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Solution Manual for Horngren's Cost Accounting, 17th Edition

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    Horngren’s Cost Accounting 17th Edition Srikant M. Datar Harvard University Madhav V. Rajan University of Chicago Instructor’s Solutions Manual

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    i TABLE OF CONTENTS Preface i ii Dedication ................................ ................................ ................................ ................................ .. i v Supplements Available for the 1 7 th Edition v Alternative Suggested Chapter Sequences v ii Categorization of Assignment Material x i Presentation of Solutions xxvi i Major Changes in Text for the 1 7 th Edition xx viii Highlights of New Chapter - by - Chapter Changes xxxi Changes in Assignment Material for the 1 7 th Edition xxx v Chapter Solutions 1 The Manager and Management Accounting 1 - 1 2 An Introduction to Cost Terms and Purposes 2 - 1 3 Cost - Volume - Profit Analysis 3 - 1 4 Job Costing 4 - 1 5 Activity - Based Costing and Activity - Based Management 5 - 1 6 Master Budget and Responsibility Accounting 6 - 1 7 Flexible Budgets, Direct - Cost Variances, and Management Control 7 - 1 8 Flexible Budgets, Overhead Cost Variances, and Management Control 8 - 1 9 Inventory Costing and Capacity Analysis 9 - 1 10 Determining How Costs Behave 10 - 1 11 Data Analytic Thinking and Prediction 1 1 - 1 1 2 Decision Making and Relevant Information 1 2 - 1 1 3 Strategy, Balanced Scorecard, and Strategic Profitability Analysis 1 3 - 1 1 4 Pricing Decisions and Cost Management 1 4 - 1 1 5 Cost Allocation, Customer - Profitability Analysis, and Sales - Variance Analysis 1 5 - 1 1 6 Allocation of Support - Department Costs, Common Costs, and Revenues 1 6 - 1 1 7 Cost Allocation: Joint Products and Byproducts 1 7 - 1 1 8 Process Costing 1 8 - 1 1 9 Spoilage, Rework, and Scrap 1 9 - 1

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    ii 20 Balanced Scorecard: Quality and Time 20 - 1 2 1 Inventory Management, Just - in - Time, and Simplified Costing Methods 2 1 - 1 2 2 Capital Budgeting and Cost Analysis 2 2 - 1 2 3 Management Control Systems, Transfer Pricing, and Multinational Considerations 2 3 - 1 2 4 Performance Measurement, Compensation, and Multinational Considerations 2 4 - 1

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    iii PREFACE The keys to the success of a course in cost accounting are the assignment and discussion of provocative problem material. The gathering of high - quality assignment material has been a crucial phase of this book’s preparation — not a painful afterthought. Please review the preface in the text in conjunction with examining the suggestions in this Instructor’s Solutions Manual . Please also read all the front matter of this manual. Mark Awada, Connie Belden, Caitlin Bowler, Molly Brown, Renee Castrigano, Tom Clausen, Barbara Dunham, Merle Ederhof, Paul Hamilton, Anna Jensen , and Ashley Shea assisted us greatly with contributing , critiquing , and checking of the problems and their solutions. We thank them for their many wonderful contributions. We appreciate the technical support for data analysis provided by DeYett Law. Her ability to cheerfully respond to our challenges made our tasks much more manageable. We are thankful to Ellen Geary , Lacey Vitetta, Chris DeJohn, Michael Trinchetto, Sara Eilert, Martha La C hance , and Claudia Fernandes at P earson f or providing continual support in preparing this Solutions Manual . SRIKANT M. DATAR MADHAV V. RAJAN

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    iv In memory of Charles T. Horngren 1926 – 2011 Chuck Horngren revolutionized cost and management accounting. He loved new ideas and introduced many new concepts. He had the unique gift of explaining these concepts in simple and creative ways. He epitomized excellence and never tired of details, whether it was finding exactly the right word or working and reworking assignment materials. He combined his great intellect with genuine humility and warmth and a human touch that inspired others to do their best. He taught us many lessons about life through his amazing discipline, his ability to make everyone feel welcome, and his love of family. It was a great privilege, pleasure, and honor to have known Chuck Horngren. Few individuals will have the enormous influence that Chuck had on the accounting profession. Fewer still will be able to do it with the class and style that was his hallmark. He was unique, special, and amazing in many, many ways and, at once, a role model, teacher, mentor, and friend. He will be deeply missed. Srikant M. Datar Harvard University Madhav V . Rajan University of Chicago

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    v SUPPLEMENTS AVAILABLE FOR THE 1 7 TH EDITION A complete package of supplements is available to assist students and instructors in using Ho rn gren, Cost Accounting , 1 7 th edition. MyLab Accounting MyLab Accounting is an online homework and assessment tool designed to help students practice cost accounting problems and concepts and to give their instructors feedback on student performance. It lets cost accounting professors assign a homework deliverable that is automatically graded but that also serves as a tutorial experience for students. Based on Pearson’s MathXL platform , which has graded millions of assignments, MyLab Accounting provides a strong, reliable platform with a rock solid performance history. To learn more , visit pearsonmylabandmastering.com . For Instructors Instructor Resource Center (IRC) These password - protected resources are accessible from www.pearsonhighered.com for Cost Accounting , 1 7 th ed. Resources i nclude the following : • Instructor’s Solutions Manual • Test Bank in W ord and in TestGen, including algorithmic questions • Instructor ’ s Resource Manual • PowerPoint Presentations • Image Library Instructor’s Solutions Manual © 2021 | 978 - 0 - 13562849 - 2 | Online This manual contains the fully worked - out and accuracy - checked solutions for every question, exercise, and problem in the text. Test Bank By Michael Griffin © 20 21 | 978 - 0 - 13 - 562855 - 3 | Online This collection of tests for each chapter offers an array of questions ranging from easy to difficult. The Test Bank supports Association to Advance Collegiate Schools of Business (AACSB) International Accreditation and is available in MS Word. TestGen © 2021 | 978 - 0 - 13 - 563256 - 7 | Online This test - generating program allows instructors to add, edit, or delete questions from the test bank; analyze test results; and organize a database of exams and student results.

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    vi Instructor’s Resource Manual By Donna McGovern © 2021 | 978 - 0 - 13 - 562856 - 0 | Online The chapter - by - chapter manual offers helpful classroom suggestions and teaching tips. PowerPoint Presentations By Jinhee Trone © 20 21 | 978 - 0 - 13 - 563282 - 6 | Online These c hapter - by - chapter presentations provide you with a slide show ready for classroom use. Use the slides as they are or edit the m to meet your classroom needs. Image Library © 20 21 | 978 - 0 - 13 - 563253 - 6 | Online The image library contains all photos, tables, exhibits and figures from the text, so that instructors can use them in their custom presentations.

