Solution manual introduction to management accounting 14e by horngren

To download more slides, ebook, solutions and test bank, visit

Solutions Manual

INTRODUCTION TO
MANAGEMENT
ACCOUNTING
Fourteenth Edition

Charles T. Horngren
Gary L. Sundem
William O. Stratton
David Burgstahler
Jeff Schatzberg

Upper Saddle River, New Jersey 07458


To download more slides, ebook, solutions and test bank, visit

AVP/Executive Editor: Steve Sartori
Project Manager: Kerri Tomasso
Production Project Manager: Kevin Holm
Buyer: Michelle Klein
Printer/Binder: Bind-Rite Graphics, Robbinsville

Copyright © 2008 by Pearson Education, Inc., Upper Saddle River, New Jersey, 07458.

Pearson Prentice Hall. All rights reserved. Printed in the United States of America. This
publication is protected by Copyright and permission should be obtained from the publisher prior
to any prohibited reproduction, storage in a retrieval system, or transmission in any form or by

any means, electronic, mechanical, photocopying, recording, or likewise. For information
regarding permission(s), write to: Rights and Permissions Department.
This work is protected by United States copyright laws and is provided solely for the use of
instructors in teaching their courses and assessing student learning. Dissemination or sale of any
part of this work (including on the World Wide Web) will destroy the integrity of the work and is
not permitted. The work and materials from it should never be made available to students
except by instructors using the accompanying text in their classes. All recipients of this work
are expected to abide by these restrictions and to honor the intended pedagogical purposes and
the needs of other instructors who rely on these materials.
Pearson Prentice HallTM is a trademark of Pearson Education, Inc.
10 9 8 7 6 5 4 3 2 1
ISBN-13: 978-0-13-241645-0
ISBN-10:
0-13-241645-X

Visit


To download more slides, ebook, solutions and test bank, visit

CONTENTS

Page
General Comments.....................................................................................................................v
Sample Assignment Schedules ............................................................................................... vii
Linking of 13th Edition Problems to those in the 14th Edition ............................................... xi
Comments on Choices of Problems in Each Chapter ........................................................... xvii
Presentation of Solutions in Class ........................................................................................ xxv
Conducting the Course ......................................................................................................... xxvi
Key Amounts from Suggested Solutions to Selected Problems ........................................ xxviii

Solutions by Chapter
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

Managerial Accounting, the Business Organization, and Professional Ethics .................1
Introduction to Cost Behavior and Cost-Volume Relationships .....................................40
Measurement of Cost Behavior.....................................................................................105
Cost Management Systems and Activity-Based Costing ..............................................175
Relevant Information for Decision Making with a Focus on Pricing
Decisions ..............................................................................................................246
Relevant Information for Decision Making with a Focus on Operational
Decisions .............................................................................................................311
Introduction to Budgets and Preparing the Master Budget ...........................................382
Flexible Budgets and Variance Analysis ......................................................................438

Management Control Systems and Responsibility Accounting ....................................495
Management Control in Decentralized Organizations ..................................................552
Capital Budgeting .........................................................................................................616
Cost Allocation …………………….. ..........................................................................687
Accounting for Overhead Costs ....................................................................................770
Job-Costing and Process-Costing Systems ...................................................................841
Basic Accounting: Concepts, Techniques, and Conventions .......................................881
Understanding Corporate Annual Reports: Basic Financial Statements......................918
Understanding and Analyzing Consolidated Financial Statements ..............................971

iii


To download more slides, ebook, solutions and test bank, visit

iv


To download more slides, ebook, solutions and test bank, visit

GENERAL COMMENTS
Please read the textbook preface before examining this material. Because this book may
be used in a wide variety of courses, several sample assignment schedules have been prepared.
We recommend using these as a starting point for building a tailored schedule. The scope and
depth of a particular assignment schedule largely depend on the instructor's personal evaluation
of the relative importance of various topics. In turn, his or her evaluation will be influenced by
students' backgrounds and other courses in the curriculum. For example, many instructors
requested a more straightforward coverage of activity-based costing in Chapter 4, primarily
because most of their students were not accounting majors and needed only fundamental
concepts. At the same time, others prefer a more demanding coverage such as for courses with

