Managerial Accounting

by Weygandt, Jerry J.; Kimmel, Paul D.; Kieso, Donald E.

• ISBN13: 9781119390381
• ISBN10: 1119390389
• Edition: 8th
• Format: Loose-leaf
• Copyright: 2018-06-06
• Publisher: Wiley

Summary

Managerial Accounting provides students with a clear introduction to fundamental managerial accounting concepts. One of the major goals of this product is to orient students to the application of accounting principles and techniques in practice. By providing students with numerous opportunities for practice with a focus on real-world companies, students are better prepared as decision makers in the contemporary business world.

Table of Contents

1 Managerial Accounting 1-1

Just Add Water . . . and Paddle: Current Designs 1-1

Managerial Accounting Basics 1-3

Comparing Managerial and Financial Accounting 1-3

Management Functions 1-3

Organizational Structure 1-4

Managerial Cost Concepts 1-7

Manufacturing Costs 1-7

Product Versus Period Costs 1-8

Illustration of Cost Concepts 1-9

Manufacturing Costs in Financial Statements 1-10

Income Statement 1-11

Cost of Goods Manufactured 1-11

Cost of Goods Manufactured Schedule 1-12

Balance Sheet 1-13

Managerial Accounting Today 1-14

Service Industries 1-14

Focus on the Value Chain 1-15

Balanced Scorecard 1-17

Business Ethics 1-17

Corporate Social Responsibility 1-18

2 Job Order Costing 2-1

Profiting from the Silver Screen: Disney 2-1

Cost Accounting Systems 2-3

Process Cost System 2-3

Job Order Cost System 2-3

Job Order Cost Flow 2-4

Accumulating Manufacturing Costs 2-5

Assigning Manufacturing Costs 2-7

Raw Materials Costs 2-8

Factory Labor Costs 2-10

Predetermined Overhead Rates 2-12

Entries for Jobs Completed and Sold 2-15

Assigning Costs to Finished Goods 2-15

Assigning Costs to Cost of Goods Sold 2-16

Summary of Job Order Cost Flows 2-17

Job Order Costing for Service Companies 2-18

Advantages and Disadvantages of Job Order Costing 2-19

Applied Manufacturing Overhead 2-20

Under- or Overapplied Manufacturing Overhead 2-21

3 Process Costing 3-1

The Little Guy Who Could: Jones Soda 3-1

Overview of Process Cost Systems 3-3

Uses of Process Cost Systems 3-3

Process Costing for Service Companies 3-4

Similarities and Differences Between Job Order Cost and Process Cost Systems 3-4

Process Cost Flow and Assigning Costs 3-6

Process Cost Flow 3-6

Assigning Manufacturing Costs—Journal Entries 3-6

Equivalent Units 3-9

Weighted-Average Method 3-9

Refinements on the Weighted-Average Method 3-10

The Production Cost Report 3-12

Compute the Physical Unit Flow (Step 1) 3-13

Compute the Equivalent Units of

Production (Step 2) 3-13

Compute Unit Production Costs (Step 3) 3-14

Prepare a Cost Reconciliation Schedule (Step 4) 3-15

Preparing the Production Cost Report 3-15

Costing Systems—Final Comments 3-16

Appendix 3A: FIFO Method for Equivalent Units 3-19

Equivalent Units Under FIFO 3-19 Comprehensive Example 3-20

FIFO and Weighted-Average 3-24

4 Activity-Based Costing 4-1

Precor Is on Your Side: Precor 4-1

Traditional vs. Activity-Based Costing 4-3

Traditional Costing Systems 4-3

Illustration of a Traditional Costing System 4-3

The Need for a New Approach 4-4

Activity-Based Costing 4-4

ABC and Manufacturers 4-7

Identify and Classify Activities and Allocate Overhead to Cost Pools (Step 1) 4-7

