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xi Comments on Choices of Problems in Each Chapter.............................................................xvii Presentation of Solutions in Class..........................................................................................xxv Conducting the Course..........................................................................................................xxvi Key Amounts from Suggested Solutions to Selected Problems..........................................xxviii Solutions by Chapter 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. Managerial Accounting, the Business Organization, and Professional Ethics...................1 Introduction to Cost Behavior and Cost-Volume Relationships.....................................40 Measurement of Cost Behavior.....................................................................................105 Cost Management Systems and Activity-Based Costing...............................................175 Relevant Information for Decision Making with a Focus on Pricing Decisions..............................................................................................................246 Relevant Information for Decision Making with a Focus on Operational Decisions.............................................................................................................311 Introduction to Budgets and Preparing the Master Budget..........................................382 Flexible Budgets and Variance Analysis........................................................................438 Management Control Systems and Responsibility Accounting.....................................495 Management Control in Decentralized Organizations...................................................552 Capital Budgeting..........................................................................................................616 Cost Allocation ............................................................................687 Accounting for Overhead Costs....................................................................................770 Job-Costing and Process-Costing Systems....................................................................841 Basic Accounting: Concepts, Techniques, and Conventions.......................................881 Understanding Corporate Annual Reports: Basic Financial Statements......................918 Understanding and Analyzing Consolidated Financial Statements................................971

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GENERAL COMMENTS Please read the textbook preface before examining this material. Because this book may be used in a wide variety of courses, several sample assignment schedules have been prepared. We recommend using these as a starting point for building a tailored schedule. The scope and depth of a particular assignment schedule largely depend on the instructor's personal evaluation of the relative importance of various topics. In turn, his or her evaluation will be influenced by students' backgrounds and other courses in the curriculum. For example, many instructors requested a more straightforward coverage of activity-based costing in Chapter 4, primarily because most of their students were not accounting majors and needed only fundamental concepts. At the same time, others prefer a more demanding coverage such as for courses with accounting majors or graduate-level accounting courses. We have significantly revised the ABC coverage to address these needs, providing a three-tiered coverage that meets the needs of several course objectives. Chapter 4 includes an introduction to ABC, Appendix 4 provides a more detailed example, and Chapter 12 (especially Appendix 12) gives more details. This edition, as previous editions, contains both straightforward assignment material, homework that can be solved simply by referring to the presentations in the chapters, and more challenging problems, which require more thoughtful analysis. This book's approach divorces product costing for financial reporting purposes from planning and control. For example, Chapters 1 through 11 assume that no changes take place in the level of beginning and ending inventories. This sharpens the analysis of planning and control, enhances clarity, and eases the learning process. The problems of product costing are then considered in Chapters 12 through 14. This approach may be unconventional, but classroom experience and experimentation have convinced us of its superiority over the traditional approach, which interweaves product costing, planning, and control. If students raise thorny questions regarding inventory valuation when Chapters 1 through 11 are being covered, we usually ask them to postpone their queries until Chapters 12 through 14 are discussed. If desired, Chapters 12, 13, and 14 may be studied at any time after Chapter 4. For comments on how to choose among the various problems in each chapter, see the section entitled "Comments on Choices of Problems in Each Chapter." Other teaching aids for use with this textbook are an Instructor's Resource Manual (which includes chapter overviews, chapter outlines organized by objectives, teaching tips, a chapter quiz, transparency masters, suggested readings and a video guide that carefully integrates the videos into classroom lectures), Solutions Transparencies (which includes acetates for all the end-of-chapter assignments), a Test Item File (including multiple choice, true/false, comprehensive problems, short-answer problems, and critical thinking questions), the Prentice Hall Custom Test (a computerized testing package), On Location Video Library (which includes segments on companies such as Three Dog Bakery, Nantucket Nectars, Oracle, McDonalds, and many more), the PH Professor: A Classroom Presentation on PowerPoint (includes over 50 PowerPoint slides for each chapter), and Power Notes (derived from the PH Professor, this efficient note-taking supplement can be downloaded from our website at www.prenhall.com/myPHLIP. An Instructor's Resource CD-ROM, complete with all instructor support materials, is available upon adoption. Available for students is a Study Guide that provides overviews, study tips and chapter reviews formatted for easy note-taking, and self-tests including a variety of test questions to prepare for examinations. Spreadsheet Templates are also available for selected exercises and v

problems are identified in the text by a CD icon. Students may opt to purchase the Student Resource CD-ROM rather than download spreadsheets, PowerPoints, etc. from the web site.

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SAMPLE ASSIGNMENT SCHEDULES Summary of Potential Assignments Suggested alternative schedules are summarized here in terms of the relative percentage of time to be devoted to various chapters. Detailed assignment schedules are shown after this summary. These schedules all assume a straightforward coverage of ABC is desired. For a more in-depth coverage see Table A on pages xix xx. Sequence A Chapter 1 2 3 4 5&6 8 9 10 11 12 13 14 Alternative 1* Sequence B Chapter 1 2 3 4 13 5&6 11 8 15 9 10 12 Percentage of Time 2% 5 6 8 6 12 8 10 9 8 7 5 Sequence A Chapter 1 15 16 17 2 3 4 5&6 8 9 10 11 12 Alternative 2** Sequence B Percentage Chapter of Time 1 2% 15 6 16 4 2 5 3 6 4 7 12 5 13 5 14 6 5&6 10 7 4 8 9 9 6 10 4 11 7 Review or Exams 14 Total 100%

Percentage of Time 2% 5 6 8 12 10 8 6 10 6 6 7

Percentage of Time 2% 7 7 8 6 5 8 10 7 6 5 10 5

For students who have taken one term of elementary financial accounting immediately prior to this course. ** For students who have not taken elementary financial accounting recently. Students with no background in elementary financial accounting will have to spend more time on Chapters 15 and 16 than is suggested in the above tables. Use of Fundamental Assignment Material Some instructors may prefer to assign all the problems in either the A series or the B series of problems under "Fundamental Assignment Material". Each series includes a set of problems that covers the most important topics in the chapter. In addition to the A or B series, selected problems from "Additional Assignment Material" can be assigned as time allows. However, for those who wish to select particular problems in each chapter, some suggestions follow.

