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  1. Preface
  2. 1 Accounting as a Tool for Managers
    1. Why It Matters
    2. 1.1 Define Managerial Accounting and Identify the Three Primary Responsibilities of Management
    3. 1.2 Distinguish between Financial and Managerial Accounting
    4. 1.3 Explain the Primary Roles and Skills Required of Managerial Accountants
    5. 1.4 Describe the Role of the Institute of Management Accountants and the Use of Ethical Standards
    6. 1.5 Describe Trends in Today’s Business Environment and Analyze Their Impact on Accounting
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Thought Provokers
  3. 2 Building Blocks of Managerial Accounting
    1. Why It Matters
    2. 2.1 Distinguish between Merchandising, Manufacturing, and Service Organizations
    3. 2.2 Identify and Apply Basic Cost Behavior Patterns
    4. 2.3 Estimate a Variable and Fixed Cost Equation and Predict Future Costs
    5. Key Terms
    6. Summary
    7. Multiple Choice
    8. Questions
    9. Exercise Set A
    10. Exercise Set B
    11. Problem Set A
    12. Problem Set B
    13. Thought Provokers
  4. 3 Cost-Volume-Profit Analysis
    1. Why It Matters
    2. 3.1 Explain Contribution Margin and Calculate Contribution Margin per Unit, Contribution Margin Ratio, and Total Contribution Margin
    3. 3.2 Calculate a Break-Even Point in Units and Dollars
    4. 3.3 Perform Break-Even Sensitivity Analysis for a Single Product Under Changing Business Situations
    5. 3.4 Perform Break-Even Sensitivity Analysis for a Multi-Product Environment Under Changing Business Situations
    6. 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  5. 4 Job Order Costing
    1. Why It Matters
    2. 4.1 Distinguish between Job Order Costing and Process Costing
    3. 4.2 Describe and Identify the Three Major Components of Product Costs under Job Order Costing
    4. 4.3 Use the Job Order Costing Method to Trace the Flow of Product Costs through the Inventory Accounts
    5. 4.4 Compute a Predetermined Overhead Rate and Apply Overhead to Production
    6. 4.5 Compute the Cost of a Job Using Job Order Costing
    7. 4.6 Determine and Dispose of Underapplied or Overapplied Overhead
    8. 4.7 Prepare Journal Entries for a Job Order Cost System
    9. 4.8 Explain How a Job Order Cost System Applies to a Nonmanufacturing Environment
    10. Key Terms
    11. Summary
    12. Multiple Choice
    13. Questions
    14. Exercise Set A
    15. Exercise Set B
    16. Problem Set A
    17. Problem Set B
    18. Thought Provokers
  6. 5 Process Costing
    1. Why It Matters
    2. 5.1 Compare and Contrast Job Order Costing and Process Costing
    3. 5.2 Explain and Identify Conversion Costs
    4. 5.3 Explain and Compute Equivalent Units and Total Cost of Production in an Initial Processing Stage
    5. 5.4 Explain and Compute Equivalent Units and Total Cost of Production in a Subsequent Processing Stage
    6. 5.5 Prepare Journal Entries for a Process Costing System
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  7. 6 Activity-Based, Variable, and Absorption Costing
    1. Why It Matters
    2. 6.1 Calculate Predetermined Overhead and Total Cost under the Traditional Allocation Method
    3. 6.2 Describe and Identify Cost Drivers
    4. 6.3 Calculate Activity-Based Product Costs
    5. 6.4 Compare and Contrast Traditional and Activity-Based Costing Systems
    6. 6.5 Compare and Contrast Variable and Absorption Costing
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  8. 7 Budgeting
    1. Why It Matters
    2. 7.1 Describe How and Why Managers Use Budgets
    3. 7.2 Prepare Operating Budgets
    4. 7.3 Prepare Financial Budgets
    5. 7.4 Prepare Flexible Budgets
    6. 7.5 Explain How Budgets Are Used to Evaluate Goals
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  9. 8 Standard Costs and Variances
    1. Why It Matters
    2. 8.1 Explain How and Why a Standard Cost Is Developed
    3. 8.2 Compute and Evaluate Materials Variances
    4. 8.3 Compute and Evaluate Labor Variances
    5. 8.4 Compute and Evaluate Overhead Variances
    6. 8.5 Describe How Companies Use Variance Analysis
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  10. 9 Responsibility Accounting and Decentralization
    1. Why It Matters
    2. 9.1 Differentiate between Centralized and Decentralized Management
    3. 9.2 Describe How Decision-Making Differs between Centralized and Decentralized Environments
    4. 9.3 Describe the Types of Responsibility Centers
    5. 9.4 Describe the Effects of Various Decisions on Performance Evaluation of Responsibility Centers
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  11. 10 Short-Term Decision Making
    1. Why It Matters
    2. 10.1 Identify Relevant Information for Decision-Making
    3. 10.2 Evaluate and Determine Whether to Accept or Reject a Special Order
    4. 10.3 Evaluate and Determine Whether to Make or Buy a Component
    5. 10.4 Evaluate and Determine Whether to Keep or Discontinue a Segment or Product
    6. 10.5 Evaluate and Determine Whether to Sell or Process Further
    7. 10.6 Evaluate and Determine How to Make Decisions When Resources Are Constrained
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  12. 11 Capital Budgeting Decisions
    1. Why It Matters
    2. 11.1 Describe Capital Investment Decisions and How They Are Applied
    3. 11.2 Evaluate the Payback and Accounting Rate of Return in Capital Investment Decisions
    4. 11.3 Explain the Time Value of Money and Calculate Present and Future Values of Lump Sums and Annuities
    5. 11.4 Use Discounted Cash Flow Models to Make Capital Investment Decisions
    6. 11.5 Compare and Contrast Non-Time Value-Based Methods and Time Value-Based Methods in Capital Investment Decisions
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  13. 12 Balanced Scorecard and Other Performance Measures
    1. Why It Matters
    2. 12.1 Explain the Importance of Performance Measurement
    3. 12.2 Identify the Characteristics of an Effective Performance Measure
    4. 12.3 Evaluate an Operating Segment or a Project Using Return on Investment, Residual Income, and Economic Value Added
    5. 12.4 Describe the Balanced Scorecard and Explain How It Is Used
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  14. 13 Sustainability Reporting
    1. Why It Matters
    2. 13.1 Describe Sustainability and the Way It Creates Business Value
    3. 13.2 Identify User Needs for Information
    4. 13.3 Discuss Examples of Major Sustainability Initiatives
    5. 13.4 Future Issues in Sustainability
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Thought Provokers
  15. Financial Statement Analysis
  16. Time Value of Money
  17. Suggested Resources
  18. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
  19. Index
EB1.