accounting majors or graduate-level accounting courses. We have significantly revised the ABC
coverage to address these needs, providing a three-tiered coverage that meets the needs of several
course objectives. Chapter 4 includes an introduction to ABC, Appendix 4 provides a more
detailed example, and Chapter 12 (especially Appendix 12) gives more details.
This edition, as previous editions, contains both straightforward assignment material,
homework that can be solved simply by referring to the presentations in the chapters, and more
challenging problems, which require more thoughtful analysis.
This book's approach divorces product costing for financial reporting purposes from
planning and control. For example, Chapters 1 through 11 assume that no changes take place in
the level of beginning and ending inventories. This sharpens the analysis of planning and
control, enhances clarity, and eases the learning process. The problems of product costing are
then considered in Chapters 12 through 14. This approach may be unconventional, but
classroom experience and experimentation have convinced us of its superiority over the
traditional approach, which interweaves product costing, planning, and control. If students raise
thorny questions regarding inventory valuation when Chapters 1 through 11 are being covered,
we usually ask them to postpone their queries until Chapters 12 through 14 are discussed. If
desired, Chapters 12, 13, and 14 may be studied at any time after Chapter 4.
For comments on how to choose among the various problems in each chapter, see the section
entitled "Comments on Choices of Problems in Each Chapter." Other teaching aids for use with
this textbook are an Instructor's Resource Manual (which includes chapter overviews, chapter
outlines organized by objectives, teaching tips, a chapter quiz, transparency masters, suggested
readings and a video guide that carefully integrates the videos into classroom lectures), Solutions
Transparencies (which includes acetates for all the end-of-chapter assignments), a Test Item File
(including multiple choice, true/false, comprehensive problems, short-answer problems, and
critical thinking questions), the Prentice Hall Custom Test (a computerized testing package), On
Location Video Library (which includes segments on companies such as Three Dog Bakery,
Nantucket Nectars, Oracle, McDonalds, and many more), the PH Professor: A Classroom
Presentation on PowerPoint (includes over 50 PowerPoint slides for each chapter), and Power
Notes (derived from the PH Professor, this efficient note-taking supplement can be downloaded
from our website at www.prenhall.com/myPHLIP. An Instructor's Resource CD-ROM, complete

with all instructor support materials, is available upon adoption.

v


To download more slides, ebook, solutions and test bank, visit

Available for students is a Study Guide that provides overviews, study tips and chapter
reviews formatted for easy note-taking, and self-tests including a variety of test questions to
prepare for examinations. Spreadsheet Templates are also available for selected exercises and
problems are identified in the text by a CD icon. Students may opt to purchase the Student
Resource CD-ROM rather than download spreadsheets, PowerPoints, etc. from the web site.

vi


To download more slides, ebook, solutions and test bank, visit

SAMPLE ASSIGNMENT SCHEDULES
Summary of Potential Assignments
Suggested alternative schedules are summarized here in terms of the relative percentage of
time to be devoted to various chapters. Detailed assignment schedules are shown after this
summary. These schedules all assume a straightforward coverage of ABC is desired. For a more
in-depth coverage see Table A on pages xix –xx.
Alternative 1*
Sequence A
Sequence B
Percentage
Percentage
Chapter of Time

Chapter
of Time
1
2%
1
2%
2
5
2
5
3
6
3
6
4
8
4
8
5&6
12
13
6
8
10
5&6
12
9
8
11
8

10
6
8
10
11
10
15
9
12
6
9
8
13
6
10
7
14
7
12
5

Review or
Exams
14
Total
100%

Review or
Exams
14

Total
100%

Alternative 2**
Sequence A
Sequence B
Percentage
Percentage
Chapter
of Time
Chapter
of Time
1
2%
1
2%
15
7
15
6
16
7
16
4
17
8
2
5
2
6

3
6
3
5
4
7
4
8
12
5
5&6
10
13
5
8
7
14
6
9
6
5&6
10
10
5
7
4
11
10
8
9

12
5
9
6
10
4
11
7
Review or
Review or
Exams
14
Exams
14
Total
100%
Total
100%

*

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

problems from "Additional Assignment Material" can be assigned as time allows. However, for
those who wish to select particular problems in each chapter, some suggestions follow.

vii


To download more slides, ebook, solutions and test bank, visit

Alternative 1, Sequence A
Designed for one semester of 15 weeks with three 50-minute meetings per week. Note that
longer semesters permit either more intensive or extensive coverage, depending on instructor
preferences.

No. of
Class
Meeting Chapter in Text
1
Introduction.

2
3
4
5
6
7
8

Ch. 1 - Perspective
Ch. 2 - Excluding
appendices

Appendices to Ch. 2

11
12
13
14
15

Ch. 3
Review Ch. 3
Review Ch. 3
Ch. 4 (See discussion on p.
xviii and Table A)
Review Ch. 4
Review Ch. 4
(Consider jump to Ch. 12)
Ch. 5
Review Ch. 5
Review Ch. 5
Ch. 6
Review Ch. 6

16

Review Ch. 6

17
18
19
20

21
22
23

(Consider jump to Ch. 11)
Ch. 7
Review Ch. 7
Ch. 8
Review Ch. 8
Review Ch. 8
Review Ch. 8
Review Ch. 8
(Consider jump to Ch. 15)

9
10

Problem Assignments
Normal: Based on
Approximately Two Hours
Selected Additional
of Homework
Problems if Time
per session
Permits
See the section that follows
shortly, "COMMENTS ON CHOICE OF
PROBLEMS IN EACH CHAPTER."
A1, A3, 32
51

