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Cost Accounting: Foundations and Evolutions
Chapter in Issues in Accounting Education · February 2011
DOI: 10.2308/iace.2011.26.1.257
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8e
Cost Accounting
Foundations and Evolutions
Michael R. Kinney, Texas A&M University
Cecily A. Raiborn, Texas State University—San Marcos
Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Cost Accounting: Foundations and Evolutions,
Eighth Edition
Michael R. Kinney, Cecily A. Raiborn
Vice President of Editorial, Business:
Jack W. Calhoun
Editor-in-Chief: Rob Dewey
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1 2 3 4 5 6 7 13 12 11 10 09
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Licensed to: iChapters User
Brief Contents
Contents
iv
Preface
xi
Acknowledgments
xvii
Chapter 1
Introduction to Cost Accounting
1
Chapter 2
Cost Terminology and Cost Behaviors
24
Chapter 3
Predetermined Overhead Rates, Flexible Budgets,
and Absorption/Variable Costing
66
Chapter 4
Activity-Based Management and Activity-Based Costing
113
Chapter 5
Job Order Costing
162
Chapter 6
Process Costing
210
Chapter 7
Standard Costing and Variance Analysis
263
Chapter 8
The Master Budget
323
Chapter 9
Break-Even Point and Cost-Volume-Profit Analysis
381
Chapter 10
Relevant Information for Decision Making
424
Chapter 11
Allocation of Joint Costs and Accounting for By-Product/Scrap
475
Chapter 12
Introduction to Cost Management Systems
516
Chapter 13
Responsibility Accounting, Support Department
Cost Allocations, and Transfer Pricing
548
Performance Measurement, Balanced Scorecards,
and Performance Rewards
598
Chapter 15
Capital Budgeting
650
Chapter 16
Managing Costs and Uncertainty
695
Chapter 17
Implementing Quality Concepts
740
Chapter 18
Inventory and Production Management
785
Chapter 19
Emerging Management Practices
835
Appendix
Present Value Tables
866
Chapter 14
Glossary
871
Name Index
882
Subject Index
884
iii
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Contents
Preface
Acknowledgments
xi
xvii
Chapter 1
Introduction to Cost Accounting
1
Introduction
2
Comparison of Financial, Management, and
Cost Accounting
Financial Accounting
Management Accounting
Cost Accounting
Cost Accounting Standards
Professional Ethics
2
2
3
4
5
5
Competing in a Global Environment
Organizational Strategy
Organizational Structure
Value Chain
Balanced Scorecard
Ethics in Multinational Corporations
7
8
10
11
12
14
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
16
18
18
19
Chapter 2
Cost Terminology and Cost Behaviors
24
Introduction
25
Cost Terminology
Association with Cost Object
25
26
Reaction to Changes in Activity
Classification on the Financial Statements
26
30
The Conversion Process
Retailers versus Manufacturers/Service Companies
Manufacturers versus Service Companies
31
32
34
Components of Product Cost
Direct Material
Direct Labor
Overhead
36
36
36
37
Accumulation and Allocation of Overhead
Cost of Goods Manufactured and Sold
38
41
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
43
47
48
48
57
Chapter 3
Predetermined Overhead Rates, Flexible Budgets,
and Absorption/Variable Costing
66
Introduction
67
Normal Costing and Predetermined
Overhead
Formula for Predetermined Overhead Rate
Applying Overhead to Production
Disposition of Underapplied and Overapplied
Overhead
Alternative Capacity Measures
Separating Mixed Costs
High–Low Method
Least Squares Regression Analysis
Flexible Budgets
Plantwide versus Departmental Overhead
Rates
Overview of Absorption and Variable
Costing
Absorption and Variable Costing Illustrations
Comparison of the Two Approaches
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
67
68
69
71
73
73
74
75
78
79
81
84
86
88
93
93
94
102
Chapter 4
Activity-Based Management and Activity-Based
Costing
113
Introduction
114
Activity-Based Management
Value-Added versus Non-Value-Added Activities
Manufacturing Cycle Efficiency
114
114
118
iv
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Contents
v
Cost Driver Analysis
Levels at Which Costs Are Incurred
Cost Level Allocations Illustrated
119
120
122
Chapter 6
Process Costing
210
Activity-Based Costing
Two-Step Allocation
Activity-Based Costing Illustrated
124
125
127
Introduction
211
Determining Whether ABC Is Useful
Large Product Variety
High Product/Process Complexity
Lack of Commonality in Overhead Costs
Irrationality of Current Cost Allocations
Changes in Business Environment
128
129
129
130
130
130
Introduction to Process Costing
Production Costs: The Numerator
Production Quantity: The Denominator
Equivalent Units of Production
211
211
213
213
Weighted Average and First-In, First-Out
Process Costing Methods
Weighted Average Method
FIFO Method
216
219
223
Criticisms of Activity-Based Costing
131
Process Costing in a Multidepartment Setting
226
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
133
137
137
137
146
Process Costing with Standard Costs
228
Hybrid Costing Systems
231
Appendix 1
Alternative Calculations of Weighted Average
and FIFO Methods
231
Appendix 2
Spoilage
233
233
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
236
241
241
242
252
Chapter 5
Job Order Costing
162
Introduction
163
Methods of Product Costing
Cost Accumulation Systems
Valuation Methods
163
163
164
Job Order Costing System
165
Job Order Costing: Details and Documents
Job Order Cost Sheet
Material Requisitions
Employee Time Sheets
Overhead
Completion of Production
167
167
169
170
171
171
Job Order Costing Illustration
172
Job Order Costing Using Standard Costs
176
Job Order Costing to Assist Managers
Concrete Café
Paul’s Pirogues
177
178
178
Product and Material Losses in Job Order
Costing
Generally Anticipated on All Jobs
Specifically Identified with a Particular Job
Abnormal Spoilage
179
180
180
181
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
181
186
186
187
196
231
Chapter 7
Standard Costing and Variance Analysis
263
Introduction
264
Development of a Standard Cost System
Material Standards
Labor Standards
Overhead Standards
264
265
266
267
General Variance Analysis Model
269
Material and Labor Variance Computations
Material Variances
Point-of-Purchase Material Variance Model
Labor Variances
270
270
272
273
Overhead Variances
Variable Overhead
Fixed Overhead
Alternative Overhead Variance Approaches
273
274
275
277
Standard Cost System Journal Entries
279
Why Standard Cost Systems Are Used
Motivating
Planning
Controlling
282
282
282
283
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vi
Contents
Decision Making
Performance Evaluation
284
284
Considerations in Establishing Standards
Appropriateness
Attainability
284
284
285
Changes in Standards Usage
Use of Ideal Standards and Theoretical Capacity
Adjusting Standards
Material Price Variance Based on Usage Rather
Than on Purchases
Decline in Direct Labor
285
285
286
288
288
Conversion Cost as an Element in Standard
Costing
288
Appendix
Mix and Yield Variances
Material Price, Mix, and Yield Variances
Labor Rate, Mix, and Yield Variances
290
290
291
293
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
294
301
302
302
312
Chapter 8
Chapter 9
Break-Even Point and Cost-Volume-Profit
Analysis
381
Introduction
382
Break-Even Point
382
Identifying the Break-Even Point
Formula Approach to Breakeven
Graphing Approach to Breakeven
Profit-Volume Graph
Income Statement Approach
384
384
385
387
388
CVP Analysis
Fixed Amount of Profit
Specific Amount of Profit per Unit
Incremental Analysis for Short-Run Changes
388
389
391
393
CVP Analysis in a Multiproduct Environment
396
Managing Risk of CVP Relationships
Margin of Safety
Operating Leverage
399
399
399
Underlying Assumptions of CVP Analysis
401
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
402
406
407
407
414
The Master Budget
323
Introduction
324
Chapter 10
The Budgeting Process
Strategic Planning
Tactical Planning
324
324
325
Relevant Information for Decision
Making
424
The Master Budget
328
Introduction
425
The Master Budget Illustrated
Production Budget
Purchases Budget
Personnel Budget
Direct Labor Budget
Overhead Budget
Selling and Administrative Budget
Capital Budget
Cash Budget
Budgeted Financial Statements
330
331
332
332
333
334
334
334
335
341
The Concept of Relevance
Association with Decision
Importance to Decision Maker
Bearing on the Future
425
425
426
426
Sunk Costs
426
Using Budgets for Management Control
347
Relevant Costs for Specific Decisions
Outsourcing Decisions
Scarce Resource Decisions
Sales Mix Decisions
Special Order Decisions
Product Line and Segment Decisions
428
428
433
435
440
442
Appendix
Budget Manual
349
349
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
351
355
356
356
365
Appendix
Linear Programming
Basics of Linear Programming
Formulating an LP Problem
Solving an LP Problem
444
444
445
445
448
Comprehensive Review Module
Potential Ethical Issues
449
453
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Contents
Questions
Exercises
Problems
vii
453
453
461
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
538
539
539
539
542
Allocation of Joint Costs and Accounting
for By-Product/Scrap
475
Chapter 13
Introduction
476
Responsibility Accounting, Support Department
Cost Allocations, and Transfer Pricing
548
Outputs of a Joint Process
476
Introduction
549
The Joint Process
478
Decentralization
549
The Joint Process Decision
479
Responsibility Accounting Systems
551
Allocation of Joint Cost
Physical Measure Allocation
Monetary Measure Allocation
482
482
484
Accounting for By-Product and Scrap
Net Realizable Value Approach
Realized Value Approach
488
489
490
Types of Responsibility Centers
Cost Center
Revenue Center
Profit Center
Investment Center
554
554
555
555
556
By-Product and Scrap in Job Order Costing
492
Joint Costs in Service Businesses and
Not-for-Profit Organizations
Support Department Cost Allocation
Allocation Bases
Methods of Allocating Support Department Costs
556
556
558
493
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
494
498
499
499
507
Service Department Cost Allocation Illustration
Direct Method Allocation
Step Method Allocation
Algebraic Method Allocation
Determining Overhead Application Rates
559
560
561
562
565
Transfer Pricing
Types of Transfer Prices
Selecting a Transfer Pricing System
565
567
569
Transfer Prices in Multinational Settings
570
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
573
577
578
579
584
Chapter 11
Chapter 12
Introduction to Cost Management Systems
516
Introduction
517
Introduction to Management Information
and Control Systems
517
Defining a Cost Management System
519
The Roles of a Cost Management System
521
Chapter 14
Designing a Cost Management System
Organizational Form, Structure, and Culture
Organizational Mission and Core Competencies
Operations and Competitive Environment and Strategies
523
523
526
526
Performance Measurement, Balanced Scorecards,
and Performance Rewards
598
Introduction
599
Determine Desired Components of CMS
Motivational Elements
Informational Elements
Reporting Elements
530
530
532
534
Organization Mission Statements
599
Organizational Roles of Performance Measures
Internal Performance Measures
External Performance Measures
600
600
601
Perform Gap Analysis and Assess Improvements
535
Appendix
Cost Management System Conceptual Design Principles
536
536
Designing a Performance Measurement System
General Criteria
Assess Progress toward Mission
602
602
603
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Licensed to: iChapters User
viii
Contents
Awareness of and Participation in Performance Measures
Appropriate Tools for Performance
Need for Feedback
Short-Term Financial Performance Measures
for Management
Divisional Profits
Cash Flow
Return on Investment
Residual Income
Economic Value Added
Limitations of Return on Investment, Residual Income,
and Economic Value Added
603
603
604
604
604
605
605
609
609
610
Differences in Perspectives
611
Nonfinancial Performance Measures
Selection of Nonfinancial Measures
Establishment of Comparison Bases
612
612
616
Use of Multiple Measures
616
Using a Balanced Scorecard for Measuring Performance 617
Performance Evaluation in Multinational Settings
619
Compensation Strategy
620
Pay-for-Performance Plans
620
Links between Performance Measures and Rewards
Degree of Control over Performance Output
Incentives Relative to Organizational Level
Performance Plans and Feedback
Worker Pay and Performance Links
Promoting Overall Success
Nonfinancial Incentives
622
623
623
623
623
624
624
Tax Implications of Compensation Elements
624
Global Compensation
625
Ethical Considerations of Compensation
625
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
626
631
632
633
637
Discounting Future Cash Flows
Net Present Value Method
Profitability Index
655
656
657
Internal Rate of Return
658
Effect of Depreciation on After-Tax Cash Flows
660
Assumptions and Limitations of Methods
662
Investment Decision
Is the Activity Worthy of an Investment?
Which Assets Can Be Used for the Activity?
Of the Available Assets for Each Activity, Which Is the Best
Investment?
Of the “Best Investments” for All Worthwhile Activities,
in Which Ones Should the Company Invest?
665
665
665
Ranking Multiple Capital Projects
668
Compensating for Risk in Capital Project Evaluation
Judgmental Method
Risk-Adjusted Discount Rate Method
Sensitivity Analysis
668
669
669
670
Postinvestment Audit
672
Appendix 1
Time Value of Money
Present Value of a Single Cash Flow
Present Value of an Annuity
673
673
673
674
Appendix 2
Accounting Rate of Return
674
674
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
675
680
681
681
687
666
666
Chapter 16
Managing Costs and Uncertainty
695
Introduction
696
Cost Control Systems
696
Capital Budgeting
650
Introduction
651
Understanding Cost Changes
698
Cost Changes Because of Volume Changes
698
Cost Changes Because of Inflation/Deflation
698
Cost Changes Because of Supply/Supplier Cost Adjustments 699
Cost Changes Because of Quantity Purchased
700
Capital Asset Acquisition
651
Cost Containment
700
Use of Cash Flows in Capital Budgeting
652
Cost Avoidance and Cost Reduction
701
Cash Flows Illustrated
Time Lines
653
653
Committed Fixed Costs
702
Payback Period
654
Discretionary Costs
Controlling Discretionary Costs
703
704
Chapter 15
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Contents
Cash Management
What Variables Influence the Optimal
Level of Cash?
What Are the Sources of Cash?
What Variables Influence the Cost of
Carrying Cash?
Banking Relationships
710
ix
Chapter 18
Inventory and Production Management
785
Introduction
786
713
713
Important Relationships in the Value Chain
786
Buying or Producing and Carrying Inventory
787
Supply-Chain Management
Information Technology and Purchasing
Advances in Authorizing and Empowering
Purchases
714
714
Inventory and Production Management Philosophies
787
Coping with Uncertainty
The Nature and Causes of Uncertainty
Four Strategies for Dealing with Uncertainty
715
715
716
Understanding and Managing Production
Activities and Costs
Product Life Cycles
Life Cycle and Target Costing
789
789
790
Just-in-Time Systems
793
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
721
724
724
725
729
Changes Needed to Implement JIT Manufacturing
Supplier Relationships and Distribution
Product Design
Product Processing
Plant Layout
795
795
797
798
799
Logistics of the JIT Environment
Accounting Implications of JIT
Flexible Manufacturing Systems and Computer-Integrated
Manufacturing
Lean Enterprises
801
802
Theory of Constraints
809
Appendix
Economic Order Quantity and Related Issues
Economic Order Quantity
Economic Production Run
811
811
811
811
Order Point and Safety Stock
812
Pareto Inventory Analysis
813
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
814
820
820
821
827
711
711
714
Chapter 17
Implementing Quality Concepts
740
Introduction
741
What Is Quality?
Production View of Quality
Consumer View of Quality
741
741
743
Benchmarking
745
Total Quality Management
Quality System
Employee Involvement
Product/Service Improvement
Long-Term Supplier Relationships
749
749
749
750
751
The Baldrige Award
751
Types of Quality Costs
754
Measuring the Cost of Quality
757
Obtaining Information about Quality from
the BSC and CMS
761
Quality as an Organizational Culture
763
Appendix
Assessing Quality Internationally
ISO
EFQM
765
765
765
766
Comprehensive Review Module
Potential Ethical Issues
Questions
Exercises
Problems
768
771
772
773
778
807
808
Chapter 19
Emerging Management Practices
835
Introduction
836
The Changing Workplace
836
Business Process Reengineering
837
Downsizing, Layoffs, and Restructuring
839
Workforce Diversity
840
Enterprise Resource Planning Systems
842
Strategic Alliances
846
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
x
Contents
Open-Book Management
Using Games to Teach Open-Book Management
Motivating Employees
Implementation Challenges
847
849
850
851
Exercises
Problems
857
860
Appendix: Present Value Tables
866
Environmental Management Systems
852
Glossary
871
Comprehensive Review Module
Potential Ethical Issues
Questions
855
856
856
Name Index
882
Subject Index
884
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Preface
Cost accounting is a dynamic discipline constantly responding to the needs of managers
in a highly competitive and global business world. Managers need cost accounting information to develop, implement, and evaluate strategy. Managers also need cost accounting
measurements to determine product costs for internal management and external financial
reporting. The eighth edition of Cost Accounting: Foundations and Evolutions provides
in-depth coverage of cost management concepts and procedures in a logically sequenced
and student-friendly framework. This text encourages students to go beyond the numbers and think critically about business decisions.
A text is valuable only when students find the subject matter applicable to their business
or personal lives. Through the use of a straightforward, readable approach, Cost Accounting:
Foundations and Evolutions displays the real-world relevance of this topic to its readers.
Hallmark Features
This edition provides in-depth, current coverage of cost management concepts and procedures, while integrating relevant, real-world business examples and ethical considerations,
in a straightforward and student-friendly framework. The unique hallmark features of this
text that have been retained include the following.
Streamlined, Student-Friendly Approach
Recognized for its unmatched readability, the book’s thought-provoking writing keeps concepts intriguing and easy to comprehend. This edition’s solid blend of concepts and practices will help students clearly understand how to solve actual business problems.
The text is well written, and students like it.
Gary L. Bridges, University of Texas at San Antonio
Relevancy in Today’s Business World
Real-world examples that appeal to today’s students and clearly exemplify the chapter’s
concepts are integrated throughout the main body of the text to immediately connect
today’s business world with the classroom experience.
The Kinney/Raiborn book does a great job on more modern topics
such as ABC, TQM, and JIT.
Alan D. Campbell, Troy University
Developing Ethical Business Leaders
Ethics
The need for students to analyze business situations and make informed, ethical decisions
is essential in today’s world. Cost Accounting: Foundations and Evolutions weaves ethical
considerations throughout each chapter so that students learn to consistently think of the
ethical implications of their actions. Potential Ethical Issues at the end of each chapter
xi
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Licensed to: iChapters User
xii
Preface
emphasize dilemmas students may encounter in business. Exercises and problems involving
ethical considerations are marked with an ethics icon.
Comprehensive Review Modules
A Comprehensive Review Module for each chapter ensures your students’ mastery of concepts
an overview of key terms, through an overview of key terms, succinct chapter summaries, solution strategies highlighting key equations and concepts, and demonstration problems that students can use as a framework for solving similar examples in homework assignments or exams.
These modules reinforce the critical concepts from the chapters and show how to apply them.
High-Quality End-of-Chapter Assignments
Students practice accounting skills with a wide array of assignment types, including Excel
Template activities, ethical problems, writing assignments, Internet research exercises, and
group activities. Questions test basic chapter comprehension, Exercises offer quick concept
checks, and Problems delve deeper into the concepts, testing students’ retention of critical
topics and procedures.
A strength of the textbook is the quality of the exercises and problems at the end of
each chapter. These items . . . do a good job of reinforcing important concepts in the chapter.
Furthermore, most chapters have one or two broad-scope problems that integrate many of the concepts presented in that chapter and, in some cases, also integrate concepts from preceding chapters.
Nace Magner, Western Kentucky University
Improvements in the Eighth Edition
We’ve tailored this edition of Cost Accounting: Foundations and Evolutions to meet the specific
needs of this course, taking the insights and suggestions of many cost accounting professors
across the country into consideration. The following improvements have been made.
Clarity for Complex Topics
Building on its proven strengths of effortlessly teaching fundamental cost accounting concepts with precision, extra care has been taken to clarify the topics that your students struggle with most—such as equivalent units for process costing, cost allocation under ABC,
and overhead variances—to make these topics easy to comprehend. New exhibits have been
added throughout to help students make visual connections with the concepts.
Superior Readability
Always praised for its engaging, student-friendly writing style, the authors have further
enhanced the text’s unmatched readability by breaking lists and equations out of text narrative for a clean presentation that’s easy to read.
Complete Student Learning System
In addition to the chapter opening learning objectives (which are indicated within the
chapter to guide students through the material), new learning objective links have been
added to the chapter summary to help students close the loop and easily identify areas
that require additional attention or practice. Page references have also been added to the
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Preface
Solution Strategies at the end of the chapter, so students can quickly reference the text for
additional explanations when necessary.
New End-of-Chapter Assignments
Numerous new problems have been added and nearly 90 percent of the end-of-chapter
assignments in this edition have been updated or modified to provide professors who
prefer to assign new questions each term with more choice and flexibility. Writing labels
have been added to better identify which assignments build written communication and
research skills.
Advanced Technology Solutions
New for this edition, a full CengageNOW for Cost Accounting: Foundations and Evolutions
provides ultimate flexibility and ease of use with the results you want NOW that ensure
that your students are mastering the procedural and decision-making skills needed for
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Preface
Chapter 17
•
•
•
•
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Preface
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Preface
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Acknowledgments
We would like to thank all the people who have helped us during the revision of this text.
