Managerial Accounting, 2nd Edition

by James Jiambalvo (Univ. of Washington)

• ISBN13: 9780471238232
• ISBN10: 0471238236
• Edition: 2nd
• Format: Hardcover
• Copyright: 2001-01-01
• Publisher: Wiley

Summary

The text is current, concise, and clearly written, with cases at the end of each chapter to illustrate the material. An interactive CD lets students test and expand their understanding with multiple-choice questions, key term matching exercises, demonstrations of various concepts and techniques, critical thinking exercise, interactive cases, and videos. A dynamic Web site provides test study guides, exercises, games, web testing, relevant articles, from The Wall Street Journal and other sources linked to the text, links to relevant web sites, additional cases, and other materials.

Author Biography

<b>PROFESSOR JAMES JIAMBALVO</b> joined the accounting faculty at the University of Washington after receiving a Ph.D. in accounting from The Ohio State University. A CPA, he has audit experience with the firm of Haskins and Sells (now Deloitte &amp; Touche), and currently serves on the national academic advisory board of&#160; Deloitte &amp; Touche LLP. From 1992-1996, Professor Jiambalvo served as chairman of the University of Washington accounting department.<br> Professor Jiambalvo's research has been published in top accounting journals, including <i>The Accounting Review, Contemporary Accounting Research</i>, the <i>Journal of Accounting and Economics</i>, and the <i>Journal of Accounting Research</i>. He is a past associate editor of <i>The Accounting Review</i> and currently serves on the editorial boards of&#160; <i>The Accounting Review, Contemporary Accounting Research; Auditing: A Journal of Practice and Theory</i>, and the <i>Journal of Management Accounting Research</i>.<br> Professor Jiambalvo has received the Burlington Northern Foundation Faculty Achievement Award and he was recognized for his teaching of managerial accounting with the MBA Professor of the Year Award. He has taught numerous executive education courses, including courses for a number of software companies. At the University of Washington, he holds the PricewaterhouseCoopers and Alumni Endowed Professorship.

