## Managerial Accounting, 10e

### With Data Analytics

by Kulp, Dragoo

| ISBN: 978-1-61853-556-6 | Copyright 2024

### Example of the Road Map & video features available for each chapter.

#### Click on a Chapter 2 eLecture or Guided Example to preview the related video.

LO Learning Objective | Topics Page eLecture Guided Example Assignments
LO2-1

Define basic cost terms and identify how costs respond to changes in sales volume.

##### Cost Behavior :: Variable Cost :: Fixed Cost :: Mixed Cost :: Step Cost :: Factors Affecting Cost Behavior
2-3

M2-11, M2-12, M2-13, M2-14, E2-17, E2-24, E2-25, E2-26, P2-30

LO2-2

Estimate a linear total cost equation.

##### Total Cost Function :: Relevant Range :: Marginal Cost :: Committed and Discretionary Fixed Costs
2-6

M2-13, M2-14, E2-17, E2-18, E2-19, E2-20, E2-24, E2-25, E2-26, P2-29, P2-31, DA2-1

LO2-3

Calculate and compare three analytic approaches to cost estimation.

##### High-Low Cost Estimation :: Scatter Diagrams :: Outlier :: Least Squares Regression :: Coefficient of Determination :: Simple Regression :: Multiple Regression
2-12

M2-13, M2-14, E2-21, E2-22, E2-23, E2-24, E2-27, P2-29, P2-31, C2-33, DA2-1, DA2-2, DA2-3, DA2-4, DA2-5

LO2-4

Identify and discuss problems encountered when analyzing data to estimate costs.

##### Additional Issues :: Changes in Technology and Prices :: Matching Activity and Costs :: Identifying Activity Cost Drivers
2-19

M2-15, E2-22, E2-23, E2-27, P2-29, P2-31, C2-32, C2-34, DA2-2, DA2-3, DA2-4, DA2-5

LO2-5

Define direct cost and indirect cost and discuss using costs for decision-making.

##### Fixed Cost :: Variable Cost :: Direct Cost :: Indirect Cost :: Direct Materials :: Direct Labor :: Manufacturing Overhead :: Combining Cost Behaviors for Decision-Making
2-21

M2-16, E2-28, P2-30, P2-31, C2-35

### Data Analytics & Excel Skill Development for Career Readiness

The basics of accounting havent changed much in hundreds of years, but businesses have experienced significant change in the past decade due to the increased use of new technologies ranging from data analytics and Blockchain to machine learning and artificial intelligence. Technology is rapidly altering how accounting is performed and what can be done with the data once they are collected. In response to the changing demands of the business world, the AACSB has incorporated data analytics requirements within its educational framework. More recently, the AICPA and NASBA have underscored the importance of data analytics by making it a significant element in the CPA Evolution Model Curriculum. The consensus suggests that todays business students need an understanding and working knowledge of data analytics and data visualization to compete for the best jobs. In addition, employers expect prospective employees to be proficient with Excel.

In recognition of the increasing importance of data analytics and the need for Excel proficiency, the Tenth Edition includes several new features to enhance students' career readiness.

• In many chapters, we use data visualizations to depict financial information. It is important for students to become comfortable interpreting visual depictions of data.

• Each Chapter includes assignments that require students to use Excel and Tableau to hone data analysis and data visualization skills.

• Appendix B, at the end of the book, provides an overview of data analytics, data visualization, and best practices for the effective display of data.

• MBC now contains a series of short videos that demonstrate the basic functions of Excel. These videos can be accessed within MBC as part of your MBC course. In addition, a number of the data analytic problems are accompanied by videos, demonstrating how to complete the assignment or a similar assignment.

myBusinessCourse is a complete, secure, web-based training and e-Learning solution. There is nothing to download or install; it is accessible through any modern web browser and most mobile devices.

### eLecture Videos

• Created by the authors of the textbook
• Consistent with the textbook's explanations and approach
• Cover learning objectives and concepts from each chapter
• Ideal for remediation
• Ideal for online and hybrid classrooms

### Guided Example Videos

• Created by the authors of the textbook
• Provide problem solving strategies as well as solutions
• Offer clear, step-by-step demonstrations of how to solve select problems from the textbook

• Provides immediate feedback
• Create assignments using problems from the textbook
• Additional randomized versions of assignments provide extra practice
• Ideal for remediation
• Include select questions from test banks

### Respondus LockDown Browser®

• Assessments are displayed full-screen and cannot be minimized
• Browser menu and toolbar options are removed, except for Back, Forward, Refresh and Stop
• Prevents access to other applications including messaging, screen-sharing, virtual machines, and remote desktops
• Printing and screen capture functions are disabled
• Copying and pasting anything to or from an assessment are prevented
• Right-click menu options, function keys, keyboard shortcuts and task switching are disabled
• An assessment cannot be exited until the student submits it for grading
• Assessments set up with LockDown Browser cannot be accessed with other browsers
• Students use their preferred device to take exams (iPad, Mac, Windows)
• Students will be prompted to install LockDown Browser prior to accessing the exam

### Detailed Reporting Tools

• Quickly review the performance of individual students
• Quickly review the performance of entire class
• Use reports on student performance to customize your lectures to fit student needs

### Enhanced eBook

• Save money
• Integrates eLecture and demonstration videos
• Bookmarking
• Note taking
• Highlighting

### Third Party Integrations

• Single sign-on
• Automatically sync gradebooks each night

### Flashcards

• Study, learn and master key terms.
• With linear-mode, get full control over the deck. Go back and forth between cards, shuffle and auto-play the deck.
• With certainty-mode, test how well you know each term. If you are not certain you have learned the term, it will display again later in the deck.

