Table of contents for Managerial accounting : creating value in a dynamic business environment / Ronald W. Hilton.

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Part I
Fundamentals and Cost Accumulation
1 The Changing Role of Managerial
Accounting in a Dynamic Business
Environment 2
Managerial Accounting: A Business Partnership with
Management 4
Managing Resources, Activities, and People 4
Decision Making 5
Planning 5
Directing Operational Activities 5
Controlling 6
How Managerial Accounting Adds Value to the
Organization 6
Objectives of Managerial Accounting Activity 6
The Balanced Scorecard 8
M.A.P. The Balanced Scorecard 9
Managerial versus Financial Accounting 10
Managerial Accounting in Different Types of
Organizations 11
Where Are Managerial Accountants Located in an
Organization? 12
Organization Chart 12
Line and Staff Positions 12
Cross-Functional Deployment 13
Physical Location 14
Major Themes in Managerial Accounting 16
Information and Incentives 16
Behavioral Issues 17
Costs and Benefits 17
Evolution and Adaptation in Managerial
Accounting 17
e-Business 17
Service versus Manufacturing Firms 18
Emergence of New Industries 18
Global Competition 18
Focus on the Customer 19
Cross-Functional Teams 19
Computer-Integrated Manufacturing 20
Product Life Cycles and Diversity 20
Time-Based Competition 20
M.A.P. The Internet as a Lifeline 21
Information and Communication Technology 21
Just-in-Time Inventory Management 22
Total Quality Management 23
Continuous Improvement 23
Cost Management Systems 23
Strategic Cost Management and the Value Chain 24
Theory of Constraints 25
The Ethical Climate of Business and the Role of the
Accountant 25
Managerial Accounting as a Career 26
Professional Organizations 27
Professional Certification 27
Professional Ethics 27
Focus on Ethics: Standards of Ethical Conduct for
Practitioners of Managerial Accounting and Financial
Management 27
Chapter Summary 28
Key Terms 29
Review Questions 29
Exercises 30
Problems 30
Cases 32
Current Issues in Managerial Accounting 33
2 Basic Cost Management Concepts and
Accounting for Mass Customization
Operations 34
What Do We Mean by a Cost? 36
Product Costs, Period Costs, and Expenses 36
Costs on Financial Statements 38
Income Statement 38
Balance Sheet 40
Manufacturing Operations and Manufacturing Costs 41
M.A.P. Mass Customization 42
Mass-Customization Manufacturing 42
Manufacturing Costs 43
Manufacturing Cost Flows 45
Production Costs in Service Industry Firms and
Nonprofit Organizations 47
Basic Cost Management Concepts: Different Costs for
Different Purposes 48
The Cost Driver Team 48
Variable and Fixed Costs 49
The Cost Management and Control Team 50
M.A.P. Airline Industry: Cost Structure, Cost Drivers,
and a Shifting Business Model 52
The Outsourcing Action Team 54
Costs and Benefits of Information 57
Focus on Ethics:Was WorldCom?s Controller Just
Following Orders? 57
Chapter Summary 58
Review Problems on Cost Classifications 59
Key Terms 60
Review Questions 60
Exercises 61
Problems 64
Cases 73
Current Issues in Managerial Accounting 75
3 Product Costing and Cost Accumulation in
a Batch Production Environment 76
Product and Service Costing 78
Product Costing in Nonmanufacturing Firms 78
Flow of Costs in Manufacturing Firms 79
Types of Product-Costing Systems 79
Job-Order Costing Systems 80
Process-Costing Systems 81
Summary of Alternative Product-Costing
Systems 81
Accumulating Costs in a Job-Order Costing
System 81
Job-Cost Record 82
Direct-Material Costs 82
Direct-Labor Costs 84
Manufacturing-Overhead Costs 84