The constructive comments and suggestions made by the following reviewers were instrumental in developing, rewriting, reorganizing, and improving the quality, readability, accuracy, and student orientation of Cost Accounting: Foundations and Evolutions.
Gary L. Bridges
University of Texas at San Antonio
Philip W. Morris
Sam Houston State University
Alan D. Campbell
Troy University
Letitia Meier Pleis
Metropolitan State College of Denver
Charles R. Chambers
University of Toledo
William R. Rhodes
University of Mississippi
Beatrix DeMott
Park University
Larry L. Simpson
Davenport University
Rita L. Dufour
Northeast Wisconsin Technical College
Jan Smolarski
University of Texas Pan American
Richard D. English
Augustana College
Ron Stunda
Birmingham-Southern College
Dennis J. George
University of Dubuque
Timothy J. Swenson
Sullivan University
Elsayed Kandiel
State University of New York,
Plattsburgh
Ara G. Volkan
Florida Gulf Coast University
Howard Lawrence
University of Mississippi
Nace Magner
Western Kentucky University
Theodore N. Wood
Gordon College
Wallace R. Wood
University of Cincinnati
David J. Medved
Thomas Edison State College
xvii
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xviii
Acknowledgments
We are grateful for the materials from the Institute of Management Accountants,
American Institute of CPAs, and various periodical publishers that have contributed significantly to making this text a truly useful learning tool for the students. The authors wish
to thank all the people at South-Western, a part of Cengage Learning (especially Krista
Kellman, Developmental Editor; Holly Henjum, Senior Content Project Manager; and
Matt Filimonov, Acquisitions Editor), who have helped us on this project. Special thanks
go to Valarmathy Munuswamy, at Integra Software Services, for her time and effort on this
edition.
We would also like to thank our supplement preparers for providing high-quality content and verifiers for ensuring the accuracy of this text and supplements:
Supplement Preparers:
Verifiers:
Test Bank:
Edward R. Walker
University of Central Oklahoma
James M. Emig
Villanova University
Instructor’s Manual:
J. Lowell Mooney
Georgia Southern University
Alice B. Sineath
Forsyth Technical
Community College
Beth Woods
PowerPoint Slides:
Herb Martin
Hope College
CengageNOW Content:
Michelle A. McFeaters
Grove City College
Excel Templates and Online Quiz Questions:
Barbara J. Muller
Arizona State University
Additional Exercises and Problems:
Kathleen Sevigny
Bridgewater State College
In closing, Cecily Raiborn would like to acknowledge Emmett and Miriam McCoy for
the ethical behavior they have consistently demonstrated in business and for their personal
philanthropic endeavors. The world would be a better place with more individuals like them.
Mike Kinney & Cecily Raiborn
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Licensed to: iChapters User
Appendix
Present Value Tables
866
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Licensed to: iChapters User
Appendix Present Value Tables
867
Table 1 Present Value of $1
Period
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
9.50%
10.00%
10.50%
11.00%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
0.9901
0.9803
0.9706
0.9610
0.9515
0.9421
0.9327
0.9235
0.9143
0.9053
0.8963
0.8875
0.8787
0.8700
0.8614
0.8528
0.8444
0.8360
0.8277
0.8195
0.8114
0.8034
0.7954
0.7876
0.7798
0.7721
0.7644
0.7568
0.7493
0.7419
0.7346
0.7273
0.7201
0.7130
0.7059
0.6989
0.6920
0.6852
0.6784
0.6717
0.6650
0.6584
0.6519
0.6455
0.6391
0.6327
0.6265
0.6203
0.6141
0.6080
0.9804
0.9612
0.9423
0.9239
0.9057
0.8880
0.8706
0.8535
0.8368
0.8204
0.8043
0.7885
0.7730
0.7579
0.7430
0.7285
0.7142
0.7002
0.6864
0.6730
0.6598
0.6468
0.6342
0.6217
0.6095
0.5976
0.5859
0.5744
0.5631
0.5521
0.5413
0.5306
0.5202
0.5100
0.5000
0.4902
0.4806
0.4712
0.4620
0.4529
0.4440
0.4353
0.4268
0.4184
0.4102
0.4022
0.3943
0.3865
0.3790
0.3715
0.9709
0.9426
0.9151
0.8885
0.8626
0.8375
0.8131
0.7894
0.7664
0.7441
0.7224
0.7014
0.6810
0.6611
0.6419
0.6232
0.6050
0.5874
0.5703
0.5537
0.5376
0.5219
0.5067
0.4919
0.4776
0.4637
0.4502
0.4371
0.4244
0.4120
0.4000
0.3883
0.3770
0.3660
0.3554
0.3450
0.3350
0.3252
0.3158
0.3066
0.2976
0.2890
0.2805
0.2724
0.2644
0.2567
0.2493
0.2420
0.2350
0.2281
0.9615
0.9246
0.8890
0.8548
0.8219
0.7903
0.7599
0.7307
0.7026
0.6756
0.6496
0.6246
0.6006
0.5775
0.5553
0.5339
0.5134
0.4936
0.4746
0.4564
0.4388
0.4220
0.4057
0.3901
0.3751
0.3607
0.3468
0.3335
0.3207
0.3083
0.2965
0.2851
0.2741
0.2636
0.2534
0.2437
0.2343
0.2253
0.2166
0.2083
0.2003
0.1926
0.1852
0.1781
0.1712
0.1646
0.1583
0.1522
0.1463
0.1407
0.9524
0.9070
0.8638
0.8227
0.7835
0.7462
0.7107
0.6768
0.6446
0.6139
0.5847
0.5568
0.5303
0.5051
0.4810
0.4581
0.4363
0.4155
0.3957
0.3769
0.3589
0.3419
0.3256
0.3101
0.2953
0.2812
0.2679
0.2551
0.2430
0.2314
0.2204
0.2099
0.1999
0.1904
0.1813
0.1727
0.1644
0.1566
0.1492
0.1421
0.1353
0.1288
0.1227
0.1169
0.1113
0.1060
0.1010
0.0961
0.0916
0.0872
0.9434
0.8900
0.8396
0.7921
0.7473
0.7050
0.6651
0.6274
0.5919
0.5584
0.5268
0.4970
0.4688
0.4423
0.4173
0.3937
0.3714
0.3503
0.3305
0.3118
0.2942
0.2775
0.2618
0.2470
0.2330
0.2198
0.2074
0.1956
0.1846
0.1741
0.1643
0.1550
0.1462
0.1379
0.1301
0.1227
0.1158
0.1092
0.1031
0.0972
0.0917
0.0865
0.0816
0.0770
0.0727
0.0685
0.0647
0.0610
0.0576
0.0543
0.9346
0.8734
0.8163
0.7629
0.7130
0.6663
0.6228
0.5820
0.5439
0.5084
0.4751
0.4440
0.4150
0.3878
0.3625
0.3387
0.3166
0.2959
0.2765
0.2584
0.2415
0.2257
0.2110
0.1972
0.1843
0.1722
0.1609
0.1504
0.1406
0.1314
0.1228
0.1147
0.1072
0.1002
0.0937
0.0875
0.0818
0.0765
0.0715
0.0668
0.0624
0.0583
0.0545
0.0510
0.0476
0.0445
0.0416
0.0389
0.0363
0.0340
0.9259
0.8573
0.7938
0.7350
0.6806
0.6302
0.5835
0.5403
0.5003
0.4632
0.4289
0.3971
0.3677
0.3405
0.3152
0.2919
0.2703
0.2503
0.2317
0.2146
0.1987
0.1839
0.1703
0.1577
0.1460
0.1352
0.1252
0.1159
0.1073
0.0994
0.0920
0.0852
0.0789
0.0731
0.0676
0.0626
0.0580
0.0537
0.0497
0.0460
0.0426
0.0395
0.0365
0.0338
0.0313
0.0290
0.0269
0.0249
0.0230
0.0213
0.9174
0.8417
0.7722
0.7084
0.6499
0.5963
0.5470
0.5019
0.4604
0.4224
0.3875
0.3555
0.3262
0.2993
0.2745
0.2519
0.2311
0.2120
0.1945
0.1784
0.1637
0.1502
0.1378
0.1264
0.1160
0.1064
0.0976
0.0896
0.0822
0.0754
0.0692
0.0634
0.0582
0.0534
0.0490
0.0449
0.0412
0.0378
0.0347
0.0318
0.0292
0.0268
0.0246
0.0226
0.0207
0.0190
0.0174
0.0160
0.0147
0.0135
0.9132
0.8340
0.7617
0.6956
0.6352
0.5801
0.5298
0.4838
0.4419
0.4035
0.3685
0.3365
0.3073
0.2807
0.2563
0.2341
0.2138
0.1952
0.1783
0.1628
0.1487
0.1358
0.1240
0.1133
0.1034
0.0945
0.0863
0.0788
0.0719
0.0657
0.0600
0.0058
0.0500
0.0457
0.0417
0.0381
0.0348
0.0318
0.0290
0.0265
0.0242
0.0221
0.0202
0.0184
0.0168
0.0154
0.0141
0.0128
0.0117
0.0107
0.9091
0.8265
0.7513
0.6830
0.6209
0.5645
0.5132
0.4665
0.4241
0.3855
0.3505
0.3186
0.2897
0.2633
0.2394
0.2176
0.1978
0.1799
0.1635
0.1486
0.1351
0.1229
0.1117
0.1015
0.0923
0.0839
0.0763
0.0693
0.0630
0.0573
0.0521
0.0474
0.0431
0.0391
0.0356
0.0324
0.0294
0.0267
0.0243
0.0221
0.0201
0.0183
0.0166
0.0151
0.0137
0.0125
0.0113
0.0103
0.0094
0.0085
0.9050
0.8190
0.7412
0,6707
0.6070
0.5493
0.4971
0.4499
0.4071
0.3685
0.3334
0.3018
0.2731
0.2471
0.2237
0.2024
0.1832
0.1658
0.1500
0.1358
0.1229
0.1112
0.1006
0.0911
0.0824
0.0746
0.0675
0.0611
0.0553
0.0500
0.0453
0.0410
0.0371
0.0336
0.0304
0.0275
0.0249
0.0225
0.0204
0.0184
0.0167
0.0151
0.0137
0.0124
0.0112
0.0101
0.0092
0.0083
0.0075
0.0068
0.9009
0.8116
0.7312
0.6587
0.5935
0.5346
0.4817
0.4339
0.3909
0.3522
0.3173
0.2858
0.2575
0.2320
0.2090
0.1883
0.1696
0.1528
0.1377
0.1240
0.1117
0.1007
0.0907
0.0817
0.0736
0.0663
0.0597
0.0538
0.0485
0.0437
0.0394
0.0355
0.0319
0.0288
0.0259
0.0234
0.0210
0.0190
0.0171
0.0154
0.0139
0.0125
0.0113
0.0101
0.0091
0.0082
0.0074
0.0067
0.0060
0.0054
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
868
Appendix Present Value Tables
Table 1 (Continued)
Period 11.50% 12.00% 12.50% 13.00% 13.50% 14.00% 14.50% 15.00% 15.50% 16.00% 17.00% 18.00% 19.00% 20.00%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
0.8969
0.8044
0.7214
0.6470
0.5803
0.5204
0.4667
0.4186
0.3754
0.3367
0.3020
0.2708
0.2429
0.2179
0.1954
0.1752
0.1572
0.1410
0.1264
0.1134
0.1017
0.0912
0.0818
0.0734
0.0658
0.0590
0.0529
0.0475
0.0426
0.0382
0.0342
0.0307
0.0275
0.0247
0.0222
0.0199
0.0178
0.0160
0.0143
0.0129
0.0115
0.0103
0.0093
0.0083
0.0075
0.0067
0.0060
0.0054
0.0048
0.0043
0.8929
0.7972
0.7118
0.6355
0.5674
0.5066
0.4524
0.4039
0.3606
0.3220
0.2875
0.2567
0.2292
0.2046
0.1827
0.1631
0.1456
0.1300
0.1161
0.1037
0.0926
0.0826
0.0738
0.0659
0.0588
0.0525
0.0469
0.0419
0.0374
0.0334
0.0298
0.0266
0.0238
0.0212
0.0189
0.0169
0.0151
0.0135
0.0120
0.0108
0.0096
0.0086
0.0077
0.0068
0.0061
0.0054
0.0049
0.0043
0.0039
0.0035
0.8889
0.7901
0.7023
0.6243
0.5549
0.4933
0.4385
0.3897
0.3464
0.3080
0,2737
0.2433
0.2163
0.1923
0.1709
0.1519
0.1350
0.1200
0.1067
0.0948
0.0843
0.0749
0.0666
0.0592
0.0526
0.0468
0.0416
0.0370
0.0329
0.0292
0.0260
0.0231
0.0205
0.0182
0.0162
0.0144
0.0128
0.0114
0.0101
0.0090
0.0080
0.0077
0.0063
0.0056
0.0050
0.0044
0.0039
0.0035
0.0031
0.0028
0.8850
0.7832
0.6931
0.6133
0.5428
0.4803
0.4251
0.3762
0.3329
0.2946
0.2607
0.2307
0.2042
0.1807
0.1599
0.1415
0.1252
0.1108
0.0981
0.0868
0.0768
0.0680
0.0601
0.0532
0.0471
0.0417
0.0369
0.0326
0.0289
0.0256
0.0226
0.0200
0.0177
0.0157
0.0139
0.0123
0.0109
0.0096
0.0085
0.0075
0.0067
0.0059
0.0052
0.0046
0.0041
0.0036
0.0032
0.0028
0.0025
0.0022
0.8811
0.7763
0.6839
0.6026
0.5309
0.4678
0.4121
0.3631
0.3199
0.2819
0.2483
0.2188
0.1928
0.1699
0.1496
0.1319
0.1162
0.1024
0.0902
0.0795
0.0700
0.0617
0.0543
0.0479
0.0422
0.0372
0.0327
0.0289
0.0254
0.0224
0.0197
0.0174
0.0153
0.0135
0.0119
0.0105
0.0092
0.0081
0.0072
0.0063
0.0056
0.0049
0.0043
0.0038
0.0034
0.0030
0.0026
0.0023
0.0020
0.0018
0.8772
0.7695
0.6750
0.5921
0.5194
0.4556
0.3996
0.3506
0.3075
0.2697
0.2366
0.2076
0.1821
0.1597
0.1401
0.1229
0.1078
0.0946
0.0830
0.0728
0.0638
0.0560
0.0491
0.0431
0.0378
0.0332
0.0291
0.0255
0.0224
0.0196
0.0172
0.0151
0.0133
0.0116
0.0102
0.0089
0.0078
0.0069
0.0060
0.0053
0.0046
0.0041
0.0036
0.0031
0.0028
0.0024
0.0021
0.0019
0.0016
0.0014
0.8734
0.7628
0.6662
0.5818
0.5081
0.4438
0.3876
0.3385
0.2956
0.2582
0.2255
0.1969
0.1720
0.1502
0.1312
0.1146
0.1001
0.0874
0.0763
0.0667
0.0582
0.0509
0.0444
0.0388
0.0339
0.0296
0.0258
0.0226
0.0197
0.0172
0.0150
0.0131
0.0115
0.0100
0.0088
0.0076
0.0067
0.0058
0.0051
0.0044
0.0039
0.0034
0.0030
0.0026
0.0023
0.0020
0.0017
0.0015
0.0013
0.0012
0.8696
0.7561
0.6575
0.5718
0.4972
0.4323
0.3759
0.3269
0.2843
0.2472
0.2149
0.1869
0.1625
0.1413
0.1229
0.1069
0.0929
0.0808
0.0703
0.0611
0.0531
0.0462
0.0402
0.0349
0.0304
0.0264
0.0230
0.0200
0.0174
0.0151
0.0131
0.0114
0.0099
0.0088
0.0075
0.0065
0.0057
0.0049
0.0043
0.0037
0.0033
0.0028
0.0025
0.0021
0.0019
0.0016
0.0014
0.0012
0.0011
0.0009
0.8658
0.7496
0.6490
0.5619
0.4865
0.4212
0.3647
0.3158
0.2734
0.2367
0.2049
0.1774
0.1536
0.1330
0.1152
0.0997
0.0863
0.0747
0.0647
0.0560
0.0485
0.0420
0.0364
0.0315
0.0273
0.0236
0.0204
0.0177
0.0153
0.0133
0.0115
0.0099
0.0086
0.0075
0.0065
0.0056
0.0048
0.0042
0.0036
0.0031
0.0027
0.0024
0.0020
0.0018
0.0015
0.0013
0.0011
0.0010
0.0009
0.0007
0.8621
0.7432
0.6407
0.5523
0.4761
0.4104
0.3538
0.3050
0.2630
0.2267
0.1954
0.1685
0.1452
0.1252
0.1079
0.0930
0.0802
0.0691
0.0596
0.0514
0.0443
0.0382
0.0329
0.0284
0.0245
0.0211
0.0182
0.0157
0.0135
0.0117
0.0100
0.0087
0.0075
0.0064
0.0056
0.0048
0.0041
0.0036
0.0031
0.0026
0.0023
0.0020
0.0017
0.0015
0.0013
0.0011
0.0009
0.0008
0.0007
0.0006
0.8547
0.7305
0.6244
0.5337
0.4561
0.3898
0.3332
0.2848
0.2434
0.2080
0.1778
0.1520
0.1299
0.1110
0.0949
0.0811
0.0693
0.0593
0.0506
0.0433
0.0370
0.0316
0.0270
0.0231
0.0197
0.0169
0.0144
0.0123
0.0105
0.0090
0.0077
0.0066
0.0056
0.0048
0.0041
0.0035
0.0030
0.0026
0.0022
0.0019
0.0016
0.0014
0.0012
0.0010
0.0009
0.0007
0.0006
0.0005
0.0005
0.0004
0.8475
0.7182
0.6086
0.5158
0.4371
0.3704
0.3139
0.2660
0.2255
0.1911
0.1619
0.1372
0.1163
0.0986
0.0835
0.0708
0.0600
0.0508
0.0431
0.0365
0.0309
0.0262
0.0222
0.0188
0.0160
0.0135
0.0115
0.0097
0.0082
0.0070
0.0059
0.0050
0.0043
0.0036
0.0031
0.0026
0.0022
0.0019
0.0016
0.0013
0.0011
0.0010
0.0008
0.0007
0.0006
0.0005
0.0004
0.0004
0.0003
0.0003
0.8403
0.7062
0.5934
0.4987
0.4191
0.3521
0.2959
0.2487
0.2090
0.1756
0.1476
0.1240
0.1042
0.0876
0.0736
0.0618
0.0520
0.0437
0.0367
0.0308
0.0259
0.0218
0.0183
0.0154
0.0129
0.0109
0.0091
0.0077
0.0064
0.0054
0.0046
0.0038
0.0032
0.0027
0.0023
0.0019
0.0016
0.0014
0.0011
0.0010
0.0008
0.0007
0.0006
0.0005
0.0004
0.0003
0.0003
0.0002
0.0002
0.0002
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
0.8333
0.6944
0.5787
0.4823
0.4019
0.3349
0.2791
0.2326
0.1938
0.1615
0.1346
0.1122
0.0935
0.0779
0.0649
0.0541
0.0451
0.0376
0.0313
0.0261
0.0217
0.0181
0.0151
0.0126
0.0105
0.0087
0.0073
0.0061
0.0051
0.0042
0.0035
0.0029
0.0024
0.0020
0.0017
0.0014
0.0012
0.0010
0.0008
0.0007
0.0006
0.0005
0.0004
0.0003
0.0003
0.0002
0.0002
0.0002
0.0001
0.0001
Licensed to: iChapters User
Appendix Present Value Tables
869
Table 2 Present Value of an Ordinary Annuity of $1
Period
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
9.50%
10.00%
10.50%
11.00%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
0.9901
1.9704
2.9410
3.9020
4.8534
5.7955
6.7282
7.6517
8.5660
9.4713
10.3676
11.2551
12.1337
13.0037
13.8651
14.7179
15.5623
16.3983
17.2260
18.0456
18.8570
19.6604
20.4558
21.2434
22.0232
22.7952
23.5596
24.3164
25.0658
25.8077
26.5423
27.2696
27.9897
28.7027
29.4086
30.1075
30.7995
31.4847
32.1630
32.8347
33.4997
34.1581
34.8100
35.4555
36.0945
36.7272
37.3537
37.9740
38.5881
39.1961
0.9804
1.9416
2.8839
3.8077
4.7135
5.6014
6.4720
7.3255
8.1622
8.9826
9.7869
10.5753
11.3484
12.1063
12.8493
13.5777
14.2919
14.9920
15.6785
16.3514
17.0112
17.6581
18.2922
18.9139
19.5235
20.1210
20.7069
21.2813
21.8444
22.3965
22.9377
23.4683
23.9886
24.4986
24.9986
25.4888
25.9695
26.4406
26.9026
27.3555
27.7995
28.2348
28.6616
29.0800
29.4902
29.8923
30.2866
30.6731
31.0521
31.4236
0.9709
1.9135
2.8286
3.7171
4.5797
5.4172
6.2303
7.0197
7.7861
8.5302
9.2526
9.9540
10.6350
11.2961
11.9379
12.5611
13.1661
13.7535
14.3238
14.8775
15.4150
15.9369
16.4436
16.9355
17.4132
17.8768
18.3270
18.7641
19.1885
19.6004
20.0004
20.3888
20.7658
21.1318
21.4872
21.8323
22.1672
22.4925
22.8082
23.1148
23.4124
23.7014
23.9819
24.2543
24.5187
24.7755
25.0247
25.2667
25.5017
25.7298
0.9615
1.8861
2.7751
3.6299
4.4518
5.2421
6.0021
6.7327
7.4353
8.1109
8.7605
9.3851
9.9857
10.5631
11.1184
11.6523
12.1657
12.6593
13.1339
13.5903
14.0292
14.4511
14.8568
15.2470
15.6221
15.9828
16.3296
16.6631
16.9837
17.2920
17.5885
17.8736
18.1477
18.4112
18.6646
18.9083
19.1426
19.3679
19.5845
19.7928
19.9931
20.1856
20.3708
20.5488
20.7200
20.8847
21.0429
21.1951
21.3415
21.4822
0.0524
1.8594
2.7233
3.5460
4.3295
5.0757
5.7864
6.4632
7.1078
7.7217
8.3064
8.8633
9.3936
9.8986
10.3797
10.8378
11.2741
11.6896
12.0853
12.4622
12.8212
13.1630
13.4886
13.7986
14.0939
14.3752
14.6430
14.8981
15.1411
15.3725
15.5928
15.8027
16.0026
16.1929
16.3742
16.5469
16.7113
16.8679
17.0170
17.1591
17.2944
17.4232
17.5459
17.6628
17.7741
17.8801
17.9810
18.0772
18.1687
18.2559
0.9434
1.8334
2.6730
3.4651
4.2124
4.9173
5.5824
6.2098
6.8017
7.3601
7.8869
8.3838
8.8527
9.2950
9.7123
10.1059
10.4773
10.8276
11.1581
11.4699
11.7641
12.0416
12.3034
12.5504
12.7834
13.0032
13.2105
13.4062
13.5907
13.7648
13.9291
14.0840
14.2302
14.3681
14.4983
14.6210
14.7368
14.8460
14.9491
15.0463
15.1380
15.2245
15.3062
15.3832
15.4558
15.5244
15.5890
15.6500
15.7076
15.7619
0.9346
1.8080
2.6243
3.3872
4.1002
4.7665
5.3893
5.9713
6.5152
7.0236
7.4987
7.9427
8.3577
8.7455
9.1079
9.4467
9.7632
10.0591
10.3356
10.5940
10.8355
11.0612
11.2722
11.4693
11.6536
11.8258
11.9867
12.1371
12.2777
12.4090
12.5318
12.6466
12.7538
12.8540
12.9477
13.0352
13.1170
13.1935
13.2649
13.3317
13.3941
13.4525
13.5070
13.5579
13.6055
13.6500
13.6916
13.7305
13.7668
13.8008
0.9259
1.7833
2.5771
3.3121
3.9927
4.6229
5.2064
5.7466
6.2469
6.7101
7.1390
7.5361
7.9038
8.2442
8.5595
8.8514
9.1216
9.3719
9.6036
9.8182
10.0168
10.2007
10.3711
10.5288
10.6748
10.8100
10.9352
11.0511
11.1584
11.2578
11.3498
11.4350
11.5139
11.5869
11.6546
11.7172
11.7752
11.8289
11.8786
11.9246
11.9672
12.0067
12.0432
12.0771
12.1084
12.1374
12.1643
12.1891
12.2122
12.2335
0.9174
1.7591
2.5313
3.2397
3.8897
4.4859
5.0330
5.5348
5.9953
6.4177
6.8052
7.1607
7.4869
7.7862
8.0607
8.3126
8.5436
8.7556
8.9501
9.1286
9.2922
9.4424
9.5802
9.7066
9.8226
9.9290
10.0266
10.1161
10.1983
10.2737
10.3428
10.4062
10.4664
10.5178
10.5668
10.6118
10.6530
10.6908
10.7255
10.7574
10.7866
10.8134
10.8380
10.8605
10.8812
10.9002
10.9176
10.9336
10.9482
10.9617
0.9132
1.7473
2.5089
3.2045
3.8397
4.4198
4.9496
5.4334
5.8753
6.2788
6.6473
6.9838
7.2912
7.5719
7.8282
8.0623
8.2760
8.4713
8.6496
8.8124
8.9611
9.0969
9.2209
9.3342
9.4376
9.5320
9.6183
9.6971
9.7690
9.8347
9.8947
9.9495
9.9996
10.0453
10.0870
10.1251
10.1599
10.1917
10.2207
10.2473
10.2715
10.2936
10.3138
10.3322
10.3490
10.3644
10.3785
10.3913
10.4030
10.4137
0.9091
1.7355
2.4869
3.1699
3.7908
4.3553
4.8684
5.3349
5.7590
6.1446
6.4951
6.8137
7.1034
7.3667
7.6061
7.8237
8.0216
8.2014
8.3649
8.5136
8.6487
8.7715
8.8832
8.9847
9.0770
9.1610
9.2372
9.3066
9.3696
9.4269
9.4790
9.5264
9.5694
9.6086
9.6442
9.6765
9.7059
9.7327
9.7570
9.7791
9.7991
9.8174
9.8340
9.8491
9.8628
9.8753
9.8866
9.8969
9.9063
9.9148
0.9050
1.7240
2.4651
3.1359
3.7429
4.2922
4.7893
5.2392
5.6463
6.0148
6.3482
6.6500
6.9230
7.1702
7.3938
7.5962
7.7794
7.9452
8.0952
8.2309
8.3538
8.4649
8.5656
8.6566
8.7390
8.8136
8.8811
8.9422
8.9974
9.0474
9.0927
9.1337
9.1707
9.2043
9.2347
9.2621
9.2870
9.3095
9.3299
9.3483
9.3650
9.3801
9.3937
9.4061
9.4163
9.4274
9.4366
9.4449
9.5424
9.4591
0.9009
1.7125
2.4437
3.1025
3.6959
4.2305
4.7122
5.1461
5.5371
5.8892
6.2065
6.4924
6.7499
6.9819
7.1909
7.3792
7.5488
7.7016
7.8393
7.9633
8.0751
8.1757
8.2664
8.3481
8.4217
8.4881
8.5478
8.6016
8.6501
8.6938
8.7332
8.7686
8.8005
8.8293
8.8552
8.8786
8.8996
8.9186
8.9357
8.9511
8.9649
8.9774
8.9887
8.9988
9.0079
9.0161
9.0236
9.0302
9.0362
9.0417
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
870
Appendix Present Value Tables
Table 2 (Continued)
Period 11.50% 12.00% 12.50% 13.00% 13.50% 14.00% 14.50% 15.00% 15.50% 16.00% 17.00% 18.00% 19.00% 20.00%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
0.8969
1.7012
2.4226
3.0696
3.6499
4.1703
4.6370
5.0556
5.4311
5.7678
6.0698
6.3406
6.5835
6.8013
6.9967
7.1719
7.3291
7.4700
7.5964
7.7098
7.8115
7.9027
7.9845
8.0578
8.1236
8.1826
8.2355
8.2830
8.3255
8.3637
8.3980
8.4287
8.4562
8.4809
8.5030
8.5229
8.5407
8.5567
8.5710
8.5839
8.5954
8.6058
8.6150
8.6233
8.6308
8.6375
8.6435
8.6489
8.6537
8.6580
0.8929
1.6901
2.4018
3.0374
3.6048
4.1114
4.5638
4.9676
5.3283
5.6502
5.9377
6.1944
6.4236
6.6282
6.8109
6.9740
7.1196
7.2497
7.3658
7.4694
7.5620
7.6447
7.7184
7.7843
7.8431
7.8957
7.9426
7.9844
8.0218
8.0552
8.0850
8.1116
8.1354
8.1566
8.1755
8.1924
8.2075
8.2210
8.2330
8.2438
8.2534
8.2619
8.2696
8.2764
8.2825
8.2880
8.2928
8.2972
8.3010
8.3045
0.8889
1.6790
2.3813
3.0056
3.5606
4.0538
4.4923
4.8821
5.2285
5.5364
5.8102
6.0535
6.2698
6.4620
6.6329
6.7848
6.9198
7.0398
7.1465
7.2414
7.3257
7.4006
7.4672
7.5264
7.5790
7.6258
7.6674
7.7043
7.7372
7.7664
7.7923
7.8154
7.8359
7.8542
7.8704
7.8848
7.8976
7.9090
7.9191
7.9281
7.9361
7.9432
7.9495
7.9551
7.9601
7.9645
7.9685
7.9720
7.9751
7.9779
0.8850
1.6681
2.3612
2.9745
3.5172
3.9976
4.4226
4.7988
5.1317
5.4262
5.6869
5.9177
6.1218
6.3025
6.4624
6.6039
6.7291
6.8399
6.9380
7.0248
7.1016
7.1695
7.2297
7.2829
7.3300
7.3717
7.4086
7.4412
7.4701
7.4957
7.5183
7.5383
7.5560
7.5717
7.5856
7.5979
7.6087
7.6183
7.6268
7.6344
7.6410
7.6469
7.6522
7.6568
7.6609
7.6645
7.6677
7.6705
7.6730
7.6752
0.8811
1.6573
2.3413
2.9438
3.4747
3.9425
4.3546
4.7177
5.0377
5.3195
5.5679
5.7867
5.9794
6.1493
6.2989
6.4308
6.5469
6.6493
6.7395
6.8189
6.8889
6.9506
7.0049
7.0528
7.0950
7.1321
7.1649
7.1937
7.2191
7.2415
7.2613
7.2786
7.2940
7.3075
7.3193
7.3298
7.3390
7.3472
7.3543
7.3607
7.3662
7.3711
7.3754
7.3792
7.3826
7.3855
7.3881
7.3904
7.3925
7.3942
0.8772
1.6467
2.3216
2.9137
3.4331
3.8887
4.2883
4.6389
4.9464
5.2161
5.4527
5.6603
5.8424
6.0021
6.1422
6.2651
6.3729
6.4674
6.5504
6.6231
6.6870
6.7429
6.7921
6.8351
6.8729
6.9061
6.9352
6.9607
6.9830
7.0027
7.0199
7.0350
7.0482
7.0599
7.0701
7.0790
7.0868
7.0937
7.0998
7.1050
7.1097
7.1138
7.1173
7.1205
7.1232
7.1256
7.1277
7.1296
7.1312
7.1327
0.8734
1.6361
2.3023
2.8841
3.3922
3.8360
4.2236
4.5621
4.8577
5.1159
5.3414
5.5383
5.7103
5.8606
5.9918
6.1063
6.2064
6.2938
6.3701
6.4368
6.4950
6.5459
6.5903
6.6291
6.6629
6.6925
6.7184
6.7409
6.7606
6.7779
6.7929
6.8060
6.8175
6.8275
6.8362
6.8439
6.8505
6.8564
6.8615
6.8659
6.8698
6.8732
6.8761
6.8787
6.8810
6.8830
6.8847
6.8862
6.8875
6.8886
0.8696
1.6257
2.2832
2.8850
3.3522
3.7845
4.1604
4.4873
4.7716
5.0188
5.2337
5.4206
5.5832
5.7245
5.8474
5.9542
6.0472
6.1280
6.1982
6.2593
6.3125
6.3587
6.3988
6.4338
6.4642
6.4906
6.5135
6.5335
6.5509
6.5660
6.5791
6.5905
6.6005
6.6091
6.6166
6.6231
6.6288
6.6338
6.6381
6.6418
6.6450
6.6479
6.6503
6.6524
6.6543
6.6559
6.6573
6.6585
6.6596
6.6605
0.8658
1.6154
2.2644
2.8263
3.3129
3.7341
4.0988
4.4145
4.6879
4.9246
5.1295
5.3069
5.4606
5.5936
5.7087
5.8084
5.8947
5.9695
6.0342
6.0902
6.1387
6.1807
6.2170
6.2485
6.2758
6.2994
6.3198
6.3375
6.3528
6.3661
6.3776
6.3875
6.3961
6.4035
6.4100
6.4156
6.4204
6.4246
6.4282
6.4314
6.4341
6.4364
6.4385
6.4402
6.4418
6.4431
6.4442
6.4452
6.4461
6.4468
0.8621
1.6052
2.2459
2.7982
3.2743
3.6847
4.0386
4.3436
4.6065
4.8332
5.0286
5.1971
5.3423
5.4675
5.5755
5.6685
5.7487
5.8179
5.8775
5.9288
5.9731
6.0113
6.0443
6.0726
6.0971
6.1182
6.1364
6.1520
6.1656
6.1772
6.1872
6.1959
6.2034
6.2098
6.2153
6.2201
6.2242
6.2278
6.2309
6.2335
6.2358
6.2377
6.2394
6.2409
6.2421
6.2432
6.2442
6.2450
6.2457
6.2463
0.8547
1.5852
2.2096
2.7432
3.1994
3.5892
3.9224
4.2072
4.4506
4.6586
4.8364
4.9884
5.1183
5.2293
5.3242
5.4053
5.4746
5.5339
5.5845
5.6278
5.6648
5.6964
5.7234
5.7465
5.7662
5.7831
5.7975
5.8099
5.8204
5.8294
5.8371
5.8437
5.8493
5.8541
5.8582
5.8617
5.8647
5.8673
5.8695
5.8713
5.8729
5.8743
5.8755
5.8765
5.8773
5.8781
5.8787
5.8792
5.8797
5.8801
0.8475
1.5656
2.1743
2.6901
3.1272
3.4976
3.8115
4.0776
4.3030
4.4941
4.6560
4.7932
4.9095
5.0081
5.0916
5.1624
5.2223
5.2732
5.3162
5.3528
5.3837
5.4099
5.4321
5.4510
5.4669
5.4804
5.4919
5.5016
5.5098
5.5168
5.5227
5.5277
5.5320
5.5356
5.5386
5.5412
5.5434
5.5453
5.5468
5.5482
5.5493
5.5502
5.5511
5.5517
5.5523
5.5528
5.5532
5.5536
5.5539
5.5541
0.8403
1.5465
2.1399
2.6386
3.0576
3.4098
3.7057
3.9544
4.1633
4.3389
4.4865
4.6105
4.7147
4.8023
4.8759
4.9377
4.9897
5.0333
5.0700
5.1009
5.1268
5.1486
5.1669
5.1822
5.1952
5.2060
5.2151
5.2228
5.2292
5.2347
5.2392
5.2430
5.2463
5.2490
5.2512
5.2531
5.2547
5.2561
5.2572
5.2582
5.2590
5.2596
5.2602
5.2607
5.2611
5.2614
5.2617
5.2619
5.2621
5.2623
0.8333
1.5278
2.1065
2.5887
2.9906
3.3255
3.6046
3.8372
4.0310
4.1925
4.3271
4.4392
4.5327
4.6106
4.6755
4.7296
4.7746
4.8122
4.8435
4.8696
4.8913
4.9094
4.9245
4.9371
4.9476
4.9563
4.9636
4.9697
4.9747
4.9789
4.9825
4.9854
4.9878
4.9898
4.9930
4.9930
4.9941
4.9951
4.9959
4.9966
4.9972
4.9976
4.9980
4.9984
4.9986
4.9989
4.9991
4.9992
4.9993
4.9995
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Licensed to: iChapters User
Glossary
A
ABC see activity-based costing
ABM see activity-based management
abnormal loss a decline in units in excess of
expectations during a production process
absorption costing a cost accumulation
and reporting method that treats the
costs of all manufacturing components
(direct material, direct labor, variable
overhead, and fixed overhead) as inventoriable or product costs; the traditional
approach to product costing; must be
used for external financial statements and
tax reporting
accounting rate of return (ARR) the rate