A1, A2 (or 46) and A3 (or 32, 33, 40, 44, 45
B1, B2) and 30 (or 31)
58 or 59, 60 or 61
Any of 37-39, 56 or 59
or 62
A1 & A3 (or B1 & B3)
47
A2 or B2
57
38, 51
53, 54 (appendix)
A1 (or B1), A2, B2
32, 37, 40
A4 (or B3),
B4, 43, 44

41, 42
49, 53

A1, A2, 47 (or 50 or 51)
B2
63
A4 (or B5 or 59)
A1 (or 60), any of 45, 46,
49, or 50
56, 65, (53 or B3), 68

57
40 or 43
53 or 54, 59, 60, 61

64
57

Start A1 or B1
Finish A1 or B1
A1 (or B1 or 36 or 37)
A3 or B2, 43
44, 45
A2, B3, 39
50, 53

30, 32, 33, 35
37
Any of 24-27
Any of 29-31, 33
41, 47
32, 48
40

viii

66, any of 28, 29, 46, or
47


To download more slides, ebook, solutions and test bank, visit

No. of
Class
Meeting

Problem Assignments:
Normal: Based on
Approximately Two Hours
Selected Additional
of Homework
Problems if Time Permits
per session

24
25
26
27
28
29
30
31
32
33

Chapter in Text
Review for Exam
*Test on Ch. 1 thru Ch. 8
Ch. 9
Review Ch. 9
Ch. 10
Review Ch. 10
Ch. 11
Review Ch. 11
Review Ch. 11

Review Ch. 11

A1 or B1, A2 or B2
A3, B3, 46, 49
A1 or B1, B2
A2, A3, A4 or B4,
A1 or B1, 44 or 45
38 or 39, 60
49, 52
A3 (or B3), A4 (or B4), 69

34
35
36

Review Ch. 11
Ch. 12
Review Ch. 12

46 or 47, 66
A1 or B2, B1 or A3
A2 or B3

37
38
39
40
41
42
43

44
45

Review Ch. 12
Ch. 13
Review Ch. 13
Review Ch. 13
Ch. 14
Review Ch. 14
Review Ch. 14
Final review
Final examination

A4 or B4
A1 or B1
A2 or B2, 32
A3 or A4, B3 or B4
A1 or B1, 23, 25
A2 or B2, A3 or B3
A4 or B4

50
48, 52
30, 40, 41, 42, 43
47, 50, 53
Any of 29-35
65
53, 71
A5 or B5 and any of 4043
53, 67, 68

39 or 40, 46
33 or 34, 41 and 43 (or 42
and 43), 44 and 45, 55
(extended case)
35, 36, 53
38 or 39
Any of 44-49
45, 46, 48, 69
Any of 24-27, 39 or 42
30-33, 43
48

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

ix


To download more slides, ebook, solutions and test bank, visit

Alternative 2, Sequence A

No. of
Class
Meeting
1
2
3
4
5
6
7
8
9
10
11
12-44

45

Problem Assignments
Normal: Based on
Approximately Two Hours Selected Additional
of Homework
Problems if Time
per session
Permits

Chapter in Text
Introduction
Ch. 1 – Perspective
Ch. 15 - Basic Concepts

Review Ch. 15
Ch. 16
Review Ch. 16
Appendix 16A
Ch. 17, Part One
Review Ch. 17, Part One
Ch. 17, Part Two
Appendix 17
Same as alternative 1, Sequence
A, from session 3 thru 37,
omitting sessions 17 and 18.
Final examination

A1, A3, 32
A1 or B1, 29, 328, 42, or 43
A2 or B2 or 35
A1 or 42, A2 or 49, A3 or
50, A4 or 51
59, 60
56 or 68, 69
A1 or B1, B3
A2 or B2, 35
A5, B5, 47
37 or 38

51
28, 33
A3 or B3
B1, B2, B3
41, 65, 67

55, 58, 71
A3, A4
48
50, 51

Students with no background in accounting will need to spend more time on Chapters 15, 16,
and 17 than is suggested in the tables above. Some instructors may wish to omit parts of
Chapters 16 and 17.

Alternative 2, Sequence B
This is basically the same as Alternative 2, Sequence A, except that those instructors who wish to
cover the chapters on planning and control earlier in the course may prefer to delay sessions 7
through 11 until the end of the course. Moreover, the sessions for Chapters 10 and 17 may be
deleted, whereas Chapters 7, 13, and 14 may be included.
Other Possibilities
Some instructors prefer to concentrate on a few chapters in greater depth and to delete other
chapters. An example is expanding the coverage of activity-based costing to include cost-system
design and use, multistage ABC, and integrating service-department allocation, product
profitability, and customer profitability. When we use this approach, we delete Chapters 13
through 17 and occasionally Chapters 7 and 11. Other instructors prefer to cover all the chapters.
To do so effectively, an instructor must obviously concentrate on the Normal Problem
Assignments above and condense the number of sessions per chapter.

x


To download more slides, ebook, solutions and test bank, visit

LINKING OF 13TH EDITION PROBLEMS TO THOSE IN THE 14TH EDITION
Users of the 13th Edition of Introduction to Management Accounting may have favorite

problems that they want to continue to use. To help select a problem in the 14th Edition that is
similar, the following table links the problems in the two editions. The first column for each
chapter lists the problem numbers from the 13th Edition, and the second column shows the
corresponding problem in the 14th Edition.