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    vii ALTERNATIVE SUGGESTED CHAPTER SEQUENCES The Preface to Cost Accounting noted that our aim in organizing the material was to present a modular, flexible organization that permits a course to be custom tailored. This section presents six possible sequences for a first course in cost accounting. For each of these six sequences, we also present the sequence of a second course that would result in coverage of many or all of the topics in Cost Accounting . Outlines I – V all include Chapters 1 to 9 in varying orders of sequence. Outline VI has a strong (almost exclusive) focus on the decision making role of cost accounting. We analyzed the sequences of chapters assigned by many users of the 1 6 th edition. Although many instructors tended to follow the sequence in the text, other instructors tailored sequences to fit their particular desires. These tailored sequences varied considerably. By far the most popular departure was to assign the chapter on process costing (Chapter 1 8 ) immediately after the coverage of job costing (Chapter 4) and activity - based costing (Chapter 5). The next most popular departure was to assign Chapter 1 0 after Chapter 2 or 3. All the accompanying alternative assignment schedules have an optional provision to facilitate tailoring a course. Obviously, instructors should alter any suggested sequence to suit their preferences. OUTLINE I: This basic course provides a balance of topics between the major purposes of cost accounting: 1. Calculating the cost of products, services, and other cost objects 2. Obtaining information for planning and control and performance evaluation 3. Analyzing relevant information for making decisions Finishing the first course with Chapters 1 2 and 1 3 means that topics with less procedural emphasis are highlighted in the last weeks of the course; these two chapters also introduce topics covered in more detail in a second course. Some instructors may assign Chapter 10 without using the Appendix on “Regr ession Analysis,” preferring to delay use of the Appendix until the second course (especially if many students have not been exposed to regression analysis at the time of the basic course). Chapter 11 cover s data science applications to management accounting. Instructors may choose to cover this in the first or the second course. OUTLINE II: This basic course covers the same chapters as Outline I but assigns Chapter 10 (Determining How Costs Behaves) immediately after Chapter 3 (Cost Volume - Profit Analysis). It also replaces Chapter 14 on Pricing Decisions and Cost Management with Chapter 1 3 on Strategy, Balanced Scorecard, and Strategic Profitability Analysis. This first part of the s econd c ourse emphasizes cost management and performance evaluation before covering the six chapters (1 5 – 2 1 ) on cost allocation and other aspects of co sting systems. OUTLINE III: After covering Chapters 1 to 9 and 1 2 in the basic course, this sequence finishes with a chapter on strategic issues (Chapter 1 3 ) and two chapters on cost allocation topics (Chapters 1 5 and 1 6 ). Some instructors view it as important that students who take only one cost accounting course become aware of how pervasive cost allocation issues are in practice.

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    viii OUTLINE IV: This basic course is similar to Outline II with one key exception : Chapter 1 8 (Process Costing) is covered immediately after Chapter 5. Many instructors prefer to cover job costing and process costing in sequence so that their differences are highlighted. OUTLINE V: This basic course emphasizes technical cost accounting topics and data analysis more than the other five outlines. Chapters 1 8 and 1 9 extend Chapters 4 and 5; covering 4, 5, 1 8 , and 1 9 as a single section of the course provides students with a solid understanding of product costing alternatives. OUTLINE VI: This basic course is adopted by instructors who wish to put most emphasis on the decision making and performance evaluation aspects of cost accounting. Finishing the basic course with Chapters 2 3 and 2 4 means that behavioral issues are highlighted in the final weeks of the course.

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    ix OUTLINE I OUTLINE II OUTLINE III BASIC COURSE Chapter Number of Sessions Chapter Number of Sessions Chapter Number of Sessions 1 (1) 1 (1) 1 (1) 2 (2) 2 (2) 2 (2) 3 (2) 3 (2) 3 (2) 4 ( 2 ) 10 (2) 4 (3) 5 (3) 4 (3) 5 (3) 6 (2) 5 (3) 6 (2) 7 (2) 6 (2) 7 (2) 8 (2) 7 (2) 8 (2) 9 (2) 8 (2) 9 (2) 10 (2) 9 (2) 1 2 (2) 11 (2) 11 (2) 1 3 (2) 1 2 (2) 12 (2) 1 5 (2) 1 4 (2) 13 (2) 1 6 (2) Tests (3) Tests (3) Tests (3) Optional ( 3 ) Optional (2) Optional (2) 32 32 32 SECOND COURSE Chapter Number of Sessions Chapter Number of Sessions Chapter Number of Sessions 1 3 (3) 2 2 (3) 10 (2) 1 5 (2) 2 3 (2) 1 1 ( 3 ) 1 6 (2) 2 4 (2) 14 ( 2 ) 1 7 (2) 14 (3) 22 ( 3 ) 1 8 (2) 15 (2) 17 (2) 1 9 (2) 16 (2) 18 (2) 20 (2) 17 (3) 19 (2) 2 1 (2) 18 (2) 20 (3) 2 2 (2) 19 (2) 2 1 (2) 2 3 (2) 20 (2) 23 (2) 2 4 (2) 21 (2) 24 (2) Tests (3) Tests (3) Tests (3) Optional (6) Optional ( 4 ) Optional ( 4 ) 32 32 32

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    x OUTLINE IV OUTLINE V OUTLINE VI BASIC COURSE Chapter Number of Sessions Chapter Number of Sessions Chapter Number of Sessions 1 (1) 1 (1) 1 (1) 2 (2) 2 (2) 2 (2) 3 (2) 3 (2) 3 (2) 10 (2) 4 ( 2 ) 10 (2) 4 (2) 5 (3) 4 (2) 5 (2) 1 8 ( 2 ) 5 (2) 1 8 (2) 1 9 (2) 6 (2) 6 (2) 6 (3) 1 2 (2) 7 (2) 7 (2) 1 3 (2) 8 (2) 8 (2) 1 4 (3) 9 (2) 9 (2) 2 3 (2) 1 2 (2) 10 (2) 2 4 (2) 1 3 (2) 11 (2) Tests (3) Tests (3) Tests (3) Optional (4) Optional ( 2 ) Optional (5) 32 32 32 SECOND COURSE Chapter Number of Sessions Chapter Number of Sessions Chapter Number of Sessions 1 1 (3) 1 2 (2) 7 (2) 1 4 (3) 1 3 (2) 8 (2) 22 (2) 2 2 (2) 9 (2) 23 (2) 1 4 (3) 1 1 (3) 2 4 (3) 15 (3) 18 (2) 15 (2) 1 6 (2) 19 (2) 16 (2) 1 7 (2) 20 (2) 1 7 (2) 20 (2) 21 (3) 19 (2) 21 (2) 22 (2) 20 (2) 2 3 (2) 15 (2) 21 (2) 2 4 (2) 16 (2) 17 (2) Tests (3) Tests (3) Tests (3) Optional ( 4 ) Optional ( 5 ) Optional ( 3 ) 32 32 32

