Managerial Accounting for Undergraduates, 3e

by Christensen, Hobson, Wallace, Matthews

| ISBN: 978-1-61853-442-2 | Copyright 2024

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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

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 last 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 to data analytics skills, 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 third edition includes several new features to enhance students’ career readiness.

  • We include Data Analytics boxes throughout the text to expose students to techniques that are used by businesses in areas related to the topic being discussed. The following box is an example:

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

    • New 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.
  • The following excerpt is from Appendix B.

  • 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.

Introducing myBusinessCourse

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Welcome to the Third Edition of Managerial Accounting for Undergraduates!

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. 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 develop strong analytical skills and 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 and Value

We created Managerial Accounting for Undergraduates to satisfy the needs of students taking their first managerial accounting course by providing a high-quality, contemporary, and engaging textbook and online learning system at an affordable price. With a suggested retail price of $85 for the paperback, full-color textbook with free access to myBusinessCourse, we challenge faculty to find a better overall value for their students.

Read on to learn why you should use it in your introductory managerial accounting class.


Business professionals know that the economy has changed dramatically over the last two decades and that the demands placed on professionals now require an understanding of broad business disciplines, including data analysis, finance, marketing, operations management, and strategy. By exposing students to real-world companies and the challenges that they face, they can begin to understand the need to integrate accounting information with other business information in making good decisions.

One of the authors is a former founder, owner, and chief financial officer of a very successful regional consulting firm, HFH Consultants, LLC. The author was intimately involved in the strategy, marketing, human resource management, finance, and accounting of this service firm from its founding with three partners and an administrative assistant to its growth to include four offices, approximately two dozen professionals and staff, and over $3.5 million in annual revenue. His extensive experience managing this firm for 14 years is reflected throughout the textbook in the form of a continuous problem based on a fictitious service firm. This practical experience is also ref lected in other real-world examples and problems based on real companies.

The following features are used throughout the textbook to help students understand how managerial accounting principles are used in real businesses today.

Real Company Examples

Students are more likely to engage in the learning process and retain the concepts taught if the examples used are real companies with which they are familiar. Throughout the textbook, we incorporate a wide range of examples using real companies such as Apple, MicrosoftBoeing, and the California State Bar. In addition, the Service Industry in Focus section in the assignments of each chapter requires the students to use the financial and operational data of a fictitious consulting company, Environmental Business Consultants, LLC, to address real business issues.

Most chapters also include real-world examples from Fezzari, a custom bike manufacturer.

Environmental, Social, and Governance (ESG)

Increasingly, companies have found that “doing good leads to a more successful enterprise. Todays students are very engaged in the ESG movement, and we have incorporated ESG boxes to help students understand how ESG is being embraced by forward-thinking enterprises as part of their long-term business models.

Service Industry in Focus

The service sector is the fastest growing segment of the U.S. economy. The Service Industry in Focus inserts help students understand how managerial accounting is applied to improve the competitiveness of service companies.

Accounting in Practice

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

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.

Student Success

Managerial accounting is often challenging—especially for students lacking business experience or previous exposure to business courses. To help students succeed in the course and better prepare for a career in business management, we include many features that provide direction to students and require them to recall and apply the managerial accounting techniques and tools described in each chapter.

Maping Each Chapter

Each chapter begins with a Road Map that outlines each chapter and provides a quick reference table that summarizes the print and digital resources for that chapter.

Your Turn!

Each learning objective concludes with a Your Turn! box as a means of reinforcing the ma- terial just presented. Solutions are provided at the end of the chapter so students can check their work and a video demonstration of how to solve each Your Turn! is included within myBusinessCourse, the texts accompanying online learning system.