Chapter
1

2

Problems
13th Ed.
A1
A2
A3
B1
B2
B3
27
28
29
30
31
32
33
34
35
36
37
38

39
40
41
42
43
44
45
46
47
48
49
50
51
52

Problems
14th Ed.
A1
A2
A3
B1
B2
B3
29
30
31
32
33
34
35

36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
53
54
55

A1
A2
B1
B2

A2
A3
B2
B3

.
Chapter
2
(cont.)

Problems
13th Ed.
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46

47
48
49
50
51
52
53
54
55
56
57
58
59
60

xi

Problems
14th Ed.
24
25
26
27
28
29
30
31
34
35
36

-37
38
39
41
42
43
44
46
47
--49
50
51
--52
-53
54
-55
56
57
58

Chapter
2
(cont.)

3

Problems
13th Ed.
61
62

63
64
65
66
67
68
69

Problems
14th Ed.

A1
A2
A3
B1
B2
B3
26
27
28
29
30
31
32
33
34
35
36
37
38

39
40
41
42
43
44
45
46

A1
A2
A3
B1
B2
B3
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40

41
42
43
44
45
46

59
60
-61
62
63
65
66
67


To download more slides, ebook, solutions and test bank, visit

Chapter
3
(cont.)

4

Problems
13th Ed.
47
48
49

50
51
52
53
54
55
56
57
58
59
60
61

Problems
14th Ed.

A1
A2
A3
A4
B1
B2
B3
B4
36
37
38
39
40
41

42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57

A1
A4
A3
-B1
B3
-B4
32
33
35
36
-37
38
39

40
41
43
44
45
---46
49
50
51
52
53

47
48
49
50
51
52
53
54
55
56
57
58
60
61
62

.
Chapter

4
(cont.)

Problems
13th Ed.
58
59
60
61
62
63
64
65
66

Problems
14th Ed.
--55
56
--58
59
60

5

A1
A2
A3
A4
B1

B2
B3
B4
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51

52

A2
6-A2
A3
A4
B2
6-B2
6-B3
B3
23
25
26
27
28
29
30
36
37
38
39
6-35
6-36
40
41
42
43
44
45
46

47
49
50
51
52
53
54
55

xii

Chapter
5
(cont.)

6

Problems
13th Ed.
53
54
55
56
57
58
59
60
61
62
63

64
65

Problems
14th Ed.
56
57
58
6-51
6-52
6-53
59
60
61
62
-65
66

A1
A2
A3
A4
B1
B2
B3
B4
B5
24
25
26

27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46

A1
A3
A4
5-A1
B1
B4
B5
B6
5-B1

24
25
26
27
5-24
28
29
30
31
32
33
34
37
38
39
40
41
42
43
44
5-31
5-32
5-33


To download more slides, ebook, solutions and test bank, visit

Chapter
6
(cont.)

7

Problems
13th Ed.
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69

Problems

14th Ed.
5-34
5-35
45
46
47
48
49
50
54
56
57
58
59
60
61
63
64
65
66
5-48
69
70
71

A1
B1
22
23
24

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

A1
B1
22
23
24
25
26
27
28
29
30

31
32
33
34
35
36
37
38
39
40
41
42

Chapter
7
(cont.)

8

Problems
13th Ed.
43
44
45
46
47
48
49
A1
A2

A3
B1
B2
B3
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45

46
47
48
49
50
51
52

xiii

Problems
14th Ed.
43
44
45
-47
48
49
A1
A2
A3
B1
B2
B3
20
21
22
23
24
25

26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52

Problems
13th Ed.

53
54
55
56
57
58

Problems
14th Ed.
53
54
55
57
58
59

9

A1
A2
A3
B1
B2
B3
28
29
30
31
32
33

34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55

A1
A2
A3
B1
B2
B3
28

29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
54
55
56

10

A1
A2
A3
A4
B1

A1
A2
A3
A4
B1

Chapter
8
(cont.)


To download more slides, ebook, solutions and test bank, visit

Chapter
10
(cont.)

11

Problems
13th Ed.
B2
B3
B4

20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49

50
51
52
53
54
55
56

Problems
14th Ed.
B2
B3
B4
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
58
59
60

A1
A2
A3
A4
A5

A1
A2
A3

A4
A5

.
Chapter
11
(cont.)

Problems
13th Ed.
B1
B2
B3
B4
B5
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39

40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65

xiv

Problems

14th Ed.
B1
B2
B3
B4
B5
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48

49
50
51
52
53
54
55
56
57
58
59
60
61
63
64
65
66

Chapter
11
(cont.)

