream costs, 302–303 U.S Postal Service, 345 Vail Resorts, 525 Val-Tek Company, 578–579 value chain, 16 variable costing, 280–294 absorption costing vs., 307–309 advantages of, 292–294 cost-volume-profit analysis and, 292–293 definition of, 282 income statements, 282, 284–286 net operating income changes, 293 reconciliation of with absorption costing, 289–291 variable costs, 31–33, 35, 230 variable expense ratio, 225–227 variable manufacturing overhead variances, 412–415 variable overhead efficiency variance, 413–415 variable overhead rate variance, 413–415 variance analysis comprehensive, 431–432, 435–437 general model for standard cost, 405–406 in hospitals, 434–435 materials price variance, 407–408 standard costs–direct materials variances and, 406–409 variable manufacturing overhead variances and, 412–415 variance analysis cycle, 392–393 variances revenue, 397–398 spending, 398–399 VBT Bicycling Vacations, 65 Venice InLine, Inc., 695–696 vertical analysis, 660, 663–665 vertical integration, 520 Victoria’s Secret, 400 Vilar Performing Arts Center, 296–297 Vines of Mendoza, 563 Virtual Journeys Unlimited, 241–243 Virtuoso, 12 Volkswagen, 349 Voltar Company, 245–248 volume trade-off decisions, 525–531, 543, 544–545 constraints in, 525–526 utilizing constrained resources to maximize profits and, 526–528 volume variance, 443–444 Volvo, 484 Vulcan Company, 323 wait time, 479 Wakabayashi, Dalsuke, 617 Walmart, 12, 471 Walsh Company, 317 Walt Disney Corporation, 294, 616 Wanderful Media, 232 Washington Trails Association (WTA), 354 Weaver Company, 645–647 Webb Company, 294 Weber, Lauren, 396–397 Weber Light Aircraft, 284, 286, 289 Webvan, 240 weighted-average method, 191, 192–198 assigning costs to units, 196–197 computing equivalent units of production, 192–195 cost computation per equivalent unit, 195–196 cost reconciliation reports, 197 Western River Expeditions, 153 Westerville Company, 491–492 Westex Products, 380–381 Westland University, 277 “what if” scenarios and forecasting, 334 Whelan, Robbie, 68 Whirlpool Corporation, 28, 398, 474 Whitman Company, 318–319 Wiersema, Fred, 12n Wild Turkey, 467 Wingate Company, 318 W.L Gore, 12 working capital, 565, 665–666 work in process, 29–30 World Cup, 398 Yadron, Danny, 512 Yost Precision Machining, 65–66, 70–71 Yum! Brands, Inc., 564 Zulily, 291 www.freebookslides.com www.freebookslides.com www.freebookslides.com www.freebookslides.com ... While Introduction to Managerial Accounting, 8e, and its teaching package make no claim of any specific AACSB qualification or evaluation, we have, within Introduction to Managerial Accounting, 8e, ... ROLOGUE Managerial Accounting: An Overview 1 WHAT IS MANAGERIAL ACCOUNTING? Planning 3 Controlling 4 Decision Making WHY DOES MANAGERIAL ACCOUNTING MATTER TO YOUR CAREER? Business Majors Accounting. .. why managerial accounting is important to the future careers of all business students It begins by answering two questions: (1) What is managerial accounting? and (2) Why does managerial accounting