Managerial Accounting for Undergraduates, 2e

by Christensen, Hobson, Wallace, Matthews

ISBN: 978-1-61853-309-8 | Copyright 2020


Welcome to Managerial Accounting for Undergraduates, Second Edition!

We have written this book to introduce future business professionals to management accounting concepts and decision-making tools that will help them manage their companies in an increasingly competitive global market. While working for both small and large service firms and teaching in a university setting, we observed that some business professionals, although possessing a technically sound knowledge of accounting principles and methods, had difficulty understanding how the “answer” applied in the context of real business issues faced by these firms. Although a business professional may be able to calculate the materials efficiency variance, for example, determining who might have been responsible for the variance and what should be done to address the variance requires a broader understanding of the overall business. We want young professionals to be better prepared to make good business decisions and contribute to the overall strategy of the companies for which they work.

Many undergraduate managerial accounting textbooks focus primarily on calculations and formulas and how to apply these accounting skills in a manufacturing environment. However, business professionals must be able to apply their technical accounting knowledge and expertise in a broader context in making good business decisions. Moreover, because the U.S. market is increasingly service oriented, professionals must develop experience in applying these skills to decision making in a service environment. Having spent several years supplementing existing textbook problems with more real-world and service industry examples, we saw a need for a new approach. Hence, we focus on helping students to (1) develop strong analytical skills and (2) apply them in realistic decision-making contexts. Finally, we have written the book with a heavy emphasis on managerial decisions in service and merchandising enterprises.

Target Audience

Managerial Accounting for Undergraduates, 2e, is intended for use in the first managerial accounting course at the undergraduate level; one that balances the development of management accounting tools with their implementation in decision making. This book teaches future business professionals how to read, analyze, and interpret accounting and other company, industry, and economic data to make informed business decisions.


Incredible Value:  Managerial Accounting for Undergraduates is offered at $60 net to the bookstore and $80 suggested retail price. Your students will benefit from high quality course materials at only 25% to 30% of the price of other leading textbooks.

myBusinessCourse:  myBusinessCourse is a complete learning and assessment program that is free with new copies of the textbook. The authors created the various video and assignments in the system ensuring consistency between the textbook and learning system.

Extensive Service Industry Coverage

The service sector is the fastest growing segment of the U.S. economy. The text includes Service Industry Margin Callouts identifying the sections of the text that apply managerial accounting concepts to the service industry.  Further, each chapter concludes with a Service Industry in Focus case that provides students an opportunity to apply what they learned within a service industry situation.

Corporate Social Responsibility

Increasingly, companies have found that “doing good” leads to a more successful, profitable enterprise. These boxed inserts help students understand how CSR is being embraced by forward-thinking enterprises as part of their long-term business models.

Accounting in Practice

These boxed inserts help bridge the gap between the classroom and what students encounter in the real world. These inserts document situations a student will likely encounter, and presents choices that companies face in making decisions.


As professionals, students will eventually be confronted with day-to-day-decisions that have ethical implications. The authors discuss ethics where appropriate in the textbook, including assignments throughout the text that raise ethical issues.

Real Company Examples

Students better engage in the learning process and retain concepts through real and familiar examples.  Throughout the text, the authors incorporate real examples such as Microsoft, Amazon, Google, and Waste Management.

Your Turn! Boxes

Your Turn! Boxes are integrated throughout each chapter as a means of reinforcing the material just presented through immediate practice. These self-study boxes are inserted at the end of each major section in each chapter and require students to apply the concepts and techniques they just learned. Solutions are provided at the end of each chapter so students can check their work.

Student Success

As managerial accounting can be challenging, the authors include many features that provide additional direction for students. Mapping Each Chapter – each chapter begins with an overview that visually depicts the layout of the chapter. A.K.A. Boxes - inform students of commonly used alternative terms that they may encounter in practice. Hints – additional suggestions inserted in the margin to help students understand difficult concepts. 

Integrated with Excel

Business professionals must be able to use spreadsheets to solve data analysis problems. In each chapter, the authors demonstrate data analysis concepts in Excel. Excel templates are provided for select assignments and are identified by an EXCEL icon. 


Additional assignments and video examples have been added to MBC, so virtually all of the textbook assignments are available in the system.

Action Plan

Each chapter opens with a grid that identifies each learning objective for the chapter, the related pages, 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.

Additional End-of-Chapter assignments

Each learning objective includes a wide variety of assignment material.  

Additional Test Bank Questions

Includes an expanded test bank.

More Your Turn! Boxes

Now each learning objective ends with a comprehensive Your Turn! exercise that gives students even more opportunities to practice.  Each Your Turn! is accompanied by a short video clip that walks students through the solution.

