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Customer Reviews

Required reading  October 20, 2014

"A lot of marginal revenue and marginal cost calculations to determine things like months of inventory, cash flow and other important metrics. More entertaining than a general ledger, but it is probably more useful in the real world if you're not going to be a beancounter for a living."

Managerial Accounting: 4 out of 5 stars based on 1 user reviews.


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For courses in Introduction to Management Accounting

Managerial Accounting, Fourth Edition helps students make the connection between managerial accounting concepts and the businesses they deal with everyday through strong coverage and effective practice. By presenting actual accounting decisions made in companies like Target and J. Crew, the text’s precise coverage of the core concepts engages students in the learning process.

MyAccountingLab for Managerial Accounting is an online homework, tutorial, and assessment program that truly engages students in learning. It helps students better prepare for class, quizzes, and exams–resulting in better performance in the course–and provides educators with a dynamic set of tools for gauging individual and class progress.

This program provides a better teaching and learning experience–for you and your students. Here’s how:

  • Personalized learning with MyAccountingLab–the online homework, tutorial and assessment program that helps students succeed in the classroom and beyond.
  • Students see the connections between accounting concepts and the businesses they interact with everyday.
  • Students learn from the latest information on important topics in the field.

Note: You are purchasing a standalone product; MyAccountingLab does not come packaged with this content. If you would like to purchase both the physical text and MyAccountingLab search for ISBN-10: 0133803805/ISBN-13: 9780133803808. That package includes ISBN-10: 0133428370/ISBN-13: 9780133428377 and ISBN-10: 0133451488/ISBN-13: 9780133451481.

MyAccountingLab is not a self-paced technology and should only be purchased when required by an instructor.

Author Biography

Karen Wilken Braun is an associate professor for the Weatherhead School of Management
at Case Western Reserve University. Professor Braun was on the faculty of the
J.M. Tull School of Accounting at the University of Georgia before her appointment at
Case Western. She has received several student-nominated Outstanding Teacher of the
Year awards at both business schools.

Professor Braun has been a Certified Public Accountant since 1985 and holds membership
in the American Accounting Association (AAA), the Institute of Management
Accountants, and the American Institute of Certified Public Accountants. She also holds
the Chartered Global Management Accountant designation, and is a member of the
AAA’s Management Accounting Section as well as the Teaching, Learning and Curriculum
Section. Her research and teaching interests revolve around lean operations,
sustainability, corporate responsibility, and accounting education. Dr. Braun’s work has
been published in Contemporary Accounting Research, Issues in Accounting Education,
and Journal of Accounting Education.

Dr. Braun received her Ph.D. from the University of Connecticut, where she was an
AICPA Doctoral Fellow, a Deloitte & Touche Doctoral Fellow, and an AAA Doctoral
Consortium Fellow. She received her B.A., summa cum laude, from Luther College,
where she was a member of Phi Beta Kappa. Dr. Braun gained public accounting experience
while working at Arthur Andersen & Co. and accumulated additional business
and management accounting experience as a corporate controller.

Wendy M. Tietz is an associate professor for the Department of Accounting in the
College of Business Administration at Kent State University, where she has taught since
2000. Prior to Kent State University, she was on the faculty at the University of Akron.
She teaches in a variety of formats, including large sections, small sections, and webbased
sections. She has received numerous college and university teaching awards while
at Kent State University. Most recently she was named the Beta Gamma Sigma Professor
of the Year for the College of Business Administration at Kent State University.
Dr. Tietz is a Certified Public Accountant, a Certified Management Accountant,
and a Chartered Global Management Accountant. She is a member of the American Accounting
Association (AAA), the Institute of Management Accountants and the American
Institute of Certified Public Accountants. She has published in Issues in Accounting
Education, Accounting Education: An International Journal, and Journal of Accounting
& Public Policy. She regularly presents at AAA regional and national meetings. She
also leads a short-term Study Abroad trip for accounting majors to Paris and London
each year.

Dr. Tietz received her Ph.D. from Kent State University. She received both her
M.B.A. and B.S.A. from the University of Akron. She worked in industry for several
years, both as a controller for a financial institution and as the operations manager and
controller for a recycled plastics manufacturer.

Dr. Tietz and her husband, Russ, have two grown sons. In her spare time, she enjoys
bike riding, walking, and reading. She is also very interested in using technology
in education.

