CHAPTER 1
Glossary G- 1
Indexes I- 1
Contents in BriefPreface xixPhoto Credits xxviiiPART 1
ContentsPreface xixPhoto Credits xxviiiPART 1
FUNDAMENTALS AND COST-ACCUMULATION SYSTEMS 1
FUNDAMENTALS AND COST-ACCUMULATION SYSTEMS 1
Indexes I- 1
Glossary G- 1
PART 2
PART 2
CHAPTER 2
MANAGERIAL ACCOUNTING:AN OVERVIEW 3
PART 3
CHAPTER 1 MANAGERIAL ACCOUNTING:AN OVERVIEW 3
PART 3
CHAPTER 3
CHAPTER 4
ORGANIZATIONS AND THEIR GOALS 4
THE MANAGEMENT PROCESS 4
PART 4
PART 4
Decision making 4/Planning 5/Directing operational activities 5/Controlling 5
THE ROLE OF MANAGERIAL ACCOUNTING 5
CHAPTER 5
Professional services and sales budget 409/Production budget:Construction of orthotic devices 410/Direct-material budget 411/Direct-professional-labor budget 414/Indirect-professional-labor budget 414/CHAPTER 6
CHAPTER 8
CHAPTER 9
Objectives of managerial accounting activity 5/Managerial versusfinancial accounting 8/Managerial accounting in different types oforganizations 9
ROLE OF THE MANAGERIAL ACCOUNTANT 10
Line and staff positions 10
CHAPTER 11
MAJOR THEMES IN MANAGERIAL ACCOUNTING 12
CHAPTER 12
CHAPTER 13
CHAPTER 14
COST ANALYSIS AND PRICING DECISIONS 15
CHAPTER 15
CHAPTER 16
CHAPTER 17
888/Fixed versus variable costs 889/Dual cost allocation 891/AllocateCHAPTER 18
Information and incentives 12/Behavioral issues 12/Costs and benefits 12/Evolution and adaptation in managerial accounting 13/Cost managementsystems 17/A systems perspective 17/Accounting and computers 18
CHAPTER 19
STRATEGIC COST MANAGEMENT AND THE VALUE CHAIN 19
CHAPTER 20
MANAGERIAL ACCOUNTING ASACAREER 22
Professional organizations 22/Professional certification 22/Professional ethics 22/Chapter summary 24/Key terms 24/Reviewquestions 25/Exercises 25/Problems 26
BASIC COST TERMS AND CONCEPTS 31
CHAPTER 2 BASIC COST TERMS AND CONCEPTS 31
COST CLASSIFICATIONS:DIFFERENT COSTS FOR DIFFERENTPURPOSES 32
Fixed and variable costs 32/Identifying cost drivers 36/Direct and indi-rect costs 36/Controllable and uncontrollable costs 38/Manufacturingcosts 39/Production costs in service industry firms and nonprofit organi-zations 41/Nonmanufacturing costs 42/Prod 43
COSTS ON FINANCIAL STATEMENTS 44
COST FLOWS IN A MANUFACTURING COMPANY 45
Income statement 44/Balance sheet 45
ECONOMIC CHARACTERISTICS OF COSTS 47
Opportunity costs 47/Sunk costs 49/Differential costs 51/Marginalcosts and average costs 52
COSTS AND BENEFITS OF INFORMATION 53
Chapter summary 53/Review problems on cost classifications 54/Solutions to review problems 55/Key terms 56/Review questions 56/Exercises 57/Problems 60/Cases 69
CHAPTER 3 JOB-ORDER COSTING SYSTEMS 73
JOB-ORDER COSTING SYSTEMS 73
Product costing in nonmanufacturing firms 74
PRODUCT AND SERVICE COSTING 74
FLOW OF COSTS IN MANUFACTURING FIRMS 75
TYPES OF PRODUCT-COSTING SYSTEMS 76
Job-order costing systems 76/Process-costing systems 77/Summary ofalternative product-costing systems 77
ACCUMULATING COSTS INAJOB-ORDER COSTING SYSTEM 78
Job-cost sheet 78/Direct-material costs 78/Direct-labor costs 80/Manufacturing-overhead costs 81/Summary of event sequence in job-order costing 82
ILLUSTRATION OF JOB-ORDER COSTING 82
Purchase of material 82/Use of direct material 84/Use of indirect ma-terial 84/Use of direct labor 84/Use of indirect labor 86/Incurrenceof manufacturing-overhead costs 86/Application of manufacturing over-head 86/Summary of overhead accounting 87/Sellin 93