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    xi CATEGORIZATION OF ASSIGNMENT MATERIAL The assignment material in the 1 7 th edition has been developed to offer instructors a broad range of options in developing a challenging and interesting course. The following exhibits assist instructors in selecting assignment material. Exhibits P - l and P - 2 show assignment material that is based on s ervice or nonprofit and on merchandising (retail, wholesale , or distribution) sectors of the economy. Although many of the assignment s in the 1 7 th edition are based in the manufacturing sector, Exhibits P - l and P - 2 provide many examples for instructors who wish to either select assignment material from a broad range of sectors or intend to concentrate on sectors outside manufacturing. 1. SERVICE AND NONPROFIT SECTORS: These assignments i nclude settings such as law, accounting , and management consulting firms, healthcare providers , advertising agencies and market research firms , bank and finance companies, internet and phone service providers, lodging companies, transportation companies, and government agencies 2. MERCHANDISING SECTORS: These assignments i nclude settings such as distributors, wholesalers, and retailers There is growing demand from instructors for assignment ma terial in three specific areas — ethics, global or international, and mode rn cost management. Exhibits P - 3 to P - 5 show assignment material in the 1 7 th edition on these three topics. 3. ETHICS. The second - to - last problem of many chapters incorporates an ethical issue facing a management accountant or a manager. Examples include pressure for “managing” cost numbers, deliberately overstating budget estimates, and conflicts of interest between management interests and incentives and the best interests of the company, customers, and employees. Many of these problems require students to consider the IMA Statement of Ethical Professional Practice on p.1 7 of the text. 4. GLOBAL AND IN TERNATIONAL DIMENSIONS. These assignments i nclude material based outside the United States or problems pertaining to companies with operations in more than one country. 5. MODERN COST MANAGEMENT FRONTIER IDEAS. These assignments i nclude material that an instructor can use to highlight areas such as customer focus, key success factors, balanced scorecard, value - chain analysis, strategic analysis of operating income, JIT, and continuous improvement. Assignment material related to activity - based costing (ABC), activity - based management (ABM), and cost drivers is found in many chapters. Chapter 11 on Data Analytic Thinking and Prediction describes how machine learning models are an important tool to gain management accounting insights.

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    xii EXHIBIT P - 1 ASSIGNMENT MATERIAL FROM SERVICE AND NOT - FOR - PROFIT SECTORS Chapter Number Context 1 1 - 1 9 Fast - food restaurants; value chain, cost classification 1 - 20 Consultation services; key success factors 1 - 21 Transportation, trucking services 1 - 23 Landscaping services 1 - 27 Windshield replacement; professional ethics 1 - 2 8 I nternet company; planning and control 1 - 3 6 Publishing company; ethics; end - of - year actions 2 2 - 23 Marketing research; c lassification of costs 2 - 2 6 Restaurant ; fixed , variable , and total costs 2 - 31 Corporate t raining s ervice s ; t otal costs and unit costs 3 3 - 23 Travel agency; CVP analysis 3 - 2 4 Restaurant; CVP analysis 3 - 2 7 Restaurant ; CVP analysis 3 - 38 Tourism; CVP analysis 3 - 39 Daycare; CVP analysis, target operating income 3 - 40 Marketing; CVP analysis, margin of safety 3 - 45 Printing Company; Alternative cost structures and sensitivity analysis 3 - 52 Museum; gross margin and contribution margin 4 4 - 23 Residential construction; job costing, normal, actual 4 - 26 Management consulting firm, job costing 4 - 29 University press; job costing, journal entries 4 - 31 Home assembly; job costing, journal entries 4 - 33 Canadian accounting firm; job costing, actual, normal and variation of normal costing 4 - 34 Web - design firm; job costing, actual, normal, and variation of normal costing 4 - 37 Law firm; job costing 4 - 38 Law firm; job costing 4 - 44 4 - 46 Printing; allocation and proration of overhead Market Research; Job costing 5 5 - 19 Testing labs; activity - based costing, cost hierarchy 5 - 20 Tax advisory firm; alternative allocation bases 5 - 24 Architectural firm; department costing based on activities 5 - 25 Printing company; activity - based costing 5 - 29 Custom framing company; activity - based costing 5 - 30 Banking; activity - based costing, product costing, cross - subsidization 5 - 31 Law firm; job costing, single direct - and indirect - cost categories 5 - 32 Law firm; job costing, multiple direct - and single indirect - cost categories 5 - 33 Law firm; job costing, multiple direct - and indirect - cost categories

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    xiii EXHIBIT P - 1 (Continued) Chapter Number Context 5 5 - 35 Lawn care/landscaping company; first - stage allocation, time - driven ABC 5 - 36 Radiology center; department, activity - cost rates 5 - 39 Medical clinic; activity - based costing system 6 6 - 21 Environmental testing; sales budget 6 - 2 8 Snow - removal ; budgeted cost of jobs 6 - 33 Tour company; responsibility accounting, stretch targets 6 - 3 9 Food - service trucks ; purchasing agent responsibility accounting 7 7 - 33 7 - 3 5 7 - 46 Student loan financing; static and flexible budgets C leaning service ; variance analysis Day spa ; mixed and yield variance analysis 8 8 - 2 9 8 - 32 Food delivery service; overhead variances Financial services; overhead variances 8 - 4 5 8 - 4 6 Food inspection ; non - financial variances Computer services provider; overhead variances 9 9 - 4 4 Hospital chain; cost allocation, downward demand spiral 9 - 4 5 Hospital chain; cost allocation, responsibility accounting, ethics 10 10 - 2 1 Delivery; linear cost function 10 - 22 Car rental contracts; variable - , fixed - and mixed - cost functions 10 - 27 Travel services; estimating a cost function, high - low method 10 - 28 Customer service; estimating a cost function, high - low method 10 - 29 Physician services; linear cost approximation 10 - 31 Professional services; regression analysis 10 - 36 Produce club; high - low method, regression analysis 10 - 37 Sports stadium; high - low method, regression analysis 10 - 38 Hotel chain; activity - based costing, choosing cost drivers 10 - 39 Agricultural transportation; interpreting regression analysis 10 - 42 Nonprofit hospital; regression, choosing among models 10 - 43 Nonprofit hospital; multiple regression 11 11 - 21 Bank; Gini impurity 11 - 22 Bank; Gini impurity 11 - 23 Investment company; loan classification, decision trees 11 - 24 Mobile phone services; stay or leave, decision trees 11 - 25 Mobile phone services; stay or leave, decision trees and pruning 11 - 26 Consumer credit; detecting fraudulent activity, maximum likelihood 11 - 27 Receiver operating characteristic (ROC) curve 11 - 31 Investment management; predicting loan default, exploring data 11 - 32 Investment management; predicting loan defaults, decision trees 11 - 33 Investment management; predicting loan defaults, decision trees and