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Alternative 1, Sequence A Designed for one semester of 15 weeks with three 50-minute meetings per week. Note that longer semesters permit either more intensive or extensive coverage, depending on instructor preferences. Problem Assignments Normal: Based on No. of Approximately Two Hours Selected Additional Class of Homework Problems if Time Meeting Chapter in Text per session Permits 1 Introduction. See the section that follows shortly, "COMMENTS ON CHOICE OF PROBLEMS IN EACH CHAPTER." 2 Ch. 1 - Perspective A1, A3, 32 51 3 Ch. 2 - Excluding appendices A1, A2 (or 46) and A3 (or 32, 33, 40, 44, 45 B1, B2) and 30 (or 31) 4 Appendices to Ch. 2 58 or 59, 60 or 61 Any of 37-39, 56 or 59 or 62 5 Ch. 3 A1 & A3 (or B1 & B3) 47 6 Review Ch. 3 A2 or B2 57 7 Review Ch. 3 38, 51 53, 54 (appendix) 8 Ch. 4 (See discussion on p. A1 (or B1), A2, B2 32, 37, 40 xviii and Table A) 9 Review Ch. 4 A4 (or B3), 41, 42 10 Review Ch. 4 B4, 43, 44 49, 53 (Consider jump to Ch. 12) 11 Ch. 5 A1, A2, 47 (or 50 or 51) 57 12 Review Ch. 5 B2 40 or 43 13 Review Ch. 5 63 53 or 54, 59, 60, 61 14 Ch. 6 A4 (or B5 or 59) 64 15 Review Ch. 6 A1 (or 60), any of 45, 46, 57 49, or 50 16 Review Ch. 6 56, 65, (53 or B3), 68 66, any of 28, 29, 46, or 47 (Consider jump to Ch. 11) 17 Ch. 7 Start A1 or B1 30, 32, 33, 35 18 Review Ch. 7 Finish A1 or B1 37 19 Ch. 8 A1 (or B1 or 36 or 37) Any of 24-27 20 Review Ch. 8 A3 or B2, 43 Any of 29-31, 33 21 Review Ch. 8 44, 45 41, 47 22 Review Ch. 8 A2, B3, 39 32, 48 23 Review Ch. 8 50, 53 40 (Consider jump to Ch. 15)

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24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45

Chapter in Text Review for Exam *Test on Ch. 1 thru Ch. 8 Ch. 9 Review Ch. 9 Ch. 10 Review Ch. 10 Ch. 11 Review Ch. 11 Review Ch. 11 Review Ch. 11 Review Ch. 11 Ch. 12 Review Ch. 12 Review Ch. 12 Ch. 13 Review Ch. 13 Review Ch. 13 Ch. 14 Review Ch. 14 Review Ch. 14 Final review Final examination

Problem Assignments: Normal: Based on Approximately Two Hours of Homework per session A1 or B1, A2 or B2 A3, B3, 46, 49 A1 or B1, B2 A2, A3, A4 or B4, A1 or B1, 44 or 45 38 or 39, 60 49, 52 A3 (or B3), A4 (or B4), 69 46 or 47, 66 A1 or B2, B1 or A3 A2 or B3 A4 or B4 A1 or B1 A2 or B2, 32 A3 or A4, B3 or B4 A1 or B1, 23, 25 A2 or B2, A3 or B3 A4 or B4

50 48, 52 30, 40, 41, 42, 43 47, 50, 53 Any of 29-35 65 53, 71 A5 or B5 and any of 4043 53, 67, 68 39 or 40, 46 33 or 34, 41 and 43 (or 42 and 43), 44 and 45, 55 (extended case) 35, 36, 53 38 or 39 Any of 44-49 45, 46, 48, 69 Any of 24-27, 39 or 42 30-33, 43 48

*Some instructors devote time to discuss tests in subsequent sessions. We have found it more fruitful to hand out photocopied solutions (try using student solutions from the test) and have students do their checking not on class time. An alternative is to have students correct their tests and turn in the corrected tests to be graded as a homework assignment (for credit). See the later section, "PRESENTATION OF SOLUTIONS IN CLASS." Alternative 1, Sequence B This is the same as the above, except that many instructors may prefer to interweave product costing and corresponding material on planning and control. Assignments 35-40 may be used immediately after meeting 10. Furthermore, assignments 30 through 34 may be used immediately after 16, and assignments 41 through 43 may be used immediately after 23.

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Alternative 2, Sequence A Problem Assignments Normal: Based on Approximately Two Hours Selected Additional of Homework Problems if Time per session Permits A1, A3, 32 A1 or B1, 29, 328, 42, or 43 A2 or B2 or 35 A1 or 42, A2 or 49, A3 or 50, A4 or 51 59, 60 56 or 68, 69 A1 or B1, B3 A2 or B2, 35 A5, B5, 47 37 or 38 51 28, 33 A3 or B3 B1, B2, B3 41, 65, 67 55, 58, 71 A3, A4 48 50, 51

Chapter in Text Introduction Ch. 1 Perspective Ch. 15 - Basic Concepts Review Ch. 15 Ch. 16 Review Ch. 16 Appendix 16A Ch. 17, Part One Review Ch. 17, Part One Ch. 17, Part Two Appendix 17 Same as alternative 1, Sequence A, from session 3 thru 37, omitting sessions 17 and 18. Final examination

Students with no background in accounting will need to spend more time on Chapters 15, 16, and 17 than is suggested in the tables above. Some instructors may wish to omit parts of Chapters 16 and 17. Alternative 2, Sequence B This is basically the same as Alternative 2, Sequence A, except that those instructors who wish to cover the chapters on planning and control earlier in the course may prefer to delay sessions 7 through 11 until the end of the course. Moreover, the sessions for Chapters 10 and 17 may be deleted, whereas Chapters 7, 13, and 14 may be included. Other Possibilities Some instructors prefer to concentrate on a few chapters in greater depth and to delete other chapters. An example is expanding the coverage of activity-based costing to include cost-system design and use, multistage ABC, and integrating service-department allocation, product profitability, and customer profitability. When we use this approach, we delete Chapters 13 through 17 and occasionally Chapters 7 and 11. Other instructors prefer to cover all the chapters. To do so effectively, an instructor must obviously concentrate on the Normal Problem Assignments above and condense the number of sessions per chapter.

LINKING OF 13TH EDITION PROBLEMS TO THOSE IN THE 14TH EDITION Users of the 13th Edition of Introduction to Management Accounting may have favorite problems that they want to continue to use. To help select a problem in the 14th Edition that is similar, the following table links the problems in the two editions. The first column for each chapter lists the problem numbers from the 13th Edition, and the second column shows the corresponding problem in the 14th Edition.

Chapter 1

. Chapter 2 (cont.)

Chapter 2 (cont.)

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Chapter 3 (cont.)

. Chapter 4 (cont.)

Problems 14th Ed. --55 56 --58 59 60 A2 6-A2 A3 A4 B2 6-B2 6-B3 B3 23 25 26 27 28 29 30 36 37 38 39 6-35 6-36 40 41 42 43 44 45 46 47 49 50 51 52 53 54 55 Problems

Chapter 5 (cont.)

Problems 14th Ed. 56 57 58 6-51 6-52 6-53 59 60 61 62 -65 66 A1 A3 A4 5-A1 B1 B4 B5 B6 5-B1 24 25 26 27 5-24 28 29 30 31 32 33 34 37 38 39 40 41 42 43 44 5-31 5-32 5-33 Problems

A1 A2 A3 A4 B1 B2 B3 B4 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 Problems

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Chapter 6 (cont.)

Chapter 7 (cont.)

Chapter 8 (cont.)

9 8

10

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Chapter 10 (cont.)