FURTHER ASPECTS OF OVERHEAD APPLICATION 93
TWO-STAGE COST ALLOCATION 98
Accuracy versus timeliness of information:A cost-benefit issue 93/Choosing the cost driver for overhead application 97/Departmental over-head rates 98
Activity-based costing:An introduction 99
PROJECT COSTING:JOB-ORDER COSTING IN NONMANUFACTURINGORGANIZATIONS 101
CHANGING TECHNOLOGY IN MANUFACTURING OPERATIONS 102
Electronic data interchange(EDI)103/Use of bar codes 103/Chaptersummary 104/Key terms 105
APPENDIX:DIFFERENT OVERHEAD RATES UNDER PLANTWIDE,DEPRTMENTAL,AND ACTIVITY-BASED COSTING SYSTEMS 106
Review questions 109/Exercises 109/Problems 115/Cases 129
PROCESS COSTING AND HYBRID PRODUCT-COSTING SYSTEMS 135
CHAPTER 4 PROCESS COSTING AND HYBRID PRODUCT-COSTING SYSTEMS 135
COMPARISON OF JOB-ORDER COSTING AND PROCESS COSTING 136
Differences between job-order and process costing 138
EQUIVALENT UNITS:A KEY CONCEPT 139
ILLUSTRATION OF PROCESS COSTING 141
Basic data for illustration 142/Weighted-average method 143/FIFOmethod 147/Just-in-Time(JIT)Inventory Methods 147
OTHER ISSUES IN PROCESS COSTING 147
HYBRID PRODUCT-COSTING SYSTEMS 150
Operation costing for batch manufacturing processes 150
ADAPTING PRODUCT-COSTING SYSTEMS TO TECHNOLOGICALCHANGE 154
Chapter summary 155/Key terms 156
APPENDIXA:FIFO METHOD OF PROCESS COSTING 157
APPENDIX B:PROCESS COSTING IN SEQUENTIAL PRODUCTIONDEPARTMENTS 163
Weighted-average method 165/FIFO method 165/Summary oftransferred-in costs 170/Review questions 170/Exercises 171/Problems 176/Cases 186
ACTIVITY-BASED COSTING AND COSTMANAGEMENT SYSTEMS 189
CHAPTER 5 ACTIVITY-BASED COSTING AND COSTMANAGEMENT SYSTEMS 189
Production process 190/Plant layout 192/Traditional,volume-basedproduct-costing system 193/Trouble in Phoenix 194/Activity-based cost-ing system 195/Interpreting the ABC product costs 201/The punch line 190
AEROTECH CORPORATION:ATALE OF TWO CITIES 190
202/Why traditional,volume-based systems distort product costs 204
ACTIVITy-BASED COSTING:SOME KEY ISSUES 206
Cost drivers 207/Homogeneous activity cost pools 209/Transaction cost-ing 209/Storyboarding 210/Multidisciplinary ABC project teams 210/Direct versus indirect costs 210/When is a new product-costing systemneeded? 211
COST MANAGEMENT SYSTEMS 212
Non-value-added costs 213/Identifying non-value-added costs in thePhoenix plant 214
ACTIVITY-BASED COSTING AND MANAGEMENT IN THE SERVICEINDUSTRY 216
ACTIVITY-BASED MANAGEMENT 216
Chapter summary 218/Review problem on cost drivers and product-costdistortion 219/Solution to review problem 220/Key terms 220/Reviewquestions 221/Exercises 221 /Problems 228/Cases 242
ACTIVITY-BASED MANAGEMENT AND THENEW MANUFACTURING ENVIRONMENT 249
CHAPTER 6 ACTIVITY-BASED MANAGEMENT AND THE NEWMANUFACTURING ENVIRONMENT 249
AEROTECH'S BAKERSFIELD PLANT:ADVANCED MANUFACTURINGTECHNOLOGY 250
Just-in-time inventory and production management 250/Flexible manufac-turing system 253/Plant layout at Aerotech's Bakersfield facility 254/Cost management system in Bakersfield 256
TWO-DIMENSIONAL ABC AND ACTIVITY-BASED MANAGEMENT 256
Using ABM to eliminate non-value-added activities and costs 261/Achieving cost reduction 263
TARGET COSTING,KAIZEN COSTING,AND CONTINUOUSIMPROVEMENT 264