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    xiv EXHIBIT P - 1 (Continued) Chapter Number Context pruning 11 11 - 34 Investment management; predicting loan defaults, likelihood values 11 - 35 Investment management; predicting loan defaults, payoff matrix and choosing cutoff values 11 - 39 Bank; loan classification, model thresholds, and payoff matrices 11 - 40 Bank; loan classification, model thresholds, payoff matrices, and sensitivity analysis 1 2 1 2 - 30 Convenience store; relevant costs, decision on closing stores 1 2 - 31 Printing press; choosing customers 1 2 - 32 Bakery; relevance of equipment costs 1 2 - 38 Painting service ; opportunity costs, relevant costs 1 2 - 47 City tours; dropping and adding tours 1 3 1 3 - 29 Architectural firm; strategy, balanced scorecard 1 3 - 30 Architectural firm; strategic analysis of operating income 1 3 - 31 Architectural firm; analysis of growth, price - recovery, and productivity components 1 3 - 32 Architectural firm; identifying and managing unused capacity 1 3 - 41 Cable and internet provider ; balanced scorecard, social performance 1 3 - 42 Airline; balanced scorecard, environmental and social performance 14 14 - 17 Tool repair shop; value - added, nonvalue - added costs 14 - 18 Architectural firm; target operating income, value - added costs 14 - 22 Hotel management; cost - plus target return on investment pricing 14 - 25 Hotel; price discrimination 14 - 28 Amusement park; target costing, value - engineering, ABC 14 - 30 Repair services; cost - plus, time and materials, ethics 14 - 31 Temp labor agency; cost - plus and market - based pricing 14 - 32 Testing labs; cost - plus and market - based pricing 14 - 33 Recycling firm; life - cycle costing 14 - 34 Airline; price discrimination 1 5 1 5 - 18 Hospitals; cost allocation 1 5 - 20 Repair service; customer profitability 15 - 22 Travel services; cost allocation and decision - making 1 5 - 23 Casino; cost allocation to divisions 1 5 - 25 Sports team; variance analysis, multiple products 1 5 - 33 Architecture and i nterior design; customer - cost hierarchy and profitability analysis 1 5 - 36 Internet, phone and TV services ; cost - hierarchy income statement, allocation of corporate costs 1 6 1 6 - 17 Trucking operations; single - rate method, budgeted versus actual costs

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    xv EXHIBIT P - 1 (Continued) Chapter Number Context 16 1 6 - 18 Trucking operations; dual - rate method, budgeted versus actual costs 1 6 - 19 Management consulting; direct and step - down support department cost allocation 1 6 - 20 Management consulting; reciprocal method support department cost allocation 1 6 - 23 Internet and phone services; a llocation of common living costs 1 6 - 24 Consulting services; allocation of common travel costs 1 6 - 29 University; fixed cost allocation 1 6 - 35 Hotel; revenue allocation, bundled products 1 6 - 36 Service; direct, step - down, reciprocal support department allocation 18 18 - 33 Spa; Operation costing 20 20 - 24 University – registration advisor; waiting time 20 - 25 University – registration advisor; waiting time, relevant costs, student satisfaction 20 - 29 Pizza delivery; quality improvement, Pareto diagram, cause - and - effect diagram 22 22 - 23 Hospital; capital budgeting methods, no income taxes 22 - 24 Hospital; capital budgeting methods, income taxes 22 - 27 22 - 28 Construction company; payback and NPV methods, no income taxes Laboratory; DCF, accrual accounting rate of return, working capital, evaluation of performance, no income taxes 22 - 31 Dermatology clinic; project choice, taxes 22 - 38 Laundromat; payback methods, even and uneven cash flows 22 - 40 Entertainment center; recognizing cash flows for capital investment projects 23 23 - 36 Composting service; full cost and market - based transfer prices 24 24 - 22 24 - 26 24 - 30 Educational services; analysis of return on invested assets, comparison of two divisions, DuPont method Reinsurance and financial services; ROI, RI, EVA Venture capital; Capital budgeting, RI 24 - 35 Coffee shops; ROI performance measures based on historical and current cost 24 - 38 Media group; ROI, RI, DuPont method, investment decisions, balanced scorecard 24 - 39 Media group; division managers' compensation, levers of control 24 - 43 Health spas; RI, EVA, measurement alternatives, goal congruence

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    xvi EXHIBIT P - 2 ASSIGNMENT MATERIAL FROM MERCHANDISING SECTORS Chapter Number Context 2 2 - 24 College store; classification of costs 2 - 35 Department store; cost of goods purchased, cost of goods sold, and income statement 2 - 36 Retail outlet store; cost of goods purchased, cost of goods sold, and income statement 3 3 - 24 D eli sub shop ; CVP 3 - 28 Jeans wholesaler; CVP and sensitivity analysis 3 - 31 Rug dealer; space rental terms, operating leverage 3 - 35 Men’s clothing retailer; contribution margin, decision making 3 - 37 Retail store; decision making under uncertainty, expected value 3 - 43 Shoe store; sales commissions, CVP analysis 3 - 44 Shoe store; sales commissions, CVP analysis 3 - 46 Cell phone covers; CVP, alternative cost structures 3 - 51 Luggage carrier retailer; sales mix, CVP analysis 5 5 - 27 Supermarket; ABC, product - line profitability 5 - 28 Furniture wholesaler; ABC, customer profitability 5 - 37 Pharmaceuticals distributor; ABC 5 - 43 Retail store; activity - based costing and activity - based management 6 6 - 30 Convenience store chain; activity - based budgeting 6 - 31 Convenience store chain; activity - based budgeting, kaizen budgeting 6 - 34 Retail store; cash flow, sensitivity analysis 10 10 - 46 10 - 47 Fashion store; interpreting regression results, matching time periods Department store chain; cost drivers, ABC, simple regression analysis 10 - 48 Department store chain; cost drivers, ABC, multiple regression analysis 11 11 - 28 TV retailer; segmenting customers, confusion matrices, payoff matrix, and choosing cutoff values 11 - 38 Retail store; predicting customer segments, receiver operating characteristic (ROC) curve 12 12 - 27 Food store; Relevant costs, contribution margin, product emphasis 12 - 30 Convenience stores; relevant costs, closing and opening stores 12 - 49 Restaurant supply; Dropping a customer, ABC, ethics 13 13 - 21 T - shirts distributor; strategy, balanced scorecard 13 - 22 T - shirts distributor; strategic analysis of operating income 13 - 23 T - shirts distributor; analysis of growth, price - recovery, and productivity components