of earnings obtained on the average capital
investment over the life of a capital project;
computed as average annual profits divided
by average investment; not based on cash
flow
activity a repetitive action performed in fulfillment of business functions
activity analysis the process of detailing
the various repetitive actions that are performed in making a product or providing
a service, classifying them as value-added
and non-value-added, and devising ways of
minimizing or eliminating non-value-added
activities
activity-based costing (ABC) a process
using multiple cost drivers to predict and
allocate costs to products and services; an
accounting system collecting financial and
operational data on the basis of the underlying nature and extent of business activities; an accounting information and costing
system that identifies the various activities
performed in an organization, collects costs
on the basis of the underlying nature and
extent of those activities, and assigns costs
to products and services based on consumption of those activities by the products and services
activity-based management (ABM) a
discipline that focuses on the activities
incurred during the production/performance process as the way to improve
the value received by a customer and the
resulting profit achieved by providing this
value
activity center a segment of the production
or service process for which management
wants to separately report the costs of the
activities performed
activity driver a measure of the demands
on activities and, thus, the resources consumed by products and services; often
indicates an activity’s output
appropriation a budgeted maximum allowable expenditure
actual cost system a valuation method that
uses actual direct material, direct labor, and
overhead charges in determining the cost
of Work in Process Inventory
approximated net realizable value at splitoff allocation a method of allocating
joint cost to joint products using a simulated net realizable value at the split-off
point; computed as final sales price minus
incremental separate costs
ad hoc discount a price concession made
under competitive pressure (real or imagined)
that does not relate to quantity purchased
asset turnover a ratio measuring asset productivity and showing the number of sales
dollars generated by each dollar of assets
administrative department an organizational unit that performs management
activities benefiting the entire organization;
includes top management personnel and
organization headquarters
authority the right (usually by virtue of position or rank) to use resources to accomplish
a task or achieve an objective
advance pricing agreement (APA) a binding contract between a company and one
or more national tax authorities that provides details of how a transfer price is to be
set and establishes that no adjustments or
penalties will be made if the agreed-upon
methodology is used
algebraic method a process of support
department cost allocation that considers
all interrelationships of the departments
and reflects these relationships in simultaneous equations
algorithm a logical step-by-step problemsolving technique (generally requiring
the use of a computer) that continuously
searches for an improved solution from the
one previously computed until the best
answer is determined
allocate to assign cost based on the use of a
cost driver, a cost predictor, or an arbitrary
method
allocation the systematic assignment of an
amount to a recipient set of categories
annuity a series of equal cash flows (either
positive or negative) per period
annuity due a series of equal cash flows
being received or paid at the beginning of
a period
applied overhead the amount of overhead
that has been allocated to Work in Process
Inventory as a result of productive activity;
credits for this amount are to an overhead
account
appraisal cost a quality control cost
incurred for monitoring or inspection;
compensates for mistakes not eliminated
through prevention activities
autonomation the use of equipment that
has been programmed to sense certain
conditions
B
backflush costing a streamlined cost
accounting method that speeds up, simplifies, and reduces accounting effort in an environment that minimizes inventory balances,
requires few allocations, uses standard costs,
and has minimal variances from standard
balanced scorecard (BSC) an approach to
performance measurement that uses performance measures from four perspectives:
financial, internal business, customer, and
innovation and learning
batch-level cost a cost that is caused by a
group of things being made, handled, or
processed at a single time
benchmarking the process of investigating how others do something better
so that the investigating company can
imitate, and possibly improve upon, its
techniques
benefits-provided ranking a listing of support departments in an order that begins
with the one providing the most support
to all other corporate areas and ends with
the support department providing support
primarily to revenue-producing areas
bill of materials a source document that
contains information about the product
material components and their specifications (including quality and quantities
needed)
black box a term for a management control
system whose exact nature of operation
cannot be observed
871
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Licensed to: iChapters User
872
Glossary
bottleneck any object or facility having a
processing speed sufficiently slow to cause
the other processing mechanisms in its network to experience idle time
production, distribution, or service
capabilities for more than one year
break-even chart a graph that depicts the
relationships among revenues, variable
costs, fixed costs, and profits (or losses)
capital budgeting a process of evaluating
an entity’s proposed long-range projects
or courses of future activity for the purpose
of allocating limited resources to desirable
projects
break-even point (BEP) the level of activity,
in units or dollars, at which total revenues
equal total costs
capital rationing a process that allocates
scarce or constrained monetary resources
to capital asset acquisitions
budget a financial plan for the future based
on a single level of activity; the quantitative
expression of a company’s commitment to
planned activities and resource acquisition
and use
carrying cost the total variable cost of carrying one unit of inventory in stock for one
year; includes the opportunity cost of capital invested in inventory
budgeting the process of formalizing plans
and committing them to written, financial
terms
budget manual a detailed set of documents
that provides descriptive information and
guidelines about the budgetary process
budget slack an intentional underestimation of revenues and/or overestimation
of expenses in a budgeting process for
the purpose of including deviations that
are likely to occur so that results will meet
expectations
budget variance the difference between
total actual overhead and budgeted overhead based on standard hours allowed for
the production achieved during the period;
computed as part of two-variance overhead
analysis; also referred to as the controllable
variance
build mission a mission of increasing market share even at the expense of short-term
profits and cash flow; typically pursued by a
business unit that has a small market share
in a high-growth industry; appropriate for
products that are in the early stages of the
product life cycle
business process reengineering (BPR)
the process of combining information
technology to create new and more
effective business processes to lower costs,
eliminate unnecessary work, upgrade
customer service, and increase speed to
market
business-value-added activity an activity
that is necessary for the operation of the
business but for which a customer would
not want to pay; a non-value-adding
activity
by-product an incidental output of a joint
process; is salable, but its sales value is not
substantial enough for management to
justify undertaking the joint process; has a
higher sales value than scrap
C
capacity a measure of production volume or
some other activity base
capital asset an asset used to generate
revenues or cost savings by providing
cash flow the receipt or disbursement of
cash; when related to capital budgeting,
cash flows arise from the purchase, operation, and disposition of a capital asset
centralization a management style that
exists when top management makes most
decisions and controls most activities of the
organizational units from the company’s
central headquarters
coefficient of determination a measure of
dispersion that indicates the “goodness of
fit” of the actual observations to the least
squares regression line; indicates what
proportion of the total variation in Y is
explained by the regression model
committed cost a cost related either to the
long-term investment in plant and equipment of a business or to the organizational
personnel deemed permanent by top
management; cannot be changed without
long-run detriment to the organization
compensation strategy a foundation for
the compensation plan that addresses
the role compensation should play in the
organization
competence the notion that individuals will
develop and maintain the skills necessary
to practice their profession
compounding period the time between
each interest computation
compound interest a method of determining interest in which interest that was
earned in prior periods is added to the original investment so that, in each successive
period, interest is earned on both principal
and interest
computer-integrated manufacturing
(CIM) the integration of two or more flexible manufacturing systems through the
use of a host computer and an information
networking system
confidentiality the notion that individuals
will refrain from disclosing company information to inappropriate parties, such as
competitors; is often specifically defined or
referred to in the company’s code of ethics
confrontation strategy an organizational
strategy in which company management
decides to confront, rather than avoid, competition; an organizational strategy in which
company management still attempts to differentiate company products through new
features or to develop a price leadership
position by dropping prices, even though
management recognizes that competitors
will rapidly bring out similar products and
match price changes; an organizational strategy in which company management identifies and exploits current opportunities for
competitive advantage in recognition of the
fact that those opportunities are transitory
constraint a restriction inhibiting the
achievement of an objective
continuous budget a plan in which there is
a rolling 12-month budget; a new budget
month (12 months into the future) is added
as each current month expires
continuous improvement an ongoing
process of enhancing employee task performance, level of product quality, and level
of company service through (1) eliminating
non-value-added activities to reduce lead
time, (2) making products (performing
services) with zero defects, (3) reducing
product costs on an ongoing basis, and/or
(4) simplifying products and processes
continuous loss any reduction in units that
occurs uniformly throughout a production
process
contribution margin (CM) the difference
between selling price and variable cost per
unit or between total revenue and total
variable cost at a specific level of activity;
the amount of each revenue dollar remaining after variable costs have been covered
that goes toward coverage of fixed costs
and generation of profits
contribution margin ratio (CM%) the
proportion of each revenue dollar remaining after variable costs have been covered;
computed as contribution margin divided
by sales
control chart a graphical presentation of the
results of a specified activity; indicates the
upper and lower control limits and those
results that are out of control
controllable cost a cost over which a manager has the ability to authorize incurrence
or directly influence magnitude
controllable variance the budget variance
of the two-variance approach to analyzing
overhead variances
conversion cost the sum of direct labor and
overhead cost; the cost necessary to transform direct material into a finished good or
service
core competency a higher proficiency relative to competitors in a critical function
or activity; a root of competitiveness and
competitive advantage; anything that is not
a core competency is a viable candidate for
outsourcing
cost the cash or cash equivalent value necessary to attain an objective such as acquiring goods and services, complying with a
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Glossary
contract, performing a function, or producing and distributing a product
cost accounting a discipline that focuses on
techniques or methods for determining the
cost of a project, process, or thing through
direct measurement, arbitrary assignment,
or systematic and rational allocation
cost of goods manufactured (CGM) the
total cost of the goods completed and
transferred to Finished Goods Inventory
during the period
cost of noncompliance the cost of production imperfections that is equal to the sum
of internal and external failure costs
Cost Accounting Standards Board
(CASB) a body established by Congress
in 1970 to promulgate cost accounting
standards for defense contractors and
federal agencies; disbanded in 1980 and
reestablished in 1988
cost of production report a process costing document that details all operating and
cost information, shows the computation
of cost per equivalent unit, and indicates
cost assignment to goods produced during
the period
cost allocation the assignment, using some
reasonable basis, of any indirect cost to one
or more cost objects
cost-plus contract a contract in which the
customer agrees to reimburse the producer
for the cost of the job plus a specified profit
margin over cost
cost avoidance the practice of finding
acceptable alternatives to high-cost items
and/or not spending money for unnecessary goods or services
cost-benefit analysis the analytical process
of comparing the relative costs and benefits
that result from a specific course of action
(such as providing information or investing
in a project)
cost center a responsibility center in which
the manager has the authority to incur
costs and is evaluated on the basis of how
well costs are controlled
cost consciousness a company-wide attitude about the topics of cost understanding, cost containment, cost avoidance, and
cost reduction
cost containment the practice of minimizing, to the extent possible, period-by-period
increases in per-unit variable and total fixed
costs
cost control system a logical structure of
formal and/or informal activities designed
to analyze and evaluate how well expenditures are managed during a period
cost driver a factor that has a direct causeeffect relationship to a cost; an activity
creating a cost
cost driver analysis the process of investigating, quantifying, and explaining the relationships of cost drivers and their related
costs
cost leadership a company’s ability to maintain its competitive edge by undercutting
competitor prices
cost management system (CMS) a set of
formal methods developed for planning
and controlling an organization’s costgenerating activities relative to its goals
and objectives
cost object anything to which costs attach
or are related
cost of capital (COC) the weighted average
cost of the various sources of funds (debt
and stock) that comprise a firm’s financial
structure
cost of compliance the sum of prevention
and appraisal costs
cost reduction the practice of lowering current costs, especially those that may be in
excess of what is necessary
cost structure the relative composition of
an organization’s fixed and variable costs
cost table a database providing information
about the impact on product costs of using
different input resources, manufacturing
processes, and design specifications
cost-volume-profit (CVP) analysis a procedure that examines changes in costs and
volume levels and the resulting effects on
net income (profits)
credibility the belief that individuals will
provide full, fair, and timely disclosure of all
relevant information
critical success factor (CSF) any operational dimension (such as quality, customer
service, efficiency, cost control, or responsiveness to change) so important that
failure in that area could cause the organization to fail
customer value perspective a balanced
scorecard perspective that addresses how
well an organization is doing relative to
important customer criteria such as speed
(lead time), quality, service, and price (both
purchases and after purchase)
CVP see cost-volume-profit analysis
cycle (lead) time the time elapsed between
the placement of an order and the time the
goods arrive for usage or are produced by
the company; the sum of value-added time
and non-value-added time
D
data mining a form of analysis in which
statistical techniques are used to uncover
answers to important questions about business operations
decentralization a management style that
exists when top management grants subordinate managers a significant degree of
autonomy and independence in operating
and making decisions for their organizational units
873
decision variable an unknown item for
which a linear programming problem is
being solved
defect a unit that has been rejected at
inspection for failure to meet appropriate
quality standards or designated product
specifications but that can be reworked
and sold
degree of operating leverage (DOL) a
factor that indicates how a percentage
change in sales, from the existing or current
level, will affect company profits; calculated
as contribution margin divided by net
income; equal to (1 ⫼ margin of safety
percentage)
dependent variable an unknown variable
that is to be predicted using one or more
independent variables
differential cost a cost that differs in
amount among the alternatives being
considered
differential revenue a revenue that differs
in amount among alternatives
direct cost a cost that is distinctly traceable
to a particular cost object
direct costing see variable costing
direct labor the individuals who work specifically on manufacturing a product or
performing a service; the time of individuals
who work specifically on manufacturing a
product or performing a service; the cost of
such time
direct material a readily identifiable part of
a product; the cost of such a part
direct method a support department cost
allocation approach that assigns support
department costs directly to revenueproducing areas with only one set of intermediate cost pools or allocations
discounting the process of reducing future
cash flows to present value amounts
discount rate the rate of return used to
discount future cash flows to their present
value amounts; should equal or exceed an
organization’s weighted average cost of
capital
discrete loss a reduction in units that occurs
at a specific point in a production process
discretionary cost a cost that is periodically
reviewed by a decision maker in a process
of determining whether it continues to be
in accord with ongoing policies; arises from
a management decision to fund an activity
at a specified cost amount for a specified
period of time, generally one year; can be
reduced to zero in the short run if necessity
so dictates
distribution cost a cost incurred to warehouse, transport, or deliver a product or
service
downsizing any management action that
reduces employment upon restructuring
operations in response to competitive
pressures
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874
Glossary
downstream cost a cost related to marketing, distribution, or customer service
dual pricing arrangement a transfer pricing system that allows a selling division to
record the transfer of goods or services at
one price (e.g., a market or negotiated market price) and a buying division to record
the transfer at another price (e.g., a costbased amount)
Du Pont model a model that indicates the
return on investment as it is affected by
profit margin and asset turnover
E
earnings management any accounting
method or practice used by managers or
accountants to deliberately “adjust” a company’s profit amount to meet a predetermined internal or external target
economic order quantity (EOQ) an estimate of the number of units per order that
will be the least costly and provide the optimal balance between the costs of ordering
and the costs of carrying inventory
economic production run (EPR) an estimate of the number of units to produce at
one time that minimizes the total costs of
setting up production runs and the costs of
carrying inventory
economic value added (EVA®) a measure
of the extent to which income exceeds the
dollar cost of capital; calculated as income
minus (invested capital times the cost of
capital percentage)
employee stock ownership plan (ESOP) a
profit-sharing compensation program in
which investments are made in the securities of the employer
employee time sheet a source document
that indicates, for each employee, what jobs
were worked on during a time period and
for what amount of time
employee-to-capital cost ratio a ratio that
measures the relative importance of human
and financial capital to the industry
engineered cost a cost that has been found
to bear an observable and known relationship to a quantifiable activity base
engineering change order (ECO) a business
mandate that changes the way in which
a product is manufactured or a service is
performed by modifying the design, parts,
process, or quality of the product or service
enterprise resource planning (ERP)
system a packaged software program
that allows a company to (1) automate
and integrate the majority of its business
processes, (2) share common data and
practices across the entire enterprise, and
(3) produce and access information in a
real-time environment
environmental constraint any limitation on
strategy options caused by external, cultural,
fiscal, legal/regulatory, or political situations;
a limiting factor that is not under the direct
control of an organization’s management;
tends to be fairly long-run in nature
e-procurement system an electronic B2B
(business-to-business) buy-side application
controlling the requisitioning, ordering, and
payment functions for inputs
equivalent units of production (EUP) an
approximation of the number of whole
units of output that could have been produced during a period from the actual effort
expended during that period; used in process
costing systems to assign costs to production
expatriate a parent company or third-country
national assigned to a foreign subsidiary or
a foreign national assigned to the parent
company
finished goods the stage in the production
or conversion process where units are fully
completed
first-in, first-out (FIFO) method (of process
costing) the method of cost assignment
that computes an average cost per equivalent unit of production for the current
period; keeps beginning inventory units
and costs separate from current period
production and costs
fixed cost a cost that remains constant in
total within the relevant range of activity
fixed overhead spending variance the
difference between the total actual fixed
overhead and budgeted fixed overhead;
is computed as part of the four-variance
overhead analysis
expected capacity a short-run concept
that represents the anticipated level
of capacity to be used by a firm in the
upcoming period; is based on projected
product demand
fixed overhead volume variance see
volume variance
expected standard a standard set at a
level that reflects what is actually expected
to occur in the future period; anticipates
future waste and inefficiencies and allows
for them; is of limited value for control and
performance evaluation purposes