### Support and Training

• Technical support for students and faculty available daily
• Faculty training conducted daily

### Welcome to Managerial Accounting, 10e!

Welcome to the Tenth Edition of Managerial Accounting with Data Analytics. Our book presents managerial accounting in the context of a big-picture, decision-oriented, business setting. It integrates traditional coverage with contemporary topics and does so with an eye toward the general business student because a book is not useful if it is not read. An overriding aim of our book is to engage students to read further and understand the materials presented.

Much has changed in recent years, including the way education is delivered to and consumed by students. Online learning has become mainstream, and today’s students expect extensive digital resources that facilitate learning. Similarly, instructors’ needs have changed. Faculty are being asked to deliver courses online, which requires extensive digital content creation.

In the tenth edition, we embrace the power of technology in the learning process. This product is not so much a textbook as it is an integrated learning system. Although the print textbook can be used on its own, we created extensive digital resources that integrate with and complement the print book. The emphasis in our approach is to provide students with a review problem for each deliberately selected, key learning objective. In this way, students see the application of concepts through a step-by-step illustration and then have the opportunity to immediately practice similar assignments electronically in myBusinessCourse (MBC), our online homework platform. In addition, MBC contains many instructional videos that were created by the authors. The combination of textbook, videos, and online practice comprises an active learning system that recognizes and embraces how today’s students prefer to learn and provides students with the tools to master managerial accounting.

### Audience and Approach

Our book is written for all students—not just accounting students. We place managerial accounting in a broad business context, relating it to other business areas. Like the trunk of a tree, our book serves as a strong base for students’ future knowledge growth and as a means of unifying the branches of business management.

Managerial accounting focuses on using financial and nonfinancial information by managers and associates of a firm to make strategic, organizational, and operational decisions. Our book provides a framework for identifying and analyzing decision alternatives and for evaluating success or failure in accomplishing such organizational goals. Although accountants are important in the managerial accounting process, managerial accounting is more about managerial tools than processes. In our era of global competition, continuous  improvement,  process  reengineering, and employee empowerment, the tools of managerial accounting are used by decision makers at all levels, rather than just by “managers."

We emphasize the use of managerial accounting information for decision-making within the context of organizational strategy. The organization and content of our book reflect our belief that students who understand the big picture are better learners, are better decision-makers, and are better able to apply what they learn.

### Innovative Pedagogy

Managerial Accounting includes several special features specifically designed to engage students and help them succeed in this course.

Each chapter opens with a grid that identifies each learning objective for the chapter, the related pages, eLecture and Guided Example videos, and end-of-chapter assignments. This allows students and faculty to quickly grasp the chapter contents and to efficiently navigate to the desired topic.

#### Critical Thinking and Decision-Making

Students appreciate and become more engaged when they can see the real-world relevance of what they are learning in the classroom. We have included a generous number of critical thinking and decision-making questions throughout each chapter. We feel that it is important for students to realize that there is not always one single correct answer for managerial type questions. The following is a representative example:

#### ESG Considerations

Demand continues to grow for the consideration of ESG impacts on a company’s operations. Look for the ESG icon throughout the text where we link the chapter’s topic to ESG considerations. ESG items are linked in a variety of ways including the integration into text discussion and as the subject of critical thinking questions and assignments.

#### Learning Objective Reviews

Accounting can be challenging—especially for students lacking business experience or previous exposure to business courses. To reinforce concepts presented in each chapter and to ensure student comprehension, we include a Review problem at the conclusion of each learning objective. Answers to the Review problems are included at the end of the chapter. Each Review has a corresponding Guided Example video, available to students in myBusinessCourse (MBC), our online learning and homework system. In addition, each Review is assignable in MBC.

#### Ethics

Managerial ethics receives extensive coverage in this edition. For example, ethics is introduced in the context of the role of management accountants in Chapter 1 in Assignments asking questions that require ethical problem solving are included at the end of each chapter, marked with an ethics icon in the margin.

#### CMA Examination Questions

The Certified Management Accountant (CMA®) is a professional certification administered by the Institute of Management Accountants (IMA®). The purpose of the CMA certificate is to prepare accountants to be strategic thinkers and to analyze data in order to make better business decisions. We include past CMA questions at the end of each chapter. These questions will help students experience how concepts are applied in realistic business situations and give them an advantage if they choose to pursue a career in management accounting and become a CMA. CMA questions are identified by a CMA icon in the margin.

#### Excellent Assignments

Excellent assignment material is a must-have component of any successful textbook (and class). We went to great lengths to create the best assignments possible. We tried to include assignments that reflect our belief that students should be trained in analyzing accounting information to make business decisions, as opposed to working on mechanical computations. Assignments encourage students to analyze accounting information, interpret it, and apply the knowledge gained to a business decision. There are five categories of assignments: Questions, Mini Exercises, Exercises, Problems, and Cases and Projects. The following is a representative example:

Changes in the 10th Edition

In general, we made significant improvements to the flow of each chapter and enhanced topical coverage.

