Managerial Accounting

by GARRISON RAY H.

Edition:

11th

ISBN13:

9780072834949

ISBN10:

0072834943

Format:

Hardcover

Pub. Date:

12/8/2004

Publisher(s):

McGraw-Hill/Irwin

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Summary

As the long-time best-seller, Garrison has helped guide close to 2 million students through the challenging waters of managerial accounting since it was first published. It identifies the three functions managers must perform within their organizations-plan operations, control activities, and make decisions-and explains what accounting information is necessary for these functions, how to collect it, and how to interpret it. To achieve this, Managerial Accounting, 11/E, focuses, now as in the past, on three qualities: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 should never have to ask "Why am I learning this?"Balance: There's more than one type of business, and so Garrison covers a variety of business models, including not-for-profit, retail, service, and wholesale organizations as well as manufacturing. In the eleventh edition, service company examples are highlighted with icons in the margins of the text.Clarity: 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 retuned to make teaching-and learning-from Garrison as easy as it can be. In addition, the supplements package is written by Garrison, Noreen, and Brewer, ensuring that students and professors will work with clear, well-written supplements that employ consistent terminology.

Managerial Accounting and the Business Environment

(32)

The Work of Management and the Need for Managerial Accounting Information

(2)

Planning

(1)

Directing and Motivating

(1)

Controlling

(1)

The End Results of Managers' Activities

(1)

The Planning and Control Cycle

(1)

Comparison of Financial and Managerial Accounting

(3)

Emphasis on the Future

(2)

Relevance of Data

(1)

Less Emphasis on Precision

(1)

Segments of an Organization

(1)

Generally Accepted Accounting Principles (GAAP)

(1)

Managerial Accounting---Not Mandatory

(1)

Organizational Structure

(3)

Decentralization

(1)

Line and Staff Relationships

(1)

The Chief Financial Officer

(1)

The Changing Business Environment

(8)

Just-In-Time (JIT)

(2)

JIT Consequences

(1)

Benefits of a JIT System

(1)

Total Quality Management (TQM)

(1)

Process Reengineering

(1)

The Theory of Constraints (TOC)

(1)

International Competition

(1)

E-Commerce

(1)

Professional Ethics

(7)

Code of Conduct for Management Accountants

(2)

Company Codes of Conduct

(2)

Codes of Conduct on the International Level

(1)

The Certified Management Accountant (CMA)

(7)

Summary

(1)

Glossary

(1)

Questions

(1)

Exercises

(1)

Problems

(2)

Group and Internet Exercises

(1)

Cost Terms, Concepts, and Classifications

(52)

General Cost Classifications

(2)

Manufacturing Costs

(1)

Direct Materials

(1)

Direct Labor

(1)

Manufacturing Overhead

(1)

Nonmanufacturing Costs

(1)

Product Costs versus Period Costs

(3)

Product Costs

(1)

Period Costs

(2)

Cost Classifications on Financial Statements

(4)

The Balance Sheet

(1)

The Income Statement

(1)

Schedule of Cost of Goods Manufactured

(2)

Product Cost Flows

(3)

Inventoriable Costs

(1)

An Example of Cost Flows

(2)

Cost Classifications for Predicting Cost Behavior

(2)

Variable Cost

(1)

Fixed Cost

(1)

Cost Classifications for Assigning Costs to Cost Objects

(1)

Direct Cost

(1)

Indirect Cost

(1)

Cost Classifications for Decision Making

(35)

Differential Cost and Revenue

(1)

Opportunity Cost

(1)

Example 1

(1)

Example 2

(1)

Example 3

(1)

Sunk Cost

(1)

Summary

(1)

Review Problem 1: Cost Terms

(1)

Review Problem 2: Schedule of Cost of Goods Manufactured and Income Statement

(2)

Glossary

(1)

Appendix 2A: Further Classification of Labor Costs'

(1)

Appendix 2B: Cost of Quality

(9)

Questions

(1)

Exercises

(4)

Problems

(9)

Cases

(2)

Group and Internet Exercises

(2)

Systems Design: Job-Order Costing

(58)

Process and Job-Order Costing

(1)

Process Costing

(1)

Job-Order Costing

(1)

Job-Order Costing---An Overview

(9)

Measuring Direct Materials Cost

(1)

Job Cost Sheet

(1)

Measuring Direct Labor Cost

(2)

Application of Manufacturing Overhead

(1)

Using the Predetermined Overhead Rate

(1)

