1 Managerial Accounting 1-1

Just Add Water . . . and Paddle: Current Designs 1-1

Managerial Accounting Basics 1-3

Comparing Managerial and Financial Accounting 1-3

Management Functions 1-3

Organizational Structure 1-4

Managerial Cost Concepts 1-7

Manufacturing Costs 1-7

Product Versus Period Costs 1-8

Illustration of Cost Concepts 1-9

Manufacturing Costs in Financial Statements 1-10

Income Statement 1-11

Cost of Goods Manufactured 1-11

Cost of Goods Manufactured Schedule 1-12

Balance Sheet 1-13

Managerial Accounting Today 1-14

Service Industries 1-14

Focus on the Value Chain 1-15

Balanced Scorecard 1-17

Business Ethics 1-17

Corporate Social Responsibility 1-18

2 Job Order Costing 2-1

Profiting from the Silver Screen: Disney 2-1

Cost Accounting Systems 2-3

Process Cost System 2-3

Job Order Cost System 2-3

Job Order Cost Flow 2-4

Accumulating Manufacturing Costs 2-5

Assigning Manufacturing Costs 2-7

Raw Materials Costs 2-8

Factory Labor Costs 2-10

Predetermined Overhead Rates 2-12

Entries for Jobs Completed and Sold 2-15

Assigning Costs to Finished Goods 2-15

Assigning Costs to Cost of Goods Sold 2-16

Summary of Job Order Cost Flows 2-17

Job Order Costing for Service Companies 2-18

Advantages and Disadvantages of Job Order Costing 2-19

Applied Manufacturing Overhead 2-20

Under- or Overapplied Manufacturing Overhead 2-21

3 Process Costing 3-1

The Little Guy Who Could: Jones Soda 3-1

Overview of Process Cost Systems 3-3

Uses of Process Cost Systems 3-3

Process Costing for Service Companies 3-4

Similarities and Differences Between Job Order Cost and Process Cost Systems 3-4

Process Cost Flow and Assigning Costs 3-6

Process Cost Flow 3-6

Assigning Manufacturing Costs—Journal Entries 3-6

Equivalent Units 3-9

Weighted-Average Method 3-9

Refinements on the Weighted-Average Method 3-10

The Production Cost Report 3-12

Compute the Physical Unit Flow (Step 1) 3-13

Compute the Equivalent Units of

Production (Step 2) 3-13

Compute Unit Production Costs (Step 3) 3-14

Prepare a Cost Reconciliation Schedule (Step 4) 3-15

Preparing the Production Cost Report 3-15

Costing Systems—Final Comments 3-16

Appendix 3A: FIFO Method for Equivalent Units 3-19

Equivalent Units Under FIFO 3-19 Comprehensive Example 3-20

FIFO and Weighted-Average 3-24

4 Activity-Based Costing 4-1

Precor Is on Your Side: Precor 4-1

Traditional vs. Activity-Based Costing 4-3

Traditional Costing Systems 4-3

Illustration of a Traditional Costing System 4-3

The Need for a New Approach 4-4

Activity-Based Costing 4-4

ABC and Manufacturers 4-7

Identify and Classify Activities and Allocate Overhead to Cost Pools (Step 1) 4-7