NEW to this Edition

  • Expanded Data Analytics:  We havexpanded Data Analytics coverage in this edition.
    • New Data Analytics boxes have been incorporated to expose students to techniques that are used by businesses in areas related to the topic being discussed.
    • Each chapter includes assignments that require students to use Excel or Tableau to hone data analysis and data visualization skills.
    • This edition also includes a new Appendix B at the end of the book that provides an overview of data analytics, data visualization, and best practices for the effective display of data. Appendix B also includes additional assignments using Tableau and Excel.
  • Expanded myBusinessCourse Resources: Additional assignments and Guided Example videos have been added to MBC, so nearly all the textbook assignments are available in the system. In addition, we have increased the overall number of algorithmic assignments and test questions.
  • Assignable Your Turns! New in the third edition, the quantitative, in-chapter Your Turns! have been programmed in MBC and can be assigned for a grade.
  • 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.
  • Expanded Excel Resources: MBC now includes short videos that show students how to use various features and functions in Excel. The videos can be accessed within MBC as part of your MBC course.
  • Environmental, Social, and Governance (ESG): We have incorporated ESG boxes to help students understand how ESG is being embraced by forward-thinking enterprises as part of their long-term business models.
  • New chapter sequencing: In the third edition, we introduce flexible budgets (now Chapter 10) before the discussion of standard costs and variance analysis (now Chapter 11) to improve the pedagogy and students’ learning.
  • Chapter 13: The statement of cash f lows chapter has been revised to be more intuitive for students.
  • Streamlining: We edited many chapters and exhibits to reduce redundancy and increase clarity. We believe the flow of topics and their presentation have been meaningfully improved this edition.

Supplement Package

  • myBusinessCourse: A web-based learning and assessment program intended to complement your textbook and classroom instruction. 
  • Solutions Manual: Created by the authors, the Solutions Manual contains complete solutions to all the assignment material in the text.
  • PowerPoint: The PowerPoint slides outline key elements of each chapter.
  • Test Bank: The Test Bank includes true/false, multiple-choice, exercises, short answer questions, and problems. 
  • Excel Templates We provide Excel spreadsheets for assignments.  These spreadsheets will save time in data entry and allow students to dedicate additional time to learning the material.  The Excel spreadsheets are identified by the Excel icon.