Introducing myBusinessCourse

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.

Request a One-on-One Demo

eLecture Videos

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

Narrated demonstration videos

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

Auto-graded assignments

Auto-graded Assignments

  • 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

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

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
  • Includes myBusinessCourse
  • Integrates eLecture and demonstration videos
  • Bookmarking
  • Note taking
  • Highlighting

Third Party Integrations

Third Party Integrations

  • Single sign-on
  • Link to assignments in myBusinessCourse from your third party course
  • Automatically sync gradebooks each night


  • 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

Support and Training

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

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

Click on a Chapter 3 eLecture or Guided Example to preview the related video.

Road Map
LO Learning Objective Page eLecture Guided Example Assignments

Describe the two basic types of cost accounting systems, discuss how they may be used in both manufacturing and nonmanufacturing environments, and explain the need for the timely determination of product cost.


SS1, Q1, Q2, Q3, Q4, SE1


Explain the need for a predetermined overhead rate and demonstrate its calculation.


SS2, Q5, Q6, Q7, Q8, Q9, SE2, SE3, SE4, E1A, E2A, E3A, E6A, E7A, E1B, E2B, E3B, E6B, E7B, P1A, P2A, P1B, P2B


Describe and explain a job order costing system, identify types of records used in order costing, and demonstrate the journal entries that accompany the flow of product costs.


SS3, SS4, Q10, Q11, Q12, SE5, E4A, E5A, E4B, E5B, P1A, P3A, P4A, P5A, P6A, P7A, P1B, P3B, P4B, P5B, P6B, P7B


Discuss the procedures and journal entries used to account for finished goods and the sale of finished goods.


SS4, SS5, Q13, Q14, Q15, SE6, SE7, E6A, E7A, E8A, E9A, E10A, E11A, E12A, E6B, E7B, E8B, E9B, E10B, E11B, E12B, E6B, E7B, E8B, E9B, E10B, E11B, E12B, P2A, P4A, P5A, P6A, P7A, P2B, P4B, P5B, P6B, P7B


Describe the procedures for cost allocation for service departments.


SS6, Q16, Q17, Q18, Q19, Q20, Q21, SE8, E13A, E13B, P8A, P8B


Contrast plant-wide overhead rates and departmental overhead rates.