Identify Cost Drivers (Step 2) 4-8

Compute Activity-Based Overhead Rates (Step 3) 4-8

Assign Overhead Costs to Products (Step 4) 4-9

Comparing Unit Costs 4-10

ABC Benefits and Limitations 4-12

The Advantage of Multiple Cost Pools 4-12

The Advantage of Enhanced Cost Control 4-13

The Advantage of Better Management Decisions 4-15

Some Limitations and Knowing When to Use ABC 4-16

ABC and Service Industries 4-17

Traditional Costing Example 4-18

Activity-Based Costing Example 4-18

Appendix 4A: Just-in-Time Processing 4-22

Objective of JIT Processing 4-23

Elements of JIT Processing 4-23

Benefits of JIT Processing 4-23

5 Cost-Volume-Profit 5-1

Don’t Worry—Just Get Big: Amazon.com 5-1

Cost Behavior Analysis 5-2

Variable Costs 5-3

Fixed Costs 5-3

Relevant Range 5-5

Mixed Costs 5-6

Mixed Costs Analysis 5-7

High-Low Method 5-7

Importance of Identifying Variable and Fixed Costs 5-9

Cost-Volume-Profit Analysis 5-10

Basic Components 5-10

CVP Income Statement 5-11

Break-Even Analysis 5-14

Mathematical Equation 5-15

Contribution Margin Technique 5-15

Graphic Presentation 5-16

Target Net Income and Margin of Safety 5-18

Target Net Income 5-18

Margin of Safety 5-20

Appendix 5A: Regression Analysis 5-22

6 Cost-Volume-Profit Analysis:Additional Issues 6-1

Not Even a Flood Could Stop It: Whole Foods Market 6-1

Basic CVP Concepts 6-3

Basic Concepts 6-3

Basic Computations 6-3

CVP and Changes in the Business

Environment 6-5

Sales Mix and Break-Even Sales 6-8

Break-Even Sales in Units 6-8

Break-Even Sales in Dollars 6-9

Sales Mix with Limited Resources 6-12

Operating Leverage and Profitability 6-14

Effect on Contribution Margin Ratio 6-15

Effect on Break-Even Point 6-15

Effect on Margin of Safety Ratio 6-16

Operating Leverage 6-16

Appendix 6A: Absorption Costing vs. Variable Costing 6-19

Example Comparing Absorption Costing with Variable Costing 6-19

Net Income Effects 6-21

Decision-Making Concerns 6-25

Potential Advantages of Variable Costing 6-27

7 Incremental Analysis 7-1

Keeping It Clean: Method Products 7-1

Decision-Making and Incremental Analysis 7-3

Incremental Analysis Approach 7-3

How Incremental Analysis Works 7-4

Qualitative Factors 7-5

Relationship of Incremental Analysis and Activity-Based Costing 7-5

Types of Incremental Analysis 7-6

Special Orders 7-6

Make or Buy 7-8

Opportunity Cost 7-9

Sell or Process Further 7-10

Single-Product Case 7-11

Multiple-Product Case 7-11

Repair, Retain, or Replace Equipment 7-14

Eliminate Unprofitable Segment or Product 7-15

8 Pricing 8-1

They’ve Got Your Size—and Color: Zappos.com 8-1

Target Costing 8-3

Establishing a Target Cost 8-4

Cost-Plus and Variable-Cost Pricing 8-5

Cost-Plus Pricing 8-5

Limitations of Cost-Plus Pricing 8-7

Variable-Cost Pricing 8-8

Time-and-Material Pricing 8-10

Transfer Prices 8-13

Negotiated Transfer Prices 8-14

Cost-Based Transfer Prices 8-17

Market-Based Transfer Prices 8-18

Effect of Outsourcing on Transfer Pricing 8-18

Transfers Between Divisions in Diff erent Countries 8-19

Appendix 8A: Absorption-Cost and Variable-Cost Pricing 8-21

Absorption-Cost Pricing 8-21

Variable-Cost Pricing 8-23

Appendix 8B: Transfers Between Divisions in Different Countries 8-24

9 Budgetary Planning 9-1

What’s in Your Cupcake?: BabyCakes NYC 9-1

Effective Budgeting and the Master Budget 9-3

Budgeting and Accounting 9-3

The Benefits of Budgeting 9-3

Essentials of Eff ective Budgeting 9-3

The Master Budget 9-6

Sales, Production, and Direct Materials Budgets 9-8

Sales Budget 9-8

Production Budget 9-9

Direct Materials Budget 9-10

Direct Labor, Manufacturing Overhead, and S&A Expense Budgets 9-13

Direct Labor Budget 9-13

Manufacturing Overhead Budget 9-14

Selling and Administrative Expense Budget 9-15

Budgeted Income Statement 9-15

Cash Budget and Budgeted Balance Sheet 9-17

Cash Budget 9-17

Budgeted Balance Sheet 9-20

Budgeting in Nonmanufacturing Companies 9-22

Merchandisers 9-22

Service Companies 9-23

Not-for-Profit Organizations 9-24

10 Budgetary Control and Responsibility Accounting 10-1

Pumpkin Madeleines and a Movie: Tribeca Grand Hotel 10-1

Budgetary Control and Static Budget Reports 10-3

Budgetary Control 10-3

Static Budget Reports 10-4

Flexible Budget Reports 10-6

Why Flexible Budgets? 10-7

Developing the Flexible Budget 10-9