Expand/Collapse All
Preface (pg. iv)
Brief Contents (pg. xiii)
Contents (pg. xiv)
Chapter 1 Overview of Managerial Accounting (pg. 1-1)
Introduction to Managerial Accounting (pg. 1-3)
Managerial Accounting versus Financial Accounting (pg. 1-3)
Objectives of Managerial Accounting (pg. 1-4)
Your Turn! 1.1 (pg. 1-4)
Types of Business Entities (pg. 1-5)
Your Turn! 1.2 (pg. 1-5)
Major Trends in Business and Managerial Accounting (pg. 1-6)
Big Data and Predictive Analytics (pg. 1-6)
Sustainability (pg. 1-7)
Factory Automation (pg. 1-7)
Customer Profitability (pg. 1-7)
Your Turn! 1.3 (pg. 1-8)
Introducing Two New Companies (pg. 1-8)
Fezzari-A U.S. Bicycle Manufacturer and Distributor (pg. 1-8)
Environmental Business Consultants, LLC-A U.S. Service Firm (pg. 1-9)
Careers in Managerial Accounting (pg. 1-10)
Alternative Career Paths (pg. 1-10)
Management Accountants’ Compensation (pg. 1-11)
Work/Life Balance (pg. 1-11)
Your Turn! 1.4 (pg. 1-12)
Professional Certifications (pg. 1-12)
Certified Public Accountant (CPA) (pg. 1-12)
Certified Management Accountant (CMA) (pg. 1-12)
Other Professional Certifications (pg. 1-12)
Ethics in Accounting (pg. 1-13)
Your Turn! 1.5 (pg. 1-13)
Summary of Learning Objectives (pg. 1-13)
Key Terms (pg. 1-15)
Self-Study Questions (pg. 1-15)
Questions (pg. 1-15)
Short Exercise (pg. 1-16)
Data Analytics, Data Visualization, and Excel Activities (pg. 1-17)
Extending Your Knowledge (pg. 1-17)
Answers to Self-Study Questions: (pg. 1-18)
Your Turn! Solutions (pg. 1-18)
Chapter 2 Managerial Accounting Concepts and Cost Flows (pg. 2-1)
Key Objectives of a Managerial Accounting System (pg. 2-3)
Product Costing in a Manufacturing Environment (pg. 2-3)
Product Costing in a Service and Merchandising Environment (pg. 2-6)
Your Turn! 2.1 (pg. 2-7)
Inventories and Cost Categories (pg. 2-8)
Inventories (pg. 2-8)
Manufacturing Product Cost Categories (pg. 2-9)
Product Cost Flows (pg. 2-10)
Raw Materials (pg. 2-10)
Labor (pg. 2-11)
Manufacturing Overhead (pg. 2-12)
Cost of Goods Manufactured (pg. 2-13)
Cost of Goods Sold (pg. 2-14)
Your Turn! 2.2 (pg. 2-14)
Illustration of Product Cost Accumulation (pg. 2-14)
Introduction of T-Accounts (pg. 2-14)
Real-World Manufacturing Example (pg. 2-15)
Schedule of Cost of Goods Manufactured (pg. 2-15)
Calculating Cost of Goods Sold (pg. 2-17)
Income Statement for a Manufacturing Firm (pg. 2-18)
Your Turn! 2.3 (pg. 2-18)
Illustration of Product Cost Journal Entries (pg. 2-18)
Cost Flows (pg. 2-20)
Financial Statements (pg. 2-22)
Your Turn! 2.4 (pg. 2-23)
Service Industry in Focus (pg. 2-24)
Comprehensive Problem (pg. 2-27)
Summary of Learning Objectives (pg. 2-28)
Key Terms (pg. 2-29)
Self-Study Questions (pg. 2-30)
Questions (pg. 2-30)
Short Exercises (pg. 2-31)
Data Analytics, Data Visualization, and Excel Activities (pg. 2-33)
Exercises-Set A (pg. 2-33)
Exercises-Set B (pg. 2-36)
Problems-Set A (pg. 2-38)
Problems-Set B (pg. 2-41)
Extending Your Knowledge (pg. 2-43)
Answers to Self-Study Questions: (pg. 2-44)
Your Turn! Solutions (pg. 2-44)
Chapter 3 Cost Accounting Systems: Job Order Costing (pg. 3-1)
Cost Accounting Systems (pg. 3-3)
Two Basic Types of Cost Accounting Systems (pg. 3-3)
Timely Product Costing (pg. 3-4)
Your Turn! 3.1 (pg. 3-5)
Predetermined Overhead Rates (pg. 3-5)
Calculation of Predetermined Overhead Rate (pg. 3-6)
Your Turn! 3.2 (pg. 3-7)
Job Order Costing Systems (pg. 3-7)
Illustration of Job Order Costing for a Manufacturer (pg. 3-8)
Your Turn! 3.3 (pg. 3-13)