SS7, Q7, Q22, Q23, SE9, SE10, P8A, P8B

Expand/Collapse All
About the Authors (pg. iii)
Preface (pg. iv)
Brief Contents (pg. xi)
Contents (pg. xii)
Chapter 1 Overview of Managerial Accounting (pg. 2)
Introduction To Managerial Accounting (pg. 4)
Managerial Accounting versus Financial Accounting (pg. 4)
Objectives of Managerial Accounting (pg. 5)
Your Turn! 1.1 (pg. 5)
Types Of Business Entities (pg. 6)
Your Turn! 1.2 (pg. 6)
Major Trends In Business And Managerial Accounting (pg. 7)
Outsourcing (pg. 7)
Factory Automation (pg. 8)
Just-in-Time Inventory Systems (pg. 8)
Lean Manufacturing (pg. 9)
Customer Profitability (pg. 9)
Big Data and Predictive Analytics (pg. 10)
Your Turn! 1.3 (pg. 10)
Introducing Two New Companies (pg. 11)
Fezzari-A U.S. Bicycle Manufacturer and Distributor (pg. 11)
Environmental Business Consultants, LLC-A U.S. Service Firm (pg. 12)
Careers In Managerial Accounting (pg. 13)
Alternative Career Paths (pg. 13)
Work/Life Balance (pg. 14)
Your Turn! 1.4 (pg. 14)
Professional Certifications (pg. 14)
Certified Public Accountant (CPA) (pg. 14)
Certified Management Accountant (CMA) (pg. 15)
Other Professional Certifications (pg. 15)
Your Turn! 1.5 (pg. 15)
Summary of Learning Objectives (pg. 16)
Key Terms (pg. 17)
Self-Study Questions (pg. 17)
Questions (pg. 18)
Extending Your Knowledge (pg. 18)
Answers to Self-Study Questions: (pg. 20)
Your Turn! Solutions (pg. 20)
Chapter 2 Managerial Accounting Concepts and Cost Flows (pg. 22)
Key Objectives of a Managerial Accounting System (pg. 24)
Product Costing in a Manufacturing Environment (pg. 24)
Product Costing in a Service and Merchandising Environment (pg. 28)
Cost Control (pg. 28)
Your Turn! 2.1 (pg. 29)
Inventories and Cost Categories (pg. 29)
Inventories (pg. 29)
Manufacturing Product Cost Categories (pg. 30)
Product Cost Flows (pg. 32)
Raw Materials (pg. 32)
Labor (pg. 32)
Manufacturing Overhead (pg. 33)
Cost of Goods Manufactured (pg. 34)
Cost of Goods Sold (pg. 35)
Your Turn! 2.2 (pg. 35)
Illustration of Product Cost Accumulation (pg. 35)
Introduction of T-Accounts (pg. 35)
Real-World Manufacturing Example (pg. 36)
Schedule of Cost of Goods Manufactured (pg. 36)
Calculating Cost of Goods Sold (pg. 38)
Income Statement for a Manufacturing Firm (pg. 39)
Your Turn! 2.3 (pg. 39)
Illustration of Product Cost Journal Entries (pg. 39)
Cost Flows (pg. 41)
Financial Statements (pg. 43)
Your Turn! 2.4 (pg. 44)
Service Industry in Focus (pg. 45)
Comprehensive Problem (pg. 48)
Summary of Learning Objectives (pg. 49)
Key Terms (pg. 50)
Self-Study Questions (pg. 51)
Questions (pg. 51)
Short Exercises (pg. 52)
Exercises-Set A (pg. 54)
Exercises-Set B (pg. 57)
Problems-Set A (pg. 59)
Problems-Set B (pg. 62)
Extending Your Knowledge (pg. 64)
Answers to Self-Study Questions: (pg. 65)
Your Turn! Solutions (pg. 65)
Chapter 3 Cost Accounting Systems: Job Order Costing (pg. 68)
Cost Accounting Systems (pg. 70)
Two Basic Types of Cost Accounting Systems (pg. 70)
Timely Product Costing (pg. 71)
Your Turn! 3.1 (pg. 72)
Predetermined Overhead Rates (pg. 73)
Calculation of Predetermined Overhead Rate (pg. 73)
Your Turn! 3.2 (pg. 74)
Job Order Costing Systems (pg. 74)
Illustration of Job Order Costing for a Manufacturer (pg. 75)
Your Turn! 3.3 (pg. 80)
Illustration of Job Order Costing for a Service Firm (pg. 84)
Your Turn! 3.4 (pg. 85)
Accounting for Service Departments (pg. 85)
Service Departments as Cost Centers (pg. 86)
Service Department Costs as Product Costs (pg. 86)
Method of Cost Allocation (pg. 87)
Choosing an Allocation Basis (pg. 87)
Your Turn! 3.5 (pg. 89)
Departmental Overhead Rates (pg. 89)
Departmental Overhead Rates (pg. 89)
Your Turn! 3.6 (pg. 90)
Service Industry in Focus (pg. 90)
Comprehensive Problem (pg. 91)
Summary of Learning Objectives (pg. 92)
Self-Study Questions (pg. 94)
