Managerial Accounting

841 Pages·2017·21.58 MB·English

M anagerial
Accounting

M anagerial
Accounting
T h i r t e e n t h E d i t i o n
Ray H. Garrison, D.B.A., CPA
Professor Emeritus
Brigham Young University
Eric W. Noreen, Ph.D., CMA
Professor Emeritus
University of Washington
Peter C. Brewer, Ph.D., CPA
Miami University—Oxford, Ohio
Boston Burr Ridge, IL Dubuque, IA Madison, WI New York San Francisco St. Louis
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D edication
To our families and
to our many colleagues who use this book.
MANAGERIAL ACCOUNTING
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the
Americas, New York, NY, 10020. Copyright © 2010, 2008, 2006, 2003, 2000, 1997, 1994, 1991, 1988, 1985,
1982, 1979, 1976 by The McGraw-Hill Companies, Inc. All rights reserved. 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 The McGraw-Hill Companies, Inc., 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.
1 2 3 4 5 6 7 8 9 0 DOW/DOW 0 9
ISBN 978-0-07-337961-6
MHID 0-07-337961-1
Vice president and editor-in-chief: Brent Gordon
Editorial director: Stewart Mattson
Publisher: Tim Vertovec
Developmental editor: Emily A. Hatteberg
Marketing manager: Kathleen Klehr
Lead project manager: Pat Frederickson
Senior production supervisor: Debra R. Sylvester
Lead designer: Matthew Baldwin
Senior photo research coordinator: Lori Kramer
Photo researcher: Keri Johnson
Senior media project manager : Susan Lombardi
Cover design: Kay Lieberherr
Cover Photo: © Mark Bertieri, Creative Photo Designs
Typeface: 10.5/12 Times Roman
Compositor: Aptara, Inc.
Printer: R. R. Donnelley
Library of Congress Cataloging-in-Publication Data
Garrison, Ray H.
Managerial accounting / Ray H. Garrison, Eric W. Noreen, Peter C. Brewer.—13th ed.
p. cm.
Includes index.
ISBN-13: 978-0-07-337961-6 (alk. paper)
ISBN-10: 0-07-337961-1 (alk. paper)
1. Managerial accounting. I. Noreen, Eric W. II. Brewer, Peter C. III. Title.
HF5657.4.G37 2010
658.15’11—dc22
2008054773
www.mhhe.com
About the
Authors
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.
Eric W. Noreen
has held appointments
at institutions in the United States, Europe, and Asia. He
is emeritus professor of accounting at the University of
Washington.
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.
Managerial Accounting Thirteenth Edition v
About the Authors
Peter C. Brewer
is a professor in the
Department of Accountancy at Miami University, Oxford,
Ohio. 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 30 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 is a member of the editorial boards of Issues in Accounting
Education and the Journal of 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 and has been recognized on two occasions by the Miami
University Associated Student Government for “making a remarkable commitment to
students and their educational development.” He is a leading thinker in undergraduate
management accounting curriculum innovation and is a frequent presenter at various
professional and academic conferences.
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.). He frequently collaborates with companies such as Harris Corporation,
Ghent Manufacturing, Cintas, Ethicon Endo-Surgery, Schneider Electric, Lenscrafters,
and Fidelity Investments in a consulting or case writing capacity.
vi Garrison Noreen Brewer
GARRISON NOREEN BREWER
Garrison
Let be Your Guide
For centuries, the lighthouse has provided guidance and safe passage
for sailors. Similarly, Garrison/Noreen/Brewer has successfully guided
millions of students through managerial accounting, helping them sail
smoothly through the course.
Decades ago, lighthouses were still being operated manually. In these
days of digital transformation, lighthouses are run using automatic lamp
changers and other modern devices. In much the same way, Garrison/
Noreen/Brewer has evolved over the years. Today, the Garrison book
not only guides students—accounting majors and non-majors alike—
safely through the course, but is enhanced by new forms of media
and technology to augment student learning and increase student
motivation. McGraw-Hill Connect Accounting allows instructors to
build assignments and tests from static and algorithmic versions of
the end-of-chapter material and testbank problems. Integrated iPod
content allows students to download lecture presentations, videos,
and self-quizzes to their MP3 player—giving them a portable
learning tool.
Just as the lighthouse continues to provide reliable guidance to
