Managerial Accounting: Tools for Business Decision Making, 2nd Edition

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  • Edition: 2nd
  • Format: Hardcover
  • Copyright: 2001-10-01
  • Publisher: Wiley
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Presents important analytical tools to decision making. * Strong real world application. * Emphasis on critical thinking and managerial decision-making.

Table of Contents

Praface v
Managerial Accounting
Compares and contrasts managerial accounting with financial accounting
Identifies three broad functions of management
Defines three classes of manufacturing costs
Distinguishes between product costs and period costs
Presents costs of goods manufactured section of income statement
Presents overview of trends in managerial accounting including shift toward service industries, value chain management, enterprise resource planning, just-in-time inventory, and activity-based costing
Job Order Cost Accounting
Provides overview of cost accounting systems
Illustrates flow of costs in a job order cost system
Presents use of job cost sheet
Demonstrates use of predetermined overhead rate
Illustrates basic entries for job order cost system
Provides simple presentation of overapplied and underapplied overhead
Process Cost Accounting
Explains the difference between job order and process costing systems
Illustrates the flow of costs and end-of-period accounting procedures for process costing
Demonstrates computation of physical units of production, equivalent units of production, and unit costs
Shows how to assign costs to units of output and prepare a production cost report
Activity-Based Costing
Explains the need for activity-based costing (ABC)
Contrasts ABC to traditional costing systems
Identifies numerous activities, activity cost pools, and cost drivers
Discusses implications of value-added and non-value added activities
Illustrates use of ABC in service industries
Reviews the benefits and limitations of ABC
Illustrates use of just-in-time inventory systems
Appendix discusses the implications of activity hierarchies levels
Cost-Volume-Profit Relationships
Distinguishes between variable and fixed costs, and explains relevant range and mixed costs
Identifies components and assumptions of CVP analysis
Discusses concept of contribution margin
Illustrates calculation of break-even point
Discusses margin of safety and target net income
Illustrates CVP income statement
Appendix presents variable and absorption costing
Budgetary Planning
Discusses benefits of budgeting
Illustrates the process of assembling information for a master budget
Prepares budgeted income statement, balance sheet, and cash budget
Discusses use of budgets in merchandising, service, and not-for-profit enterprises
Budgetary Control and Responsibility Accounting
Explains how budgets are used to control costs and operations
Contrasts static budgets and flexible budgets
Uses a case study to illustrate usefulness of flexible budgets
Illustrates responsibility reporting systems
Defines cost centers, profit centers, and investment centers
Illustrates the computation and use of return on investment and (in a chapter appendix) residual income
Performance Evaluation Through Standard Costs
Differentiates between a standard and a budget
Discusses advantages of standard costs and methods of computing
Illustrates computation of direct materials variance, direct labor variance, and manufacturing overhead variance
Demonstrates analysis through comparison of actual with standard
Appendix illustrates the journal entries for a standard cost system
Incremental Analysis
Presents the concept of incremental analysis through a simple example
Explains the concepts of relevant cost, opportunity cost, and sunk cost
Applies incremental analysis in the following decision settings:
Accept an order at a special price
Make or buy
Sell or process further, including discussion of joint costs
Retain or replace equipment
Eliminate an unprofitable segment
Reviews sales mix issues, including how to allocate limited resources across multiple products and how to determine break-even points with more than one product
Capital Budgeting
Discusses nature of capital budgeting decisions
Describes and illustrates four methods of evaluating capital expenditures:
Cash payback technique
Net present value method
Internal rate of return method
Annual rate of return technique
Discusses the profitability index, post audits, and the implications of intangible benefits when making capital budgeting decisions
Pricing Decisions
Demonstrates how to compute target cost when a product's price is determined by the market
Illustrates how to compute target selling price using cost-plus pricing
Demonstrates how to use time and materials pricing when services are provided
Discusses the objective of transfer pricing
Illustrates how to determine a transfer price using the cost-based, market-based, and negotiated approaches
Explains the issues involved when goods are transferred between countries with different tax rates
The Statement of Cash Flows
Discusses the purpose and usefulness of the statement of cash flows
Discusses the implications of the product life-cycle for analysis of the statement of cash flows
Illustrates preparation of the statement of cash flows using a two-year progression of transactions. Year 1 is basic transactions, and year 2 involves more advanced transactions. The presentation is designed to allow the instructor to focus exclusively on either the indirect approach or the direct approach, or to cover both
Presents ratio analysis of the statement of cash flows using free cash flow, capital expenditure ratio, current cash debt coverage, cash debt coverage, and cash return on sales
Financial Analysis: The Big Picture
Provides a comprehensive discussion of analytical tools and their interrelationships
Discusses the concept of earning power and the presentation of irregular items: discontinued operations, extraordinary items, and cumulative effect of change in accounting principle
Includes a basic discussion of comprehensive income
Illustrates horizontal and vertical analysis
Provides thorough analysis of the actual financial statements of Kellogg Company using ratio analysis
The First Edition of Managerial Accounting was very well received. In the spirit of continuous improvement, we have made many changes in this Second Edition. The changes can be categorized into three types: Cases for Management Decision Making, Interactive CD-ROM and Web site, and changes to the text chapters