Questions (pg. 95)
Short Exercises (pg. 96)
Exercises-Set A (pg. 98)
Exercises-Set B (pg. 100)
Problems-Set A (pg. 103)
Problems-Set B (pg. 108)
Extending Your Knowledge (pg. 112)
Answers to Self-Study Questions: (pg. 114)
Your Turn! Solutions (pg. 114)
Chapter 4 Cost Accounting Systems: Process Costing (pg. 116)
Introduction to Process Costing (pg. 118)
Job Order Costing Review (pg. 118)
Process Costing (pg. 119)
Characteristics of Process Costing (pg. 120)
Manufacturing Departments (pg. 121)
Basic Processing Patterns (pg. 121)
Process Costing Steps (pg. 122)
Step 1: Visualize the Physical Flow of the Units (pg. 124)
Your Turn! 4.1 (pg. 125)
Step 2: Calculate the Equivalent Units (pg. 125)
Your Turn! 4.2 (pg. 127)
Step 3: Determine the Per-Unit Costs (pg. 127)
Your Turn! 4.3 (pg. 128)
Step 4: Calculate the Cost of Goods Manufactured (pg. 128)
Your Turn! 4.4 (pg. 129)
Step 5: Calculate the Cost of Ending Work-in-Process Inventory (pg. 129)
Your Turn! 4.5 (pg. 129)
The Product Cost Report (pg. 130)
Companies with Multiple Production Processes (pg. 131)
Journal Entries Illustrated (pg. 131)
Materials (pg. 131)
Labor (pg. 132)
Manufacturing Overhead (pg. 132)
Your Turn! 4.6 (pg. 132)
Service Industry in Focus (pg. 133)
Comprehensive Problem (Including Transferred-in Costs) (pg. 134)
Appendix 4A: Process Costing Using FIFO Method (pg. 136)
Your Turn! 4.7 (pg. 138)
Your Turn! 4.8 (pg. 141)
Your Turn! 4.9 (pg. 142)
Your Turn! 4.10 (pg. 143)
Your Turn! 4.11 (pg. 143)
Your Turn! 4.12 (pg. 146)
Summary of Learning Objectives (pg. 146)
Key Terms (pg. 148)
Self-Study Questions (pg. 148)
Questions (pg. 149)
Short Exercises (pg. 149)
Exercises-Set A (pg. 151)
Exercises-Set B (pg. 154)
Problems-Set A (pg. 156)
Problems-Set B (pg. 160)
Extending Your Knowledge (pg. 163)
ANSWERS TO Self-Study Questions: (pg. 164)
Your Turn! Solutions (pg. 164)
Chapter 5 Activity-Based Costing (pg. 170)
Understanding Indirect Costs Using Activity-Based Costing (pg. 172)
Changing Cost Environment (pg. 173)
Activity-Based Costing (pg. 174)
ABC Product Costing Model (pg. 175)
Your Turn! 5.1 (pg. 177)
Traditional Product Costing and ABC Compared (pg. 177)
Applying Overhead with Activity-Based Costing (pg. 178)
Limitations of ABC Illustration (pg. 181)
Comparing Traditional and Activity-Based Costing (pg. 181)
Your Turn! 5.2 (pg. 181)
ABC Implementation Issues (pg. 182)
Your Turn! 5.3 (pg. 183)
ABC and Customer Profitability Analysis (pg. 183)
Customer Profitability Profile (pg. 183)
Your Turn! 5.4 (pg. 186)
Activity-Based Management (pg. 186)
Your Turn! 5.5 (pg. 187)
Services Industry in Focus (pg. 187)
Customer Profitability Analysis (pg. 187)
Summary of Learning Objectives (pg. 188)
Key Terms (pg. 190)
Self-Study Questions (pg. 190)
Questions (pg. 191)
Short Exercises (pg. 191)
Exercises-Set A (pg. 195)
ExerciseS-Set B (pg. 198)
Problems-Set A (pg. 201)
Problems-Set B (pg. 206)
Extending Your Knowledge (pg. 211)
Answers to Self-Study Questions: (pg. 212)
Your Turn! Solutions (pg. 213)
Chapter 6 Cost-Volume-Profit Relationships (pg. 214)
Cost Behavior Analysis (pg. 216)
Selecting the Activity Basis (pg. 216)
Cost-Volume Graphs (pg. 217)
Classifications of Cost Behavior Patterns (pg. 218)
Your Turn! 6.1 (pg. 219)
Relevant Range (pg. 219)
Your Turn! 6.2 (pg. 220)
Analyzing Cost Behavior (pg. 220)
Scattergraph Method (pg. 221)
High-Low Method (pg. 221)
Least Squares Regression Method (pg. 223)
Analyzing Costs in Practice (pg. 224)
Your Turn! 6.3 (pg. 225)
Cost-Volume-Profit (CVP) Analysis (pg. 226)
Break-Even Analysis (pg. 226)
Your Turn! 6.4 (pg. 228)
Contribution Margin Analysis (pg. 228)
Your Turn! 6.5 (pg. 231)
Planning For Profit (pg. 231)
Desired Profit (pg. 231)
Margin of Safety (pg. 233)
Operating Leverage (pg. 233)
Using Cost-Volume-Profit Relationships (pg. 237)