flexible manufacturing system (FMS)
a production system in which a single factory manufactures numerous variations of
products through the use of computercontrolled robots
expired cost an expense or a loss
external failure cost any expenditure for
items such as warranty work, customer
complaints, litigation, and defective product
recalls incurred after a faulty unit of product
has been shipped to the customer
F
failure cost a quality control cost associated with goods or services that have been
found not to conform or perform to the
required standards as well as all related
costs (such as that of the complaint department); it may be internal or external
feasible region the graphical space contained within and on all of the constraint
lines in the graphical solution to a linear
programming problem
feasible solution a solution to a linear programming problem that does not violate
any problem constraints
financial budget a plan that aggregates
monetary details from the operating budgets; includes the cash and capital budgets
of a company as well as the pro forma
financial statements
financial performance perspective a balanced scorecard perspective that addresses
the concerns of stockholders and other
stakeholders about profitability and organizational growth
financing decision a judgment made
regarding the method of raising funds that
will be used to make acquisitions; is based
on an entity’s ability to issue and service
debt and equity securities
flexible budget a presentation of multiple
budgets that show costs according to their
behavior at different levels of activity
focused factory arrangement an arrangement in which a vendor (which may be
an external party or an internal corporate
division) agrees to provide a limited number of products according to specifications
or to perform a limited number of unique
services to a company that is typically
operating on a just-in-time system
Foreign Corrupt Practices Act (FCPA)
a law passed by Congress in 1977 that
makes it illegal for a U.S. company to
engage in various “questionable” foreign
payments and makes it mandatory for
a U.S. company to maintain accurate
accounting records and a reasonable system of internal control
forward contract see option
full costing see absorption costing
functional classification a separation of
costs into groups based on a similar reason
for their incurrence; includes cost of goods
sold and detailed selling and administrative
expenses
future value (FV) the amount to which one
or more sums of money invested at a specified interest rate will grow over a specified
number of time periods
G
gap analysis the study of the differences
between two information systems, often a
current and a proposed system
goal congruence a circumstance in which
the personal and organizational goals of
decision makers throughout a firm are consistent and mutually supportive
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Glossary
grade (of product or service) the addition or
removal of product or service characteristics
to satisfy additional needs, especially price
indirect cost a cost that cannot be traced
explicitly to a particular cost object; a common cost
H
input-output coefficient a number (prefaced as a multiplier to an unknown variable) that indicates the rate at which each
decision variable uses up (or depletes) the
scarce resource
harvest mission a mission that attempts
to maximize short-term profits and cash
flow, even at the expense of market share;
is typically pursued by a business unit that
has a large market share in a low-growth
industry; is appropriate for products in the
final life cycle stages
hedging using options and forward contracts to manage price risk
high-low method a technique used to
determine the fixed and variable portions
of a mixed cost; uses only the highest and
lowest levels of activity within the relevant
range
hold mission a mission that attempts to
protect the business unit’s market share
and competitive position; is typically pursued by a business unit with a large market
share in a high-growth industry
hurdle rate a preestablished rate of return
against which other rates of return are
measured; is usually the cost of capital rate
when used in evaluating capital projects
hybrid costing system a costing system
combining characteristics of both job order
and process costing systems
I
ideal capacity
see theoretical capacity
ideal standard a standard that provides for
no inefficiencies of any type; is impossible
to attain on a continuous basis
idle time the amount of time spent in storing inventory or waiting at a production
operation for processing
imposed budget a budget developed by
top management with little or no input
from operating personnel; operating personnel are then informed of the budget
objectives and constraints
incremental analysis a process of evaluating changes that focuses only on the factors that differ from one course of action or
decision to another
incremental cost the cost of producing or
selling an additional contemplated quantity
of output
incremental revenue the revenue resulting
from an additional contemplated sale
independent project an investment project
that has no specific bearing on any other
investment project
independent variable a variable that, when
changed, will cause consistent, observable
changes in another variable; a variable used
as the basis for predicting the value of a
dependent variable
inspection time the time taken to perform
quality control activities
integer programming a mathematical programming technique in which all solutions
for variables must be restricted to whole
numbers
integrity the notion that individuals will not
participate in activities that would discredit
their company or profession
intellectual capital the sum of the intangible assets of skill, knowledge, and
information that exist in an organization;
encompasses human, structural, and relationship capital
internal benchmarking a comparative
technique that focuses on how and why
one organizational unit is performing better
than another
internal business perspective a balanced
scorecard perspective that addresses those
things an organization needs to do well to
meet customer needs and expectations
internal control any measure used by management to protect assets, promote the
accuracy of records, ensure adherence to
company policies, or promote operational
efficiency
internal failure cost an expenditure, such
as scrap and rework, incurred on defective
units before those units are shipped to the
customer
internal rate of return (IRR) the expected
or actual rate of return from a project based
on, respectively, the assumed or actual cash
flows; the discount rate at which the net
present value of the cash flows equals zero
Internet business model a model that
involves (1) few physical assets, (2) little
management hierarchy, and (3) a direct
pipeline to customers
intranet a mechanism for sharing information and delivering data from corporate
databases to the local-area network (LAN)
desktops
875
ISO 9000 series a comprehensive series of
international quality standards that define
the various design, material procurement,
production, quality control, and delivery
requirements and procedures necessary to
produce quality products and services; the
series of three compliance standards (ISO
9001, 9002, and 9003) and two guidance
standards (ISO 9000 and 9004) were integrated into ISO 9001:2000
J
JIT
see just-in-time
job a single unit or group of units identifiable
as being produced for a specific customer
job cost record see job order cost sheet
job order costing system a method of
product costing used by an entity that provides limited quantities of products or services unique to a customer’s needs; focus of
recordkeeping is on individual jobs
job order cost sheet a source document
that provides virtually all the financial information about a particular job; the set of all
job order cost sheets for uncompleted jobs
composes the Work in Process Inventory
subsidiary ledger
joint cost the total of all costs (direct material, direct labor, and overhead) incurred in a
joint process up to the split-off point
joint process a manufacturing process that
simultaneously produces multiple product
lines
joint product one of the primary outputs of a
joint process; each joint product individually
has substantial revenue generating ability
judgmental method (of risk adjustment)
an informal method of adjusting for risk
that allows the decision maker to use logic
and reason to decide whether a project
provides an acceptable rate of return
just-in-time (JIT) a philosophy about when
to do something; the when is “as needed”
and the something is a production, purchasing, or delivery activity
just-in-time manufacturing system a
production system that attempts to acquire
components and produce inventory only as
needed, to minimize product defects, and
to reduce lead/setup times for acquisition
and production
inventoriable cost see product cost
investment center a responsibility center
in which the manager is responsible for
generating revenues and planning and
controlling expenses and has the authority
to acquire, dispose of, and operate assets
to earn the highest rate of return feasible
on those assets given the mission of the
responsibility center
investment decision a judgment about
which assets will be acquired by an entity
to achieve its stated objectives
K
kaizen costing a costing technique to
reflect continuous efforts to reduce product costs, improve product quality, and/
or improve the production process after
manufacturing activities have begun
kanban the Japanese word for card; was
the original name for a JIT system because
of the use of cards that indicated a work
center’s need for additional components
during a manufacturing process
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876
Glossary
L
labor efficiency variance the number of
hours actually worked minus the standard
hours allowed for the production achieved
multiplied by the standard rate; establishes
a value for efficiency (favorable) or inefficiency (unfavorable) of the work force
line personnel any employee (some of
whom are in management positions) who
works directly toward attaining organizational goals
M
labor mix variance (actual mix ⫻ actual
hours ⫻ standard rate) minus (standard
mix ⫻ actual hours ⫻ standard rate); presents
the financial effect associated with changing
the proportionate amount of higher-or lowerpaid workers in production
make-or-buy decision a decision that compares the cost of internally manufacturing a
component of a final product (or providing
a service function) with the cost of purchasing it from outside suppliers (outsourcing)
or from another division of the company at
a specified transfer price
labor rate variance the actual rate (or
actual weighted average rate) paid to direct
labor for the period minus the standard
rate multiplied by all hours actually worked
during the period; can also be calculated
as actual labor cost minus (actual hours ⫻
standard rate)
management by exception a management
concept involving the setting of upper and
lower tolerance limits for deviations
labor yield variance (standard mix ⫻ actual
hours ⫻ standard rate) minus (standard
mix ⫻ standard hours ⫻ standard rate);
shows the monetary impact of using more
or fewer total hours than the standard
allowed
lagging indicator reflection of the results of
past decisions
lag indicator an outcome assessed by
historical data, often financial, that have
resulted from past actions
lead indicator a future financial or nonfinancial outcome (including opportunities
and problems) that helps assess strategic
progress and guide decision making before
lag indicators are known
leading indicator statistical data about the
actionable steps that will create the results
desired
lead time see cycle time
lean manufacturing a concept that refers
to making only those items in demand by
customers and making those items without
waste
learning and growth perspective a balanced scorecard perspective that focuses
on using an organization’s intellectual capital to adapt to changing customer needs
or to influence new customers’ needs and
expectations through product or service
innovations
least squares regression analysis a
statistical technique that investigates
the association between dependent and
independent variables; determines the
line of “best fit” for a set of observations by
minimizing the sum of the squares of the
vertical deviations between actual points
and the regression line; can be used to
determine the fixed and variable portions
of a mixed cost
linear programming (LP) a method of
mathematical programming used to solve a
problem that involves an objective function
and multiple limiting factors or constraints
management control system (MCS) an
information system that helps managers
gather information about actual organizational occurrences, make comparisons
against plans, effect changes when they
are necessary, and communicate among
appropriate parties; should serve to guide
organizations in designing and implementing strategies so that organizational goals
and objectives are achieved
management information system (MIS) a
structure of interrelated elements that collects, organizes, and communicates data
to managers so they may plan, control,
evaluate performance, and make decisions;
its emphasis is on internal demands for
information rather than external demands;
some or all of the MIS may be computerized for ease of access to information,
reliability of input and processing, and
ability to simulate outcomes of alternative
situations
manufacturer a company engaged in a
high degree of conversion that results in a
tangible output
manufacturing cell a linear or U-shaped
production grouping of workers or
machines
manufacturing cycle efficiency (MCE) a
ratio resulting from dividing the actual production time by total lead time; reflects the
proportion of lead time that is value-added
margin of safety (MS) the excess of the
budgeted or actual sales of a company over
its breakeven point; can be calculated in
units or dollars or as a percentage; is equal
to (1 ⫼ degree of operating leverage)
mass customization a process of personalizing production that is generally accomplished through the use of flexible manufacturing systems; reflects an organization’s
increase in product variety from the same
basic component elements
a measure of the monetary effect of substituting a nonstandard mix of material
material price variance total actual cost of
material purchased minus (actual quantity of
material ⫻ standard price); is the amount of
money spent below (favorable) or in excess
(unfavorable) of the standard price for the
quantity of materials purchased; can be calculated based on the actual quantity of material purchased or the actual quantity used
material quantity variance (actual
quantity ⫻ standard price) minus (standard
quantity allowed ⫻ standard price); reflects
the cost saved (favorable) or expended
(unfavorable) due to the difference between
the actual quantity of material used and the
standard quantity of material allowed for
the goods produced during the period
material requisition form a source
document that indicates the types and quantities of material to be placed into production
or used in performing a service; causes materials and their costs to be released from the
raw material inventory warehouse and sent
to the production center
material yield variance (standard mix ⫻
actual quantity ⫻ standard price) minus
(standard mix ⫻ standard quantity ⫻
standard price); computes the difference
between the actual total quantity of input
and the standard total quantity allowed
based on output and uses standard mix
and standard prices to determine variance
mathematical programming a variety
of techniques used to allocate limited
resources among activities to achieve a
specific objective
method of least squares
regression analysis
see least squares
method of neglect a method of treating
spoiled units in the equivalent units schedule as if those units did not occur; is used
for continuous normal spoilage
methods-time measurement (MTM) an
industrial engineering process that analyzes
work tasks to determine the time a trained
worker requires to perform a given operation at a rate that can be sustained for an
eight-hour workday
mission statement a written expression
of organizational purpose that describes
how the organization uniquely meets its
targeted customers’ needs with its products
or services
mix any possible combination of material or
labor inputs
mixed cost a cost that has both a variable
and a fixed component; varies with
changes in activity, but not proportionately
master budget the comprehensive set of
all budgetary schedules and the pro forma
financial statements of an organization
multiple regression a statistical technique
that uses two or more independent variables to predict a dependent variable
material mix variance (actual mix ⫻ actual
quantity ⫻ standard price) minus (standard
mix ⫻ actual quantity ⫻ standard price); is
mutually exclusive projects a set of proposed capital projects from which one is
chosen, causing all the others to be rejected
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Glossary
mutually inclusive projects a set of proposed capital projects that are all related
and that must all be chosen if the primary
project is chosen
O
objective function the linear mathematical
equation that states the purpose of a linear
programming problem
offshoring an outsourcing of jobs formerly
performed in the home country to foreign
countries
N
negotiated transfer price an intracompany
charge for goods or services set through a
process of negotiation between the selling
and purchasing unit managers
net present value (NPV) the difference
between the present values of all cash
inflows and outflows for an investment
project
net present value method a process that
uses the discounted cash flows of a project
to determine whether the rate of return
on that project is equal to, higher than, or
lower than the desired rate of return
net realizable value (NRV) the amount
remaining after all costs necessary to
prepare and dispose of a product are subtracted from product revenue at sales point
or at split-off
net realizable value approach a method
of accounting for by-products or scrap
that requires that the net realizable value
of these products be treated as a reduction in the cost of the primary products;
primary product cost may be reduced by
decreasing either (1) cost of goods sold
when the joint products are sold or (2) the
joint process cost allocated to the joint
products
net realizable value at split-off allocation
a method of allocating joint cost to joint
products that uses, as the proration base,
sales value at split-off minus all costs
necessary to prepare and dispose of the
products; requires that all joint products be
salable at the split-off point
noncontrollable variance the fixed overhead volume variance; is computed as part
of the two-variance approach to overhead
analysis
non-negativity constraint a restriction in
a linear programming problem stating that
negative values for physical quantities cannot exist in a solution
non-value-added (NVA) activity an activity that increases the time spent on a product or service but that does not increase its
worth or value to the customer
normal capacity the long-run (5–10 years)
average production or service volume of a
firm; takes into consideration cyclical and
seasonal fluctuations
normal cost system a valuation method
that uses actual costs of direct material and
direct labor in conjunction with a predetermined overhead rate or rates in determining the cost of Work in Process Inventory
normal loss an expected decline in units
during the production process
open-book management a philosophy
about increasing a firm’s performance by
involving all workers and by ensuring that
all workers have access to operational and
financial information necessary to achieve
performance improvements
operating budget a budget expressed in
both units and dollars
operating leverage the proportionate relationship between a company’s variable and
fixed costs; reflects the cost structure
operations flow document a source
document listing all operations necessary to produce one unit of product
(or perform a specific service) and the
corresponding time allowed for each
operation
opportunity cost a potential benefit that
is forgone because one course of action is
chosen over another
optimal solution the solution to a linear
programming problem that provides
the best answer to the objective
function
877
organizational structure the manner in
which authority and responsibility for decision making are distributed in an entity
outlier an abnormal or nonrepresentative
point within a data set
outsourcing the use, by one company, of an
external provider of a service or manufacturer of a component
outsourcing decision
decision
see make-or-buy
overapplied overhead a credit balance in
the Overhead Control account at the end of
a period; exists when the applied overhead
amount is greater than the actual overhead
that was incurred
overhead any factory or production cost
that is indirect to the product or service;
does not include direct material or direct
labor; any production cost that cannot be
directly traced to the product
overhead application rate
mined overhead rate
see predeter-
overhead efficiency variance the difference between total budgeted overhead at
actual hours and total budgeted overhead
at standard hours allowed for the production achieved; is computed as part of a
three-variance analysis; is the same as variable overhead efficiency variance
option an agreement that gives the holder
the right to purchase a given quantity of a
specific item (e.g., stock) at a specific price
overhead spending variance the difference between total actual overhead and
total budgeted overhead at actual hours;
is computed as part of a three-variance
analysis; is equal to the sum of the variable
and fixed overhead spending variances
ordering cost the variable cost associated
with preparing, receiving, and paying for
an order
P
order point the level of inventory that triggers the placement of an order for additional units; is determined based on usage,
lead time, and safety stock
ordinary annuity a series of equal cash
flows being received or paid at the end of
a period
organizational culture the set of basic
assumptions about the organization and
its goals and ways of doing business; a
system of shared values about what is
important and beliefs about how things get
accomplished; provides a framework that
organizes and directs employee behavior at
work; describes an organization’s norms in
internal and external, as well as formal and
informal, transactions
organizational form an entity’s legal nature
(for example, sole proprietorship, partnership, corporation)
Pareto inventory analysis an analysis that
separates inventory into three groups based
on annual cost-to-volume usage
Pareto principle a rule that states that the
greatest effects in human endeavors are
traceable to a small number of causes (the
vital few), while the majority of causes (the
trivial many) collectively yield only a small
impact; is often referred to as the 20:80 rule
participatory budget a budget that has
been developed through a process of joint
decision making by top management and
operating personnel
payback period the time it takes an investor
to recoup an original investment through
cash flows from a project
perfection standard see ideal standard
period cost a cost other than one associated
with making or acquiring inventory
organizational-level cost a cost incurred to
support the ongoing facility or operations
phantom profit a temporary absorption
costing profit caused by producing more
inventory than is sold
organizational memory the aggregation of
