Solutions Manual

COST
ACCOUNTIN
G
Solutions Manual
Upper Saddle River, NJ 07458
This work is protected by United States copyright laws and is provided
solely for the use of instructors in teaching their courses and assessing
2012 Pearson Education, Inc. Publishing as Prentice Hall
COST
ACCOUNTIN
G
Fourteenth Edition
Charles T. Horngren
Srikant M. Datar
Madhav Rajan
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10 9 8 7 6 5 4 3 2 1
ISBN-13: 978-0-13-210921-5
ISBN 10: 0-13-210921-2
TABLE OF CONTENTS
Preface v
Supplements Available for Fourteenth Edition ix
Alternative Suggested Chapter Sequences xiii
Categorization of Assignment Material xvii
Presentation of Solutions xxxi
Major Changes in ext for the Fourteenth Edition xxxiii
Changes in Assignment Material for the Fourteenth Edition xxxvii
Chapter Solutions
! he Manager and Management Accounting !"!
# An $ntroduction to Cost erms and Purposes #"!
% Cost"&olume"Profit Anal'sis %"!
( )ob Costing ("!
* Activit'"+ased Costing and Activit'"+ased Management *"!
, Master +udget and -esponsibilit' Accounting ,"!
. Flexible +udgets/ 0irect"Cost &ariances/ and Management Control ."!
1 Flexible +udgets/ 2verhead Cost &ariances/ and Management Control 1"!
3 $nventor' Costing and Capacit' Anal'sis 3"!
!4 0etermining 5o6 Costs +ehave !4"!
!! 0ecision Ma7ing and -elevant $nformation !!"!
!# Pricing 0ecisions and Cost Management !#"!
!% Strateg'/ +alanced Scorecard/ and Strategic Profitabilit' Anal'sis !%"!
!( Cost Allocation/ Customer"Profitabilit' Anal'sis/ and Sales"&ariance Anal'sis !("!
!* Allocation of Support"0epartment Costs/ Common Costs/ and -evenues !*"!
!, Cost Allocation8 )oint Products and +'products !,"!
!. Process Costing !."!
!1 Spoilage/ -e6or7/ and Scrap !1"!
!3 +alanced Scorecard8 9ualit'/ ime/ and the heor' of Constraints !3"!
#4 $nventor' Management/ )ust"in"ime/ and Simplified Costing Methods #4"!
#! Capital +udgeting and Cost Anal'sis #!"!
## Management Control S'stems/ ransfer Pricing/ and Multinational Considerations ##"!
#% Performance Measurement/ Compensation/ and Multinational Considerations #%"!
v
vi
PREFACE
he 7e's to the success of a course in cost accounting are the assignment and discussion of
provocative problem material: he gathering of high"qualit' assignment material has been a
crucial phase of this boo7;s preparation < not a painful afterthought:
Please revie6 the preface in the text in conjunction 6ith examining the suggestions in this
Solutions Manual: Please also read all the front matter of this manual:
Anna )ensen/ +arbara 0urham/ Anna )ensen and Shalin Shah assisted us greatl' 6ith
contributing/ critiquing/ and chec7ing of the problems and their solutions: =e than7 them for
their man' 6onderful contributions:
=e deepl' appreciate the tremendous support of Caroline -oop/ Aim>e 5amel/ and Shalin Shah:
heir abilit' to cheerfull' respond to the man' challenges made our tas7s much more
manageable: =e further appreciate the technical support for data anal'sis provided b' 0e?ett
@a6:
=e are than7ful to Stephanie =all and Christina -umbaugh at Prentice"5all for providing
continual support in preparing this Solutions Manual:
C5A-@ES : 52-AB-EA
S-$CAA M: 0AA-
MA05A& &: -A)AA
vii
viii
SUPPLEMENTS AVALABLE FOR T!E FOURTEENT! E"TON
A complete pac7age of supplements is available to assist students and instructors in using
Cost Accounting: A Managerial Emphasis
M#A$$%&'(i')La*+ for 5orngren Cost Accounting !(e
M'Accounting@ab is an online home6or7 and assessment tool/ designed to help students
practice cost accounting problems and concepts/ and give their instructors feedbac7 on their
performance: $t lets cost accounting professors assign a home6or7 deliverable that is
automaticall' graded/ but that also serves as a tutorial experience for students:
+ased on Pearson;s MathD@ platform that has graded over millions of assignments/
M'Accounting@ab provides a strong/ reliable platform 6ith a roc7 solid performance histor': o
learn more visit ,,,-.#a$$%&'(i')la*-$%.:
F%r '/(r&$(%r/
'/(r&$(%r Re/%&r$e Ce'(er 0RC1
hese pass6ord"protected resources are accessible from ,,,-pear/%'2i)2ered-$%. for Cost
Accounting/ !(
th
ed: -esources $nclude8
$nstructor;s Manual
est $tem File
est Ben E9EA computerized test item file:
Solutions Manual
$mage @ibrar'EAccess to most of the images and illustrations featured in the text:
Excel @abs and their solutions: Also included are the Excel files of the figures and tables
in the text:
Complete Po6erPoint Presentations
AE= Po6erPoint slides of full'"6or7ed"out solutions for selected problems:
Support for +lac7board and =ebC courses
'/(r&$(%r3/ Ma'&al
+' Sheila 5and'
F #4!# G 4"!%"#!43#(". G 2nline
Chapter b' chapter manual offers helpful classroom suggestions and teaching tips
Te/( (e. File
F #4!# G 4"!%"#!43##"4 G 2nline
his collection of tests for each chapter offers an arra' of questions ranging from eas' to
difficult: An electronic version of these questions is also available: he Test Item File no6
supports Association to Advance Collegiate Schools of +usiness HAACS+I $nternational
Accreditation:
ix
S%l&(i%'/ Ma'&al
F #4!# G 4"!%"#!43#!"# G Paper
his manual contains the full' 6or7ed"out and accurac'"chec7ed solutions for ever' question/
exercise and problem in the text:
P%,er P%i'( Pre/e'(a(i%'/
F #4!# G 4"!%"#!433."# G 2nline
Chapter b' chapter presentations that provide 'ou 6ith a slide sho6 read' for classroom use: Jse
the slides as the' are/ or edit them to meet 'our classroom needs:
F%r S(&de'(/
S(&de'( S(&d# 4&ide
b' )ohn C: 5arris
F #4!# G 4"!%"#!43#4"( G Paper
his chapter"b'"chapter learning aid effectivel' helps students learn cost accounting and get the
maximum benefit from their stud' time: Each chapter provides a Chapter 2vervie6 and -evie6/
a Featured Exercise that covers all of the most important chapter material/ and -evie6 9uestions
and Exercises 6ith Solutions that best test the students; understanding of the material:
S(&de'( S%l&(i%'/ Ma'&al
F #4!# G 4"!%"#!43!3"4 G Paper
his manual contains the full' 6or7ed"out and accurac'"chec7ed solutions for selected end"of"
chapter problems in the text:
E5$el Ma'&al 6%r C%/( A$$%&'(i')
+' @aurie +urne' and Michelle Matherl'
F #4!# G 4"!%"#!43!1# G Paper
his brief supplement is aligned to bring students up to speed 6ith using Excel in this course:
S(&de'( "%,'l%ad Pa)e 777 !%r')re'
URL+ ,,,-pear/%'2i)2ered-$%.82%r')re'
2ur Companion =ebsite provides students 6ith chapter learning objectives and chapter b'