Break-Even Analysis and Multiple Products (pg. 239)
Cost-Volume-Profit Analysis for Retail Businesses (pg. 239)
Your Turn! 6.6 (pg. 241)
Service Industry in Focus (pg. 241)
Comprehensive Problem (pg. 243)
Summary of Learning Objectives (pg. 244)
Key Terms (pg. 246)
Self-Study Questions (pg. 247)
Questions (pg. 247)
Short Exercises (pg. 248)
Exercises-Set A (pg. 249)
Exercises-Set B (pg. 252)
Problems-Set A (pg. 256)
Problems-Set B (pg. 260)
Extending Your Knowledge (pg. 265)
Answers to Self-Study Questions: (pg. 265)
Your Turn! Solutions (pg. 265)
Chapter 7 Variable Costing: A Tool for Decision Making (pg. 268)
Treatment of Product Costs (pg. 270)
Absorption Costing (pg. 270)
Variable Costing (pg. 270)
Appropriate Use of Absorption Costing and Variable Costing (pg. 272)
Your Turn! 7.1 (pg. 272)
Variable Costing Income Statement (pg. 272)
Income Statement Preparation (pg. 272)
Your Turn! 7.2 (pg. 275)
Income Reconciliation (pg. 275)
Your Turn! 7.3 (pg. 276)
Advantages and Disadvantages of Variable Costing (pg. 277)
Advantages (pg. 278)
Disadvantages (pg. 278)
Your Turn! 7.4 (pg. 278)
Services Industry in Focus (pg. 278)
Comprehensive Problem (pg. 280)
Summary of Learning Objectives (pg. 282)
Key Terms (pg. 282)
Self-Study Questions (pg. 283)
Questions (pg. 283)
Short Exercises (pg. 283)
Exercises-Set A (pg. 285)
Exercises-Set B (pg. 286)
Problems-Set A (pg. 287)
Problems-Set B (pg. 289)
Extending Your Knowledge (pg. 291)
Answers to Self-Study Questions: (pg. 291)
Your Turn! Solutions (pg. 291)
Chapter 8 Relevant Costs and Short-Term Decision Making (pg. 292)
Management and the Decision-Making Process (pg. 294)
Who Makes Decisions? (pg. 294)
Phases of Decision Making (pg. 296)
Relevant Costs and Differential Analysis (pg. 297)
Your Turn! 8.1 (pg. 299)
Illustrations of Differential Analysis (pg. 299)
The Special Order (pg. 299)
Your Turn! 8.2 (pg. 301)
Make or Buy? (pg. 301)
Your Turn! 8.3 (pg. 302)
Dropping Unprofitable Segments (pg. 303)
Your Turn! 8.4 (pg. 304)
Sell or Process Further? (pg. 304)
Your Turn! 8.5 (pg. 308)
Constrained Resources (pg. 308)
Your Turn! 8.6 (pg. 311)
Service Industry in Focus (pg. 311)
Summary of Learning Objectives (pg. 312)
Key Terms (pg. 313)
Self-Study Questions (pg. 314)
Questions (pg. 314)
Short Exercises (pg. 315)
Exercises-Set A (pg. 318)
Exercises-Set B (pg. 321)
Problems-Set A (pg. 323)
Problems-Set B (pg. 326)
Extending Your Knowledge (pg. 329)
Answers to Self-Study Questions: (pg. 331)
Your Turn! Solutions (pg. 331)
Chapter 9 Planning and Budgeting (pg. 334)
The Planning Process (pg. 336)
Strategic Planning (pg. 337)
Operational Planning (pg. 338)
Progress Measurement and Reporting (pg. 339)
Your Turn! 9.1 (pg. 339)
The Budgeting Process (pg. 339)
Advantages of Budgeting (pg. 340)
Elements of Effective Budgeting (pg. 340)
Zero-Based Budgeting (pg. 341)
Your Turn! 9.2 (pg. 343)
The Framework of the Master Budget (pg. 343)
Your Turn! 9.3 (pg. 344)
Illustration of a Master Budget and its Components (pg. 344)
Sales Budget (pg. 344)
Production Budget (pg. 345)
Direct Materials Budget (pg. 346)
Direct Labor Budget (pg. 347)
Manufacturing Overhead Budget (pg. 348)
Selling and Administrative Expense Budget (pg. 349)
Capital Expenditures Budget (pg. 350)
Cash Budget (pg. 351)
Illustration of a Service Firm’s Budgets (pg. 351)
Your Turn! 9.4 (pg. 354)
Budgeted Financial Statements (pg. 354)
Your Turn! 9.5 (pg. 357)
Services Industry in Focus (pg. 357)
Comprehensive Problem (pg. 359)
Summary of Learning Objectives (pg. 361)
Key Terms (pg. 363)
Self-Study Questions (pg. 363)
Questions (pg. 364)
Short Exercises (pg. 365)
Exercises-Set A (pg. 367)
Exercises-Set B (pg. 369)
Problems-Set A (pg. 372)
Problems-Set B (pg. 374)
Extending Your Knowledge (pg. 377)
Answers to Self-Study Questions: (pg. 378)
Your Turn! Solutions (pg. 379)