Illustration of Job Order Costing for a Service Firm (pg. 3-17)
Your Turn! 3.4 (pg. 3-18)
Departmental Overhead Rates (pg. 3-18)
Departmental Overhead Rates (pg. 3-18)
Your Turn! 3.5 (pg. 3-19)
Service Industry in Focus (pg. 3-19)
Comprehensive Problem (pg. 3-21)
Summary of Learning Objectives (pg. 3-21)
Key Terms (pg. 3-23)
Self-Study Questions (pg. 3-23)
Questions (pg. 3-24)
Short Exercises (pg. 3-24)
Data Analytics, Data Visualization, and Excel Activities (pg. 3-26)
Exercises-Set A (pg. 3-26)
Exercises-Set B (pg. 3-29)
Problems-Set A (pg. 3-31)
Problems-Set B (pg. 3-35)
Extending Your Knowledge (pg. 3-39)
Answers to Self-Study Questions: (pg. 3-40)
Your Turn! Solutions (pg. 3-40)
Chapter 4 Cost Accounting Systems: Process Costing (pg. 4-1)
Introduction to Process Costing (pg. 4-3)
Job Order Costing Review (pg. 4-3)
Process Costing (pg. 4-4)
Characteristics of Process Costing (pg. 4-5)
Manufacturing Departments (pg. 4-6)
Basic Processing Patterns (pg. 4-6)
Process Costing Steps (pg. 4-7)
Step 1: Visualize the Physical Flow of the Units (pg. 4-9)
Your Turn! 4.1 (pg. 4-9)
Step 2: Calculate the Equivalent Units (pg. 4-10)
Your Turn! 4.2 (pg. 4-12)
Step 3: Determine the Per-Unit Costs (pg. 4-12)
Your Turn! 4.3 (pg. 4-13)
Step 4: Calculate the Cost of Goods Manufactured (pg. 4-13)
Your Turn! 4.4 (pg. 4-14)
Step 5: Calculate the Cost of Ending Work-in-Process Inventory (pg. 4-14)
Your Turn! 4.5 (pg. 4-14)
The Product Cost Report (pg. 4-15)
Companies with Multiple Production Processes (pg. 4-16)
Journal Entries Illustrated (pg. 4-16)
Materials (pg. 4-16)
Labor (pg. 4-17)
Manufacturing Overhead (pg. 4-17)
Your Turn! 4.6 (pg. 4-17)
Service Industry in Focus (pg. 4-18)
Comprehensive Problem (Including Transferred-in Costs) (pg. 4-19)
Appendix 4A: Process Costing Using FIFO Method (pg. 4-21)
Process Costing Steps (pg. 4-21)
The Product Cost Report (pg. 4-28)
Journal Entries Illustrated (pg. 4-29)
Summary of Learning Objectives (pg. 4-30)
Key Terms (pg. 4-32)
Self-Study Questions (pg. 4-32)
Questions (pg. 4-33)
Short Exercises (pg. 4-33)
Data Analytics, Data Visualization, and Excel Activities (pg. 4-35)
Exercises-Set A (pg. 4-35)
Exercises-Set B (pg. 4-37)
Problems-Set A (pg. 4-40)
Problems-Set B (pg. 4-43)
Extending Your Knowledge (pg. 4-47)
Answers to Self-Study Questions: (pg. 4-47)
Your Turn! Solutions (pg. 4-47)
Chapter 5 Activity-Based Costing (pg. 5-1)
Understanding Indirect Costs Using Activity-Based Costing (pg. 5-3)
Changing Cost Environment (pg. 5-4)
Activity-Based Costing (pg. 5-4)
ABC Product Costing Model (pg. 5-6)
Your Turn! 5.1 (pg. 5-8)
Traditional Product Costing and ABC Compared (pg. 5-8)
Applying Overhead with Activity-Based Costing (pg. 5-9)
Limitations of ABC Illustration (pg. 5-12)
Comparing Traditional and Activity-Based Costing (pg. 5-12)
Your Turn! 5.2 (pg. 5-12)
ABC Implementation Issues (pg. 5-13)
ABC Implementation Considerations (pg. 5-13)
Other Uses of ABC (pg. 5-14)
Your Turn! 5.3 (pg. 5-14)
ABC and Customer Profitability Analysis (pg. 5-14)
Customer Profitability Profile (pg. 5-14)
Your Turn! 5.4 (pg. 5-17)
Activity-Based Management (pg. 5-17)
Focus on Activities (pg. 5-17)
Your Turn! 5.5 (pg. 5-18)
Services Industry in Focus (pg. 5-18)
Customer Profitability Analysis (pg. 5-18)
Summary of Learning Objectives (pg. 5-20)
Key Terms (pg. 5-21)
Self-Study Questions (pg. 5-21)
Questions (pg. 5-22)
Short Exercises (pg. 5-22)
Data Analytics, Data Visualization, and Excel Activities (pg. 5-26)
