PART ONE FOCUS ON DECISION MAKING 2
1 Managerial Accounting & the Business Organization 2
Chapter Opener: Cisco Systems 3
Accounting and Decision Making 4
Effects of Government Regulation 7
Management Accounting in Service and Nonprofit Organizations 8
Cost-Benefit and Behavioral Considerations 8
The Management Process and Accounting 9
Illustration of Budgets and Performance Reports 11
Planning and Control for Product Life Cycles and the Value Chain 12
Accounting's Position in the Organization 16
Career Opportunities in Management Accounting 20
Adaptation to Change 21
Just-in-Time Philosophy and Computer-Integrated Manufacturing 23
Importance of Ethical Conduct 24
Highlights to Remember 28
Accounting Vocabulary 29
Fundamental Assignment Material 30
Additional Assignment Material 32
2 Introduction to Cost Behavior and Cost-Volume Relationships 40
Chapter Opener: Boeing 41
Activities, Costs, and Cost Drivers 42
Comparison of Variable and Fixed Costs 43
Cost-Volume-Profit Analysis 47
Additional Uses of Cost-Volume Analysis 57
Nonprofit Application 60
Highlights to Remember 62
Appendix 2A: Sales-Mix Analysis 63
Appendix 2B: Impact of Income Taxes 64
Accounting Vocabulary 65
Fundamental Assignment Material 66
Additional Assignment Material 68
3 Measurement of Cost Behavior 84
Chapter Opener: America West 85
Cost Drivers and Cost Behavior 86
Management Influence on Cost Behavior 89
Cost Functions 92
Methods of Measuring Cost Functions 95
Highlights to Remember 104
Appendix 3: Use and Interpretation of Least-Squares Regression 106
Accounting Vocabulary 110
Fundamental Assignment Material 110
Additional Assignment Material 112
4 Cost Management Systems and Activity-Based Costing 128
Chapter Opener: AT&T 129
Cost Management Systems 130
Different Costs for Different Decisions 132
Activity-Based Costing 138
Illustration of Activity-Based Costing 147
Activity-Based Management 153
Highlights to Remember 157
Accounting Vocabulary 158
Fundamental Assignment Material 158
Additional Assignment Material 162
5 Relevant Information and Decision Making:Marketing Decisions 180
Chapter Opener: Grand Canyon Railway 181
The Concept of Relevance 182
The Special Sales Order 185
Deletion or Addition of Products, Services, or Departments 190
Optimal Use of Limited Resources 192
Pricing Decisions 194
General Influences on Pricing in Practice 197
Role of Costa in Pricing Decisions 198
Target Costing 203
Highlights to Remember 208
Accounting Vocabulary 209
Fundamental Assignment Material 209
Additional Assignment Material 212
6 Relevant Information and Decision Making:Production Decisions 226
Chapter Opener: Nantucket Nectars 227
Opportunity Outlay, and Differential Costs 228
Make-or-Buy Decisions 231
Joint Product Costs 236
Irrelevance of Past Costs 238
Irrelevance of Future Costs That Will Not Differ 241
Beware of Unit Costs 241
Conflicts Between Decision Making and Performance Evaluation 242
How Income Statements Influence Decision Making 244
Highlights to Remember 248
Accounting Vocabulary 249
Fundamental Assignment Material 249
Additional Assignment Material 253
PART Two ACCOUNTING FOR PLANNING AND CONTROL 268
7 The Master Budget 268
Chapter Opener: The Ritz-Carlton 269
Budgets and the Organization 270
Preparing the Master Budget 273
Difficulties of Sales Forecasting 283
Getting Employees to Accept the Budget 284
Financial Planning Models 285
Highlights to Remember 290
Appendix 7: Use of Spreadsheets for Budgeting 291
Accounting Vocabulary 294
Fundamental Assignment Material 294
Additional Assignment Material 296
8 Flexible Budgets and Variance Analysis 310
Chapter Opener: McDonald's 311
Flexible Budgets: Bridge Between Static 312
Budgets and Actual Results 312
Isolating the Causes of Variances 317
Flexible-Budget Variances in Detail 323
Overhead Variances 327
General Approach 328
Highlights to Remember 332
Accounting Vocabulary 333
Fundamental Assignment Material 333
Additional Assignment Material 335
9 Management Control Systems and Responsibility Accounting 350
Chapter Opener: Foundation Health Systems 351
Management Control Systems 352
Designing Management Control Systems 355
Controllability and Measurement of Financial Performance 362
Nonfinancial Measures of Performance 366
Management Control Systems in Service, Government,and Nonprofit Organizations 373
Future of Management Control Systems 374
Highlights to Remember 375
Accounting Vocabulary 376
Fundamental Assignment Material 377
Additional Assignment Material 380
10 Management Control in Decentralized Organizations 392
Chapter Opener: Nike 393
Centralization Versus Decentralization 394
Transfer Pricing 396
Performance Measures and Management Control 403
Measures of Profitability 407
ROI or Residual Income? 410
A Closer Look at Invested Capital 412
Keys to Successful Management Control Systems 416
Highlights to Remember 417
Accounting Vocabulary 418
Fundamental Assignment Material 419
Additional Assignment Material 422
PART THREE CAPITAL BUDGETING 433
11 Capital Budgeting 434