13th Ed. B2 B3 B4 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 A1 A2 A3 A4 A5

14th Ed. B2 B3 B4 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 58 59 60 A1 A2 A3 A4 A5

Chapter 11 (cont.)

11

13th Ed. B1 B2 B3 B4 B5 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

14th Ed. B1 B2 B3 B4 B5 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 63 64 65 66

Chapter 11 (cont.)

13th Ed. 66 67 68 69 70 A1 A2 A3 A4 B1 B2 B3 B4 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

12

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Chapter 13

Chapter 13 (cont.)

Chapter 14 (cont.)

14

15

16

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Chapter 16 (cont.)

13th Ed. 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74

14th Ed. 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 73 74 75

Chapter 17

13th Ed. A1 A2 A3 A4 A5 B1 B2 B3 B4 B5 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54

14th Ed. A1 A2 A3 A4 A5 B1 B2 B3 B4 B5 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 53 54 55

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COMMENTS ON CHOICES OF PROBLEMS IN EACH CHAPTER Throughout the book, the "fundamental assignment material" contains two sets of problems, an "A" series (such as 1-A1 and 1-A2) and a "B" series (such as 1-B1 and 1-B2). To cover the basics of any chapter, you can assign either the "A" or the "B" series. To reinforce the basics or to explore issues in more depth, you can use items in the "additional assignment material". We especially encourage use of some of the cases. These are generally not overly long cases, but they allow discussion of material that is not straightforward. They are a good basis for class discussions. The cognitive exercises in each chapter are short and designed to cover issues across the various value chain functions and disciplines other than accounting. These exercises present an opportunity to explore the role of accounting in support of other disciplines such as marketing, production, and general management. There is a problem in each chapter based on Nikes 10-K report, a condensed version of which is included in the text as Appendix C. This is intended to give students experience finding publicly available information and using that information to make inferences about managerial accounting issues. The Excel application exercise in each chapter gives step-by-step instructions on how to use a spreadsheet to solve one of the chapters problems. Use of a few of these exercises throughout the quarter will help students who do not already have spreadsheet expertise. The collaborative learning exercise is designed for assignment to a group or for a class exercise. They will help students learn from one another. The Internet exercise at the end of assignment material gives students an opportunity to relate the concepts presented in the text to actual company experiences. These exercises require the use of company Web sites. The information and format of these Web sites change frequently so the instructor should review each exercise prior to assigning it. We especially encourage coverage of some of the ethics questions. There is at least one in each chapter. These provide a great basis for class discussion. Chapter 1: Managerial Accounting, the Business Organization, and Professional Ethics The distinctions between scorekeeping, attention directing, and problem solving are frequently subject to argument. We do not find such disputes fruitful, so we cut them short. Despite their fuzziness, these distinctions help the student to recognize that accounting is a rich discipline that is not confined solely to data accumulation. These issues can be explored using problem 1-A1 or 1-B1. Management by exception is covered in problems 1-A2, 1-B2, and 1-33. Problems 1-41 and 1-42 stress the cost-benefit approach to the design of systems. Problem 1-44 covers the value chain. We encourage the use of one or more of the following oroblems that cover ethics: 1A3, 1-B4, 1-37, 1-38, 1-47, 1-48, 1-49, and 1-51.

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Chapter 2: Introduction to Cost Behavior and Cost-Volume Relationships Problems 2-A1 and 2-A2 (or 2-B1 and 2-B2) cover the basic techniques, but any of 2-40 through 2-59 may be viewed as substitutes. There are plenty of good choices. Many instructors may prefer not to assign the appendices. Other problems in later chapters, such as 5-42 and 5-43 may be logically assigned in conjunction with Chapter 2. You may desire to examine Chapters 2 through 6 as a package before choosing particular assignments for each chapter. Chapter 3: Measurement of Cost Behavior Chapter 3 problems are designed with several purposes: (1) to measure fixed and variable cost behavior, (2) to stress the role of activity-based cost drivers, and (3) to predict costs with appropriate cost drivers. Problem 3-31 is a good, visual approach to cost behavior, and 3-39, 342, and 3-47 are different approaches to modeling cost behavior. Many of the problems involve non-output-volume-related cost drivers; these include 3-49, 3-52, 3-53, 3-54, 3-57, and 3-58. Problems 3-35, 3-37, 3-44, 3-45, 3-48, and 3-56 use cost behavior to predict costs. Several problems require least squares regression analysis: 3-52, 3-53, and perhaps 3-58. Two problems require understanding regression output but do not require the analysis itself: 3-42 (note there is an error in the first printing of the textbook for this problem: the + sign in the given regression equation should be a - sign so the equation should be Y = 7,810 - .47X) and 3-51. Chapter 4: Cost Management Systems and Activity-Based Costing This chapter has been revised significantly from the previous edition. The focus of the revision is on presenting ABC material in three stages (see Table A): fundamental concepts, design and use, and advanced concepts. Many instructors teach courses that are designed to give only an overview of the fundamental concepts of management accounting. What is needed for these courses is a straightforward coverage of ABC and ABM. For such courses, we strongly recommend the Fundamental Concepts coverage shown in Table A and included in the text of Chapter 4. We have class tested this structure and find that students grasp the main concepts of ABC and ABM within 2 or 3 50-minute lectures. For instructors wishing to extend ABC to cover the design and use of concepts, an additional 1-2 lectures covering Appendix 4 are required. Finally, for those who want a demanding and thorough coverage of ABC and ABM, Appendix 12 presents multi-stage processbased cost systems. This material is demanding and is designed for courses where students need to master ABC concepts. To cover the first half of the chapter, we suggest problems 1-A1, 1-A2, and 1-B2, possibly followed by 4-46 or 4-54. Our favorites for basic ABC are 4-A4, 4-B4, and 4-42. A long but excellent basic case is 4-54. Problems 4-51, 4-52, and 4-53 review chapters 2, 3, and 4 without using ABC. Many instructors prefer to insert Chapters 12, 13, and 14 immediately after Chapter 4. This can be accomplished without breaking continuity. We prefer not to cover the process costing section of Chapter 14 in an introductory course. There are too many other important and stimulating topics that deserve attention. Therefore, give serious consideration to omitting pages 649 - 664 completely, or perhaps you may wish to assign only pages 649 - 654.

