Introduction to Managerial Accounting, 9th Edition
Brewer’sIntroduction to Managerial Accounting has earned a reputation as the mostaccessible and readable book on the market. Its manageable chapters and clearpresentation point students toward understanding, just as the needle of thecompass provides direction to travelers.
However, thebook’s authors also understand that everyone’s destination may be different.Some students will become accountants, while others are destined for careers inmanagement, marketing, or finance. Not only does the Brewer text teach studentsmanagerial accounting concepts in a clear and concise way, it also asksstudents to consider how the concepts they are learning will apply to thereal-world situations they will eventually face in their careers. Thiscombination of conceptual understanding and the ability to apply that knowledgedirects students toward success, whatever their final destination may be.
Cover Title Copyright Dedication About the Authors Pointing Students in the Right Direction Brewer / Garrison / Noreen’s Powerful Pedagogy New in the Ninth Edition Connect Acknowledgments Brief Contents Table of Contents Prologue: Managerial Accounting: An Overview What is Managerial Accounting? Planning Controlling Decision Making Why does Managerial Accounting Matter to Your Career? Business Majors Accounting Majors Professional Certification—A Smart Investment Managerial Accounting: Understanding the Broader Context Big Data Ethics Code of Conduct for Management Accountants Strategy Enterprise Risk Management Corporate Social Responsibility Process Management Perspective Leadership Intrinsic Motivation Extrinsic Incentives Cognitive Bias Summary Glossary Questions Exercises Chapter One: Managerial Accounting and Cost Concepts Cost Classifications for Assigning Costs to Cost Objects Direct Cost Indirect Cost Cost Classifications for Manufacturing Companies Manufacturing Costs Direct Materials Direct Labor Manufacturing Overhead Nonmanufacturing Costs Cost Classifications for Preparing Financial Statements Product Costs Period Costs Cost Classifications for Predicting Cost Behavior Variable Cost Fixed Cost The Linearity Assumption and the Relevant Range Mixed Costs Cost Terminology—A Closer Look Cost Classifications for Decision Making Differential Cost and Revenue Opportunity Cost and Sunk Cost Using Different Cost Classifications for Different Purposes The Traditional Format Income Statement The Contribution Format Income Statement Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem 1: Cost Terms Review Problem 2: Income Statement Formats Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Two: Job-Order Costing: Calculating Unit Product Costs Job-Order Costing—An Overview Job-Order Costing—An Example Measuring Direct Materials Cost Job Cost Sheet Measuring Direct Labor Cost Computing Predetermined Overhead Rates Applying Manufacturing Overhead Manufacturing Overhead—A Closer Look The Need for a Predetermined Rate Computation of Total Job Costs and Unit Product Costs Job-Order Costing—A Managerial Perspective Choosing an Allocation Base—A Key to Job Cost Accuracy Job-Order Costing using Multiple Predetermined Overhead Rates Multiple Predetermined Overhead Rates—A Departmental Approach Multiple Predetermined Overhead Rates—An Activity-Based Approach Job-Order Costing—An External Reporting Perspective Overhead Application and the Income Statement Job Cost Sheets: A Subsidiary Ledger Job-Order Costing in Service Companies Summary Guidance Answer to Decision Point Guidance Answers to Concept Checks Review Problem: Calculating Unit Product Costs Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Three: Job-Order Costing: Cost Flows and External Reporting Job-Order Costing—The Flow of Costs The Purchase and Issue of Materials Issue of Direct and Indirect Materials Labor Cost Manufacturing Overhead Costs Applying Manufacturing Overhead The Concept of a Clearing Account Nonmanufacturing Costs Cost of Goods Manufactured Cost of Goods Sold Schedules of Cost of Goods Manufactured and Cost of Goods Sold Schedule of Cost of Goods Manufactured Schedule of Cost of Goods Sold Income Statement Underapplied and Overapplied Overhead—A Closer Look Computing Underapplied and Overapplied Overhead Disposition of Underapplied