chapter self"stud' quizzes:
""" F%r S(&de'(/+ Excel templates for selected and <of"chapter exercises and problems
Hmar7ed 6ith an iconI are available online: hese templates allo6 students to complete
selected exercises and problems using Excel: he Focus is on having students use Excel
to understand and appl' chapter content: his Excel"based learning is completel'
optionalK therefore/ students ma' choose to solve these exercises and problems manuall':
he Excel @abs can be found on the $nstructor;s -esource Center H$-CI:
x
ALTERNATVE SU44ESTE" C!APTER SE9UENCES
he Preface to Cost Accounting noted that our aim in organizing the material 6as to present a
modular/ flexible organization that permits a course to be custom tailored: his section presents
six possible sequences for a first course in cost accounting: For each of these six sequences/ 6e
also present the sequence of a second course that 6ould result in coverage of man' or all of the
topics in Cost Accounting: 2utlines $<& all include Chapters ! to 3 in var'ing orders of
sequence: 2utline &$ has a strong Halmost exclusiveI focus on the decision ma7ing role of cost
accounting:
=e anal'zed the sequences of chapters assigned b' man' users of the !%th edition: Although
man' instructors tended to follo6 the sequence in the text/ other instructors tailored sequences to
fit their particular desires: hese tailored sequences varied considerabl': +' far the most popular
departure 6as to assign the chapter on process costing HChapter !.I immediatel' after the
coverage of job costing HChapter (I and activit'"based costing HChapter *I: he next most
popular departure 6as to assign Chapter !4 after Chapter # or %: All the accompan'ing
alternative assignment schedules have an optional provision to facilitate tailoring a course:
2bviousl'/ instructors should alter an' suggested sequence to suit their preferences:
2J@$AE $8 his basic course provides a balance of topics bet6een the major purposes of cost
accounting8
!: Calculating the cost of products/ services/ and other cost objects:
#: 2btaining information for planning and control and performance evaluation:
%: Anal'zing relevant information for ma7ing decisions:
Finishing the first course 6ith Chapters !! and !# means that topics 6ith less procedural
emphasis are highlighted in the last 6ee7s of the courseK these t6o chapters also introduce topics
covered in more detail in a second course: Some instructors ma' assign Chapter !4 6ithout using
the Appendix on L-egression Anal'sis/M preferring to dela' use of the Appendix until the second
course Hespeciall' if man' students have not been exposed to regression anal'sis at the time of
the basic courseI:
2J@$AE $$8 his basic course covers the same chapters as 2utline $/ but assigns Chapter !4
H0etermining 5o6 Costs +ehavesI immediatel' after Chapter % HCost &olume"Profit Anal'sisI:
$t also assigns the ne6 Chapter !% on Strateg'/ +alanced Scorecard/ and Strategic Profitabilit'
Anal'sis: his first part of the Second Course emphasizes cost management and performance
evaluation before covering the six chapters H!(<#4I on cost allocation and other aspects of
costing s'stems:
2J@$AE $$$8 After covering Chapters ! to 3 and !! in the basic course/ this sequence finishes
6ith a chapter on strategic issues HChapter !%I and t6o chapters on cost allocation topics
HChapters !( and !*I: Some instructors vie6 it as important that students ta7ing onl' one cost
accounting course become a6are of ho6 pervasive cost allocation issues are in practice:
2J@$AE $&8 his basic course is similar to 2utline $$ 6ith one 7e' exceptionK Chapter !.
HProcess CostingI is covered immediatel' after Chapter *: Man' instructors prefer to cover job
costing and process costing in sequence so that their differences are highlighted:
xi
2J@$AE &8 his basic course emphasizes technical cost accounting topics more than the other
five outlines: Chapters !. and !1/ extend Chapters ( and *K covering (/ */ !./ and !1/ as a single
section of the course provides students 6ith a solid understanding of product costing alternatives:
2J@$AE &$8 his basic course is adopted b' instructors 6ho 6ish to put most emphasis on the
decision ma7ing and performance evaluation aspects of cost accounting: Finishing the basic
course 6ith Chapters ## and #% means that behavioral issues are highlighted in the final 6ee7s of
the course:
xii
OUTLNE OUTLNE OUTLNE
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OUTLNE V OUTLNE V OUTLNE V
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xiv
CATE4OR:ATON OF ASS4NMENT MATERAL
he assignment material in the fourteenth edition has been developed to offer instructors a broad
range of options in developing a challenging and interesting course: he follo6ing exhibits assist
instructors in selecting assignment material:
Exhibits P"l and P"# sho6 assignment material that is based on serviceNnonprofit/ merchandising
Hretail/ 6holesale or distributionI sectors of the econom': =hile much assignment in the
fourteenth edition is based in the manufacturing sector/ Exhibits P"l and P"# provide man'
examples for instructors to either select assignment material from a broad range of sectors or
indeed to concentrate on sectors outside manufacturing:
!: SE-&$CE AA0 A2AP-2F$ SEC2-S8 $ncludes such settings as accounting firms/
la6 firms/ advertising agencies/ ban7 and finance companies/ lodging companies/
transportation companies/ and government agencies:
#: ME-C5AA0$S$AB SEC2-S8 $ncludes such settings as distributors/ 6holesalers/ and
retailers:
here is gro6ing demand from instructors for assignment material in three specific areasE
ethics/ global or international/ and modern cost management: Exhibits P"% to P"* sho6
assignment material in the fourteenth edition on these three topics:
%: E5$CS: he second"last problem of man' chapters incorporates an ethical issue facing a
management accountant or a manager: Examples include pressure for coo7ing the boo7s/
concealing of unfavorable information/ and conflicts of interest bet6een management
incentives and compan' value: Man' of these problems require students to consider the
OStandards of Ethical Conduct for Practitioners of Management Accounting and Financial
ManagementO on p:!, of the text:
(: B@2+A@N$AE-AA$2AA@ 0$MEAS$2AS: $ncluded assignment material based
outside the Jnited States or problems pertaining to companies 6ith operations in more
than one countr':
*: M20E-A C2S MAAABEMEA F-2A$E- $0EAS: $ncludes assignment material