seafarers, the Garrison/Noreen/Brewer book continues its tradition
of helping students sail successfully through managerial accounting
by always focusing on three important qualities: relevance, accuracy,
and clarity.
Managerial Accounting Thirteenth Edition vii
RELEVANCE.
Every effort is made to help students
relate the concepts in this book to the decisions made by
working managers. With insightful chapter openers, the popular
Managerial Accounting in Action segments within the chapters,
and stimulating end-of-chapter exercises, a student reading
“Garrison is THE classic
Garrison should never have to ask “Why am I learning this?”
managerial accounting text.”
Angela Sandberg,
ACCURACY.
Jacksonville State University The Garrison book continues to set
the standard for accurate and reliable material in its thirteenth
edition. With each revision, the authors evaluate the book and
“A well-written, well-explained its supplements in their entirety, working diligently to ensure
text with terrific in chapter that the end-of-chapter material, solutions manual, and test
examples and excellent end
bank, are consistent, current, and accurate.
of chapter materials.”
Charles “Tony” Wain, CLARITY.
Babson College Generations of students have praised Garrison
for the friendliness and readability of its writing, but that’s just
the beginning. Technical discussions have been simplified,
material has been reordered, and the entire book carefully
“I love the text.”
retuned to make teaching—and learning—from Garrison as
Pam Meyer,
easy as it can be. In addition, the key supplements were written
University of Louisiana at Lafayette
by Garrison, Noreen, and Brewer, ensuring that students and
professors will work with clear, well-written supplements that
employ consistent terminology.
“The seminal text on
managerial accounting.”
The authors’ steady focus
Dr. Reed W. Easton, on these three
Seton Hall University core elements has led to tremendous results. Managerial
Accounting has consistently led the market, being used by
over two million students and earning a reputation for reliability
that other texts aspire to match.
viii Garrison Noreen Brewer
Garrison’s
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 Garrison a beacon for over two million students.
Opening Vignette
Each chapter opens with a Business Focus
10
C
feature that provides a real-world example h
a
for students, allowing them to see how p
t
e
the chapter’s information and insights
r
Flexible Budgets and
apply to the world outside the classroom.
Performance Analysis
Learning Objectives alert students to
The Inevitability of Forecasting Errors
what they should expect as they progress
While companies derive numer-
through the chapter. ous benefits from planning for
the future, they must be able to
respond when actual results de- LEARNING OBJECTIVES
viate from the plan. For example,
just two months after telling Wall
Street analysts that it would Ashftoeurl ds tbued yainbgle Ctoh:apter 10, you
breakeven for the first quarter
of 2005, General Motors (GM) LO1 Prepare a flexible budget.
acknowledged that its actual
US snaalle sfo wreecrea sfta ra lneds st hthea nc oitms opraingyi- LO2 Pacretipvaitrye v aa rrieapncoerts .showing
C would lose $850 million in the LO3 Prepare a report showing
O quarter. For the year, GM acknowledged that projected earnings would be 80% lower revenue and spending
SS F t han Wprheevnio au sclyo minpdaicnayt’esd p. laTnhse dceovmiaptea nfyro’sm s tiotsc ka cptruicael rdersoupltpse, dm bayn a$g4e.r7s1 n.eed to under- LO4 vPareripaanrcee sa. performance report
USINE sdcatraifaesfne eldir k o eftfrhl oyeG m tMroe , bab tusehdo elgne eassct sfet oudtrha astl hnalee leov dserie?lg voiHnifaoa tswliloay ln embssu.u dicHsgh ofe waitsre mdcle.aus uTcsshh tee hidssa e ncb alyotuh wtsehee ebrd u acbdcoygts ietothstn,e sds foooa cfns tomo ttm hasaneigta angacacetltr uumsaa?la l Icnsnoaa tgslheteess- tvshaparetian cndocinmegsb viananerdisa nraeccveteisvn.iutye and
B rial effectiveness. This chapter explains how to analyze the sources of discrepancies LO5 Prepare a flexible budget with
“This textbook is one of the between budgeted and actual results. ■ more than one cost driver.
LO6 Understand common errors
best written, best illustrated Source: Alex Taylor III, “GM Hits the Skids,” Fortune, April 4, 2005, pp. 71–74. made in preparing
performance reports based on
budgets and actual results.
textbooks that we have used
for the managerial course.”
Bonnie McQuitter Banks,
Alabama A&M University
417
Managerial Accounting Thirteenth Edition ix