M.A.P. Supply Chain Management 85
Summary of Event Sequence in Job-Order
Costing 86
Illustration of Job-Order Costing 88
Purchase of Material 88
Use of Direct Material 88
Use of Indirect Material 88
Use of Direct Labor 89
Use of Indirect Labor 89
Incurrence of Manufacturing-Overhead
Costs 90
Application of Manufacturing Overhead 90
Summary of Overhead Accounting 91
Selling and Administrative Costs 92
Completion of a Production Job 92
Sale of Goods 92
Underapplied and Overapplied Overhead 93
Schedule of Cost of Goods Manufactured 94
Schedule of Cost of Goods Sold 95
Posting Journal Entries to the Ledger 95
Further Aspects of Overhead Application 97
Accuracy versus Timeliness of Information:
A Cost-Benefit Issue 97
Choosing the Cost Driver for Overhead
Application 99
Limitation of Direct Labor as a Cost Driver 99
Departmental Overhead Rates 99
M.A.P. Are Layoffs a Good Way to Cut Costs during
an Economic Downturn? 100
Two-Stage Cost Allocation 100
Project Costing: Job-Order Costing in Nonmanufacturing
Organizations 102
Changing Technology in Manufacturing
Operations 103
Electronic Data Interchange 103
M.A.P. Online Purchasing 103
Use of Bar Codes 104
Focus on Ethics: Did Boeing Exploit Accounting Rules to
Conceal Cost Overruns and Production Snafus? 104
Chapter Summary 105
Key Terms 106
Appendix to Chapter 3: Activity-Based Costing:
An Introduction 106
Review Questions 109
Exercises 110
Problems 115
Cases 127
Current Issues in Managerial Accounting 129
4 Process Costing and Hybrid Product-
Costing Systems 130
Comparison of Job-Order Costing and Process
Costing 132
Flow of Costs 132
Differences between Job-Order and Process
Costing 134
Equivalent Units: A Key Concept 134
Equivalent Units 135
Illustration of Process Costing 136
Basic Data for Illustration 136
M.A.P. Process-Costing Steps in Paper
Manufacturing 138
Weighted-Average Method of Process Costing 138
Other Issues in Process Costing 142
Actual versus Normal Costing 142
Other Cost Drivers for Overhead Application 143
Subsequent Production Departments 143
Hybrid Product-Costing Systems 143
Operation Costing for Batch Manufacturing
Processes 144
Chapter Summary 147
Key Terms 148
Appendix to Chapter 4: Process Costing in Sequential
Production Departments 148
Review Questions 151
Exercises 152
Problems 155
Cases 163
Current Issues in Managerial Accounting 165
Part II
Cost Management Systems,
Activity-Based Costing, and Activity-Based
5 Activity-Based Costing and Cost
Management Systems 166
Aerotech Corporation: A Tale of Two Cities 168
Aerotech?s Phoenix Plant: Traditional Production
Process 168
Production Process 168
Plant Layout 169
Traditional, Volume-Based Product-Costing
System 169
Trouble in Phoenix 171
Activity-Based Costing System 172
Interpreting the ABC Product Costs 177
The Punch Line 179
Why Traditional, Volume-Based Systems
Distort Product Costs 179
M.A.P. Cost Distortion at Rockwell
International 182
Activity-Based Costing: Some Key Issues 182
Cost Drivers 182
Homogeneous Activity Cost Pools 184
M.A.P. Activity Cost Drivers in the Health Care
Industry 184
Collecting ABC Data 185
Activity Dictionary and Bill of Activities 186
Direct versus Indirect Costs 186
When Is a New Product-Costing System Needed? 187
Cost Management Systems 188
Non-Value-Added Costs 189
Identifying Non-Value-Added Costs in the
Phoenix Plant 190
Activity-Based Costing in the Service Industry 191
M.A.P. Activity-Based Costing in the Service
Industry 192
Focus on Ethics: Ethical Issues Surrounding
Activity-Based Costing 193
Chapter Summary 194
Review Problems on Cost Drivers and