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Text Fundamental Concepts Chapter 4 Describe the purposes of cost management systems. Explain the relationship between cost, cost objective, cost accumulation, and cost assignment. Distinguish between direct, indirect, and unallocated costs. Explain how the financial statements of manufacturers and merchandisers differ because of the types of goods they sell. Understand the main differences between traditional and activity-based costing ABC) systems and why ABC systems provide value to managers. Cost management systems Cost accounting systems Cost terms used when making strategic and operational control decisions Cost terms used for external reporting Traditional and ABC cost accounting systems Activity-based management Detailed illustration of cost allocation with several very similar exercises to reinforce understanding of fundamentals Business First example of ABC Making managerial decision boxes to emphasize key concepts Summary Problem for Your Review with detailed solution. Design and Use of ABC Systems Appendix 4 & Chapt. 12 Chapter 4: Design a cost accounting system that includes activity-based costing. Use activity-based cost information to make strategic and operational control decisions. Chapter 12: Integrate service department allocation systems with traditional and ABC systems to allocate total systems costs to product or service cost objects. Allocate costs associated with customer actions to customers. Chapter 4: Detailed illustration of twostage ABC design and use Process maps Strategic and operational cost control decisions using ABM Chapter 12: Design and use ABC to determine product and customer profitability Use ABC to set strategy to improve customer profitability Special graphics to aid learning Business First example of ABC Making managerial decision boxes to emphasize key concepts Summary Problem for Your Review with detailed solutions in both Chapters 4 and 12. Advanced (multistage) ABC Appendix 12

Learning Objectives

Topics

Key attributes of multistage ABC systems Illustration of multi-stage ABC Application of multi-stage with solution

Special graphics to aid learning Detailed illustration of multistage ABC Business First example of ABC Making managerial decision boxes to emphasize key concepts Summary Problem for Your Review with detailed solution.

1 50-minute lecture

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Chapter 5: Relevant Information for Decision Making with a Focus on Pricing Decisions Chapters 5 and 6 can help students learn much about how accounting data bear on decision making. Careful selection of assignment material in these two chapters is critical. Depending on the time available, our preferences in Chapter 5 follow: 5-A1, 5-A2, and 5-B2. Others that deserve special mention are 5-43, 5-49 through 5-51, and 5-61 and 5-62. The answer to 5-40 is obvious to most students, but it drives home a lesson to many students who are harder to convince. Problem 5-60 combines target costing and activity-based management. Problem 5-63 is a new problem that examines a hypothetical special order situation for Nike. Chapter 6: Relevant Information for Decision Making with a Focus on Operational Decisions Problem 6-A4 is a special favorite that we always follow up (see 6-60). Problem 6-58 is a practical example of 6-60. Problems 6-B5 and 6-B6 are shortened versions of 6-A4 and 6-60. Problems 6-45, 6-47, 6-49 and 6-50 are short items that warrant consideration. Cases 6-65 and 6-66 provide more opportunity for discussion. . Problem 5-68 is a new problem that examines a hypothetical outsourcing decision for Nike. Many instructors prefer to insert Chapter 11 immediately after Chapter 6. Chapter 7: Introduction to Budgeting and Preparing the Master Budget The exercises, 7-28 through 7-34, cover relatively simple elements of the master budget. The fundamental assignment problems, 7-A1 and 7-B1, are complete master budgets. Because these are time consuming, it may be best to build up to these with assignments that cover parts of the master budget if time permits. If computer literacy is part of the course objectives, problems 7-41 and 7-42 should be assigned. Also consider a group assignment to create a spreadsheet that reproduces the master budget in the summary review problem at the end of the chapter, with a ground-rule that only formulas, no numbers, can appear in any of the master budget cells. Chapter 8: Flexible Budgets and Variance Analysis If time is short or if you do not wish to emphasize calculation of detailed price and quantity variances, you may wish to assign only the first half of the chapter. Exercises 8-24 through 8-28 and problems 8-34 through 8-42 focus on flexible budgets without detailed variances. Most of these problems refer to textbook Exhibit 8-5, which provides a helpful template for solving this sort of problem. In addition, Case 8-53 introduces an activity approach to flexible budgeting that is worth considering given the current interest in activity analysis. Problems that require detailed variance calculations refer to textbook Exhibits 8-8 or 8-9, which are concrete examples and useful templates for variance analysis. These references aid students by giving them a framework for organizing data and developing problem solutions. Chapter 9: Management Control Systems and Responsibility Accounting

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Chapter 9 problems focus on setting goals and objectives, developing incentives, and measuring performance toward objectives. Goals and objectives are covered in 9-32, 9-36, 9-42, and 9-50. Incentives are covered in 9-34 and 9-44. Performance measurement is in 9-37, 9-43, 9-48, and 9-49. Case 9-50 combines strategic pricing issues, cost behavior, and productivity; it is not a long case, but it is thought provoking. Problems 9-35, 9-45 and 9-48 cover the balanced scorecard, and the relationship between strategy and key success factors. Chapter 10: Management Control in Decentralized Organizations Many instructors will want to delay assigning Chapter 10 until the end of the course. Chapter 10 is easily divisible into two separate parts, one on performance measurement including economic value added and residual income measures and one on transfer pricing. In any event, the material can be covered on either of two levels: a brisk survey, which would concentrate on 10-A1 and 10-A2 (or 10-B1 and 10-B3), and problem 10-40 (comparison of EVA and residual income measures), or a deeper study, which would necessitate more than one class session. There are several "nuts and bolts" problems: 10-A2, 10-A4, 10-B1, 10-B3, 10-27 through 10-30, and 10-34 through 10-36. Problems 10-29 and 10-43 deal with economic profit. Problems 10-30, 10-40, 10-41, and 10-42 cover economic value added. Problems 10-50 provides perspective on transfer pricing, while several other problems cover various transfer-pricing issues. 10-36 and10-53 cover multinational transfer prices. Problem 10-37 introduces agency theory. Case 10-55 (a special favorite) shows how the issues in Chapters 9 and 10 are closely related. We especially like 10-55 because it underscores the goal congruence and management effort aspects of designing management control systems. Too often, much material in this chapter is dismissed as being too "soft" or too qualitative for an accounting course. We disagree. We regard this chapter as the conceptual core of the course. It stresses the central questions that the designer of a control system must face, even though few pat answers are provided. Knowing what central questions to ask is an extremely important lesson for accountants and managers. Chapter 11: Capital Budgeting Many instructors want to introduce income taxes at the outset of capital budgeting. However, income tax considerations are not needed to grasp the essential ideas. The problem of determining what is relevant is far more imposing that any difficulties in using discounted cash flow tables. In addition to the fundamental assignment material, our favorite problems include 1160, 11-49, 11-51, and 11-52. Problem 11-52 is of special interest because it has negative operating cash flows under both alternatives but a positive incremental operating cash flow. Cases 11-65, 11-66, and 11-67 address investment decisions in the new manufacturing environment. Problem 11-53 might be assigned in conjunction with Problem 11-63. The "nuts and bolts" problems are 11-A1, 11-38, and 11-45 (or 11-B1, 11-39, and 11-44), 11-29 through 11-32, and 11-34. Taxes complicate capital budgeting but do not change the basic concepts. Problems 11-A3 and 11-A4 (or 11-B3 and 11-B4) provide the most efficient way to drive the major points home regarding income taxes and discounted cash flow, but 11-A5 (or 11-B5) should also be used if there is time. Problems 11-40 and 11-41 provide informative basic exercises. . Problem 11-69 is a new problem that examines a hypothetical capital budgeting context with taxes for Nike.

