Describe what each letter stands for in the cvp graph

Rev.Confirming Pages

S e c o n d E d i t i o n

Eric W. Noreen, Ph.D., CMA Professor Emeritus University of Washington

Peter C. Brewer, Ph.D., CPA Miami University —Oxford, Ohio

Ray H. Garrison, D.B.A., CPA Professor Emeritus Brigham Young University

managersMANAGERIAL ACCOUNTING for

nor27130_fm_i-xxviii.indd inor27130_fm_i-xxviii.indd i 10/5/09 2:49:58 PM10/5/09 2:49:58 PM

Rev.Confirming Pages

MANAGERIAL ACCOUNTING FOR MANAGERS Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2011, 2008 by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

Some ancillaries, including electronic and print components, may not be available to customers outside the United States.

This book is printed on acid-free paper.

1 2 3 4 5 6 7 8 9 0 DOW/DOW 1 0 9 8 7 6 5 4 3 2 1 0

ISBN 978-0-07-352713-0 MHID 0-07-352713-0

Vice president and editor-in-chief: Brent Gordon Editorial director: Stewart Mattson Publisher: Tim Vertovec Director of development: Ann Torbert Development editor: Emily A. Hatteberg Vice president and director of marketing: Robin J. Zwettler Marketing manager: Kathleen Klehr Vice president of editing, design and production: Sesha Bolisetty Lead project manager: Pat Frederickson Lead production supervisor: Carol A. Bielski Senior designer: Mary Kazak Sander Senior photo research coordinator: Lori Kramer Photo researcher: Keri Johnson Media project manager: Jennifer Lohn Cover designer: Gino Cieslik Interior design: Gino Cieslik Cover photo: Integrated Laser Pointer, courtesy of VSON Technology Co., Ltd. Typeface: 10.5/12 Times Roman Compositor: Laserwords Private Limited Printer: R. R. Donnelley

Library of Congress Cataloging-in-Publication Data Noreen, Eric W. Managerial accounting for managers / Eric W. Noreen, Peter C. Brewer, Ray H. Garrison.—2nd ed. p. cm. Includes index. ISBN-13: 978-0-07-352713-0 (alk. paper) ISBN-10: 0-07-352713-0 (alk. paper) 1. Managerial accounting. I. Brewer, Peter C. II. Garrison, Ray H. III. Title. HF5657.4.N668 2011 658.15’11—dc22 2009037451

www.mhhe.com

Dedication To our families and to our many colleagues who use this book.

nor27130_fm_i-xxviii.indd iinor27130_fm_i-xxviii.indd ii 10/5/09 2:49:59 PM10/5/09 2:49:59 PM

www.mhhe.com
Rev.Confirming Pages

iii

About the Authors

Eric W. Noreen has held appointments at institutions in the United States, Europe, and Asia. He is emeritus professor of accounting at the University of Washington.

His BA degree is from the University of Washington and his MBA and PhD degrees are from Stanford University. A Certified Management Accountant, he was awarded a Certificate of Distinguished Performance by the Institute of Certified Management Accountants.

Professor Noreen has served as associate editor of The Accounting Review and the Journal of Accounting and Economics. He has had numerous articles published in academic journals including: the Journal of Accounting Research; the Accounting Review; the Journal of Accounting and Economics; Accounting Horizons; Accounting, Organizations and Society; Contemporary Accounting Research; the Journal of Management Accounting Research; and the Review of Accounting Studies.

Professor Noreen has won a number of awards from students for his teaching.

Peter C. Brewer is a professor in the Department of Accountancy at Miami University, Oxford, Ohio. He holds a BS degree in accounting from Penn State University, an MS degree in accounting from the University of Virginia, and a PhD from the University of Tennessee. He has published more than 30 articles in a variety of journals including: Management Accounting Research, the Journal of Information Systems, Cost Management, Strategic Finance, the Journal of Accountancy, Issues in Accounting Education, and the Journal of Business Logistics.

nor27130_fm_i-xxviii.indd iiinor27130_fm_i-xxviii.indd iii 10/5/09 2:50:00 PM10/5/09 2:50:00 PM

Rev.Confirming Pages

iv

About the Authors Professor Brewer is a member of the editorial boards of Issues in Accounting Education and the Journal of Accounting Education. His article “Putting Strategy into the Balanced Scorecard” won the 2003 International Federation of Accountants’ Articles of Merit competition and his articles “Using Six Sigma to Improve the Finance Function” and “Lean Accounting: What’s It All About?” were awarded the Institute of Management Accountants’ Lybrand Gold and Silver Medals in 2005 and 2006. He has received Miami University’s Richard T. Farmer School of Business Teaching Excellence Award and has been recognized on two occasions by the Miami University Associated Student Government for “making a remarkable commitment to students and their educational development.” He is a leading thinker in undergraduate management accounting curriculum innovation and is a frequent presenter at various professional and academic conferences.

Prior to joining the faculty at Miami University, Professor Brewer was employed as an auditor for Touche Ross in the firm’s Philadelphia office. He also worked as an internal audit manager for the Board of Pensions of the Presbyterian Church (U.S.A.). He frequently collaborates with companies such as Harris Corporation, Ghent Manufacturing, Cintas, Ethicon Endo-Surgery, Schneider Electric, Lenscrafters, and Fidelity Investments in a consulting or case writing capacity.

Ray H. Garrison is emeritus professor of accounting at Brigham Young University, Provo, Utah. He received his BS and MS degrees from Brigham Young University and his DBA degree from Indiana University.