The Need for a Predetermined Rate

(2)

Choice of an Allocation Base for Overhead Cost

(1)

Computation of Unit Costs

(1)

Summary of Document Flows

(2)

Job-Order Costing---The Flow of Costs

(6)

The Purchase and Issue of Materials

(1)

Issue of Direct and Indirect Materials

(1)

Issue of Direct Materials Only

(1)

Labor Cost

(1)

Manufacturing Overhead Costs

100

(1)

The Application of Manufacturing Overhead

101

(1)

The Concept of a Clearing Account

101

(1)

Nonmanufacturing Costs

102

(1)

Cost of Goods Manufactured

103

(1)

Cost of Goods Sold

103

(1)

Summary of Cost Flows

104

(1)

Problems of Overhead Application

104

(8)

Underapplied and Overapplied Overhead

104

(5)

Disposition of Under- or Overapplied Overhead Balances

109

(1)

Closed Out to Cost of Goods Sold

109

(1)

Allocated between Accounts

110

(1)

A General Model of Product Cost Flows

110

(1)

Multiple Predetermined Overhead Rates

110

(1)

Job-Order Costing in Service Companies

111

(1)

Use of Information Technology

112

(32)

Summary

113

(1)

Review Problem: Job-Order Costing

114

(2)

Glossary

116

(1)

Appendix 3A: The Predetermined Overhead Rate and Capacity

117

(1)

Questions

118

(1)

Exercises

119

(7)

Problems

126

(12)

Cases

138

(4)

Group and Internet Exercises

142

(2)

Systems Design: Process Costing

144

(38)

Comparison of Job-Order and Process Costing

146

(1)

Similarities between Job-Order and Process Costing

146

(1)

Differences between Job-Order and Process Costing

146

(1)

A Perspective of Process Cost Flows

147

(5)

Processing Departments

147

(1)

The Flow of Materials, Labor, and Overhead Costs

148

(1)

Materials, Labor, and Overhead Cost Entries

148

(1)

Materials Costs

149

(1)

Labor Costs

149

(1)

Overhead Costs

150

(1)

Completing the Cost Flows

150

(2)

Equivalent Units of Production

152

(1)

Weighted-Average Method

152

(1)

Production Report---Weighted-Average Method

153

(6)

Step 1: Prepare a Quantity Schedule and Compute the Equivalent Units

155

(1)

Step 2: Compute Costs per Equivalent Unit

156

(1)

Step 3: Prepare a Cost Reconciliation

156

(1)

Example of a Cost Reconciliation

156

(3)

Operation Costing

159

(23)

Summary

159

(1)

Review Problem: Process Cost Flows and Reports

160

(2)

Glossary

162

(1)

Appendix 4A: FIFO Method

162

(6)

Questions

168

(1)

Exercises

169

(5)

Problems

174

(6)

Cases

180

(1)

Group and Internet Exercises

181

(1)

Cost Behavior: Analysis and Use

182

(46)

Types of Cost Behavior Patterns

184

(12)

Variable Costs

184

(1)

The Activity Base

185

(1)

Extent of Variable Costs

186

(1)

True Variable versus Step-Variable Costs

187

(1)

True Variable Costs

187

(1)

Step-Variable Costs

187

(1)

The Linearity Assumption and the Relevant Range

188

(1)

Fixed Costs

188

(2)

Types of Fixed Costs

190

(1)

Committed Fixed Costs

190

(1)

Discretionary Fixed Costs

191

(1)

The Trend toward Fixed Costs

192

(1)

Is Labor a Variable or a Fixed Cost?

192

(1)

Fixed Costs and the Relevant Range

193

(1)

Mixed Costs

194

(2)

The Analysis of Mixed Costs

196

(10)

Diagnosing Cost Behavior with a Scattergraph Plot

198

(3)

The High-Low Method

201

(3)

The Least-Squares Regression Method

204

(2)

Multiple Regression Analysis

206

(1)

The Contribution Format Income Statement

206

(22)

Why a New Income Statement Format?

