Introduction to Managerial Accounting

Description

Introduction to Managerial Accounting, 5/e by Brewer/Garrison/Noreen is based on the market-leading text, Managerial Accounting, by Garrison, Noreen and Brewer. However, this is not simply a briefer book with chapters removed; Brewer 5e has been rethought and retooled to meet the needs of the market. Brewer 5e is a more accessible, yet thoroughly student-friendly text that satisfies the basic needs of the managerial accounting student without unnecessary depth on advanced topics associated with the follow-up course: cost accounting/cost management. Faculty and students alike will find this new edition has retained the hallmark features of the Garrison brand: author-written supplements, excellent readability, terrific examples, and balanced end-of-chapter material. Title Contents PROLOGUE Managerial Accounting and the Business Environment GLOBALIZATION STRATEGY ORGANIZATIONAL STRUCTURE Decentralization The Functional View of Organizations PROCESS MANAGEMENT Lean Production The Lean Thinking Model The Theory of Constraints Six Sigma THE IMPORTANCE OF ETHICS IN BUSINESS Code of Conduct for Management Accountants Company Codes of Conduct Codes of Conduct on the International Level CORPORATE GOVERNANCE The Sarbanes-Oxley Act of 2002 ENTERPRISE RISK MANAGEMENT Identifying and Controlling Business Risks CORPORATE SOCIAL RESPONSIBILITY THE CERTIFIED MANAGEMENT ACCOUNTANT (CMA) Summary Glossary CHAPTER ONE Managerial Accounting and Cost Concepts Decision Feature: Management Accounting: It’s More than Just Crunching Numbers THE WORK OF MANAGEMENT AND THE NEED FOR MANAGERIAL ACCOUNTING INFORMATION Planning Directing and Motivating Controlling The End Results of Managers’ Activities The Planning and Control Cycle COMPARISON OF FINANCIAL AND MANAGERIAL ACCOUNTING Emphasis on the Future Relevance of Data Less Emphasis on Precision Segments of an Organization Generally Accepted Accounting Principles (GAAP) Managerial Accounting—Not Mandatory GENERAL COST CLASSIFICATIONS Manufacturing Costs Direct Materials Direct Labor Manufacturing Overhead Nonmanufacturing Costs PRODUCT COSTS VERSUS PERIOD COSTS Product Costs Period Costs Prime Cost and Conversion Cost COST CLASSIFICATIONS ON FINANCIAL STATEMENTS The Balance Sheet The Income Statement Schedule of Cost of Goods Manufactured PRODUCT COST FLOWS Inventoriable Costs An Example of Cost Flows COST CLASSIFICATIONS FOR PREDICTING COST BEHAVIOR Variable Cost Fixed Cost COST CLASSIFICATIONS FOR ASSIGNING COSTS TO COST OBJECTS Direct Cost Indirect Cost COST CLASSIFICATIONS FOR DECISION MAKING Differential Cost and Revenue Opportunity Cost Sunk Cost Summary Guidance Answer to You Decide Guidance Answers to Concept Checks Review Problem 1: Cost Terms Review Problem 2: Schedule of Cost of Goods Manufactured and Income Statement Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application CHAPTER TWO Systems Design: Job-Order Costing Decision Feature: Two College Students Succeeding as Entrepreneurs PROCESS AND JOB-ORDER COSTING Process Costing Job-Order Costing JOB-ORDER COSTING—AN OVERVIEW Measuring Direct Materials Cost Job Cost Sheet Measuring Direct Labor Cost Applying Manufacturing Overhead Using the Predetermined Overhead Rate The Need for a Predetermined Rate Choice of an Allocation Base for Overhead Cost Computation of Unit Costs Summary of Document Flows JOB-ORDER COSTING—THE FLOW OF COSTS The Purchase and Issue of Materials Issue of Direct and Indirect Materials Labor Cost Manufacturing Overhead Costs Applying Manufacturing Overhead The Concept of a Clearing Account Nonmanufacturing Costs Cost of Goods Manufactured Cost of Goods Sold Summary of Cost Flows PROBLEMS OF OVERHEAD APPLICATION Underapplied and Overapplied Overhead Disposition of Underapplied or Overapplied Overhead Balances A General Model of Product Cost Flows Multiple Predetermined Overhead Rates JOB-ORDER COSTING IN SERVICE COMPANIES Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Job-Order Costing Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application CHAPTER THREE Systems Design: Activity-Based Costing Decision Feature: The Payoff from Activity-Based Costing ASSIGNING OVERHEAD COSTS TO PRODUCTS Plantwide Overhead Rate Departmental Overhead Rates Activity-Based Costing (ABC) DESIGNING AN