Chapter 10 Standard Costing and Variance Analysis (pg. 380)
Standard Costs (pg. 382)
Uses of Standard Cost Accounting (pg. 383)
Your Turn! 10.1 (pg. 384)
Determining Standard Costs (pg. 384)
Direct Materials Standards (pg. 384)
Direct Labor Standards (pg. 385)
Variable Overhead Standards (pg. 385)
Total Standard Costs (pg. 386)
Cost Variances (pg. 387)
Your Turn! 10.2 (pg. 388)
Direct Materials Variances (pg. 388)
Fezzari’s Direct Materials Variances (pg. 390)
Your Turn! 10.3 (pg. 392)
Direct Labor Variances (pg. 392)
Fezzari’s Direct Labor Variances (pg. 394)
Your Turn! 10.4 (pg. 395)
Variable Overhead Variances (pg. 395)
Fezzari’s Variable Overhead Variances (pg. 396)
Your Turn! 10.5 (pg. 397)
Standard Costs In Financial Statements (pg. 397)
Your Turn! 10.6 (pg. 398)
Services Industry in Focus (pg. 398)
Appendix 10A: Cost Variance Journal Entries Illustrated (pg. 399)
Your Turn! 10.7 (pg. 401)
Comprehensive Problem (pg. 403)
Summary of Learning Objectives (pg. 403)
Key Terms (pg. 405)
Self-Study Questions (pg. 405)
Questions (pg. 405)
Short Exercises (pg. 406)
Exercises-Set A (pg. 407)
Exercises-Set B (pg. 408)
Problems-Set A (pg. 410)
Problems-Set B (pg. 411)
Extending Your Knowledge (pg. 413)
Answers to Self-Study Questions: (pg. 415)
Your Turn! Solutions (pg. 415)
Chapter 11 Flexible Budgets, Segment Reporting, and Performance Analysis (pg. 418)
Static Budgets (pg. 420)
Your Turn! 11.1 (pg. 421)
Flexible Budgets (pg. 421)
Flexible Budgets in a Manufacturing Environment (pg. 422)
Flexible Budgets in a Service Environment (pg. 424)
Your Turn! 11.2 (pg. 427)
Internal Reporting of Segment Operations (pg. 428)
Decentralized Organizations (pg. 428)
Segment Reporting (pg. 428)
Types of Business Segments (pg. 429)
Your Turn! 11.3 (pg. 430)
Performance Reporting (pg. 431)
Departmental Operations (pg. 431)
Contribution Margin Income Statement (pg. 431)
Segment Performance Evaluation (pg. 433)
Service Company Segment Reporting Illustration (pg. 433)
Office Margin (pg. 434)
Your Turn! 11.4 (pg. 437)
Performance Analysis (pg. 437)
Return on Investment (pg. 438)
Profit Margin (pg. 439)
Asset Turnover (pg. 439)
Residual Income (pg. 440)
Balanced Scorecard (pg. 441)
Your Turn! 11.5 (pg. 441)
Your Turn! 11.6 (pg. 441)
Service Industry in Focus (pg. 442)
APPENDIX 11A: Transfer Pricing (pg. 444)
Your Turn! 11.7 (pg. 451)
Comprehensive Problem (pg. 451)
Summary of Learning Objectives (pg. 452)
Key Terms (pg. 455)
Self-Study Questions (pg. 455)
Questions (pg. 456)
Short Exercises (pg. 457)
Exercises-Set A (pg. 459)
Exercises-Set B (pg. 460)
Problems-Set A (pg. 462)
Problems-Set B (pg. 466)
Extending Your Knowledge (pg. 469)
Chapter 12 Capital Budgeting (pg. 472)
Elements of Capital Budgeting (pg. 474)
Capital Budgeting Phases (pg. 474)
Capital Expenditure Analysis (pg. 475)
Your Turn! 12.1 (pg. 476)
Required Rates of Return and the Time Value of Money (pg. 476)
Cost of Capital (pg. 476)
Time Value of Money (pg. 477)
Your Turn! 12.2 (pg. 479)
Performing Net Present Value Calculations (pg. 479)
Single-Sum Cash Flows (pg. 479)
Annuity Cash Flows (pg. 480)
Measurement of Investments and Returns (pg. 481)
Cash Flows (pg. 481)
After-Tax Cash Flows (pg. 482)
Depreciation Tax Shield (pg. 482)
Illustration of After-Tax Cash Flows (pg. 483)
Summary of Concerns Underlying Capital Budgeting (pg. 485)
Your Turn! 12.4 (pg. 485)
Net Present Value Analysis (pg. 485)
Basic Steps (pg. 485)
Illustration of Net Present Value (NPV) Analysis (pg. 486)
Liquidation Proceeds (pg. 490)
Excess Present Value Index (pg. 491)
Other Capital Budgeting Analyses (pg. 491)
Internal Rate of Return Analysis (pg. 491)
Basic Steps (pg. 492)
Your Turn! 12.6 (pg. 493)
Cash Payback Analysis (pg. 493)
Average Rate of Return Analysis (pg. 495)
Capital Budgeting: A Complex Subject (pg. 497)
Your Turn! 12.7 (pg. 497)