206

(1)

The Contribution Approach

207

(1)

Summary

207

(1)

Review Problem 1: Cost Behavior

208

(1)

Review Problem 2: High-Low Method

209

(1)

Glossary

210

(1)

Appendix 5A: Least-Squares Regression Using Microsoft® Excel

210

(2)

Questions

212

(1)

Exercises

213

(4)

Problems

217

(6)

Cases

223

(4)

Group and Internet Exercises

227

(1)

Cost-Volume-Profit Relationships

228

(46)

The Basics of Cost-Volume-Profit (CVP) Analysis

231

(4)

Contribution Margin

231

(2)

CVP Relationships in Graphic Form

233

(1)

Preparing the CVP Graph

233

(2)

Contribution Margin Ratio (CM Ratio)

235

(1)

Some Applications of CVP Concepts

236

(3)

Change in Fixed Cost and Sales Volume

236

(1)

Change in Variable Costs and Sales Volume

237

(1)

Change in Fixed Cost, Sales Price, and Sales Volume

237

(1)

Change in Variable Cost, Fixed Cost, and Sales Volume

238

(1)

Change in Regular Sales Price

239

(1)

Break-Even Analysis

239

(5)

Break-Even Computations

239

(1)

The Equation Method

239

(1)

The Contribution Margin Method

240

(1)

Target Profit Analysis

241

(1)

The CVP Equation

241

(1)

The Contribution Margin Approach

242

(1)

The Margin of Safety

242

(2)

CVP Considerations in Choosing a Cost Structure

244

(3)

Cost Structure and Profit Stability

244

(2)

Operating Leverage

246

(1)

Structuring Sales Commissions

247

(1)

The Concept of Sales Mix

248

(2)

The Definition of Sales Mix

248

(1)

Sales Mix and Break-Even Analysis

248

(2)

Assumptions of CVP Analysis

250

(24)

Summary

251

(1)

Review Problem: CVP Relationships

251

(3)

Glossary

254

(1)

Questions

254

(1)

Exercises

255

(5)

Problems

260

(8)

Cases

268

(4)

Group and Internet Exercises

272

(2)

Variable Costing: A Tool for Management

274

(38)

Overview of Absorption and Variable Costing

276

(2)

Absorption Costing

276

(1)

Variable Costing

276

(1)

Unit Cost Computations

277

(1)

Income Comparison of Absorption and Variable Costing

278

(2)

Extended Comparison of Income Data

280

(4)

Effect of Changes in Production on Net Operating Income

284

(4)

Variable Costing

285

(1)

Absorption Costing

285

(3)

Choosing a Costing Method

288

(24)

The Impact on the Manager

288

(1)

CVP Analysis and Absorption Costing

289

(1)

Decision Making

290

(1)

External Reporting and Income Taxes

290

(1)

Advantages of Variable Costing and the Contribution Approach

291

(1)

Variable Costing and the Theory of Constraints

292

(1)

Impact of JIT Inventory Methods

292

(1)

Summary

293

(1)

Review Problem: Contrasting Variable and Absorption Costing

293

(2)

Glossary

295

(1)

Questions

295

(1)

Exercises

296

(4)

Problems

300

(6)

Cases

306

(4)

Group and Internet Exercises

310

(2)

Activity-Based Costing: A Tool to Aid Decision Making

312

(64)

How Costs Are Treated under Activity-Based Costing

315

(2)

Nonmanufacturing Costs and Activity-Based Costing

315

(1)

Manufacturing Costs and Activity-Based Costing

315

(1)

Plantwide Overhead Rate

315

(1)

Departmental Overhead Rates

316

(1)

The Costs of Idle Capacity in Activity-Based Costing

317

(1)

Designing an Activity-Based Costing (ABC) System

317

(6)

Step 1: Identify and Define Activities and Activity Cost Pools

320

(3)

The Mechanics of Activity-Based Costing

323

(7)

Step 2: Whenever Possible, Directly Trace Overhead Costs to Activities and Cost Objects

323

(1)

Step 3: Assign Costs to Activity Cost Pools

324

(3)

Step 4: Calculate Activity Rates

327

(1)

Step 5: Assign Costs to Cost Objects

328

(2)

Step 6: Prepare Management Reports

330

(1)

Comparison of Traditional and ABC Product Costs

330

(5)

Product Margins Computed Using the Traditional Cost System

330

(1)

The Differences between ABC and Traditional Product Costs

331

(4)

Targeting Process Improvements

335

(2)

Activity-Based Costing and External Reports

337

(1)

The Limitations of Activity-Based Costing

338

(38)

Summary

339

(1)

Review Problem: Activity-Based Costing

340

(1)

Glossary

341

(1)

Appendix 8A: ABC Action Analysis

342

(8)

Questions

350

(1)

Exercises

351

(10)

Problems

361

(8)

