Cornerstones of Managerial Accounting

759 Pages·2011·25.69 MB·English

by  Maryanne M. Mowen

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1st Pass Pages
4
E
c o r n e r s t o n e s
OF
MANAGERIAL ACCOUNTING
MARYANNE M. MOWEN
Oklahoma State University

DON R. HANSEN
Oklahoma State University

DAN L. HEITGER
Miami University
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BRIEF CONTENTS
CHAPTER 1 Introduction to Managerial Accounting 2
CHAPTER 2 Basic Managerial Accounting Concepts 24
CHAPTER 3 Cost Behavior 62
CHAPTER 4 Cost-Volume-Profit Analysis: A Managerial Planning Tool 108
MAKINGTHECONNECTION 158
CHAPTER 5 Job-Order Costing 160
CHAPTER 6 Process Costing 214
CHAPTER 7 Activity-Based Costing and Management 262
CHAPTER 8 Absorption and Variable Costing, and Inventory Management 320
CHAPTER 9 Profit Planning 356
CHAPTER 10 Standard Costing: A Managerial Control Tool 404
MAKINGTHECONNECTION 444
CHAPTER 11 Flexible Budgets and Overhead Analysis 446
CHAPTER 12 Performance Evaluation and Decentralization 490
CHAPTER 13 Short-Run Decision Making: Relevant Costing 536
CHAPTER 14 Capital Investment Decisions 582
MAKINGTHECONNECTION 626
CHAPTER 15 Statement of Cash Flows 630
CHAPTER 16 Financial Statement Analysis 668
Glossary 711
Check Figures 719
Index 723
iv
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
v
h
w i t
r e
h e
T
G e t
Cornerstones
C
ornerstones is an innovative text and technology Cornerstone, which supports accounting concepts with a
solution that helps you achieve your desired grades. compelling example, step-by-step calculations to solve a
The best part about this solution is that it was created business problem, and a link to a brief video segment that
by modern professors who understand the challenges you reinforces and summarizes key concepts and procedures.
face every day. The authors of Cornerstones realized that
their students were using textbooks differently than they had
in the past. They found that because other books were not
structured around helping students complete homework,
they were spending too much of their classes going over
“With my current textbook, it is hard to find valuable
homework in class. Cornerstones will help you learn more
material. With Cornerstones, finding important
independently before attending lecture.
material is much quicker and more effective.”
Cornerstones is all about giving you the tools you need to — JOSHUA MARKS, STUDENT AT ST. NORBERT COLLEGE
succeed. According to our research with students like you,
this approach models the way that students use textbooks.
Most admit that they attempt the homework before going
into the text itself to learn, making clear and easy-to-find
examples crucial. For this reason, we have linked the
Cornerstone Exercises to the Cornerstone examples and
created a multi-tiered approach to homework assignments.
Focus on Decision Making
The Cornerstones approach not only helps you get f urther
The new You Decide feature helps students actively
with your homework so that you can comprehend the more
practice decision making by playing the part of a
technical aspects of accounting, but it also gives you the
manager or business owner. By considering the different
tools to understand analysis and decision-making.
factors of their decisions and how they will affect
outcomes, Cornerstones is helping students prepare for
the real world.
“I found that after reading the material, the
‘Cornerstones’ helped reinforce the main points and
overall understanding….The professor can spend more
Finding the Break-Even Point for
time teaching other concepts and different examples.” a New Business
—SARAH EARNHART, STUDENT AT EASTERN ILLINOIS UNIVERSITY You are an accountant in private practice. A friend of yours, Linda, recently started a novelty greeting card business. Linda designs
greeting cards that allow the sender to write in his or her own message. She uses heavy card stock, cut to size, and decorates the front
of each card with bits of fabric, lace, and ribbon in seasonal motifs (e.g., a heart for Valentine’s Day, a pine tree for Christmas). Linda
hired several friends to make the cards, according to Linda’s instructions, on a piece-work basis. (In piece work, the worker is paid on the
basis of number of units produced.) The workers could make the cards at their homes, meaning that no factory facilities were involved.
Linda designs the cards and travels around her four-state region to sell the completed cards on consignment. For the few months the
company has been in existence, the cards have been selling well, but Linda is operating at a loss.
What types of information do you need to find the break-even point? How can the business owner use this
SUPERIOR TEXT information to make decisions?
In order to determine the break-even point, you need to determine the prices and variable costs for the cards. Since creating a multi-
product break-even analysis could be complex, it may be easier to determine the average price and the average variable cost for the