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    xvii EXHIBIT P - 2 (Continued) Chapter Number Context 13 13 - 24 T - shirts distributor; identifying and managing unused capacity 14 14 - 19 Distributor; target prices, target costs, ABC 14 - 21 14 - 30 Solar - heating systems vendor; target costs, process - design changes Vendor; cost - plus, time and materials, ethics 15 15 - 19 Environmental products distributor; customer profitability, customer - cost hierarchy 15 - 21 Pharmaceutical distributor; customer profitability 15 - 26 Wine glass retailer; variance analysis, multiple products 15 - 31 Paper distributor; customer profitability 16 16 - 21 Online book retailer; direct and step - down support department cost allocation 16 - 22 Online book retailer; reciprocal method support department cost allocation 16 - 25 Retailer; revenue allocation 16 - 26 Auto sales; allocation of common costs 16 - 27 Department store; single - rate, dual - rate and practical capacity allocation 16 - 33 Furniture retailer; revenue allocation 20 20 - 22 Flower store; quality improvement, relevant costs, relevant revenues 21 21 - 21 Sporting goods retailer; EOQ 21 - 22 Sporting goods retailer; EOQ, effect of parameter changes 21 - 23 Textile retailer; EOQ 21 - 25 Retailer; sensitivity of EOQ to changes in relevant ordering and carrying costs, cost of prediction error 21 - 33 Outdoor equipment retailer; effect of management evaluation criteria on EOQ model 22 22 - 25 Soda distributor; Capital budgeting with uneven cash flows, no income taxes 22 - 41 Grocery store; NPV, inflation, income taxes 24 24 - 27 Fashion retailer; ROI, loss - making division

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    xviii EXHIBIT P - 3 ASSIGNMENT MATERIAL ON ETHICS Chapter Number Context 1 1 - 2 6 Division performance 1 - 2 7 Division performance 1 - 3 4 Pharmaceutical company, budgeting 1 - 3 5 Snack foods division; End - of - year actions 1 - 3 6 Consumer magazines; End - of - year actions 1 - 3 7 Furniture manufacturing g lobal company, end - of - year actions 2 2 - 4 7 C ost classification ; ethics 3 3 - 53 Environmental costs, CVP analysis , ethics 4 4 - 4 5 Job costing, ethics 5 5 - 4 2 Electronics; ABC, implementation, ethics 6 6 - 4 6 Manufacturer; slack, ethics 7 7 - 4 7 GPS manufacturer; price and efficiency variances, benchmarking, ethics 8 8 - 4 8 Overhead variances, ethics 9 9 - 4 5 C ost allocation, responsibility accounting, ethics 1 2 1 2 - 4 9 Dropping a customer, activity - based costing, ethics 1 4 1 4 - 30 C ost - plus, time and materials, ethics 1 5 1 5 - 4 2 Writing smaller orders; customer profitability and ethics 1 8 1 8 - 47 Laminate - flooring plants; benchmarking, ethics 1 9 1 9 - 45 Job costing, classifying spoilage, ethics 20 20 - 19 20 - 3 6 Costs of quality ethics E thics and quality 2 1 2 1 - 41 JIT production, relevant benefits, relevant costs, ethics 2 3 2 3 - 3 3 T ransfer pricing, goal congruence, ethics 2 4 2 4 - 4 2 Eth ics, levers of control

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    xix EXHIBIT P - 4 ASSIGNMENT MATERIAL WITH GLOBAL OR INTERNATIONAL SETTING Chapte r Number Context 1 1 - 3 7 Contract bidding, ethical and cultural issues 3 3 - 23 Travel agency, CVP analysis 3 - 3 2 International cost structure differences, CVP analysis 4 4 - 33 Canadian accounting firm; job costing, actual, normal and variation of normal costing 5 5 - 20 Tax advice for multinational firms; Alternative allocation bases for a professional services firm 6 6 - 25 Mexico bicycle manufacturer; revenues, production and purchases budgets 8 8 - 28 Telecommunications company; manufacturing overhead, standard - costing system 10 10 - 39 Agricultural transportation in Canada; interpreting regression results 12 12 - 36 International outsourcing; relevant costs, exchange rates 22 22 - 34 Prototype chip manufacturer based in Ireland; equipment replacement, no income taxes 23 23 - 20 Computer manufacturing; Multinational transfer pricing, effect of alternative transfer - pricing methods, global income tax minimization 23 - 22 23 - 23 23 - 30 Chainsaw manufacturer; Multinational transfer pricing, global tax minimization Chainsaw manufacturer; Multinational transfer pricing, goal congruence High - end fertilizers; Multinational transfer pricing, global tax minimization 23 - 32 Component manufacturer; International transfer pricing, taxes, goal congruence 24 24 - 31 Manufacturing, U.S. and Norway; Multinational performance measurement, ROI, RI 24 - 37 Multinational firm, U.S., France, and Australia; Differing risk, comparison of profit, ROI, and RI

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    xx EXHIBIT P - 5 ASSIGNMENT MATERIAL USING MODERN COST MANAGEMENT FRONTIER IDEAS Chapter Number Context 1 1 - 1 7 Computer company; value chain, cost classification 1 - 1 8 Pharmaceutical company; value chain, cost classification 1 - 1 9 Fast food restaurant; value chain, cost classification 1 - 20 K ey success factors 1 - 2 1 Key success factors 1 - 2 9 Making strategic decisions 1 - 30 Making strategic decisions 2 2 - 30 Technology company; value chain, cost drivers 2 - 31 Cost drivers and functions 5 5 - 18 Cost hierarchy at manufacturer 5 - 19 Testing labs; ABC, cost hierarchy 5 - 21 Automotive products; plantwide, department, ABC costing 5 - 22 Trophies manufacturer; plantwide, department, ABC costing 5 - 23 Calculator manufacturer; ABC, process costing 5 - 24 Architectural firms; Department costing based on activities 5 - 25 Printing company; activity - based costing 5 - 26 Door manufacturer; activity - based costing 5 - 27 Supermarket; ABC, product - line profitability 5 - 28 Furniture wholesaler; ABC, customer profitability 5 - 29 Custom framing; activity - based costing 5 - 30 Banking; ABC, product costing, cross - subsidization 5 - 32 Law firm; job costing, multiple direct - and single indirect - cost categories 5 - 33 Law firm; job costing, multiple direct - and indirect - cost categories 5 - 34 Metal products manufacturer; first - stage allocation, ABC 5 - 35 Lawn care, landscaping; first - stage allocation, ABC 5 - 36 Radiology center; department, activity - cost rates 5 - 37 Pharmaceuticals distributor; ABC 5 - 38 Bag manufacturer; activity - based costing and management 5 - 39 Health care; ABC system 5 - 40 Surfboard manufacturer; unused capacity, activity - based costing and management 5 - 41 Bow manufacturer; ABC and activity - based management 5 - 42 Electronics; ABC, implementation, ethics 5 - 43 Pet supply merchandiser; activity - based costing and management