Exercises-Set A (pg. 5-26)
ExerciseS-Set B (pg. 5-29)
Problems-Set A (pg. 5-32)
Problems-Set B (pg. 5-37)
Extending Your Knowledge (pg. 5-42)
Answers to Self-Study Questions: (pg. 5-43)
Your Turn! Solutions (pg. 5-43)
Chapter 6 Cost-Volume-Profit Relationships (pg. 6-1)
Cost Behavior Analysis (pg. 6-3)
Selecting the Activity Basis (pg. 6-3)
Cost-Volume Graphs (pg. 6-4)
Classifications of Cost Behavior Patterns (pg. 6-5)
Your Turn! 6.1 (pg. 6-6)
Relevant Range (pg. 6-6)
Your Turn! 6.2 (pg. 6-7)
Analyzing Cost Behavior (pg. 6-7)
Scattergraph Method (pg. 6-8)
High-Low Method (pg. 6-8)
Least Squares Regression Method (pg. 6-10)
Analyzing Costs in Practice (pg. 6-11)
Your Turn! 6.3 (pg. 6-12)
Cost-Volume-Profit (CVP) Analysis (pg. 6-13)
Break-Even Analysis (pg. 6-13)
Your Turn! 6.4 (pg. 6-15)
Contribution Margin Analysis (pg. 6-15)
Your Turn! 6.5 (pg. 6-17)
Planning for Profit (pg. 6-18)
Desired Profit (pg. 6-18)
Margin of Safety (pg. 6-20)
Operating Leverage (pg. 6-20)
Using Cost-Volume-Profit Relationships (pg. 6-23)
Break-Even Analysis and Multiple Products (pg. 6-25)
Cost-Volume-Profit Analysis for Retail Businesses (pg. 6-25)
Your Turn! 6.6 (pg. 6-27)
Service Industry in Focus (pg. 6-27)
Comprehensive Problem (pg. 6-28)
Summary of Learning Objectives (pg. 6-30)
Key Terms (pg. 6-32)
Self-Study Questions (pg. 6-32)
Questions (pg. 6-33)
Short Exercises (pg. 6-34)
Data Analytics, Data Visualization, and Excel Activities (pg. 6-34)
Exercises-Set A (pg. 6-35)
Exercises-Set B (pg. 6-38)
Problems-Set A (pg. 6-42)
Problems-Set B (pg. 6-46)
Extending Your Knowledge (pg. 6-50)
Answers to Self-Study Questions: (pg. 6-51)
Your Turn! Solutions (pg. 6-51)
Chapter 7 Variable Costing: A Tool for Decision-Making (pg. 7-1)
Treatment of Product Costs (pg. 7-3)
Absorption Costing (pg. 7-3)
Variable Costing (pg. 7-3)
Appropriate Use of Absorption Costing and Variable Costing (pg. 7-4)
Your Turn! 7.1 (pg. 7-5)
Variable Costing Income Statement (pg. 7-5)
Income Statement Preparation (pg. 7-5)
Your Turn! 7.2 (pg. 7-7)
Income Reconciliation (pg. 7-7)
Your Turn! 7.3 (pg. 7-10)
Advantages and Disadvantages of Variable Costing (pg. 7-10)
Advantages (pg. 7-10)
Disadvantages (pg. 7-10)
Your Turn! 7.4 (pg. 7-11)
Services Industry in Focus (pg. 7-11)
Comprehensive Problem (pg. 7-13)
Summary of Learning Objectives (pg. 7-14)
Key Terms (pg. 7-15)
Self-Study Questions (pg. 7-15)
Questions (pg. 7-16)
Short Exercises (pg. 7-16)
Data Analytics, Data Visualization, and Excel Activities (pg. 7-18)
Exercises-Set A (pg. 7-18)
Exercises-Set B (pg. 7-19)
Problems-Set A (pg. 7-19)
Problems-Set B (pg. 7-21)
Extending Your Knowledge (pg. 7-22)
Answers to Self-Study Questions: (pg. 7-23)
Your Turn! Solutions (pg. 7-23)
Chapter 8 Relevant Costs and ShortTerm Decision-Making (pg. 8-1)
Management and the Decision-Making Process (pg. 8-3)
Who Makes Decisions? (pg. 8-3)
Phases of Decision-Making (pg. 8-5)
Relevant Costs and Differential Analysis (pg. 8-6)
Relevant Costs (pg. 8-6)
Differential Analysis (pg. 8-7)
Your Turn! 8.1 (pg. 8-8)
Illustrations of Differential Analysis (pg. 8-8)
The Special Order (pg. 8-9)
Your Turn! 8.2 (pg. 8-10)
Make or Buy? (pg. 8-10)
Your Turn! 8.3 (pg. 8-12)
Dropping Unprofitable Segments (pg. 8-12)
Your Turn! 8.4 (pg. 8-13)
Your Turn! 8.5 (pg. 8-17)
Constrained Resources (pg. 8-17)
Your Turn! 8.6 (pg. 8-20)
Service Industry in Focus (pg. 8-20)
Summary of Learning Objectives (pg. 8-21)
Key Terms (pg. 8-22)
Self-Study Questions (pg. 8-23)