that an instructor can use to highlight areas such as customer focus/ 7e' success factors/
balanced scorecard/ total value"chain anal'sis/ strategic anal'sis of operating income/ )$/
and continuous improvement: Assignment material related to activit'"based costing
HA+CI/ activit'"based management HA+MI/ and cost drivers is found in man' chapters:
xv
E;!BT P7<
ASS4NMENT MATERAL FROM SERVCE AN" NOT7FOR7PROFT SECTORS
C2ap(er N&.*er C%'(e5(
! !"## 5ouse"painting serviceK five"step decision"ma7ing process
!"#( $nternet compan'K planning and control
!"%4 Publishing compan'K ethicsK end"of"'ear actions
!"%! Shipping compan'K ethical challenges
# #"!1 Classification of costs/ mar7eting research
#"#! Phone contractK fixed and variable costs
#"#( Publishing compan'K value chain/ cost drivers
#"#, otal costs and unit costs of student entertainment
% %"!1 ravel agenc'K C&P anal'sis
%"## -estaurantK C&P anal'sis
%"#3 Music Societ'K C&P anal'sis
%"%% ourismK C&P anal'sis
%"%( 0a'careK C&P anal'sis/ target operating income
%"(4 Printing compan'K brea7evenK alternative cost structures/ uncertaint'/
sensitivit'
%"(! Computer retailerK C&P/ alternative cost structures
%"(. Museum of artK gross margin/ contribution margin
( ("!1 -esidential constructionK job costing/ normal/ actual
("#! Consulting firm/ job costing
("#( Jniversit' pressK job costing/ journal entries
("#1 Canadian accounting firmK actual/ normal and variation from normal
costing
("#3 Architecture firmK actual/ normal/ and variation from normal costing
("%# @a6 firmK job costing
("%% @a6 firmK job costing
("%3 PrintingK allocation and proration of overhead
("(! +oo7 signing agenc'K job costing
* *"!. esting labsK activit'"based costing/ cost hierarch'
*"!1 Professional services firmK alternative allocation bases
*"## Printing compan'K activit'"based costing
*"#. Custom framingK activit'"based costing
*"#1 +an7ingK activit'"based costing/ product costing/ cross"subsidization
*"#3 @a6 firmK job costing/ single direct" and indirect"cost categories
*"%4 @a6 firmK job costing/ multiple direct" and single indirect"cost
categories
*"%! @a6 firmK job costing/ multiple direct" and indirect"cost categories
*"%% -adiolog' centerK department/ activit'"cost rates
*"%( 0ance studio/ childcare/ fitnessK activit'"based costing and management
*"%. 5ealth careK activit'"based costing s'stem
xvi
E;!BT P7< 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
, ,"!, Environmental testingK sales budget
,"(4 5air salonK human aspects of budgeting
. ."%! Car detailingK variance anal'sis
1 1"#( Food deliver' serviceK overhead variances
1"%, Publishing compan'K activit'"based costing
1"(4 Pet food inspectionK non"financial variances
3 3"%! Jniversit' pressK metrics to minimize inventor' buildups
3"%3 5ospital chainK cost allocation/ do6n6ard demand spiral
3"(4 5ospital chainK cost allocation/ responsibilit' accounting/ ethics
!4 !4"!. Car rental contractsK variable"/ fixed" and mixed"cost functions
!4"#4 Car 6ashK account anal'sis method
!4"#! -estaurantK account anal'sis method
!4"#% ravel servicesK estimating a cost function/ high"lo6 method
!4"#( Customer"service costsK estimating a cost function/ high"lo6 method
!4"#* Consulting servicesK linear cost approximation
!4"#. Catering compan'K regression anal'sis
!4"%# Produce clubK high"lo6 method/ regression anal'sis
!4"%% -estaurantK sales and advertising/ high"lo6 method/ regression anal'sis
!! !!"#( 5ospitalK relevant costs/ decision on closing surger' centers
!!"#, Printing pressK choosing customers
!!"#. Auto 6ash compan'K relevance of equipment costs
!# !#"!3 ool repair shopK value"added/ nonvalue"added costs
!#"#4 ArchitectsK target operating income/ value"added costs
!#"#% 5otel managementK cost"plus target return on investment pricing
!#"#. 5otelK price discrimination
!#"%! -epair servicesK cost"plus/ time and materials/ ethics
!#"%# emp labor agenc'K cost"plus and mar7et"based pricing
!#"%% esting labsK cost"plus and mar7et"based pricing
!#"%% esting labsK cost"plus and mar7et"based pricing
!#"%* AirlineK price discrimination
!#"%, Art framingK preparing a bid/ pricing/ ethics
!% !%"#, Consulting firmK strateg'/ balanced scorecard
!%"#. Consulting firmK strategic anal'sis of operating income
!%"#1 Consulting firmK anal'sis of gro6th/ price"recover'/ and productivit'
components
!%"#3 Consulting firmK identif'ing and managing unused capacit'
xvii
E;!BT P7< 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
!( !("!, 5ospitalsK cost allocation
!("!1 5otelK cost allocation to divisions
!("#! -epair serviceK customer profitabilit'
!("#% Sports teamK variance anal'sis/ multiple products
!("%1 $nterior designK customer"cost hierarch' and profitabilit' anal'sis
!* !*"!3 Management consultingK direct and step"do6n support department cost
allocation
!*"#4 Management consultingK reciprocal method support department cost
allocation
!*"#% Allocation of common living costs
!*"#( Consulting servicesK allocation of common travel costs
!*"#3 Jniversit'K fixed cost allocation
!*"%* 5otelK revenue allocation/ bundled products
!. !."%1 Publishing compan'K transferred"in costs/ 6eighted"average method
!."%3 Publishing compan'K transferred"in costs/ F$F2 method
!3 !3"#! Conference centerK qualit' improvement/ relevant costs and revenues
!3"## Jniversit'K 6aiting time
!3"#% Jniversit'K 6aiting time/ relevant costs/ student satisfaction
!3"%4 5ealthcare groupK patient satisfaction/ 6aiting time/ compensation
!3"%. Pizza deliver'K qualit' improvement/ Pareto diagram/ cause"and"effect
diagram
#! #!"!1 5ospitalK capital budgeting methods/ no income taxes
#!"!3 5ospitalK capital budgeting methods/ income taxes
#!"## Construction compan'K pa'bac7 and AP& methods/ no income taxes
#!"#( +a7er'K ne6 equipment purchase/ income taxes
#!"%( Fitness centerK recognizing cash flo6s for capital investment projects/
AP&/ income taxes
## ##"!, heme par7sK management control s'stems/ balanced scorecard
#% #%"!. Educational servicesK 0uPont method
#%"#3 -estaurantsK -2$/ measurement alternatives for performance measures
#%"%# Media groupK -2$/ -$/ 0uPont method/ investment decisions/ balanced
scorecard
#%"%% Media groupK division managersP compensation/ levers of control
#%"%( +an7K compensation/ balanced scorecard/ compensation
#%"%. 5ealth spasK -$/ E&A/ measurement alternatives/ goal congruence
xviii
E;!BT P7=
ASS4NMENT MATERAL FROM MERC!AN"SN4 SECTORS
C2ap(er N&.*er C%'(e5(