12

Problems
13th Ed.
66
67
68
69

70

Problems
14th Ed.
67
68
70
71
72

A1
A2
A3
A4
B1
B2
B3
B4
19
20
21
22
23
24
25
26
27
28
29
30

31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50

A1
A2
A3
A4
B1
B2
-B4
26
27

28
4-34
29
30
31
32
35
36
37
4-47
4-48
39
40
41
42
43
46
47
48
49
50
51
52
53
4-B2
4-54
56
59
---

To download more slides, ebook, solutions and test bank, visit

Chapter
13

Problems
13th Ed.
A1
A2
A3
A4
B1
B2
B3
B4
29
30
31
32
33
34
35
36
37
38
39
40
41
42

43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66

Problems
14th Ed.
A1
A2
A3

A4
B1
B2
B3
B4
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
52
53
54
55
56
57
58

59
60
61
62
63
64
65
66
67
68
69
---

Chapter
13
(cont.)

14

Problems
13th Ed.
67
68
69
70
71

Problems
14th Ed.

A1
A2
A3
A4
B1
B2
B3
B4
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36

37
38
39
40
41
42
43
44
45
46

A1
A2
A3
A4
B1
B2
B3
B4
15
16
17
18
19
21
-22
23
24
25
26

27
28
30
31
32
33
34
35
-36
37
38
39
40
41
42
43
44
45
46

xv

70
71
73
74
75

Problems
13th Ed.

47
48
49
50
51

Problems
14th Ed.

15

A1
A2
A3
B1
B2
B3
19
20
21
22
23
24
25
26
27
28
29
30
31

32
33
34
35
36
37
38
39
40
41
42
43

A1
A2
A3
B1
B2
B3
23
24
25
26
27
28
29
30
31
32
33

34
36
37
38
39
40
-41
42
43
44
46
47
48

16

A1
A2
A3
A4
B1
B2
B3
36

A1
A2
A3
A4
B1

B2
B3
36

Chapter
14
(cont.)

47
48
50
51
52


To download more slides, ebook, solutions and test bank, visit

Chapter
16
(cont.)

Problems
13th Ed.
37
38
39
40
41
42
43

44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73

74

Problems
14th Ed.
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62

63
64
65
66
67
68
69
70
71
73
74
75

Chapter
17

Problems
13th Ed.
A1
A2
A3
A4
A5
B1
B2
B3
B4
B5
25
26

27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54

xvi

Problems
14th Ed.
A1
A2
A3
A4
A5
B1
B2
B3
B4
B5
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41

42
43
44
45
46
47
48
49
50
51
53
54
55


To download more slides, ebook, solutions and test bank, visit

COMMENTS ON CHOICES OF PROBLEMS IN EACH CHAPTER
Throughout the book, the "fundamental assignment material" contains two sets of
problems, an "A" series (such as 1-A1 and 1-A2) and a "B" series (such as 1-B1 and 1-B2). To
cover the basics of any chapter, you can assign either the "A" or the "B" series. To reinforce the
basics or to explore issues in more depth, you can use items in the "additional assignment
material". We especially encourage use of some of the cases. These are generally not overly long
cases, but they allow discussion of material that is not straightforward. They are a good basis for
class discussions.
The cognitive exercises in each chapter are short and designed to cover issues across the
various value chain functions and disciplines other than accounting. These exercises present an
opportunity to explore the role of accounting in support of other disciplines such as marketing,
production, and general management.
There is a problem in each chapter based on Nike’s 10-K report, a condensed version of

which is included in the text as Appendix C. This is intended to give students experience finding
publicly available information and using that information to make inferences about managerial
accounting issues.
The Excel application exercise in each chapter gives step-by-step instructions on how to
use a spreadsheet to solve one of the chapter’s problems. Use of a few of these exercises
throughout the quarter will help students who do not already have spreadsheet expertise.
The collaborative learning exercise is designed for assignment to a group or for a class
exercise. They will help students learn from one another.
The Internet exercise at the end of assignment material gives students an opportunity to
relate the concepts presented in the text to actual company experiences. These exercises require
the use of company Web sites. The information and format of these Web sites change frequently
so the instructor should review each exercise prior to assigning it.
We especially encourage coverage of some of the ethics questions. There is at least one in
each chapter. These provide a great basis for class discussion.
Chapter 1: Managerial Accounting, the Business Organization, and Professional Ethics
The distinctions between scorekeeping, attention directing, and problem solving are
frequently subject to argument. We do not find such disputes fruitful, so we cut them short.
Despite their fuzziness, these distinctions help the student to recognize that accounting is a rich
discipline that is not confined solely to data accumulation. These issues can be explored using
problem 1-A1 or 1-B1.
Management by exception is covered in problems 1-A2, 1-B2, and 1-33. Problems 1-41
and 1-42 stress the cost-benefit approach to the design of systems. Problem 1-44 covers the
value chain. We encourage the use of one or more of the following oroblems that cover ethics: 1A3, 1-B4, 1-37, 1-38, 1-47, 1-48, 1-49, and 1-51.