Table of Contents

Introduction to Managerial Accounting	1	(26)
Goal of Managerial Accounting	2	(5)
Planning	2	(1)
Budgets for Planning	2	(1)
Control	2	(2)
Performance Reports for Control	4	(1)
Decision Making	5	(1)
A Comparison of Managerial and Financial Accounting	6	(1)
Internal versus External Users	6	(1)
Need to Use GAAP	6	(1)
Detail of Information	6	(1)
Emphasis on Non-monetary Information	6	(1)
Emphasis on the Future	7	(1)
Similarities between Financial and Managerial Accounting	7	(1)
Cost Terms Used in Discussing Planning, Control, and Decision Making	7	(3)
Variable and Fixed Costs	7	(1)
Variable Costs	7	(1)
Fixed Costs	8	(1)
Sunk Costs	8	(1)
Opportunity Costs	9	(1)
Direct and Indirect Costs	9	(1)
Controllable and Noncontrollable Costs	9	(1)
Two Key Ideas in Managerial Accounting	10	(3)
Decision Making Relies on Incremental Analysis	11	(1)
You Get What You Measure!	12	(1)
The Controller as the Top Management Accountant	13	(1)
Link To Practice:
The Changing World of the Management Accountant	14	(1)
The Institute of Management Accounting	15	(1)
Summary of Learning Objectives	15	(1)
Key Terms	16	(1)
Self-Assessment	16	(1)
Interactive Learning	17	(1)
Questions	18	(1)
Exercises	18	(2)
Problems	20	(5)
Case	25	(2)
Manufacturing Costs and Job-Order Costing Systems	27	(48)
Cost Classifications for Manufacturing Firms	28	(4)
Manufacturing Costs	29	(1)
Direct Material	29	(1)
Direct Labor	30	(1)
Manufacturing Overhead	30	(1)
Non-manufacturing Costs	30	(1)
Selling Costs	30	(1)
General and Administrative Costs	31	(1)
Product and Period Costs	31	(1)
Product Costs	31
Period Costs	3l	(32)
Product Cost Information in Financial Reporting and Decision Making	32	(1)
Balance Sheet Presentation of Product Costs	33	(1)
The Raw Material Inventory	33	(1)
Work in Process Inventory	33	(1)
Finished Goods Inventory	33	(1)
Flow of Product Costs in Accounts	34	(1)
Income Statement Presentation of Product Costs	34	(2)
Cost of Goods Manufactured	35	(1)
Cost of Goods Sold	35	(1)
Types of Costing Systems	36	(2)
Job-Order Costing Systems	37	(1)
Process Costing Systems	37	(1)
Overview of Job Costs and Financial Statement Accounts	38	(1)
Job-Order Costing System	39	(6)
Direct Material Cost	40	(2)
Direct Labor Cost	42	(1)
Manufacturing Overhead	43	(2)
Assigning Costs to Jobs: A Summary	45	(1)
Using Job Cost Information at Eastlake Motorboat	45	(2)
Relation between the Costs of Jobs and the Flow of Costs in Work in Process, Finished Goods, and Cost of Goods Sold	47	(1)
Allocating Overhead to Jobs: A Closer Look	48	(3)
Overhead Allocation Rates	48	(1)
Selecting an Overhead Allocation Base	48	(1)
Activity-based Costing (ABC) and Multiple Overhead Rates	49	(1)
Activity-based costing (ABC)	49	(1)
Predetermined Overhead Rates	49	(1)
Eliminating Overapplied or Underapplied Overhead	50	(1)
Job-Order Costing for Service Companies	51	(1)
Changes in Manufacturing Practices and Product Costing Systems	52
Just-in-Time (JIT) Production	53	(1)
Computer Controlled Manufacturing	54	(1)
Total Quality Management	55
Link to Practice:
Product and Period Costs at Dell Computer Corporation	32	(5)
Examples of Companies Using Job-Order and Process Costing Systems	37	(16)
How JIT Is Creating Transportation Woes in Japan	53	(3)
Can There Be Too Much Emphasis on Quality?	56	(1)
Summary of Learning Objectives	57	(1)
Key Terms	58	(1)
Self-Assessment	58	(2)
Interactive Learning	60	(1)
Questions	60	(1)
Exercises	61	(3)
Problems	64	(7)
Cases	71	(4)
Process Costing	75	(30)
Difference Between Job-Order and Process Costing Systems	76	(2)
Product and Cost Flows	78	(3)
Product Flows Through Departments	78	(1)
Cost Flows Through Accounts	78	(2)
Direct Material	80	(1)
Direct Labor	80	(1)
Manufacturing Overhead	80	(1)
Transferred-in Costs	80	(1)
Calculating Unit Costs	81	(2)
Equivalent Units	81	(1)
Cost Per Equivalent Unit	82	(1)
Calculating and Applying Cost Per Equivalent Unit: Mixing Department Example	83	(2)
Cost Transferred Out	84	(1)
Ending Work in Progress	84	(1)
Production Cost Report	85	(2)
Reconciliation of Units	85	(1)
Reconciliation of Costs	85	(2)
Basic Steps in Process Costing: A Summary	87	(1)
Answering Stacy's Questions	87	(1)
Dealing With Transferred-In Cost: Packaging Department Example	88
Link To Practice:
What Type of Costing System Is Used by Kimberley-Clark Corporation?	76	(3)
Production Departments for Two Manufacturing Operations	79	(11)
Summary of Learning Objectives	90	(1)
Key Terms	91	(1)
Self-Assessment	91	(1)
Interactive Learning	92	(1)
Questions	92	(1)
Exercises	93	(2)
Problems	95	(5)
Case	100	(5)
Cost-Volume-Profit Analysis	105	(48)
