xvii
Exhibit P-5 (Continued)
Chapter
Number
Context
11
11-19
Special order, activity-based costing
11-20
Make versus buy, activity-based costing
11-24
Filing cabinets; theory of constraints, throughput margin
12
12-16
Balanced scorecard
12-17
Analysis of growth, price-recovery and productivity components
12-18
Merchandising; strategy, balanced scorecard
12-19
Merchandising; strategic analysis of operating income
12-20
Merchandising; analysis of growth, price-recovery, and productivity
components
12-21
Merchandising; identifying and managing unused capacity
12-22
Manufacturing; strategy, balanced scorecard
12-23
Manufacturing; strategic analysis of operating income
12-24
Manufacturing; analysis of growth, price-recovery and productivity
components
12-25
Manufacturing; identifying and managing unused capacity
12-26
Consulting firm; strategy, balanced scorecard
12-27
Consulting firm; strategic analysis of operating income
12-28
Consulting firm; analysis of growth, price-recovery, and productivity
components
12-29
Consulting firm; identifying and managing unused capacity
12-30
Manufacturing; strategy, balanced scorecard
12-31
Manufacturing; strategic analysis of operating income
12-32
Manufacturing; analysis of growth, price-recovery, and productivity
components
12-33
Manufacturing; identifying and managing unused capacity
12-34
Balanced scorecard
12-35
Petroleum company; balanced scorecard
12-36
Laser printers; balanced scorecard
12-37
Chocolate manufacturer; balanced scorecard, environmental and social
performance
12-38
Cable and internet services; balanced scorecard, social performance
12-39
Airline; balanced scorecard, environmental and social performance
12-40
Manufacturing; partial productivity measurement
12-41
Manufacturing; total factor productivity
11-26
Printers; customer profitability analysis
11-36
Manufacturing; ABC, make versus buy
11-39
Electronic testing equipment manufacturer; theory of constraints,
throughput margin
11-40
Toy manufacturer; theory of constraints, sensitivity analysis
11-41
Customer profitability, activity-based costing, ethics
xviii
Exhibit P-5 (Continued)
Chapter
Number
Context
13
13-16
Tool repair shop; value-added, nonvalue-added costs
13-17
Architects; target operating income, value-added costs
13-18
Distributor; target prices, target costs, ABC
13-19
Medical instruments; target costs, effect of product-design changes on
product costs
13-27
Amusement park; value engineering, target costing, ABC
13-28
Candy manufacturer; target return on investment pricing
13-30
Temp labor agency; cost-plus and market-based pricing
13-31
Testing labs; cost-plus, activity-based costing, market-based pricing
13-32
Industrial site cleanup; life-cycle costing
13-33
Airline; price discrimination
13-34
Airline; anti-trust laws, pricing
13-36
Wood sculpture manufacturing; target prices, target costs, locked-in costs,
value engineering
14
14-17
Environmental products distributor; customer profitability, customer-cost
hierarchy
14-18
Repair service; customer profitability
14-19
Pharmaceutical distributor; customer profitability
14-28
Jewelry manufacturer; customer profitability
14-29
Paper distributor; customer profitability
14-30
Manufacturing company; customer profitability analysis
Interior design; customer-cost hierarchy, customer profitability
Metal rod manufacturer; cost-hierarchy income statement, allocation of
corporate, division, and channel costs to customers
Keyboard manufacturer; cost-hierarchy income statement, allocation of
corporate, division, and channel costs to customers
Writing smaller orders; customer-cost hierarchy, profitability and ethics
19
Cell phone equipment; costs of quality
Car seats; costs of quality
Car seats; costs-of-quality, ethics
Cell phone covers; nonfinancial measures of quality and time
13-20
Energy audits; target costs, effect of process-design changes on service
costs
13-21
Hotel management; cost-plus target return on investment pricing
13-22
Manufacturer; cost-plus, target pricing
13-23
Vacuum manufacturer; life-cycle budgeting and costing
13-24
Hotel; price discrimination
13-25
Manufacturer; target pricing
13-26
Cosmetics manufacturer; value engineering, target pricing, target costing
xix
Exhibit P-5 (Continued)
Chapter
Number
Context
Conference center, quality improvement, relevant costs and relevant
revenues
efficiency
Cereal manufacturer; statistical quality control
Pizza delivery; quality improvement, Pareto diagram, cause-and-effect
diagram
Valve manufacturing; quality improvement, relevant costs, and relevant
revenues
Plastic products; quality improvement, relevant costs, and relevant
revenues
Plastic products; waiting times, manufacturing lead times
Plastic products; waiting times, relevant revenues, and relevant costs
Wire harnesses; manufacturing cycle times, relevant revenues, and
relevant costs