xvii


To download more slides, ebook, solutions and test bank, visit

Chapter 2: Introduction to Cost Behavior and Cost-Volume Relationships

Problems 2-A1 and 2-A2 (or 2-B1 and 2-B2) cover the basic techniques, but any of 2-40
through 2-59 may be viewed as substitutes. There are plenty of good choices. Many instructors
may prefer not to assign the appendices. Other problems in later chapters, such as 5-42 and 5-43
may be logically assigned in conjunction with Chapter 2. You may desire to examine Chapters 2
through 6 as a package before choosing particular assignments for each chapter.
Chapter 3: Measurement of Cost Behavior
Chapter 3 problems are designed with several purposes: (1) to measure fixed and
variable cost behavior, (2) to stress the role of activity-based cost drivers, and (3) to predict costs
with appropriate cost drivers. Problem 3-31 is a good, visual approach to cost behavior, and 339, 3-42, and 3-47 are different approaches to modeling cost behavior. Many of the problems
involve non-output-volume-related cost drivers; these include 3-49, 3-52, 3-53, 3-54, 3-57, and
3-58. Problems 3-35, 3-37, 3-44, 3-45, 3-48, and 3-56 use cost behavior to predict costs. Several
problems require least squares regression analysis: 3-52, 3-53, and perhaps 3-58. Two problems
require understanding regression output but do not require the analysis itself: 3-42 (note there is
an error in the first printing of the textbook for this problem: the “+” sign in the given regression
equation should be a “-“ sign so the equation should be Y = 7,810 - .47X) and 3-51.
Chapter 4: Cost Management Systems and Activity-Based Costing
This chapter has been revised significantly from the previous edition. The focus of the
revision is on presenting ABC material in three stages (see Table A): fundamental concepts,
design and use, and advanced concepts. Many instructors teach courses that are designed to give
only an overview of the fundamental concepts of management accounting. What is needed for
these courses is a straightforward coverage of ABC and ABM. For such courses, we strongly
recommend the Fundamental Concepts coverage shown in Table A and included in the text of
Chapter 4. We have class tested this structure and find that students grasp the main concepts of
ABC and ABM within 2 or 3 50-minute lectures.
For instructors wishing to extend ABC to cover the design and use of concepts, an
additional 1-2 lectures covering Appendix 4 are required. Finally, for those who want a
demanding and thorough coverage of ABC and ABM, Appendix 12 presents multi-stage processbased cost systems. This material is demanding and is designed for courses where students need
to master ABC concepts.
To cover the first half of the chapter, we suggest problems 1-A1, 1-A2, and 1-B2, possibly
followed by 4-46 or 4-54. Our favorites for basic ABC are 4-A4, 4-B4, and 4-42. A long but

excellent basic case is 4-54. Problems 4-51, 4-52, and 4-53 review chapters 2, 3, and 4 without
using ABC.
Many instructors prefer to insert Chapters 12, 13, and 14 immediately after Chapter 4.
This can be accomplished without breaking continuity. We prefer not to cover the process
costing section of Chapter 14 in an introductory course. There are too many other important and
stimulating topics that deserve attention. Therefore, give serious consideration to omitting pages
649 - 664 completely, or perhaps you may wish to assign only pages 649 - 654.
xviii


To download more slides, ebook, solutions and test bank, visit

Table A: ABC COVERAGE RECOMMENDATIONS
Text





Learning
Objectives








Topics






Special
Learning
Aids





Lecture
Time
Required

Fundamental Concepts
Chapter 4
Describe the purposes of
cost management systems.
Explain the relationship
between cost, cost objective,
cost accumulation, and cost
assignment.
Distinguish between direct,
indirect, and unallocated
costs.
Explain how the financial
statements of manufacturers

and merchandisers differ
because of the types of
goods they sell.
Understand the main
differences between
traditional and activity-based
costing ABC) systems and
why ABC systems provide
value to managers.
Cost management systems
Cost accounting systems
Cost terms used when
making strategic and
operational control decisions
Cost terms used for external
reporting
Traditional and ABC cost
accounting systems
Activity-based management
Detailed illustration of cost
allocation with several very
similar exercises to reinforce
understanding of
fundamentals
Business First example of
ABC
Making managerial decision
boxes to emphasize key
concepts
Summary Problem for Your

Review with detailed
solution.

2-3 50-minute lectures

Advanced
(multistage) ABC
Appendix 12

Design and Use of ABC Systems
Appendix 4 & Chapt. 12
Chapter 4:
 Design a cost accounting
system that includes activitybased costing.
 Use activity-based cost
information to make strategic
and operational control
decisions.
Chapter 12:
 Integrate service department
allocation systems with
traditional and ABC systems to
allocate total systems costs to
product or service cost objects.
 Allocate costs associated with
customer actions to customers.

Chapter 4:
 Detailed illustration of two-stage
ABC design and use

 Process maps
 Strategic and operational cost
control decisions using ABM
Chapter 12:
 Design and use ABC to determine
product and customer profitability
 Use ABC to set strategy to improve
customer profitability
 Special graphics to aid learning
 Business First example of ABC
 Making managerial decision boxes
to emphasize key concepts
 Summary Problem for Your
Review with detailed solutions in
both Chapters 4 and 12.