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Chapter 12: Cost Allocation Chapter 12 contains some technical details on cost allocation, and instructors who wish to avoid such detail can skip this chapter entirely. Those who desire an emphasis on ABC and ABM may want to use the new material on customer profitability (pages 539-548). Others may want to insert this chapter and Chapter 13 immediately after Chapter 4. Problem 12-A2 is comprehensive, covering the general framework for allocation, service department allocation, ABC, customer profitability, and process maps. Problems 12-A3 and 12B1 contain the important basic ideas of cost allocation. Problems 12-A1, 12-B2, 12-31, and 1249 compare direct and step-down methods of cost allocation. Problem 12-B3 presents the concepts of customer profitability incorporating the costs to serve. The newly constructed case 12-55 is a demanding, indepth case involving the design and use of ABC to determine both product and customer profitability. Activity-based costing is the focus of problems 12-31, 12-50, 12-51, and 12-52. Problems 12-41 through 12-45 illustrate and apply the chapter discussion for service-department cost allocation, process maps, ABC, and customer profitability. Choice of cost pools and allocation bases is covered in case 12-50, and case 12-51 presents multiple allocation bases. Joint product costs are the focus of problems 12-A4, 12-B4, 12-35, 12-36, and 12-53. Multistage ABC is the focus of problem 12-54. Chapter 13: Accounting for Overhead Costs This chapter may be assigned without assigning Chapters 12. However, Chapter 8 should precede Chapter 13. Assign this material carefully so that the student does some simple work first. Problems 13-A3 (or 13-B3), 13-A4 (or 13-B4 or 13-55), and 13-43 provide a basic introduction. Problems 13-44, 13-45, and 13-58 concentrate on essentials of absorption and direct costing. Cases 13-70 and 13-71 pursue the topic more deeply. The essentials of production volume variances are covered in 13-60. A recapitulation of all variances, as discussed in the first appendix, is presented in 13-48, 13-49, 13-67, and 13-68. Problem 13-64 covers the disposition of variances. Please note the overall tone of this set of problems. The emphasis is on an overall perspective, not on detailed intricacies of variance analysis. In particular, consider the lessons that can be learned from 13-56 and 13-71.

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Chapter 14: Job-Costing and Process-Costing Systems This chapter is organized into two distinct parts job-costing systems and process-costing systems. Job-costing systems. Job-costing systems may be assigned without assigning processcosting systems (a subject we prefer to omit). Job costing may be studied at two levels or more. The first level would be confined to 14-A1 or 14-B1, which cover the basic points. At this first level, 14-21 to 14-24, 14-28, and 14-39 might also be considered. There are many short straightforward exercises and problems. Consider 14-25, and 14-41. Nonmanufacturing situations are presented in 14-23 and 14-42. Process-costing systems. The second part of the chapter on process-costing systems also may be studied as three independent sections. For example, many instructors may confine their coverage to process costing basics and do not cover the effects of beginning inventories and backflush costing. The second section considers the effects of beginning inventories. Others will skip this second section but cover the last section, which introduces backflush costing. The assignment material is divided accordingly. Problems 14-A2, 14-B2, 14-32 through 14-35, and 14-45 through 14-47 cover the basics of process costing. Problems 14-A3, 14-B3, 14-36 through 14-38 cover the weighted-average method. Finally, problems 14-A4, 14-B4, and 14-48 cover backflush costing. SPECIAL NOTE ON CHAPTERS 15-17 Much of the assignment material in Chapters 15-17 is similar to that in this textbook's companion volume, Introduction to Financial Accounting. Students who have thoroughly studied that book will have little need to study Chapters 15-17 here, except as a review or to fill in gaps. For example, if there is time, many topics in the final two chapters of this book will deserve more careful study than may have been feasible in an earlier course. Consider intercompany investments, consolidations, and accounting for changing prices. Chapter 15: Basic Accounting: Concepts, Techniques, and Conventions This material can be used in a variety of ways, depending on the objectives of the course and the backgrounds of the students. For example, if we are teaching managers in a class on "financial accounting for non-financial executives," we usually assign either 15-A2 and 15-A3 (or 15-B2 and 15-B3). If we have more time, we also assign 15-A1 (or 15-B1), 15-28, and 15-29. For regular classes, we also like to assign 15-32 (or 15-33 if there is enough time) and 15-34. Problems 15-41 through 15-44 all help understand real published financial statements. The assignment material for Appendix 15B (15-36 through 15-40) permits a study of the mechanics of bookkeeping and provides a deeper study of the general concepts of the chapter. If there is little time, it is unnecessary to cover the appendix on ledger accounts. Subsequent chapters are not dependent on knowledge of T accounts. In sum, there is an ample supply of material that can be used for a quick survey or for a deep probing of basic accounting concepts and procedures. The amount of time devoted to the chapter will obviously depend on the instructor's purposes. xxiii

Chapter 16: Understanding Corporate Annual Reports: Basic Financial Statements Although this chapter was not formally divided into major parts, instructors can pick and choose if they prefer. For instance, some instructors may wish to assign only the early part of the chapter on the balance sheet and income statement. Consider the following pertinent assignment material that covers the highlights: 16-A1 (or 16-B1), 16-41, 16-42, 16-59 through 16-63. The statement of cash flows is covered in the fundamental assignment material (16-A2 through 16-A4, 16-B2 and 16-B3) and also by 16-43 through 16-53 and 16-64 through 16-67. To explore the basics of the statement of cash flows step-by-step see exercises 16-43 through 1646. Problems 16-47, 16-48, 16-50, 16-52, 16-53, 16-66, and 16-67 cover the indirect method. Appendix 16A is covered in 16-54 through 16-58 and 16-68 through 16-71. Problems 1656 and 16-68 are good basic problems that have solutions similar to first Exhibit 16-18 in the chapter. Chapter 17: More on Understanding Corporate Annual Reports Either Part 1 or Part can be assigned separately. Part 1 is a simple coverage of intercorporate investments, including consolidated financial statements. Because consolidated statements are so pervasive, we believe it is important for students to understanding the basic issues involved. We always take a few minutes in class to stress the highlights of the consolidated balance sheet and income statement in the two big exhibits in the chapter. Problems 17-B2 and 17-B3 may be the most serious candidates for homework assignments, with 17-A2, 17-A3, and 17-A4 as alternatives. Problem 17-35 provides a general overview of consolidated financial statements. Problems 17-31, 17-32, 17-45, and 17-46 cover goodwill. Problem 17-49 provides an especially good context to discuss ethics. To cover financial ratios, consider 17-A5, 17-B4, 17-B5, 17-36, and 17-48. We cover financial ratios only if the finance course does not. Problems 17-37, 17-38, 17-50, and 17-51 cover Appendix 17. Problem 17-38 has a solution similar to Exhibit 17-9 of the text. When inflation is covered, there is a danger of getting too enmeshed in the details of how the four major methods differ. Some time should be devoted to the measuring of the differences, especially the strengths and weaknesses of the historical cost/constant dollar method in comparison with the other methods.