#### General Changes

• Expanded the coverage, resources, and assignments related to data analytics and Excel skill development in an effort to enhance career readiness.
• Emphasized critical thinking required in managerial decision-making through new questions inserted within, and directly related to, the chapter content. The authors emphasized questions where there is more than one viable answer to a problem, signaling that there are often no single, correct answers.
• Highlighted ESG implications of each chapter's topics in a variety of ways including new text discussions, critical thinking questions, and end-of-chapter assignments—all marked with an ESG icon.
• Made any necessary adjustments to learning objectives to ensure each learning objective represents a standalone learning unit.
• Streamlined, revamped, and rearranged chapter content to improve the chapter flow.
• Revised, enhanced, and added new chapter exhibits and graphics.
• Updated chapters with new relevant examples.
• Added many new end-of-chapter assignments (over 80 new assignments in total).
• Expanded ethics-related assignments and identified all ethical questions with a unique icon.
• Added new Excel data analysis assignments in each chapter and directly linked Tableau assignments from Appendix B.
• Referenced a new set of assignments that require students to analyze existing data visualizations.
• Selected a focus company for each chapter. We referenced the focus company for the vast majority of examples within a chapter for a more consistent presentation. In a similar way, we utilized a competitor to the focal company throughout many of the chapter reviews.
• Gleim CMA Review Questions:  Cambridge Business Publishers has partnered with Gleim to provide students with CMA prep materials within MBC that will give them a competitive advantage as they transition from the accounting classroom to taking the CMA Exam.

#### Chapter-Specific Changes

Chapter One

1. Moved the value chain discussion from Chapter 8 to Chapter 1 to provide better context for later chapters.
2. Added discussion on the CGMA (Chartered Global Management Accountant).
3. Enhanced the discussion in the ethics section to include the IMA standards of ethical conduct and steps to establish an ethical culture.
4. Expanded the initial discussion of ESG implications on managerial accounting topics.

Chapter Two

1. Supplemented the least-squares regression discussion with Excel spreadsheets and expanded Review 2-3 to include related problems.
2. Added new ESG content on responses to environmental issues and the impact on costs.

Chapter Three

1. Shifted focus from the functional statement to the contribution margin statement.
2. Moved income tax implications to the chapter appendix.
3. Added new ESG content in chapter discussion and critical thinking question.

Chapter Four

1. Added new ESG content related to suppliers and added DA4-3 on Scope 3 emissions.
2. Enhanced discussion on discontinuing a segment.

Chapter Five

1. Significantly revamped, reorganized, and streamlined topics and exhibits to improve presentation for students.
2. Moved t-account presentation to the margins allowing faculty to choose between schedule and t-account presentations. Offered assignments with alternative approaches.

Chapter Six

1. Significantly revamped, reorganized, and streamlined topics and exhibits to improve presentation for students.
2. Added discussion on time-driven activity-based costing.
3. Moved appendix on activity-based cost drivers from Chapter 3 to Appendix 6A.

Chapter Seven

1. Added a new section to differentiate between financial statement reporting needs and managerial decision needs.
2. Added a new learning objective on the cost of excess capacity.
3. Showed computations for the various ratios.
4. Added the CGMA Framework to LO7-4.
5. Added new backflush example to LO7-3.

Chapter Eight

1. Added new ESG content to chapter discussion.

Chapter Nine

1. Replaced minimum approach with zero-based budgeting.
2. Deleted open-book management discussion.
3. Differentiated operating budgets from financial budgets.
4. Added background information on budget committees.

Chapter Ten

1. Used the same company and related data for all of the reviews in this chapter for consistency.
2. Added a critical thinking question referencing a sustainability report.

Chapter Eleven

1. Added a new section on cost of quality.
2. Updated dashboard example.
3. Added the ESG considerations on a balanced scorecard.

Chapter Twelve

1. Moved the tax section to the Appendix.
2. Moved models that do not consider the time value of money ahead of the models that do consider the time value of money.
3. Dropped the calculation for the cost of capital.
4. Added new ESG discussion within the chapter’s content.

Appendix A

1. Added numerical examples for vertical and horizontal analysis.
2. Dropped the average interest rate metric.

Supplemental Materials

Our book is part of a comprehensive and carefully prepared teaching package that includes various forms of assistance to both instructors and students.

#### For Instructors

myBusinessCourse: A web-based learning and assessment program intended to complement your textbook and classroom instruction. This easy-to-use course management system grades homework automatically and provides students with additional help when you are not available. In addition, detailed diagnostic tools assess class and individual performance. myBusinessCourse is ideal for online courses or traditional face-to-face courses for which you want to offer students more resources to succeed. Assignments with the MBC Homework icon in the margin are available in myBusinessCourse. eLecture videos are available for the chapter Learning Objectives, and the Guided Examples for the in-chapter Reviews are available for you to assign to students.

Solutions Manual: Prepared by the authors; contains detailed solutions to all assignments

PowerPoint: Prepared by the authors; instructional PowerPoint slides for each chapter enhance the classroom presentation of book materials.

Test Bank: Prepared by the authors; a collection of multiple-choice questions, exercises, and problems designed to save time in preparing and grading periodic and final exams.