As a certified public accountant, Professor Garrison has been involved in management consulting work with both national and regional accounting firms. He has published articles in The Accounting Review, Management Accounting, and other professional journals. Innovation in the classroom has earned

Professor Garrison the Karl G. Maeser Distinguished Teaching Award from Brigham Young University.

nor27130_fm_i-xxviii.indd ivnor27130_fm_i-xxviii.indd iv 10/5/09 2:50:02 PM10/5/09 2:50:02 PM

Rev.Confirming Pages

v

Focus on the Future Manager

with Noreen/ Brewer/Garrison

In Managerial Accounting for Managers, the authors have crafted a streamlined managerial accounting book that is perfect for non- accounting majors who intend to move into managerial positions. Topics such as process costing, the statement of cash flows, and financial state- ment analysis have been dropped to enable instructors to focus their attention on the bedrocks of managerial accounting—planning, control, and decision making. Noreen/Brewer/Garrison focuses on the fundamentals, allowing students to develop the conceptual framework managers need to succeed.

In its second edition, Managerial Accounting for Managers continues to adhere to three core standards:

FOCUS. Noreen/Brewer/Garrison pinpoints the key managerial concepts students will need in their future careers. With no journal entries or financial accounting topics to worry about, students can focus on the fundamental principles of managerial accounting.

RELEVANCE. With its insightful Business Focus features to begin each chapter, current In Business examples throughout the text, and tried-and-true end-of-chapter material, a student will always see the real-world applicability of Noreen/Brewer/Garrison.

BALANCE. There is more than one type of business, and so Noreen/Brewer/Garrison covers a variety of business models, including nonprofit, retail, service, wholesale, and manufacturing organizations. Service company examples are highlighted with icons in the margins of the text.

nor27130_fm_i-xxviii.indd vnor27130_fm_i-xxviii.indd v 10/5/09 2:50:04 PM10/5/09 2:50:04 PM

Rev.Confirming Pages

vi

Noreen’s Powerful Pedagogy Managerial Accounting for Managers is full of pedagogy designed to make studying productive and hassle free.

Opening Vignette Each chapter opens with a Business Focus feature that provides a real-world example for students, allowing them to see how the chapter’s information and insights apply to the world outside the classroom. Learning Objectives alert students to what they should expect as they progress through the chapter.

“Many concepts in accounting are rather abstract if not given some type of context to understand them in. The

business focus features help to provide this context and can lead to discussions

in class if the instructor wishes.” —Jeffrey Wong, University of Nevada, Reno

B U

S IN

E S

S F

O C

U S

367367

Learning Objectives

After studying Chapter 10, you should be able to:

LO1 Explain how direct materials standards and direct labor standards are set.

LO2 Compute the direct materials price and quantity variances and explain their significance.

LO3 Compute the direct labor rate and efficiency variances and explain their significance.

LO4 Compute the variable manufacturing overhead rate and efficiency variances.

LO5 Compute delivery cycle time, throughput time, and manufacturing cycle efficiency (MCE).

LO6 (Appendix 10A) Compute and interpret the fixed overhead budget and volume variances.

Standard Costs and Operating Performance Measures Managing Materials and Labor

Schneider Electric’s Oxford, Ohio, plant manufactures busways that transport electricity from its point of entry into a building to remote locations throughout the building. The plant’s managers pay close attention to direct material costs because they are more than half of the plant’s total manufacturing costs. To help control scrap rates for direct materials such as copper, steel, and aluminum, the

accounting department prepares direct materials quantity variances. These variances compare the standard quantity of direct materials that should have been used to make a product (according to computations by the plant’s engineers) to the amount of direct materials that were actually used. Keeping a close eye on these differences helps to identify and deal with the causes of excessive scrap, such as an inadequately trained machine operator, poor quality raw material inputs, or a malfunctioning machine.

Because direct labor is also a significant component of the plant’s total manufac- turing costs, the management team daily monitors the direct labor efficiency variance. This variance compares the standard amount of labor time allowed to make a product to the actual amount of labor time used. When idle workers cause an unfavorable labor efficiency variance, managers temporarily move workers from departments with slack to departments with a backlog of work to be done. ■

Source: Author’s conversation with Doug Taylor, plant controller, Schneider Electric’s Oxford, Ohio, plant.

10 C h a p t e r

nor27130_ch10_367-418.indd 367 9/15/09 8:19:34 AM

nor27130_fm_i-xxviii.indd vinor27130_fm_i-xxviii.indd vi 10/5/09 2:50:05 PM10/5/09 2:50:05 PM

Rev.Confirming Pages

vii

In Business Boxes These helpful boxed features offer a glimpse into how real companies use the managerial accounting concepts discussed within the chapter. Each chapter contains from three to fourteen of these current examples.

Managerial Accounting in Action Vignettes These vignettes depict cross-functional teams working together in real-life settings, working with the products and services that students recognize from their own lives. Students are shown step-by-step how accounting concepts are implemented in organizations and how these concepts are applied to solve everyday business problems. First, “The Issue” is introduced through a dialogue; the student then walks through the implementation process; finally, “The Wrap-up” summarizes the big picture.

“I love these. Again, a connection to real world that adds credence to the course.”

—Larry N. Bitner, Shippensburg University

“This element is exceptional. The situations truly reflect real life issues business people would

face—not just “textbook” manufactured examples that always have black/white answers.”