# #"!3 Classification of costs/ merchandising sector
#"#3 0epartment storeK cost of goods purchased/ cost of goods sold/ and
income statement
#"%4 -etail outlet storeK cost of goods sold and income statement
% %"!3 0oughnut retailingK C&P
%"#! Car dealerK C&P anal'sis
%"#% +oo7 publisherK C&P and sensitivit' anal'sis
%"#* -ug dealerK space rental terms/ operating leverage
%"#1 +agel shopK sales mixK C&P
%"%4 MenPs clothing retailerK contribution margin/ decision ma7ing
%"%# -etailK uncertaint'/ expected costs
%"%1 Shoe storeK sales commissions/ C&P anal'sis
%"%3 Shoe storeK sales commissions/ C&P anal'sis
%"(, @uggage carrier retailerK sales mix/ C&P
* *"#( Supermar7etK A+C/ product"line profitabilit'
*"#* Furniture 6holesalerK A+C/ customer profitabilit'
*"%* Pharmaceuticals distributorK A+C
*"(! +oo7storeK activit'"based costing and management
, ,"#( Supermar7et chainK activit'"based budgeting
,"#* Supermar7et chainK activit'"based budgeting/ 7aizen budgeting
,"#. &ideo game distributorK cash flo6 anal'sis
,"%. =holesalerK cash budgeting
!4 !4"(4 0epartment store chainK cost drivers/ A+C/ simple regression anal'sis
!4"(! 0epartment store chainK cost drivers/ A+C/ multiple regression anal'sis
!4"(# Clothing storeK matching time periods/ regression/ ethics
!! !!"## Food storeK relevant costs/ contribution margin/ product emphasis
!!"#* Convenience storesK relevant costs/ closing and opening stores
!# !#"#! 0istributorK target prices/ target costs/ A+C
!% !%"!1 "shirts distributorK strateg'/ balanced scorecard
!%"!3 "shirts distributorK strategic anal'sis of operating income
!%"#4 "shirts distributorK anal'sis of gro6th/ price"recover'/
and productivit' components
!%"#! "shirts distributorK identif'ing and managing unused capacit'
!%"%3 Clothing retailerK strategic anal'sis of operating income
xix
E;!BT P7= 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
!( !("#4 Electronics distributorK customer profitabilit'/ customer"cost hierarch'
!("## Pharmaceutical distributorK customer profitabilit'
!("#( =ine glass retailerK variance anal'sis/ multiple products
!("%4 +ottled 6ater distributorK customer profitabilit'
!("%( Belato storesK variance anal'sis/ multiple products
!* !*"#! 2nline boo7 retailerK direct and step"do6n support department cost
allocation
!*"## 2nline boo7 retailerK reciprocal method support department cost
allocation
!*"#* Fragrance retailerK revenue allocation
!*"#, Auto salesK allocation of common costs
!*"#. 0epartment storeK single"rate/ dual"rate and practical capacit' allocation
!*"%% Computer hard6are salesK revenue allocation
#4 #4"!, Sporting goods retailerK E29
#4"!. Sporting goods retailerK E29/ effect of parameter changes
#4"!1 extile retailerK E29
#4"#, @inen retailerK effect of different order quantities/ E29/
#4"#3 2nline computer retailerK E29/ performance evaluation
#! #!"!. 5ard6are storesK capital budgeting methods/ no income taxes
#!"%, Food retailerK AP&/ inflation/ income taxes
#!"%. Food franchiseK AP&/ internal rate of return/ sensitivit' anal'sis
#% #%"## Automobile retailerK -2$/ -$/ E&A
#%"#, Car batter' salesK ris7 sharing/ incentives/ benchmar7ing/ multiple tas7s
xx
E;!BT P7>
ASS4NMENT MATERAL ON ET!CS
C2ap(er N&.*er C%'(e5(
! !"#% 0ivision performance
!"#1 Pharmaceutical compan'/ budgeting
!"#3 End"of"'ear actions
!"%4 End"of"'ear actions
!"%! Blobal compan'/ end"of"'ear actions
# #"(! Cost classification
% %"(1 Environmental costs/ C&P anal'sis
( ("(4 )ob costing/ contracting/ cost reimbursement
* *"(4 ElectronicsK A+C/ implementation/ ethics
, ,"%3 ManufacturerK slac7/ ethics
. ."(! 0rum manufacturerK variances/ standard"setting/ benchmar7ing/ ethics
1 1"(# 2verhead variances/ ethics
3 3"(4 5ospital chainK cost allocation/ responsibilit' accounting/ ethics
!4 !4"(# Clothing storeK matching time periods/ regression/ ethics
!! !!"(! 0ropping a customer/ activit'"based costing/ ethics
!# !#"%! -epair servicesK cost"plus/ time and materials/ ethics
!#"%, Art framingK preparing a bid/ pricing/ ethics
!% !%"%% Electronic component manufacturerK ethics
!( !("%3 =riting smaller ordersK customer profitabilit' and ethics
!3 !3"!1 Car seatsK costs of qualit'/ ethics
!3"%1 Auto parts manufacturerK ethics and qualit'
#4 #4"%, Container manufacturerK )$ production/ relevant benefits/ relevant
costs/ ethics
## ##"%* @uggage manufacturerK transfer pricing/ goal congruence/ ethics
#% #%"%* SemiconductorsK managerPs performance evaluation/ ethics
#%"%, Picture frame moldingK levers of control/ ethics
xxv
E;!BT P74
ASS4NMENT MATERAL ?T! 4LOBALOR NTERNATONAL SETTN4
C2ap(er N&.*er C%'(e5(
! !"%! Contract bidding/ ethical and cultural issues
% %"!1 ravel agenc'/ C&P anal'sis
%"#, $nternational cost structure differences/ C&P anal'sis
( ("#1 Canadian accounting firmK actual/ normal and variation from normal
costing
, ,"## )apanese motorc'cle manufacturerK revenues/ production and purchases
budgets
1 1"#% elecommunications compan'K manufacturing overhead/ standard"costing
s'stem
!! !!"%4 $nternational outsourcingK relevant costs/ exchange rates
#! #!"#, Clothing manufacturerK selling a plant/ income taxes
#!"#3 Fragrance manufacturerK 0CF/ sensitivit' anal'sis/ no income taxes
## ##"!3 Multinational computer compan'K transfer pricing/ global income"tax
minimization
##"#4 Canadian lumber compan'K transfer"pricing methods/ goal congruence
##"#% elecommunications equipment/ global mar7etingK multinational transfer
pricing/ global tax minimization
##"#( elecommunications equipment/ global mar7etingK multinational transfer
pricing/ goal congruence
##"%# $ndustrial diamondsK multinational transfer pricing/ global tax
minimization
##"%% Component manufacturerK multinational transfer pricing/ taxation/ goal
congruence
#% #%"#( Manufacturing/ J:S: and Aor6a'K multinational performance
measurement/ -2$/ -$
##"%4 Manufacturing/ J:S: and FranceK multinational performance
measurement/ -2$/ -$
#%"%! Multinational firm/ J:S:/ Berman'/ and Ae6 QealandK performance
measurement/ -2$/ -$/ cost of capital/ taxes
xxvi
E;!BT P75
ASS4NMENT MATERAL USN4 MO"ERN COST MANA4EMENT FRONTER "EAS
C2ap(er N&.*er C%'(e5(
! !"!, Computer compan'K value chain/ cost classification
!"!. Pharmaceutical compan'K value chain/ cost classification
!"!1 Fast food restaurantK value chain/ cost classification
!"!3 Ce' success factors
!"#* Ma7ing strategic decisions
# #"#( Publishing compan'K value chain/ cost drivers
* *"!, Cost hierarch' at manufacturer
*"!. esting labsK A+C/ cost hierarch'