Expand/Collapse All
Brief Contents (pg. xiv)
Contents (pg. xv)
Chapter 1: Managerial Accounting: Tools for Decision-Making (pg. 1-1)
Uses of Accounting Information (pg. 1-3)
Financial Accounting (pg. 1-3)
Managerial Accounting (pg. 1-4)
Review 1-1 (pg. 1-6)
Missions, Goals, and Strategies (pg. 1-6)
An Organization’s Mission, Goals, and Strategies (pg. 1-6)
Strategic Position Analysis (pg. 1-8)
Managerial Accounting and Goal Attainment (pg. 1-9)
Planning, Organizing, and Controlling (pg. 1-10)
Review 1-2 (pg. 1-11)
Understanding the Value Chain (pg. 1-11)
Illustration of the Value Chain (pg. 1-12)
Usefulness of a Value Chain Perspective (pg. 1-14)
Review 1-3 (pg. 1-15)
Changing Environment of Business (pg. 1-16)
Global Competition and Its Key Dimensions (pg. 1-16)
Big Data and Analysis (pg. 1-16)
Robotics and Cognitive Technologies (pg. 1-17)
Enterprise Risk Management (ERM) (pg. 1-17)
Review 1-4 (pg. 1-17)
Ethics in Managerial Accounting (pg. 1-18)
Ethical Dilemmas (pg. 1-18)
Codes of Ethics/Conduct (pg. 1-19)
Environmental, Social, and Governance Considerations (pg. 1-20)
Environmental and Social Considerations (pg. 1-20)
Governance Considerations (pg. 1-21)
Review 1-5 (pg. 1-21)
Multiple Choice (pg. 1-22)
Data Analytics (pg. 1-22)
Data Visualization (pg. 1-23)
Questions (pg. 1-23)
Mini Exercises (pg. 1-23)
Exercises (pg. 1-25)
Cases and Projects (pg. 1-27)
Solutions to Review Problems (pg. 1-29)
Chapter 2: Cost Behavior, Activity Analysis, and Cost Estimation (pg. 2-1)
Cost Behavior Analysis (pg. 2-3)
Four Basic Cost Behavior Patterns (pg. 2-3)
Identifying Cost Behavior Patterns (pg. 2-5)
Factors Affecting Cost Behavior Patterns (pg. 2-6)
Review 2-1 (pg. 2-6)
Estimating the Total Cost Function for an Organization or Segment (pg. 2-6)
Relevant Range and the Total Cost Function (pg. 2-7)
Distinguishing between Total Cost, Variable Cost, and Average Cost (pg. 2-9)
Cost Behavior of Committed and Discretionary Fixed Costs (pg. 2-11)
Review 2-2 (pg. 2-12)
Analyzing Data for Cost Estimation (pg. 2-12)
High-Low Cost Estimation (pg. 2-12)
Scatter Diagrams (pg. 2-14)
Least-Squares Regression (pg. 2-15)
Review 2-3 (pg. 2-18)
Additional Issues in Cost Estimation (pg. 2-19)
Adapting to Changes in Technology and Prices (pg. 2-20)
Responding to Environmental Considerations (pg. 2-20)
Matching Activities and Costs (pg. 2-20)
Identifying Cost Drivers (pg. 2-21)
Review 2-4 (pg. 2-21)
Cost Classification and Decision-Making (pg. 2-21)
Classifying Costs as Direct or Indirect (pg. 2-21)
Combining Cost Behaviors for Decision-Making (pg. 2-22)
Review 2-5 (pg. 2-23)
Key Ratios and Equations (pg. 2-24)
Multiple Choice (pg. 2-24)
Data Analytics (pg. 2-25)
Data Visualization (pg. 2-28)
Questions (pg. 2-28)
Mini Exercises (pg. 2-29)
Exercises (pg. 2-32)
Problems (pg. 2-35)
Cases and Projects (pg. 2-36)
Solutions to Review Problems (pg. 2-37)
Chapter 3: Cost-Volume-Profit Analysis and Planning (pg. 3-1)
Cost-Volume-Profit Analysis (pg. 3-3)
Profit Equation (pg. 3-3)
Using the Profit Equation in Multiple Scenarios (pg. 3-5)
Review 3-1 (pg. 3-6)
Contribution Income Statement (pg. 3-6)
Analysis Using Contribution Margin (Total, Unit, Ratio) (pg. 3-7)
Review 3-2 (pg. 3-9)
Break-Even Point and Profit Planning (pg. 3-9)
Determining Break-Even Point and Margin of Safety in Unit Sales (pg. 3-9)
Determining Unit Sales at a Target Profit (pg. 3-10)
Determining Break-Even in Sales Dollars (pg. 3-11)
Determining Sales Dollars at a Target Profit (pg. 3-11)
Creating and Analyzing the Cost-Volume-Profit Graph (pg. 3-12)
Creating and Analyzing the Profit-Volume Graph (pg. 3-13)
CVP Key Assumptions (pg. 3-14)
Review 3-3 (pg. 3-14)
Multiple-Product Cost-Volume-Profit Analysis (pg. 3-15)
Determining Break-Even in Unit Sales with Multiple Products (pg. 3-15)
Determining Break-Even in Sales Dollars with Multiple Products (pg. 3-16)
Review 3-4 (pg. 3-19)
Analysis of Operating Leverage (pg. 3-19)
Review 3-5 (pg. 3-21)
Appendix 3A: Cost-Volume-Profit Analysis and Income Taxes (pg. 3-21)
Determining Sales at a Target After-Tax Profit (pg. 3-22)
Key Ratios and Equations (pg. 3-23)
Multiple Choice (pg. 3-23)
Data Analytics (pg. 3-25)
Data Visualization (pg. 3-26)
Questions (pg. 3-26)
Mini Exercises (pg. 3-26)
Exercises (pg. 3-29)
Problems (pg. 3-33)
Cases and Projects (pg. 3-37)
Solutions to Review Problems (pg. 3-38)
Chapter 4: Using Relevant Costs and Differential Analysis for Decision-Making (pg. 4-1)
Identifying Relevant Revenues and Costs (pg. 4-3)
Equipment Replacement Decision (pg. 4-3)
Review 4-1 (pg. 4-7)