Cases

369

(6)

Group and Internet Exercises

375

(1)

Profit Planning

376

(50)

The Basic Framework of Budgeting

378

(9)

Personal Budgets

378

(1)

Difference between Planning and Control

378

(1)

Advantages of Budgeting

378

(1)

Responsibility Accounting

379

(1)

Choosing a Budget Period

380

(1)

The Self-Imposed Budget

381

(1)

Human Factors in Budgeting

382

(1)

Zero-Based Budgeting

382

(2)

The Budget Committee

384

(1)

The Master Budget: An Overview

385

(1)

The Sales Budget

385

(1)

The Cash Budget

385

(1)

Sales Forecasting---A Critical Step

385

(2)

Preparing the Master Budget

387

(12)

The Sales Budget

389

(1)

The Production Budget

390

(1)

Inventory Purchases---Merchandising Company

391

(1)

The Direct Materials Budget

391

(2)

The Direct Labor Budget

393

(1)

The Manufacturing Overhead Budget

394

(1)

The Ending Finished Goods Inventory Budget

395

(1)

The Selling and Administrative Expense Budget

395

(1)

The Cash Budget

396

(3)

The Budgeted Income Statement

399

(3)

The Budgeted Balance Sheet

400

(2)

International Aspects of Budgeting

402

(24)

Summary

403

(1)

Review Problem: Budget Schedules

403

(2)

Glossary

405

(1)

Questions

406

(1)

Exercises

406

(2)

Problems

408

(13)

Cases

421

(4)

Group and Internet Exercises

425

(1)

Standard Costs and the Balanced Scorecard

426

(64)

Standard Costs---Management by Exception

429

(2)

Who Uses Standard Costs?

430

(1)

Setting Standard Costs

431

(4)

Ideal versus Practical Standards

431

(1)

Setting Direct Materials Standards

432

(1)

Setting Direct Labor Standards

432

(2)

Setting Variable Manufacturing Overhead Standards

434

(1)

Are Standards the Same as Budgets?

435

(1)

A General Model for Variance Analysis

435

(1)

Price and Quantity Variances

435

(1)

Using Standard Costs---Direct Materials Variances

436

(5)

Materials Price Variance---A Closer Look

438

(1)

Isolation of Variances

439

(1)

Responsibility for the Variance

439

(1)

Materials Quantity Variance---A Closer Look

440

(1)

Using Standard Costs---Direct Labor Variances

441

(2)

Labor Rate Variance---A Closer Look

441

(1)

Labor Efficiency Variance---A Closer Look

442

(1)

Using Standard Costs---Variable Manufacturing Overhead Variances

443

(2)

Manufacturing Overhead Variances---A Closer Look

443

(2)

Variance Analysis and Management by Exception

445

(2)

International Uses of Standard Costs

447

(1)

Evaluation of Controls Based on Standard Costs

447

(2)

Advantages of Standard Costs

447

(1)

Potential Problems with the Use of Standard Costs

448

(1)

Balanced Scorecard

449

(41)

Common Characteristics of Balanced Scorecards

450

(2)

A Company's Strategy and the Balanced Scorecard

452

(2)

Tying Compensation to the Balanced Scorecard

454

(1)

Advantages of Timely and Graphic Feedback

454

(2)

Some Measures of Internal Business Process Performance

456

(1)

Delivery Cycle Time

456

(1)

Throughput (Manufacturing Cycle) Time

456

(1)

Manufacturing Cycle Efficiency (MCE)

457

(1)

Some Final Observations Concerning the Balanced Scorecard

458

(1)

Summary

459

(1)

Review Problem: Standard Costs

459

(2)

Glossary

461

(1)

Appendix 10A: General Ledger Entries to Record Variances

462

(2)

Questions

464

(1)

Exercises

465

(6)

Problems

471

(13)

Cases

484

(4)

Group and Internet Exercises

488

(2)

Flexible Budgets and Overhead Analysis

490

(48)

Flexible Budgets

492

(6)

Characteristics of a Flexible Budget

492

(1)

Deficiencies of the Static Budget

493

(1)

How a Flexible Budget Works

494

(1)

Using the Flexible Budgeting Concept in Performance Evaluation

495

(3)

The Measure of Activity---A Critical Choice

498

(1)

Variable Overhead Variances---A Closer Look

498

(4)

Actual versus Standard Hours

498

(1)

Spending Variance Alone

499

(1)