or Overapplied Overhead Balances Closed to Cost of Goods Sold Closed Proportionally to Work in Process, Finished Goods, and Cost of Goods Sold Comparing the Two Methods for Disposing of Underapplied or Overapplied Overhead A General Model of Product Cost Flows Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem: The Flow of Costs in a Job-Order Costing System Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Appendix 3A: Job-Order Costing: A Microsoft Excel-Based Approach Appendix 3A: Exercises and Problems Chapter Four: Activity-Based Costing Assigning Overhead Costs to Products Plantwide Overhead Rate Departmental Overhead Rates Activity-Based Costing (ABC) Designing an Activity-Based Costing System Hierarchy of Activities An Example of an Activity-Based Costing System Design Using Activity-Based Costing Comtek Inc.’s Basic Data Direct Labor-Hours as a Base Computing Activity Rates Computing Product Costs Shifting of Overhead Cost Targeting Process Improvements Evaluation of Activity-Based Costing The Benefits of Activity-Based Costing Limitations of Activity-Based Costing The Cost of Implementing Activity-Based Costing Limitations of the ABC Model Modifying the ABC Model Activity-Based Costing and Service Industries Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem: Activity-Based Costing Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Five: Process Costing Comparison of Job-Order and Process Costing Similarities between Job-Order and Process Costing Differences between Job-Order and Process Costing Cost Flows in Process Costing Processing Departments The Flow of Materials, Labor, and Overhead Costs Materials, Labor, and Overhead Cost Entries Materials Costs Labor Costs Overhead Costs Completing the Cost Flows Process Costing Computations: Three Key Concepts Key Concept #1 Key Concept #2 Key Concept #3 The Weighted-Average Method: An Example Step 1: Compute the Equivalent Units of Production Step 2: Compute the Cost per Equivalent Unit Step 3: Assign Costs to Units Step 4: Prepare a Cost Reconciliation Report Operation Costing Summary Guidance Answer to Decision Point Guidance Answers to Concept Checks Review Problem: Process Cost Flows and Costing Units Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Six: Cost-Volume-Profit Relationships The Basics of Cost-Volume-Profit (CVP) Analysis Contribution Margin CVP Relationships in Equation Form CVP Relationships in Graphic Form Preparing the CVP Graph Contribution Margin Ratio (CM Ratio) and the Variable Expense Ratio Applications of the Contribution Margin Ratio Additional Applications of CVP Concepts Example 1: Change in Fixed Cost and Sales Volume Alternative Solution 1 Alternative Solution 2 Example 2: Change in Variable Costs and Sales Volume Solution Example 3: Change in Fixed Cost, Selling Price, and Sales Volume Solution Example 4: Change in Variable Cost, Fixed Cost, and Sales Volume Solution Example 5: Change in Selling Price Solution Break-Even and Target Profit Analysis Break-Even Analysis The Equation Method The Formula Method Break-Even in Dollar Sales Target Profit Analysis The Equation Method The Formula Method Target Profit Analysis in Terms of Dollar Sales The Margin of Safety CVP Considerations in Choosing A Cost Structure Cost Structure and Profit Stability Operating Leverage Sales Mix The Definition of Sales Mix Sales Mix and Break-Even Analysis Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem: CVP Relationships Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Appendix 6A: Analyzing Mixed Costs Glossary (Appendix 6A) Appendix 6A: Exercises and Problems Chapter Seven: Variable Costing and Segment Reporting: Tools for Management Overview of Variable and Absorption Costing Variable Costing Absorption Costing Selling and Administrative Expenses Summary of Differences Variable and Absorption Costing—An Example Variable Costing Contribution Format Income Statement Absorption Costing Income Statement Reconciliation of Variable Costing with Absorption Costing Income Advantages of Variable Costing and the Contribution Approach Enabling CVP Analysis Explaining Changes in Net Operating Income Supporting Decision Making Segmented Income Statements and the Contribution Approach Traceable and Common Fixed Costs and the Segment Margin Identifying