ACTIVITY-BASED COSTING SYSTEM Hierarchy of Activities An Example of an Activity-Based Costing System Design USING ACTIVITY-BASED COSTING Comtek Sound, Inc.’s Basic Data Direct Labor-Hours as a Base Computing Activity Rates Computing Product Costs Shifting of Overhead Cost TARGETING PROCESS IMPROVEMENTS EVALUATION OF ACTIVITY-BASED COSTING The Benefits of Activity-Based Costing Limitations of Activity-Based Costing The Cost of Implementing Activity-Based Costing Limitations of the ABC Model Modifying the ABC Model Activity-Based Costing and Service Industries COST FLOWS IN AN ACTIVITY-BASED COSTING SYSTEM An Example of Cost Flows Basic Data Tracking the Flow of Costs Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Activity-Based Costing Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application CHAPTER FOUR Systems 4 Design: Process Costing Decision Feature: Costing the “Quicker-Picker-Upper” COMPARISON OF JOB-ORDER AND PROCESS COSTING Similarities between Job-Order and Process Costing Differences between Job-Order and Process Costing COST FLOWS IN PROCESS COSTING Processing Departments The Flow of Materials, Labor, and Overhead Costs Materials, Labor, and Overhead Cost Entries Materials Costs Labor Costs Overhead Costs Completing the Cost Flows EQUIVALENT UNITS OF PRODUCTION Weighted-Average Method COMPUTE AND APPLY COSTS Cost per Equivalent Unit—Weighted-Average Method Applying Costs—Weighted-Average Method Cost Reconciliation Report—Weighted-Average Method Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Process Cost Flows and Costing Units Glossary Questions Brief Exercises Exercises Problems Building Your Skills CHAPTER FIVE Cost Behavior: Analysis and Use Decision Feature: The Business of Art Sculpture TYPES OF COST BEHAVIOR PATTERNS Variable Costs The Activity Base Extent of Variable Costs True Variable versus Step-Variable Costs True Variable Costs Step-Variable Costs The Linearity Assumption and the Relevant Range Fixed Costs Types of Fixed Costs Committed Fixed Costs Discretionary Fixed Costs The Trend toward Fixed Costs Is Labor a Variable or a Fixed Cost? Fixed Costs and the Relevant Range Mixed Costs THE ANALYSIS OF MIXED COSTS Diagnosing Cost Behavior with a Scattergraph Plot The High-Low Method The Least-Squares Regression Method Multiple Regression Analysis THE CONTRIBUTION FORMAT INCOME STATEMENT Why a New Income Statement Format? The Contribution Approach Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem1: Cost Behavior Review Problem 2: High-Low Method Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application Appendix 5A: Variable Costing Appendix 5A Summary Appendix 5A Review Problem: Contrasting Variable and Absorption Costing Appendix 5A Glossary Appendix 5A Questions Appendix 5A Exercises and Problems CHAPTER SIX Cost-Volume-Profit Relationships Decision Feature: Forget 6 the Theater—Make Money on Cable TV THE BASICS OF COST-VOLUME-PROFIT (CVP) ANALYSIS Contribution Margin CVP Relationships in Equation Form CVP Relationships in Graphic Form Preparing the CVP Graph Contribution Margin Ratio (CM Ratio) Some Applications of CVP Concepts Change in Fixed Cost and Sales Volume Change in Variable Cost and Sales Volume Change in Fixed Cost, Sales Price, and Sales Volume Change in Variable Cost, Fixed Cost, and Sales Volume Change in Selling Price TARGET PROFIT AND BREAK-EVEN ANALYSIS Target Profit Analysis The Equation Method The Formula Method Target Profit Analysis in Terms of Sales Dollars Break-Even Analysis Break-Even in Unit Sales Break-Even in Sales Dollars The Margin of Safety CVP CONSIDERATIONS IN CHOOSING A COST STRUCTURE Cost Structure and Profit Stability Operating Leverage STRUCTURING SALES COMMISSIONS SALES MIX The Definition of Sales Mix Sales Mix and Break-Even Analysis ASSUMPTIONS OF CVP ANALYSIS Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: CVP Relationships Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application CHAPTER SEVEN Profit Planning Decision Feature: Lilo & Stitch on Budget THE BASIC FRAMEWORK OF BUDGETING Advantages of Budgeting Responsibility Accounting Choosing a Budget Period The Self-Imposed Budget Human Factors in Budgeting The Budget Committee The Master Budget: An Overview PREPARING THE MASTER BUDGET The Sales Budget The Production Budget Inventory Purchases—Merchandising