data, facts, experiences, and lessons learned
that is important to an organization’s
existence
physical measure allocation a method of
allocating a joint cost to products that uses
a common physical characteristic as the
proration base
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878
Glossary
postinvestment audit the process of gathering information on the actual results of a
capital project and comparing them to the
expected results
practical capacity the physical production
or service volume that a firm could achieve
during normal working hours with consideration given to ongoing, expected operating interruptions
process map a flowchart or diagram indicating every step that goes into making a
product or providing a service
process productivity the total number
of units produced during a period during
value-added processing time
process quality yield the proportion of
good units that resulted from the activities
expended
practical standard a standard that can be
reached or slightly exceeded with reasonable effort by workers; allows for normal,
unavoidable delays and for worker breaks;
is often believed to be most effective in
inducing the best performance from workers because it represents an attainable
challenge
product complexity an assessment about
the number of components in a product
predetermined overhead rate an estimated constant charge per unit of activity
used to assign overhead cost to production
or services of the period; is calculated by
dividing total budgeted annual overhead at
a selected level of volume or activity by that
selected measure of volume or activity; is
also the standard overhead application rate
product differentiation a company’s ability
to offer superior quality products or more
unique services than its competitors
predictor an activity measure that, when
changed, is accompanied by consistent,
observable changes in another item
preference decision the second decision
made in capital project evaluation in which
projects are ranked according to their
impact on the achievement of company
objectives
present value (PV) the amount that one or
more future cash flows is worth currently,
given a specified rate of interest
present value index see profitability index
prevention cost a cost incurred to improve
quality by preventing defects from
occurring
price elasticity a numerical measure of the
relationship of supply or demand to price
changes
prime cost the total cost of direct material
and direct labor for a product
process a series of activities that, when performed together, satisfy a specific objective
process benchmarking a comparative
technique that focuses on practices and
how the best-in-class companies achieved
their results
process complexity an assessment about
the number of processes through which a
product flows
process costing system a method of accumulating and assigning costs to units of
production in companies producing large
quantities of homogeneous products; accumulates costs by cost component in each
production department and assigns costs to
units using equivalent units of production
processing (service) time the actual time
consumed performing the functions necessary to manufacture a product
product contribution margin the difference between selling price and variable
cost of goods sold
product cost a cost associated with making
or acquiring inventory
productive processing time the proportion
of total time that is value-added time; also
known as manufacturing cycle efficiency
product-level (process-level) cost a cost
that is caused by the development, production, or acquisition of specific products or
services
product life cycle a model depicting the
stages through which a product class (not
necessarily each product) passes
product line margin see segment margin
inventory that is not currently needed
because of lead time or economic production/order requirements; requires that
excess inventory be stored until needed
Q
quality the condition of having all the characteristics of a product or service to meet
the stated or implied needs of the buyer;
relates to both performance and value;
the pride of workmanship; conformity to
requirements
quality audit a review of product design
activities (although not for individual products), manufacturing processes and controls, quality documentation and records,
and management philosophy
quality control (QC) the implementation
of all practices and policies designed to
eliminate poor quality and variability in
the production or service process; places
the primary responsibility for quality at the
source of the product or service
R
radio frequency identification (RFID) an
advanced information technology that
uses exceptionally small “flakes” of silicon to
transmit a code for the item to which it is
attached
product variety the number of different
types of products produced (or services
rendered) by a firm
random the concept that some portion of
a cost is not predictable based on the cost
driver or the cost is stochastically, rather than
deterministically, related to the cost driver
profitability index (PI) a ratio that compares the present value of net cash flows to
the present value of the net investment
raw material the stage in the production or
conversion process where work has not yet
been started
profit center a responsibility center for
which the manager is accountable for generating revenues and planning and controlling all expenses
realized value approach a method of
accounting for by-product or scrap that
does not recognize any value for such
product until it is sold; the value recognized
upon sale can be treated as other revenue
or other income
profit margin the ratio of income to sales
profit sharing an incentive payment to
employees that is contingent on organizational or individual performance
profit-volume (PV) graph a visual representation of the amount of profit or loss
associated with each level of sales
pseudo-profit center a center created
when one responsibility center uses a transfer price to artificially “sell” goods or services
to another responsibility center
pull system a production system dictated
by product sales and demand; a system
in which parts are delivered or produced
only as they are needed by the work center
for which they are intended; requires only
minimal storage facilities
purchasing cost the quoted price of inventory minus any discounts allowed plus shipping charges
push system the traditional production
system in which work centers may produce
red-line system an inventory ordering system in which a red line is painted on the
inventory container at a point deemed to
be the reorder point
regression line any line that goes through
the means (or averages) of the set of observations for an independent variable and
its dependent variable; mathematically,
there is a line of “best fit,” which is the least
squares regression line
reinvestment assumption an assumption
made about the rate of return that will be
earned by intermediate cash flows from a
capital project; the net present value and
profitability index assume reinvestment at
the discount rate; the internal rate of return
assumes reinvestment at the IRR
relevant costing a process that compares,
to the extent possible and practical, the
incremental revenues and incremental
costs of alternative decisions
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Licensed to: iChapters User
Glossary
relevant range the specified range
of activity over which a variable cost
per unit remains constant or a fixed
cost remains fixed in total; is generally
assumed to be the normal operating
range of the organization
sales price variance a revenue variance that
indicates the financial difference between
the actual and budgeted sales prices for the
actual number of units sold
879
simplex method an iterative (sequential)
algorithm used to solve multivariable, multiconstraint linear programming problems
six sigma method a high-performance,
data-driven approach to analyzing and solving the root causes of business problems
responsibility the obligation to accomplish
a task or achieve an objective
sales value at split-off allocation a method of assigning joint cost to joint products
that uses the relative sales values of the
products at the split-off point as the proration basis; use of this method requires that
all joint products are salable at the split-off
point
responsibility accounting system an
accounting system for successively higherlevel managers about the performance of
segments or subunits under the control of
each specific manager
sales volume variance a revenue variance
that indicates the difference caused by
actually selling more or fewer units than
budgeted multiplied by the budgeted sales
price
special order decision a situation in which
management must determine a sales price
to charge for manufacturing or service jobs
outside the company’s normal production/
service market
responsibility center a cost object or area
under the control of a manager
scarce resource a resource that is essential
to production activity, but is available only
in some limited quantity
split-off point the point at which the outputs of a joint process are first identifiable
or can be separated as individual products
scrap an incidental output of a joint process;
is salable but the sales value from scrap
is not enough for management to justify
undertaking the joint process; is viewed
as having a lower sales value than a byproduct; has a minimal but distinguishable
disposal value
spoilage a unit that has been rejected at
inspection for failure to meet appropriate
quality standards or designated product
specifications and that cannot be reworked
and sold
residual income (RI) the profit earned by a
responsibility center that exceeds an amount
“charged” for funds committed to that center
responsibility report a report that reflects
the revenues and/or costs under the control of a particular unit manager
results benchmarking a comparative technique in which an end product or service is
examined; the focus is on product/service
specifications and performance results
return of capital the recovery of the original
investment (or principal) in a project
return on capital income; is equal to the
rate of return multiplied by the amount of
the investment
return on investment (ROI) a ratio that
relates income generated by an investment
center to the resources (or asset base) used
to produce that income
revenue center a responsibility center for
which the manager is accountable only for
the generation of revenues and has no control over setting selling prices, or budgeting
or incurring costs
risk uncertainty; reflects the possibility of differences between the expected and actual
future returns from an investment
risk-adjusted discount rate method a
formal method of adjusting for risk in which
the decision maker increases the rate used
for discounting the future cash flows to
compensate for increased risk
Robinson-Patman Act a law that prohibits
companies from pricing the same products
at different amounts when those amounts
do not reflect related cost differences
rolling budget see continuous budget
routing document
document
see operations flow
S
screening decision the first decision made
in evaluating capital projects; indicates
whether a project is desirable based on
some previously established minimum
criterion or criteria (see also preference
decision)
segment margin the excess of revenues
over direct variable expenses and avoidable
fixed expenses for a particular segment
sensitivity analysis a process of determining the amount of change that must occur
in a variable before a different decision
would be made
separate cost a cost that follows incurrence
of joint cost and that is related to a specific
product or group of products; is assigned
only to that product or group of products
service company a firm engaged in a high
or moderate degree of conversion that
results in service output
service cycle efficiency a ratio resulting
from dividing total actual value-added
service time by total cycle time; reflects the
proportion of total time that is value-added
service department an organizational unit
that provides one or more specific functional tasks for other internal units
shrinkage a decrease in units arising from
an inherent characteristic of the production process; includes decreases caused by
evaporation, leakage, and oxidation
safety stock a buffer level of inventory kept
on hand by a company in the event of fluctuating usage or unusual delays in lead time
simple interest a method of determining
interest in which interest is earned only
on the original investment (or principal)
amount
sales mix the relative combination of quantities of sales of the various products that
make up the total sales of a company
simple regression a statistical technique
that uses only one independent variable to
predict a dependent variable
slack variable a variable used in a linear
programming problem that represents the
unused amount of a resource at any level of
operation; is associated with less-than-orequal-to constraints
staff personnel any employee responsible
for providing advice, guidance, and service
to line personnel; may be management
standard a model or budget against which
actual results are compared and evaluated;
a benchmark or norm used for planning
and control purposes
standard cost card a document that summarizes the direct material, direct labor, and
overhead standard quantities and prices
needed to complete one unit of product
standard cost system a valuation method
that uses predetermined norms for direct
material, direct labor, and overhead to
assign costs to the various inventory
accounts and Cost of Goods Sold
standard quantity the standard quantity
of input (in hours or some other cost driver
measurement) required for the output actually achieved for the period
Statement on Management Accounting
(SMA) a cost or management accounting
pronouncement developed and issued by
the Institute of Management Accountants;
application of these statements is voluntary
statistical process control (SPC) the use
of control techniques that are based on the
theory that a process has natural variations
in it over time, but uncommon variations
are typically the points at which the process
produces “errors,” which can be defective
goods or poor service
step cost a cost that increases in distinct
amounts because of increased activity
step method a process of support department cost allocation that assigns support
department costs to cost objects after
considering the interrelationships of the
support departments and revenue-producing
departments
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880
Glossary
stockout the condition of not having inventory available upon need or request
strategic alliance an agreement between
two or more firms with complementary
core competencies to jointly contribute to
the supply chain
strategic benchmarking a comparative
technique that is non–industry specific
and focuses on how companies compete,
seeking to identify the winning strategies that have enabled high-performing
companies to be successful in their
marketplaces
strategic planning the process of developing a statement of long-range (5–10 years)
goals for the organization and defining the
strategies and policies that will help the
organization achieve those goals
strategy the link between an organization’s
goals and objectives and the activities actually conducted by the organization
strict FIFO method (of process costing)
the method of cost assignment that uses
FIFO to compute a cost per equivalent unit
and, in transferring units from a department,
keeps the cost of the beginning inventory
units separate from the cost of the units
started and completed during the current
period
suboptimization a situation in which an
individual manager pursues goals and
objectives that are in his/her own and his/
her segment’s particular interests rather
than in the company’s best interests
sunk cost a cost incurred in the past and not
relevant to any future courses of action; the
historical or past cost associated with the
acquisition of an asset or a resource
supply-chain management the cooperative strategic planning, controlling, and
problem solving by a company and its
vendors and customers to conduct efficient
and effective transfers of goods and services within the supply chain
support department the collective term for
service and administrative departments
surplus variable a variable used in a linear
programming problem that represents
overachievement of a minimum requirement; is associated with greater-than-orequal-to constraints
T
tactical planning the process of determining the specific means or objectives by
which the strategic plans of the organization
will be achieved; is short range in nature
(usually 1–18 months)
target costing a method of determining
what the cost of a product should be based
on the product’s estimated selling price less
the desired profit
tax benefit (of depreciation) the amount
of depreciation deductible for tax purposes
multiplied by the tax rate; the reduction
in taxes caused by the deductibility of
depreciation
tax deferral a tax treatment in which
income is subject to tax in a future period
tax exemption a tax treatment in which
income is never subject to income taxation
tax shield (of depreciation) the amount
of depreciation deductible for tax purposes; the amount of revenue shielded
from taxes because of the depreciation
deduction
theoretical capacity the estimated maximum production or service volume that a
firm could achieve during a period
U
uncertainty the doubt or lack of precision in
specifying future outcomes
underapplied overhead a debit balance in
the Overhead Control account at the end of
a period; exists when the applied overhead
amount is less than the actual overhead
incurred
unexpired cost
an asset
unit-level cost a cost caused by the production or acquisition of a single unit of product or the delivery of a single unit of service
units started and completed the difference between the number of units
completed for the period and the units
in beginning inventory; can also be computed as the number of units started during the period minus the units in ending
inventory
theory of constraints (TOC) a method
of analyzing the bottlenecks (constraints)
that keep a system from achieving higher
performance; states that production cannot
take place at a rate faster than the slowest
machine or person in the process
upstream cost a cost related to research,
development, or product design
throughput the total output of a plant that
is completed and sold during a period
usage the quantity of inventory used or sold
each time interval
time line a representation of the amounts and
timing of all cash inflows and outflows; is used
in analyzing cash flow from a capital project
total contribution margin see contribution
margin
total cost to account for the sum of the
costs in beginning inventory and the costs
of the current period
total overhead variance the difference
between total actual overhead and total
applied overhead; is the amount of underapplied or overapplied overhead
total quality management (TQM) a structural system for creating organization-wide
participation in planning and implementing
a continuous improvement process that
exceeds the expectations of the customer/
client; the application of quality principles
to all company endeavors; is also known as
total quality control
total units to account for the sum of the
beginning inventory units and units started
during the current period
V
value the characteristic of meeting the highest number of customer needs at the lowest possible price
value-added (VA) activity an activity that
increases the worth of the product or service to the customer
value chain the set of processes that converts inputs into products and services for
the firm’s customers; includes the processes
of suppliers as well as internal processes
value chart a visual representation indicating the value-added and non-value-added
activities and time spent in those activities from the beginning to the end of a
process
value engineering a disciplined search for
various feasible combinations of resources
and methods that will increase product
functionality and reduce costs
total variance the difference between total
actual cost incurred and total standard cost
for the output produced during the period
values statement a statement reflecting an
organization’s culture by identifying fundamental beliefs about what is important to
that organization
transfer price an internal charge established
for the exchange of goods or services
between organizational units of the same
company
variable cost a cost that varies in total in
direct proportion to changes in activity; is
constant on a per-unit basis
transfer time the time consumed by moving products or components from one
place to another
two-bin system an inventory ordering system in which two containers (or stacks) of
raw materials or parts are available for use;
when one container is depleted, the removal of materials from the second container
begins and a purchase order is placed to
refill the first container
variable costing a cost accumulation and
reporting method that includes only variable production costs (direct material, direct
labor, and variable overhead) as inventoriable or product costs; treats fixed overhead
as a period cost; is not acceptable for external reporting and tax reporting
variable cost ratio (VC%) the proportion of
each revenue dollar represented by variable
costs; computed as variable costs divided by
sales or as (1 ⫺ contribution margin ratio)
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Glossary
variable overhead efficiency variance the difference between budgeted
variable overhead based on actual input
activity and variable overhead applied to
production
variable overhead spending variance
the difference between total actual variable overhead and the budgeted amount
of variable overhead based on actual input
activity
variance a difference between an actual and
a standard or budgeted cost; is favorable if
actual is less than standard and is unfavorable if actual is greater than standard
variance analysis the process of categorizing the nature (favorable or unfavorable)
of the differences between standard and
actual costs and determining the reasons
for those differences
vertex a corner produced by the intersection
of lines on a graph
881
cost per equivalent unit of production for
all units completed during the current
period; combines beginning inventory
units and costs with current production
and costs, respectively, to compute the
average
virtual reality an artificial, computergenerated environment in which the user
has the impression of being part of that
environment and has the ability to navigate
and manipulate objects (such as products)
behaving like real-world objects
volume variance a fixed overhead variance
that represents the difference between
budgeted fixed overhead and fixed overhead applied to production of the period;
is also referred to as the noncontrollable
variance
working capital the amount remaining
after total current liabilities are subtracted
from total current assets; measures the
amount of an organization’s liquid assets;
may also be referred to as “net working
capital”
W
work in process the stage in the production
or conversion process where work has been
started but not yet completed
waste a residual output of a production process that has no sales value and that must
be disposed of
weighted average (WA) method (of
process costing) the method of cost
assignment that computes an average
Y
yield the quantity of output that results from
a specified input
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Name Index
Note: Page numbers followed by “n” refer to footnotes.