1-2 50-minute lectures

xix

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

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

1 50-minute lecture

To download more slides, ebook, solutions and test bank, visit

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

these problems refer to textbook Exhibit 8-5, which provides a helpful template for solving this
sort of problem. In addition, Case 8-53 introduces an activity approach to flexible budgeting that
is worth considering given the current interest in activity analysis.
Problems that require detailed variance calculations refer to textbook Exhibits 8-8 or 8-9,
which are concrete examples and useful templates for variance analysis. These references aid
students by giving them a framework for organizing data and developing problem solutions.

xx


To download more slides, ebook, solutions and test bank, visit

Chapter 9: Management Control Systems and Responsibility Accounting
Chapter 9 problems focus on setting goals and objectives, developing incentives, and
measuring performance toward objectives. Goals and objectives are covered in 9-32, 9-36, 9-42,
and 9-50. Incentives are covered in 9-34 and 9-44. Performance measurement is in 9-37, 9-43,
9-48, and 9-49. Case 9-50 combines strategic pricing issues, cost behavior, and productivity; it is
not a long case, but it is thought provoking. Problems 9-35, 9-45 and 9-48 cover the balanced
scorecard, and the relationship between strategy and key success factors.
Chapter 10: Management Control in Decentralized Organizations
Many instructors will want to delay assigning Chapter 10 until the end of the course.
Chapter 10 is easily divisible into two separate parts, one on performance measurement including
economic value added and residual income measures and one on transfer pricing. In any event,
the material can be covered on either of two levels: a brisk survey, which would concentrate on
10-A1 and 10-A2 (or 10-B1 and 10-B3), and problem 10-40 (comparison of EVA and residual
income measures), or a deeper study, which would necessitate more than one class session.
There are several "nuts and bolts" problems: 10-A2, 10-A4, 10-B1, 10-B3, 10-27 through
10-30, and 10-34 through 10-36. Problems 10-29 and 10-43 deal with economic profit.
Problems 10-30, 10-40, 10-41, and 10-42 cover economic value added. Problems 10-50 provides
perspective on transfer pricing, while several other problems cover various transfer-pricing

issues. 10-36 and10-53 cover multinational transfer prices. Problem 10-37 introduces agency
theory.
Case 10-55 (a special favorite) shows how the issues in Chapters 9 and 10 are closely
related. We especially like 10-55 because it underscores the goal congruence and management
effort aspects of designing management control systems. Too often, much material in this
chapter is dismissed as being too "soft" or too qualitative for an accounting course. We disagree.
We regard this chapter as the conceptual core of the course. It stresses the central questions that
the designer of a control system must face, even though few pat answers are provided. Knowing
what central questions to ask is an extremely important lesson for accountants and managers.
Chapter 11: Capital Budgeting
Many instructors want to introduce income taxes at the outset of capital budgeting.
However, income tax considerations are not needed to grasp the essential ideas. The problem of
determining what is relevant is far more imposing that any difficulties in using discounted cash
flow tables. In addition to the fundamental assignment material, our favorite problems include
11-60, 11-49, 11-51, and 11-52. Problem 11-52 is of special interest because it has negative
operating cash flows under both alternatives but a positive incremental operating cash flow.
Cases 11-65, 11-66, and 11-67 address investment decisions in the new manufacturing
environment. Problem 11-53 might be assigned in conjunction with Problem 11-63.
The "nuts and bolts" problems are 11-A1, 11-38, and 11-45 (or 11-B1, 11-39, and 11-44),
11-29 through 11-32, and 11-34.

xxi


To download more slides, ebook, solutions and test bank, visit

Taxes complicate capital budgeting but do not change the basic concepts. Problems 11-A3
and 11-A4 (or 11-B3 and 11-B4) provide the most efficient way to drive the major points home
regarding income taxes and discounted cash flow, but 11-A5 (or 11-B5) should also be used if
there is time. Problems 11-40 and 11-41 provide informative basic exercises. . Problem 11-69 is

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

xxii

To download more slides, ebook, solutions and test bank, visit

Chapter 14: Job-Costing and Process-Costing Systems
This chapter is organized into two distinct parts – job-costing systems and process-costing
systems.
Job-costing systems. Job-costing systems may be assigned without assigning processcosting systems (a subject we prefer to omit). Job costing may be studied at two levels or more.
The first level would be confined to 14-A1 or 14-B1, which cover the basic points. At this first
level, 14-21 to 14-24, 14-28, and 14-39 might also be considered.
There are many short straightforward exercises and problems. Consider 14-25, and 14-41.
Nonmanufacturing situations are presented in 14-23 and 14-42.
Process-costing systems. The second part of the chapter on process-costing systems also
may be studied as three independent sections. For example, many instructors may confine their
coverage to process costing basics and do not cover the effects of beginning inventories and
backflush costing. The second section considers the effects of beginning inventories. Others will
skip this second section but cover the last section, which introduces backflush costing. The
assignment material is divided accordingly. Problems 14-A2, 14-B2, 14-32 through 14-35, and
14-45 through 14-47 cover the basics of process costing. Problems 14-A3, 14-B3, 14-36 through
14-38 cover the weighted-average method. Finally, problems 14-A4, 14-B4, and 14-48 cover
backflush costing.