AND PEDAGOGY! cards, then find the total fixed cost, and tell Linda how many cards she would need to sell to break even.
Suppose that the break-even number of cards is 250 per month, and that the average contribution margin per card is $0.80. Then,
as soon as Linda sells the 250th card, she knows she is in the black. From then on, every card sold adds $0.80 to her profit. This was
very important information for Linda—whose business losses are coming right out of her family’s checking account. Not only does Linda
have a sales goal for each month, she also knows at any point in time how much income she has made.
Carefully crafted in response to studies on student reading
Owners of small businesses find break-even analysis and concepts to be very helpful. A knowledge of contribution
margin helps owners know how they are doing at any point in time.
behavior, this innovative approach has been proven to
increase student engagement and preparedness while
improving grades. Each major concept is illustrated in a
CHE-MOWEN4E-10-0610-004.indd 129 03/12/10 8:08 PM
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
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vi
MULTIPLE WAYS TO PRACTICE
Cornerstones offers a variety of questions types and levels
of difficulty in the end-of-chapter homework, including: “The connectivity between topical content (LOs), calculations,
and decisions are developed well in the end-of-chapter
• Review Problems
• Discussion Questions material.” —NOEL MCKEON, FLORIDA STATE COLLEGE
• Multiple-Choice Exercises
• Cornerstone Exercises*
• Exercises
CORNERSTONE Calculating Sales Needed to Earn
• Problems 4-6 a Target Operating Income
• Cases Information:
Whittier Company sells mowers at $400 each. Variable cost per unit is $325, and total fixed cost
• Making the Connection is $45,000.
Required:
integrative exercises 1. Calculate the contribution margin ratio.
2. Calculate the sales that Whittier must make to earn an operating income of $37,500.
3. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated.
* By offering Cornerstone Exercises that
Solution:
reference the Cornerstone examples in the 1. Contribution margin ratio (cid:2) $400 (cid:5) $325 (cid:2) 0.1875
$400
text, students have a way to get started with
the homework. 2. Sale s dollars (cid:2) T a r g Ceot nintrciboumtieo n(cid:4) m Taortagli nfi xraetdio cost
(cid:2) $37,500 (cid:4) $45,000 (cid:2) $440,000
0.1875
3. Contribution margin income statement based on sales revenue of $440,000:
Sales $440,000
Total variable expense (0.8125 (cid:3) $440,000) 357,500
Total contribution margin $ 82,500
Total fixed expense 45,000
“I have recently tried the problems in Operating income $ 37,500
Cornerstones and found that the Indeed, sales revenue of $440,000000C000o rdddnoeerss ytoiiienlllddde oEpxeerracttiiiinseg iii4n-c1o8m e S oaff le$$s3 7N,5e0e0d.ed to Earn Target Income OBJECTIVE 2
step-by-step examples that are placed Hcoesat dis- F6ir0s tp Cerocmenpta onfy tphlaen ssa tleos sperlli c5e,;0 c0o0n btricibyuclteio hne lmmaertgs iant i$s7 450 e pacehrc ienn tth oef ctohme isnagle ys eparri.c Ve.a rTiaobtlael CORNERSTONE 4-6
fixed cost equals $49,500 (includes fixed factory overhead and fixed selling and administrative
within the text helped extremely…. expense).
CHE-MOWEN4E-10-0610-004.indd 119 25/11/10 1:34 AM
I compared the chapters in Cornerstones Required:
1. Calculate the sales revenue that Head-First must make to earn operating income of $81,900.
to our textbooks and felt that 2. Check your answer by preparing a contribution margin income statement based on the sales
dollars calculated in Requirement 1.
Cornerstones was much easier to
understand by just reading the chapter.”
—KATIE HOGAN, STUDENT AT UNIVERSITY OF
CINCINNATI
• More advanced exercises and problems are presented that
sometimes cover multiple Learning Objectives. These questions further
“It supports student learning in the challenge you since they do not list the corresponding Cornerstone
beginning by giving them direction, example(s). These help you grasp more difficult concepts and see the
big picture.
then as they progress leads them to be
more independent and learn to apply
the concepts and knowledge. This should • Conceptual Connection analytical requirements within many
end-of-chapter assignments help students understand the differences
prepare them for testing and real-world
between alternative methods, how different decisions will yield
better than if they are always given the
different results, and articulate why this is the case.
appropriate learning objective to apply.”
—BARBARA WOODS MCEELROYY,, • CHEI-MlOlWuEN4sEPGt-1r0-0a702t-00i4n.inddg 11 5Relationships questions help you understand the 07/08/10 4:48 PM
SUSQUEHANNA UNIVVEERSITTYY relationships between different variables and how they impact each
other.
• M aking the Connection assignments present opportunities to
integrate concepts from several chapters to analyze accounting
information in a broader context.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
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