*"!3 Automotive productsK plant6ide/ department/ A+C costing
*"#4 rophies and plaques manufacturerK plant6ide/ department/ A+C
costing
*"#! Calculator manufacturerK A+C/ process costing
*"## Printing compan'K activit'"based costing
*"#% 0oor manufacturerK activit'"based costing
*"#( Supermar7etK A+C/ product"line profitabilit'
*"#* Furniture 6holesalerK A+C/ customer profitabilit'
*"#, Food processingK A+C/ area cost"driver rates/ product cross"
subsidization
*"#. Custom framingK activit'"based costing
*"#1 +an7ingK A+C/ product costing/ cross"subsidization
*"%4 @a6 firmK job costing/ multiple direct" and single indirect"cost
categories
*"%! @a6 firmK job costing/ multiple direct" and indirect"cost categories
*"%# roph' manufacturingK plant6ide/ department/ activit'"cost rates
*"%% -adiolog' centerK department/ activit'"cost rates
*"%( 0ance studio/ childcare/ fitnessK activit'"based costing and management
*"%* Pharmaceuticals distributorK A+C
*"%, +ag manufacturerK activit'"based costing and management
*"%. 5ealth careK A+C s'stem
*"%1 Sports manufacturerK unused capacit'/ activit'"based costing and
management
*"%3 Machining shopK A+C
*"(4 ElectronicsK A+C/ implementation/ ethics
*"(! +oo7storeK activit'"based costing and management
, ,"#( Supermar7et chainK activit'"based budgeting
,"#* Supermar7et chainK activit'"based budgeting/ 7aizen budgeting
,"#3 "shirt manufacturerK 7aizen approach
,"%# Purchasing agentK responsibilit' accounting
,"%% @uggage manufacturerK activit'"based budgeting
,"%1 Plastic accessories manufacturerK activit'"based budgeting
,"(! Foot6ear manufacturerK activit'"based budgeting
xxvii
E;!BT P75 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
. ."#* @amp manufacturerK continuous improvement
."%# Sunglass frameNlens manufacturerK responsibilit' issues
."%1 E'eglass lens manufacturerK use of variances for benchmar7ing
."(! 0rum manufacturerK variances/ standard"setting/ benchmar7ing/ ethics
."(# Electronics manufacturerK variances/ standards/ negotiations
1 1"%* Shoe manufacturerK activit'"based costing/ batch"level variance anal'sis
1"%, Publishing compan'K activit'"based costing/ batch"level variance
anal'sis
1"%. )e6elr' ma7erK relationship bet6een production"volume and sales"
volume variance anal'sis
1"(! Cloth shopping bag ma7erK relationship bet6een production"volume and
sales"volume variance anal'sis
3 3"!. Auto compan'K throughput costing
3"!3 Electronics manufacturerK throughput costing
3"#* Capacit' management/ denominator"level capacit' concepts
3"#, Motorc'cle manufacturerK alternative denominator"level capacities
3"%! extboo7 publisherK metrics to minimize inventor' buildups
3"%( 0enominator"level choices/ changes in inventor' levels/ effect on
operating income
3"%, Electronics manufacturerK do6n6ard demand spiral
3"%3 5ospital meal serviceK cost allocation/ do6n6ard demand spiral
3"(4 5ospital meal serviceK cost allocation/ responsibilit' accounting/ ethics
!4 !4"%( ManufacturingK cost drivers/ A+C/ simple regression anal'sis
!4"%1 ManufacturingK cost drivers/ A+C/ simple regression anal'sis
!4"%3 ManufacturingK cost drivers/ A+C/ multiple regression anal'sis
!4"(4 0epartment store chainK cost drivers/ A+C/ simple regression anal'sis
!4"(! 0epartment store chainK cost drivers/ A+C/ multiple regression anal'sis
!! !!"!3 Special order/ activit'"based costing
!!"#4 Ma7e versus bu'/ activit'"based costing
!!"#, PrintersK customer profitabilit' anal'sis
!!"%, ManufacturingK A+C/ ma7e versus bu'
!!"(! Customer profitabilit'/ activit'"based costing/ ethics
!# !#"!3 ool repair shopK value"added/ nonvalue"added costs
!#"#4 ArchitectsK target operating income/ value"added costs
!#"#! 0istributorK target prices/ target costs/ A+C
!#"## Medical instrumentsK target costs/ effect of product"design changes on
product costs
!#"#% 5otel managementK cost"plus target return on investment pricing
!#"#( ManufacturerK cost"plus/ target pricing
!#"#* o' manufacturerK life"c'cle product costing
!#"#. 5otelK price discrimination
xxviii
E;!BT P75 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
!#"#1 ManufacturerK target pricing
!#"#3 ElectronicsK target prices/ target costs/ value engineering/ cost
incurrence/ loc7ed"in costs/ A+C
!#"%4 Cand' manufacturerK target return on investment pricing
!#"%# emp labor agenc'K cost"plus and mar7et"based pricing
!#"%% esting labsK cost"plus/ activit'"based costing/ mar7et"based pricing
!#"%( $ndustrial site cleanupK life"c'cle costing
!#"%* AirlineK price discrimination
!#"%. ManufacturingK target prices/ target costs/ loc7ed"in costs/ value
engineering
!% !%"!, +alanced scorecard
!%"!. Anal'sis of gro6th/ price"recover' and productivit' components
!%"!1 MerchandisingK strateg'/ balanced scorecard
!%"!3 MerchandisingK strategic anal'sis of operating income
!%"#4 MerchandisingK anal'sis of gro6th/ price"recover'/ and productivit'
components
!%"#! MerchandisingK identif'ing and managing unused capacit'
!%"## ManufacturingK strateg'/ balanced scorecard
!%"#% ManufacturingK strategic anal'sis of operating income
!%"#( ManufacturingK anal'sis of gro6th/ price"recover' and productivit'
components
!%"#* ManufacturingK identif'ing and managing unused capacit'
!%"#, Consulting firmK strateg'/ balanced scorecard
!%"#. Consulting firmK strategic anal'sis of operating income
!%"#1 Consulting firmK anal'sis of gro6th/ price"recover'/ and productivit'
components
!%"#3 Consulting firmK identif'ing and managing unused capacit'
!%"%4 ManufacturingK strateg'/ balanced scorecard
!%"%! ManufacturingK strategic anal'sis of operating income
!%"%# ManufacturingK anal'sis of gro6th/ price"recover'/ and productivit'
components
!%"%% ManufacturingK identif'ing and managing unused capacit'
!%"%( +alanced scorecard
!%"%* Petroleum compan'K balanced scorecard
!%"%, @aser printersK balanced scorecard
!%"%. ManufacturingK partial productivit' measurement
!%"%1 ManufacturingK total factor productivit'
!%"%3 Clothing retailerK strategic anal'sis of operating income
!( !("#4 Electronics distributionK customer profitabilit'/ customer"cost hierarch'
!("#! -epair serviceK customer profitabilit'
!("## Pharmaceutical distributorK customer profitabilit'
!("#3 )e6elr' manufacturerK customer profitabilit'
!("%4 +ottled 6ater distributorK customer profitabilit'
!("%! Manufacturing compan'K customer profitabilit' anal'sis
xxix
E;!BT P75 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
!("%1 $nterior designK customer"cost hierarch'/ customer profitabilit'