Interpreting the Spending Variance

500

(1)

Both Spending and Efficiency Variances

500

(1)

Interpreting the Efficiency Variance

500

(1)

Control of the Efficiency Variance

501

(1)

Activity-Based Costing and the Flexible Budget

502

(1)

Overhead Rates and Fixed Overhead Analysis

502

(36)

Flexible Budgets and Overhead Rates

502

(1)

Denominator Activity

503

(1)

Computing the Overhead Rate

504

(1)

Overhead Application in a Standard Cost System

505

(1)

The Fixed Overhead Variances

505

(1)

The Budget Variance---A Closer Look

506

(1)

The Volume Variance---A Closer Look

507

(1)

Graphic Analysis of Fixed Overhead Variances

508

(1)

Cautions in Fixed Overhead Analysis

509

(1)

Overhead Variances and Under- or Overapplied Overhead Cost

509

(1)

Summary

509

(1)

Review Problem: Overhead Analysis

510

(2)

Glossary

512

(1)

Questions

513

(1)

Exercises

513

(6)

Problems

519

(12)

Cases

531

(4)

Group and Internet Exercises

535

(3)

Segment Reporting and Decentralization

538

(62)

Decentralization in Organizations

540

(1)

Advantages and Disadvantages of Decentralization

540

(1)

Responsibility Accounting

541

(2)

Cost, Profit, and Investment Centers

541

(1)

Cost Center

541

(1)

Profit Center

541

(1)

Investment Center

542

(1)

An Organizational View of Responsibility Centers

542

(1)

Decentralization and Segment Reporting

543

(10)

Building a Segmented Income Statement

543

(3)

Levels of Segmented Statements

546

(1)

Sales and Contribution Margin

546

(2)

Traceable and Common Fixed Costs

548

(1)

Identifying Traceable Fixed Costs

548

(1)

Activity-Based Costing

548

(2)

Traceable Costs Can Become Common Costs

550

(1)

Segment Margin

550

(2)

Segmented Financial Information on External Reports

552

(1)

Hindrances to Proper Cost Assignment

553

(2)

Omission of Costs

553

(1)

Inappropriate Methods for Assigning Traceable Costs among Segments

554

(1)

Failure to Trace Costs Directly

554

(1)

Inappropriate Allocation Base

554

(1)

Arbitrarily Dividing Common Costs among Segments

554

(1)

Evaluating Investment Center Performance---Return on Investment

555

(6)

The Return on Investment (ROI) Formula

556

(1)

Net Operating Income and Operating Assets Defined

556

(1)

Understanding ROI---The DuPont Perspective

556

(2)

Example 1: Increased Sales without Any Increase in Operating Assets

558

(1)

Example 2: Decreased Operating Expenses with No Change in Sales or Operating Assets

559

(1)

Example 3: Decreased Operating Assets with No Change in Sales or Operating Expenses

559

(1)

Example 4: Invest in Operating Assets to Increase Sales

560

(1)

ROI and the Balanced Scorecard

560

(1)

Criticisms of ROI

561

(1)

Residual Income

561

(39)

Motivation and Residual Income

563

(1)

Divisional Comparison and Residual Income

563

(2)

Summary

565

(1)

Review Problem 1: Segmented Statements

565

(1)

Review Problem 2: Return on Investment (ROI) and Residual Income

565

(2)

Glossary

567

(1)

Appendix 12A: Transfer Pricing

568

(6)

Review Problem 3: Transfer Pricing

574

(2)

Questions

576

(1)

Exercises

576

(6)

Problems

582

(12)

Cases

594

(3)

Group and Internet Exercises

597

(3)

Relevant Costs for Decision Making

600

(52)

Cost Concepts for Decision Making

601

(8)

Identifying Relevant Costs and Benefits

601

(1)

Different Costs for Different Purposes

602

(1)

An Example of Identifying Relevant Costs and Benefits

602

(4)

Reconciling the Total and Differential Approaches

606

(2)

Why Isolate Relevant Costs?