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PRESENTATION OF SOLUTIONS IN CLASS Instructors have a variety of views regarding the use of classroom time for homework solutions. Most instructors put solutions on a chalkboard or use overhead projectors. In turn, many students frantically copy the materials in their notes. Our practice is to reproduce the printed homework solutions for distribution either before, during, or after the discussion of a particular solution. The members of the class are glad to pay a modest fee to the school to cover the reproduction costs. In this way, students can spend more of their classroom time in thinking rather than writing. Furthermore, they have a complete set of notes. Some instructors object to this procedure because it provides students with a "file" that can be passed along to subsequent classes. Students in subsequent classes will then use the "file" to avoid conscientious preparation of homework. There will always be some students who hurt themselves by not doing homework in an appropriate way. Why should the vast majority of students be penalized by withholding the printed solutions? The benefits of using printed solutions clearly outweigh the costs; we no longer fret about the few students who beat the system (and themselves). Similarly, we distribute printed solutions to tests and examinations along with a summary of overall class performance. We do not devote class time to discussing these solutions. The students deserve feedback, but they have sufficient motivation to scrutinize the printed solutions and check their errors on an individual basis. In this way more class time is available for new material. If students have complaints about grades, we usually ask them to cool off for 24 hours and then submit a written analysis of how they were unjustly treated. We take these complaints in batches, regrade the papers, and return the papers. If the student then wants to have a person-toperson discussion of the matter, he or she is welcome to see us. This procedure may seem too impersonal, but we recommend it to those teachers (like us) who have been through some painful debates that have been inefficient and frustrating for both student and teacher. Incidentally, key numbers from the solutions to each problem, which begin on p. xxix of this solutions manual, are available in quantities without charge from Accounting Editor, Prentice-Hall, Inc., Upper Saddle River, New Jersey 07458. Some instructors may wish to distribute these to the class at the start of the course.

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CONDUCTING THE COURSE From time to time we have received inquiries regarding how we teach a course in management accounting. The following "Notes on Classroom Procedures" explains our philosophy, and it can be handed out to students at the start of a course: Notes on Classroom Procedures The following describes my general teaching style. I am placing this description in writing to avoid any misunderstanding; in the past, a few students have been misled about why I operate classes in a particular way. In my view, the most effective and efficient use of classroom time aims at reinforcing or clarifying what the student has tried to learn on an individual basis (or sometimes a group basis) before entering the classroom. Therefore, optimal learning is achieved by (a) wholehearted preparation via studying the assigned readings and solving the assigned problems or cases; (b) discussion of the material by the students and teacher in class; and (c) the instructor's underscoring of the most important points via comments or short lectures (lecturettes). I rarely give lectures per se. My lectures are in the text or the readings. Obviously, problems or cases are not ends in themselves; instead they are the means of focusing on central issues, concepts, or knowledge. Given the foregoing, the success of this course depends on adequate preparation for classes by both students and teacher. It also requires participation during class--always participation of the mind and occasional participation of the mouth. Throughout the term, a variety of helpful questions arise from a variety of students. As in all situations throughout life, some individuals naturally speak more often than others. (We all realize that there is no necessary consistency between lots of talk and lots of comprehension of the subject matter.) I use a call list for two major reasons: (a) to get acquainted with all the students in class so that I can at least link faces with names; and (b) to provide motivation and ensure widespread participation. From time to time, you may come to class unprepared for a variety of reasons. In such instances, if you want to preclude the possibility of being called on, simply put your name on a slip of paper on the front desk before the session begins. In this way, everybody wins; I don't enjoy calling on students who are unprepared.

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Unless otherwise specified, no assignments need to be handed in. However, as you know, the best preparation entails writing solutions and answers. Your contribution to the class via your solutions, comments, and questions is an essential part of the course. If you are absent from a particular class, you should hand in your solutions at the subsequent class. This requirement encourages an active rather than a passive role in the course. Some of you may have unusually severe anxiety about being called on in class. If so, please see me after class during the first week of the quarter to discuss alternate arrangements. My use of a call list is not intended to be a terror tactic.

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KEY AMOUNTS FROM SUGGESTED SOLUTIONS TO SELECTED PROBLEMS For Students' Use in Checking Their Own Solutions Introduction to Management Accounting, 14th Ed. Horngren, Sundem, Stratton, Schatzberg, and Burgstahler

Chapter 1 1-A2 Tot. var., $175U 1-B2 Actual, $14,340 1-B3 1. Controller 1-30 2, 4, 5, 6 Marketing Chapter 2 2-A1 1. 95,750 2-A2 1. 25,000; $25,000 2-B1 2. $64,600 2-B2 1. 1,000 2-B3 1. $1,220 2-28 3. Sales, $940,000 2-29 1. Net inc., $80,000 2-34 1. $60,000,000 2-35 2. 80,000 rooms 2-36 1. $28 2-37 2. 41,143 2-38 2. 66,000 2-39 $1,700,000 2-40 1. $76,100 2-41 $1,100,000 2-42 2. P & G $5,100,000 2-43 1. $468 2-44 2. 1,010,989

2-45 2-46 2-47 2-48 2-49 2-50 2-51 2-52 2-53 2-54 2-56 2-57 2-58 2-59 2-60 2-61 2-62 2-63

2. $77,000 1. 3,500 1. 32.5 Operating income $16,758 1. $1,100 1. $71 million 1. $104 per day 2. 21.8% 1. $4,634 1. 40,000 1. $140,000 1. 225,000 2. 52.5% 1. a 1. 15,000 1. Old, $20,000; New, $60,000 1. B-E: L, 170; D, 85 1. 283,125

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Chapter 3 3-A1 1. b; 3. a; 5. d; 7. b; 9. a;11. b 3-A2 1. Sign A, $180 and $80 3-A3 1. Var., $5.00 3-B2 Act. anal., Z15, $64 3-B3 FC, $80,000,000/month 3-32 2. B 3-34 1. 2001, $76 million 3-35 1. $3,400/month 3-36 Disc., $85,000 3-37 B-E, 50,000 orders 3-38 2. Var., $2.22/unit Chapter 4 4-A1 Small Std. $35,600 4-A2 2. Tot., $146,000 4-A4 1. Company GP 13.73% 2. Cell-Phone Casings GP 6.58% 4-B1 Hand Tool parts $88 4-B2 3. a. $6/MH b. $15/DLH 4-B3 1. Company GP 17.4% 2. Cell-Phone casings GP 17.81% 4-B4 1. Slim, $16,250 4-37 1. D, V 4-39 1. b, f 4-40 2. U Chapter 5 5-A1 2. $337,000 5-A1 2. Inc. in op. income 41.8% 5-A3 2. 50% 5-B1 2. $2,438,000 5-B2 4. $150,000 decline 5-30 Difference, $53 5-31 2. $180,000 5-32 c. 115,000,000 5-33 k. $170,000,000 5-34 Sales, ZAR900,000 5-35 3. $90,000 5-36 1. $300 increase 5-37 3. a. 150 5-38 1. 250