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    xxi EXHIBIT P - 5 (Continued) Chapter Number Context 6 6 - 30 Convenience store chain; activity - based budgeting 6 - 31 Convenience store chain; activity - based budgeting, kaizen budgeting 6 - 33 Tour company; responsibility accounting, stretch targets 6 - 36 T - shirt manufacturer; kaizen approach 6 - 39 Purchasing agent; responsibility accounting 6 - 44 Wooden playground equipment manufacturer; activity - based budgeting 6 - 47 Chemical company; kaizen budgeting for carbon emissions 6 - 48 Footwear manufacturer; activity - based budgeting 7 7 - 32 Insulated cups manufacturer; benchmarking against competitors 7 - 38 7 - 42 Bicycle manufacturer; responsibility issues in supply chain Game manufacturer; variances, custom production, just - in - time manufacturing 7 - 43 Eyeglass lens manufacturer; use of variances for benchmarking 7 - 47 GPS manufacturer; variances, benchmarking, ethics 8 8 - 31 8 - 40 8 - 41 Custom shirt maker; relationship between production - volume and sales - volume variance analysis Shoe manufacturer; activity - based costing, batch - level variance analysis Suitcase manufacturer; relationship between overhead and sales - volume variance analysis 8 - 42 T - shirt maker; activity - based costing, batch - level variance analysis 9 9 - 22 Auto company; throughput costing 9 - 24 Television set manufacturer; throughput costing 9 - 29 Capacity management, denominator - level capacity concepts 9 - 30 Motorcycle manufacturer; alternative denominator - level capacities 9 - 33 Sports equipment manufacturer; throughput costing 9 - 36 Textbook publisher; metrics to minimize inventory buildups 9 - 37 Brewery; alternative denominator - level capacities, effect on operating income 9 - 38 Brewery; alternative denominator - level capacities, motivational considerations 9 - 40 Pet supply manufacturer; downward demand spiral 9 - 42 Electronics manufacturer; alternative denominator - level capacities, effect on operating income 9 - 44 Hospital meal service; cost allocation, downward demand spiral 9 - 47 Airport equipment manufacturer; absorption, variable, and throughput costing 10 10 - 33 Radar system manufacture; learning curves 10 - 34 Radar system manufacture; learning curves 10 - 38 Hotel chain; ABC, choosing cost drivers 10 - 44 Manufacturing; cost estimation

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    xxii Exhibit P - 5 (Continued) Chapter Number Context 10 10 - 45 Manufacturing; cost estimation, learning curves 10 - 47 Department store chain; cost drivers, ABC, simple regression analysis 10 - 48 Department store chain; cost drivers, ABC, multiple regression analysis 11 11 - 21 Bank; Gini impurity 11 - 22 Bank; Gini impurity 11 - 23 Investment company; loan classification, decision trees 11 - 24 Mobile phone services; stay or leave, decision trees 11 - 25 Mobile phone services; stay or leave, decision trees and pruning 11 - 26 Consumer credit; detecting fraudulent activity, maximum likelihood 11 - 27 Receiver operating characteristic (ROC) curve 11 - 28 TV retailer; segmenting customers, confusion matrices, payoff matrix, and choosing cutoff values 11 - 29 Produce processing company; sorting apples, model thresholds, and payoff matrices 11 - 30 Produce processing company; sorting apples, model thresholds, and payoff matrices 11 - 31 Investment management; predicting loan default, exploring data 11 - 32 Investment management; predicting loan defaults, decision trees 11 - 33 Investment management; predicting loan defaults, decision trees and pruning 11 - 34 Investment management; predicting loan defaults, likelihood values 11 - 35 Investment management; predicting loan defaults, payoff matrix and choosing cutoff values 11 - 36 Brake pad manufacturer; identifying defective product, maximum likelihood 11 - 37 Brake pad manufacturer; identifying defective product, payoff matrix, and choosing cutoff values 11 - 38 Retail store; predicting customer segments, receiver operating characteristic (ROC) curve 11 - 39 Bank; loan classification, model thresholds, and payoff matrices 11 - 40 Bank; loan classification, model thresholds, payoff matrices, and sensitivity analysis 12 12 - 24 Special order, activity - based costing 12 - 25 Cellular modems; make versus buy, activity - based costing 12 - 29 Filing cabinets; theory of constraints, throughput margin 12 - 31 Printers; customer profitability analysis 12 - 41 Manufacturing; ABC, make versus buy 12 - 44 Electronic testing equipment manufacturer; theory of constraints, throughput margin 12 - 45 Pharmaceu t ical manufacturer; theory of constraints, sensitivity analysis 12 - 49 Customer profitability, activity - based costing, ethics

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    xxiii Exhibit P - 5 (Continued) Chapter Number Context 13 13 - 19 Electric motor manufacturer; balanced scorecard 13 - 20 Electric motor manufacturer; analysis of growth, price - recovery and productivity components 13 - 21 Merchandising; strategy, balanced scorecard 13 - 22 Merchandising; strategic analysis of operating income 13 - 23 Merchandising; analysis of growth, price - recovery, and productivity components 13 - 24 Merchandising; identifying and managing unused capacity 13 - 25 Machine manufacturer; strategy, balanced scorecard 13 - 26 Machine manufacturer; strategic analysis of operating income 13 - 27 Machine manufacturer; analysis of growth, price - recovery and productivity components 13 - 28 Machine manufacturer; identifying and managing unused capacity 13 - 29 Architecture firm; strategy, balanced scorecard 13 - 30 Architecture firm; strategic analysis of operating income 13 - 31 Architecture firm; analysis of growth, price - recovery, and productivity components 13 - 32 Architecture firm; identifying and managing unused capacity 13 - 33 Robotic vacuum manufacturer; strategy, balanced scorecard 13 - 34 Hoverboard manufacturer; strategic analysis of operating income 13 - 35 Hoverboard manufacturer; analysis of growth, price - recovery, and productivity components 13 - 36 Hoverboard manufacturer; identifying and managing unused capacity 13 - 37 Balanced scorecard 13 - 38 Petroleum company; balanced scorecard 13 - 39 Laser printers; balanced scorecard 13 - 40 Chocolate manufacturer; balanced scorecard, environmental and social performance 13 - 41 Cable and internet services; balanced scorecard, social performance 13 - 42 Airline; balanced scorecard, environmental and social performance 13 - 43 Manufacturing; partial productivity measurement 13 - 44 Manufacturing; total factor productivity 14 14 - 17 Tool repair shop; value - added, nonvalue - added costs 14 - 18 Architecture firm; target operating income, value - added costs 14 - 19 Distributor; target prices, target costs, ABC 14 - 20 Medical instruments; target costs, effect of product - design changes on product costs 14 - 21 Solar heating systems; target costs, effect of process - design changes on service costs 14 - 22 Hotel management; cost - plus target return on investment pricing 14 - 23 Table sets manufacturer; cost - plus, target pricing 14 - 24 Electronics manufacturer; life - cycle budgeting and costing 14 - 25 Hotel; price discrimination