Cases for Management Decision Making
Consistent with our objective of developing decision-making skills, we have added a series of cases to this edition of the text. These cases provide opportunities to use the decision tools presented in the chapters in a realistic business situation. The cases can be used as a comprehensive capstone activity at the end of the course, or as a recurring activity during the course. These activities are intended to be richer and more challenging than a traditional problem but are still targeted at the introductory-level student
Interactive CD-ROM and Web Site
Technology offers many opportunities to enrich the learning environment. With this edition of the text we have expanded the materials provided on our Web site, as well as developed an interactive CD-ROM. These materials include the following:
Learning Techniques resources are designed to improve student study skills
Learning Styles Quiz
Interactive Study Skills Chart
Course Materials reinforce materials covered in the text or provide resources to develop communication skills
Interactive Self-Test
Key Term Matching Activity
Accounting Cycle Tutorial
Interactive Problems and Demonstration Problems
Writing Handbook
Surviving the Group Project
Career Paths provides resources about careers in accounting
Why Accounting Is Important
Careers in Accounting
Professional Profiles
Managerial Accounting
New Feature Story on Compaq Computer
Revised and streamlined presentation on management functions
New Business Insight on auto manufacturing productivity
New Business Insight on managing the delivery of bananas
Revised coverage of service industry trends, significantly revised illustrations
New section on value chain management
Two new e-Business Insights on computerized business infrastructures and computer-integrated manufacturing
Revised exercises and problems
Job Order Cost Accounting
Clarified rationale for predetermined overhead rates
New e-Business Insight on GM's Web-based order system
New Business Insight on the use of microcomputers by small manufacturers
New Business Insight on overhead in service companies
Revised exercises and problems
Process Cost Accounting
Added a six-page appendix discussing and illustrating the FIFO method of computing equivalent units (as contrasted to the weighted average method covered in the chapter)
Activity-Based Costing
Moved ``Activity-Based Costing in Service Industries'' section from appendix into body of the chapter
Moved section on hierarchy of activity levels from the body of the chapter into an appendix
Revised the infographic on activities and related cost drivers to tie it more conceptually to the illustrations, and expanded the text explanation of the related illustrations
New Business Insight on General Mills's efforts to eliminate nonvalue-added activities
Revised exercises and problems
Cost-Volume-Profit Relationships
Added new section on CVP income statement, including illustrations of the statement with and without net income
Revised the section on use of the mathematical equation in breakeven analysis
Simplified the presentation of detailed CVP income statement
Revised the Decision Toolkit to include the contribution margin ratio
New Business Insight on efficiency in woodworking
New e-Business Insight on flightserve.com
New e-Business Insight on Internet business ``conversion rates''
New Business Insight on the use of computer graphics in ``what if analysis''
Revised exercises and problems
Budgetary Planning
Simplified long-range planning discussion
New e-Business Insight on improving planning and budgeting
Revised exercises and problems
Budgetary Control and Responsibility Accounting
Added new chapter appendix on ``Residual Income-Another Performance Measurement'' and related home-work material
New e-Business insight on enterprise application systems (EAS)
Revised exercises and problems
Performance Evaluation Through Standard Costs
Added a new Before You Go On (Review It/Do It) following direct materials variances section
Moved the Standard Cost Accounting System section with journal entries into a chapter appendix
New e-Business Insight on computerized standard cost systems
Revised exercises and problems
Incremental Analysis
Added joint-product presentation with illustrations in sell-or-process-further section, plus related homework materials
Revised exercises and problems
Capital Budgeting
Added several new marginal Helpful Hints
New e-Business Insight on General Electric's e-business related capital expenditures
Revised exercises and problems
Pricing Decisions
Entirely new chapter consisting of two major pricing-decision parts: I. External sales (customer pricing), and II. Internal sales (transfer pricing)
A chapter appendix discusses the absorption cost and the contribution approaches
All new homework material
A Comprehensive Problem covering Chapters 1-11 is provided on the CD-Rom that accompanies the text, as well as on the book's Web site
The Statement of Cash Flows (formerly Chapter 11)
New Feature Story-``Cash is Cash, and Everything Else is Accounting''
New section on the corporate life cycle
New section on the meaning of the term ``cash flows''
New Business Insight on the corporate life cycle of specific companies
New infographic drawings
New Business Insight comparing ``net income'' to ``net cash from operations''
Revised exercises and problems
Financial Analysis: The Big Picture (formerly Chapter 12)
New Feature Story on the day-trading New York cabby
Updated Kellogg Company and Quaker Oats financial results used in analysis
Expanded the explanation of comparative analysis
New e-Business Insight on internal security analysis
Revised exercises and problems
Appendix A: New Specimen Financial Statements: Tootsie Roll Industries, Inc
Appendix B: New Comparative Specimen Financial Statements: Hershey Foods Corporation
Appendix C: Time Value of Money
Appendix D: Ethical Standards
Cases for Management Decision Making
New selection of five cases to be used in conjunction with Chapters 2, 4, 5, 6, 9, 10, and 11
In this book we have used many proven pedagogical tools to help students learn accounting concepts and apply them to decision making in the business world. This pedagogical framework emphasizes the processes students undergo as they learn

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