Target costing 264 / Kaizen costing 265 / Toyota:Target costing and kaizencosting in action 266/Benchmarking 267/Re-engineering 268/Theory ofconstraints 269
KEYS TO SUCCESSFULLY IMPLEMENTING ABC AND ABM 269
COST FLOWS IN A JIT SETTING 271
OTHER COSTMANAGEMENT ISSUES IN THE NEW MANUFACTURINGENVIRONMENT 273
Chapter summary 274/Key terms 275 / Review questions 275/Exercises 276/Problems 279/Cases 289
PLANNING AND CONTROLSYSTEMS 293
PLANNING AND CONTROLSYSTEMS 293
CHAPTER 7 COST BEHAVIOR AND ESTIMATION 295
CHAPTER 7 COST BEHAVIOR AND ESTIMATION 295
COST BEHAVIOR PATTERNS 296
Variable costs 297/Step-variable costs 298/Fixed costs 299 / Step-fixedcosts 301/Semivariable cost 301/Curvilinear cost 302/Using cost be-havior patterns to predict costs 304/Engineered,committed,and discre-tionary costs 305/Shifting cost structure in th 307
COST ESTIMATION 308
Account-classification method 308/Visual-fit method 309/High-lowmethod 311 / Least-squares regression method 311/Multiple regression 308
WORK MEASUREMENT 318
Chapter summary 320/Review problems on cost behavior and estimation 318
315/Data collection problems 315/Engineering method of cost estima-tion 316/Effect of learning on cost behavior 316/Costs and benefits ofinformation 318
321/Solutions to review problems 321/Key terms 322
APPENDIX:FINDING THE LEAST-SQUARES REGRESSION ESTIMATES 322
Key terms:Appendix 325/REview questions 325/Exercises 327/Problems 332/Cases 342
CHAPTER 8 COST-VOLUME-PROFIT ANALYSIS 349
COST-VOLUME-PROFIT ANALYSIS 349
Projected expenses and revenue 350
ILLUSTRATION OF COST-VOLUME-PROFIT ANALYSIS 350
THE BREAK-EVEN POINT 351
Contribution-margin approach 351/Equation approach 352
Interpreting the CVP graph 355/Alternative format for the CVP graph 353
GRAPHING COST-VOLUME-PROFIT REIATIONSHIPS 353
357/Profit-volume graph 357
TARGET NET PROFIT 357
Contribution-margin approach 358/Equation approach 359/Graphicalapproach 359
APPLYING CVP ANALYSIS 359
Safety margin 359/Changes in fixed expenses 360/Changes in the unitcontribution margin 360/Predicting profit given expected volume 361/Interdependent changes in key variables 363/CVP information in pub-lished annual reports 364
CVP ANALYSIS WITH MULTIPLE PRODUCTS 364
ASSUMPTIONS UNDERLYING CVP ANALYSIS 366
Role of computerized planning models and electronic spreadsheets 367
CVP RELATIONSHIPS AND THE INCOME STATEMENT 368
Traditional income statement 368/Contribution income statement 368
368/Comparison of traditional and contribution income statements 368
COST STRUCTURE AND OPERATING LEVERAGE 370
Operating leverage 371/Cost structure and operating leverage:a cost-benefit issue 373
CVP ANALYSIS,ACTIVITY-BASED COSTING,AND ADVANCEDMANUFACTURING SYSTEMS 374
A move toward JIT and flexible manufacturing 375/Chapter summary 377/Review problem on cost-volume-profit analysis 374
377/Solution to review problem 378/Key terms 378
APPENDIX:EFFECT OF INCOME TAXES 379
Key terms:Appendix 382/Review questions 382/Exercises 383/Problems 386/Cases 396
CHAPTER 9 BUDGETING:PROFIT PLANNING AND CONTROLSYSTEMS 403
BUDGETING:PROFIT PLANNING ANDCONTROL SYSTEMS 403
PURPOSES OF BUDGETING SYSTEMS 404
THE MASTER BUDGET:A PLANNING TOOL 405
TYPES OF BUDGETS 405
Sales of services or goods 405/Operational budgets 407/Budgeted finan-cial statements 408/Nonprofit organizations 408