Preparing and Applying Differential Analysis (pg. 4-7)
Equipment Replacement Decision (pg. 4-7)
Review 4-2 (pg. 4-9)
Evaluating Changes in Profit Plans (pg. 4-9)
Evaluating the Effect on the Profit Plan of Discontinuing a Segment (pg. 4-11)
Review 4-3 (pg. 4-11)
Special Orders (pg. 4-12)
Review 4-4 (pg. 4-14)
Outsourcing Decisions (Make or Buy) (pg. 4-14)
Review 4-5 (pg. 4-17)
Sell or Process Further (pg. 4-17)
Review 4-6 (pg. 4-19)
Appendix 4A: Use of Limited Resources (pg. 4-19)
Single Constraint (pg. 4-19)
Multiple Constraints (pg. 4-20)
Theory of Constraints (pg. 4-20)
Review 4-7 (pg. 4-21)
Multiple Choice (pg. 4-22)
Data Analytics (pg. 4-23)
Data Visualization (pg. 4-24)
Questions (pg. 4-24)
Mini Exercises (pg. 4-25)
Exercises (pg. 4-29)
Problems (pg. 4-33)
Cases and Projects (pg. 4-38)
Solutions to Review Problems (pg. 4-41)
Chapter 5: Product Costing: Job and Process Operations (pg. 5-1)
Reporting Inventory Costs in Various Organizations (pg. 5-3)
Inventory Categories Reported for Various Types of Organizations (pg. 5-3)
Product and Period Cost Reporting Distinction for Manufacturers (pg. 5-5)
Three Components of Product Costs (pg. 5-6)
Determining Costs of Products Outside of Financial Reporting (pg. 5-7)
Review 5-1 (pg. 5-8)
A Closer Look at Manufacturing Overhead (pg. 5-8)
Review 5-2 (pg. 5-11)
Job Order Costing for Products and Services (pg. 5-11)
Production Planning and Control Process (pg. 5-12)
Basic Flow of Costs in Job Order Costing (pg. 5-12)
Illustration of Job Order Cost Flows for Samsung (pg. 5-14)
Overapplied and Underapplied Overhead (pg. 5-19)
Job Costing in Service Organizations (pg. 5-21)
Review 5-3 (pg. 5-22)
Process Costing (pg. 5-22)
Cost of Production Report Using the Weighted-Average Method (pg. 5-23)
First-In, First-Out Process Costing (pg. 5-27)
Process Costing in Service Organizations (pg. 5-27)
Review 5-4 (pg. 5-28)
Appendix 5A: Absorption and Variable Costing (pg. 5-28)
Basic Concepts (pg. 5-28)
Income Under Absorption and Variable Costing (pg. 5-29)
Production Equals Sales: June (pg. 5-30)
Production Exceeds Sales: July (pg. 5-31)
Sales Exceed Production: August (pg. 5-31)
Evaluating Alternatives to Inventory Valuation (pg. 5-32)
Review 5-5 (pg. 5-33)
Key Ratios and Equations (pg. 5-34)
Multiple Choice (pg. 5-34)
Data Analytics (pg. 5-35)
Data Visualization (pg. 5-36)
Questions (pg. 5-36)
Mini Exercises (pg. 5-37)
Exercises (pg. 5-39)
Problems (pg. 5-44)
Cases and Projects (pg. 5-51)
Solutions to Review Problems (pg. 5-53)
Chapter 6: Activity-Based Costing, Customer Profitability, and Activity-Based Management (pg. 6-1)
Applying Overhead with a Plantwide Rate (pg. 6-3)
Applying Overhead with Departmental Rates (pg. 6-5)
Review 6-1 (pg. 6-7)
Concepts Underlying Activity-Based Costing (pg. 6-8)
Hierarchy of Activity Costs (pg. 6-8)
Summarizing Activity-Based Costing Concepts (pg. 6-10)
Review 6-2 (pg. 6-10)
Applying Activity-Based Costing (pg. 6-11)
Illustrating the ABC Product Cost Model (pg. 6-11)
Review 6-3 (pg. 6-14)
Considerations before Implementing Activity-Based Costing (pg. 6-15)
Choosing between Traditional and Activity-Based Costing (pg. 6-15)
Limitations of Activity-Based Costing System (pg. 6-16)
Challenges of Implementing Activity-Based Costing System (pg. 6-16)
Applications of Activity-Based Costing Systems (pg. 6-17)
Activity-Based Management (pg. 6-18)
Review 6-4 (pg. 6-19)
ABC and Customer Profitability Analysis (pg. 6-19)
Customer Profitability Profile (pg. 6-19)
ABC Customer Profitability Analysis Illustrated (pg. 6-20)
Review 6-5 (pg. 6-22)
Appendix 6A: Profitability Analysis with Activity-Based Cost Drivers (pg. 6-22)
Multi-Level Contribution Income Statement (pg. 6-22)
Variations in Multi-Level Contribution Income Statement (pg. 6-24)
Review 6-6 (pg. 6-25)
Multiple Choice (pg. 6-25)
Data Analytics (pg. 6-26)
Data Visualization (pg. 6-27)
Questions (pg. 6-27)
Mini Exercises (pg. 6-28)
Exercises (pg. 6-31)
Problems (pg. 6-36)
Cases and Projects (pg. 6-43)
Solutions to Review Problems (pg. 6-46)
Chapter 7: Additional Topics in Product Costing (pg. 7-1)
Allocation of Service Department Costs (pg. 7-3)
Reasons for Allocating Service Department Costs (pg. 7-4)
The Process of Allocating Service Department Costs (pg. 7-4)
Using the Direct Method to Allocate Service Department Costs (pg. 7-6)
Comparing the Direct Method to the Step Method (pg. 7-7)
Using the Step Method to Allocate Service Department Costs (pg. 7-8)
Review 7-1 (pg. 7-10)
The Cost of Excess Capacity (pg. 7-11)
Calculating the Overhead Application Rate Under Different Capacity Levels (pg. 7-11)