Questions (pg. 8-23)
Short Exercises (pg. 8-24)
Data Analytics, Data Visualization, and Excel Activities (pg. 8-26)
Exercises-Set A (pg. 8-26)
Exercises-Set B (pg. 8-30)
Problems-Set A (pg. 8-32)
Problems-Set B (pg. 8-35)
Extending Your Knowledge (pg. 8-38)
Answers to Self-Study Questions: (pg. 8-40)
Your Turn! Solutions (pg. 8-40)
Chapter 9 Planning and Budgeting (pg. 9-1)
The Planning Process (pg. 9-3)
Strategic Planning (pg. 9-4)
Operational Planning (pg. 9-5)
Progress Measurement and Reporting (pg. 9-5)
Your Turn! 9.1 (pg. 9-6)
The Budgeting Process (pg. 9-6)
Advantages of Budgeting (pg. 9-7)
Elements of Effective Budgeting (pg. 9-7)
Zero-Based Budgeting (pg. 9-8)
Your Turn! 9.2 (pg. 9-10)
The Framework of the Master Budget (pg. 9-10)
Master Budget Components (pg. 9-10)
Budget Interrelationships (pg. 9-10)
Your Turn! 9.3 (pg. 9-11)
Illustration of a Master Budget and Its Components (pg. 9-11)
Sales Budget (pg. 9-11)
Production Budget (pg. 9-12)
Direct Materials Budget (pg. 9-13)
Direct Labor Budget (pg. 9-14)
Manufacturing Overhead Budget (pg. 9-14)
Selling and Administrative Expense Budget (pg. 9-15)
Capital Expenditures Budget (pg. 9-16)
Cash Budget (pg. 9-17)
Illustration of a Service Firm’s Budgets (pg. 9-17)
Your Turn! 9.4 (pg. 9-20)
Budgeted Financial Statements (pg. 9-20)
Your Turn! 9.5 (pg. 9-23)
Services Industry in Focus (pg. 9-23)
Comprehensive Problem (pg. 9-24)
Summary of Learning Objectives (pg. 9-28)
Key Terms (pg. 9-29)
Self-Study Questions (pg. 9-30)
Questions (pg. 9-30)
Short Exercises (pg. 9-31)
Data Analytics, Data Visualization, and Excel Activities (pg. 9-33)
Exercises-Set A (pg. 9-33)
Exercises-Set B (pg. 9-35)
Problems-Set A (pg. 9-38)
Problems-Set B (pg. 9-40)
Extending Your Knowledge (pg. 9-44)
Answers to Self-Study Questions: (pg. 9-44)
Your Turn! Solutions (pg. 9-44)
Chapter 10 Flexible Budgets, Segment Reporting, and Performance Analysis (pg. 10-1)
Static Budgets (pg. 10-3)
Static Budget Performance Report (pg. 10-3)
Your Turn! 10.1 (pg. 10-4)
Flexible Budgets (pg. 10-4)
Flexible Budgets in a Manufacturing Environment (pg. 10-4)
Flexible Budgets in a Service Environment (pg. 10-7)
Your Turn! 10.2 (pg. 10-10)
Internal Reporting of Segment Operations (pg. 10-10)
Decentralized Organizations (pg. 10-10)
Segment Reporting (pg. 10-11)
Types of Business Segments (pg. 10-11)
Your Turn! 10.3 (pg. 10-13)
Performance Reporting (pg. 10-13)
Departmental Operations (pg. 10-15)
Contribution Margin Income Statement (pg. 10-15)
Segment Performance Evaluation (pg. 10-16)
Service Company Segment Reporting Illustration (pg. 10-16)
Office Margin (pg. 10-16)
Your Turn! 10.4 (pg. 10-19)
Performance Analysis (pg. 10-20)
Return on Investment (pg. 10-20)
Profit Margin (pg. 10-21)
Asset Turnover (pg. 10-21)
Residual Income (pg. 10-22)
Balanced Scorecard (pg. 10-23)
Your Turn! 10.5 (pg. 10-23)
Your Turn! 10.6 (pg. 10-23)
Service Industry in Focus (pg. 10-24)
Appendix 10A: Transfer Pricing (pg. 10-27)
Domestic Transfer Pricing (pg. 10-27)
International Transfer Pricing (pg. 10-33)
Your Turn! 10.7 (pg. 10-33)
Comprehensive Problem (pg. 10-33)
Summary of Learning Objectives (pg. 10-34)
Key Terms (pg. 10-36)
Self-Study Questions (pg. 10-37)
Questions (pg. 10-38)
Short Exercises (pg. 10-38)
Data Analytics, Data Visualization, and Excel Activities (pg. 10-40)
Exercises-Set A (pg. 10-41)
Exercises-Set B (pg. 10-42)
Problems-Set A (pg. 10-43)
Problems-Set B (pg. 10-47)
Extending Your Knowledge (pg. 10-50)