Common Cost Behavior Patterns	106	(2)
Variable Costs	106	(1)
Fixed Costs	107	(1)
Mixed Costs	107	(1)
Cost Estimation Methods	108	(8)
Account Analysis	109	(1)
Scattergraph Approach	110	(2)
High-Low Method	112	(2)
Regression Analysis	114	(1)
The Relevant Range	114	(2)
Cost-Volume-Profit Analysis	116	(3)
Break-Even Point	116	(1)
Margin of Safety	117	(1)
Contribution Margin	117	(1)
Contribution Margin Ratio	118	(1)
``What-If'' Analysis	119	(1)
Change in Fixed and Variable Costs	119	(1)
Change in Selling Price	119	(1)
Multiproduct Analysis	119	(4)
Contribution Margin Approach	119	(1)
Contribution Margin Ratio Approach	120	(3)
Assumptions in C-V-P Analysis	123	(1)
Code Connect Example Revisited	124	(1)
Operating Leverage	125	(1)
Constraints	126
Link To Practice:
Deciding to Use the Contribution Margin per Unit or the Contribution Margin Ratio Baskin-Robbins/Sears	121	(5)
Operating Leverage at Microsoft	126	(1)
Summary of Learning Objectives	127	(1)
Appendix Variable and Full Costing	128	(25)
Key Terms	133	(1)
Self-Assessment	133	(1)
Interactive Learning	134	(1)
Questions	135	(1)
Exercises	135	(6)
Problems	141	(7)
Cases	148	(5)
Cost Allocation and Activity-Based Costing	153	(48)
Purposes of Cost Allocation	154	(4)
To Provide Information for Decision Making	154	(2)
To Reduce Frivolous Use of Common Resources	156	(1)
To Encourage Evaluation of Services	156	(2)
To Provide ``Full Cost'' Information	158	(1)
Process of Cost Allocation	158	(3)
Determining the Costs Objective	158	(1)
Forming Cost Pools	159	(1)
Selecting an Allocation Base	160	(1)
Allocating Service Department Costs	161	(2)
Direct Method of Allocating Service Department Costs	161	(1)
Allocated Budget and Actual Service Department Costs	162	(1)
Problems with Cost Allocation	163	(5)
Responsibility Accounting and Controllable Costs	163	(1)
Arbitrary Allocations	164	(1)
Unitized Fixed Costs and Lump-Sum Allocations	165	(2)
The Problem of Too Few Cost Pools	167	(1)
Using Only Volume-Related Allocation Bases	168	(1)
Activity-Based Costing	168	(8)
The Problem of Using Only Measures of Production Volume to Allocate Overhead	169	(1)
The ABC Approach	169	(1)
Relating Costs Pools to Products Using Cost Drivers	170	(1)
The ABC Approach at Gardenrite Manufacturing: A Comprehensive Example	171	(1)
Gardenrite's Costs Under the Traditional Approach	171	(1)
Gardenrite's Costs Under the ABC Approach	172	(3)
Pros and Cons of ABC	175	(1)
Benefits	175	(1)
Limitations	175	(1)
Activity-Based Management (ABM)	176	(1)
Remember: You Get What You Measure!	177
Link To Practice:
Some Companies That Have Cost-Plus Contracts: Raytheon Systems/Lockheed Martin/Allied Signal	157	(17)
ABC and Service Firms: Valley View Hospital/First Tennessee National Corp.	174	(3)
ABM Uncovers Cost Savings in Snow Removal	177	(1)
Summary of Learning Objectives	178	(1)
Key Terms	179	(1)
Self-Assessment	179	(1)
Interactive Learning	180	(1)
Questions	181	(1)
Exercises	181	(5)
Problems	186	(6)
Cases	192	(9)
The Use of Cost Information and Management Decisions	201	(39)
Incremental Analysis	202	(9)
Additional Processing Decision	202	(2)
Make or Buy Decisions	204	(4)
Dropping a Product Line	208	(2)
Beware of the Cost Allocation Death Spiral!	210	(1)
Summary of Incremental, Avoidable, Sunk, and Opportunity Costs	211	(1)
Decisions Involving Joint Costs	212	(4)
Allocation of Joint Costs	214	(1)
Additional Processing Decisions and Joint Costs	215	(1)
Qualitative Considerations in Decision Analysis	216
Link To Practice:
Dropping Product Lines at Apple Computer	211
Outsourcing Decisions Lead to New Executive Position---the CRO	207	(6)
The Sunk Cost Effect	213	(4)
Summary of Learning Objectives	217	(1)
Appendix Pricing Decisions	217	(23)
Key Terms	221	(1)
Self-Assessment	221	(1)
Interactive Learning	222	(1)
Questions	222	(1)
Exercises	222	(5)
Problems	227	(8)
Cases	235	(5)
Capital Budgeting Decisions	240	(45)
Capital Budgeting Decisions	241	(2)
Evaluating Investment Opportunities: Time Value of Money Approaches	243	(7)
Basic Time Value of Money Calculations	244	(1)
The Net Present Value Method	245	(1)
Steps in the NPV Method	245	(1)
An Example of the NPV Approach	246	(2)
The Internal Rate of Return Method	248	(2)
Summary of Net Present Value and Internal Rate of Return	250	(1)
Estimating the Required Rate of Return	250	(2)
Additional Cash Flow Consideration	252	(1)
Cash Flows, Taxes, and the Depreciation Tax Shield	252	(3)
Adjusting Cash Flows for Inflation	254	(1)
Simplified Approaches to Capital Budgeting	255	(2)
Payback Period Method	255	(1)
Accounting Rate of Return	256	(1)
Conflict Between Performance Evaluation and Capital Budgeting	257	(1)