Table of Contents

1 Introduction to Managerial Accounting 1
What is Managerial Accounting? 2
Managers’ Three Primary Responsibilities 2
A Road Map: How Managerial Accounting Fits In 3
Differences Between Managerial Accounting and Financial Accounting 4
What Role do Management Accountants Play? 6
Organizational Structure 6
The Changing Roles of Management Accountants 7
The Skills Required of Management Accountants 8
Professional Associations 9
Average Salaries of Management Accountants 10
Ethics 11
Examples of Ethical Dilemmas 12
What Regulatory Issues Affect
Management Accounting? 17
Sarbanes-Oxley Act of 2002 17
International Financial Reporting Standards (IFRS) 18
Extensible Business Reporting Language (XBRL) 18
What Business Trends Affect Management Accounting? 19
Sustainability, Social Responsibility, and the Triple Bottom Line 19
Integrated Reporting 20
Shifting Economy 21
Global Marketplace 21
Advanced Information Systems 22
Lean Operations 23
Total Quality Management 23
End of Chapter 27

2 Building Blocks of Managerial Accounting 46
What are the Most Common Business Sectors and Their Activities? 47
Service, Merchandising, and Manufacturing Companies 47
Which Business Activities Make up the Value Chain? 49
Coordinating Activities Across the Value Chain 50
How do Companies Define Cost? 52
Cost Objects, Direct Costs, and Indirect Costs 52
Costs for Internal Decision Making and External Reporting 54
Merchandising Companies’ Inventoriable Product Costs 56
Manufacturing Companies’ Inventoriable Product Costs 57
Prime and Conversion Costs 59
Additional Labor Compensation Costs 59
Recap: Inventoriable Product Costs Versus Period Costs 60
How are Inventoriable Product Costs and Period Costs Shown in the Financial Statements? 63
Service Companies 63
Merchandising Companies 63
Manufacturing Companies 65
Comparing Balance Sheets 68
Sustainability and Corporate Reporting 68
What Other Cost Terms are Used by Managers? 69
Controllable Versus Uncontrollable Costs 69
Relevant and Irrelevant Costs 69
Fixed and Variable Costs 70
How Manufacturing Costs Behave 71
Calculating Total and Average Costs 72
End of Chapter 76

3 Job Costing 102
What Methods are Used to Determine the Cost of Manufacturing a Product? 103
Process Costing 103
Job Costing 104
How do Manufacturers Determine a Job’s Cost? 105
Overview: Flow of Inventory Through a Manufacturing System 105
Scheduling Production 106
Purchasing Raw Materials 107
Using a Job Cost Record to Accumulate Job Costs 108
Tracing Direct Materials Cost to a Job 110
Tracing Direct Labor Cost to a Job 112
Allocating Manufacturing Overhead to a Job 114
Completing the Job Cost Record and Using it to Make Business Decisions 117
How Can Job Costing Information be Enhanced for Decision Making? 119
Non-Manufacturing Costs 121
Direct or Variable Costing 121
How do Managers Deal with Underallocated or Overallocated Manufacturing Overhead? 125
What Journal Entries are Needed in a Manufacturer’s Job Costing System? 127
Appendix 3A 141
How do Service Firms Use Job Costing to Determine the Amount to Bill Clients? 141
What Costs are Considered Direct Costs of Serving the Client? 141
What Costs are Considered Indirect Costs of Serving the Client? 142
Finding the Total Cost of the Job and Adding a Profit Markup 143
Invoicing the Client Using a Professional Billing Rate 143
What Journal Entries are Needed in a Service Firm’s Job Costing System? 144
End of Chapter 145

4 Activity-Based Costing, Lean Operations, and the Costs of Quality 176
Why and How do Companies Refine Their Cost Allocation Systems? 177
Simple Cost Allocation Systems Can Lead to Cost Distortion 177
Review: Using a Plantwide Overhead Rate to Allocate Indirect Costs 178
Using Departmental Overhead Rates to Allocate Indirect Costs 180
Using Activity-Based Costing to Allocate Indirect Costs 185
How do Managers Use the Refined Cost Information to Improve Operations? 192
Activity-Based Management (ABM) 192
Passing the Cost-Benefit Test 194
What is Lean Thinking? 200
The Eight Wastes of Traditional Operations 200
Characteristics of Lean Operations 202
Lean Operations in Service and Merchandising Companies 207
How do Managers Improve Quality? 207
Costs of Quality (COQ) 208
Relationship Among Costs 209
Using Costs of Quality Reports to Aid
Decisions 210
End of Chapter 215