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    xxiv Exhibit P - 5 (Continued) Chapter Number Context 14 14 - 26 Manufacturer; target pricing 14 - 27 Cosmetics manufacturer; value engineering, target pricing, target costing 14 - 28 Amusement park; value engineering, target costing, ABC 14 - 29 Candy manufacturer; target return on investment pricing 14 - 31 Temp labor agency; cost - plus and market - based pricing 14 - 32 Testing labs; cost - plus, activity - based costing, market - based pricing 14 - 33 Industrial site cleanup; life - cycle costing 14 - 34 Airline; price discrimination 14 - 35 Hair dryer manufacturer; pricing products using the target - costing approach 14 - 37 Wood sculpture manufacturing; target prices, target costs, locked - in costs, value engineering 15 15 - 19 Environmental products distributor; customer profitability, customer - cost hierarchy 15 - 20 Repair service; customer profitability 15 - 21 Pharmaceutical distributor; customer profitability 15 - 30 Jewelry manufacturer; customer profitability 15 - 31 Paper distributor; customer profitability 15 - 32 Manufacturing company; customer profitability analysis 15 - 33 Architecture and interior design; customer - cost hierarchy, customer profitability 15 - 36 Internet, phone, TV service; cost - hierarchy income statement, allocation of corporate, division, and channel costs to customers 15 - 37 Sporting goods and memorabilia manufacturer; cost - hierarchy income statement, allocation of corporate, division, and channel costs to customers 15 - 42 Writing smaller orders; customer - cost hierarchy, profitability and ethics 18 18 - 46 Water bottle manufacturer; sustainable materials and processes 18 - 47 Laminate - flooring manufacturer; benchmarking and ethics 19 19 - 45 Pharmaceutical manufacturer; contract manufacturing

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    xxv Exhibit P - 5 (Continued) Chapter Number Context 20 20 - 17 Cell phone equipment; costs of quality 20 - 18 Outdoor chair manufacturer; costs of quality 20 - 19 Car seats; costs - of - quality, ethics 20 - 20 Computer bags; nonfinancial measures of quality and time 20 - 21 Printing presses; quality improvements, relevant costs and relevant revenues 20 - 22 Flower shop; quality improvement, relevant costs and relevant revenues 20 - 23 Pet toys; waiting time 20 - 24 University; waiting time 20 - 25 University; waiting time, relevant costs, student satisfaction 20 - 26 Cell phones; nonfinancial measures of quality and time 20 - 27 Manufacturer; nonfinancial measures of quality, manufacturing cycle efficiency 20 - 28 Cereal manufacturer; statistical quality control 20 - 29 Pizza delivery; quality improvement, Pareto diagram, cause - and - effect diagram 20 - 30 Valve manufacturing; quality improvement, relevant costs, and relevant revenues 20 - 31 Plastic lamps; quality improvement, relevant costs, and relevant revenues 20 - 32 Plastic products; waiting times, manufacturing cycle times 20 - 33 Plastic products; waiting times, relevant revenues, and relevant costs 20 - 34 Wire harnesses; manufacturing cycle times, relevant revenues, and relevant costs 20 - 35 Electronics manufacturer ; quality improvement, relevant costs, relevant revenues 20 - 36 Processor manufacturer; quality and ethics 20 - 37 Textile printing; quality improvement 21 21 - 26 Men’s neckwear manufacturer; JIT production, relevant benefits, relevant costs 21 - 27 Electronics manufacturer; backflush costing, two trigger points, incentives 21 - 28 Electronics manufacturer; backflush costing, two trigger points, operating income 21 - 29 Electronics manufacturer; backflush costing 21 - 32 Music players; MRP, EOQ, JIT production 21 - 34 Steel supplier, JIT purchasing, relevant benefits, relevant cost 21 - 35 Computer manufacturer; supplier evaluation, costs of quality, timely deliveries 21 - 36 Jeans manufacturer; supplier evaluation, costs of quality, timely deliveries 21 - 37 Electrical meters; backflush costing and JIT production 21 - 38 Electrical meters; backflush, two trigger points, materials purchase and sale

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    xxvi Exhibit P - 5 (Continued) Chapter Number Context 21 21 - 39 Electrical meters; backflush, two trigger points, completion of production and sale 21 - 40 Security devices; lean accounting 21 - 41 Pump manufacturer; JIT production, relevant benefits, relevant costs, ethics. 2 3 23 - 1 6 Window manufacturing; cost centers, profit centers, decentralization, transfer prices 2 4 2 4 - 23 24 - 24 2 4 - 2 5 24 - 26 2 4 - 2 9 24 - 30 Sports equipment; ROI and RI ROI, RI, measurement of assets Electric car manufacturer; ROI, RI Insurance and financial services company; ROI, RI, EVA Automotive retailer; ROI, RI, EVA Venture capital; capital budgeting, RI (conservation property) 2 4 - 31 Manufacturing, U.S. and Norway; multinational performance measurement, ROI, RI 2 4 - 3 2 Fashion product manufacturer; ROI, RI, EVA, performance evaluation 2 4 - 3 3 Food conglomerate; risk sharing, incentives, benchmarking, multiple tasks 2 4 - 3 4 Doorbell manufacturing; Residual income and EVA, timing issues 2 4 - 3 7 Multinational firm, U.S., France, and Australia; differing risk, comparison of profit, ROI, and RI 2 4 - 3 8 Media group; ROI, RI, DuPont method, investment decisions, balanced scorecard 2 4 - 3 9 Media group; division managers' compensation, levers of control 2 4 - 40 Executive compensation, balanced scorecard 2 4 - 4 2 Tableware manufacturer; levers of control, ethics 2 4 - 4 3 Health spas; RI, EVA, measurement alternatives, goal congruence