608

(1)

Adding and Dropping Product Lines and Other Segments

609

(4)

An Illustration of Cost Analysis

609

(2)

A Comparative Format

611

(1)

Beware of Allocated Fixed Costs

611

(2)

The Make or Buy Decision

613

(2)

Strategic Aspects of the Make or Buy Decision

613

(1)

An Example of Make or Buy

614

(1)

Opportunity Cost

615

(1)

Special Orders

616

(2)

Utilization of a Constrained Resource

618

(4)

Contribution in Relation to a Constrained Resource

618

(2)

Managing Constraints

620

(1)

The Problem of Multiple Constraints

621

(1)

Joint Product Costs and the Contribution Approach

622

(3)

The Pitfalls of Allocation

622

(1)

Sell or Process Further Decisions

622

(3)

Activity-Based Costing and Relevant Costs

625

(27)

Summary

626

(1)

Review Problem: Relevant Costs

626

(1)

Glossary

627

(1)

Questions

628

(1)

Exercises

628

(6)

Problems

634

(8)

Cases

642

(8)

Group and Internet Exercises

650

(2)

Capital Budgeting Decisions

652

(64)

Capital Budgeting---Planning Investments

654

(1)

Typical Capital Budgeting Decisions

654

(1)

The Time Value of Money

654

(1)

Discounted Cash Flows---The Net Present Value Method

655

(6)

The Net Present Value Method Illustrated

655

(2)

Emphasis on Cash Flows

657

(1)

Typical Cash Outflows

657

(1)

Typical Cash Inflows

657

(1)

Recovery of the Original Investment

658

(1)

Simplifying Assumptions

658

(1)

Choosing a Discount Rate

659

(1)

An Extended Example of the Net Present Value Method

659

(2)

Discounted Cash Flows---The Internal Rate of Return Method

661

(2)

The Internal Rate of Return Method Illustrated

661

(1)

Salvage Value and Other Cash Flows

661

(1)

Using the Internal Rate of Return

662

(1)

The Cost of Capital as a Screening Tool

662

(1)

Comparison of the Net Present Value and the Internal Rate of Return Methods

662

(1)

Expanding the Net Present Value Method

663

(4)

The Total-Cost Approach

663

(2)

The Incremental-Cost Approach

665

(1)

Least-Cost Decisions

666

(1)

Uncertain Cash Flows

667

(2)

An Example

668

(1)

Real Options

668

(1)

Preference Decisions---The Ranking of Investment Projects

669

(1)

Internal Rate of Return Method

669

(1)

Net Present Value Method

670

(1)

Other Approaches to Capital Budgeting Decisions

670

(6)

The Payback Method

671

(1)

Evaluation of the Payback Method

671

(2)

An Extended Example of Payback

673

(1)

Payback and Uneven Cash Flows

674

(1)

The Simple Rate of Return Method

674

(2)

Criticisms of the Simple Rate of Return

676

(1)

Postaudit of Investment Projects

676

(40)

Summary

677

(1)

Review Problem I: Basic Present Value Computations

678

(1)

Review Problem 2: Comparison of Capital Budgeting Methods

679

(1)

Glossary

680

(1)

Appendix 14A: The Concept of Present Value

681

(3)

Appendix 14B: Inflation and Capital Budgeting

684

(3)

Appendix 14C: Future Value and Present Value Tables

687

(4)

Appendix 14D: Income Taxes in Capital Budgeting Decisions

691

(4)

Questions

695

(1)

Exercises

696

(6)

Problems

702

(8)

Cases

710

(4)

Group and Internet Exercises

714

(2)

Service Department Costing: An Activity Approach

716

(32)

Allocations Using the Direct and Step Methods

718

(5)

Selecting Allocation Bases

718

(1)

Interdepartmental Services

719

(1)

Direct Method

720

(1)

Step Method

721

(1)

Reciprocal Method

722

(1)

Revenue Producing Departments

723

(1)

Allocating Costs by Behavior

723

(4)

Variable Costs

723

(1)

Fixed Costs

723

(1)

Should Actual or Budgeted Costs Be Allocated?

724

(1)

A Summary of Cost Allocation Guidelines

725

(1)

Implementing the Allocation Guidelines

725

(1)

Base Allocation Techniques

725

(2)

Effect of Allocations on Operating Departments

727

(1)

An Extended Example

728

(1)

Some Cautions in Allocating Service Department Costs

729

(19)

Pitfalls in Allocating Fixed Costs

729

(2)

Beware of Sales Dollars as an Allocation Base

731

(1)

Summary

732

(1)

Review Problem: Direct and Step Methods

733

(1)

Glossary

734

(1)

Questions

734

(1)

Exercises

734

(4)

Problems

738

(5)

Cases

743

(3)

Group and Internet Exercises

746

(2)

``How Well Am I Doing?'' Statement of Cash Flows

748

(38)

The Basic Approach to a Statement of Cash Flows

750

(3)

Definition of Cash

750

(1)

Constructing the Statement of Cash Flows Using Changes in Noncash Balance Sheet Accounts

751

(2)

An Example of a Simplified Statement of Cash Flows

753

(3)

Constructing a Simplified Statement of Cash Flows

753

(2)

The Need for a More Detailed Statement

755

(1)

Organization of the Full-Fledged Statement of Cash Flows

756

(2)

Operating Activities

756

(1)

Investing Activities

757

(1)

Financing Activities

757

(1)

Other Issues in Preparing the Statement of Cash Flows

758

(1)

Cash Flows: Gross or Net?