Traceable Fixed Costs Traceable Fixed Costs Can Become Common Fixed Costs Segmented Income Statements—An Example Levels of Segmented Income Statements Segmented Income Statements—Decision Making and Break-Even Analysis Decision Making Break-Even Analysis Segmented Income Statements—Common Mistakes Omission of Costs Inappropriate Methods for Assigning Traceable Costs among Segments Failure to Trace Costs Directly Inappropriate Allocation Base Arbitrarily Dividing Common Costs among Segments Income Statements—An External Reporting Perspective Companywide Income Statements Segmented Financial Information Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem 1: Contrasting Variable and Absorption Costing Review Problem 2: Segmented Income Statements Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Eight: Master Budgeting Why and How Do Organizations Create Budgets? Why Do Organizations Create Budgets? How Do Organizations Create Budgets? The Master Budget: An Overview Seeing the Big Picture Preparing the Master Budget The Beginning Balance Sheet The Budgeting Assumptions The Sales Budget The Production Budget Inventory Purchases—Merchandising Company The Direct Materials Budget The Direct Labor Budget The Manufacturing Overhead Budget The Ending Finished Goods Inventory Budget The Selling and Administrative Expense Budget The Cash Budget The Budgeted Income Statement The Budgeted Balance Sheet Summary Guidance Answer to Decision Point Guidance Answers to Concept Checks Review Problem: Budget Schedules Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Nine: Flexible Budgets, Standard Costs, and Variance Analysis The Variance Analysis Cycle Preparing Planning Budgets and Flexible Budgets with One Cost Driver Characteristics of a Flexible Budget Deficiencies of the Static Planning Budget How a Flexible Budget Works Flexible Budget Variances Revenue Variances Spending Variances Preparing Planning Budgets and Flexible Budgets with Multiple Cost Drivers Standard Costs—Setting the Stage Setting Direct Materials Standards Setting Direct Labor Standards Setting Variable Manufacturing Overhead Standards Using Standards in Flexible Budgets A General Model for Standard Cost Variance Analysis Using Standard Costs—Direct Materials Variances The Materials Price Variance The Materials Quantity Variance Using Standard Costs—Direct Labor Variances The Labor Rate Variance The Labor Efficiency Variance Using Standard Costs—Variable Manufacturing Overhead Variances The Variable Manufacturing Overhead Rate and Efficiency Variances An Important Subtlety in the Materials Variances Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem 1: Variance Analysis Using a Flexible Budget Review Problem 2: Standard Costs Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Appendix 9A: Predetermined Overhead Rates and Overhead Analysis in a Standard Costing System Glossary Appendix 9A: Exercises and Problems Appendix 9B: Standard Cost Systems: A Financial Reporting Perspective Using Microsoft Excel Appendix 9B: Exercises and Problems Chapter Ten: Performance Measurement in Decentralized Organizations Decentralization in Organizations Advantages and Disadvantages of Decentralization Responsibility Accounting Cost, Profit, and Investment Centers Cost Center Profit Center Investment Center Evaluating Investment Center Performance—Return on Investment The Return on Investment (ROI) Formula Net Operating Income and Operating Assets Defined Understanding ROI Criticisms of ROI Residual Income Motivation and Residual Income Divisional Comparison and Residual Income Operating Performance Measures Throughput (Manufacturing Cycle) Time Delivery Cycle Time Manufacturing Cycle Efficiency (MCE) Example Solution Balanced Scorecard Common Characteristics of Balanced Scorecards A Company’s Strategy and the Balanced Scorecard Tying Compensation to the Balanced Scorecard Summary Guidance Answer to Decision Point Guidance Answers to Concept Checks Review Problem: Return on Investment (ROI) And Residual Income Glossary Questions Chapter 10: Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Eleven: Differential Analysis: The Key to Decision Making Decision Making: Six Key Concepts Key Concept #1 Key Concept #2 Key Concept #3 Key Concept #4 Key Concept #5 Key Concept #6 Identifying