Chapter Opener: Deer Valley Lodge 435
Capital Budgeting for Programs or Projects 436
Discounted-Cash-Flow Models 436
Sensitivity Analysis and Risk Assessment in DCF Models 441
The NPV Comparison of Two Projects 442
Income Taxes and Capital Budgeting 447
Confusion About Depreciation 454
Capital Budgeting and Inflation 455
Other Models for Analyzing Long-Range Decisions 458
Performance Evaluation 460
Highlights to Remember 461
Accounting Vocabulary 462
Fundamental Assignment Material 463
Additional Assignment Material 465
PART FOUR PRODUCT COSTING 482
12 Cost Allocation 482
Chapter Opener: Dell Computer Corporation 483
Cost Allocation in General 484
Allocation of Service Department Costs 487
Allocation of Costs to Final Cost Objects 496
Activity-Based-Costing (ABC) Approach 497
Allocation of Joint Costs and By-Product Costs 502
Highlights to Remember 507
Accounting Vocabulary 508
Fundamental Assignment Material 508
Additional Assignment Material 512
13 Job-Costing Systems 526
Chapter Opener: Dell Computer Corporation 527
Distinction Between Job Costing and Process Costing 528
Illustration of Job Costing 529
Accounting for Factory Overhead 533
Illustration of Overhead Application 534
Problems of Overhead Application 536
Activity-Based Costing/Management in a Job-Costing Environment 539
Product Costing in Service and Nonprofit Organizations 542
Highlights to Remember 545
Accounting Vocabulary 546
Fundamental Assignment Material 546
Additional Assignment Material 549
14 Process-Costing Systems 564
Chapter Opener: Nally and Gibson Georgetown, Inc 565
Process Costing Basics 566
Application of Process Costing 569
Physical Units and Equivalent Units (Steps 1 and 2) 570
Calculation of Product Costs (Steps 3 to 5) 571
Effects of Beginning Inventories 573
Weighted Average Method 574
First-In, First-Out Method 574
Process Costing in a JIT System: Backflush Costing 581
Highlights to Remember 583
Appendix 14: Hybrid Systems-Operation Costing 584
Accounting Vocabulary 587
Fundamental Assignment Material 587
Additional Assignment Material 589
15 Overhead Application: Variable and Absorption Costing 596
Chapter Opener: L.A. Darling Company 597
Variable Versus Absorption Costing 598
Fixed Overhead and Absorption Costs of Product 604
Effect of Other Variances 610
Highlights to Remember 614
Appendix 15: Comparisons of Production-Volume Variance with Other Variances 615
Accounting Vocabulary 617
Fundamental Assignment Material 617
Additional Assignment Material 619
PART FIVE BASIC FINANCIAL ACCOUNTING 636
16 Basic Accounting: Concepts, Techniques, & Conventions 636
Chapter Opener: Lands' End 637
The Need for Accounting 638
Financial Statements 638
Accrual Basis and Cash Basis 644
Adjustments to the Accounts 645
Adjustment Type Ⅰ: Expiration of Unexpired Costs 645
Adjustment Type Ⅱ: Recognition (Earning) of Unearned Revenues 648
Adjustment Type Ⅲ: Accrual of Unrecorded Expenses 650
Adjustment Type Ⅳ: Accrual of Unrecorded Revenues 651
Dividends and Retained Income 652
Preparing Financial Statements 654
Sole Proprietorships and Partnerships 655
Generally Accepted Accounting Principles 656
Three Measurement Conventions 657
Highlights to Remember 660
Appendix 16A: Additional Accounting Concepts 661
Appendix 16B: Using Ledger Accounts 663
Accounting Vocabulary 667
Assignment Material 667
Fundamental Assignment Material 668
Additional Assignment Material 670
17 Understanding Corporate Annual Reports:Basic Financial Statements 678
Chapter Opener: Oracle Corporation 679
Classified Balance Sheet 680
Income Statement 689
Statement of Retained Earnings 691
Statement of Cash Flows 692
Interpretation of a Statement of Cash Flows: The Direct Method 695
Interpretation of a Statement of Cash Flows: The Indirect Method 699
Highlights to Remember 705
Appendix 17: Shareholder Reporting, Income Tax Reporting, and Deferred Taxes 706
Accounting Vocabulary 708
Fundamental Assignment Material 708
Additional Assignment Material 711
18 More on Understanding Corporate Annual Reports 722
Chapter Opener: General Motors 723
Part One: Intercorporate Investments Including Consolidations 724
Market and Equity Methods 724
Consolidated Financial Statements 726
Highlights to Remember: Part One 736
Accounting Vocabulary 737
Part Two: Analysis of Financial Statements 737
Uses of Ratios 740
Efficient Markets and Investor Decisions 744
Highlights to Remember: Part Two 747
Accounting Vocabulary 747
Fundamental Assignment Material 747
Additional Assignment Material 751
19 Difficulties in Measuring Net Income 762
Chapter Opener: Home Depot 763
Part One: Principal Inventory Methods 764
Four Major Inventory Methods 764
Lower-of-Cost-or-Market (LCM) Method 769
Highlights to Remember: Part One 771
Accounting Vocabulary: Part One 771
Part Two: Changing Prices and Income Measurement 771
Income or Capital 772
Measurement Alternatives Under Inflation 773
Highlights to Remember: Part Two 779
Accounting Vocabulary: Part Two 780
Fundamental Assignment Material 780
Additional Assignment Material 782