—Ann E. Selk, University of Wisconsin – Green Bay

IS THIS REALLY A JOB? VBT Bicycling Vacations of Bristol, Vermont, offers deluxe bicycling vacations in the United States, Canada, Europe, and other locations throughout the world. For example, the company offers a 10-day tour of the Puglia region of Italy—the “heel of the boot.” The tour price includes international airfare, 10 nights of lodging, most meals, use of a bicycle, and ground transportation. Each tour is led by at least two local tour leaders, one of whom rides with the guests along the tour route. The other tour leader drives a “sag wagon” that carries extra water, snacks, and bicycle repair equip- ment and is available to shuttle guests back to the hotel or up a hill. The sag wagon also transports guests’ luggage from one hotel to another.

Each specific tour can be considered a job. For example, Giuliano Astore and Debora Trippetti, two natives of Puglia, led a VBT tour with 17 guests over 10 days in late April. At the end of the tour, Giuliano submitted a report, a sort of job cost sheet, to VBT headquarters. This report detailed the on the ground expenses incurred for this specific tour, including fuel and operating costs for the van, lodging costs for the guests, the costs of meals provided to guests, the costs of snacks, the cost of hiring additional ground transportation as needed, and the wages of the tour leaders. In addition to these costs, some costs are paid directly by VBT in Vermont to vendors. The total cost incurred for the tour is then compared to the total revenue collected from guests to determine the gross profit for the tour.

Sources: Giuliano Astore and Gregg Marston, President, VBT Bicycling Vacations. For more information about VBT, see www.vbt.com .

I N B U S I N E S S

nor27130_ch05_164-205.indd 166 8/31/09 2:20:41 PM

338 Chapter 9

Victoria: How is the budgeting going? Rick: Pretty well. I didn’t have any trouble putting together the budget for March. I also

prepared a report comparing the actual results for March to the budget, but that report isn’t giving me what I really want to know.

Victoria: Because your actual level of activity didn’t match your budgeted activity? Rick: Right. I know the level of activity shouldn’t affect my fixed costs, but we had

more client-visits than I had expected and that had to affect my other costs. Victoria: So you want to know whether the higher actual costs are justified by the

higher level of activity you actually had in March? Rick: Precisely. Victoria: If you leave your reports and data with me, I can work on it later today, and by

tomorrow I’ll have a report to show you.

How a Flexible Budget Works A flexible budget approach recognizes that a budget can be adjusted to show what costs should be for the actual level of activity. To illustrate how flexible budgets work, Victoria prepared the report in Exhibit 9–4 that shows what the revenues and costs should have been given the actual level of activity in March. Preparing the report is straightforward. The cost formula for each cost is used to estimate what the cost should have been for 1,100 client- visits—the actual level of activity for March. For example, using the cost formula $1,500 � $0.10q, the cost of electricity in March should have been $1,610 (� $1,500 � $0.10 � 1,100).

We can see from the flexible budget that the net operating income in March should have been $30,510, but recall from Exhibit 9–2 that the net operating income was actually only $21,230. The results are not as good as we thought. Why? We will answer that question shortly.

To summarize to this point, Rick had budgeted for a profit of $16,800. The actual profit was quite a bit higher—$21,230. However, given the amount of business the salon had in March, the profit should have been even higher—$30,510. What are the causes of these discrepancies? Rick would certainly like to build on the positive factors, while working to reduce the negative factors. But what are they?

To answer Rick’s questions concerning the discrepancies between budgeted and actual costs, we will need to break down the variances shown in Exhibit 9–3 into two types of variances— activity variances and revenue and spending variances. We do that in the next two sections.

Flexible Budget Variances

MANAGERIAL ACCOUNTING IN ACTION The Issue

Rick’s Hairstyling Flexible Budget

For the Month Ended March 31

Actual client-visits (q) .................................................. 1,100

Revenue ($180.00q) ................................................... $198,000 Expenses: Wages and salaries ($65,000 � $37.00q) ............... 105,700 Hairstyling supplies ($1.50q) ................................... 1,650 Client gratuities ($4.10q) ......................................... 4,510 Electricity ($1,500 � $0.10q) .................................. 1,610 Rent ($28,500) ........................................................ 28,500 Liability insurance ($2,800) ...................................... 2,800 Employee health insurance ($21,300) ..................... 21,300 Miscellaneous ($1,200 � $0.20q) ........................... 1,420 Total expense .............................................................. 167,490 Net operating income .................................................. $ 30,510

E X H I B I T 9 – 4 Flexible Budget Based on Actual Activity

nor27130_ch09_334-366.indd 338 9/15/09 10:06:31 AM

nor27130_fm_i-xxviii.indd viinor27130_fm_i-xxviii.indd vii 10/26/09 4:43:01 PM10/26/09 4:43:01 PM

www.vbt.com
Rev.Confirming Pages

viii

“This text is a clear, succinct presentation of appropriate

managerial accounting topics for an introductory course. The

management focus makes the text more relevant to the

introductory accounting course in which the majority of students

are non-accounting majors.” —Darlene Coarts, University of

Northern Iowa

“This text is very thorough and has lots of rich current examples and applications. It has exceptional supplements of all types. It is a very user oriented book and

very appropriate for courses for non-accounting majors as a second accounting course.” —Dana Carpenter, Madison Area

Technical College

“Clear, concise, covers the most relevant topics for students in all concentrations of business and a great text for students that are going into Cost Accounting.” —Shirley Polejewski, University of

St. Thomas

“This is a very comprehensive Managerial Accounting textbook

with an excellent use of examples within the text.”

—Tammy Metzke, Milwaukee Area Technical College-West Allis

Utilizing the Icons

To reflect our service-based economy, the text is replete with examples from service-based businesses. A helpful icon distinguishes service-related examples in the text.