758

(1)

Operating Activities: Direct or Indirect Method?

758

(1)

Direct Exchange Transactions

759

(1)

An Example of a Full-Fledged Statement of Cash Flows

759

(27)

Eight Basic Steps to Preparing the Statement of Cash Flows

759

(2)

Setting Up the Worksheet (Steps 1--4)

761

(1)

Adjustments to Reflect Gross, Rather than Net, Amounts (Step 5)

762

(2)

Classifying Entries as Operating, Investing, or Financing Activities (Step 6)

764

(1)

The Completed Statement of Cash Flows (Steps 7 and 8)

765

(1)

Interpretation of the Statement of Cash Flows

765

(1)

Depreciation, Depletion, and Amortization

766

(1)

Summary

767

(1)

Review Problem

768

(2)

Glossary

770

(1)

Appendix 16A: The Direct Method of Determining the Net Cash Provided by Operating Activities

771

(1)

Questions

772

(1)

Exercises

773

(3)

Problems

776

(7)

Group and Internet Exercises

783

(3)

``How Well Am I Doing?'' Financial Statement Analysis

786

(38)

Limitations of Financial Statement Analysis

788

(1)

Comparison of Financial Data

788

(1)

The Need to Look beyond Ratios

788

(1)

Statement in Comparative and Common-Size Form

789

(5)

Dollar and Percentage Changes on Statements

789

(1)

Common-Size Statements

789

(5)

Ratio Analysis---The Common Stockholder

794

(4)

Earnings per Share

794

(1)

Price-Earnings Ratio

794

(1)

Dividend Payout and Yield Ratios

795

(1)

The Dividend Payout Ratio

795

(1)

The Dividend Yield Ratio

795

(1)

Return on Total Assets

795

(1)

Return on Common Stockholders' Equity

796

(1)

Financial Leverage

796

(1)

Book Value per Share

797

(1)

Ratio Analysis---The Short-Term Creditor

798

(3)

Working Capital

798

(1)

Current Ratio

798

(1)

Acid-Test (Quick) Ratio

799

(1)

Accounts Receivable Turnover

800

(1)

Inventory Turnover

800

(1)

Ratio Analysis---The Long-Term Creditor

801

(1)

Times Interest Earned Ratio

801

(1)

Debt-to-Equity Ratio

802

(1)

Summary of Ratios and Sources of Comparative Ratio Data

802

(22)

Summary

802

(2)

Review Problem: Selected Ratios and Financial Leverage

804

(3)

Glossary

807

(1)

Questions

807

(1)

Exercises

807

(5)

Problems

812

(12)

Appendix Pricing Products and Services

824

(16)

Introduction

825

(1)

The Economists' Approach to Pricing

825

(5)

Elasticity of Demand

826

(1)

The Profit-Maximizing Price

827

(3)

The Absorption Costing Approach to Cost-Plus Pricing

830

(3)

Setting a Target Selling Price Using the Absorption Costing Approach

830

(1)

Determining the Markup Percentage

831

(1)

Problems with the Absorption Costing Approach

832

(1)

Target Costing

833

(7)

Reasons for Using Target Costing

833

(1)

An Example of Target Costing

834

(1)

Summary

834

(1)

Glossary

835

(1)

Questions

835

(1)

Exercises

835

(1)

Problems

836

(4)

Appendix Profitability Analysis

840

(13)

Introduction

841

(1)

Absolute Profitability

841

(1)

Relative Profitability

841

(3)

Volume Trade-Off Decisions

844

(2)

Managerial Implications

846

(7)

Summary

847

(1)

Glossary

848

(1)

Questions

848

(1)

Exercises

848

(1)

Problems

849

(3)

Cases

852

(1)

Photo Credits

853

(1)

Index

854

Managerial Accounting

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