AN ILLUSTRATION OF THE MASTER BUDGET 408
Overhead budget 414/Selling and administrative expense budget 416/Cash receipts budget 417/Cash disbursements budget 417/Summarycash budget 420/Budgeted income statement 421/Budgeted balancesheet 421/Using the master budget for planning 424
BUDGET ADMINISTRATION 424
ASSUMPTIONS AND PREDICTIONS:THE UNDERPINNINGS OF THEMASTER BUDGET 425
Financial planning models 426
ZERO-BASE BUDGETING 427
INTERNATIONAL ASPECTS OF BUDGETING 427
BUDGETING PRODUCT LIFE-CYCLE COSTS 428
BEHAVIORAL IMPACT OF BUDGETS 429
Budgetary slack:Padding the budget 430/Participative budgeting 431/Management by objectives 432/Ethical issues in budgeting 432/Chapter summary 433/Key terms 434
APPENDIX:INVENTORY MANAGEMENT 435
Economic order quantity 435/Timing of orders 437
JIT INVENTORY MANAGEMENT:IMPLICATIONS FOR EOQ 439
Key terms:Appendix 440/Review questions 440/Exercises 441/Problems 441/Cases 462
CHAPTER 1O STANDARD COSTING AND PERFORMANCEMEASURES FOR THE NEW MANUFACTURINGENVIRONMENT 469
CHAPTER 1OSTANDARD COSTING AND PERFORMANCEMEASURES FOR THE NEW MANUFACTURINGENVIRONMENT 469
CONTROLLING COSTS 470
Management by exception 470
SETTING STANDARDS 471
Participation in setting standards 471/Perfection versus practical stan-dards:A behavioral issue 472
USE OF STANDARDS BY NONMANUFACTURING ORGANIZATIONS 472
COST VARIANCE ANALYSIS 474
Direct-material standards 474/Direct-labor standards 474/Standardcosts given actual output 475/Analysis of cost variances 475/Direct-material variances 475/Direct-labor variances 478/Multiple types of di-rect material or direct labor 479/Allowing for spo 479
SIGNIFICANCE OF COST VARIANCES 480
A statistical approach 482
BEHAVIORAL IMPACT OF STANDARD COSTING 483
CONTROLLABILITY OF VARIANCES 484
Interaction among variances 485
STANDARD COSTS AND PRODUCT COSTING 486
ADVANTAGES OF STANDARD COSTING 488
CHANGING ROLE OF STANDARD-COSTING SYSTEMS IN THE NEWMANUFACTURING ENVIRONMENT 489
Criticisms of standard costing in the new manufacturing environment 490/Adapting standard-costing systems 491
OPERATIONAL CONTROL MEASURES IN THE NEWMANUFACTURING ENVIRONMENT 492
Gain-sharing plans 497
Chapter summary 498/Review problems on standard costing and operationalperformance measures 499/Solutions to review problems 500/Key terms 497
THE BALANCED SCORECARD 497
502/Review questions 502/Exercises 503/Problems 507/Cases 520
FLEXIBLE BUDGETS AND CONTROL OFOVERHEAD COSTS 525
CHAPTER 11 FLEXIBLE BUDGETS AND CONTROL OFOVERHEAD COSTS 525
OVERHEAD BUDGETS 526
Flexible budgets 526/Advantages of flexible budgets 526/The activitymeasure 527
FLEXIBLE OVERHEAD BUDGET ILLUSTRATED 529
OVERHEAD APPLICATION IN A STANDARD-COSTING SYSTEM 530
Criteria for choosing the activity measure 531
CHOICE OF ACTIVITY MEASURE 531
OVERHEAD COST VARIANCES 533
Variable overhead 534/Fixed overhead 537/Four-way,three-way,andtwo-way variance analysis 540
STANDARD COSTS AND PRODUCT COSTING 542
OVERHEAD COST PERFORMANCE REPORT 542
ACTIVITY-BASED FLEXIBLE BUDGET 543
MEASURING AND REPORTING QUALITY COSTS 546
Chapter summary 549/Review problem on overhead variances 550/Solution to review problem 550/Key terms 551
APPENDIX:SALES VARIANCES 552
ISO 9000 STANDARDS 568
Key terms:Appendix 553/Review questions 553/Exercises 554/Problems 558/Cases 574