5 Process Costing 247
Process Costing: An Overview 248
Two Basic Costing Systems: Job Costing and Process Costing 248
How Does the Flow of Costs Differ Between Job and Process Costing? 249
What are the Building Blocks of Process Costing? 252
Conversion Costs 252
Equivalent Units 252
Inventory Flow Assumptions 253
How Does Process Costing Work in the First Processing Department? 254
Step 1: Summarize the Flow of Physical Units 256
Step 2: Compute Output in Terms of Equivalent Units 256
Step 3: Summarize Total Costs to Account For 258
Step 4: Compute the Cost per Equivalent Unit 258
Step 5: Assign Total Costs to Units Completed and to Units in Ending Work in Process Inventory 259
Average Unit Costs 259
What Journal Entries are Needed in a Process Costing System? 261
How Does Process Costing Work in a Second or Later Processing Department? 267
Process Costing in SeaView’s Insertion Department 267
Steps 1 and 2: Summarize the Flow of Physical Units and Compute Output in Terms of Equivalent Units 269
Steps 3 and 4: Summarize Total Costs to Account for and Compute the Cost per Equivalent Unit 270
Step 5: Assign Total Costs to Units Completed and to Units in Ending Work in Process Inventory 271
Unit Costs and Gross Profit 271
Production Cost Reports 272
Journal Entries in a Second Processing Department 273
End of Chapter 280

6 Cost Behavior 309
Cost Behavior: How do Changes in Volume Affect Costs? 310
Variable Costs 310
Fixed Costs 313
Mixed Costs 316
Relevant Range 318
Other Cost Behaviors 319
How do Managers Determine Cost Behavior? 324
Account Analysis 324
Scatter Plots 324
High-Low Method 326
Regression Analysis 328
Data Concerns 332
What are the Roles of Variable Costing and the Contribution Margin Income Statement? 333
Comparing Absorption Costing and Variable Costing 333
The Contribution Margin Income Statement 335
Comparing Operating Income: Variable Versus Absorption Costing 338
Reconciling Operating Income Between the Two Costing Systems 340
End of Chapter 347

7 Cost-Volume-Profit Analysis 382
How Does Cost-Volume-Profit Analysis Help Managers? 383
Data and Assumptions Required for CVP Analysis 383
The Unit Contribution Margin 384
The Contribution Margin Ratio 385
How do Managers Find the Breakeven Point? 387
The Income Statement Approach 388
The Shortcut Approach Using the Unit Contribution Margin 389
The Shortcut Approach Using the Contribution Margin Ratio 390
How do Managers Find the Volume Needed to Earn a Target Profit? 391
How Much Must we Sell to Earn a Target Profit? 391
Graphing CVP Relationships 393
How do Managers Use CVP to Plan for Changing Business Conditions? 398
Changing the Sales Price 398
Changing Variable Costs 399
Changing More Than One Factor 400
Changing Fixed Costs 401
Changing the Mix of Products Offered for Sale 403
What are Some Common Indicators of Risk? 407
Margin of Safety 407
Operating Leverage 408
Choosing a Cost Structure 411
End of Chapter 417

8 Relevant Costs for Short-Term Decisions 443
How do Managers Make Decisions? 444
Relevant Information 444
Relevant Nonfinancial Information 445
Keys to Making Short-Term Special Decisions 446
How do Managers Make Special Order and Regular Pricing Decisions? 448
Special Order Decisions 448
Regular Pricing Decisions 452
How do Managers Make Other Special Business Decisions? 460
Decisions to Discontinue Products, Departments, or Stores 460
Product Mix Decisions when Resources are Constrained 464
Outsourcing Decisions (Make or Buy) 466
Decisions to Sell As Is or Process Further 470
End of Chapter 476

9 The Master Budget 502
How and Why do Managers Use Budgets? 503
How are Budgets Used? 503
How are Budgets Developed? 503
What are the Benefits of Budgeting? 505
What is the Master Budget? 506
How are the Operating Budgets Prepared? 507
Sales Budget 507
Production Budget 508
Direct Materials Budget 510
Direct Labor Budget 511
Manufacturing Overhead Budget 512
Operating Expenses Budget 513
Budgeted Income Statement 514
How are the Financial Budgets Prepared? 519
Capital Expenditures Budget 519
Cash Collections Budget 519
Cash Payments Budget 520
Combined Cash Budget 522
Budgeted Balance Sheet 523
Sensitivity Analysis and Flexible Budgeting 525
How do the Budgets for Service and Merchandising Companies Differ? 527
Service Companies 527
Merchandising Companies 527
Impact of Credit and Debit Card Sales on Budgeting 529
End of Chapter 534