Ethics assignments and examples serve as a reminder that good conduct is vital in business. Icons call out content that relates to ethical behavior for students.

Media integrated icons throughout the text link content back to chapter-specific quizzes, audio lectures, and visual presentations; all of which can be downloaded to an MP3 player. This gives students access to a portable, electronic learning option to support their classroom instruction.

The writing icon denotes problems that require students to use critical thinking as well as writing skills to explain their decisions.

An Excel© icon alerts students that spread sheet templates are available for use with select problems and cases.

The IFRS icon highlights content that may be affected by the impending change to IFRS and possible convergence between U.S. GAAP and IFRS.

IF RS

nor27130_fm_i-xxviii.indd viiinor27130_fm_i-xxviii.indd viii 10/5/09 2:50:28 PM10/5/09 2:50:28 PM

Rev.Confirming Pages

ix

End-of-Chapter Material Building on Garrison/Noreen/Brewer’s reputation for having the best end-of-chapter review and discussion material of any text on the market, Noreen’s problem and case material continues to conform to AACSB, AICPA, and Bloom’s Taxonomy Categories and makes a great starting point for class discussions and group projects.

“The end of the chapter problems... are excellent and are varied enough so that the student is not performing

the same problem over and over again.”

—Peter Woodlock, Youngstown State University

Author-Written Supplements Unlike other managerial accounting texts, Noreen, Brewer, and Garrison write all of the text’s major supplements, ensuring a perfect fit between text and supplement. For more information on Managerial Accounting for Managers’s supplements package, see page xvi.

• Instructor’s Resource Guide

• Testbank

• Solutions Manual

• Workbook/Study Guide

w w

w.m hhe.com

/noreen2e

Multiple-choice questions are provided on the text website at www.mhhe.com/noreen2e .

EXERCISE 4–1 Preparing a Contribution Format Income Statement [ LO1 ] Whirly Corporation’s most recent income statement is shown below:

Total Per Unit

Sales (10,000 units) ........................... $350,000 $35.00 Variable expenses ............................. 200,000 20.00

Contribution margin ........................... 150,000 $15.00 Fixed expenses 135 000

Exercises

nor27130_ch04_118-163.indd 147 8/14/09 8:06:59 PM

The questions in this exercise are based on the Benetton Group, a company headquartered in Italy and known in the United States primarily for one of its brands of fashion apparel—United Colors of Benetton. To answer the questions, you will need to download the Benetton Group’s 2004 Annual Report at www.benetton.com/investors . Once at this website, click on the link toward the top of the page called “Site Map” and then scroll down to the heading called “Financial Reports” and click on the year 2004. You do not need to print this document to answer the questions.

Required: 1. How do the formats of the income statements shown on pages 33 and 50 of Benetton’s

annual report differ from one another (disregard everything beneath the line titled “income from operations”)? Which expenses shown on page 50 appear to have been reclassified as variable selling costs on page 33?

2. Why do you think cost of sales is included in the computation of contribution margin on page 33?

3. Perform two separate computations of Benetton’s break-even point in euros. For the first computation, use data from 2003. For the second computation, use data from 2004. Why do the numbers that you computed differ from one another?

RESEARCH AND APPLICATION 4-34 [ LO3 , LO4 , LO5 , LO6 , LO7 , LO8 , LO9 ]

nor27130_ch04_118-163.indd 162 8/14/09 8:07:14 PM

w w

w. m

hh e.

co

PROBLEM 4–19 Basics of CVP Analysis [ LO1 , LO3 , LO4 , LO6 , LO8] Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $20 per unit. Variable costs are $8 per unit, and fixed costs total $180,000 per year.

Required: Answer the following independent questions: 1. What is the product’s CM ratio? 2. Use the CM ratio to determine the break-even point in sales dollars. 3. Due to an increase in demand, the company estimates that sales will increase by $75,000 during the

next year. By how much should net operating income increase (or net loss decrease) assuming that fixed costs do not change?

4. Assume that the operating results for last year were:

Sales .......................................................................... $400,000 Variable expenses ..................................................... 160,000

Contribution margin ................................................... 240,000 Fixed expenses .......................................................... 180,000

Net operating income ................................................ $ 60,000

Problems

nor27130_ch04_118-163.indd 152 8/14/09 8:07:05 PM

nor27130_fm_i-xxviii.indd ixnor27130_fm_i-xxviii.indd ix 10/26/09 4:43:27 PM10/26/09 4:43:27 PM

www.mhhe.com/noreen2e
www.benetton.com/investors
www.mhhe.com/noreen2e
www.mhhe.co
This page intentionally left blank

Rev.Confirming Pages

xi

New to the Second Edition

Faculty feedback helps us continue to improve Managerial Accounting for Managers. In response to reviewer suggestions we have:

• Reordered variances in Chapters 9 and 10. Both chapters have been extensively rewritten to follow a more logical flow.

• Added coverage of corporate social responsibility to Chapter 1 to introduce students to an important and relevant topic in today’s business world.

• Moved the coverage of balanced scorecard to Chapter 11 where it more naturally belongs.

• Added International Financial Reporting Standards (IFRS) icons throughout the text to highlight topics that may be affected should the U.S. adopt IFRS in the future.

Specific changes were made in the following chapters:

• In Business boxes updated throughout.

• All end-of-chapter items tagged to Bloom’s Taxonomy categories as well as AACSB and AICPA standards.

Chapter 1 • New material on corporate social responsibility has been added.