Calculating the Cost of Excess Capacity (pg. 7-13)
Managing Excess Capacity (pg. 7-13)
Capacity Considerations When Using Dual Overhead Allocation Rates (pg. 7-14)
Review 7-2 (pg. 7-14)
Just-In-Time (JIT) Inventory Management/Lean Production (pg. 7-14)
Characteristics of JIT/Lean Production Approach (pg. 7-14)
Performance Evaluation Under JIT/Lean Production Approach (pg. 7-17)
Review 7-3 (pg. 7-18)
Increased Focus on Data-Driven Decision-Making (pg. 7-19)
Using Data Effectively (pg. 7-19)
Developing Skills for Decision-Making (pg. 7-20)
Review 7-4 (pg. 7-20)
Key Ratios and Equations (pg. 7-21)
Multiple Choice (pg. 7-21)
Data Analytics (pg. 7-22)
Data Visualization (pg. 7-23)
Questions (pg. 7-24)
Mini Exercises (pg. 7-24)
Exercises (pg. 7-26)
Problems (pg. 7-29)
Cases and Projects (pg. 7-34)
Solutions to Review Problems (pg. 7-35)
Chapter 8: Decision-Making: Pricing and Product Cost Management (pg. 8-1)
Cost-Based Pricing (pg. 8-3)
Contrasting a Cost-Based Approach to an Economic Approach (pg. 8-3)
Cost-Based Approaches to Pricing (pg. 8-3)
Review 8-1 (pg. 8-7)
Price-Based Costing (pg. 8-8)
Target Costing: Price-Based Costing (pg. 8-8)
Characteristics of Target Costing (pg. 8-9)
Review 8-2 (pg. 8-12)
Continuous Improvement (pg. 8-12)
Kaizen Costing Approach (pg. 8-12)
Review 8-3 (pg. 8-13)
Benchmarking to Improve Performance (pg. 8-13)
Applications of Benchmarking (pg. 8-14)
Process of Benchmarking (pg. 8-14)
Review 8-4 (pg. 8-15)
Key Ratios and Equations (pg. 8-15)
Multiple Choice (pg. 8-15)
Data Analytics (pg. 8-16)
Data Visualization (pg. 8-16)
Questions (pg. 8-17)
Mini Exercises (pg. 8-17)
Exercises (pg. 8-18)
Problems (pg. 8-20)
Cases and Projects (pg. 8-23)
Solutions to Review Problems (pg. 8-24)
Chapter 9: Operational Budgeting and Profit Planning (pg. 9-1)
The Budgeting Process (pg. 9-3)
Reasons for Budgeting (pg. 9-3)
Approaches to Budgeting (pg. 9-5)
Review 9-1 (pg. 9-7)
Master Budget for a Merchandiser (pg. 9-8)
Overview of the Master Budget Assembly for a Merchandiser (pg. 9-8)
Starting Point: Beginning of Period Balance Sheet (pg. 9-10)
Sales Budget (pg. 9-11)
Purchases Budget (pg. 9-11)
Selling Expense Budget (pg. 9-12)
General and Administrative Expense Budget (pg. 9-13)
Cash Budget (pg. 9-13)
Budgeted Financial Statements (pg. 9-15)
Finalizing the Budget (pg. 9-16)
Review 9-2 (pg. 9-17)
Master Budget for a Manufacturer (pg. 9-17)
Overview of Master Budget Assembly for a Manufacturer (pg. 9-17)
Sales Budget (pg. 9-19)
Production Budget (pg. 9-19)
Materials Purchases Budget (pg. 9-19)
Manufacturing Cost Budget (pg. 9-20)
Review 9-3 (pg. 9-21)
Aspects of Budgeting That Impact Behavior and Outcomes (pg. 9-22)
Employee Participation in the Budgeting Process (pg. 9-22)
Selecting Budgeting Periods (pg. 9-23)
Utilizing Forecasts in Budgets (pg. 9-23)
Motivating Ethical Behavior in Budget Development (pg. 9-24)
Review 9-4 (pg. 9-24)
Multiple Choice (pg. 9-25)
Data Analytics (pg. 9-26)
Data Visualization (pg. 9-27)
Questions (pg. 9-28)
Mini Exercises (pg. 9-28)
Exercises (pg. 9-30)
Problems (pg. 9-35)
Cases and Projects (pg. 9-41)
Solutions to Review Problems (pg. 9-43)
Chapter 10: Standard Costs and Performance Reports (pg. 10-1)
Responsibility Accounting (pg. 10-3)
Responsibility Accounting and Performance Reporting (pg. 10-3)
Performance Reporting and Organization Structures (pg. 10-4)
Types of Responsibility Centers (pg. 10-5)
Financial and Nonfinancial Performance Measures (pg. 10-6)
Review 10-1 (pg. 10-7)
Performance Reporting for Cost Centers (pg. 10-7)
Differentiating a Static Budget from a Flexible Budget (pg. 10-7)
Performance Report with a Flexible Budget (pg. 10-8)
Standard Costs and Performance Reports (pg. 10-10)
Review 10-2 (pg. 10-11)
Variance Analysis for Costs (pg. 10-11)
Components of Standard Cost Analysis: Price and Quantity Variances (pg. 10-11)
Standard Cost Variance Analysis of Direct Materials (pg. 10-11)
Review 10-3 (pg. 10-14)
Standard Cost Variance Analysis of Direct Labor (pg. 10-15)
Review 10-4 (pg. 10-17)
Standard Cost Variance Analysis of Variable Manufacturing Overhead (pg. 10-17)
Overview of Fixed Overhead Variances (pg. 10-19)
Review 10-5 (pg. 10-20)
Revenue Variances and Performance Reporting (pg. 10-20)
Performance Report of Sales Department as a Revenue Center (pg. 10-20)
Performance Report for Controllable Selling Costs (pg. 10-22)
Performance Report of Sales Department as a Profit Center (pg. 10-22)
Review 10-6 (pg. 10-24)
Appendix 10A: Fixed Overhead Variances (pg. 10-24)
Review 10-7 (pg. 10-25)