A
Abdallah, Wagdy M., 570
Albers, David, 128n
Alexander, Marc, 153
Ambler, Tim, 543
Andu, Ritsuko, 838n
Antari, Sam, 306
Anthony, Robert N., 518n, 519
Applegate, Jane, 795n
B
Barkowski, Lawrence, 167
Barnes, Brenda, 726
Bass, Dina, 751n
Bateman, Thomas S., 525n
Beattie, Pam, 54
Benke, Ralph L., 566n
Berliner, Callie, 536n, 537
Berwick, Donald, 733
Blanchard, Cherie, 748n
Böer, Germain, 853n, 854
Borthick, A. Faye, 151
Boudreaux, Paul, 178
Bowe, Christopher, 779
Bradley, Joann, 178
Brannen, Laurie, 349
Brent, Paul, 429n
Briggs, Alice, 725
Brimson, James A., 536n, 537
Brown, Alan, 702n
Brown, Gary, 848
Brown, Herbert E., 152
Brown, Sarah, 662
Butler, Janet B., 619n
C
Caffrey, Diana, 101
Cairncross, Frances, 853n
Calley, Tonya, 544
Cane, Alan, 536n
Carey, John, 698n
Challenger, John A., 863
Cheatham, Carole, 614n
Cheng, Susan, 542
Chow, Chee W., 619n
Christensen, Bob, 643
Clark, Steve, 750n
Cole, Clare, 159
Colmenares, Leopoldo, 843n
Comm, Clare, 748n
Compton, Ted R., 732
Conçalves, Paulo, 528n
Conroe, Maria, 194
Constantinides, Sylvia, 845
Cooper, Robin, 119n, 128n, 517n, 520, 526n,
566n, 850n
Cosgrove, Janet, 461
Cox, Jeff, 809n
Coyle, Wayne, 638
Crail, Mark, 750n
Craycraft, Cathy, 389n
Crosby, Philip, 757, 757n
Cummings, John, 349
Curran, Rob, 545
Curtin, Margaret, 853n, 854
D
Dalton, Julie Carrick, 851n
Dalton, Lacy, 102
Davis, Bob, 625n
Davis, Theresa, 594
Davis, Tim, 848, 848n
Delbert, Diane, 833
Deming, W. Edwards, 754, 765
Dhir, Joe, 583
Dirope, Cynthia, 320
Ducey, Mike, 797n
Dyer, Geoff, 779
E
Edwards, James Don, 566n
Egger, Ed, 733
Eliason, Jill, 688
Ellram, L. M., 793
Engardio, Peter, 10n
Erhun, Feryal, 528n
Estrin, T. L., 128n
Etheridge, Jenna, 155
Evans, Bob, 644
F
Favole, Jared, 779
Fehrenbacher, Katie, 701n
Finkle, Jim, 838n
Foster, Shelly, 689
Frank, Robert, 625n
Friedman, Milton, 23
G
Ganer, Pamela, 622n
Ganulin, Denise, 619n
Gardner, Sid, 702n
Garvin, David, 744
Gatti, James F., 476n
Gibbons, Brenda, 463
Giles, Joe, 823
Godfrey, James T., 760
Goldratt, Eliyahu, 809n
Gomes, Lee, 830
Govindarajan, Vijay, 518n, 519
Graham, J. R., 647
Greenhouse, Steven, 195
Greer, John, 640
Grinnell, D. Jacque, 476n
Gross, Larry, 863
Guidry, Flora, 389n
Guillon, Sharon, 689
H
Haas, Jill, 642
Hackl, John, 748n
Haddad, Kamal, 619n
Hadley, Scott W., 786n
Hall, Gene, 838n
Hansen, Fay, 349
Haoki, Anulu, 314
Harvey, C. R., 647
Hassa, Nabil, 152
Henderson, Sandra Cherie, 619n
Hendricks, Kevin B., 754n
Hogaboam, Liliya S., 652
Hopman, Jay, 528n
Horrigan, James O., 389n
Howe, Molly, 648
Hoyt, Louis, 853n, 854
Hunt, Stephen, 348n
Huss, Jerry S., 378
I
Irby, Miriam, 360
J
Jack, Andrew, 779
Jehle, Kathryn, 697
Jensen, Sam, 647
Jilg, Lois, 725
Johnson, Laura, 864, 865
Johnstown, Jill, 426
Jones, Brad, 368
Jones, Jenny, 674
Jones, Jim, 457
Jones, Joe, 674
Jordan, Cara, 372
Juran, Joseph, 129n, 741
Jusko, Jill, 128n
K
Kantor, Jeffrey, 128n
Kaplan, Robert S., 14, 617n
Kaslowski, Lana, 638
Keeton, Ann, 720n
Keller, Carl E., Jr., 853n
882
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Licensed to: iChapters User
Name Index
Kennedy, Vic, 49
Kettering, Ronald C., 615
Klammer, Candice, 688
Klatz, Soloman, 669
Klein, Paula, 348n
Koontz, Pat, 250
Koss, Michael, 829
Kroll, Karen M., 550n
Kruger, Daniel, 264n
Krumwiede, Kip R., 802n
Kumar, Ashok, 129n
Nelson, Bob, 750n
Newport, Jason, 378
Norton, David P., 14, 617n
O
Obenchain, William, 774
O’Connell, Betsy, 156
Oehlke, Mary Sue, 596
Orange, Erica, 846n
Orman, Suze, 687
P
L
Lang, Pete, 152
Larsen, Doug, 645
Lawson, Kendra, 544
LeBlanc, Gigi, 202
Lemak, David, 751n
Leyh, Ellen, 590
Linden, Lars, 594
Lipscomb, Bernie, 155
Litcomb, Wayne, 578
Liu, Lucy, 732
Lloyd, Mary Ellen, 833
Lockwood, Nancy R., 841
Logan, Willie, 739
Louise, Tina, 107
Lustgarten, Abrahm, 853n
Lutrell, Bethany, 500
M
Mahoney, James, 160
Malanga, Joe, 439
Malhotra, Yogesh, 838
Marshall, Alfred, 609n
Martin, John, 701n
Martin, Jose, 735
Mathaisel, Dennis, 748n
Mayberry, Mike, 691
McCafferty, Joseph, 514, 544
McCartney, Scott, 837n
McGhee, Mitch, 572n
Mendez, Francis, 580
Mero, Neal, 751n
Moore, Dayna, 861
Moore, George, 372
Morgan, J. P., 625
Moriarity, Michael, 156
Morris, Cindy, 49
Morris, Rose, 587
Muddle, Paul, 748n
Mui, Ylan Q., 837n
Mundy, Alicia, 779
N
Nabors, Edward, 201
Nakamoto, Michiyo, 746n
Nardelli, Bob, 860
Narisetti, Raju, 543
Natore, Rocky, 774
Paladino, Robert E., 618
Palate, Tanzi, 309
Pareto, Vilfredo, 129n
Pasewark, William R., 760
Payne, Geoff, 57
Peach, Sam, 648
Perkins, Jo, 49
Peterson, Pete, 774
Pillar, Frank, 129n
Plaskoff, Matt, 852n
Poole, Janet, 464
Power, Sue, 193
R
Raiborn, Cecily, 619n
Rajgopal, S., 647
Rankin, Toni, 58
Razer, Rachelle, 827
Rechtin, Mark, 793n
Reed, John, 746n
Reed, Richard, 751n
Reed, Tom, 596
Reeves, Ron, 745
Reichheld, Frederick, 863
Richman, Tom, 763n
Rigera, Amir, 586
Riley, Rita, 691
Robinson, Michael A., 160
Roper, Caroline, 736
Rosen, Corey, 851
Rosenthal, Jim, 838n
Roth, Harold P., 151, 155, 853n
Rubin, Hannele, 861
Ryan, Faye, 593
S
Sacks, Erin, 505
Sahling, Leonard, 129n
Sanches, Ludmilla, 461
Sanchez, Imelda, 640
Saunders, Paul M., 152
Schneider, Linda, 745
Sharp, Kevin, 150
Sheridan, John H., 801n
Shook, Steven R., 652
Shulman, Bret, 736
Sims, Linda T., 155
Singhal, Vinod R., 754n
883
Slagmulder, Regine, 517n, 520
Smith, Jenna, 684
Snell, Scott A., 525n
Snider, Tom, 108
Sopariwala, Parvez, 748n
South, Jeannie, 636
Spathis, Charalambos, 845
Stendardi, Edward J., 848n
Stocks, Kevin D., 802n
Strauss, Marie, 594
Swain, Monte R. 802n
Sweet, Denise, 306
T
Tate, Mervin, 463
Taub, Kessla, 588
Thomas, Paulette, 829
Thompson, Joey, 864
Thompson, Laura, 545
Tobias, Stan, 178
Tompkin, Steve, 49
Trachtenberg, Jeffrey, 8n
Travers, Terry, 643
Troy, Mike, 699n
Tschohl, John, 800n
Turner, Susan, 545
Tyler, Joe, 544–545
Tyner, Ted, 419
Tyson, Thomas, 848n
V
Van Schaik, Marcel, 774
Vatter, William J., 122n
Vernyi, Bruce, 128n
Victoria, Graca, 275
Vinas, Tonya, 128n
W
Wade, Judy, 838n
Walker, Marcus, 861
Weatherby, Mons, 416
Weiss, Tom, 545
Wenskel, Steve, 320
Westin, Farrah, 139
Whalen, Henry, 505
White, LaNora, 457
White, Letitia, 159
White, Paddy, 843n
Whiting, Rick, 348n
Williamson, Jim, 619n
Wingfield, Nick, 466
Winslow, Ron, 779
Wipple, George, 545
Wittier, Jeff, 463
Wong, Doug, 673
Wood, Bill, 459
Woods, Michael D., 126
Wright, Benjamin, 428n
Wright, Laura, 720
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Licensed to: iChapters User
Subject Index
Note: Page numbers followed by “n” refer to footnotes.
A
ABC, determining usefulness of
business environment, changes in, 130–131
current cost allocations, irrationality of, 130
factors to consider, 128
high product/process complexity, 129–130
overhead costs, lack of commonality in, 130
product variety, 129
Ability-to-bear criterion, 557
Abnormal loss
job order costing, 179
process costing, 233, 234–235
Abnormal spoilage, 181
Absorption cost, 36n
Absorption costing
cost behavior, 83–84
defined, 81
illustrations, 84–86
variable costing, comparison to, 86–87
variable costing, differences between, 82–83
Accounting “dialects,” 2–4, 2n
Accounting rate of return (ARR), 669,
674–675, 674n
Accounts payable, 339–341
Accounts receivable (A/R), 338–339
Activity, 114
Activity analysis, 114
Activity-based costing (ABC)
activity center cost pools, 125
activity driver, 125
components of, 124
cost drivers, 125, 126
criticisms of, 131–132
defined, 124
illustrated, 127–128
introduction, 114
JIT system, 804n
two-step allocation, 125–126
usefulness of, determining
(See ABC, determining usefulness of )
Activity-based management (ABM)
business-value-added activities, 115
introduction, 114
manufacturing cycle efficiency (MCE), 117–118
non-value-added (NVA) activity, 114
value-added (VA) activity, 114
value-added versus non-value-added
activities, 114–117
Activity center cost pools, 125
Activity driver, 125
“Acts of nature,” 720
Actual costing systems, 164–165, 165n
Actual cost system, 38
Actual fixed overhead (FOH), 70
Actual input quantity (AQ), 269
Actual price (AP), 269
Ad hoc discounts, 441
Administrative departments, 556
Advance pricing agreements (APAs), 572
After-tax cash flows, effect of
depreciation on, 660–662
“Age of change,” 836
“Aggressive” accounting, 5
Algebraic method, 559, 562–565
Algorithm, 449
Allocation bases, 556–558
“Allowable” product cost, 791–792
Altering of Worker Time Cards Spurs Growing
Number of Suits (Greenhouse), 195
Amazon.com, 8
American Productivity and Quality Center, 348, 745n
American Society for Quality Control (ASQC), 741
Amoco (Texas City, Texas), 749–750
Annuity, 654
Annuity, present value of, 674
Annuity due, 674
Anti-Bribery Convention (1999), 15
Apple, 528, 854
Applied overhead, 69
Appraisal costs, 37, 754
Appropriation, 704
Approximated net realizable value at
split-off allocation, 486
Archstone Consulting, 13
Asset turnover, 606
Aston Martin, 177–178, 178n
AT&T, 525
Athens Supplements Co. (ASC), 559
“Attitude of indifference,” 750
Authority, 10
Autonomation, 801
B
B2B (business-to-business), 541, 801–802
Backflush costing, 805–807
“Bad will,” 529
“Bag” assumption, 396, 396n
Baker Hughes Inc., 15
Balanced scorecard (BSC)
customer value perspective, 13
financial performance perspective, 13
internal business perspective, 13
lag indicators, 12
lead indicators, 12
learning and growth perspective, 12–13
measuring performance, 617–619
objectives of, 12
overview, 12–13
perspectives and, 13–14
quality, obtaining information using, 761–763
simplistic, 13
TQM and, 761–763
Balance sheet, 30
budgeted financial statements, 343
defined, 30
Baldrige Award, 750–754
Banking relationships, 713–714
Bar coding, 39, 522, 615
BASF Corporation, 797
“Basket” assumption, 396, 396n
Batch-level costs, 120–121
Benchmarking
code of conduct, 745n
cost reduction, 701
defined, 745–746
internal, 746
introduction, 745–746
process benchmarking, 747–748
reasons for, 746
results, 746
salary information, 623n
steps in, 748
strategic benchmarking, 748
types of, 746–747
Benchmarks, 177, 228, 600, 603–604, 615
Benefits-provided ranking, 558–559
Bic pens, 9
Bidding, 284
Bill of materials, 265
Blackberry, 528
Black box, 519
“Blow the whistle,” 7
Bond ratings, 711
Borders Group Inc., 8
Bottlenecks, 809
See also Theory of constraints (TOC)
Breakeven
formula approach to, 384–385
graphing approach to, 385–387
Break-even chart, 385
Break-even point (BEP), 382
Break-even point (BEP), identifying
income statement approach, 388
profit-volume (PV) graph, 387–388
revenue and cost assumptions
summary, 382–383
Bribes, 14–15
Britain’s Chessington World of Adventures, 750
British Standards Institution, 765
Budget, 324
Budgeted financial statements
balance sheet, 343
budgeted balance sheet, 345
cost of goods manufactured
schedule, 342–343
884
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Subject Index
income statement, 343, 344
introduction, 341–342
statement of cash flows (SCF), 343–347
Budgeting process, 324–327
defined, 324
external variables, 324, 325
internal variables, 324, 325
planning processes, relationships
among, 326
strategic planning, 324–325
tactical planning, 325
Budget manual, 349–350
Budget slack, 348–349
Budget variance, 278
“Build” mission, 532, 535
Burden, 37n
Business environment, changes in, 130–131
Business process reengineering (BPR),
837–838
Business-to-business (B2B) relationships,
541, 801–802
Business-value-added activities, 115, 115n
By-product, 476
By-product and scrap, accounting for
net realizable value approach, 489, 489n
other income approach, 490–492
realized value approach, 490–492
sales value of the by-product, recording
method, 488–489, 489n
use of terms, 488
By-product and scrap, in job order
costing, 492, 492n
C
“Call for action,” 490–492
Capacity, measures of, 74
Capital asset acquisition, 651, 652
Capital assets, 651
Capital budgeting
accounting rate of return (ARR), 674–675
after-tax cash flows, effect of depreciation
on, 660–662
capital asset acquisition, 651, 652
capital project evaluation, compensating for
risk in, 668–672
cash flows, use of, 651–653
cash flows illustrated, 653
future cash flows, discounting, 655–658
internal rate of return (IRR), 658–660
introduction, 651
investment decision, 665–668
methods, assumptions and limitations of,
662–664
multiple capital projects, ranking, 668
net present value (NPV), 656
net present value method, 656–657
payback period, 654–655
postinvestment audit, 672
profitability index (PI), 657–658
time lines, 653–654
time value of money, 673–674
Capital project evaluation, compensating
for risk in
introduction, 668–669
judgmental method, 669
risk-adjusted discount rate method, 669–670
sensitivity analysis, 670–672
“Carbon offsets,” 853
“Carrots,” 532
Cash, sources of, 711–713
Cash budget
accounts payable, 339–341
accounts receivable (A/R), 338–339
cash disbursements, 339–341
cash receipts, 336–338
introduction, 335–336
model, 336
ten ways to improve small business
cash flow, 342
Cash collection cycle, 711–712
Cash disbursements, 339–341, 652
Cash flows
in capital budgeting, 651–653
defined, 652
statement of, 605
Cash flows, illustrated
introduction, 653
time lines, 653–654
Cash management
banking relationships, 713–714
cash, cost of carrying, 713
cash, optimal level of, 711
cash, sources of, 711–713
introduction, 710–711
Cash receipts, 336–338, 652
Centralization, 549
Central processing unit (CPU), 758
Certified Management Accountant (CMA), 2
Certified Public Accountant (CPA), 2
“Certify” suppliers, 797
“Change nothing” option, 426
Chief executive officers (CEOs), 6
Chief financial officers (CFOs), 6
Circuit City, 837
Cisco, 701
CMS, designing
competitive environment, 527–528
core competencies, 526
cost accumulation, 761
cost structure, 526–527
design of, 524
generic missions, 524–525
organizational culture, 525–526
organizational form, 523–526
organizational structure, 525
organization mission, 525
process measurement activities, 761
research and development (R&D) costs, 761
strategies, 528–530
Coding, 758
Coding (transactions), 758
Coefficient of determination, 717
Collaboration, 715, 802
Committed costs, 702
Committed fixed costs, 702–703
Common expenses, 442, 443n
Compensation, ethical considerations of, 625–626
Compensation elements, tax
implications of, 624–625
Compensation strategy, 620, 621
Competence, 7
Compounding period, 673
Compound interest, 673
Computer Aided Manufacturing-International
Inc. (CAM-I), 536
Computer-integrated manufacturing (CIM), 808
Concrete Café, 178
Confidentiality, 7
885
Constraint, 445, 809
Consumer Price Index (CPI), 698
Continuous budget, 347–348
Continuous improvement concepts, 131
Continuous loss, 233
Contribution income statement, 83
Contribution margin (CM), 83, 383, 383n
Contribution margin ratio (CM%), 384–385,
396, 398
Contribution margin ratio formula, derivation
of, 385n
Control charts, 743
Controllable variance, 278
Controllers, 10
Conversion cost
defined, 30–31
standard costing, as an element in, 288–290
Conversion process
business input/output relationships, 33–34
finished goods, 32
firms, degrees of conversion in, 31–32
inputs, 31
inventory accounts, 33
manufacturers versus service
companies, 33–35
outputs, 31
period costs, 31
product costs, 31
production center, 34
raw material, 32
retailers versus manufacturers/service
companies, 32–33
work in process, 32
Core competency, 8–9
Corporate “profit” (or savings), 567
Corporations, 14–15, 523, 661, 661n
Cost, 25
Cost accounting, 4–5
Cost accounting standards, 5
Cost Accounting Standards Board (CASB), 5
Cost accumulation systems, 163–164
Costa Del Mar (energy credits), 853
Cost allocation, 38, 130
Cost avoidance, 697, 701–702
Cost-based transfer prices, 567–568, 567n
Cost behavior, 83–84
Cost center, 554–555, 555n
Cost changes
because of inflation/deflation, 698
because of quantity purchased, 700
because of supply/supplier
adjustments, 699
because of volume changes, 698
introduction, 698
Cost classification categories, 25
Cost consciousness, 697
Cost containment, 697, 700, 709, 710
Cost control systems, 696–697, 701–702
Cost driver, 29–30
Cost driver analysis
batch-level costs, 120
cost drivers, 118–119
cost level allocations illustrated, 122–124
cost pools, 119
defined, 120
levels at which costs are incurred, 119–122
organizational-level costs, 121, 122
product-level (process-level) cost, 121
unit-level costs, 120
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886
Subject Index
Cost drivers
classification of, 118
identifying, 118, 119
two-step allocation, 125, 126
Cost leadership, 9
Cost management system (CMS), 760
balanced scorecard (BSC), 761–763
conceptual design principles, 536–537
defined, 25
defining, 519–521
designing (See CMS, designing)
dual focus of, 520
enterprise resource planning (ERP)
systems, 536
gap analysis, 535–536
integrated, 521
introduction, 517
management control system (MCS), 518–519
management information system (MIS),
517–518
organizational role of, 520
production process, 761
quality, obtaining information using, 761–763
roles of, 521–523
Cost management system (CMS), components of
CMS elements, 530
informational elements, 532–534
managerial contracting process, 531
motivational elements, 530–532
reporting elements, 534–535
Cost object, 26
Cost of capital (COC), 655, 671
Cost of compliance, 755, 756
Cost of goods manufactured (CGM), 41, 42
Cost of Goods Sold (CGS), 39, 171
underapplied and overapplied overhead,
effects of, 71–72, 72n
Cost of noncompliance, 755, 756
Cost of production report, 222
Cost of quality, 615
Cost-plus contract, 165
Cost pools, 119
Cost reduction
ABC and, 128
budgeting financial statements
and, 341–342
cost consciousness, 697
intent of, 701
JIT and, 807
SCF and, 605
technological advances, interaction
between, 699
VE and, 792
Costs
batch-level, 120–121
levels of, 120
organizational-level, 121, 122
product-level (process-level), 121
unit-level, 120
Cost structure, 526–527
Cost tables, 792
Cost terminology
actual cost system, 38
appraisal costs, 37
balance sheet, 30
conversion cost, 30–31
conversion process, 31–35
cost allocation, 38
cost classification categories, 25
cost driver, 29–30
cost management system, 25
cost object, 26
cost of goods manufactured (CGM), 41, 42
direct costs, 26
direct labor, 30, 36–37
direct material, 30, 36
distribution cost, 31
expenses, 30
failure costs, 37
financial statements, 30–31
finished goods, 32
Finished Goods Inventory account, 34
fixed cost, 27–28
fixed overhead costs, 37
income statement, 30
indirect costs, 26
indirect costs (overhead), 26, 30
inputs, 31
intangible output, 32
inventoriable costs, 30
inventory accounts, 33
losses, 30
manufacturer, 32
mixed cost, 28
normal cost system, 39
outputs, 31
overhead, 37–38
overhead (indirect costs), 30
period costs, 30
predetermined overhead rate (or overhead
application rate), 39
predictor, 29, 30
prevention costs, 37
prime cost, 31
product costs, 30
production center, 34
quality costs, 37, 38
raw material, 32
relevant range, 26
service company, 32
step cost, 29
step fixed cost, 29
step variable cost, 29
tangible output, 32