Product-Cost Distortion 194
Key Terms 195
Review Questions 195
Exercises 196
Problems 200
Cases 212
6 Activity-Based Management and
Today?s Advanced Manufacturing
Environment 216
Aerotech?s Bakersfield Plant: Advanced Manufacturing
Technology 218
Just-in-Time Inventory and Production
Management 218
Flexible Manufacturing System 220
Plant Layout at Aerotech?s Bakersfield Facility 221
Cost Management System in Bakersfield 222
Two-Dimensional ABC and Activity-Based
Management 224
Using ABM to Eliminate Non-Value-Added
Activities and Costs 224
Achieving Cost Reduction 226
Customer-Profitability Analysis 226
Illustration of Customer-Profitability Analysis 227
M.A.P. DHL 230
M.A.P. Bank One Corp. and FedEx 231
M.A.P. Dow Chemical Company 232
Target Costing, Kaizen Costing, and Continuous
Improvement 232
Target Costing 233
Kaizen Costing 234
Toyota: Target Costing and Kaizen Costing in
Action 234
Benchmarking 236
Reengineering 236
Theory of Constraints 236
Focus on Ethics: Ethical Issues Surrounding
ABM and Cost-Reduction Initiatives 237
Chapter Summary 238
Key Terms 238
Review Questions 239
Exercises 239
Problems 243
Cases 251
Current Issues in Managerial Accounting 252
Part III
Planning, Control, and Cost Management
7 Activity Analysis, Cost Behavior, and Cost
Estimation 254
Cost Behavior Patterns 256
Variable Costs 257
Step-Variable Costs 257
Fixed Costs 258
Step-Fixed Costs 259
Semivariable Cost 260
Curvilinear Cost 262
Using Cost Behavior Patterns to Predict Costs 263
M.A.P. Is Direct Labor a Variable or a
Fixed Cost? 264
Engineered,Committed,and Discretionary Costs 265
Shifting Cost Structure in the Contemporary
Manufacturing Environment 266
Operations-Based versus Volume-Based Cost
Drivers 266
Cost Behavior in Other Industries 267
Cost Estimation 267
Account-Classification Method 268
Visual-Fit Method 268
High-Low Method 270
Least-Squares Regression Method 271
Multiple Regression 273
Data Collection Problems 274
Engineering Method of Cost Estimation 275
Effect of Learning on Cost Behavior 275
Costs and Benefits of Information 276
Focus on Ethics: Cisco Systems,Wal-Mart, Taco Bell,
Starbucks, U-Haul, General Dynamics, and Farmer?s
Insurance: Is Direct Labor a Variable Cost? 277
Chapter Summary 277
Review Problems on Cost Behavior and Estimation 277
Key Terms 279
Appendix to Chapter 7: Finding the Least-Squares
Regression Estimates 279
Review Questions 281
Exercises 282
Problems 286
Cases 294
Current Issues in Managerial Accounting 297
8 Cost-Volume-Profit Analysis 298
Illustration of Cost-Volume-Profit Analysis 300
Projected Expenses and Revenue 300
The Break-Even Point 301
Contribution-Margin Approach 302
Equation Approach 303
Graphing Cost-Volume-Profit Relationships 304
Interpreting the CVP Graph 304
Alternative Format for the CVP Graph 306
Profit-Volume Graph 306
Target Net Profit 307
Contribution-Margin Approach 307
Equation Approach 308
Graphical Approach 308
Applying CVP Analysis 308
Safety Margin 308
Changes in Fixed Expenses 309
Changes in the Unit Contribution Margin 309
Predicting Profit Given Expected Volume 311
Interdependent Changes in Key Variables 312
CVP Information in Published Annual Reports 313
M.A.P. Airlines Keep a Close Eye on Break-Even
Load Factors 313
CVP Analysis with Multiple Products 313
Assumptions Underlying CVP Analysis 316
Role of Computerized Planning Models and Electronic
Spreadsheets 316
CVP Relationships and the Income Statement 316
Traditional Income Statement 317
Contribution Income Statement 317
Comparison of Traditional and Contribution Income