10 Performance Evaluation 572
How Does Decentralization Affect Performance Evaluation? 573
Advantages and Disadvantages of Decentralization 573
Performance Evaluation Systems 574
What is Responsibility Accounting? 574
Types of Responsibility Centers 575
Responsibility Center Performance Reports 577
Evaluation of Investment Centers 579
What is Transfer Pricing? 586
Strategies and Mechanisms for Determining a Transfer Price 587
How do Managers Use Flexible Budgets to Evaluate Performance? 593
Creating a Flexible Budget Performance Report 594
Underlying Causes of the Variances 596
How do Companies Incorporate Nonfinancial Performance Measurement? 598
The Balanced Scorecard 598
End of Chapter 607

11 Standard Costs and Variances 642
What are Standard Costs? 643
Types of Standards 643
Information Used to Develop and Update Standards 644
Computing Standard Costs 644
How do Managers Use Standard Costs to Compute DM and DL Variances? 647
Using Standard Costs to Develop the Flexible Budget 647
Direct Materials Variances 647
Direct Labor Variances 653
Summary of Direct Materials and Direct Labor Variances 655
Advantages and Disadvantages of Using Standard Costs and Variances 655
How do Managers Use Standard Costs to Compute MOH Variances? 660
Variable Manufacturing Overhead Variances 660
Fixed Manufacturing Overhead Variances 662
Standard Costing Systems 664
Appendix 11A 668
Standard Costing 668
Standard Costing Income Statement 671
End of Chapter 672

12 Capital Investment Decisions and the Time Value of Money 698
What is Capital Budgeting? 699
Four Popular Methods of Capital Budgeting Analysis 699
Focus on Cash Flows 700
Capital Budgeting Process 700
How do Managers Calculate the Payback Period and Accounting Rate of Return? 702
Payback Period 702
Accounting Rate of Return (ARR) 705
How do Managers Compute the Time Value of Money? 711
Factors Affecting the Time Value of Money 711
Future Values and Present Values: Points Along the Time Continuum 712
Future Value and Present Value Factors 713
Calculating Future Values of Single Sums and Annuities Using FV Factors 714
Calculating Present Values of Single Sums and Annuities Using PV Factors 715
How do Managers Calculate the Net Present Value and Internal Rate of Return? 718
Net Present Value (NPV) 719
Internal Rate of Return (IRR) 724
How do the Capital Budgeting Methods Compare? 727
Appendix 12A 731
Present Value Tables and Future Value Tables 731
Table A Present Value of $1 731
Table B Present Value of Annuity of $1 732
Table C Future Value of $1 733
Table D Future Value of Annuity of $1 734
Appendix 12B 735
Solutions to Chapter Examples Using Microsoft Excel 735
Appendix 12C 739
Using a TI-83, TI-83 Plus, TI-84, or TI-84 Plus Calculator to Perform Time Value of Money Calculations 739
End of Chapter 745

13 Statement of Cash Flows 765
What is the Statement of Cash Flows? 766
Three Types of Activities That Generate and Use Cash 767
Two Methods of Presenting Operating Activities 769
How is the Statement of Cash Flows Prepared Using the Indirect Method? 774
Information Needed to Prepare the Statement of Cash Flows 774
Preparing the Cash Flows from Operating Activities 774
Preparing the Cash Flows from Investing Activities 780
Preparing the Cash Flows from Financing Activities 782
Interpreting the Statement of Cash Flows 784
Recap: Steps to Preparing the Statement of Cash Flows Using the Indirect Method 784
How is the Statement of Cash Flows Prepared Using the Direct Method? 785
Overview 785
Determining Cash Payments and Receipts 786
End of Chapter 794

14 Financial Statement Analysis 823
What are the Most Common Methods of Analysis? 824
Horizontal Analysis 824
Horizontal Analysis of the Income Statement 826
Horizontal Analysis of the Balance Sheet 826
Trend Percentages 826
Vertical Analysis 828
How do we Compare One Company with Another? 830
What are Some of the Most Common Financial Ratios? 835
Measuring Ability to Pay Current Liabilities 835
Measuring Ability to Sell Inventory and Collect Receivables 836
Measuring Ability to Pay Long-Term Debt 838
Measuring Profitability 839
Analyzing Stock Investments 841
Red Flags in Financial Statement Analysis 843
End of Chapter 850

15 Sustainability 876
What is Sustainability and How Does it Create Business Value? 877
Historical Overview 878
The Business Case for Sustainability 879
What is Sustainability Reporting? 883
Current State of Sustainability Reporting 883
Reasons for Sustainability Reporting 884
Framework for Sustainability Reporting 884
What is Environmental Management Accounting (EMA)? 888
EMA Systems 888
Uses of Environmental Management Accounting Information 890
Challenges to Implementing EMA Systems 891
Future of Environmental Management Accounting 893
End of Chapter 895
Company Names Index I-1
Glossary/Index I-5

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