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P R I N C I P L E S O F C OST A CCOUNTING This page intentionally left blank P R I N C I P L E S O F C OST A CCOUNTING 15 E E J . V D D W A R D A N E R B E C K Professor Emeritus Department of Accountancy Xavier University PrinciplesofCostAccounting,15thEdition ª2010,2008South-Western,CengageLearning EdwardJ.VanDerbeck ALLRIGHTSRESERVED.Nopartofthisworkcoveredbythecopy- righthereinmaybereproduced,transmitted,storedorusedinany VicePresidentofEditorial,Business:JackW.Calhoun formorbyanymeansgraphic,electronic,ormechanical,includingbut notlimitedtophotocopying,recording,scanning,digitizing,taping, AcquisitionsEditor:MattFilimonov Webdistribution,informationnetworks,orinformationstorageand DevelopmentalEditor:LaurenAthmer retrievalsystems,exceptaspermittedunderSection107or108ofthe MarketingManager:KristenHurd 1976UnitedStatesCopyrightAct,withoutthepriorwrittenpermission ofthepublisher. MarketingCoordinator:HeatherMcAuliffe ContentProjectManager:CoreyGeissler ProductionTechnologyAnalyst:StarrattAlexander Forproductinformationandtechnologyassistance,contactusat CengageLearningCustomer&SalesSupport,1-800-354-9706 MediaEditor:ScottFidler Forpermissiontousematerialfromthistextorproduct,submitall Sr.ManufacturingCoordinator:DougWilke requestsonlineatwww.cengage.com/permissions ProductionService:Cadmus Furtherpermissionsquestionscanbeemailedto Sr.ArtDirector:StacyShirley [email protected] InternalDesigner:JenniferLambert,Jen2Design,LLC CoverDesigner:cmillerdesign LibraryofCongressControlNumber:2009935270 CoverImage:ªGettyImages ISBN-10:0-8400-3703-1 ISBN-13:978-0-8400-3703-9 South-WesternCengageLearning, 5191NatorpBoulevard MasonOH45040, USA CengageLearningproductsarerepresentedinCanadabyNelson Education,Ltd. Foryourcourseandlearningsolutions,visitwww.cengage.com Purchaseanyofourproductsatyourlocalcollegestoreoratour preferredonlinestorewww.ichapters.com Printed in the United States of America 1 2 3 4 5 6 7 13 12 11 10 09 P REFACE Why Study Cost Accounting? The 15th edition of Principles of Cost Accounting, in an easily accessible presentation, applies cost concepts, cost behavior, and cost accounting techniques to manufacturing, merchandising, and service businesses. Stu- dents learn how to determine costs of products and services more accu- rately; use the knowledge of product and service costs to set selling prices, to bid on contracts, and to analyze the relative profitability of various products and services; use techniques to measure the performance of managersandsubunitswithinanorganization;designanaccountingsystem tofittheproductionanddistributionsystemofanorganization;andusethe accounting system as a tool to motivate managers towards the organiza- tion’sgoals. What Does the 15th Edition Offer? . Appropriate content for a one-quarter or one-semester cost accounting course. . A ten-chapter format—a distinguishing feature of the text that makes it mostappropriateforshortercourses. . Directedassignmentsatintervalswithineachchapter. . A very readable and relevant text that covers the essentials of cost accountinginalogicalsequenceandconcisemanner. . Theinclusionofcostaccountingtechniquesforservicebusinesses. . A discussion of the special purpose reports and analytical techniques usedformanagementdecisionmaking. . Emphasis on nonfinancial performance measures via the balanced scorecard. . An increase in the number of end-of-chapter exercises, problems, and Self-StudyProblems. vi PrinciplesofCostAccounting What Is New in the 15th Edition? The15theditionincludesthefollowingchanges: . Allnewchapter-openingvignetteswithreal-worldapplications. . Increased use of graphics, including Excel spreadsheet ‘‘screen shots’’ andflowdiagrams. . Anincreaseinthenumberofend-of-chapterself-studyproblems. . An increased emphasis on ethical decision making in the end-of-chapter Mini-Cases. . Newlyadded‘‘realcompany’’examplesthroughoutthetext. . First-time inclusion of corporate governance, lean manufacturing, de- mandsoftware,andWeb-basedbudgeting. . Anintegratedillustrationofmaterialscontrolprocedures. . An illustration of the least squares regression method using Microsoft Excel. What Are the Features of the 15th Edition? The 15th edition includes several features that facilitate the learning processforthestudentandallowtheinstructortoteachwithease. Directed Assignments At specific points within each chapter, students are directed to appropriate end-of-chapter assignments. This allows students to work practice items withoutcompletingtheentirechapter. Self-Study Problems Two demonstration problems are included at the end of each chapter, with a step-by-step explanation of how to solve them. These Self-Study Pro- blems are constructed from difficult concepts in the chapter and reinforce thetechniquesandproceduresdiscussed inthechapter.Anaddedfeatureis end-of-chapter problems that reference students back to Self-Study Pro- blemsthataresimilarintopicanddifficulty. End-of-Chapter Materials Theend-of-chapterquestions,exercises,problems,mini-cases,andInternet activities have been carefully written, revised, added to, and verified to reflect the coverage as it appears in