!("%3 =riting smaller ordersK customer"cost hierarch'/ profitabilit' and ethics
!3 !3"!, Cell phone equipmentK costs of qualit'
!3"!. Car seatsK costs of qualit'
!3"!1 Car seatsK costs"of"qualit'/ ethics
!3"!3 Cell phonesK nonfinancial measures of qualit' and time
!3"#4 Printing pressesK qualit' improvements/ relevant costs and relevant
revenues
!3"#! Conference center/ qualit' improvement/ relevant costs and relevant
revenues
!3"## Jniversit'K 6aiting time
!3"#% Jniversit'K 6aiting time/ relevant costs/ student satisfaction
!3"#( ManufacturerK nonfinancial measures of qualit'/ manufacturing c'cle
efficienc'
!3"#* Filing cabinetsK theor' of constraints/ throughput margin/ relevant costs
!3"#, Filing cabinetsK theor' of constraints/ throughput margin/ qualit'
!3"#. &alve manufacturingK qualit' improvement/ relevant costs/ and relevant
revenues
!3"#1 Plastic productsK qualit' improvement/ relevant costs/ and relevant
revenues
!3"#3 Cereal manufacturerK statistical qualit' control
!3"%4 5ealthcare groupK 6aiting time/ patient satisfaction/ compensation
!3"%! Plastic productsK 6aiting times/ manufacturing lead times
!3"%# Plastic productsK 6aiting times/ relevant revenues/ and relevant costs
!3"%% =ire harnessesK manufacturing c'cle times/ relevant revenues/ and
relevant costs
!3"%( Electronic testing equipmentK theor' of constraints/ throughput margin/
relevant costs
!3"%* Pharmaceutical manufacturerK theor' of constraints/ throughput margin/
qualit'/ relevant costs
!3"%, o' manufacturerK theor' of constraints/ sensitivit' anal'sis
!3"%. Pizza deliver'K qualit' improvement/ Pareto diagram/ cause"and"effect
diagram
!3"%1 Auto parts manufacturerK qualit' and ethics
!3"%3 extile printingK qualit' improvementK theor' of constraints
#4 #4"#! Car manufacturerK )$/ balanced scorecard
#4"## 5ard6are compan'K )$ production/ relevant benefits/ relevant costs
#4"#% Computer assembl'K bac7flush costing and )$ production
#4"#( Computer assembl'K bac7flush costing/ t6o trigger points/ materials
purchase and sale
#4"#* Computer assembl'K bac7flush costing/ t6o trigger points/ completion of
production and sale
#4"#1 Music pla'ersK E29/ )$ production
#4"%4 Automotive supplier/ )$ purchasing/ relevant benefits/ relevant cost
xxx
E;!BT P75 0C%'(i'&ed1
C2ap(er N&.*er C%'(e5(
#4"%! Computer manufacturerK supplier evaluation/ costs of qualit'/ timel'
deliveries
#4"%# Electrical goodsK bac7flush costing and )$ production
#4"%% Electrical goodsK bac7flush/ t6o trigger points/ materials purchase and
sale
#4"%( Electrical goodsK bac7flush/ t6o trigger points/ completion of production
and sale
#4"%* Securit' devicesK lean accounting
#4"%, Container manufacturerK )$ production/ relevant benefits/ relevant
costs/ ethics:
## ##"!, heme par7sK management control s'stems/ balanced scorecard
##"!1 Supermar7et chainK decentralization/ goal congruence/ responsibilit'
centers
#% #%"## Automotive retailerK -2$/ -$/ E&A
#%"#( Manufacturing/ J:S: and Aor6a'K multinational performance
measurement/ -2$/ -$
#%"#* Fashion product manufacturerK -2$/ -$/ E&A/ performance evaluation
#%"#, AutomotiveK ris7 sharing/ incentives/ benchmar7ing/ multiple tas7s
#%"#. 0oorbell manufacturingK -$/ E&A/ adjusted operating income
#%"%4 Manufacturing/ J:S: and FranceK multinational performance
measurement/ -2$/ -$
#%"%! Multinational firm/ J:S:/ Berman'/ and Ae6 QealandK multinational
performance measurement/ -2$/ -$/ cost of capital/ taxes
#%"%# Media groupK -2$/ -$/ 0uPont method/ investment decisions/ balanced
scorecard
#%"%% Media groupK division managersP compensation/ levers of control
#%"%( +an7K business unit compensation/ balanced scorecard
#%"%, Picture frame moldingK levers of control/ ethics
#%"%. 5ealth spasK -$/ E&A/ measurement alternatives/ goal congruence
xxxi
xxxii
PRESENTATON OF SOLUTONS
T2i/ edi(i%' i/ a$$%.pa'ied *# a Student Solutions Manual, ,2i$2 i/ availa*le 6%r /ale (%
/(&de'(/- T2e Manual pr%vide/ ,%r@ed7%&( /%l&(i%'/ (% all %6 (2e eve' '&.*ered a//i)'.e'(
.a(erial-
$nstructors have a variet' of vie6s regarding the use of classroom time for home6or7 solutions:
Most instructors put solutions on a blac7board or an overhead projector: $n turn/ their students
franticall' cop' the materials in their notes: 2ur practice is to reproduce the printed home6or7
solutions for distribution either before/ during/ or after the discussion for a particular solution:
he members of the class are glad to pa' a modest fee to the school to cover the reproduction
costs: $n this 6a'/ students can spend more of their classroom time in thin7ing rather than 6riting:
Further/ the' have a complete set of notes:
Some instructors object to this procedure because it provides students 6ith a OfileO that can be
passed along to subsequent classes: Students in subsequent classes 6ill then use the OfileO to
avoid conscientious preparation of home6or7: =e used to 6orr' about such practices/ but long
ago 6e decided that there 6ould al6a's be some students 6ho hurt themselves b' not doing
home6or7 in an appropriate 6a': =h' should the vast majorit' of students be penalized b'
6ithholding the printed solutionsR he benefits of using printed solutions clearl' out6eigh the
costs: =e no longer fret about the fe6 students 6ho beat the s'stem Hand themselvesI:
Similarl'/ 6e distribute printed solutions to tests and examinations along 6ith a summar' of
overall class performance: =e do not devote class time to discussing these solutions: he students
deserve feedbac7/ but the' have sufficient motivation to scrutinize the printed solutions and chec7
their errors on an individual basis: $n this 6a' more class time is available for ne6 material:
$f students have complaints about grades/ 6e usuall' as7 them to cool off for #( hours and to then
submit a 6ritten anal'sis of ho6 the' 6ere unjustl' treated: =e then ta7e these complaints in
batches/ regrade the papers/ and return the papers: $f the student then 6ants to have a person"to""
person discussion of the matter/ he or she is 6elcome at our office: his procedure ma' seem too
impersonal/ but 6e recommend it to those teachers 6ho have been through some painful debates
that have been inefficient and frustrating for both student and teacher:
xxxiii
xxxiv
MAJOR C!AN4ES N TE;T OF T!E FOURTEENT! E"TON
4rea(er E.p2a/i/ %' S(ra(e)#
his edition deepens the boo7;s emphasis on strateg' development and execution: Several
chapters build on the strateg' theme introduced in Chapter !: Chapter !% has a greater discussion