Wilson Air Revisited	258
Link To Practice:
BMW Invests in Greer, South Carolina Plant	242	(7)
Investing in E-Business	249	(2)
Estimates of the Cost of Capital	251	(2)
Depreciation Tax Shield at Amazon.Com	253	(7)
Summary of Learning Objectives	260	(1)
Appendix A The Internal Rate of Return with Unequal Cash Flows	261	(1)
Appendix B Criticisms of Time Value of Money Approaches to Evaluating Investments	262	(2)
Link To Practice:
``Soft'' Benefits Related to ERP Projects	264	(3)
Appendix C Present Value Tables	267	(18)
Key Terms	268	(1)
Self-Assessment	268	(1)
Interactive Learning	269	(1)
Questions	270	(1)
Exercises	270	(3)
Problems	273	(7)
Cases	280	(5)
Budgetary Planning and Control	285	(40)
Use of Budgets in Planning and Control	286	(2)
Planning	286	(1)
Control	286	(2)
Developing the Budget	288	(2)
Budget Time Period	289	(1)
Zero-Base Budgeting	289	(1)
The Master Budget	290	(10)
Sales Budget	290	(2)
Production Budget	292	(1)
Direct Material Purchases Budget	293	(1)
Direct Labor Budget	294	(1)
Manufacturing Overhead Budget	294	(1)
Selling and Administrative Expense Budget	295	(1)
Budgeted Income Statement	295	(2)
Capital Acquisitions Budget	297	(1)
Cash Receipts and Disbursement Budget	298	(2)
Budgeted Balance Sheet	300	(1)
Use of Computers in the Budget Planning Process	300	(2)
Budgetary Control	302	(3)
Budgets as a Standard for Evaluation	302	(1)
Static and Flexible Budgets	302	(3)
Investigating Budget Variances	305	(1)
Conflict in Planning and Control Uses of Budgets	305	(1)
Evaluation, Measurement, and Management Behavior	306	(1)
The Preston Joystick Case	306
Link To Practice:
Sometimes a Bottom-Up Approach Is Still Top Down!	289
CEOs Say Budgeting is the CFO's Major Responsibility	288	(3)
The Chicago White Sox Budget for Curve Balls	291	(10)
Software for Budgeting	301	(6)
Summary of Learning Objectives	307	(1)
Key Terms	307	(1)
Self-Assessment	307	(1)
Interactive Learning	308	(1)
Questions	309	(1)
Exercises	309	(4)
Problems	313	(7)
Cases	320	(5)
Standard Costs and Variance Analysis	325	(33)
Standard Costs	326	(2)
Standard Costs and Budgets	327	(1)
Development of Standard Costs	327	(1)
Ideal and Attainable Standards	328	(1)
General Approach to Variance Analysis	328	(1)
Material Variances	329	(2)
Material Price Variance	329	(1)
Material Quantity Variance	330	(1)
Direct Labor Variances	331	(1)
Labor Rate Variance	331	(1)
Labor Efficiency Variance	332	(1)
Overhead Variances	332	(3)
Controllable Overhead Variance	333	(1)
Overhead Volume Variance	333	(2)
Comprehensive Example: Darrington Ice Cream	335	(3)
Material Variances	336	(2)
Labor Variances	338	(1)
Overhead Variances	338	(1)
Investigation of Standard Cost Variances	338	(2)
Management by Exception	339	(1)
``Favorable'' Variances May Be Unfavorable	340	(1)
Responsibility Accounting and Variances	340
Link To Practice:
Starbucks Uses Standard Costs	326	(5)
You Get What You Measure!	331	(9)
Summary of Learning Objectives	340	(1)
Appendix Recording Standard Costs in Accounts	341	(17)
Key Terms	344	(1)
Self-Assessment	344	(1)
Interactive Learning	345	(1)
Questions	346	(1)
Exercises	346	(4)
Problems	350	(4)
Cases	354	(4)
Decentralization and Performance Evaluation	358	(41)
Why Firms Decentralize	360	(2)
Advantages of Decentralization	360	(2)
Disadvantages of Decentralization	362	(1)
Why Companies Evaluate the Performance of Subunits and Subunit Managers	362	(2)
Responsibility Accounting and Performance Evaluation	363	(1)
Cost Centers, Profit Centers and Investment Centers	364	(3)
Cost Centers	365	(1)
Profit Centers	365	(1)
Investment Centers	366	(1)
Evaluating Investment Centers with ROI	367	(3)
Measuring Income and Invested Capital When Calculating ROI	368	(1)
Problems with Using ROI	369	(1)
Problems of Over-Investment and Under-Investment	370	(1)
You Get What You Measure!	370	(1)
Evaluation in Terms of Profit Can Lead to Over-Investment	370	(1)
Evaluation in Terms of ROI Can Lead to Under-Investment	371	(1)
Other Measures Used in Evaluation	371	(1)
Residual Income (RI) and Economic Value Added (EVA)	371
Link To Practice:
Subunits at Nordstrom	366	(7)
Companies that Use EVA	373	(1)
Using a Balanced Scorecard to Evaluate Performance	373	(2)
Boeing Drops Market Share as a Performance Measure Following Financial Difficulties	375	(1)
Summary of Learning Objectives	376	(1)
Appendix Transfer Pricing	377	(22)
Key Terms	383	(1)
Self-Assessment	383	(2)
Interactive Learning	385	(1)
Questions	385	(1)
Exercises	386	(3)
Problems	389	(5)
Cases	394	(5)
Solutions to Self-Assessment Questions	399	(2)
Glossary	401	(6)
Photo Credits	407	(2)
Index	409