Healthcare group; waiting time, patient satisfaction, compensation
Auto parts manufacturer; quality and ethics
Textile printing; quality improvement; theory of constraints
20
Hardware company; JIT production, relevant benefits, relevant costs
Computer assembly; backflush costing and JIT production
Computer assembly; backflush costing, two trigger points, materials
purchase and sale
Computer assembly; backflush costing, two trigger points, completion of
production and sale
Music players; EOQ, JIT production
Automotive supplier, JIT purchasing, relevant benefits, relevant cost
Computer manufacturer; supplier evaluation, costs of quality, timely
deliveries
Deli sandwich shop; supplier evaluation, costs of quality, timely deliveries
Electrical meters; backflush costing and JIT production
Electrical meters; backflush, two trigger points, materials purchase and
sale
Electrical meters; backflush, two trigger points, completion of production
and sale
Security devices; lean accounting
19-22
Pet toys; waiting time
19-23
University; waiting time
19-24
University; waiting time, relevant costs, student satisfaction
19-25
Cell phones; nonfinancial measures of quality and time
19-26
Manufacturer; nonfinancial measures of quality, manufacturing cycle
xx
Exhibit P-5 (Continued)
Chapter
Number
Context
21
Construction and mining site supplier; NPV of information system,
income taxes
23
Automotive retailer; ROI, RI, EVA
Venture capital; capital budgeting, RI (conservation property)
Manufacturing, U.S. and Norway; multinational performance
measurement, ROI, RI
Fashion product manufacturer; ROI, RI, EVA, performance evaluation
Automotive; risk sharing, incentives, benchmarking, multiple tasks
Doorbell manufacturing; Residual income and EVA, timing issues
Multinational firm, U.S., Germany, and New Zealand; differing risk,
comparison of profit, ROI, and RI
Media group; ROI, RI, DuPont method, investment decisions, balanced
scorecard
Media group; division managers’ compensation, levers of control
Bank; executive (business unit) compensation, balanced scorecard
Health spas; RI, EVA, measurement alternatives, goal congruence
22-17
Window manufacturing; cost centers, profit centers, decentralization,
transfer prices
22-18
Supermarket chain; benefits and costs of decentralization
xxi
PRESENTATION OF SOLUTIONS
Instructors have a variety of views regarding the use of classroom time for homework solutions.
Most instructors put solutions on a blackboard or an overhead projector. In turn, their students
frantically copy the materials in their notes. Our practice is to reproduce the printed homework
solutions for distribution either before, during, or after the discussion for a particular solution.
The members of the class are glad to pay a modest fee to the school to cover the reproduction
costs. In this way, students can spend more of their classroom time in thinking rather than
writing. Further, they have a complete set of notes.
Similarly, we distribute printed solutions to tests and examinations along with a summary of
overall class performance. We do not devote class time to discussing these solutions. The
students deserve feedback, but they have sufficient motivation to scrutinize the printed solutions
and check their errors on an individual basis. In this way, more class time is available for new
material.
xxii
MAJOR CHANGES IN TEXT OF THE 15TH EDITION
Deeper Consideration of Global Issues
Businesses today have no choice but to integrate into an increasingly global ecosystem. Virtually
all aspects, including supply chains, product markets, and the market for managerial talent, have
become more international in their outlook. To illustrate this, we incorporate global
considerations into many of the chapters. For example, Chapter 6 talks about the special
Increased Focus on the Merchandising and Service Sectors
In keeping with the shifts in the U.S. and world economy, this edition makes greater use of
merchandising and service sector examples, with a corresponding de-emphasis of traditional
manufacturing settings. For example, Chapter 10 illustrates linear cost functions in the context of
Greater Emphasis on Sustainability
This edition places significant emphasis on sustainability as one of the critical managerial
challenges of the coming decades. Many managers are promoting the development and
implementation of strategies to achieve long-term financial, social and environmental
New Cutting-Edge Topics
The pace of change in organizations continues to be rapid. The 15th edition of Cost
Accounting reflects changes occurring in the role of cost accounting in organizations.
• We have introduced sustainability strategies and the methods companies use to implement
sustainability with business goals.
xxiii
• We have added ideas based on academic research regarding the weights to be placed on
performance measures in a balanced scorecard.