LO 3.1Calculate the per-unit contribution margin of a product that has a sale price of $150 if the variable costs per unit are $40.

EB2.

LO 3.1Calculate the per-unit contribution margin of a product that has a sale price of $350 if the variable costs per unit are $95.

EB3.

LO 3.1A product has a sales price of $175 and a per-unit contribution margin of $75. What is the contribution margin ratio?

EB4.

LO 3.1A product has a sales price of $90 and a per-unit contribution margin of $30. What is the contribution margin ratio?

EB5.

LO 3.2Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The company’s monthly fixed expenses are $180,000.

  1. What is the company’s break-even point in units?
  2. What is the company’s break-even point in dollars?
  3. Prepare a contribution margin income statement for the month of October when they will sell 10,000 units.
  4. How many units will Cadre need to sell in order to realize a target profit of $300,000?
  5. What dollar sales will Cadre need to generate in order to realize a target profit of $300,000?
  6. Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.
EB6.

LO 3.2Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The company’s monthly fixed expenses are $72,000.

  1. What is the company’s break-even point in units?
  2. What is the company’s break-even point in dollars?
  3. Prepare a contribution margin income statement for the month of January when they will sell 500 units.
  4. How many units will Kerr need to sell in order to realize a target profit of $120,000?
  5. What dollar sales will Kerr need to generate in order to realize a target profit of $120,000?
  6. Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.
EB7.