of strateg' maps as a useful tool to implement the balanced scorecard and a simplified
presentation of ho6 income statements of companies can be anal'zed from the strategic
perspective of product differentiation or cost leadership: =e also discuss strateg' considerations
in the design of activit'"based costing s'stems in Chapter */ the preparation of budgets in Chapter
,/ and decision ma7ing in Chapters !! and !#:

"eeper C%'/idera(i%' %6 4l%*al //&e/
+usiness is increasingl' becoming more global: Even small and medium"sized companies across
the manufacturing/ merchandising/ and service sectors are being forced to deal 6ith the effects of
globalization: Blobal considerations permeate man' chapters: For example/ Chapter !! discusses
the benefits and the challenges that arise 6hen outsourcing products or services outside the
Jnited States: Chapter ## examines the importance of transfer pricing in minimizing the tax
burden faced b' multinational companies: Several ne6 examples of management accounting
applications in companies are dra6n from international settings:
'$rea/ed F%$&/ %' (2e Servi$e Se$(%r
$n 7eeping 6ith the shifts in the J:S: and 6orld econom' this edition ma7es greater use of service
sector examples: For example/ Chapter # discusses the concepts around the measurement of costs
in a soft6are development rather than a manufacturing setting: Chapter , provides several
examples of the use of budgets and targets in service companies: Several concepts in action boxes
focus on the service sector such as activit'"based costing at Charles Sch6ab HChapter *I and
managing 6ireless data bottlenec7s HChapter !3I:
Ne, C&((i')7Ed)e T%pi$/
he pace of change in organizations continues to be rapid: he fourteenth edition of Cost
Accounting reflects changes occurring in the role of cost accounting in organizations:
=e have introduced foreign currenc' and for6ard contract issues in the context of
outsourcing decisions:
=e have added ideas based on Six Sigma to the discussion of qualit':
=e have re6ritten the chapter on strateg' and the balanced scorecard and simplified the
presentation to connect strateg' development/ strateg' maps/ balanced scorecard/ and anal'sis
of operating income:
=e discuss current trends to6ards +e'ond +udgeting and the use of rolling forecasts:
=e develop the lin7 bet6een traditional forms of cost allocation and the nascent movement in
Europe to6ards -esource Consumption Accounting:
=e focus more sharpl' on ho6 companies are simplif'ing their costing s'stems 6ith the
presentation of value streams and lean accounting:
Ope'i') Vi)'e((e/
Each chapter opens 6ith a vignette on a real compan' situation: he vignettes engage the reader
in a business situation/ or dilemma/ illustrating 6h' and ho6 the concepts in the chapter are
relevant in business: For example/ Chapter ! describes ho6 Apple uses cost accounting
information to ma7e decisions relating to ho6 the' price the most popular songs on iunes:
xxxv
Chapter % explains ho6 the band J# paid for their extensive ne6 stage b' lo6ering tic7et prices:
Chapter . describes ho6 even the A+A 6as forced to cut costs after over half of the league;s
franchises declared losses: Chapter !! sho6s ho6 )et+lue uses 6itter and e"mail to help their
customers ma7e better pricing decisions: Chapter !# discusses ho6 ata Motors designed a car
for the $ndian masses/ priced at onl' S#/*44: Chapter !( sho6s ho6 +est +u' boosts profits b'
anal'zing its customers and their bu'ing habits: Chapter !1 describes ho6 +oeing incurred great
losses as it re6or7ed its much"anticipated 0reamliner airplane:
C%'$ep(/ i' A$(i%' B%5e/
Found in ever' chapter/ these boxes cover real"6orld cost accounting issues across a variet' of
industries including automobile racing/ defense contracting/ entertainment/ manufacturing/ and
retailing: Ae6 examples include
5o6 Qipcar 5elps -educe +usiness ransportation Costs
)ob Costing at Co6bo's Stadium
he L0eath SpiralM and the End of @andline elephone Service
ransfer Pricing 0ispute emporaril' Stops the Flo6 of Fiji =ater
S(rea.li'ed Pre/e'(a(i%'
=e continue to tr' to simplif' and streamline our presentation of various topics to ma7e it as eas'
as possible for a student to learn the concepts/ tools/ and frame6or7s introduced in different
chapters: Examples of more streamlined presentations can be found in Chapter %/ on the
discussion of target net income
Chapter */ on the core issues in activit'"based costing HA+CI
Chapter 1/ 6hich uses a single comprehensive example to illustrate the use of variance
anal'sis in A+C s'stems
Chapter !%/ 6hich contains a much simpler presentation of the strategic anal'sis of operating
income
Chapter !*/ 6hich uses a simpler/ unified frame6or7 to discuss various cost"allocation
methods
Chapters !. and !1/ 6here the material on standard costing has been moved to the appendix/
allo6ing for smoother transitions through the sections in the bod' of the chapter
!i)2li)2(/ %6 Ne, C2ap(er7*#7C2ap(er C2a')e/
C2ap(er <+
Chapter ! has been re6ritten to focus on strateg'/ decision"ma7ing/ and learning emphasizing the
managerial issues that animate modern management accounting: $t no6 emphasizes decision
ma7ing instead of problem solving/ performance evaluation instead of score7eeping and learning
instead of attention directing:
C2ap(er =+
Chapter # has been re6ritten to emphasize the service sector: For example/ instead of a
manufacturing compan' context/ the chapter uses the soft6are development setting at a compan'
li7e Apple $nc: to discuss cost measurement: $t also develops ideas related to ris7 6hen discussing
fixed versus variable costs:
xxxvi
C2ap(er >+
Chapter % has been re6ritten to simplif' the presentation of target net income b' describing ho6
target net income can be converted to target operating income: his allo6s students to use the
equations alread' developed for target operating income 6hen discussing target net income: =e
deleted the section on multiple cost drivers/ because it is closel' related to the multi"product
example discussed in the chapter: he managerial and decision"ma7ing aspects of the chapter
have also been strengthened:
C2ap(er 4+
Chapter ( has been reorganized to first discuss normal costing and then actual costing because
normal costing is much more prevalent in practice: As a result of this change the exhibits in the
earl' part of the chapter tie in more closel' to the detailed exhibits of normal job"costing s'stems