Relevant Costs and Benefits: An Example Decision Analysis: The Total Cost and Differential Cost Approaches Why Isolate Relevant Costs? Adding and Dropping Product Lines and other Segments An Illustration of Cost Analysis A Comparative Format Beware of Allocated Fixed Costs Make or Buy Decisions Strategic Aspects of the Make or Buy Decision An Example of a Make or Buy Decision Opportunity Cost Special Order Decisions Volume Trade-Off Decisions What Is a Constraint? Utilizing a Constrained Resource to Maximize Profits Managing Constraints Joint Product Costs and Sell or Process Further Decisions Santa Maria Wool Cooperative: An Example Activity-Based Costing and Relevant Costs Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem: Differential Analysis Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Chapter Twelve: Capital Budgeting Decisions Capital Budgeting—An Overview Typical Capital Budgeting Decisions Cash Flows Versus Net Operating Income Typical Cash Outflows Typical Cash Inflows The Time Value of Money The Payback Method Evaluation of the Payback Method An Extended Example of Payback Payback and Uneven Cash Flows The Net Present Value Method The Net Present Value Method Illustrated Recovery of the Original Investment An Extended Example of the Net Present Value Method The Internal Rate of Return Method The Internal Rate of Return Method Illustrated Comparison of the Net Present Value and Internal Rate of Return Methods Expanding the Net Present Value Method Least-Cost Decisions Uncertain Cash Flows An Example Preference Decisions—The Ranking of Investment Projects Internal Rate of Return Method Net Present Value Method The Simple Rate of Return Method Postaudit of Investment Projects Summary Guidance Answer to Decision Point Guidance Answers to Concept Checks Review Problem: Comparison of Capital Budgeting Methods Glossary Questions Applying Excel The Foundational 15 Exercises Problems Building Your Skills Appendix 12A: The Concept of Present Value Appendix 12A: Review Problem: Basic Present Value Computations Appendix 12A: Exercises Appendix 12B: Present Value Tables Chapter Thirteen: Statement of Cash Flows The Statement of Cash Flows: Key Concepts Organizing the Statement of Cash Flows Operating Activities: Direct or Indirect Method? The Indirect Method: A Three-Step Process Step 1 Step 2 Step 3 Investing and Financing Activities: Gross Cash Flows Property, Plant, and Equipment Retained Earnings Summary of Key Concepts An Example of a Statement of Cash Flows Operating Activities Step 1 Step 2 Step 3 Investing Activities Financing Activities Seeing the Big Picture Interpreting the Statement of Cash Flows Consider a Company’s Specific Circumstances Consider the Relationships among Numbers Free Cash Flow Earnings Quality Summary Guidance Answers to Decision Point Guidance Answers to Concept Checks Review Problem Glossary Questions The Foundational 15 Exercises Problems Building Your Skills Appendix 13A: The Direct Method of Determining the Net Cash Provided by Operating Activities Appendix 13A: Exercises and Problems Chapter Fourteen: Financial Statement Analysis Limitations of Financial Statement Analysis Comparing Financial Data across Companies Looking beyond Ratios Statements in Comparative and Common-Size Form Dollar and Percentage Changes on Statements Common-Size Statements Ratio Analysis—Liquidity Working Capital Current Ratio Acid-Test (Quick) Ratio Ratio Analysis—Asset Management Accounts Receivable Turnover Inventory Turnover Operating Cycle Total Asset Turnover Ratio Analysis—Debt Management Times Interest Earned Ratio Debt-to-Equity Ratio Equity Multiplier Ratio Analysis—Profitability Gross Margin Percentage Net Profit Margin Percentage Return on Total Assets Return on Equity Ratio Analysis—Market Performance Earnings per Share Price-Earnings Ratio Dividend Payout and Yield Ratios The Dividend Payout Ratio The Dividend Yield Ratio Book Value per Share Summary of Ratios and Sources of Comparative Ratio Data Summary Guidance Answer to Decision Point Guidance Answers to Concept Checks Review Problem: Selected Ratios and Financial Leverage Glossary Questions The Foundational 15 Exercises Problems Building Your Skills Integration Exercises: An Overview Index
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