Statements 318
Cost Structure and Operating Leverage 318
Operating Leverage 319
M.A.P. Operating Leverage Helps These Web
Companies Become Profitable 321
Labor-Intensive Production Processes versus Advanced
Manufacturing Systems 321
Cost Structure and Operating Leverage:
A Cost-Benefit Issue 321
M.A.P. Cost Structure and Operating
Leverage 322
CVP Analysis, Activity-Based Costing, and Advanced
Manufacturing Systems 322
A Move toward JIT and Flexible Manufacturing 324
ABC Provides a Richer Understanding of Cost Behavior
and CVP Relationships 325
Chapter Summary 326
Review Problems on Cost-Volume-Profit Analysis 326
Key Terms 327
Appendix to Chapter 8: Effect of Income Taxes 327
Review Questions 330
Exercises 330
Problems 333
Cases 334
Current Issues in Managerial Accounting 345
9 Profit Planning, Activity-Based Budgeting,
and e-Budgeting 346
Purposes of Budgeting Systems 348
Types of Budgets 348
The Master Budget: A Planning Tool 349
Sales of Services or Goods 349
Sales Forecasting 349
Operational Budgets 351
Budgeted Financial Statements 352
Nonprofit Organizations 352
Activity-Based Budgeting 352
M.A.P. Activity-Based Budgeting (ABB) at American
Express and AT&T Paradyne 353
Using Activity-Based Budgeting to Prepare the
Master Budget 354
Sales Budget 355
Production Budget 355
Direct-Material Budget 356
Direct-Labor Budget 358
Manufacturing Overhead Budget 359
Activity-Based Budgeting and the Cost
Hierarchy 359
Benefits of ABB 359
Selling, General, and Administrative (SG&A)
Expense Budget 360
Cash Receipts Budget 361
Cash Disbursements Budget 362
Cash Budget: Combining Receipts and
Disbursements 364
Budgeted Schedule of Cost of Goods
Manufactured and Sold 365
Budgeted Income Statement 366
Budgeted Statement of Cash Flows 367
Budgeted Balance Sheet 368
Assumptions and Predictions Underlying the Master
Budget 369
Financial Planning Models 370
Budget Administration 370
M.A.P. Budget Administration at Cornell
University 371
e-Budgeting 371
Firewalls and Information Security 371
M.A.P. Lockheed Martin 372
Zero-Base Budgeting 372
International Aspects of Budgeting 373
Budgeting Product Life-Cycle Costs 373
Behavioral Impact of Budgets 374
Budgetary Slack: Padding the Budget 375
Participative Budgeting 376
Focus on Ethics: Is Padding the Budget Unethical? 376
Chapter Summary 377
Key Terms 377
Appendix to Chapter 9: Inventory Management 378
Review Questions 381
Exercises 382
Problems 386
Cases 399
Current Issues in Managerial Accounting 404
10 Standard Costing, Operational
Performance Measures, and the
Balanced Scorecard 406
Managing Costs 408
Management by Exception 408
Setting Standards 409
Methods for Setting Standards 409
Participation in Setting Standards 410
Perfection versus Practical Standards:
A Behavioral Issue 410
Use of Standards by Nonmanufacturing
Organizations 410
Cost Variance Analysis 410
Direct-Material Standards 411
Direct-Labor Standards 412
Standard Costs Given Actual Output 412
Analysis of Cost Variances 412
Direct-Material Variances 413
Direct-Labor Variances 415
M.A.P. Parker Hannifin Corporation?s Brass
Products Division 416
Multiple Types of Direct Material or
Direct Labor 417
Allowing for Spoilage or Defects 417
Significance of Cost Variances 417
A Statistical Approach 419
Behavioral Impact of Standard Costing 420
Controllability of Variances 421
Interaction among Variances 422
Standard Costs and Product Costing 423
Advantages of Standard Costing 423
Changing Role of Standard-Costing Systems in Today?s
Manufacturing Environment 424
Criticisms of Standard Costing in Today?s Manufacturing