3-41 3-44 3-45 3-48 3-49 3-50 3-52 3-54 3-55 3-57

Var., 20/ton 2. $3,000 fixed cost/week 1. Var., $10,400U Projected income $4,000 1. Act. anal., Blooms, $3,960 2. $4,280.50 3. $287.68 2. a. # of boards, $149,133 2. $12,650 2. 2006, $174.32/employee

4-41 4-42 4-43 4-44 4-46 4-47 4-49 4-51 4-52 4-53 4-54 4-55

GM, Pen Casings, $33,900 1. Std., $224 Process other trans., $159,000 1. Retail, $98.46 2. Alpha, $112,700 Tot. Cost, $13,725 Gross margin, ($3,575) d. Breakeven $122,727 c. 3,000 Won 2. $7,000 1. S, 2,033,500 3. b. Ret., $1,672.50

5-39 5-42 5-43 5-44 5-45 5-48 5-50 5-52 5-54 5-55 5-56 5-57 5-59 5-61

1. c. $26.80 1. $10 1. 150% 3. $201,600 $3,480,000 a. 111,000,000 1. With, 101,200 1. 548,334 1. Op. inc. @300,000, $210,000 1. 2nd option by $20 1. Increase 1,500 1. $5 1. $32.40 1. $1,550,000

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Chapter 6 6-A1 3. $68,000 6-A2 1. Plain: $20, 28.6% 6-A3 1. $44,000 6-A4 1. $37,000 6-B1 1. Difference, 3.75/unit 6-B2 1. XY-7, 4/5 hour 6-B4 1. $300 6-B5 Difference, $10,000 6-32 1. Difference, $20,000 6-36 1. SFR 1,200 decrease 6-38 1. a 6-39 1. $100 6-40 1. Difference, $3,000 6-41 2. $20 6-42 $20,260 6-44 2. $21,600 Chapter 7 7-A1 1. Net inc., $30,860; cash bal., 8/31, $25,360 7-B1 1. Net inc., $14,367; cash bal., 3/31, $30,992 7-26 2. Sales 7-27 $860,000 7-28 1. $1,648,000 7-29 3. $495,000 7-30 July collections, $431,000 7-31 March collections, 230,400,000 7-32 $403,300

6-45 6-46 6-47 6-48 6-49 6-50 6-53 6-54 6-56 6-57 6-59 6-61 6-63 6-64 6-65 6-66 7-33 7-34 7-35 7-36 7-37 7-38 7-43 7-44 7-45 7-46

2. 2. 1. 1. 1. 1. 2. 1. 1. 3. 1. 3. 2. 2. 2. 2.

63.64% 60% Difference, $50,000 $312,000 With, $4,660,320 With, $9.07 $2.40 48,600 $168,000 24,000 units Difference, $2,000 a. 525/show $850,000 $300 $9.75 50,000 units

July purchases, $260,000 1. $33,000 Cash, 6/30, $31,000 Cash, 4/30, $166,300 Cash, 10/31, $13,115 2. $686,340 2. Inc., $575,000 3. $1,476,000 2. Total, $13,986,700 2. Income, 10% revenue increase $1,794

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Chapter 8 8-A1 2. $980,000 + $.80X 8-A2 Sales-Activity var., $7,500U 8-A3 2. Mat. quantity, $750U 8-B1 2. Flex.-bud. var., $3,500U 8-B2 1. Lab. price var., $22,500F 8-B3 2. 117,000 hours 8-24 $411,800 8-25 @40,000, $14,400 8-26 Dir. mat., $8/unit 8-28 Flex.-bud. var., $14,500U 8-29 Mat. price var., B39,500F 8-30 1. $14.62 8-31 Lab. usage var., $4,200U 8-32 1. 12,700 hours 8-33 Mat. usage var., $2,500F 8-34 Sales-act. var., $1,080,000U 8-35 Tot. flex.-bud. var., $3U

8-36 8-38 8-39 8-40 8-41 8-43 8-44 8-45 8-46 8-47 8-48 8-49 8-50 8-52 8-53 8-54

1. Act. op. inc., $134,400 1. Sales-act. var RMB760,000F 2. Flex bud. Var. $9,900U 1. Quantity var. , $1,200U Tot actual, $14,982 Labor usage var., $4,000U 1. e. 5,500SFR U 2. Lab. price var., $870F 1. Mat. pr. var., $5,400F 1. a. DM Quantity, $800U Tot. cost, $204.40 Dir. mat., $52.704 1. a. $9,200U 2. $(10,680) 1. Flex.-bud. var., $11,000U 2. Flex.-bud. var., $12,200F

Chapter 9 9-A2 Littleton seg. cont. $145,000 9-A3 1. 2007, Bohn, $126,864/emp. 9-B2 Div. 2 seg. cont. ($400,000) 9-34 1. C, March, 413,500 9-38 1. Duluth cont., $105,000 Chapter 10 10-A1 3. Beta, $66,000 10-A2 1. $40,000 disadvantage 10-A3 $26,000 advantage 10-A4 1. a. $4.50 10-B1 1. b. ROI, 33% 10-B2 2005, $2,626 million 10-B3 $3.35 per gallon 10-B4 1. c. 5.72% 10-27 2. 5.0% 10-28 A. 18% 10-29 3. Y, $26,000 10-30 1. 2006, $(87,938,000) 10-31 1. b. Laurel, 28% 10-32 1. J, ROI, 28% 10-33 1. 20% 10-34 1. a. Overall, $13.00

1. 2. 1. 1.

10-35 10-36 10-38 10-39 10-40 10-41 10-42 10-43 10-44 10-47 10-50 10-51 10-53 10-54 10-57

2. $10 if excess capacity 1. 400 2. Baker, ROI, 3% 1. a. Pub./Info., 17.3% EVA, $(87,938,000) 2005, $329,000,000 1. $2,252,050,000 1. Tools, ROA, rep. cost, 17.3% 1. a. Plant, 10% 2. Yes, $750,000 advantage 2. $78.72 if idle capacity $23 to $39 1. $35 saved 1. $24,000 increase 2006, ROI, US, 44.9%

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Chapter 11 11-A2 $28,240 11-A3 1. $(16,318) 11-A4 1. $(104,189) 11-A5 a. $65,000, Cash up $59,000 11-B1 1. a. $13,335.00 11-B2 $100,634 11-B3 1. $(12,060) 11-B4 2. $3,095 11-B5 1. Cash inflow, $14,000 11-29 1. b. $25,459 11-30 1. $409,800,000 11-31 2. a. $376,440 11-32 1. $371,379 11-33 $1,216,800 11-34 NPV, 20 yrs., $2,225 11-35 $7,972 11-36 1. $67,808 11-37 2. 12%. 11-38 2. $4,069 11-39 1. $6,862 11-40 Net inc., $56,000 11-41 $520,000 11-42 2. 2007, $1,280 11-43 a. $67,570 11-44 2. $1,114 Chapter 12 12-A1 2. Tot., machining, $1,872,864 12-A2 4. Display type A, $16.27 12-A3 1. Northern, $6 million 12-A4 2. B, $7,680,000 12-B1 1. Business, $72,000 12-B2 3. a. $10.45 12-B3 2. Cust. type 1, 64% 12-B4 2. Oat bran, $200,000 12-29 2. $1,770 12-30 2. Sunnyville, $60,000 12.31 2. Res., $401,159 12-32 2. Assembly, $868,096 12-33 2. Cust. Type 2, 33% 12-34 2. Cust. Type 3, 25.2% 12-35 2. B, $150,000 12-36 2. B, $240,000 12-37 3. $1,060,000 12-39 1. $.40