Identify Cost Drivers (Step 2) 4-8

Compute Activity-Based Overhead Rates (Step 3) 4-8

Assign Overhead Costs to Products (Step 4) 4-9

Comparing Unit Costs 4-10

ABC Benefits and Limitations 4-12

The Advantage of Multiple Cost Pools 4-12

The Advantage of Enhanced Cost Control 4-13

The Advantage of Better Management Decisions 4-15

Some Limitations and Knowing When to Use ABC 4-16

ABC and Service Industries 4-17

Traditional Costing Example 4-18

Activity-Based Costing Example 4-18

Appendix 4A: Just-in-Time Processing 4-22

Objective of JIT Processing 4-23

Elements of JIT Processing 4-23

Benefits of JIT Processing 4-23

5 Cost-Volume-Profit 5-1

Don’t Worry—Just Get Big: Amazon.com 5-1

Cost Behavior Analysis 5-2

Variable Costs 5-3

Fixed Costs 5-3

Relevant Range 5-5

Mixed Costs 5-6

Mixed Costs Analysis 5-7

High-Low Method 5-7

Importance of Identifying Variable and Fixed Costs 5-9

Cost-Volume-Profit Analysis 5-10

Basic Components 5-10

CVP Income Statement 5-11

Break-Even Analysis 5-14

Mathematical Equation 5-15

Contribution Margin Technique 5-15

Graphic Presentation 5-16

Target Net Income and Margin of Safety 5-18

Target Net Income 5-18

Margin of Safety 5-20

Appendix 5A: Regression Analysis 5-22

6 Cost-Volume-Profit Analysis:Additional Issues 6-1

Not Even a Flood Could Stop It: Whole Foods Market 6-1

Basic CVP Concepts 6-3

Basic Concepts 6-3

Basic Computations 6-3

CVP and Changes in the Business

Environment 6-5

Sales Mix and Break-Even Sales 6-8

Break-Even Sales in Units 6-8

Break-Even Sales in Dollars 6-9

Sales Mix with Limited Resources 6-12

Operating Leverage and Profitability 6-14

Effect on Contribution Margin Ratio 6-15

Effect on Break-Even Point 6-15

Effect on Margin of Safety Ratio 6-16

Operating Leverage 6-16

Appendix 6A: Absorption Costing vs. Variable Costing 6-19

Example Comparing Absorption Costing with Variable Costing 6-19

Net Income Effects 6-21

Decision-Making Concerns 6-25

Potential Advantages of Variable Costing 6-27

7 Incremental Analysis 7-1

Keeping It Clean: Method Products 7-1

Decision-Making and Incremental Analysis 7-3

Incremental Analysis Approach 7-3

How Incremental Analysis Works 7-4

Qualitative Factors 7-5

Relationship of Incremental Analysis and Activity-Based Costing 7-5

Types of Incremental Analysis 7-6

Special Orders 7-6

Make or Buy 7-8

Opportunity Cost 7-9

Sell or Process Further 7-10

Single-Product Case 7-11

Multiple-Product Case 7-11

Repair, Retain, or Replace Equipment 7-14

Eliminate Unprofitable Segment or Product 7-15

8 Pricing 8-1

They’ve Got Your Size—and Color: Zappos.com 8-1

Target Costing 8-3

Establishing a Target Cost 8-4

Cost-Plus and Variable-Cost Pricing 8-5

Cost-Plus Pricing 8-5

Limitations of Cost-Plus Pricing 8-7

Variable-Cost Pricing 8-8

Time-and-Material Pricing 8-10

Transfer Prices 8-13

Negotiated Transfer Prices 8-14

Cost-Based Transfer Prices 8-17

Market-Based Transfer Prices 8-18

Effect of Outsourcing on Transfer Pricing 8-18

Transfers Between Divisions in Diff erent Countries 8-19

Appendix 8A: Absorption-Cost and Variable-Cost Pricing 8-21

Absorption-Cost Pricing 8-21

Variable-Cost Pricing 8-23

Appendix 8B: Transfers Between Divisions in Different Countries 8-24

9 Budgetary Planning 9-1

What’s in Your Cupcake?: BabyCakes NYC 9-1

Effective Budgeting and the Master Budget 9-3

Budgeting and Accounting 9-3

The Benefits of Budgeting 9-3

Essentials of Eff ective Budgeting 9-3

The Master Budget 9-6

Sales, Production, and Direct Materials Budgets 9-8

Sales Budget 9-8

Production Budget 9-9

Direct Materials Budget 9-10

Direct Labor, Manufacturing Overhead, and S&A Expense Budgets 9-13

Direct Labor Budget 9-13

Manufacturing Overhead Budget 9-14

Selling and Administrative Expense Budget 9-15

Budgeted Income Statement 9-15

Cash Budget and Budgeted Balance Sheet 9-17

Cash Budget 9-17

Budgeted Balance Sheet 9-20

Budgeting in Nonmanufacturing Companies 9-22

Merchandisers 9-22

Service Companies 9-23

Not-for-Profit Organizations 9-24

10 Budgetary Control and Responsibility Accounting 10-1

Pumpkin Madeleines and a Movie: Tribeca Grand Hotel 10-1

Budgetary Control and Static Budget Reports 10-3

Budgetary Control 10-3

Static Budget Reports 10-4

Flexible Budget Reports 10-6

Why Flexible Budgets? 10-7

Developing the Flexible Budget 10-9