Answers to Self-Study Questions: (pg. 10-51)
Your Turn! Solutions (pg. 10-51)
Chapter 11 Standard Costing and Variance Analysis (pg. 11-1)
Standard Costs (pg. 11-3)
Uses of Standard Cost Accounting (pg. 11-4)
Your Turn! 11.1 (pg. 11-5)
Determining Standard Costs (pg. 11-5)
Direct Materials Standards (pg. 11-5)
Direct Labor Standards (pg. 11-6)
Variable Overhead Standards (pg. 11-6)
Review of Flexible Budget Cost Variance (pg. 11-8)
Your Turn! 11.2 (pg. 11-9)
Variable Manufacturing Cost Variances (pg. 11-9)
Direct Materials Variances (pg. 11-9)
Your Turn! 11.3 (pg. 11-13)
Direct Labor Variances (pg. 11-13)
Your Turn! 11.4 (pg. 11-16)
Variable Overhead Variances (pg. 11-16)
Your Turn! 11.5 (pg. 11-18)
Standard Costs in Financial Statements (pg. 11-18)
Your Turn! 11.6 (pg. 11-19)
Services Industry in Focus (pg. 11-19)
Appendix 11A: Cost Variance Journal Entries Illustrated (pg. 11-20)
Journal Entries Illustrated (pg. 11-20)
Your Turn! 11.7 (pg. 11-22)
Comprehensive Problem (pg. 11-23)
Summary of Learning Objectives (pg. 11-24)
Key Terms (pg. 11-25)
Self-Study Questions (pg. 11-26)
Questions (pg. 11-26)
Short Exercises (pg. 11-27)
Data Analytics, Data Visualization, and Excel Activities (pg. 11-28)
Exercises-Set A (pg. 11-28)
Exercises-Set B (pg. 11-29)
Problems-Set A (pg. 11-30)
Problems-Set B (pg. 11-32)
Extending Your Knowledge (pg. 11-34)
Answers to Self-Study Questions: (pg. 11-35)
Your Turn! Solutions (pg. 11-36)
Chapter 12 Capital Budgeting (pg. 12‑1)
Elements of Capital Budgeting (pg. 12‑3)
Capital Budgeting Phases (pg. 12‑3)
Capital Expenditure Analysis (pg. 12‑4)
Your Turn! 12.1 (pg. 12‑5)
Required Rates of Return and the Time Value of Money (pg. 12‑5)
Cost of Capital (pg. 12‑5)
Time Value of Money (pg. 12‑6)
Your Turn! 12.2 (pg. 12‑7)
Performing Net Present Value Calculations (pg. 12‑8)
Single-Sum Cash Flows (pg. 12‑8)
Annuity Cash Flows (pg. 12‑9)
Your Turn! 12.3 (pg. 12‑10)
Measurement of Investments and Returns (pg. 12‑10)
Cash Flows (pg. 12‑10)
After-Tax Cash Flows (pg. 12‑10)
Depreciation Tax Shield (pg. 12‑11)
Illustration of After-Tax Cash Flows (pg. 12‑11)
Summary of Concerns Underlying Capital Budgeting (pg. 12‑13)
Your Turn! 12.4 (pg. 12‑14)
Net Present Value Analysis (pg. 12‑14)
Basic Steps (pg. 12‑14)
Illustration of Net Present Value (NPV) Analysis (pg. 12‑15)
Liquidation Proceeds (pg. 12‑18)
Excess Present Value Index (pg. 12‑19)
Your Turn! 12.5 (pg. 12‑19)
Other Capital Budgeting Analyses (pg. 12‑20)
Internal Rate of Return Analysis (pg. 12‑20)
Basic Steps (pg. 12‑20)
Your Turn! 12.6 (pg. 12‑21)
Cash Payback Analysis (pg. 12‑21)
Average Rate of Return Analysis (pg. 12‑23)
Capital Budgeting: A Complex Subject (pg. 12‑25)
Your Turn! 12.7 (pg. 12‑25)
Service Industry in Focus (pg. 12‑25)
Appendix 12A: Time Value of Money Calculations (pg. 12‑26)
Using a Financial Calculator (pg. 12‑26)
Using an Electronic Spreadsheet (pg. 12‑28)
Comprehensive Problem (pg. 12‑29)
Summary of Learning Objectives (pg. 12‑30)
Key Terms (pg. 12‑32)
Self-Study Questions (pg. 12‑32)
Questions (pg. 12‑33)
Short Exercises (pg. 12‑34)
Data Analytics, Data Visualization, and Excel Activities (pg. 12‑36)
Exercises-Set A (pg. 12‑36)
Exercises-Set B (pg. 12‑37)
Problems-Set A (pg. 12‑38)
Problems-Set B (pg. 12‑41)
Extending Your Knowledge (pg. 12‑44)
Answers to Self-Study Questions: (pg. 12‑45)
Your Turn! Solutions (pg. 12‑45)
Chapter 13 Statement of Cash Flows (pg. 13-1)
Cash and Cash Equivalents (pg. 13-3)