SPECIAL NOTE ON CHAPTERS 15-17
Much of the assignment material in Chapters 15-17 is similar to that in this textbook's
companion volume, Introduction to Financial Accounting. Students who have thoroughly
studied that book will have little need to study Chapters 15-17 here, except as a review or to fill
in gaps. For example, if there is time, many topics in the final two chapters of this book will
deserve more careful study than may have been feasible in an earlier course. Consider
intercompany investments, consolidations, and accounting for changing prices.
Chapter 15: Basic Accounting: Concepts, Techniques, and Conventions

This material can be used in a variety of ways, depending on the objectives of the course
and the backgrounds of the students. For example, if we are teaching managers in a class on
"financial accounting for non-financial executives," we usually assign either 15-A2 and 15-A3
(or 15-B2 and 15-B3). If we have more time, we also assign 15-A1 (or 15-B1), 15-28, and 1529. For regular classes, we also like to assign 15-32 (or 15-33 if there is enough time) and 15-34.
Problems 15-41 through 15-44 all help understand real published financial statements.
The assignment material for Appendix 15B (15-36 through 15-40) permits a study of the
mechanics of bookkeeping and provides a deeper study of the general concepts of the chapter. If
there is little time, it is unnecessary to cover the appendix on ledger accounts. Subsequent
chapters are not dependent on knowledge of T accounts.

xxiii


To download more slides, ebook, solutions and test bank, visit

In sum, there is an ample supply of material that can be used for a quick survey or for a
deep probing of basic accounting concepts and procedures. The amount of time devoted to the
chapter will obviously depend on the instructor's purposes.
Chapter 16: Understanding Corporate Annual Reports: Basic Financial Statements
Although this chapter was not formally divided into major parts, instructors can pick and
choose if they prefer. For instance, some instructors may wish to assign only the early part of the
chapter on the balance sheet and income statement. Consider the following pertinent assignment
material that covers the highlights: 16-A1 (or 16-B1), 16-41, 16-42, 16-59 through 16-63.
The statement of cash flows is covered in the fundamental assignment material (16-A2
through 16-A4, 16-B2 and 16-B3) and also by 16-43 through 16-53 and 16-64 through 16-67. To
explore the basics of the statement of cash flows step-by-step see exercises 16-43 through 16-46.
Problems 16-47, 16-48, 16-50, 16-52, 16-53, 16-66, and 16-67 cover the indirect method.
Appendix 16A is covered in 16-54 through 16-58 and 16-68 through 16-71. Problems 1656 and 16-68 are good basic problems that have solutions similar to first Exhibit 16-18 in the
chapter.
Chapter 17: More on Understanding Corporate Annual Reports

Either Part 1 or Part can be assigned separately. Part 1 is a simple coverage of
intercorporate investments, including consolidated financial statements. Because consolidated
statements are so pervasive, we believe it is important for students to understanding the basic
issues involved. We always take a few minutes in class to stress the highlights of the
consolidated balance sheet and income statement in the two big exhibits in the chapter.
Problems 17-B2 and 17-B3 may be the most serious candidates for homework assignments, with
17-A2, 17-A3, and 17-A4 as alternatives. Problem 17-35 provides a general overview of
consolidated financial statements. Problems 17-31, 17-32, 17-45, and 17-46 cover goodwill.
Problem 17-49 provides an especially good context to discuss ethics.
To cover financial ratios, consider 17-A5, 17-B4, 17-B5, 17-36, and 17-48. We cover
financial ratios only if the finance course does not.
Problems 17-37, 17-38, 17-50, and 17-51 cover Appendix 17. Problem 17-38 has a
solution similar to Exhibit 17-9 of the text. When inflation is covered, there is a danger of
getting too enmeshed in the details of how the four major methods differ. Some time should be
devoted to the measuring of the differences, especially the strengths and weaknesses of the
historical cost/constant dollar method in comparison with the other methods.

xxiv


To download more slides, ebook, solutions and test bank, visit

PRESENTATION OF SOLUTIONS IN CLASS
Instructors have a variety of views regarding the use of classroom time for homework
solutions. Most instructors put solutions on a chalkboard or use overhead projectors. In turn,
many students frantically copy the materials in their notes. Our practice is to reproduce the
printed homework solutions for distribution either before, during, or after the discussion of a
particular solution. The members of the class are glad to pay a modest fee to the school to cover
the reproduction costs. In this way, students can spend more of their classroom time in thinking
rather than writing. Furthermore, they have a complete set of notes.

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

xxv