SECTION 1 RESPONSIBILITY ACCOUNTING ANDSEGMENTED REPORTING 579
RESPONSIBILITY ACCOUNTING AND INCOMEREPORTING 579
CHAPTER 12 RESPONSIBILITY ACCOUNTING AND INCOMEREPORTING 579
Responsibility centers 580
ILLUSTRATION OF RESPONSIBILITY ACCOUNTING 580
PERFORMANCE REPORTS 583
Cost-plus pricing 751/Absorption-cost pricing formulas 753/Variable-costBUDGETS,VARIANCE ANALYSIS,AND RESPONSIBILITYACCOUNTING 586
Cost allocation 586/Activity-based responsibility accounting 588
BEHAVIORAL EFFECTS OF RESPONSIBILITY ACCOUNTING 589
Information versus blame 589/Controllability 590/Motivating desiredbehavior 590
SEGMENTED REPORTING 591
Segments versus segment managers 593/Key features of segmented report-ing 593/Customer profitability analysis and activity-based costing 593
SECTION 2 VARIABLE AND ABSORPTIONCOSTING 594
ILLUSTRATION OF VARIABLE AND ABSORPTION COSTING 595
Absorption-costing income statements 595/Variable-costing income state-ments 596/Reconciling income under absorption and variable costing 595
597/Cost-volume-profit analysis 599/Evaluation of absorption and vari-able costing 600/Chapter summary 601/Review problem on responsibil-ity accounting 602/Solution to review problem 602/Key terms 603
APPENDIX:EFFECT OF THE VOLUME VARIANCE UNDERABSORPTION AND VARIABLE COSTING 604
Review questions 607/Exercises 608/Problems 612/Cases 623
CHAPTER 13 INVESTMENT CENTERS AND TRANSFERPRICING 629
INVESTMENT CENTERS AND TRANSFERPRICING 629
DELEGATION OF DECISION MAKING 630
Obtaining goal congruence:A behavioral challenge 630/Adaptation ofmanagement control systems 630
MEASURING PERFORMANCE IN INVESTMENT CENTERS 631
Return on investment 632/Residual income 634
MEASURING INCOME AND INVESTED CAPITAL 637
Invested capital 637/Measuring investment-center income 640/Inflation:Historical-cost versus current-value accounting 641/Measuring incomeand invested capital:Summary 642
OTHER ISSUES IN SEGMENT PERFORMANCE EVALUATION 642
Alternatives to ROI and residual income 642/Importance of nonfinancialinformation 643/Measuring performance in nonprofit organizations 644
TRANSFER PRICING 644
Goal congruence 644/General-transfer-pricing rule 645/Transfers basedon the external market price 648/Negotiated transfer prices 650/Cost-based transfer prices 650/Standard versus actual costs 651/Undermining divisional autonomy 651/An international pers 653
BEHAVIORAL ISSUES:RISK AVERSION AND INCENTIVES 653
GOAL CONGRUENCE AND INTERNAL CONTROL SYSTEMS 654
Chapter summary 655/Review problems on investment centers and trans-fer pricing 655/Solutions to review problems 656/Key terms 657/Review questions 657/Exercises 658/Problems 661/Cases 669
USING ACCOUNTING INFORMATIONIN MAKING DECISIONS 675
USING ACCOUNTING INFORMATIONIN MAKING DECISIONS 675
THE MANAGERIAL ACCOUNTANT'S ROLE IN DECISION MAKING 677
CHAPTER 14 DECISION MAKING:RELEVANT COSTS ANDBENEFITS 677
DECISION MAKING:RELEVANT COSTS ANDBENEFITS 677
Steps in the decision-making process 678/Quantitative versus qualitativeanalysis 679/Obtaining information:Relevance,accuracy,and timeliness 677
Importance of identifying relevant costs and benefits 681
RELEVANT INFORMATION 681
IDENTIFYING RELEVANT COSTS AND BENEFITS 682
ANALYSIS OF SPECIALDECISIONS 687
Sunk costs 682/Irrelevant future costs and benefits 685/Opportunitycosts 685/Summary 687