LO 3.2Delta Co. sells a product for $150 per unit. The variable cost per unit is $90 and fixed costs are $15,250. Delta Co.’s tax rate is 36% and the company wants to earn $44,000 after taxes.

  1. What would be Delta’s desired pre-tax income?
  2. What would be break-even point in units to reach the income goal of $44,000 after taxes?
  3. What would be break-even point in sales dollars to reach the income goal of $44,000 after taxes?
  4. Create a contribution margin income statement to show that the break-even point calculated in B, generates the desired after-tax income.
EB8.

LO 3.3Shonda & Shonda is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are as follows:

Current information: Units Sold 1,400, Sales Price per Unit $225, Variable Cost per Unit $145, Fixed Costs $52,000, Break-Even (in units) 650, Contribution Margin per Unit $0.36, Break-Even (in dollars) $146,250, Sales $315,000, Variable Costs $203,000, Fixed Costs $52,000, Net Income $60,000.
  1. What will be the impact on the break-even point if Shonda & Shonda purchases the new computer?
  2. What will be the impact on net operating income if Shonda & Shonda purchases the new computer?
  3. What would be your recommendation to Shonda & Shonda regarding this purchase?
EB9.

LO 3.3Baghdad Company produces a single product. They have recently received the result of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. All other costs will remain unchanged. If they enact the 10% price increase, what will be their new break-even point in units and dollars? Their most recent CVP analysis is:

Current information: Units Sold 1,450, Sales Price per Unit $90, Variable Cost per Unit $40, Contribution Marin per Unit $50, Fixed Costs $20,650, Break-Even (in units) 413, Break-Even (in dollars) $37,170, Sales $130,500, Variable Costs $58,000, Contribution Margin $72,500, Fixed Costs $20,650, Net Income $51,850.
EB10.

LO 3.3Keleher Industries manufactures pet doors and sells them directly to the consumer via their web site. The marketing manager believes that if the company invests in new software, they will increase their sales by 10%. The new software will increase fixed costs by $400 per month. Prepare a forecasted contribution margin income statement for Keleher Industries reflecting the new software cost and associated increase in sales. The previous annual statement is as follows:

Sales (3,100 units at $250 per unit) $775,000 less Variable costs (3,100 units at $115 per unit) 356,500 equals Contribution Margin 418,500. Subtract Fixed Cost 19,500 equals Net Income $399,000.
EB11.

LO 3.4JJ Manufacturing builds and sells switch harnesses for glove boxes. The sales price and variable cost for each follows:

Product, Selling Price per Unit, Variable Cost per Unit (respectively): Trunk Switch, $60, $28; Gas Door Switch $75, $33; Glove Box Light $40, $22.

Their sales mix is reflected in the ratio 4:4:1. What is the overall unit contribution margin for JJ Manufacturing with their current product mix?

EB12.

LO 3.4JJ Manufacturing builds and sells switch harnesses for glove boxes. The sales price and variable cost for each follow:

Product, Selling Price per Unit, Variable Cost per Unit (respectively): Trunk Switch, $60, $28; Gas Door Switch, $75, $33; Glove Box Light, $40, $22.

Their sales mix is reflected in the ratio 4:4:1. If annual fixed costs shared by the three products are $18,840 how many units of each product will need to be sold in order for JJ to break even?

EB13.

LO 3.4Use the information from the previous exercises involving JJ Manufacturing to determine their break-even point in sales dollars.

EB14.

LO 3.5Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are $600,000. Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company B’s fixed costs are $375,000. Compute the degree of operating leverage for both companies. Which company will benefit most from a 15% increase in sales? Explain why.

EB15.

LO 3.5Best Wholesale recently calculated their break-even point for their Midwest operations. The national sales manager has asked them to include a $10,500 margin of safety in their calculations. Using the following information, recalculate Best Wholesale’s break-even point in units and dollars with the $10,500 margin of safety included.

Current information: Units Sold 1,200, Sales Price per Unit $765, Variable Cost per Unit 590, Contribution margin per Unit $175, Fixed Costs 97,000, Break-Even in units 554, Contribution Margin Ratio 0.23 Break-Even in Dollars $424,028.57.
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