Company The Direct Materials Budget The Direct Labor Budget The Manufacturing Overhead Budget The Ending Finished Goods Inventory Budget The Selling and Administrative Expense Budget The Cash Budget The Budgeted Income Statement The Budgeted Balance Sheet Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Budget Schedules Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application CHAPTER EIGHT Flexible Budgets Flexible Budgets and Performance Analysis Decision Feature: Controlling Costs—Rain or Shine FLEXIBLE BUDGETS Characteristics of a Flexible Budget Deficiencies of the Static Planning Budget How a Flexible Budget Works FLEXIBLE BUDGET VARIANCES Activity Variances Revenue and Spending Variances A Performance Report Combining Activity and Revenue and Spending Variances Performance Reports in Nonprofit Organizations Performance Reports in Cost Centers FLEXIBLE BUDGETS WITH MULTIPLE COST DRIVERS SOME COMMON ERRORS Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Variance Analysis Using a Flexible Budget Glossary Questions Brief Exercises Exercises Problems Building Your Skills CHAPTER NINE Standard Costs Decision Feature: Managing STANDARD COSTS— EXCEPTION 9 Materials and Labor MANAGEMENT BY Who Uses Standard Costs? SETTING STANDARD COSTS Ideal versus Practical Standards Setting Direct Material Standards Setting Direct Labor Standards Setting Variable Manufacturing Overhead Standards A GENERAL MODEL FOR VARIANCE ANALYSIS Price and Quantity Variances USING STANDARD COSTS—DIRECT MATERIALS VARIANCES Materials Price Variance—A Closer Look Isolation of Variances Responsibility for the Variance Materials Quantity Variance—A Closer Look USING STANDARD COSTS—DIRECT LABOR VARIANCES Labor Rate Variance—A Closer Look Labor Efficiency Variance—A Closer Look USING STANDARD COSTS—VARIABLE MANUFACTURING OVERHEAD VARIANCES Manufacturing Overhead Variances—A Closer Look VARIANCE ANALYSIS AND MANAGEMENT BY EXCEPTION EVALUATION OF CONTROLS BASED ON STANDARD COSTS Advantages of Standard Costs Potential Problems with the Use of Standard Costs Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Standard Costs Glossary Questions Brief Exercises Exercises Problems Building Your Skills Appendix 9A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Appendix 9A Summary Appendix 9A Glossary Appendix 9A Exercises and Problems Appendix 9B Journal Entries to Record Variances Appendix 9B Summary Appendix 9B Exercises and Problems CHAPTER TEN Segment Reporting, Decentralization, and the Balanced Scorecard Decision Feature: Sony Attempts to Rebound DECENTRALIZATION IN ORGANIZATIONS Advantages and Disadvantages of Decentralization RESPONSIBILITY ACCOUNTING Cost, Profit, and Investment Centers Cost Center Profit Center Investment Center An Organizational View of Responsibility Centers DECENTRALIZATION AND SEGMENT REPORTING Building a Segmented Income Statement Levels of Segmented Statements Sales and Contribution Margin Traceable and Common Fixed Costs Identifying Traceable Fixed Costs Activity-Based Costing Traceable Costs Can Become Common Costs Segment Margin Segmented Financial Information in External Reports HINDRANCES TO PROPER COST ASSIGNMENT Omission of Costs Inappropriate Methods for Assigning Traceable Costs among Segments Failure to Trace Costs Directly Inappropriate Allocation Base Arbitrarily Dividing Common Costs among Segments EVALUATING INVESTMENT CENTER PERFORMANCE—RETURN ON INVESTMENT The Return on Investment (ROI) Formula Net Operating Income and Operating Assets Defined Understanding ROI Criticisms of ROI RESIDUAL INCOME Motivation and Residual Income Divisional Comparison and Residual Income BALANCED SCORECARD Common Characteristics of Balanced Scorecards A Company’s Strategy and the Balanced Scorecard Tying Compensation to the Balanced Scorecard Advantages of Timely and Graphic Feedback Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem 1: Segmented Statements Review Problem 2: Return on Investment (ROI) and Residual Income Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application CHAPTER ELEVEN Relevant Costs for Decision Making Decision Feature: Massaging the 11 Numbers COST CONCEPTS FOR DECISION MAKING Identifying Relevant Costs and Benefits Different Costs for Different Purposes An Example of Identifying Relevant Costs and Benefits Reconciling the