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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
EA1.

LO 4.1Little Things manufactures toys. For each item listed, identify whether it is a product cost, a period cost, or not an expense.

  1. internet provider services
  2. material expense
  3. raw materials inventory
  4. production equipment rental
  5. showroom rental
  6. factory employee salary
  7. Human Resource Director salary
EA2.

LO 4.2Table 4.3 shows a list of expenses involved in the production of custom, professional lacrosse sticks.

  1. For each item listed, state whether the cost should be applied to manufacturing or sales and administration.
  2. If the cost is a manufacturing cost, state whether it is direct materials, direct labor, or manufacturing overhead.
  3. If the cost is a manufacturing overhead cost, state whether it is indirect materials, indirect labor, or another type of manufacturing overhead.
Expenses Involved in Lacrosse Stick Production
Lacrosse Stick Production Costs Manufacturing or Sales & Administration Cost? If Manufacturing: Direct Materials, Direct Labor, or Overhead? If Overhead: Indirect Materials, Indirect Labor, or Other?
Carbon, fiberglass      
Administrative building rent      
Accountant salary      
Factory building depreciation      
Strings for the pocket      
Advertising      
Production supervisor salary      
Paint for sticks      
Research and development costs      
Wages of person who strings the sticks      
Cutting machine depreciation      
Human resources salaries      
Factory maintenance      
Table 4.3
EA3.

LO 4.2Burnham Industries incurs these costs for the month:

A list of costs reads “Direct materials, $2,000”, “Direct labor, 3,000”, “Factory depreciation expense, 3,500”, “Factory utilities expense, 750”, “CEO’s salary, 4,000”.
  1. What is the prime cost?
  2. What is the conversion cost?
EA4.

LO 4.3Marzoni’s records show raw materials inventory had a beginning balance of $200 and an ending balance of $300. If the cost of materials used during the month was $900, what were the purchases made during the month?

EA5.

LO 4.3Sterling’s records show the work in process inventory had a beginning balance of $4,000 and an ending balance of $3,000. How much direct labor was incurred if the records also show:

Figure lists Materials used as $1,500, Overhead Applied as 500, and Cost of Goods Manufactured as 7500.
EA6.

LO 4.3Logo Gear purchased $2,250 worth of merchandise during the month, and its monthly income statement shows cost of goods sold of $2,000. What was the beginning inventory if the ending inventory was $1,000?

EA7.

LO 4.4A company estimates its manufacturing overhead will be $750,000 for the next year. What is the predetermined overhead rate given the following independent allocation bases?

  1. Budgeted direct labor hours: 60,000
  2. Budgeted direct labor expense: $1,500,000
  3. Estimated machine hours: 100,000
EA8.

LO 4.4Job order cost sheets show the following costs assigned to each job:

Chart showing the Direct Material and Direct Labor for Jobs 13, 14, and 15. Respectively, the dollar figures are: Job 13 7560 and 3760, Job 14 1525 and 3824, Job 15 3290 and 3796.

The company assigns overhead at $1.25 for each direct labor dollar spent. What is the total cost for each of the jobs?

EA9.

LO 4.4A new company started production. Job 10 was completed, and Job 20 remains in production. Here is the information from job cost sheets from their first and only jobs so far:

A chart for both Jobs 10 and 20 showing the production costs. Job 10’s costs are: Direct Materials $765, Direct Labor 75 hours for labor cost of 1574, Manufacturing Overhead 60, equaling a total cost of $2400. Job 20’s costs are: Direct Materials $145, Direct Labor 113 hours for labor cost of 2373, Manufacturing Overhead 90, equaling a total cost of $2608.

Using the information provided,

  1. What is the balance in work in process?
  2. What is the balance in the finished goods inventory?
  3. If manufacturing overhead is applied on the basis of direct labor hours, what is the predetermined overhead rate?
EA10.

LO 4.5K company production was working on Job 1 and Job 2 during the month. Of the $780 in direct materials, $375 in materials was requested for Job 1. Direct labor cost, including payroll taxes, are $23 per hour, and employees worked 18 hours on Job 1 and 29 hours on Job 2. Overhead is applied at the rate of $20 per direct labor hours. Prepare job order cost sheets for each job.

EA11.

LO 4.7A company has the following transactions during the week.

  • Purchase of $1,000 raw materials inventory
  • Assignment of $500 of raw materials inventory to Job 5
  • Payroll for 20 hours with $1,000 assigned to Job 5
  • Factory utility bills of $750
  • Overhead applied at the rate of $10 per hour

What is the cost assigned to Job 5 at the end of the week?

EA12.

LO 4.7During the month, Job AB2 used specialized machinery for 450 hours and incurred $500 in utilities on account, $300 in factory depreciation expense, and $100 in property tax on the factory. Prepare journal entries for the following:

  1. Record the expenses incurred.
  2. Record the allocation of overhead at the predetermined rate of $1.50 per machine hour.
EA13.

LO 4.7Job 113 was completed at a cost of $5,000, and Job 85 was completed at a cost of $3,000 and sold on account for $4,500. Prepare journal entries for the following:

  1. Completion of Job 113.
  2. Completion and sale of Job 85.
EA14.

LO 4.7A company’s individual job sheets show these costs:

A chart showing costs for Jobs 131, 132, and 133. Direct materials is 4,585, 8723, and 1,575 respectively. Direct labor is 2,385, 2,498, and 2,874, respectively.

Overhead is applied at 1.25 times the direct labor cost. Use the data on the cost sheets to perform these tasks:

  1. Apply overhead to each of the jobs.
  2. Prepare an entry to record the assignment of direct materials to work in process.
  3. Prepare an entry to record the assignment of direct labor to work in process.
  4. Prepare an entry to record the assignment of manufacturing overhead to work in process.
EA15.

LO 4.7A summary of material requisition slips and time tickets, along with the overhead allocation, show these costs:

A four column cost chart with the following headings: Job No., Material Requisition Slips, Factory Labor Time Tickets, Overhead Applied. The rows are: 131, 505, 200, 70; 132, 251, 260, 91; 133, 393, 180, 63; 134, 340, 300, 105; Not job specific, 76, 145, 0; Totals 1565, 1,085, 329.
  1. Prepare an entry to record the assignment of direct material to work in process.
  2. Prepare an entry to record the assignment of direct labor to work in process.
  3. Prepare an entry to record the assignment of manufacturing overhead to work in process.
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