the chapters. There has been a concerted effort to provide the instructor with a wide choice of subject matter and degree of difficulty when assigning end-of-chapter materials. Where appropriate, comprehensive review problems have been added that cover concepts from more than one chapter. Additionally, selected pro- blemsmaybesolvedusingspreadsheetsoftware. Preface vii Integrated Learning Objectives Learningobjectivesbegineachchapter.Eachlearningobjectiveisindicated in the text where first discussed. All end-of-chapter exercises, problems, mini-cases,andInternetactivitiesareidentifiedbylearningobjectives. Key Terms Key terms are highlighted as they are introduced. They are listed, along with page references, at the end of each chapter. A comprehensive glossary is included at the end of the book, providing definitions for all the key terms. Actualcompanies arehighlighted where theirpractices arediscussed inthechapters. Appendixes The Institute of Management Accountants ‘‘Statement of Ethical Profes- sional Practice’’ is included in an appendix at the end of Chapter 1. An appendix at the end of Chapter 9 illustrates the four-variance and three- variancemethodsofanalyzingfactoryoverhead. What Supplementary Materials Are Available? A complete package of supplementary materials is available with the 15th editionofPrinciplesofCostAccountingtoassistbothinstructorsandstudents. The package includes materials that have been carefully prepared and reviewed. Available to Instructors AllinstructorresourcesareavailableonlineontheInstructorCompa- nion Web Site (www.cengage.com/accounting/vanderbeck), as well as ontheInstructorResourceCD-ROM(IRCD). Solutions Manual. This manual contains the answers to all end-of-chapter questions,exercises,problems,Internetexercises,andmini-cases. Test Bank. The test bank is available in a computerized version for Windows.Theusermayselect,mix,edit,andaddquestionsorproblemsto createthetypeoftestorproblemsetneeded. ExamView ProTM Testing Software. The printed test bank is available in a computerizedversionforWindows.Theusermayselect,mix,edit,andadd questions or problems to create the type of test or problem set needed. ExamViewisavailableontheInstructor’sResourceCD. PowerPoint Presentations. This resource provides presentations for each chapter, created specifically for this edition; thus, they follow along closely viii PrinciplesofCostAccounting with the text. The presentations for each chapter are also available online forstudentstouseasanadditionalstudyresource. Instructor Resource CD-ROM (IRCD). This convenient resource includes the Test Bank, ExamView, the Solutions Manual, PowerPoint Presenta- tions,andtheInstructorSpreadsheetTemplates(withsolutions). InstructorSpreadsheetTemplates.The Instructor Spreadsheet Templates show the completed spreadsheet solutions for exercises within the end-of- chapter materials. These files are available on the IRCD, or they can be downloadedfromtheInstructorCompanionWebSite. Instructor Companion Web Site (www.cengage.com/accounting/vanderbeck).The text-specific Web site provides access to all instructor resources organized by chapter and topic, and are password protected. All of these resources are also available on the IRCD: Test Bank, ExamView, Solutions Manual, PowerPoint Presentations, and the Instructor Spreadsheet Tem- plates(withsolutions). Available to Students All student resources are available online on the Student Companion WebSite(www.cengage.com/accounting/vanderbeck). StudyGuide.The study guide provides a review summary for each chapter as well as questions and problems to test comprehension of chapter material.Solutionsforallquestionsandproblemsareincludedinaseparate sectionattheendofthestudyguide. Student Spreadsheet Templates. The Student Spreadsheet Templates correlate to exercises within the end-of-chapter materials. These files are availablefordownloadingontheStudentCompanionWebSite. PowerPoint Presentations. This study resource provides presentations for each chapter, created specifically for this edition; thus, they follow along closelywiththetext. ExperienceAccountingVideos.Highlightprogressivecompaniesandallow you to effectively visualize critical chapter concepts—enhancing what you learn in class! The Experience Accounting Videos can be bundled at no additional cost with new copies of the text or can be purchased separately. You canaccessthevideosatwww.cengage.com/accounting/eav. Preface ix Acknowledgments We would like to thank all ofthose individuals whohave helped during the revisionofthistextbyprovidingconstructivecommentsandsuggestions. JosephineM.Mathias MercerCountyCommunityCollege JoanneE.Shurbert Concord’sCommunityCollegeandManchesterCommunityCollege AnnBikofsky CollegeofWestChester TheresaLaws-Dahl BlackhawkTechnicalCollege SamLester MiddleGeorgiaTechnicalCollege EdwardKufuor ASAInstitute JimMurray WesternTechnicalCollege DavidA.Flannery Bryant&StrattonCollege,VirginiaBeach JamesEmig VillanovaUniversity

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The 15th edition of Principles of Cost Accounting, in an easily accessible presentation, applies cost concepts, cost behavior, and cost accounting.