Fundam. of Cost Accounting
Fundam. of Cost Accounting
Fundam. of Cost Accounting
Cost Accounting
2e
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lan26720_fm.qxd 8/9/07 3:47 PM Page ii
Fundamentals of
Cost Accounting
2e
William N. Lanen
University of Michigan
Shannon W. Anderson
Rice University
Michael W. Maher
University of California at Davis
Boston Burr Ridge, IL Dubuque, IA New York San Francisco St. Louis
Bangkok Bogot Caracas Kuala Lumpur Lisbon London Madrid Mexico City
Milan Montreal New Delhi Santiago Seoul Singapore Sydney Taipei Toronto
lan26720_fm.qxd 8/9/07 3:47 PM Page iii
FUNDAMENTALS OF COSTACCOUNTING
Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221
Avenue of the Americas, New York, NY, 10020. Copyright 2008 by The McGraw-Hill
Companies, Inc. All rights reserved. No part of this publication may be reproduced or distributed
in any form or by any means, or stored in a database or retrieval system, without the prior written
consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other
electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers
outside the United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 0 WCK/WCK 0 9 8 7
ISBN 978-0-07-352672-0
MHID 0-07-352672-X
Editorial director: Stewart Mattson
Senior sponsoring editor: Alice Harra
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Associate producer, media technology: Xin Zhu
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Compositor: ICC Macmillan Inc.
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Library of Congress Cataloging-in-Publication Data
Lanen, William N.
Fundamentals of cost accounting / William N. Lanen, Shannon W. Anderson,
Michael W. Maher.2e.
p. cm.
First ed. has Michael Mahar as rst author.
Includes index.
ISBN-13: 978-0-07-352672-0 (alk. paper)
ISBN-10: 0-07-352672-X (alk. paper)
1. Cost accounting. I. Anderson, Shannon W. II. Maher, Michael, 1946-
III. Maher, Michael, 1946-Fundamentals of cost accounting. IV. Title.
HF5686.C8M224 2008
657'.42dc21
2007022813
www.mhhe.com
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Dedication
To my wife, Donna, and my children, Cathy and Tom, for
encouragement, support, patience, and general good cheer
throughout the years.
Bill
I dedicate this book to my husband Randy, my children
Evan and David, and my parents, Max and Nina Weems.
Your support and example motivate me to improve. Your
love and Gods grace assure me that it isnt necessary.
Shannon
I dedicate this book to my children, Krista and Andrea, and
to my extended family, friends, and colleagues, who have
provided their support and wisdom over the years.
Michael
lan26720_fm.qxd 8/9/07 3:47 PM Page v
Assurance of Learning Ready
Many educational institutions
today are focused on the notion
of assurance of learning, an im-
portant element of some accred-
itation standards. Fundamentals of Cost Accounting is designed
specically to support your assurance of learning initiatives with a
simple, yet powerful, solution.
McGraw-Hill Companies is a proud corporate member of AACSB
International. Recognizing the importance and value of AACSB
accreditation, the authors of Fundamentals of Cost Accounting,
2e, have sought to recognize the curricula guidelines detailed in
AACSB standards for business accreditation by connecting se-
lected questions in Fundamentals of Cost Accounting with the
general knowledge and skill guidelines found in the AACSB stan-
dards. It is important to note that the statements contained in
Fundamentals of Cost Accounting are provided only as a guide for
the users of this text.
The AACSB leaves content coverage and assessment clearly
within the realm and control of individual schools, the mission of
the school, and the faculty. The AACSB does also charge schools
with the obligation of doing assessment against their own content
and learning goals. While Fundamentals of Cost Accounting and
its teaching package make no claim of any specic AACSB qual-
ication or evaluation, we have, within the Instructors Manual
and Test Bank that accompany Fundamentals of Cost Accounting
identied selected questions according to the six general knowl-
edge and skills areas. There are, of course, many more within the
test bank, text, and the teaching resources that might be used as a
standard for your course. However, the labeled questions are
suggested for your consideration.