11-45 11-46 11-47 11-48 11-49 11-50 11-51 11-52 11-53 11-54 11-55 11-56 11-57 11-58 11-59 11-60 11-61 11-63 11-64 11-65 11-66 11-67 11-68 11-71

2. $2,240 1. $12,229 2. $75,838 2. Difference, $(15,994) Difference, $9,357 NPV, $22,552 Difference, 17,800 1. $21,000 2. 45.2 trips 2. $11,810 1. $(1,362) $9,735 NPV, $46,864 6. 87,897,000 3. $35,878 1. $11,069 1. $28,936 1. NPV, $11,697 2. $782 1. NPV, Skr 238,660 2. $5,034,375 NPV, $352,078 Alt. C, NPV, $(209,117) Exp. NPV, ($558,070)

12-40 12-41 12-43 12-44 12-45 12-46 12-47 12-48 12-49 12-50 12-51 12-52 12-53 12-54 12-55 12-56

4. To North, $562,500 Whole company, $688,740 Customer type 1, $379,500 2. Specialty stores, $316,000 2. Specialty stores, Cust. Profitability, 11.5% 1. Childrens, $6,300 3. M1, $183.32 3. M1, $182.92 3. $7.25 1. Model 1, 12,020 1. $24,075 1. $1,488 2. To A, op. prof., $112 1. Residential, $3.5258 1. Cust. Type 1, GP % 35% 1. $216,750

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Chapter 13 13-A1 3. $775 13-A2 1. Underapplied, $8,000 13-A3 1. $10,000 13-A4 Gross margin, $1,960 13-B1 2. Lower by $10,000 13-B2 2. $20.00 13-B3 2. $1,000 13-B4 Absorption op. inc., $447,000 13-38 Applied OH, $408,000 13-39 61,000 direct labor hours 13-40 2. b. $350,000 13-41 Case 2, underapplied, $17 13-42 No proration, $22,000 lower 13-43 Var. cost net income 20X9, $21 13-45 1. $3,000 13-46 1,290,000 unfavorable 13-47 1.c. $11,000 13-48 Efficiency variance, 400U 13-49 Flexible-budget variance fixed, 1,500F 13-50 2. $384,017 Chapter 14 14-A1 2. WIP, $55,000 14-A2 2. WIP, $11,400 14-A3 2. WIP, $304,000 14-B1 2. WIP, 29,000 14-B2 2. WIP, $675,000 14-B3 WIP, $3,968 14-21 2., 11 14-22 2., 14 14-25 1. Cost of houses sold, Oct., $605,000 14-26 WIP, $5,000,000

13-51 13-52 13-54 13-55 13-56 13-57 13-58 13-59 13-60 13-61 13-62 13-63 13-65 13-66 13-67 13-68 13-69 13-70 14-27 14-28 14-32 14-33 14-36 14-40 14-41 14-42 14-45 14-46 14-47

2. $350,727 3. First Valley, $39,375 Last 6 months, $31,500 under Under absorption, $6 increase 1. 20X5 variable cost net income, $100 1. 20X5 variable cost net income, $100 1. Absorption op. inc., $122,000 1. Absorption op. inc., $228,400 5. Fixed OH prod.-vol. var., $2,400F 4. $75,000,000 2. Flex. bud. var., $27,000U 1. Base c, 20X6, $13 e. $1,146,500 1.b. $45 Efficiency var., $3,600U Prod.-vol. var., 1,200U Tot. mfg. cost, $95.03 2.b. 270,000 Finished goods, $32,000,000 Case C, $6 per machine hour WIP, $1,069,200 WIP, $38,220 Conversion, 91,000 COGS, $884,000 4., $53,500 2., $31.25 3. $1,920,000 WIP, 132,000 WIP, 113,000

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Chapter 15 15-A1 A, $25,000; H, $40,000 15-A2 2. Net inc., $7,000 15-A3 $50,000 15-B1 A, $2,145.2 million 15-B2 2. Net earn., $60 million 15-B3 $460,000,000 15-27 1. F 15-32 3. B179,000 15-33 2. X, $3,000; Y, $6,000 Chapter 16 16-A1 Add. PIC, $121,000 16-A2 Cash from op. act., $254,000 16-A4 1. Net inc., $95,000 16-B1 Accounts Payable, $2,249 mill. 16-B3 $4,451 million 16-41 Tot. assets, 2,680 16-42 L.-T. inv., 15,000 million 16-43 $751,000 16-44 $408,000 16-45 $65,000 16-46 Cash from op. act., NK251,000 16-49 Cash from op. act., $215,000 16-51 Net inc., $20 million 16-52 Cash from op. act., $70 million 16-53 1. Cash from op. act., $28 mill. Chapter 17 17-A2 2. Consol. op. inc., $95 million 17-A3 2. Consol. net inc., $93 million 17-A4 2. b. $3 million lower 17-A5 1. a. $60 million 17-B2 2. Consol. op. inc., $500 mill. 17-B3 1. $192,440,000 17-B4 1. a. 4,639 17-B5 1. 1.92 17-29 $43 million; $50 million 17-30 2. Consol. net inc., $290,000 17-33 1. $122 million 17-34 1. Tot. assets, $490 million

2. Net inc., $7,900 1. Accrual op. inc., $62,200 1. Cr. 5, 8, 9. T a. $719,700,000 1. a. Net inc., $2,533 million Net earn., $1,351.4 million 1. Rev., 8.8%

16-54 16-55 16-56 16-57 16-58 16-59 16-61 16-63 16-64 16-66 16-68 16-69 16-70 16-71 16-72 17-35 17-36 17-37 17-38 17-41 17-43 17-44 17-45 17-46 17-47 17-48 17-50

1. a. $14,650 12/31/20X1, $75,000 LIFO, GM, $90,000 1. b. EPS, $.175 1. LIFO, GM, $224,000 2. $12.5 million 1. $345,288,000 Gain, $5,538,000 a. Financing Cash fr. op. act., $80,426,000 2. a. Lower, $184 LIFO, taxes $96 lower 1. Op. Inc., $9.0 billion 2006 op inc., $1,584 million 2. 15% Consol. net inc., $135 million 1. b. 20X2, 6.3% 1. Hold. gain, CC/ND, $50,000 CC/CD, inc. fr. cont. ops., $300 2. $3,661 million 1. 1,205,000,000 1. $(10,567) million 2. $2.97 billion less 2. $2,534.8 million 1. 7.532% 2. a. 1.16 1. c. HC/CD, $1,172.6 million

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