Flexible Budget—A Case Study 10-9

Flexible Budget Reports 10-11

Responsibility Accounting and Responsibility Centers 10-13

Controllable versus Noncontrollable Revenues and Costs 10-15

Principles of Performance Evaluation 10-15

Responsibility Reporting System 10-17

Types of Responsibility Centers 10-18

Investment Centers 10-22

Return on Investment (ROI) 10-23

Responsibility Report 10-23

Judgmental Factors in ROI 10-24

Improving ROI 10-24

Appendix 10A: ROI vs. Residual Income 10-28

Residual Income Compared to ROI 10-28

Residual Income Weakness 10-29

11 Standard Costs and Balanced Scorecard 11-1

80,000 Different Caffeinated Combinations: Starbucks 11-2

Overview of Standard Costs 11-3

Distinguishing Between Standards and Budgets 11-4

Setting Standard Costs 11-4

Direct Materials Variances 11-7

Analyzing and Reporting Variances 11-7

Calculating Direct Materials Variances 11-9

Direct Labor and Manufacturing Overhead Variances 11-11

Direct Labor Variances 11-11

Manufacturing Overhead Variances 11-14

Variance Reports and Balanced Scorecards 11-16

Reporting Variances 11-16

Income Statement Presentation of Variances 11-16

Balanced Scorecard 11-17

Appendix 11A: Standard Cost Accounting System 11-21

Journal Entries 11-21

Ledger Accounts 11-23

Appendix 11B: Overhead Controllable and Volume Variances 11-24

Overhead Controllable Variance 11-24

Overhead Volume Variance 11-25

12 Planning for Capital Investments 12-1

Floating Hotels: Holland America Line 12-2

Capital Budgeting and Cash Payback 12-3

Cash Flow Information 12-3

Illustrative Data 12-4

Cash Payback 12-4

Net Present Value Method 12-6

Equal Annual Cash Flows 12-7

Unequal Annual Cash Flows 12-8

Choosing a Discount Rate 12-9

Simplifying Assumptions 12-9

Comprehensive Example 12-10

Capital Budgeting Challenges and Refinements 12-11

Intangible Benefits 12-11

Profitability Index for Mutually Exclusive Projects 12-13

Risk Analysis 12-14

Post-Audit of Investment Projects 12-15

Internal Rate of Return 12-16

Comparing Discounted Cash Flow Methods 12-17

Annual Rate of Return 12-18

13 Statement of Cash Flows 13-1

Got Cash?: Microsoft 13-1

Usefulness and Format of the Statement of Cash Flows 13-3

Usefulness of the Statement of Cash Flows 13-3

Classification of Cash Flows 13-3

Significant Noncash Activities 13-4

Format of the Statement of Cash Flows 13-5

Preparing the Statement of Cash Flows—Indirect Method 13-6

Indirect and Direct Methods 13-7

Indirect Method—Computer Services Company 13-7

Step 1: Operating Activities 13-9

Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Method 13-12

Step 2: Investing and Financing Activities 13-13

Step 3: Net Change in Cash 13-14

Analyzing the Statement of Cash Flows 13-17

Free Cash Flow 13-17

Appendix 13A: Statement of Cash Flows—Direct Method 13-19

Step 1: Operating Activities 13-19

Step 2: Investing and Financing Activities 13-25

Step 3: Net Change in Cash 13-26

Appendix 13B: Worksheet for the Indirect Method 13-26

Preparing the Worksheet 13-27

Appendix 13C: Statement of Cash Flows—T-Account Approach 13-31

14 Financial Analysis: The Big Picture 14-1

It Pays to Be Patient: Warren Buffett 14-1

Sustainable Income and Quality of Earnings 14-3

Sustainable Income 14-3

Quality of Earnings 14-7

Horizontal Analysis and Vertical Analysis 14-9

Horizontal Analysis 14-10

Vertical Analysis 14-12

Ratio Analysis 14-14

Liquidity Ratios 14-15

Solvency Ratios 14-16

Profitability Ratios 14-16

Comprehensive Example of Ratio Analysis 14-17

Appendix A Time Value of Money A-1

Interest and Future Values A-1

Nature of Interest A-1

Future Value of a Single Amount A-3

Future Value of an Annuity A-5

Present Value A-7

Present Value Variables A-7

Present Value of a Single Amount A-7

Present Value of an Annuity A-9

Time Periods and Discounting A-11

Present Value of a Long-Term Note or Bond A-11

Capital Budgeting Situations A-14

Using Financial Calculators A-15

Present Value of a Single Sum A-16

Present Value of an Annuity A-17

Future Value of a Single Sum A-17

Future Value of an Annuity A-17

Internal Rate of Return A 18

Useful Applications of the Financial Calculator A-18

Cases for Managerial Decision-Making

(The full text of these cases is available in WileyPLUS.)

Company Index I-1

Subject Index I-3

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