• Materials dealing with the distinction between financial and

managerial accounting have been moved to Chapter 2.

Chapter 2 • The schedule of cost of goods manufactured has been simplified by

eliminating the list of the elements of manufacturing overhead. This

removes a discrepancy that had existed between the coverage of

the schedule of cost of goods manufactured in Chapter 2 and in

Chapter 3.

Chapter 4 • The basic equations used in target profit analysis and break-even

analysis have been revised to be more intuitive.

• Break-even analysis has been moved to follow target profit analysis

because break-even analysis is just a special caser of target profit

analysis.

• Profit graphs are covered in addition to CVP graphs.

Chapter 5 • Portions of the chapter have been rewritten to enhance clarity.

• The appendix has been rewritten to highlight its assumptions.

Chapter 6 • The chapter has been extensively revised with the overall objective

of making the material more user-friendly. Tables have been

simplified and computing cost of goods sold is streamlined.

Chapter 9 • This chapter has been completely rewritten to follow a logical path

leading from budgeting to performance evaluation comparing

budgets to actual results and then on to standard cost analysis.

Flexible budgets are used to prepare performance reports with

activity variances and revenue and spending variances. This chapter

contains some of the material that used to be in Chapter 11.

Chapter 10 • This chapter now covers all standard cost variances—including

fixed manufacturing overhead variances in an appendix. The

material in this chapter has been extensively rewritten—particularly

the materials dealing with manufacturing overhead.

Chapter 11 • The balanced scorecard has been moved to this chapter, where it

more naturally belongs.

nor27130_fm_i-xxviii.indd xinor27130_fm_i-xxviii.indd xi 10/5/09 2:50:31 PM10/5/09 2:50:31 PM

Rev.Confirming Pages

xii

McGraw-Hill Connect TM Accounting Less Managing. More Teaching. Greater Learning. McGraw-Hill Connect Accounting is an online assignment and assessment solution that connects students with the tools and resources they’ll need to achieve success.

McGraw-Hill Connect Accounting helps prepare students for their future by enabling faster learning, more efficient studying, and higher retention of knowledge.

McGraw-Hill Connect Accounting features Connect Accounting offers a number of powerful tools and features to make managing assignments easier so faculty can spend more time teaching. With Connect Accounting, students can engage with their coursework anytime and anywhere, making the learning process more accessible and efficient. Connect Accounting offers you the features described below.

Simple assignment management With Connect Accounting, creating assignments is easier than ever, so you can spend more time teaching and less time managing. The assignment management function enables you to:

• Create and deliver assignments easily with selectable end-of-chapter questions and testbank items.

• Streamline lesson planning, student progress reporting, and assignment grading to make classroom management more efficient than ever.

• Go paperless with the eBook and online submission and grading of student assignments.

Smart grading When it comes to studying, time is precious. Connect Accounting helps students learn more efficiently by providing feedback and practice material when they need it, where they need it. When it comes to teaching, your time also is precious. The grading function enables you to:

• Have assignments scored automatically, giving students immediate feedback on their work and side-by-side comparisons with correct answers.

• Access and review each response; manually change grades or leave comments for students to review.

• Reinforce classroom concepts with practice tests and instant quizzes.

Instructor library The Connect Accounting Instructor Library is your repository for additional resources to improve student engage- ment in and out of class. You can select and use any asset that enhances your lecture. The Connect Accounting Instructor Library includes:

Connect Your Students to Learning and Success

accounting

• PowerPoints • Transparency Masters • Instructor’s Resource Guide

• Assignment Topic Grids • Testbank Topic Grids

nor27130_fm_i-xxviii.indd xiinor27130_fm_i-xxviii.indd xii 10/26/09 4:43:29 PM10/26/09 4:43:29 PM

Rev.Confirming Pages

xiii

Student Study Center The Connect Accounting Student Study Center is the place for students to access additional resources. The Student Study Center:

• Offers students quick access to lectures, practice materials, eBooks, and more.

• Provides instant practice material and study questions, easily accessible on the go.

• Gives students access to the Personal Learning Plan described below.

Personal Learning Plan The Personal Learning Plan (PLP) connects each student to the learning resources needed for success in the course. For each chapter, students:

• Take a practice test to initiate the Personal Learning Plan.

• Immediately upon completing the practice test, see how their performance compares to chapter learning objectives.

• Receive a Personal Learning Plan that recommends specific readings from the text, supplemental study mate- rial, and practice work that will improve their understanding and mastery of each learning objective.

Diagnostic and adaptive learning of concepts: LearnSmart Students want to make the best use of their study time. The LearnSmart adaptive self-study technology within Connect Accounting provides students with a seamless combination of practice, assessment, and remediation for every concept in the textbook. LearnSmart’s intelligent software adapts to every student response and automatically delivers concepts that advance the student’s understanding while reducing time devoted to the concepts already mastered. The result for every student is the fastest path to mastery of the chapter concepts. LearnSmart:

• Applies an intelligent concept engine to identify the relationships between concepts and to serve new concepts to each student only when he or she is ready.

• Adapts automatically to each student, so students spend less time on the topics they understand and practice more those they have yet to master.

• Provides continual reinforcement and remediation but gives only as much guidance as students need.

• Integrates diagnostics as part of the learning experience.

• Enables you to assess which concepts students have efficiently learned on their own, thus freeing class time for more applications and discussion.

Student progress tracking Connect Accounting keeps instructors informed about how each student, section, and class is performing, allow- ing for more productive use of lecture and office hours. The progress-tracking function enables you to:

• View scored work immediately and track individual or group performance with assignment and grade reports.