in manufacturing later in the chapter: he presentation of actual costing has been retained to help
students understand the benefits and challenges of actual costing s'stems: o focus on job
costing/ 6e moved the discussion of responsibilit' centers and departments to Chapter ,:
C2ap(er 5+
Chapter * has been reorganized to clearl' distinguish design choices/ implementation challenges/
and managerial applications of A+C s'stems: he presentation of the ideas has been simplified
and streamlined to focus on the core issues:
C2ap(er A+
Chapter , no6 includes ideas from relevant applied research on the usefulness of budgets and the
circumstances in 6hich the' add the greatest value/ as 6ell as the challenges in administering
them: $t incorporates ne6 material on the +e'ond +udgeting movement/ and in particular the
trend to6ards the use of rolling forecasts::
C2ap(er/ 7 a'd 8+
Chapters . and 1 present a streamlined discussion of direct"cost and overhead variances/
respectivel': he separate sections on A+C and variance anal'sis in chapters . and 1 have no6
been combined into a single integrated example at the end of Chapter 1: A ne6 appendix to
Chapter . no6 addresses more detailed revenue variances using the existing =ebb Compan'
example: he use of potentiall' confusing terms such as #"variance anal'sis and !"variance
anal'sis has been eliminated:
C2ap(er B+
=e have re6ritten Chapter 3 as a single integrated chapter 6ith the same running example rather
than as t6o distinct sub"parts on inventor' costing and capacit' anal'sis: he material on the tax
and financial reporting implications of various capacit' concepts has also been full' revised:
C2ap(er <0+
Chapter !4 has been revised to provide a more linear progression through the ideas of cost
estimation and the choice of cost drivers/ culminating in the use of quantitative anal'sis
Hregression anal'sis/ in particularI for managerial decision"ma7ing:
C2ap(er <<+
Chapter !! no6 includes more discussion of global issues such as foreign currenc' considerations
in international outsourcing decisions: here is also greater emphasis on strateg' and decision"
ma7ing:
xxxvii
C2ap(er <=+
Chapter !# has been reorganized to more sharpl' delineate short"run from long"run costing and
pricing and to bring together the various considerations other than costs that affect pricing
decisions: his reorganization has helped streamline several sections in the chapter:
C2ap(er <>+
Chapter !% has been substantiall' re6ritten: Strateg' maps are presented as a 6a' to lin7 strategic
objectives and as a useful first step in developing balanced scorecard measures: he section on
strategic anal'sis of operating income has been significantl' simplified b' focusing on onl' one
indirect cost and eliminating most of the technical details: Finall'/ the section on engineered and
discretionar' costs has been considerabl' shortened to focus on onl' the 7e' ideas:
C2ap(er <4+
Chapter !( no6 discusses the use of L6hale curvesM to depict the outcome of customer
profitabilit' anal'sis: he last part of the chapter has been rationalized to focus on the
decomposition of sales volume variances into quantit' and mix variancesK and the calculation of
sales mix variances has also been simplified:
C2ap(er <5+
Chapter !* has been completel' revised and uses a simple/ unified conceptual frame6or7 to
discuss various cost allocation methods Hsingle"rate versus dual"rate/ actual costs versus budgeted
costs/ etc:I:
C2ap(er <A+
Chapter !, no6 provides a more in"depth discussion of the rationale underl'ing joint cost
allocation as 6ell as the reasons 6h' some firms do not allocate costs Halong 6ith real"6orld
examplesI:
C2ap(er/ <7 a'd <8+
Chapters !. and !1 have been reorganized/ 6ith the material on standard costing moved to the
appendix in both chapters: his reorganization has made the chapters easier to navigate and full'
consistent Hsince all sections in the bod' of the chapter no6 use actual costingI: he material on
multiple inspection points from the appendix to Chapter !1 has been moved into the bod' of the
chapter/ but using a variant of the existing example involving Anzio Corp:
C2ap(er <B+
Chapter !3 introduces the idea of Six Sigma qualit': $t also integrates design qualit'/
conformance qualit'/ and financial and nonfinancial measures of qualit': he discussion of
queues/ dela's/ and costs of time has been significantl' streamlined:
C2ap(er =0+
Chapter #4;s discussion of E29 has been substantiall' revised and the ideas of lean accounting
further developed: he section on bac7flush costing has been completel' re6ritten:
C2ap(er =<+
Chapter #! has been revised to incorporate the pa'bac7 period method 6ith discounting/ and also
no6 includes surve' evidence on the use of various capital budgeting methods: he discussion of
xxxviii
goal congruence and performance measurement has been simplified and combined/ ma7ing the
latter half of the chapter easier to follo6:
C2ap(er ==+
Chapter ## has been full' re6ritten 6ith a ne6 section on the use of h'brid pricing methods: he
chapter also no6 includes a fuller description Hand a variet' of examplesI of the use of transfer
pricing for tax minimization/ and incorporates such developments as the recent tax changes
proposed b' the 2bama administration:
C2ap(er =>+
Chapter #% includes a more thorough description of -esidual $ncome and E&A/ as 6ell as a more
streamlined discussion of the various choices of accounting"based performance measures:
xxxix
C!AN4ES N ASS4NMENT MATERAL FOR T!E FOURTEENT! E"TON
2ver ,4T of the exercises and problems in the fourteenth edition are ne6 or revised: he
remaining exercises and problems are ta7en from the thirteenth edition: he follo6ing exhibits
indicate the source of each of the exercises and problems in the thirteenth edition: hese exhibits
can be read as follo6s8
Chapter *
!(E !%E
U U
U U
U U
Categor' HaI *"xx Ae6
Categor' HbI *"'' *"'' -ev
Categor' HcI *"zz *"zz
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Categor' HbI sho6s that problem *"'' in the fourteenth edition is a revision of problem
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the thirteenth edition have been revised:
Categor' HcI sho6s that problem *"zz in the fourteenth edition is problem *"zz in the
thirteenth edition: he absence of a V-evM after V*"zz; means that no change in the content or
numbers has been made in continuing use of this problem in the fourteenth edition:
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