Appendix 10B: Reconciling Budgeted and Actual Income (pg. 10-25)
Review 10-8 (pg. 10-27)
Key Ratios and Equations (pg. 10-27)
Multiple Choice (pg. 10-27)
Data Analytics (pg. 10-28)
Data Visualization (pg. 10-29)
Questions (pg. 10-29)
Mini Exercises (pg. 10-30)
Exercises (pg. 10-32)
Problems (pg. 10-35)
Cases and Projects (pg. 10-41)
Solutions to Review Problems (pg. 10-43)
Chapter 11: Performance Measurement Using Segment Reporting, Transfer Pricing, and Balanced Scorecard (pg. 11-1)
Segment Analysis and Reporting (pg. 11-3)
Preparing Segment Reports (pg. 11-3)
Interpreting Segment Reports (pg. 11-6)
Review 11-1 (pg. 11-8)
Transfer Pricing (pg. 11-8)
Resolving Transfer-Pricing Conflicts (pg. 11-8)
Determining Transfer Prices (pg. 11-11)
Review 11-2 (pg. 11-14)
Investment Center Evaluation Measures (pg. 11-14)
Return on Investment (pg. 11-14)
Residual Income (pg. 11-18)
Which Measure Is Best? (pg. 11-19)
Review 11-3 (pg. 11-20)
Balanced Scorecard (pg. 11-21)
Balanced Scorecard Framework (pg. 11-21)
Balanced Scorecard and Strategy (pg. 11-25)
Review 11-4 (pg. 11-27)
Key Ratios and Equations (pg. 11-27)
Multiple Choice (pg. 11-27)
Data Analytics (pg. 11-29)
Data Visualization (pg. 11-30)
Questions (pg. 11-30)
Mini Exercises (pg. 11-31)
Exercises (pg. 11-34)
Problems (pg. 11-37)
Cases and Projects (pg. 11-43)
Solutions to Review Problems (pg. 11-45)
Chapter 12: Capital Budgeting Decisions (pg. 12-1)
Long-Range Planning and Capital Budgeting (pg. 12-3)
The Capital Budgeting Process (pg. 12-4)
Capital Budgeting Models That Do Not Consider Time Value of Money (pg. 12-6)
Predicted Cash Flows (pg. 12-6)
Payback Period (pg. 12-7)
Accounting Rate of Return (pg. 12-8)
Review 12-1 (pg. 12-9)
Capital Budgeting Models That Consider Time Value of Money (pg. 12-9)
Net Present Value (pg. 12-10)
Internal Rate of Return (pg. 12-11)
Review 12-2 (pg. 12-12)
Evaluation of Capital Budgeting Models (pg. 12-12)
Review 12-3 (pg. 12-15)
Considering Risks and Relevant Cost Analysis in Capital Budgeting Decisions (pg. 12-15)
Evaluating Risk and Uncertainty in Capital Budgeting Decisions (pg. 12-15)
Using Differential Analysis in Capital Budgeting Decisions (pg. 12-16)
Avoiding Errors in Predicting Differential Costs and Revenues (pg. 12-18)
Review 12-4 (pg. 12-19)
Appendix 12A: Time Value of Money (pg. 12-20)
Future Value (pg. 12-20)
Present Value (pg. 12-20)
Annuities (pg. 12-22)
Unequal Cash Flows (pg. 12-23)
Deferred Returns (pg. 12-23)
Review 12-5 (pg. 12-24)
Appendix 12B: Table Approach to Determining Internal Rate of Return (pg. 12-24)
Equal Cash Flows (pg. 12-24)
Unequal Cash Flows (pg. 12-25)
Review 12-6 (pg. 12-26)
Appendix 12C: Taxes in Capital Budgeting Decisions (pg. 12-26)
Depreciation Tax Shield (pg. 12-26)
Investment Tax Credit (pg. 12-28)
Review 12-7 (pg. 12-28)
Key Ratios and Equations (pg. 12-29)
Multiple Choice (pg. 12-29)
Data Analytics (pg. 12-30)
Data Visualization (pg. 12-31)
Questions (pg. 12-31)
Mini Exercises (pg. 12-32)
Exercises (pg. 12-34)
Problems (pg. 12-37)
Cases and Projects (pg. 12-40)
Solutions to Review Problems (pg. 12-45)
Appendix A: Managerial Analysis of Financial Statements (pg. A-1)
Financial Statement Analysis (pg. A-3)
The Value of Financial Statement Analysis to Managers (pg. A-3)
Factors Impacting Financial Statement Analysis (pg. A-4)
Review Appendix A-1 (pg. A-5)
Evaluative Standards for Financial Statement Analysis (pg. A-6)
Types of Financial Analysis Standards (pg. A-6)
Financial Analysis Using Comparative and Common Size Statements (pg. A-7)
Review Appendix A-2 (pg. A-10)
Financial Statement Ratio Analysis (pg. A-11)
Performance Analysis (pg. A-11)
Review Appendix A-3 (pg. A-14)
Liquidity Analysis (pg. A-14)
Solvency Analysis (pg. A-17)
Financial Measure Trend Analysis and Benchmarking (pg. A-19)
Trend Analysis of Financial Measures (pg. A-19)
Industry Benchmarking of Financial Measures (pg. A-21)
Review Appendix A-4 (pg. A-22)
Data Analytics (pg. A-22)
Data Visualization (pg. A-22)
Questions (pg. A-22)
Mini Exercises (pg. A-23)
Exercises (pg. A-25)
Problems (pg. A-26)
Cases and Projects (pg. A-29)
Solutions to Review Problems (pg. A-30)
Appendix B: Data Analytics (pg. B-1)
Data Analytics (pg. B-2)
Big Data (pg. B-2)
Types of Data Analytics (pg. B-2)
Data Analytics in the Accounting Profession (pg. B-3)
The Analytics Mindset (pg. B-4)
Data Analytic Tools (pg. B-5)
Data Visualization (pg. B-6)
Summary of Learning Objectives (pg. B-10)
Multiple Choice (pg. B-11)
Data Analytics and Data Visualizations (pg. B-11)
Index (pg. I-1)
Chapter Vignette Sources (pg. I-12)