Service Industry in Focus (pg. 497)
Appendix 12A: Time Value of Money Calculations (pg. 499)
Comprehensive Problem (pg. 501)
Summary of Learning Objectives (pg. 503)
Key Terms (pg. 505)
Self-Study Questions (pg. 505)
Questions (pg. 505)
Short Exercises (pg. 506)
Exercises-Set A (pg. 508)
Exercises-Set B (pg. 509)
Problems-Set A (pg. 511)
Problems-Set B (pg. 513)
Extending Your Knowledge (pg. 517)
Chapter 13 Statement of Cash Flows (pg. 520)
Cash and Cash Equivalents (pg. 522)
Activity Classifications in the Statement of Cash Flows (pg. 523)
Operating Activities (pg. 524)
Investing Activities (pg. 524)
Financing Activities (pg. 524)
Usefulness of Activity Classification (pg. 525)
Noncash Investing and Financing Activities (pg. 526)
Using the Statement of Cash Flows (pg. 526)
Cash Flow from Operating Activities (pg. 527)
Your Turn! 13.1 (pg. 528)
Preparing the Statement of cash flows USING the Indirect Method (pg. 528)
Five Steps to Preparing a Statement of Cash Flows (pg. 529)
Your Turn! 13.2 (pg. 535)
Analyzing Cash Flows (pg. 536)
Free Cash Flow (pg. 536)
Operating-Cash-Flow-to-Current-Liabilities Ratio (pg. 536)
Operating-Cash-Flow-to-Capital-Expenditures Ratio (pg. 537)
Your Turn! 13.3 (pg. 538)
Comprehensive Problem (pg. 538)
Appendix 13A: Preparing the Statement of Cash Flows Under the Direct Method (pg. 540)
Your Turn! 13A.1 (pg. 542)
Summary of Learning Objectives (pg. 543)
Key Terms (pg. 544)
Self-Study Questions (pg. 544)
Questions (pg. 546)
Short Exercises (pg. 547)
Exercises-Set A (pg. 548)
Exercises-Set B (pg. 551)
Problems-Set A (pg. 554)
Problems-Set B (pg. 559)
Extending Your Knowledge (pg. 564)
Answers to Self-Study Questions: (pg. 568)
Your Turn! Solutions (pg. 568)
Chapter 14 Analysis and Interpretation of Financial Statements (pg. 570)
Persistent Earnings and the Income Statement (pg. 572)
Discontinued Operations (pg. 574)
Changes in Accounting Principles (pg. 574)
Comprehensive Income (pg. 575)
Your Turn! 14.1 (pg. 575)
Sources of Information (pg. 576)
Analytical Techniques (pg. 576)
Horizontal Analysis (pg. 577)
Trend Analysis (pg. 580)
Your Turn! 14.2 (pg. 581)
Vertical Analysis (pg. 581)
Your Turn! 14.3 (pg. 582)
Ratio Analysis (pg. 582)
Analyzing Firm Profitability (pg. 584)
Your Turn! 14.4 (pg. 587)
Analyzing ShortTerm Firm Liquidity (pg. 587)
Your Turn! 14.5 (pg. 592)
Analyzing LongTerm Firm Solvency (pg. 592)
Your Turn! 14.6 (pg. 594)
Financial Ratios for Common Stockholders (pg. 594)
Your Turn! 14.7 (pg. 597)
Limitations of Financial Statement Analysis (pg. 597)
Comprehensive Problem (pg. 598)
Appendix 14A: Financial Statement Disclosures (pg. 599)
Summary of Learning Objectives (pg. 602)
Summary of Financial Statement Ratios (pg. 603)
Key Terms (pg. 605)
Self-Study Questions (pg. 606)
Questions (pg. 607)
Short Exercises (pg. 608)
Exercises-Set A (pg. 609)
Exercises-Set B (pg. 612)
Problems-Set A (pg. 614)
Problems-Set B (pg. 620)
Extending Your Knowledge (pg. 626)
Answers to Self-Study Questions: (pg. 632)
Your Turn! Solutions (pg. 632)
Appendix A Accounting and the Time Value of Money (pg. A-1)
Time Value of Money Concept (pg. A-2)
Time Value of Money: Simple Interest Model (pg. A-2)
Time Value of Money: Compound Interest Model (pg. A-2)
Your Turn! A-1 (pg. A-3)
Future Value of an Amount (pg. A-3)
Your Turn! A-2 (pg. A-5)
Future Value of an Annuity (pg. A-5)
Your Turn! A-3 (pg. A-6)
Present Value of an Amount (pg. A-7)
Your Turn! A-4 (pg. A-9)
Present value of an annuity (pg. A-9)
Your Turn! A-5 (pg. A-10)
Calculations Using a Calculator And A Spreadsheet (pg. A-10)
Summary of Learning Objectives (pg. A-11)
Key Terms (pg. A-11)
Self-Study Questions (pg. A-11)
Exercises-Set A (pg. A-12)
Exercises-Set B (pg. A-13)
Answers to Self-Study Questions: (pg. A-14)
Your Turn! Solutions (pg. A-15)
Index (pg. I-1)
Theodore E. Christensen