Environment 424
M.A.P. Cost of Ownership 425
Adapting Standard-Costing Systems 426
Operational Performance Measures in Today?s
Manufacturing Environment 427
Gain-Sharing Plans 430
The Balanced Scorecard 431
Lead and Lag Measures: The Key to the
Balanced Scorecard 432
Linking the Balanced Scorecard to
Organizational Strategy 434
M.A.P. Linking the Balanced Scorecard to
Organizational Strategy 434
Focus on Ethics: Sacrificing Quality to Cut
Standard Costs 436
Chapter Summary 436
Review Problem on Standard Costing and Operational
Performance Measures 437
Key Terms 439
Appendix to Chapter 10: Use of Standard
Costs for Product Costing 439
Review Questions 441
Exercises 442
Problems 445
Cases 455
Current Issues in Managerial Accounting 457
11 Flexible Budgeting and the
Management of Overhead and
Support Activity Costs 458
Overhead Budgets 460
Flexible Budgets 460
Advantages of Flexible Budgets 461
The Activity Measure 461
Flexible Overhead Budget Illustrated 463
Overhead Application in a Standard-Costing
System 464
Choice of Activity Measure 464
Criteria for Choosing the Activity Measure 465
Changing Manufacturing Technology:
Computer-Integrated Manufacturing 465
Cost Drivers 465
Cost Management Using Overhead Cost
Variances 466
Variable Overhead 467
Fixed Overhead 470
Overhead Cost Performance Report 473
M.A.P. Cost Management Systems in
Germany 473
Activity-Based Flexible Budget 473
Focus on Ethics: Misstated Standards Affect Accuracy
of Reports 476
Chapter Summary 477
Review Problem on Overhead Variances 478
Key Terms 479
Appendix A to Chapter 11: Standard Costs
and Product Costing 479
Appendix B to Chapter 11: Sales Variances 480
Review Questions 482
Exercises 482
Problems 485
Cases 497
Current Issues in Managerial Accounting 499
12 Responsibility Accounting, Quality
Control, and Environmental Cost
Management 500
Responsibility Centers 502
Illustration of Responsibility Accounting 503
Performance Reports 505
Budgets, Variance Analysis, and
Responsibility Accounting 506
Cost Allocation 507
Cost Allocation Bases 508
Allocation Bases Based on Budgets 509
Activity-Based Responsibility Accounting 509
Behavioral Effects of Responsibility Accounting 510
Information versus Blame 510
Controllability 510
Motivating Desired Behavior 510
Segmented Reporting 511
Segments versus Segment Managers 513
Key Features of Segmented Reporting 513
Customer Profitability Analysis and
Activity-Based Costing 513
Total Quality Management 513
Measuring and Reporting Quality Costs 514
Changing Views of Optimal Product Quality 516
M.A.P. Six Sigma for Quality Management
and Cost Reduction 518
ISO 9000 Standards 519
Environmental Cost Management 520
Classifying Environmental Costs 520
Managing Private Environmental Costs 521
Environmental Cost Strategies 523
Tie-In to the Responsibility Accounting System 523
Focus on Ethics: Short-Sighted View of Cost Cutting 523
Chapter Summary 524
Review Problems on Responsibility Accounting 525
Key Terms 526
Review Questions 526
Exercises 527
Problems 529
Cases 537
Current Issues in Managerial Accounting 539
13 Investment Centers and Transfer
Pricing 540
Delegation of Decision Making 542
Obtaining Goal Congruence:
A Behavioral Challenge 542
Adaptation of Management Control Systems 543
Measuring Performance in Investment
Centers 543
Return on Investment 544
Residual Income 546
Economic Value Added 548
M.A.P. Pay for Performance Based on EVA 550
Measuring Income and Invested Capital 550
Invested Capital 550
Measuring Investment-Center Income 553
Inflation: Historical-Cost versus