• Access an instant view of student or class performance relative to learning objectives.

• Collect data and generate reports required by many accreditation organizations, such as AACSB and AICPA.

nor27130_fm_i-xxviii.indd xiiinor27130_fm_i-xxviii.indd xiii 10/5/09 2:50:32 PM10/5/09 2:50:32 PM

Rev.Confirming Pages

xiv

McGraw-Hill Connect™ Plus Accounting McGraw-Hill reinvents the textbook learning experience for the modern student with Connect Plus Accounting. A seamless integration of an eBook and Connect Accounting, Connect Plus Accounting provides all of the Connect Accounting features plus the following:

• An integrated eBook, allowing for anytime, anywhere access to the textbook.

• Dynamic links between the problems or questions you assign to your students and the location in the eBook where that problem or question is covered.

• A powerful search function to pinpoint and connect key concepts in a snap.

In short, Connect Accounting offers you and your students powerful tools and features that optimize your time and energies, enabling you to focus on course content, teaching, and student learning. Connect Accounting also offers a wealth of content resources for both instructors and students. This state-of-the-art, thoroughly tested sys- tem supports you in preparing students for the world that awaits.

For more information about Connect, go to www.mcgrawhillconnect.com, or contact your local McGraw-Hill sales representative.

Tegrity Campus: Lectures 24/7 Tegrity Campus is a service that makes class time avail- able 24/7 by automatically capturing every lecture in a searchable format for students to review when they study and complete assignments. With a simple one-click start-

and-stop process, you capture all computer screens and corresponding audio. Students can replay any part of any class with easy-to-use browser-based viewing on a PC or Mac.

Educators know that the more students can see, hear, and experience class resources, the better they learn. In fact, studies prove it. With Tegrity Campus, students quickly recall key moments by using Tegrity Campus’s unique search feature. This search helps students efficiently find what they need, when they need it, across an entire semester of class recordings. Help turn all your students’ study time into learning moments immediately supported by your lecture.

To learn more about Tegrity watch a 2-minute Flash demo at http://tegritycampus.mhhe.com.

iPod® Content Harness the power of one of the most popular technology tools today—the Apple® iPod®. Our innovative approach allows students to download audio and video presentations right into their iPod and take learning materials with them wherever they go.

Students can visit the Online Learning Center at www.mhhe.com/noreen2e to download our iPod content. For each chapter of the book they will be able to download narrated lecture presentations, managerial accounting videos, and even self- quizzes designed for use on various versions of iPods. It makes review and study time as easy as putting on earphones.

nor27130_fm_i-xxviii.indd xivnor27130_fm_i-xxviii.indd xiv 10/26/09 4:43:29 PM10/26/09 4:43:29 PM

www.mcgrawhillconnect.com
www.mhhe.com/noreen2e
http://tegritycampus.mhhe.com
Rev.Confirming Pages

xv

Online Learning Center (OLC)

www.mhhe.com/noreen2e More and more students are studying online. That’s why we offer an Online Learning Center (OLC) that follows Managerial Accounting for Managers chapter by chapter. It doesn’t require any building or maintenance on your part. It’s ready to go the moment you and your students type in the URL.

As your students study, they can refer to the OLC website for such benefits as:

• Internet-based activities

• Self-grading quizzes

• Excel spreadsheets

• PowerPoint slides

• iPod® Content

A secured Instructor Resource Center stores your essential course materials to save you prep time before class. The Instructor’s Resource Guide, Solutions Manual, Testbank, and PowerPoint slides are now just a couple of clicks away.

CourseSmart CourseSmart is a new way to find and buy eTextbooks. At CourseSmart you can save up to 50 percent off the cost of a print textbook, reduce your impact on the environ- ment, and gain access to powerful Web tools for learning. CourseSmart has the l argest selection of eTextbooks available anywhere, offering thousands of the most

commonly adopted textbooks from a wide variety of higher education publishers. CourseSmart eTextbooks are available in one standard online reader with full text search, notes and highlighting, and e-mail tools for sharing notes between classmates.

McGraw-Hill Customer Care Contact Information At McGraw-Hill, we understand that getting the most from new technology can be challenging. That’s why our services don’t stop after you purchase our products. You can e-mail our Product Specialists 24 hours a day to get product-training online. Or you can search our knowledge bank of Frequently Asked Questions on our support website. For Customer Support, call 800-331-5094, e-mail hmsupport@mcgraw-hill.com, or visit www.mhhe.com/support. One of our Technical Support Analysts will be able to assist you in a timely fashion.

nor27130_fm_i-xxviii.indd xvnor27130_fm_i-xxviii.indd xv 10/26/09 4:43:36 PM10/26/09 4:43:36 PM

www.mhhe.com/noreen2e
www.mhhe.com/support
Rev.Confirming Pages

xvi

Assurance of Learning Ready Many educational institutions today are focused on the notion of assurance of learning, an important element of some accreditation standards. Managerial Accounting for Managers, 2e, is designed specifically to support your assurance of learning initiatives with a simple, yet powerful, solution. Each testbank question for Managerial Accounting for Managers, 2e, maps to a specific chapter learning outcome/objective listed in the text. You can use our testbank software, EZ Test, to easily query for learning outcomes/objectives that directly relate to the learning objectives for your course. You can then use the reporting features of EZ Test to aggregate student results in similar fashion, making the collection and presentation of assurance of learning data simple and easy.