Total and Differential Approaches Why Isolate Relevant Costs? ADDING AND DROPPING PRODUCT LINES AND OTHER SEGMENTS An Illustration of Cost Analysis A Comparative Format Beware of Allocated Fixed Costs THE MAKE OR BUY DECISION An Example of Make or Buy OPPORTUNITY COST SPECIAL ORDERS UTILIZATION OF A CONSTRAINED RESOURCE Contribution Margin per Unit of the Constrained Resource Managing Constraints Summary Guidance Answer to Decision Maker Guidance Answers to Concept Checks Review Problem: Relevant Costs Glossary Questions Brief Exercises Exercises Problems Building Your Skills CHAPTER TWELVE Capital Budgeting Decisions Decision Feature: Capital Investments: A Key to Profitable Growth CAPITAL BUDGETING—PLANNING INVESTMENTS Typical Capital Budgeting Decisions The Time Value of Money THE NET PRESENT VALUE METHOD Emphasis on Cash Flows Typical Cash Outflows Typical Cash Inflows Simplifying Assumptions Choosing a Discount Rate An Extended Example of the Net Present Value Method EXPANDING THE NET PRESENT VALUE METHOD The Total-Cost Approach The Incremental-Cost Approach Least-Cost Decisions PREFERENCE DECISIONS—THE RANKING OF INVESTMENT PROJECTS THE INTERNAL RATE OF RETURN METHOD THE NET PRESENT VALUE METHOD AND INCOME TAXES OTHER APPROACHES TO CAPITAL BUDGETING DECISIONS The Payback Method Evaluation of the Payback Method An Extended Example of Payback Payback and Uneven Cash Flows The Simple Rate of Return Method Criticisms of the Simple Rate of Return POSTAUDIT OF INVESTMENT PROJECTS Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Comparison of Capital Budgeting Methods Glossary Questions Brief Exercises Exercises Problems Building Your Skills Appendix 12A: The Concept of Present Value Appendix 12A Summary Appendix 12A Glossary Appendix 12A Exercises Appendix 12B: Present Value Tables CHAPTER THIRTEEN “How Well 13 Am I Doing?” Statement of Cash Flows Decision Feature: Understanding Cash Flows THE BASIC APPROACH TO A STATEMENT OF CASH FLOWS Definition of Cash Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts AN EXAMPLE OF A SIMPLIFIED STATEMENT OF CASH FLOWS Constructing a Simplified Statement of Cash Flows The Need for a More Detailed Statement ORGANIZATION OF THE FULL-FLEDGED STATEMENT OF CASH FLOWS Operating Activities Investing Activities Financing Activities OTHER ISSUES IN PREPARING THE STATEMENT OF CASH FLOWS Cash Flows: Gross or Net? Operating Activities: Direct or Indirect Method? AN EXAMPLE OF A FULL-FLEDGED STATEMENT OF CASH FLOWS Eight Basic Steps to Preparing the Statement of Cash Flows Setting Up the Worksheet (Steps 1–4) Adjustments to Reflect Gross, Rather than Net, Amounts (Step 5) Classifying Entries as Operating, Investing, or Financing Activities (Step 6) The Completed Statement of Cash Flows (Steps 7 and 8) Interpretation of the Statement of Cash Flows Depreciation, Depletion, and Amortization FREE CASH FLOW Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application Appendix 13A: The Direct Method of Determining the Net Cash Provided by Operating Activities Appendix 13A Summary Appendix 13A Exercises and Problems Appendix 13B: The T-Account Approach to Preparing the Statement of Cash Flows Appendix 13B Brief Exercise CHAPTER FOURTEEN “How Well Am I Doing?” Financial Statement Analysis Decision Feature: Getting Paid on Time LIMITATIONS OF FINANCIAL STATEMENT ANALYSIS Comparison of Financial Data The Need to Look beyond Ratios STATEMENTS IN COMPARATIVE AND COMMON-SIZE FORM Dollar and Percentage Changes on Statements Common-Size Statements RATIO ANALYSIS—THE COMMON STOCKHOLDER Earnings per Share Price-Earnings Ratio Dividend Payout and Yield Ratios The Dividend Payout Ratio The Dividend Yield Ratio Return on Total Assets Return on Common Stockholders’ Equity Financial Leverage Book Value per Share RATIO ANALYSIS—THE SHORT-TERM CREDITOR Working Capital Current Ratio Acid-Test (Quick) Ratio Accounts Receivable Turnover Inventory Turnover RATIO ANALYSIS—THE LONG-TERM CREDITOR Times Interest Earned Ratio Debt-to-Equity Ratio SUMMARY OF RATIOS AND SOURCES OF COMPARATIVE RATIO DATA Summary Guidance Answers to Decision Maker and You Decide Guidance Answers to Concept Checks Review Problem: Selected Ratios and Financial Leverage Glossary Questions Brief Exercises Exercises Problems Building Your Skills Research and Application Credits Index