Current-Value Accounting 554
Other Issues in Segment Performance Evaluation 554
Alternatives to ROI, Residual Income, and Economic
Value Added (EVA) 554
Importance of Nonfinancial Information 555
Measuring Performance in Nonprofit
Organizations 555
Transfer Pricing 556
Goal Congruence 556
General Transfer-Pricing Rule 557
Transfers Based on the External Market Price 560
Negotiated Transfer Prices 561
Cost-Based Transfer Prices 562
Standard versus Actual Costs 563
Undermining Divisional Autonomy 563
An International Perspective 563
M.A.P. Transfer Pricing and Tax Issues 564
Transfer Pricing in the Service Industry 565
Behavioral Issues: Risk Aversion and Incentives 565
Goal Congruence and Internal Control Systems 565
Chapter Summary 566
Review Problems on Investment Centers
and Transfer Pricing 567
Key Terms 568
Review Questions 568
Exercises 568
Problems 571
Cases 576
Current Issues in Managerial Accounting 580
Part IV
Using Accounting Information in
Decision Making
14 Decision Making: Relevant Costs and
Benefits 582
The Managerial Accountant?s Role in
Decision Making 584
Steps in the Decision-Making Process 584
Quantitative versus Qualitative Analysis 585
Obtaining Information: Relevance,
Accuracy, and Timeliness 585
Relevant Information 587
Unique versus Repetitive Decisions 587
Importance of Identifying Relevant
Costs and Benefits 587
Identifying Relevant Costs and Benefits 588
Sunk Costs 588
Irrelevant Future Costs and Benefits 590
Opportunity Costs 591
Summary 592
Analysis of Special Decisions 592
Accept or Reject a Special Offer 592
Outsource a Product or Service 594
M.A.P. Outsourcing 594
Add or Drop a Service, Product, or Department 597
M.A.P. Adding a Service 599
Special Decisions in Manufacturing Firms 599
Joint Products: Sell or Process Further 599
Decisions Involving Limited Resources 601
Theory of Constraints 603
Uncertainty 603
Activity-Based Costing and Today?s Advanced
Manufacturing Environment 604
Conventional Outsourcing (Make-or-Buy)
Analysis 605
Activity-Based Costing Analysis of the
Outsourcing Decision 606
Other Issues in Decision Making 607
Incentives for Decision Makers 607
Short-Run versus Long-Run Decisions 608
Pitfalls to Avoid 608
Focus on Ethics: Effects of Decision to Close a Department
and Outsource 609
Chapter Summary 609
Review Problem on Relevant Costs 610
Key Terms 611
Appendix to Chapter 14: Linear Programming 611
Review Questions 613
Exercises 614
Problems 617
Cases 629
Current Issues in Managerial Accounting 631
15 Target Costing and Cost Analysis for
Pricing Decisions 632
Major Influences on Pricing Decisions 634
Customer Demand 634
Actions of Competitors 634
Costs 635
Political, Legal, and Image-Related Issues 635
Economic Profit-Maximizing Pricing 636
Total Revenue, Demand, and Marginal
Revenue Curves 636
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Total Cost and Marginal Cost Curves 638
Profit-Maximizing Price and Quantity 638
Price Elasticity 640
Limitations of the Profit-Maximizing Model 641
Costs and Benefits of Information 641
Role of Accounting Product Costs in Pricing 642
Cost-Plus Pricing 642
Absorption-Cost Pricing Formulas 643
Variable-Cost Pricing Formulas 644
Determining the Markup 644
Cost-Plus Pricing: Summary and Evaluation 646
Strategic Pricing of New Products 646
M.A.P. Cost Cutting to Maintain Prices 647
Target Costing 647
M.A.P. Pricing on the Internet by
?e-Tailers? 648
A Strategic Profit and Cost Management
Process 648
Activity-Based Costing and Target Costing 650
Product-Cost Distortion and Pricing:
The Role of Activity-Based Costing 651