AACSB Statement McGraw-Hill Companies is a proud corporate member of AACSB International. Recognizing the importance and value of AACSB accreditation, we have sought to recognize the curricula guidelines detailed in AACSB standards for business accreditation by connecting selected questions in Managerial Accounting for Managers, 2e, to the general knowledge and skill guidelines found in the AACSB standards. The statements contained in Managerial Accounting for Managers, 2e, are provided only as a guide for the users of this text. The AACSB leaves content coverage and assessment clearly within the realm and control of individual schools, the mission of the school, and the faculty. The AACSB does also charge schools with the obligation of doing assessment against their own content and learning goals. While Managerial Accounting for Managers, 2e, and its teaching package make no claim of any specific AACSB qualification or evaluation, we have, within Managerial Accounting for Managers, 2e, labeled selected questions according to the six general knowledge and skills areas. The labels or tags within Managerial Accounting for Managers, 2e, are as indicated. There are, of course, many more within the testbank, the text, and the teaching package which might be used as a “standard” for your course. However, the labeled questions are suggested for your consideration.

EZ Test Available on the Instructor CD and the password-protected Instructor OLC.

McGraw-Hill’s EZ Test is a fl exible electronic testing program. The program allows instructors to create tests from book-specifi c items. It accommodates a wide range of question types, plus instructors may add their own questions and sort questions by format. EZ Test can also scramble questions and answers for multiple versions of

the same test. Use this testbank to make different versions of the same test, change the answer order, edit and add questions, and conduct online testing. Technical support for this software is available.

Instructor CD-ROM MHID 0077268563 ISBN-13 9780077268565 Allowing instructors to create a customized multimedia presentation, this all-in-one resource incorporates the testbank, PowerPoint Slides, Instructor’s Resource Guide and the Solutions Manual.

Instructor’s Resource Guide Available on the Instructor CD and the password-protected Instructor OLC.

Extensive chapter-by-chapter lecture notes help with classroom presentations and contain useful suggestions for presenting key concepts and ideas. The lecture notes dovetail exactly with the PowerPoint Slides, making lesson planning even easier.

Testbank Available on the Instructor CD and the password-protected Instructor OLC.

Over 2,000 questions are organized by chapter and include true/false, multiple-choice, and problems. The testbank includes worked out solutions and all items have been tied to AACSB-AICPA standards.

Microsoft Excel® Template Solutions Available on the Instructor CD and the password-protected Instructor OLC.

Prepared by Jack Terry of ComSource Associates, Inc., these Excel templates offer solutions to the student version.

Check Figures These provide key answers for selected problems and cases should you want to make them available for your students. They are available on the student side of the text’s website.

PowerPoint® Slides Available on the Instructor CD and the OLC.

Prepared by Jon Booker and Charles Caldwell of Tennessee Technological University, and Susan Galbreath of Lipscomb University, these slides offer a great visual complement for your lectures. A complete set of slides covers each chapter.

Instructor Supplements

nor27130_fm_i-xxviii.indd xvinor27130_fm_i-xxviii.indd xvi 10/5/09 2:50:38 PM10/5/09 2:50:38 PM

Rev.Confirming Pages

xvii

Student Supplements

PowerPoint® Slides Available on the OLC.

Separate from the instructor PowerPoint slides, this short and manageable supplement focuses on the most important topics in the chapter and is perfect as a refresher for right before a big test or as a reference during homework or study time.

Online Learning Center (OLC) When it comes to getting the most out of your textbook, the Online Learning Center is the place to start. The OLC follows Managerial Accounting for Managers chapter by chapter, offering all kinds of supplementary help for you as you read. Before you even start reading Chapter 1, go to this address and bookmark it:

www.mhhe.com/noreen2e

Remember, your Online Learning Center was created specifically to accompany Managerial Accounting for Managers—so don’t let this great resource pass you by!

McGraw-Hill Connect TM Accounting McGraw-Hill Connect Accounting is an online assignment and assessment solution that connects students with the tools and resources they’ll need to achieve success. McGraw-Hill Connect Accounting helps prepare students for their future by enabling faster learning, more efficient studying, and higher retention of knowledge. See page xii for details.

Workbook/Study Guide MHID: 007726858X ISBN-13: 9780077268589 This study aid provides suggestions for studying chapter material, summarizes essential points in each chapter, and tests your knowledge using self-test questions and exercises.

iPod Content Available on the OLC.

The online learning center contains course-related videos, chapter- specific quizzes, and audio and visual lecture presentations that tie directly to the text. Icons in the margins of the book direct you to the assets available on the website that can offer you additional help in understanding difficult topics.

Excel® Templates Available on the OLC.

Prepared by Jack Terry of ComSource Associates, Inc., this spreadsheet-based software uses Excel to solve selected problems and cases in the text. These selected problems and cases are identified in the margin of the text with an appropriate icon.

Practice Set MHID: 0073396192 ISBN-13: 9780073396194 Available via Primus Online Authored by Janice L. Cobb of Texas Christian University, Doing the Job of the Managerial Accountant is a real-world application for the introductory Managerial Accounting student. The case is based on an actual growing, entrepreneurial manufacturing company that is complex enough to demonstrate the decisions management must make, yet simple enough that a sophomore student can easily understand the entire operations of the company. The case requires the student to do tasks they would perform working as the manage- rial accountant for the company. The required tasks are directly related to the concepts learned in all managerial accounting classes. The practice set can be used by the professor as a teaching tool for class lectures, as additional homework assignments, or as a semes- ter project.

nor27130_fm_i-xxviii.indd xviinor27130_fm_i-xxviii.indd xvii 10/5/09 2:50:38 PM10/5/09 2:50:38 PM

www.mhhe.com/noreen2e
Rev.Confirming Pages

xviii

Acknowledgments Suggestions have been received from many of our colleagues throughout the world. Each of those who have offered comments and suggestions has our thanks.