total cost to account for, 42
trading costs, 28
variable cost, 26–27
variable overhead costs, 37
work in process, 32
Work in Process Inventory account, 34
“work not started” stage, 34
Cost understanding, 697, 715
Cost-volume-profit (CVP) analysis
defined, 388
fixed amount of profit, after tax, 390–391
fixed amount of profit, before tax, 389–390
incremental analysis for short-run
changes, 393–396
overview, 388–389
revenue and cost assumptions
summary, 382–383
specific amount of profit per unit,
after tax, 392–393
specific amount of profit per unit,
before tax, 391–392
underlying assumptions of, 401–402
Credibility, 7
Curvilinear relationships between variables, 75n
Customer relationship management (CRM), 527
Customer value perspective, 13
CVP analysis, in multiproduct environment,
396–398
CVP relationships, managing risk of
margin of safety (MS), 399
operating leverage, 399–401
Cycle (lead) time, 116
D
D&O (directors’ and officers’) insurance, 720
Data mining, 845
Debt Collection Improvement Act of 1996, 698
Decentralization, 549–551
Decision variable, 445
Defects, 179
Degree of operating leverage (DOL), 400–401
Deming Prize
Deming Application Prize, 754
Deming Prize for Individuals, 754
Quality Control Award for Operations, 754
Dependent variable, 75
Depreciation
ABC, 131
after-tax cash flows, effect on, 660–662
capital budgeting, 335
divisional profits and, 605
fixed cost, as a, 27, 28
fixed costs, 702, 708
indirect, 26
overhead cost, 37
period costs, 31
product line decisions, 444
ROI computations and, 607
service-life method, 37
straight-line, 37, 694
tax benefits, 661
tax shield, 661
units-of-production method, 37
Diagnostic-related groups (DRGs), 310–311
Differential cost, 425
Differential revenue, 425
Direct costing (See Variable costing)
Direct costs, 26
Direct labor, 30, 36–37
Direct labor hours (DLHs), 273–274
Direct material, 30, 36
Direct method, 558, 560–561
“Director of Taxation,” 660
Discounted cash flow techniques
internal rate of return (IRR), 658–660
net present value method, 656–657
profitability index (PI), 657–658
Discounting, 655
Discount rate, 655
Discrete loss, 233–234
Discretionary costs, 555n
benefits from, measuring, 705
budget, control using, 708–710
budgeting, 704
effectiveness, 706–707
efficiency, 706
engineered costs, control using, 707–708
introduction, 703–704
Disney, 9
Distribution cost, 31
Diversity, 128, 550, 617
See also Workforce diversity
Divisional profits, 604–605
“Do nothing” option, 426
Downsizing, 839–840
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Licensed to: iChapters User
Subject Index
Downstream costs, 3, 4
Dual pricing arrangement, 569
Du Pont model, 606
E
Earnings management, 5
Economic order quantity (EOQ)
economic production run (EPR), 811–812
EOQ formula, 811
introduction, 811
Economic production run (EPR), 811–812
Economic value added (EVA®), 609–610,
609n, 610–611
EDI (electronic data interchange), 710, 714, 802
EDS (outsourcing firm), 838
Effective, importance of defining, 600
Effectiveness, 706–707
Efficiency, 706
Efficiency variance, 278
Efficient, importance of defining, 600
EFQM Excellence Model, 766–767, 766n
Electronic data interchange (EDI), 802
Employees, defined, 599n
Employees, young, 621–622, 622n
Employee stock ownership plan (ESOP),
624, 851
Employee suggestions, 800
Employee time sheets, 170–171
“End-of-pipe strategy,” 853
Engineered costs, 707
Engineering change orders (ECOs),
121, 792, 803
Enterprise resource planning (ERP) systems
adopting, and perceived benefits from, 845
adopting, reasons for, 845
benefits from, 843–844
concept of, 844–845
data mining, 845
defined, 842–843
ERP information management, 843
financial function, impact on, 845–846
implementing, 843
internal supply chain and traditional
information management, 842
introduction, 536
modules in, 844
personal computers (PCs), 842
reality mining, 846
Environmental constraint, 10–11
Environmental management systems, 852–854
Environmental Protection Agency (EPA), 698
E-procurement systems, 715
Equivalent units of production (EUP), 213–216,
216n, 220n, 331n
Ernst & Young Global Transfer Pricing Survey
2007–2008, 572–573
Establishing standards
appropriateness, 284
attainability, 285
Ethics
multinational corporations, 14–15
professional, 5–7
European Foundation for Quality Management
(EFQM), 766–767
European Quality Award, 766
Executive pay, 625, 625n
Expatriates, 625
Expected capacity, 73, 73n
Expected standards, 285
Expenses, 30
Expired cost, 25
External failure costs, 754
External performance measures, 601–602
F
Failure costs, 37, 758
Fair Labor Standards Act, 171
False Claims Act, 7
Feasible region, 448
Feasible solutions, 445
Feedback
budgeting process, 327
performance evaluation, 604
performance plans and, 623
“Feeder” systems, 529
FIFO EUP calculation, 232
Financial accounting, 2–3, 761
Financial Accounting Standards
Board (FASB), 2, 83
Financial budgets, 328–329
Financial performance perspective, 13
Financial statements, classification of, 30–31
Financing decision, 652
Finished goods, 32
Finished Goods (FG) Inventory, 39, 171,
213, 331–332
Finished Goods Inventory account, 34, 268
Finished Goods Inventory control account, 171
First-in, first-out (FIFO) method, 211, 216–218,
223–226, 225n, 235, 235n
Fixed cost, 27–28, 383, 433, 440
Fixed Manufacturing Overhead Control, 275
Fixed overhead (FOH) rate, 274
Fixed overhead (FOH) variance, 275–277
Fixed overhead costs, 37
Fixed overhead spending variance, 276
“Flakes” of silicon, 522
Flexible budget, 78–79
Flexible manufacturing systems (FMSs), 807–808
Flextronics International Ltd., 751
Focused factory arrangements, 851
Ford Motor Company, 751
Foreign Corrupt Practices Act (FCPA), 14–15
For-profit businesses, 32
Forward contracts, 719–720
Full costing (See Absorption costing)
Full production cost, 441–442
Functional classification, 81
Future value (FV), 673
G
Gap analysis, 535–536
Generally accepted accounting principles (GAAP)
ABC and, 131
cost management system (CMS), 517
distribution costs, 31
financial accounting compliance, 2
normal capacity, 73
overhead costs, 38n
product/period cost distinction, 122
General Mills, 748
General Motors, 11–12, 746, 808, 848
General partnerships, 523
General price-level changes, 698
Georgia Ports Authority and the
Panama Canal Authority,
agreement between, 846
Gillette, 435
887
Global compensation, 625
Global environment, 7–8
Goal congruence, 553
Goal programming, 445n
“Good” service, 750
Governing board, 847
Grade, 745
Gross margin, 434n
Gross profit, 434n
Group incentives, 622
H
Half-year (or mid-quarter) convention, 662n
Hallmark, 129, 699
“Harvest” mission, 532
Hedging, 719–720
Heterogeneous output, 176
Hewlett-Packard, 117n
Higashimaru Shoyu, 850
High-low method, 74–75
“High quality,” 765
“High quality” versus “high grade,” 745
Homogeneous output, 176
Honda, 9
Hurdle rate, 659–660, 675
Hybrid costing systems, 231
I
IBM, 10
IBM Global Business Services, 348
Ideal (theoretical) standards, 285–286
Idle time, 116
Imposed budgets, 348
Incentives
CMS and, 530
compensation strategy, 620
cost control systems, 701
group, 622
lead time, 615–616
motivational element, as a, 532
nonfinancial, 624
open-book management, 851
pay-for-performance plans, 621, 622
relative to organizational level, 623
strategic alliances, 846
sub-unit managers, 535
Income statement, 30
budgeted financial statements,
343, 344
defined, 30
Incremental analysis
defined, 394
examples, 394–396
Incremental cost, 425
Incremental revenue, 425
Independent projects, 667
Independent variables, 75, 75n
Indirect costs, 26, 36
Indirect costs (overhead), 30
Industry Week, 125
Inefficient operations, loss from, 286
Inflation/deflation, 698
Information sharing, 802, 831, 839
Information technology (IT), 801–802
“Innovation portal,” 10
Input–output coefficients, 446
Inputs, 129
Insourcing, 429, 432
Inspection time, 116
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Licensed to: iChapters User
888
Subject Index
Institute of Management Accountants (IMA)
ethical issues, guidance on, 7
overview, 5
Statement of Ethical Professional Practice, 6
Insurance contracts, 720
Intangible output, 32
Integer programming, 445
Integrity, 7
Intel, mission statement, 599, 599n
Intellectual capital, 10
Interest, 673, 673n
Internal benchmarking, 746
Internal business perspective, 13
Internal failure costs, 754
Internal performance measures, 600–601
Internal rate of return (IRR), 658–660
Internal Revenue Service (IRS), 83, 516, 572
International Accounting Standards
Board (IASB), 2
International Organization for Standardization
(ISO), 765–766
Internet business model, 801
Interpolation, 659n
Intranet, 166
Inventoriable costs, 30
Inventory
buying, 787
carrying, 787
introduction, 786
producing, 787
production management philosophies and,
787–788, 789, 790
value chain, relationships in, 786–787
Inventory (use of term), 787
Inventory accounts, 33
Investment center, 556
Investment decision
activity, worthiness of, 665
assets, identifying appropriate, 665–666
capital investment information, 666
capital project acceptability, judging, 666
defined, 652
independent projects, 667
mutually exclusive projects, 667
mutually inclusive project, 667
preference decision, 666
process, 666–668
screening decision, 666
Investment in project, 674
iPhone, 528
ISO 9000 series, 765
product and material losses
(See Product and material
losses (job order costing))
Raw Material Inventory, 169
stages of production, 167, 167n
standard costing, 176–177
Job order costing system, 163, 164–167
Job order cost sheet, 167–169
Job time tickets, 170n
Johnson Controls, 11
“Joint activities,” 493
Joint cost, 476
Joint cost, allocation of
introduction, 482
monetary measure allocation, 484–488
physical measure allocation, 482–484
product pricing, 476n
Joint costs
in not-for-profit organizations,
493, 493n
in services business, 493, 493n
Joint process
decision, the, 479–482
description of, 478–479
introduction, 476
model of, 480
output, illustration of, 478
outputs of, 476–478
Joint products, 476, 477–478
Judgmental method (of risk adjustment), 669
Just-in-time (JIT), 793–795
Just-in-time (JIT) environment, logistics of
accounting implications of,
802–807, 803n, 804n
flexible manufacturing systems (FMSs),
807–808
introduction, 801–802
lean enterprises, 808–809
Just-in-time (JIT) manufacturing,
implementation of
introduction, 795
plant layout, 799–801
product design, 797–798
product processing, 798–799
supplier relationships and
distribution, 795–797
Just-in-time (JIT) manufacturing process
efficiency, increasing, 118
ideal (theoretical) standards, 285–286
outsourcing, 433
Just-in-time (JIT) systems, 793–795
J
K
Japan Quality Medal, 754
“Jidoka,” 801
Job order costing
Aston Martin, 178–179, 178n
by-product and scrap in, 492, 492n
completion of production, 171–172
Concrete Café, 178
documents and cast flows, 172
employee time sheets, 170–171, 170n
illustration, 172–175
introduction, 163
job order cost sheet, 167–169
managers, assisting, 177–179
material requisitions, 169–170
overhead, 171
Paul’s Pirogues, 178–179
Kaizen costing, 792–793
Kyoto Protocol, 852–853
L
Labor efficiency variance (LEV), 273
Labor mix variance, 293–294
Labor rate variance (LRV), 273, 293–294
Labor variances, 273
Labor yield variance, 293–294
Lack of high quality, 754
Lagging indicators, 611, 612
Lag indicators, 12
Law of demand elasticity, 436, 436n
Layoffs, 839
Lead indicators, 12
Leading indicators, 611, 612
Lead time, 615–616, 812
Lean enterprises, 808–809
Lean manufacturing, 808
Learning and growth perspective, 12–13
Least squares regression analysis, 75–78, 716–717
“Less is not better,” 704
Life cycle costs, 791, 792
“Lights-out” environment, 808, 809
Limited liability companies (LLCs), 523
Limited liability partnerships (LLPs), 523
Linear programming (LP)
basics of, 445
formulating a problem, 445–447
input–output coefficients, 446
introduction, 444
solving a problem, 448–449
Line personnel, 10
Local area network (LAN), 166
Long ton, 482
Losses, 30
Loss from Inefficient Operations, 286
Low-ball price, 440, 440n
M
Machine hour (MH), 78, 184
Make-or-buy decision, 429
Malcolm Baldrige National Quality Award
(MBNQA), 766
See also Baldrige Award
Management accounting, 2
downstream costs, 3, 4
financial accounting and, differences
between, 3
function of, 3
upstream costs, 3, 4
Management Accounting Guidelines (MAGs), 5
Management-by-exception concept, 283
Management-by-exception principle,
552–553, 554, 743
Management information system (MIS), 517–518
Management practices, emerging
business process reengineering (BPR), 837–838
downsizing, 839–840
enterprise resource planning (ERP) systems,
842–846
environmental management systems, 852–854
introduction, 836
layoffs, 839
open-book management, 847–852
restructuring, 839–840
strategic alliances, 846–847
value chain and cost management, 840
workforce diversity, 840–842
workplace, changing, 836–837
Managers, defined, 599n
Manufacturer, defined, 32
Manufacturers versus service
companies, 34–35
Manufacturing cells, 799
Manufacturing cycle efficiency (MCE),
117–118
Manufacturing overhead (OH), 67
Manufacturing Overhead control
account, 171, 180
Margin of safety (MS), 399
Margin of safety percentage (MS%), 399
Market-based transfer prices, 568–569
Mass customization, 129
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
Licensed to: iChapters User
Subject Index
Master budget
budgeting process, 324–328
budget manual, 349–350
components of, 328
contingency planning, 328n
defined, 327
illustrated (See Master budget illustrated)
introduction, 324
management control, using for, 347–349
overview, 328–330, 328n
revisions to, 348, 350, 350n
Master budget illustrated
budgeted financial statements
(See Budgeted financial statements)
capital budget, 334–335
cash budget (See Cash budget)
direct labor budget, 333
introduction, 330–331
overhead budget, 334
personnel budget, 332
production budget, 331
purchases budget, 332, 333
selling and administrative
budget, 334, 335
Material mix variance, 291–293
Material price variance (MPV), 270, 291–293
Material quantity variance (MQV), 270, 272
Material requisition form, 169–170
Material variance computations, 270–272
Material yield variance, 291–293
Mathematical programming, 444
Matrix algebra, 449
Mattel, 435
Mercedes-Benz USA, 751
Method of neglect, 233, 234–235, 235n
Methods-time measurement (MTM), 266
Metric ton, 482
Microsoft, 528, 751
Mission statement, 8, 599–600
Mix, 291
Mixed cost, 28, 383
Mixed costs, separating
defined, 73
estimation, simplification of, 73
flexible budgets, 78–79
high-low method, 74–75
least squares regression
analysis, 75–78
outliers, 75
overhead rates, plantwide versus
departmental, 79–80
straight-line formula, 73–74
Mix variances, 290
Modified accelerated cost recovery system
(MACRS), 661
Monetary capital, 10
Monetary measure allocation
approximated net realizable value at split-off
allocation, 486–488
benefit of, 484, 484n
net realizable value at split-off allocation
method, 485–486
prorate joint cost to joint products,
484–485, 485n
sales value at split-off allocation, 485
Money factor, 687
Mont Blanc pens, 9
Multinational corporations, 14–15
Multinational enterprises (MNEs), 572
Multinational settings
performance evaluation in, 619–620
transfer prices in, 570–573
Multiple regression, 75
Mutually exclusive projects, 667
Mutually inclusive project, 667
N
NASCAR, 748
National Institute of Standards and Technology
(Baldrige Award), 753
Negative gap analysis, 748
Negotiated transfer prices, 569
Neiman Marcus, 9
Net present value (NPV), 656–657, 658–660
Net present value method, 655–657
Net realizable value (NRV), 485
Net realizable value (NRV) approach,
485–486, 487, 489, 489n
Net realizable value at split-off allocation, 485–486
Noncontrollable variance, 276
Nonfinancial incentives, 624
Nonfinancial performance measures (NFPMs)
comparison bases, establishment of, 616
financial performance measures, advantages
over, 613
introduction, 612
Nonfinancial performance measures (NFPMs),
selection of
cost of quality, 615
introduction, 612–613
lead time, 615–616
throughput, 613–615, 614n
Nonlinear programming, 445n
Non-negativity constraint, 445
“Nonperforming” customers, 750
Non-value-added (NVA) activity
eliminate or reduce, 786, 792
eliminating, 742
idle time, 116
labor activities, 803
master budget, 349
production view of quality, 742
transfer time, 116
value-added versus non-value-added
activities, 114
Normal capacity, 73, 73n
Normal costing
actual versus, 67
alternative capacity measures, 73
defined, 67
expected capacity, 73, 73n
introduction, 67
manufacturing overhead (OH), 67
normal capacity, 73, 73n
overapplied overhead, disposition of,
71–72
overhead, applying to production, 69–71
practical capacity, 73
predetermined OH rate, 68–69
theoretical capacity, 73
underapplied overhead, disposition of,
71–72
Normal cost system, 39
Normal loss, 234–235
job order costing, 179
Not-for-profit (NFP) organization, 32, 476,
493, 493n
889
O
Objective function, 445
Offset approach (See Net realizable value (NRV)
approach)
Offshoring, 428
Open-book management
accountants, role of, 851–852
employee stock ownership plans (ESOPs), 851
games, as teaching aids, 849–850
implementation challenges, 851–852
introduction, 847–848
motivating employees, 850–851
performance measures, 852
ten common principles of, 848
Operating budget, 328
Operating leverage, 399–401
Operations flow document, 267
Opportunity costs, 426, 758
Optimal solution, 445
Options, 719–720
Order point, 812–813
Ordinary annuity, 674
Organizational constraints
culture, 10
environmental, 10–11
intellectual capital, 10
management style, 10
monetary capital, 10
Organizational costs
downstream, 3, 4
upstream, 3, 4
Organizational culture, 525–526
Organizational form, 523–526
Organizational goals, 600
Organizational-level costs, 121, 122
Organizational memory, 839
Organizational strategy
core competency, 8–9
cost leadership, 9
factors influencing, 8
mission statement, 8
product differentiation, 9
questions, checklist of, 9
strategy, 8
Organizational structure
authority, 10
CMS, designing, 523–526
constraints, 10–11
controllers, 10
defined, 10
line personnel, 10
responsibility, 10
staff personnel, 10
treasurers, 10
Organization of Economic Cooperation and
Development (OECD), 15, 573
Outliers, 75
Outputs, 129
Outsourcing
assessing outsourcing risk, 430
benefits of, 429
cost savings, 13
decision considerations, 429–430
defined, 428
fixed costs, 433
highest total contract values for
work outsourced and offshored
in 2008, 428
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890
Subject Index
Outsourcing (continued)
insourcing, 429, 432
just-in-time (JIT) technologies, 433
make-or-buy decision, 429
outsourcing decision, 429
relevant costs, 431
risk pyramid, 431
Outsourcing decisions
introduction, 428
offshoring, 428
Overapplied overhead, 70–72, 72n
Overhead
accounts, 69n
accumulation of, 38, 39–41
actual cost system, 38
allocation of, 38–39
applied, 69