Accept or reject a special order 687/Outsource a product of service 689/Add or drop a service,product,or department 692
SPECIAL DECISIONS IN MANUFACTURING FIRMS 694
Joint products:Sell or process further 694/Decisions involving limited re-sources 696/Uncertainty 698
ACTIVITY-BASED COSTING AND THE NEW MANUFACTURINGENVIRONMENT 699
Conventional outsourcing(make-or-buy)analysis 700/Activity-based cost-ing analysis of the outsourcing decision 702
OTHER ISSUES IN DECISION MAKING 703
Incentives for decision makers 703/Short-run versus long-run decisions 703
704/Pitfails to avoid 704/Chapter summary 705/Review problem onrelevant costs 706/Solution to review problem 706/Kev terms 707
APPENDIX:LINEAR PROGRAMMING 708
Graphical solution 709/Managerial accountant's role 710/Key terms:Appendix 711/Review questions 711/Exercises 712/Problems 716/Cases 734
CHAPTER 15 COST ANALYSIS AND PRICING DECISIONS 741
MAJOR INFLUENCES ON PRICING DECISIONS 742
Customer demand 742/Actions of competitors 742/Costs 742/Political,legal,and image-related issues 744
ECONOMIC PROFIT-MAXIMIZING PRICING 745
Total revenue,demand,and marginal revenue curves 745/Total cost andmarginal cost curves 747/Profit-maximizing price and quantity 749/Price elasticity 749/Limitations of the profit-maximizing model 750/Costs and benefits of information 750
ROLE OF ACCOUNTING PRODUCT COSTS IN PRICING 750
pricing formulas 753/Determining the markup 754/Cost-plus pricing:Summary and evaluation 755
TIME AND MATERIAL PRICING 756
COMPETITIVE BIDDING 758
STRATEGIC PRICING OF NEW PRODUCTS 760
Target costing 762/Product-cost distortion and pricing:The role ofactivity-based costing 765
EFFECT OF ANTITRUST LAWS ON PRICING 765
Chapter summary 766/Review problem on cost-plus pricing 766/Solution to review problem 767/Key terms 768/Review questions 768/Exercises 769/Problems 772/Cases 781
CAPITAL EXPENDITURE DECISIONS:ANINTRODUCTION 787
CHAPTER 16 CAPITAL EXPENDITURE DECISIONS:ANINTRODUCTION 787
CONCEPT OF PRESENT VALUE 788
DISCOUNTED-CASH-FLOW ANALYSIS 794
Net-present-value method 795/Internal-rate-of-return method 796/Comparing the NPV and IRR methods 800/Assumptions underlyingdiscounted-cash-flow analysis 801/Choosing the hurdle rate 802/Depreciable assets 802
COMPARING TWO INVESTMENT PROJECTS 803
MANAGERIAL ACCOUNTANT'S ROLE 805
Sensitivity analysis 806
CAPITAL BUDGET ADMINISTRATION 807
Postaudit 807/Controlling capital-investment expenditures 808
PERFORMANCE EVALUATION:A BEHAVIORAL ISSUE 808
JUSTIFICATION OF INVESTMENTS IN ADVANCEDMANUFACTURINGSYSTEMS 810
Chapter summary 812/Key terms 813
APPENDIX:FUTURE VALUE AND PRESENT VALUE TABLES 814
Review questions 818/Exercises 818/Problems 821/Cases 828
FURTHER ASPECTS OF CAPITALEXPENDITURE DECISIONS 833
CHAPTER 17 FURTHER ASPECTS OF CAPITAL EXPENDITUREDECISIONS 833
INCOME TAXES AND CAPITAL BUDGETING 834
After-tax cash flows 834/Accelerated depreciation 837/ModifiedAccelerated Cost Recovery System(MACRS)837/Gains and losses on dis-posal 841/Investment in working capital 843/Extended illustration ofincometax effects in capital budgeting 845
RANKING INVESTMENT PROJECTS 847
ADDITIONAL METHODS FOR MAKING INVESTMENT DECISIONS 849
Payback method 849/Accounting-rate-of return method 852