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    xxvii PRESENTATION OF SOLUTIONS Instructors have a variety of views regarding the use of classroom time for homework solutions. Most instructors put solutions on a blackboard or an overhead projector. In turn, their students frantically copy the materials in their notes. Our practice is to reproduce the printed homework so lutions for distribution either before, during, or after the discussion for 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. Further, 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. We used to worry about such practices, but long ago , we decided there would always be some students who hurt themselves by not doing homework in an appropriate way. Why should we penalize the vast majority of students by withholding the printed solutions? The benefits of usi ng printed solutions clearly outweigh the costs. We no longer fret about the few students who beat the system (and themselves). Moreover, schools using My Accounting Lab can have new problems assigned to students where the problem structure is the same but the numbers are different. 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 scrutin ize 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 to submit a written analysis of how they were unjustly treated. We then take these complaints in batches, regrade the papers, and return the papers. If the student then wants to have a person - to - person discussion of the matter, he or she is welcome at our office. This procedure may seem too impersonal, but we recommend it to those teachers who have been through some painful debates that have been inefficient and frustrating for both student and teacher.

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    xxviii MAJOR CHANGES IN TEXT OF THE 1 7 TH EDITION Increased Focus on Merchandising and Service Sectors In keeping with the shifts in the U.S. and world economy, this edition makes great use of merchandising and service sector examples, with corresponding de - emphasis of traditional manufacturing settings. For example, Chapter 10 illustrates linear cost functions in the context of payments for cloud computing services. Chapter 11 describes revenue management using big - data analytics at a company investing in loans. Chapter 21 highlights inventory management in retail organizations and uses an example based on a seller of sunglasses. Chapter 22 incorporates a running example that looks at capital budgeting in the context of a transportation company. Several Concepts in Action boxes focus on the merchandising and service sectors, including achieving cost leadership at Costco (Chapter 1), reducing fixed costs at Lyft (Chapter 2), using activity - based costing to reduce the costs of health care delivery at the Mayo Clinic (Chapter 5), developing Internet - based budgeting at P. F. Chang’s (Chapter 6) , analyzing operati ng income per formance at Buffalo Wild Wings (Chapter 13 ) , and Facebook’s work to overcome mobile data bottlenecks (Chapter 20) . Greater Emphasis on Sustainability This edition places significant emphasis on sustainability as one of the critical managerial challenges of the coming decades. Many managers are promoting the development and implementation of strategies to achieve long - term financial, social, and environmental performance as key imperatives. We highlight this in Chapter 1 and return to the theme in several subsequent chapters. Chapter 13 discusses the benefits to companies from measuring social and environmental performance and how such measures can be incorporated in a balanced scorecard. Chapter 24 provides several examples of compani es that mandate disclosures and evaluate managers on environmental and social metrics. A variety of ch apters, including Chapters 2, 6, 10, 14, and 22 , contain material that stress themes of recognizing and accounting for environmental costs ; energy independence ; setting stretch targets to mot ivate greater carbon reductions; using cost analysis, carbon tax, and cap - and - trade auctions to reduce environme ntal footprints; and constructing “green” homes in a cost - effective manner. Focus on Innovation We discuss the role of accounting concepts and systems in fostering and supporting innovation and entrepreneurial activities in firms. In particular, we discuss the challenges posed by recognizing R&D costs as period expenses even though the benefits of in novation accrue in later periods. In Chapter 6, we describe how companies budget for innovation expenses and develop measures to monitor success of the innovation efforts delinked from operational performance i n the current period. Chapter 12 presents the importance of nonfinancial measures when making decisions about innovation. Chapter 14 stresses that innovation starts with understanding customer needs , while Chapter 20 discusses process innovations for improving quality. Many of the organizations used in “Concepts in Action” emphasize innovation (e.g., Lyft, Chapter 2; Mayo Clinic, Chapter 5; Facebook, Chapter 20). The running examples used in Chapter 2 and Chapter 20 focus on an innovative company (Tesla) and an innovativ e product (3D printers).

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    xxix New Cutting - Edge Topics The pace of change in organizations continues to be rapid. The seventeenth edition of Cost Accounting reflects changes occurring in the role of cost accounting in organizations. • We have added new material and a new Chapter 11 to explain recent trends in big data and data analytics to manage revenues and predict costs. Companies are increasingly looking for management accountants who can interface with data scientists. • We have introduced sustainability strategies and the methods companies use to implement sustainability and business goals. • We describe ideas based on academic research regarding the weights placed on performance measures in a balanced scorecard. We have a section on methods to evaluate strategy maps such as the strength of links, differentiators, focal points, and trigger points. • We provide details on the transfer pricing strategies used by multinational technology firms such as Apple and Google to minimize income taxes. • We discuss current trends in the regulation of executive compensation. • We describe the evolution of enterprise resource planning systems and newer simplified costing systems that practice lean accounting. Opening Vignettes Each chapter opens with a vignette on a real company situation. The vignettes engage the reader in a business situation or dilemma, illustrating why and how the concepts in the chapter are relevant in business. For example, Chapter 2 describes how teen apparel chain Aeropostale was driven into bankruptcy by the relatively high proportion of fixed costs in its operations. Chapter 5 explains the use of activity - based costing by IBM to evaluate the true cost of data breaches . Chapter 9 highlights Under Armor’s use of a new internal company system to better manage its inventory and supply chain with efficiency and precision to reduce inventory costs. Chapter 15 shows how Starbucks changed its rewards program to better align rewards with customer spending. Chapter 19 shows the impact on Tesla of the rework costs associated with a drastic ramp - up of production to meet unprecedented customer demand. Chapter 24 describes the misalignment between performance measurement and pay at General Electric . Concepts in Action Boxes Found in every chapter, these boxes cover real - world cost accounting issues across a variety of industries, including defense contracting, entertainment, manufacturing, retailing, and sports. New examples include: • Cost Leadership at Costco: Rock - Bottom Prices and Sky - High Profits (Chapter 1) • Can Cost – Volume – Profit Analysis Help Whole Foods Escape the “Whole Paycheck” Trap? (Chapter 3) • P. F. Chang’s and Internet - Based Budgeting (Chapter 6) • Can ESPN Avoid the Cord - Cutting “Death Spiral”? (Chapter 9 ) • Zara Uses Target Pricing to Become the World’s Largest Fashion Retailer (Chapter 14 ) • Big Data Joint - Products and Byproducts Create New Business Opportunities (Chapter 17)

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