Theodore E. Christensen

Director and Terry Distinguished Chair of Business in the J.M. Tull School of Accounting at the University of Georgia (UGA).

Prior to coming to UGA, he was on the faculty at Brigham Young University from 2000-2015 and at Case Western Reserve University from 1995-2000. He was a visiting professor at the University of Michigan (2013-2014) and the University of Utah (2012) and has taught at Santa Clara University in a summer program since 2005. He received a B.S. degree in accounting from San Jose State University, an M.Acc. degree in tax from Brigham Young University, and a Ph.D. in accounting from the University of Georgia. Professor Christensen has authored and coauthored articles published in many journals, including The Accounting Review; the Journal of Accounting and Economics; the Journal of Accounting Research; Review of Accounting Studies; Contemporary Accounting Research; Accounting Organizations and Society; the Journal of Business Finance & Accounting; the Journal of Accounting, Auditing, and Finance; Accounting Horizons; and Issues in Accounting Education.

L. Scott Hobson

L. Scott Hobson

L. Scott Hobson is a teaching Professor of Accounting at Brigham Young University (BYU) since 2003.

He received his B.S. in Accounting and Master of Accountancy Degrees from BYU in 1983. Prior to his career in academics, Professor Hobson was the founder and the owner of Hilton Farnkopf & Hobson (now HFG Consultants), a management consulting firm headquartered in Walnut Creek, California, for 14 years. He also worked in public accounting at Price Waterhouse for 5.5 years in both audit and consulting. While at Price Waterhouse, he taught for 2 years as an adjunct faculty at San Jose University. He has taught accounting at all levels, from principles to M.B.A. courses, including managerial accounting, financial accounting, governmental and not-for-profit accounting, and management consulting. Professor Hobson is licensed as a CPA (inactive) in California. Professor Hobson has published a case titled "Managing the CPA Firm at Dodge Company" in Issues in Accounting Education.

James S. Wallace

James S. Wallace

Associate Professor at The Peter F. Drucker and Masatoshi Ito Graduate School of Management at The Claremont Graduate University.

He received his Bachelors of Arts from the University of California, Santa Barbara, his MBA from the University of California, Davis, and his PhD from the University of Washington. Professor Wallace also holds a CPA certification from the state of California. He previously served on the faculty of the University of California, Irvine and has served as a visiting professor at the University of California, San Diego. Professor Wallace's work has appeared in leading academic journals including the Journal of Accounting and Economics, the Journal of Corporate Finance, and Information Systems Research, along with leading applied journals such as the Journal of Applied Corporate Finance, the Journal of Accountancy, Issues in Accounting Education and Accounting Horizons. Prior to his career in academics, Professor Wallace worked in public accounting and in industry with a Fortune 500 company. He has done consulting work with numerous companies in multiple industries.

Jason W. Matthews

Jason W. Matthews

Senior Lecturer of Accounting and Director of Undergraduate Programs in the J.M. Tull School of Accounting at the University of Georgia (UGA)

He received his B.S. from Missouri State University; his Master of Accountancy degree from North Carolina State University; and his Ph.D. from the University of Georgia. Prior to his career in academics, Dr. Matthews was the interim Chief Financial Officer at Roark Capital Group, a private equity firm with approximately $12 billion in equity capital based in Atlanta, Georgia. He was also the Director and Chief Financial Officer at United Coal Company, a producer of metallurgical and steam coal and the Director and Chief Financial Officer of Oculan Corporation, which developed hardware and software related to IT security management.  Dr. Matthews has taught across all levels at UGA, including financial accounting to full-time and Executive M.B.A. students, accounting information systems to MAcc students, cost accounting and audit to accounting majors, and introductory financial and managerial accounting to non-accounting majors. He is the recipient of numerous teaching awards, including most recently the 2018 Terry College of Business Instructional Excellence Award and the 2018 Pearcy B. Yeargin Outstanding Undergraduate Teacher of the Year award. He has been active in serving on committees in the Teaching Learning and Curriculum section of the American Accounting Association and is a CMA. 

Last Updated: Jun 15 2022

Corrections to identified errors in the text.

Excel Templates
Last Updated: Dec 31 2019

Excel templates to use for identified end-of-chapter assignments.

Practice Quizzes
Last Updated: May 4 2021

Brief practice quizzes for each chapter. Includes solutions.

Columbia Sportswear Company
Last Updated: Jan 6 2020

Columbia Sportswear Company's 2017 10K Report

General Mills
Last Updated: Jan 6 2020

General Mills' 2017 10K Report

Under Armour
Last Updated: Jan 6 2020

Under Armour's 2017 10K Report

Instructors Only