#### Susan Kulp

Susan L. Kulp is Professor of Accountancy at the George Washington University School of Business. She received her Ph.D. at Stanford University. Before joining the George Washington University faculty, Professor Kulp was a faculty member at Harvard Business School.

Professor Kulp’s research focuses on performance measurement, incentive, and internal decision-making issues in inter-organizational relationships. The settings that she examines include supply chain relationships, private partnerships, and government entities. Her research highlights the conflicts between inter-organizational contracts and the control systems in place within the partnering firms. She has published research studies in both accounting and operations management journals, including the Journal of Accounting Research, The Accounting Review, Management Science, Production and Operations Research, and Review of Accounting Studies. Professor Kulp currently services as a Department Editor at Decision Sciences. In addition to her published research studies, Professor Kulp has published several Harvard Business School cases focused on management control.

Professor Kulp has taught managerial accounting to undergraduate, MBA, online MBA, and executive MBA
students. Additionally, she teaches financial accounting to online MBA students. Professor Kulp has won several teaching awards.

#### Amie L. Dragoo

Professor of Accounting and Educational Consultant

Former Accounting Department Chair at Edgewood College, Professor Dragoo earned her BA and MBA from Michigan State University, and her doctorate from Edgewood College. She holds a CPA license, and for nearly 15 years has been a Becker Professional Education faculty instructor. Prior to her experiences in higher education, Professor Dragoo was a senior business assurance associate with PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.). Professor Dragoo has extensive teaching experiences, including courses in Intermediate Accounting I and II, Cost Accounting, Advanced Cost Management, Strategic Financial Management, and other advanced courses in financial and managerial accounting. She has received a number of teaching awards including the School of Business Outstanding Faculty Award and the Estervig-Beaubien Excellence in Teaching and Mentoring Award. She has also worked as an independent consultant, including projects in higher education, and has worked with several corporate clients. Professor Dragoo’s research has been published in the Journal of Education for Business and the Journal of Continuing Higher Education and she has contributed to numerous articles published by organizations affiliated with the AICPA. She has been involved in many community-oriented programs including the Volunteer Income Tax Assistance (VITA) program.

 Errata Last Updated: Oct 26 2023 Corrections to identified errors in the text.
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