appraisal costs, 37
budget, 334
cost allocation, 38
cost of goods manufactured and sold, 41–42
costs, lack of commonality in, 129–130
defined, 37
failure costs, 37
fixed overhead costs, 37
job order costing, 171
normal cost system, 39
overapplied overhead, 70–72
Overhead Control account, 38
overview, 171
predetermined overhead rate (or overhead
application rate), 39
prevention costs, 37
process costing, 218, 218n
production costs, 213
quality costs, 37
underapplied overhead, 70–72
variable overhead costs, 37
variances (See Overhead variances)
Work in Process (WIP) Inventory, 38
Overhead (indirect costs), 30
Overhead (OH) rates
plantwide versus departmental, 79–80
predetermined, reasons for using, 68
Overhead accounts, 69, 69n, 70
Overhead application rates, 39
Overhead Control account, 38, 39
See also Manufacturing Overhead control
account
Overhead variances
alternative approaches, 277–279
budget variance, 278
controllable variance, 278
efficiency variance, 278–279
fixed overhead (FOH) variance, 275–277
fixed overhead spending variance, 276
noncontrollable variance, 276
predetermined OH rates, 273–274
spending variance, 278–279
total overhead variance, 277
variable (VOH) variances, 274–275
volume variance, 276–277
Overtime, 36–37
P
Packaging, 117, 117n
Panama Canal Authority and the Georgia
Ports Authority, agreement between, 846
Pareto analysis, 757–758
Pareto inventory analysis, 813–814
Pareto principle, 129, 129n
Participatory budget, 348
Paul’s Pirogues, 178–179
Payback period, 654–655
Pay-for-performance plans, 620–622, 622n
Performance measurements, 616–617
Performance measurement system, designing
assess progress toward mission, 603
balanced scorecard (BSC), 617–619
compensation, ethical considerations
of, 625–626
compensation elements, tax implications
of, 624–625
compensation strategy, 620, 621
feedback, need for, 604
general criteria, 602–603
global compensation, 625
multinational settings, performance
evaluation in, 619–620
pay-for-performance plans, 620–622
performance, appropriate tools for, 603–604
performance measurements, 616–617
performance measures, awareness of and
participation in, 603
performance measures and rewards, links
between, 622–624
Performance measures
external, 601–602
internal, 600–601
introduction, 600
Performance measures and rewards, links
between
incentives relative to organizational level, 623
introduction, 622–623
nonfinancial incentives, 624
performance output, degree of control
over, 623
performance plans and feedback, 623
promoting overall success, 624
worker pay and performance links, 623–624
Period costs, 30, 31
Perpetual inventory accounting system,
illustration of, 39
Personal computers (PCs), 842
Personnel budget, 332
Perspectives, differences in, 611–612
Phantom profits, 86
Physical measure allocation, 482–484
Plato, 625
Point-of-purchase material variance
model, 272–273
Postinvestment audit, 672
Practical capacity, 73
Practical or theoretical capacity, 803n
Practical standards, 285
Predetermined overhead (OH) rates (or
overhead application rates), 39
activity-based costing (ABC), 124
alternative capacity measures, 73
irrationality of current cost allocations, 130
job order costing, 177, 180, 181
overhead variances, 273–274, 277
plantwide versus departmental, 79–80
product costing, 68–69
standard cost card, 267
valuation methods, 164–165
Predictor, 29, 30
Preference decision, 666
“Preference” lists, 797
Present value (PV), 655, 655n, 657–658, 673
Prevention costs, 37, 754
Price elasticity, 699
Price-escalation clauses, 698
Price risk, using options and forward contracts to
mitigate, 719–720
PricewaterhouseCoopers, 701
Prime cost, 31, 31nn
Prior department cost, 226
Process benchmarking, 747
Process complexity, 129–130
Process costing
equivalent units of production (EUP), 213–216
EUP, denominator in, 216, 216n
FIFO EUP calculation, 232
first-in, first-out (FIFO) method, 211,
216–218, 223–226
hybrid costing systems, 231
introduction, 163, 211
multidepartment setting, 226–227
prior department cost, 226
production costs: the numerator, 211–213
production quantity: the denominator, 213
spoilage, 233–235
standard costs, with, 228–231
steps in, 217–218, 218n
total cost to account for, 218
transferred-in cost, 226
WA EUP calculation, 231, 232
weighted average (WA) method,
216–218, 219–223
Process costing systems, 163–164
See also Process costing
Processes, 115–116
Processing (service) time, 116
Process map, 116
Process productivity, 614
Process quality yield, 614
Process yield, 291
Procter & Gamble, 129
Product and material losses (job order costing)
abnormal spoilage, 181
accounting treatment for, 179
all jobs, anticipated on, 180
introduction, 179
particular jobs, specifically identified with, 180
Product complexity, 125
Product contribution margin, 83, 383n
Product cost, 5
Product costing
cost accumulation systems, 163–164
costing systems and inventory evaluation,
163n, 164
introduction, 163
methods, 163–164
valuation methods, 164–165
Product costs
absorption cost, 36n
accumulation, 39–41
burden, 37n
definition of, 30, 36, 36n
direct labor, 36–37
direct material, 36
overhead, 37–38
variable costing, 36n
Product differentiation, 9, 526
Production, stages and cost of, 35
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Licensed to: iChapters User
Subject Index
Production activities and costs
introduction, 788
life cycle costs, 791, 792
product life cycles, 789–791
target costing, 791–792, 793
Production center, 34
Production cost, 787
Product-level (process-level) cost, 121
Product life cycle, 789
Product life cycles
decline stage, 791
design stage, 789
growth stage, 789–790
introduction, 789
maturity stage, 790
Product variety, 125
Professional ethics, 5–7
Profitability index (PI), 657–658, 658n
Profit as performance measure, 601–602
Profit center, 555–556
Profit margin, 606
Profit sharing, 532, 624
Profit-volume (PV) graph, 387–388
Pseudo-profit center, 566, 566n
Public Company Accounting Oversight Board
(PCAOB), 2
Pull systems, 787–788, 790
Purchase orders
allocation bases, 558
common costs, 443n
cost levels, 120
EDI (electronic data interchange), 802
JIT system, 803, 803n
overhead, allocation of, 69
Purchases budget, 332, 333
Purchasing
advances in authorizing and
empowering, 714–715
decentralization and, 550
EOQ and, 811
e-procurement systems, 715
ERP and, 843
group purchasing, 700
information technology and, 714
inventory management and, 787–788
JIT systems and, 793
master budget and, 329
needs, determining, 282
point-of-purchase material variance
model, 272–273
production process, 115–116
purchases, advances in authorizing and
empowering, 714–715
purchases budget and, 332
scarce resources decisions, 433
vendor partnerships and, 797
Purchasing agents, 265–266, 700
Purchasing cost (for inventory), 787
Purchasing managers, 811
Pursuit of high quality, 754
Push system, 787, 789
Q
Quality
assessing internationally, 765–767
characteristics of, 744
consumer view of, 743–745
defined, 741
European Foundation for Quality
Management (EFQM), 766–767
grade, 745
“high quality” versus “high grade,” 745
International Organization for Standardization
(ISO), 765–766
measuring the cost of, 757–760
as an organizational culture, 763–765
production view of, 741–743
service, 744–745
value, 745
Quality, obtaining information about
BSC, 761–763
CMS, 761–763
Quality as an organizational structure, 763–765
Quality audit, 765
Quality control (QC), 742
Quality Control Award for Operations, 754
Quality costs, types of
accounting and information about, 755–757
appraisal, 37, 754
compliance, 755
cost behaviors, 38
external failure, 754
failure, 37
internal failure, 754
lack of high quality, 754
noncompliance, 755
prevention, 37, 754
pursuit of high quality, 754
time-phase model for quality costs, 757
total quality cost, formulas for calculating, 760
Quality Is Free (Crosby), 757
Quantity purchased, 700
R
Radio frequency identification (RFID), 522
Random, 715–716
Random effects, 623
Raw (Direct) Material Inventory accounts, 268
Raw and In-Process (RIP) Inventory account, 804
Raw material, 32
Raw Material (RM) Inventory, 39, 169
Reality mining, 846
Realized value approach, 490–492
Receiving Department, 118
Red-line system, 813
Regression line, 76–78
Reinvestment assumptions, 668
Relevance, concept of
bearing on the future, 426
decision, association with, 425–426
importance to decision maker, 426
introduction, 425
Relevant costing, 425
See also Relevant information for
decision making
Relevant costs for specific decisions
introduction, 428
outsourcing decisions, 428–433
product line, 442–443, 444
sales mix decisions, 435–439
scarce resource decisions, 433–435
segment margin, 443
special order decisions, 440–442
Relevant information for decision making
introduction, 425
linear programming, 444–449
891
relevance, concept of, 425–426
specific decisions, relevant costs for, 428–444
sunk costs, 426–428
Relevant range, 26, 383, 383n
Renewable energy certificates, 853
Research and development (R&D) costs, 761
Residual income (RI), 609, 610–611
Resource constraints, 446n
Responsibility, 10
Responsibility accounting system
basic control functions, 552
defined, 551
goal congruence, 553
manager’s responsibility report, 552
responsibility reports, 551, 552
“rolling up” (aggregating) of information, 553
variances, 552–553
Responsibility centers
cost center, 554–555, 555n
investment center, 556
profit center, 555–556
revenue center, 555
types of, 554
Responsibility reports, 551
Restructuring, 839–840
Results benchmarking, 746
Return of capital, 655
Return on capital, 655
Return on investment (ROI), 2, 605–609,
609n, 610–611
Revenue, 383
Revenue and limited cost center, 555
Revenue center, 555
Reverse engineering, 746
Risk, 668
Risk-adjusted discount rate method, 669–670
Ritz-Carlton, 751
Robinson-Patman Act, 396n, 441
Rolling budget, 347
Ryan & Company, 701
S
Safety stock, 812–813
Sales mix, 435
Sales mix decisions
ad hoc discounts, 441
advertising budget changes, 438–439
demand, decline in, 436n
fixed costs, 440
introduction, 435
Robinson-Patman Act, 441
sales compensation changes, 438–439, 438nn
sales price changes and relative profitability of
products, 435–438, 438n
special order decisions, 440
Sales price variance, 555
Sales value at split-off allocation, 485
Sales volume variance, 555
Sam’s Club buildings, 701
Sarbanes-Oxley Act of 2002 (SOX), 2, 572, 752
(Section 404), 531
Scarce resource decisions, 433–435
Scarce resources, 433
Scrap, 476
Screening decision, 666
“Secret shoppers,” 744
Securities and Exchange Commission (SEC),
2, 83, 517
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892
Subject Index
Securities ratings, 711
Segment margin, 443, 604–605, 604n
Selling and administrative (S&A) expenses, 334
Selling and administrative budget, 334, 335
Selve, 129
Sensitivity analysis
asset, range of the life of, 672
cash flows, range of, 671
discount rate, range of, 670–671
effects of uncertainty, 718
introduction, 670
Separate costs, 476
Service businesses, 34, 41, 128, 493, 493n
Service company
defined, 32
versus manufacturers, 34
Service cycle efficiency, 118
Service department, 556
Service department cost allocation illustration
algebraic method, 562–565
direct method, 560–561
introduction, 559–560
overhead application rates, determining, 565
step method, 561–562
Service quality, 744–745
Shift premiums, 36–37
Short-term financial performance measures for
management
cash flow, 605
divisional profits, 604–605
economic value added (EVA®),
609–610, 609n
economic value added (EVA®),
limitations of, 610–611
introduction, 604
residual income (RI), 609
residual income (RI), limitations of, 610–611
return on investment (ROI), 605–609, 609n
return on investment (ROI), limitations of,
610–611
Shrinkage, 179
Simple interest, 673
Simple regression, 75
Simplex method, 449
Single cash flow, present value of, 673–674
“Situation,” positive or negative, 801
Six sigma, 742, 808
Slack variable, 449
“Slowdown” tactics, 266–267
Society of Management Accountants of Canada, 5
Special order decision, 440
Split-off point, 479
Spoilage, 179, 233–235
Springfield Remanufacturing, 848
Staff personnel, 10
Standard cost card, 267–268
Standard cost system journal entries, 279–282
Standard cost systems
allocated, 268
applied, 268
component prices, 265–266
introduction, 264–265
labor standards, 266–267
material standards, 265–266
overhead (OH) standards, 267–268
valuation methods, 164–165
variance, 268
waste of components, 265, 265n
Standard cost systems, reasons for
using, 283–284
advantages of, 282
controlling, 283
decision making, 284
motivating, 282
performance evaluation, 284
planning, 282
variances, 283–284
Standard hours, 280
Standard price (SP), 269
Standard quantity, 269
Standards, 264
establishing (See Establishing standards)
expected, 285
ideal (theoretical) standards, 285–286
labor, 266–267
material, 265–266
overhead, 267–268
practical, 285
standard cost systems, 264
theoretical capacity, 286
usage (See Standards usage)
Standards usage
adjusting standards, 286–288
direct labor, decline in, 288
ideal (theoretical) standards, 285–286
material price variance based on usage rather
than purchases, 288
theoretical capacity, 286
Statement of cash flows (SCF), 343–347, 605
Statement of Ethical Professional Practice, 6
Statements on Management Accounting
(SMAs), 5
Statistical process control (SPC), 742
Step cost, 29
Step fixed cost, 29
Step method, 558, 561–562
Step variable cost, 29
Stock-keeping units (SKUs), 129
Straight-line formula, 73–74
Strategic alliances, 846–847
Strategic benchmarking, 748
Strategic planning, 324–325
Strategy, 8
“Stretch” goals, 838
Strict equality constraints, 446n
Suboptimization, 556, 611
“Sunk” costs, 426, 482
Supplier Cost Adjustments, 699
Supply-chain management, 801–802
information technology and
purchasing, 714
introduction, 714
purchases, advances in authorizing and
empowering, 714–715
supply-chain relationships, 714
Support department cost allocation
administrative departments, 556
allocation bases, 556–558
introduction, 556
methods of, 558–559
service department, 556
Support departments, 556
Surplus variable, 449
T
Tactical planning, 324–327
Tangible output, 32
Target costing, 791–792, 793
Tax benefit (of depreciation), 661
Tax deferral, 624
Tax exemption, 624
Tax Reform Act of 1986, 661
Tax shield (of depreciation), 661
Teevin Bros. Land and Timber
Company, 31
Theoretical capacity, 73, 286
Theory of constraints (TOC), 809–810
Throughput, 613–615, 614n
Time lines, 653–654
Time value of money, 655, 655n, 673
Ton, 482
Total Cost Management Center (Ford), 700
Total cost of ownership (TCO), 265–266
Total cost to account for, 42, 218
Total material variance (TMV), 272
Total overhead variance, 277
Total quality management (TQM)
Baldrige Award, 753–754
defined, 749
Deming Prize, 754
employee involvement, 749–750
ideal standards and, 285
long-term supplier relationships, 750
product/service improvement, 750
quality, measuring the cost of, 758
quality as an organizational
structure, 763–765
quality system, 749
Total units to account for, 219–220
Total variance, 269
Toyota, 9, 26
Trading costs, 28
Transactional relationships, 802
Transfer price, 565
Transfer prices in multinational
settings, 570–573
Transfer pricing
cost-based transfer prices,
567–568, 567n
dual pricing, 569
introduction, 565–567
market-based transfer prices, 568–569
negotiated transfer prices, 569
pseudo-profit center, 566, 566n
Transfer pricing system, selecting, 569–570
Transferred-in cost, 226
Transferred-out cost, 222
Transfer time, 116
Treasurers, 10
Two-bin system, 813
U
Uncertainty, dealing with
and cost structure, relationship between, 719
defined, 715
explicitly considering when estimating future
costs, 716–718
insuring against occurrences of specific
events, 720
structuring costs to adjust to uncertain
outcomes, 718–719
using options and forward contracts to
mitigate price risk, 719–720
Uncertainty, nature and causes of
causes and effects, 715–716
unforeseen events, occurrence of, 716
Underapplied overhead, 70–72, 72n
Underwriters Laboratories, 765
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Licensed to: iChapters User
Subject Index
Unexpired cost, 25
Unit contribution margin, 434
Unit cost
formula for determining, 211
production costs: the numerator, 211–213
production quantity: the denominator, 213
separate calculations of, 215n
Unit-level costs, 120
Units (use of term), 165n
Units started and completed, 219
University of St. Thomas, 750
Upstream costs, 3, 4
Usage, 812
U.S. Office of Federal Procurement Policy, 5
U.S. tax rate, 661, 661n
V
Valuation methods, 164–165
Value, 745
Value-added (VA) activity, 114, 742, 786
Value-added (VA) versus non-value-added (NVA)
activities, 114–117, 117n
Value chain, 786–787
communication network, 12
components of, 11
cost management system (CMS), 535
customer service, 12
defined, 11
design, 11
distribution, 12
marketing, 12
production, 11
research and development, 11
supply, 11
Value chart, 117
Value engineering (VE), 792
Values statement, 599
Variable (VOH) variances, 274–275
Variable cost, 26–27, 383
Variable costing
absorption costing, comparison to, 86–87
absorption costing, differences
between, 82–83
defined, 81–82
illustrations, 84–86
income statement, 83
relationships, 83
Variable cost of goods sold, 83
Variable cost ratio (VC%), 385
Variable Manufacturing Overhead Control, 274
Variable overhead (VOH) rate, 274
Variable overhead costs, 37
Variable overhead efficiency variance, 275
Variable overhead spending variance, 274–275
Variance analysis, 283
Variance analysis model
favorable (F), 269, 270
total variance, 269
total variance, diagrammed, 270
unfavorable (U), 269, 270
Variances
actual costs, 228n
analysis model, 269–270
JIT and, 802–804
labor, 273
material variance computations, 270–272
overhead, 273–279
point-of-purchase material variance
model, 272
responsibility accounting systems, 552–553
revenue, 555n
sales price, 555
sales volume, 555
standard cost system, 176–177, 268
Vendor certification, 797
Vendor partnerships, 797, 798
Vertex, 448
893
Virtual reality, 791
Volume variance, 86, 276–277
W
WA EUP calculation, 231, 232
Waldenbooks, 8
Wal-Mart, 9, 117n, 522, 525–526, 747–748
Waste, 477
Weighted average (WA) method, 211,
216–218, 219–223
Worker pay, 623–624
Workers, defined, 599n
Workforce diversity, 840–842
Working capital, 711
Work in process, 32
Work in Process (WIP) Inventory
actual cost system, 38
first-in, first-out (FIFO), 211
perpetual inventory system, 39
predetermined OH rate, 68
process costing, 213
weighted average (WA), 211
Work in Process (WIP) Inventory account, 34, 268
Work in Process (WIP) valuation
methods, 164–165
Workplace, the changing, 836–837
X
Xbox 360, 528–529, 751
Xerox, 766
Y
“Yardsticks,” 532
Yield, 291
Yield variances, 290
Young employees, 621–622, 622n
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.
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Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part.