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Table of contents
  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. A | Financial Statement Analysis
  16. B | Time Value of Money
  17. C | 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
1.

LO 5.1Which of the following production characteristics is better suited for process costing and not job order costing?

  1. Each product batch is distinguishable from the prior batch.
  2. The costs are easily traced to a specific product.
  3. Costs are accumulated by department.
  4. The value of work in process is the direct material used, the direct labor incurred, and the overhead applied to the job in process.
2.

LO 5.1A process costing system is most likely used by which of the following?

  1. airplane manufacturing
  2. a paper manufacturing company
  3. an accounting firm specializing in tax returns
  4. a hospital
3.

LO 5.1Which of the following is a prime cost?

  1. direct labor
  2. work in process inventory
  3. administrative labor
  4. factory maintenance expenses
4.

LO 5.1Which of the following is a conversion cost?

  1. raw materials
  2. direct labor
  3. sales commissions
  4. direct material used
5.

LO 5.1During production, how are the costs in process costing accumulated?

  1. to cost of goods sold
  2. to each individual product
  3. to manufacturing overhead
  4. to each individual department
6.

LO 5.2Which is not needed to compute equivalent units of production?

  1. the percentage of completion for inventory still in process
  2. the number of units transferred out
  3. the number of units started and completed
  4. the material cost per unit
7.

LO 5.2What is the cost of direct labor if the conversion costs are $330,000 and manufacturing overhead is $275,000?

  1. $55,000
  2. $275,000
  3. $330,000
  4. $605,000
8.

LO 5.2What is the conversion cost to manufacture insulated travel cups if the costs are: direct materials, $17,000; direct labor, $33,000; and manufacturing overhead, $70,000?

  1. $16,000
  2. $50,000
  3. $103,000
  4. $120,000
9.

LO 5.2Which of the following lists contains only conversion costs for an inflatable raft manufacturing corporation?

  1. vinyl for raft, machine operator, electricity, insurance
  2. machine operator, electricity, depreciation, plastic for air valves
  3. machine operator, electricity, depreciation, insurance
  4. vinyl for raft, electricity, insurance, plastic for air valves
10.

LO 5.3Direct material costs $3 per unit, direct labor costs $5 per unit, and overhead is applied at the rate of 100% of the direct labor cost. What is the value of the inventory transferred to the next department if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory?

  1. $1,000
  2. $13,000
  3. $130,000
  4. $20,000
11.

LO 5.3Beginning inventory and direct material cost added during the month total $55,000. What is the value of the ending work in process inventory if beginning inventory was 2,000 units; 9,000 units were started; and 1,000 units were in ending inventory?

  1. $1,000
  2. $5,000
  3. $50,000
  4. $55,000
12.

LO 5.3The initial processing department had a beginning inventory of 750 units and an ending inventory of 1,350 units, and it started 9,500 units into production. How many were transferred out to the next department?

  1. 750
  2. 1,350
  3. 8,900
  4. 10,250
13.

LO 5.3There were 1,000 units in ending inventory after transferring 16,000 units to finished goods inventory. If the beginning inventory was 2,000 units, how many units were started in process?

  1. 1,000
  2. 2,000
  3. 15,000
  4. 17,000
14.

LO 5.4The costs to be accounted for consist of which of the following?

  1. costs of the units added during the period
  2. costs of the units in ending inventory
  3. costs of the units started and transferred during the period
  4. costs of the units in the beginning inventory and costs added during the period
15.

LO 5.4Which of the following is the step in which materials, labor, and overhead are detailed?

  1. determining the units to which costs are assigned
  2. determining the equivalent units of production
  3. determining the cost per equivalent units
  4. allocating the costs to the units transferred out and the units partially completed
16.

LO 5.5The journal entry to record the $500 of work in process ending inventory that consists of $300 of direct materials, $50 of manufacturing overhead, and $150 of direct labor is which of the following?


  1. Debit Work in Process Inventory, Credit Accounts Payable 500 (When added to the process).

  2. Debit work in Process Inventory 500, credit Materials Inventory 300, Labor Payable 150, Manufacturing Overhead 50 (As incurred or applied).

  3. Debit Cost of Goods Sold and debit Work in Process Inventory 500 (When transferred).

  4. Debit Accounts Payable and credit Work in Process Inventory 500 (When added to the process).
17.

LO 5.5Assigning indirect costs to departments is completed by ________.

  1. applying the predetermined overhead rate
  2. debiting the manufacturing costs incurred
  3. applying the costs to manufacturing overhead
  4. applying the costs to work in process inventory
18.

LO 5.5In a process costing system, which account shows the overhead assigned to the department?

  1. cost of goods sold
  2. finished goods inventory
  3. raw material inventory
  4. work in process inventory
19.

LO 5.5In a process cost system, factory depreciation expense incurred is debited to ________.

  1. finished goods inventory
  2. work in process inventory
  3. manufacturing overhead
  4. cost of goods sold
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