Value Engineering and Target Costing 651
Time and Material Pricing 653
Competitive Bidding 654
Effect of Antitrust Laws on Pricing 656
Chapter Summary 657
Review Problem on Cost-Plus Pricing 658
Key Terms 659
Review Questions 659
Exercises 660
Problems 662
Cases 669
Current Issues in Managerial Accounting 671
16 Capital Expenditure Decisions 672
Section 1: Discounted-Cash-Flow Analysis 674
Net-Present-Value Method 675
Internal-Rate-of-Return Method 675
Comparing the NPV and IRR Methods 678
Assumptions Underlying Discounted-
Cash-Flow Analysis 679
Choosing the Hurdle Rate 679
Depreciable Assets 680
Comparing Two Investment Projects 681
Managerial Accountant?s Role 683
Postaudit 683
Real Option Analysis 684
Section 2: Income Taxes and Capital
Budgeting 684
After-Tax Cash Flows 685
Accelerated Depreciation 688
Modified Accelerated Cost Recovery System
(MACRS) 688
Gains and Losses on Disposal 691
Investment in Working Capital 692
Extended Illustration of Income-Tax Effects
in Capital Budgeting 693
M.A.P. Capital Budgeting at Pharmaceutical
Firms 696
Ranking Investment Projects 696
Section 3: Alternative Methods for Making Investment
Decisions 698
Payback Method 698
Accounting-Rate-of-Return Method 700
Estimating Cash Flows: The Role of Activity-Based
Costing 702
M.A.P. Interactive Television?Capital
Budgeting and ABC 703
Justification of Investments in Advanced
Manufacturing Systems 703
Focus on Ethics: Dysfunctional Focus on Early
Cash Flows 705
Chapter Summary 705
Key Terms 706
Appendix A to Chapter 16: Future Value and
Present Value Tables 707
Appendix B to Chapter 16: Impact of Inflation 709
Review Questions 711
Exercises 712
Problems 715
Cases 721
Current Issues in Managerial Accounting 723
Part V
Selected Topics for Further Study
17 Absorption, Variable, and Throughput
Costing 724
Product Costs 726
Illustration of Absorption and Variable Costing 726
Absorption-Costing Income Statements 727
Variable-Costing Income Statements 729
Reconciling Income under Absorption
and Variable Costing 729
Cost-Volume-Profit Analysis 731
Evaluation of Absorption and Variable Costing 731
M.A.P. IRS: Unique Product Packaging Is an
Inventoriable Cost 733
Throughput Costing 733
Throughput-Costing Income Statements 733
Focus on Ethics: Incentive to Overproduce Inventory 734
Chapter Summary 735
Key Terms 736
Appendix to Chapter 17: Effect of the Volume
Variance under Absorption and Variable Costing 736
Review Questions 738
Exercises 739
Problems 741
Cases 746
Current Issues in Managerial Accounting 748
18 Allocation of Support Activity Costs and
Joint Costs 750
Section 1: Service Department Cost Allocation 752
Direct Method 755
Step-Down Method 755
Reciprocal-Services Method 756
Fixed versus Variable Costs 757
Dual Cost Allocation 758
M.A.P. Cost Management in the Health Care
Industry 759
Allocate Budgeted Costs 761
Today?s Advanced Manufacturing Environment 761
The Rise of Activity-Based Costing 761
Section 2: Joint Product Cost Allocation 762
Allocating Joint Costs 762
M.A.P. Joint Cost Allocation in the Petroleum
Industry 764
Chapter Summary 765
Key Terms 765
Appendix to Chapter 18:
Reciprocal-Services Method 765
Review Questions 767
Exercises 767
Problems 769
Cases 774
Current Issues in Managerial Accounting 775
Appendix I: Compound Interest and
the Concept of Present Value 776
References for Management
Accountants: In Their Own
Words 783
Glossary 786
Photo Credits 797
Index of Companies and
Organizations 799
Index of Subjects 801

Library of Congress Subject Headings for this publication:

Managerial accounting.