Activity Classifications in the Statement of Cash Flows (pg. 13-4)
Operating Activities (pg. 13-5)
Investing Activities (pg. 13-5)
Financing Activities (pg. 13-6)
Usefulness of Activity Classification (pg. 13-6)
Noncash Investing and Financing Activities (pg. 13-7)
Using the Statement of Cash Flows (pg. 13-8)
Cash Flow from Operating Activities (pg. 13-8)
Your Turn! 13.1 (pg. 13-9)
Preparing the Statement of Cash Flows Using the Indirect Method (pg. 13-9)
Five Steps to Preparing a Statement of Cash Flows (pg. 13-11)
Your Turn! 13.2 (pg. 13-17)
Analyzing Cash Flows (pg. 13-18)
Free Cash Flow (pg. 13-18)
Operating-Cash-Flow-to-Current-Liabilities Ratio (pg. 13-18)
Operating-Cash-Flow-to-Capital-Expenditures Ratio (pg. 13-19)
Your Turn! 13.3 (pg. 13-20)
Comprehensive Problem (pg. 13-20)
Appendix 13A: Preparing the Statement of Cash Flows Under the Direct Method (pg. 13-22)
Your Turn! 13A.1 (pg. 13-25)
Summary of Learning Objectives (pg. 13-25)
Key Terms (pg. 13-26)
Self-Study Questions (pg. 13-26)
Questions (pg. 13-28)
Short Exercises (pg. 13-29)
Data Analytics, Data Visualization, and Excel Activities (pg. 13-30)
Exercises-Set A (pg. 13-30)
Exercises-Set B (pg. 13-33)
Problems-Set A (pg. 13-36)
Problems-Set B (pg. 13-41)
Extending Your Knowledge (pg. 13-45)
Answers to Self-Study Questions: (pg. 13-47)
Your Turn! Solutions (pg. 13-48)
Chapter 14 Analysis and Interpretation of Financial Statements (pg. 14-1)
Persistent Earnings and the Income Statement (pg. 14-3)
Discontinued Operations (pg. 14-5)
Changes in Accounting Principles (pg. 14-5)
Comprehensive Income (pg. 14-5)
Your Turn! 14.1 (pg. 14-6)
Sources of Information (pg. 14-6)
Analytical Techniques (pg. 14-7)
Horizontal Analysis (pg. 14-7)
Trend Analysis (pg. 14-10)
Your Turn! 14.2 (pg. 14-11)
Vertical Analysis (pg. 14-12)
Your Turn! 14.3 (pg. 14-13)
Ratio Analysis (pg. 14-13)
Analyzing Firm Profitability (pg. 14-14)
Your Turn! 14.4 (pg. 14-17)
Analyzing ShortTerm Firm Liquidity (pg. 14-18)
Your Turn! 14.5 (pg. 14-22)
Analyzing LongTerm Firm Solvency (pg. 14-22)
Your Turn! 14.6 (pg. 14-24)
Financial Ratios for Common Stockholders (pg. 14-25)
Your Turn! 14.7 (pg. 14-27)
Limitations of Financial Statement Analysis (pg. 14-27)
Comprehensive Problem (pg. 14-28)
Appendix 14A: Financial Statement Disclosures (pg. 14-29)
Parenthetical Disclosures (pg. 14-29)
Supplementary Information (pg. 14-32)
Summary of Learning Objectives (pg. 14-32)
Summary of Financial Statement Ratios (pg. 14-33)
Key Terms (pg. 14-35)
Self-Study Questions (pg. 14-35)
Questions (pg. 14-37)
Short Exercises (pg. 14-37)
Data Analytics, Data Visualization, and Excel Activities (pg. 14-39)
Exercises-Set A (pg. 14-39)
Exercises-Set B (pg. 14-41)
Problems-Set A (pg. 14-44)
Problems-Set B (pg. 14-49)
Extending Your Knowledge (pg. 14-54)
Answers to Self-Study Questions: (pg. 14-59)
Your Turn! Solutions (pg. 14-59)
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-6)
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-14)
Appendix B Data Analytics (pg. B-1)
Data Analytics (pg. B-2)
Big Data (pg. B-2)
Types of Data Analytics (pg. B-3)
Data Analytics in the Accounting Profession (pg. B-3)
The Analytics Mindset (pg. B-5)
Data Analytic Tools (pg. B-6)
Data Visualization (pg. B-7)
Summary of Learning Objectives (pg. B-11)
Key Terms (pg. B-11)
Questions (pg. B-12)
Exercises (pg. B-12)
Problems (pg. B-13)
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. 

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