ESTIMATING CASH FLOWS:THE ROLE OF ACTIVITY-BASEDCOSTING 855
Chapter summary 855/Key terms 856
APPENDIX:IMPACT OF INFIATION 857
Two capital-budgeting approaches under inflation 858/Key terms:Appendix 861/Review questions 861/Exercises 862/Problems 864/Cases 878
SELECTED TOPICS FOR FURTHERSTUDY 881
SELECTED TOPICS FOR FURTHERSTUDY 881
COST ALLOCATION:A CLOSER LOOK 883
CHAPTER 18 COST ALLOCATION:A CLOSER LOOK 883
Direct method 886/Step-down method 887/Reciprocal-services method 884
SECTION 1 SERVICE DEPARTMENT COSTALLOCATION 884
THE NEW MANUFACTURING ENVIRONMENT 893
SECTION 2 JOINT PRODUCT COST ALLOCATION 894
The rise of activity-based costing 894
Allocating joint costs 896/Chapter summary 899/Key terms 899
APPENDIX:RECIPROCAL-SERVICES METHOD 900
Review questions 903/Exercises 903/Problems 905/Cases 910
ANALYZING FINANCIAL STATEMENTS 915
CHAPTER 19 ANALYZING FINANCIAL STATEMENTS 915
Analytical techniques used 916/Importance of comparisons and trends 916
OBJECTIVES OF FINANCIAL STATEMENT ANALYSIS 916
OVERVIEW OF FINANCIAL STATEMENTS 916
COMPARATIVE FINANCIAL STATEMENTS 918
917/Sources of data 918
Horizontal analysis 918/Trend analysis 920/Vertical analysis 921
Working capital 923/Current ratio 924/Acid-test ratio 924/Accountsreceivable turnover 925/Inventory turnover 926/Book value of securities 923
RATIO ANALYSIS:THE BALANCE SHEET 923
927/Capitalization ratios 927
929/Earnings per share 930/Return on assets 932/Return on equity 929
Operating income 929/Coverage of interest and preferred stock dividends 929
RATIO ANALYSIS:THE INCOME STATEMENT 929
933/Return on sales 933/Financial leverage 934
RATIO ANALYSIS:THE STATEMENT OF RETAINED EARNINGS 935
Dividend payout ratio 935/Dividend yield ratio 935
NOTES TO FINANCIAL STATEMENTS 935
SUMMARY OF FINANCIAL STATEMENT ANALYSIS 936
LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS 936
Chapter summary 938/Key terms 938/Review questions 938/Exercises 936
939/Problems 942/Cases 953
CHAPTER 2O PREPARING THE STATEMENT OF CASHFLOWS 959
PREPARIN G THE STATEMENT OF CASHFLOWS 959
EVOLUTION OF THE STATEMENT OF CASH FLOWS 960
Purpose of the statement of cash flows 960
CASH AND CASH EQUIVALENTS 960
Operating activities 961/Investing activities 961/Financing activities 961
CONTENT AND ORGANIZATION OF THE STATEMENT 961
PREPAR ATION OF THE STATEMENT 963
Direct and indirect methods 963
USING THE INDIRECT METHOD OF STATEMENT PREPARATITON 963
Operating activities 964/Investing activities 970/Financing activities972/Completed statement of cash flows 973
USE OFT-ACCOUNTS AS AN AID IN PREPARING THE STATEMENTOF CASH FLOWS 974
Step one:Prepare T-accounts 975/Step two:Enter account balances 975/Step three:Analyze the cash flows from operating activities 975/Step four:Analyze the cash flows from investing activities 978/Step five:Analyzethe cash flows from financing activities 979
USING THE DIRECT METHOD OF STATEMENT PREPARATION 979
Operating activities 980/Investing activities 983/Financing activities984/Completed statement of cash flows 984
OTHER ISSUES IN PREPARING THE STATEMENT OF CASH FLOWS 984
Gross versus net cash flows 984/Direct exchange or noncash transactions 984
USING THE STATEMENT OF CASH FLOWS 986
Illustration of the statement of cash flows 986 / Chapter summary 986 /Review questions 988/Exercises 989/Problems 991/Case 1000