Flexible Budget—A Case Study 10-9

Flexible Budget Reports 10-11

Responsibility Accounting and Responsibility Centers 10-13

Controllable versus Noncontrollable Revenues and Costs 10-15

Principles of Performance Evaluation 10-15

Responsibility Reporting System 10-17

Types of Responsibility Centers 10-18

Investment Centers 10-22

Return on Investment (ROI) 10-23

Responsibility Report 10-23

Judgmental Factors in ROI 10-24

Improving ROI 10-24

Appendix 10A: ROI vs. Residual Income 10-28

Residual Income Compared to ROI 10-28

Residual Income Weakness 10-29

11 Standard Costs and Balanced Scorecard 11-1

80,000 Different Caffeinated Combinations: Starbucks 11-2

Overview of Standard Costs 11-3

Distinguishing Between Standards and Budgets 11-4

Setting Standard Costs 11-4

Direct Materials Variances 11-7

Analyzing and Reporting Variances 11-7

Calculating Direct Materials Variances 11-9

Direct Labor and Manufacturing Overhead Variances 11-11

Direct Labor Variances 11-11

Manufacturing Overhead Variances 11-14

Variance Reports and Balanced Scorecards 11-16

Reporting Variances 11-16

Income Statement Presentation of Variances 11-16

Balanced Scorecard 11-17

Appendix 11A: Standard Cost Accounting System 11-21

Journal Entries 11-21

Ledger Accounts 11-23

Appendix 11B: Overhead Controllable and Volume Variances 11-24

Overhead Controllable Variance 11-24

Overhead Volume Variance 11-25

12 Planning for Capital Investments 12-1

Floating Hotels: Holland America Line 12-2

Capital Budgeting and Cash Payback 12-3

Cash Flow Information 12-3

Illustrative Data 12-4

Cash Payback 12-4

Net Present Value Method 12-6

Equal Annual Cash Flows 12-7

Unequal Annual Cash Flows 12-8

Choosing a Discount Rate 12-9

Simplifying Assumptions 12-9

Comprehensive Example 12-10

Capital Budgeting Challenges and Refinements 12-11

Intangible Benefits 12-11

Profitability Index for Mutually Exclusive Projects 12-13

Risk Analysis 12-14

Post-Audit of Investment Projects 12-15

Internal Rate of Return 12-16

Comparing Discounted Cash Flow Methods 12-17

Annual Rate of Return 12-18

13 Statement of Cash Flows 13-1

Got Cash?: Microsoft 13-1

Usefulness and Format of the Statement of Cash Flows 13-3

Usefulness of the Statement of Cash Flows 13-3

Classification of Cash Flows 13-3

Significant Noncash Activities 13-4

Format of the Statement of Cash Flows 13-5

Preparing the Statement of Cash Flows—Indirect Method 13-6

Indirect and Direct Methods 13-7

Indirect Method—Computer Services Company 13-7

Step 1: Operating Activities 13-9

Summary of Conversion to Net Cash Provided by Operating Activities—Indirect Method 13-12

Step 2: Investing and Financing Activities 13-13

Step 3: Net Change in Cash 13-14

Analyzing the Statement of Cash Flows 13-17

Free Cash Flow 13-17

Appendix 13A: Statement of Cash Flows—Direct Method 13-19

Step 1: Operating Activities 13-19

Step 2: Investing and Financing Activities 13-25

Step 3: Net Change in Cash 13-26

Appendix 13B: Worksheet for the Indirect Method 13-26

Preparing the Worksheet 13-27

Appendix 13C: Statement of Cash Flows—T-Account Approach 13-31

14 Financial Analysis: The Big Picture 14-1

It Pays to Be Patient: Warren Buffett 14-1

Sustainable Income and Quality of Earnings 14-3

Sustainable Income 14-3

Quality of Earnings 14-7

Horizontal Analysis and Vertical Analysis 14-9

Horizontal Analysis 14-10

Vertical Analysis 14-12

Ratio Analysis 14-14

Liquidity Ratios 14-15

Solvency Ratios 14-16

Profitability Ratios 14-16

Comprehensive Example of Ratio Analysis 14-17

Appendix A Time Value of Money A-1

Interest and Future Values A-1

Nature of Interest A-1

Future Value of a Single Amount A-3

Future Value of an Annuity A-5

Present Value A-7

Present Value Variables A-7

Present Value of a Single Amount A-7

Present Value of an Annuity A-9

Time Periods and Discounting A-11

Present Value of a Long-Term Note or Bond A-11

Capital Budgeting Situations A-14

Using Financial Calculators A-15

Present Value of a Single Sum A-16

Present Value of an Annuity A-17

Future Value of a Single Sum A-17

Future Value of an Annuity A-17

Internal Rate of Return A 18

Useful Applications of the Financial Calculator A-18

Cases for Managerial Decision-Making

(The full text of these cases is available in WileyPLUS.)

Company Index I-1

Subject Index I-3