The efforts of many people are needed to develop and improve a text. Among these people are the reviewers and consultants who point out areas of concern, cite areas of strength, and make recommendations for change. In this regard, the following professors provided feedback that was enormously helpful in preparing the second edition of Managerial Accounting for Managers:

Second Edition Reviewers: Linda Abernathy, Kirkwood Community College James Andrews, Central New Mexico Community College Kashi R. Balachandran, New York University Larry N. Bitner, Shippensburg University Jorja Bradford, Alabama State University Rusty Calk, New Mexico State University Dana Carpenter, Madison Area Technical College Robert Clarke, Brigham Youg University-Idaho Darlene Coarts, University of Northern Iowa Elizabeth Connors, University of Massachusetts-Boston David L. Doyon, Southern New Hampshire University J. Marie Gibson, University of Nevada Reno Richard O. Hanson, Southern New Hampshire University Iris Jenkel, St. Norbert College Cynthia Khanlarian, University of North Carolina-Greensboro Leon Korte, The University of South Dakota Chuo-Hsuan Lee, SUNY-Plattsburgh Natasha Librizzi, Milwaukee Area Technical College William R. Link, University of Missouri-St. Louis Mary Loretta Manktelow, James Madison University Tammy Metzke, Milwaukee Area Technical College-West Allis Tim Mills, Eastern Illinois University Mark E. Motluck, Anderson University Gerald M. Myers, Pacific Lutheran University Joseph M. Nicassio, Westmoreland County Community College Shirley Polejewski, University of St. Thomas Luther L. Ross, Sr., Central Piedmont Community College Ann E. Selk, University of Wisconsin-Green Bay Vic Stanton, University of California-Berkeley Samantha Ternes, Kirkwood Community College Kiran Verma, University of Massachusetts-Boston Jeffrey Wong, University of Nevada, Reno Peter Woodlock, Youngstown State University Ronald Zhao, Monmouth University

Previous Edition Reviewers: Frank Aquilino, Montclair State University Kashi R. Balachandran, New York University Surasakdi Bhamornsiri, University of North Carolina-Charlotte

Janet Butler, Texas State University-San Marcos Rusty Calk, New Mexico State University Cathy Claiborne, Texas Southern Univiversity Nancy Coulmas, Bloomsburg University of Pennsylvania Jean Crawford, Alabama State University Andrea Drake, University of Cincinnati-Cincinnati Jan Duffy, Iowa State University Cindy Easterwood, Virginia Tech Janice Fergusson, University of South Carolina Ananda Ganguly, Clairmont College Olen Greer, Missouri State University Ken Harmon, Kennesaw State University Kathy Ho, Niagara University Maggie Houston, Wright State University Tom Hrubec, Franklin University Robyn Jarnagin, Montana State University Randy Johnston, Michigan State University Nancy Jones, California State University Carl Keller, Indiana Purdue University/Fort Wayne James Kinard, Ohio State University-Columbus Kathy Long, University of Tennessee at Chattanooga Patti Lopez, Valencia Comm College East Jim Lukawitz, University of Memphis Anna Lusher, Slippery Rock University Laurie Mcwhorter, Mississippi State University James Meddaugh, Ohio University Alfonso R. Oddo, Niagara University Tamara Phelan, Northern Illinois University Les Price, Pierce College Kamala Raghavan, Robert Morris University Raul Ramos, Lorain County Community College John Reisch, East Carolina University Michelle Reisch, East Carolina University Pamela Rouse, Butler University Amy Santos, Manatee Community College Ellen Sweatt, Georgia Perimeter College Rick Tabor, Auburn University Diane Tanner, University of North Florida Chuck Thompson, University of Massachusetts Marjorie E. Yuschak, Rutgers Business School

nor27130_fm_i-xxviii.indd xviiinor27130_fm_i-xxviii.indd xviii 10/5/09 2:50:39 PM10/5/09 2:50:39 PM

Rev.Confirming Pages

xix

We are grateful for the outstanding support from McGraw-Hill. In particular, we would like to thank Stewart Mattson, Editorial Director; Tim Vertovec, Publisher; Emily Hatteberg, Developmental Editor; Kathleen Klehr., Marketing Manager; Pat Frederickson, Lead Project Manager; Carol Bielski, Production Supervisor; Mary Sander, Senior Designer; Jennifer Lohn, Media Project Manager; and Lori Kramer, Photo Research Coordinator.

Finally, we would like to thank Beth Woods for working so hard to ensure an error-free second edition. The authors also wish to thank Linda and Michael Bamber for inspiring the creation of the 10-K Research and Application exercises that are included in the end-of-chapter materials throughout the book.

We are grateful to the Institute of Certified Management Accountants for permission to use questions and/ or unofficial answers from past Certificate in Management Accounting (CMA) examinations. Likewise, we thank the American Institute of Certified Public Accountants, the Society of Management Accountants of Canada, and the Chartered Institute of Management Accountants (United Kingdom) for permission to use (or to adapt) selected problems from their examinations. These problems bear the notations CPA, SMA, and CIMA respectively.

Eric W. C. Noreen • Peter Brewer • Ray H. Garrison

nor27130_fm_i-xxviii.indd xixnor27130_fm_i-xxviii.indd xix 10/5/09 2:50:39 PM10/5/09 2:50:39 PM