Opening Vignettes
Each chapter opens with a vignette on a real company situation. The vignettes engage the reader
in a business situation, or dilemma, illustrating why and how the concepts in the chapter are
relevant in business. For example, Chapter 2 describes how Hostess Brands, the maker of
Twinkies, was driven into liquidation by the relatively high proportion of fixed costs in its
Concepts in Action Boxes
Found in every chapter, these boxes cover real-world cost accounting issues across a variety of
industries including automobile racing, defense contracting, entertainment, manufacturing, and
retailing. New examples include
• Cost-Volume-Profit Analysis Makes Megabus a Mega-Success (Chapter 3)
• Flexible Budgets at Corning (Chapter 7)
• What Does It Cost AT&T Wireless to Send a Text Message? (Chapter 10)
• Are Charitable Organizations Allocating Joint Costs in a Misleading Way? (Chapter 16)
• Avoiding Performance-Measurement Silos at Staples (Chapter 23)
Streamlined Presentation
We continue to try to simplify and streamline our presentation of various topics to make it as
easy as possible for a student to learn the concepts, tools, and frameworks introduced in different
chapters. A major change in this edition is the reorganization of Chapters 12 and 13. Chapter 13
xxiv
allocation. As a result of the reorganization, we have also made major revisions in the structure
and writing of each of these chapters as we discuss in detail in the next section.
Other examples of more streamlined presentations can be found in the following:
• Chapter 2 on the discussion of fundamental cost concepts and the managerial framework for
decision making
xxv
HIGHLIGHTS OF NEW CHAPTER-BY-CHAPTER CHANGES
Chapter 1
Chapter 1 has been rewritten to include greater discussion of sustainability and why this issue
has become increasingly critical for managers. It also includes more material on the importance
of ethics, values, and behaviors, as well as the role of the Sarbanes-Oxley act in improving the
quality of financial reporting.
Chapter 3
Chapter 3 now includes greater managerial content, using examples from real companies to
illustrate the value of cost-volume-profit analysis in managerial decision making.
Chapter 5
Chapter 5 has been reorganized with a new section on first-stage allocation to help students
understand how costs from the standard accounting classifications (salaries, depreciation, rent,
etc.) are allocated to activity-cost pools. The discussion of behavioral considerations in
implementing activity-based costing has been moved to a new section and integrated with other
material in the chapter. There is also new material on the tradeoffs related to allocating facility-
sustaining costs to products or not allocating them at all because these costs do not have good
cost drivers.
xxvi
Chapter 9
Chapter 9 has been simplified substantially by a change in the integrated example from three to
two periods. This retains the pedagogical value of the example while making it much easier for
students to read and understand. Exhibit 9-4 and the material around it have been simplified
further, and the self-study problem has also been revised.
Chapter 11
Chapter 11 has been revised substantially; the material on “Theory of Constraints and
Throughput Contribution Margin” from Chapter 19 has now been incorporated into a new
section in this chapter. The text and numbers have been rewritten to link with the Power
Recreation problem already in Chapter 11 (and the chapter Appendix). The chapter has been
made easier for students to follow by replacing paragraphs with tables. Throughout, there is
greater emphasis on understanding why relevant costs and revenues are important when making
decisions.
Chapter 13
The new Chapter 13 focuses on cost allocation for long-run pricing decisions. The material on
short-run costing and pricing from Chapter 12 in the 14th edition has been moved to Chapter 11.
xxvii
Chapter 15
Chapter 15 is also heavily revised, with new content, examples, and exhibits. It continues the
example of Robinson Company from Chapter 4 but adds more issues around cost allocation—
single rate, dual rate, and support-department cost allocations using direct, step-down, and
reciprocal methods. Using the same example helps link and integrate normal costing and support
department cost allocation.
Chapters 17 and 18
Chapters 17 and 18 present actual costing with the material on standard costing discussed in the
appendix. We have added a discussion of managerial issues when estimating equivalent units and
choosing between the FIFO and weighted-average costing methods. Chapter 18 emphasizes the
importance of reducing spoilage and scrap and more generally the theme of striving for a
sustainable production and service environment.
Chapter 21
Chapter 21 has been completely redone with an entirely new example and a set of revised (and
clearer) exhibits. The focus has shifted from a manufacturing setting to a transportation firm
evaluating the purchase of a new hybrid-engine bus.
Chapter 22
Chapter 22 has been significantly revised to reflect the latest developments in the controversial
use of transfer prices for tax minimization by multinational corporations and provides several
real-world examples. The revision also highlights the costs and benefits of decentralization and
the tradeoffs involved in setting a transfer pricing policy.
xxviii
CHANGES IN ASSIGNMENT MATERIAL FOR THE 15TH EDITION
More than 70% of the exercises and problems in the 15th edition are new or revised. The
remaining exercises and problems are taken from the 14th edition. The following exhibits
indicate the source of each of the exercises and problems in the 14th edition. These exhibits can
be read as follows:
Chapter 5
15E
14E
∙
∙
∙
∙
∙
∙
Category (a)
5-xx
Category (b)
5-yy
Category (c)
xxix
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
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Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
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xxxi
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
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xxxii
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
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