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vii
Letter from the Authors
As the second edition of Fundamentals of Cost Accounting goes to press, we want to
take a moment to thank you for the success of the rst edition, and to introduce our new
coauthor, Shannon Anderson.
Our mission in writing Fundamentals of Cost Accounting is to help students develop
an intuition about how to think about decisions using cost information. If they do so, they
will be better consumers of cost information (as managers) and better preparers of cost
information (as accountants). We believe Fundamentals of Cost Accounting helps instruc-
tors convey the usefulness of cost accounting information in decision making through
examples, illustrations, problems, and cases based on actual experience.
In the rst edition, our goal was to bring a fresh and contemporary approach to present-
ing cost accounting concepts. We wrote a text that would engage students with modern
examples reective of how business is done today and not forty years ago. We were hum-
bled that so many of our colleagues agreed with us and selected Fundamentals of Cost
Accounting for their students. We were cited for clarity of writing, focus on the concepts that
students needed, and good problemmaterial. In preparation for the second edition, over 100
of you participated in reviews of the rst and second edition manuscript, and many also par-
ticipated in the focus group we held. We are truly grateful for the generous amount of time
that our users and reviewers gave us to help create an even better second edition.
In our second edition, we are thrilled to welcome our new coauthor, Shannon
Anderson. Shannon is an Associate Professor of Management at the Jesse H. Jones
Graduate School of Management at Rice University and a Principle Fellow at the Univer-
sity of Melbourne. She is both a valued friend and respected colleague and she brings to
the team her extensive experience in cost management systems from both research and
practice. Her research in companies of various industries and in many countries is
reected throughout the book, adding to the relevance of the text to todays students and
managers. Shannon previously taught at the University of Michigan and worked as an
engineer at General Motors Corporation. She received a doctorate and masters degree
in business economics at Harvard University and a BSE in civil engineering with a con-
centration in operations research at Princeton University.
With the success of the rst edition, your excellent feedback, and the addition of
Shannon Anderson, we are condent that our second edition provides a clear, modern,
and practical view of cost accounting that will help your students become informed and
intelligent consumers and preparers of cost information.
Best wishes for a good semester,
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William N. Lanen
viii
William Lanen is Professor of Accounting at the
University of Michigan Business School. He holds
degrees in economics from the University of
California, Berkeley, and Purdue University and
earned a PhD in accounting from the Wharton
School of the University of Pennsylvania.
Bill teaches management accounting in both the BBA
and MBA programs at the University of Michigan. He
also teaches management accounting in Global MBA
Programs and Executive Education Programs in Asia,
Europe, and Latin America. Before coming to the
University of Michigan, Bill was on the faculty at the
Wharton School of the University of Pennsylvania,
where he taught various nancial and managerial
accounting courses at the undergraduate, MBA, and
Executive MBA levels. He has received teaching
awards at both the University of Michigan and the
Wharton School.
Bill serves on the Editorial Board of the Journal of
Management Accounting Research. He has published
in Journal of Accounting Research; Journal of
Accounting and Economics; Accounting,
Organizations and Society; and The Accounting
Review. Bill is past-president of the Management
Accounting Section of the American Accounting
Association.
William N. Lanen
About
the
Authors
About
the
Authors
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Michael W. Maher Shannon W. Anderson
ix
Michael Maher is a Professor of Management at the
University of California-Davis. He previously taught at
the University of Michigan, the University of Chicago,
and the University of Washington. He also worked on
the audit staff at Arthur Andersen & Company and
was a self-employed nancial consultant for small
businesses. He received his BBA from Gonzaga
University, which named him Distinguished Alumnus
in 1989, and his MBA and PhD from the University of
Washington, and he earned the CPA from the state of
Washington.
Michael is a past-president of the Management
Accounting Section of the American Accounting
Association and has served on the editorial boards of
The Accounting Review, Accounting Horizons,
Journal of Management Accounting Research, and
Management Accounting. He is coauthor of two
leading textbooks, Principles of Accounting and
Managerial Accounting. Maher has coauthored
several additional books and monographs, including
Internal Controls in U.S. Corporations and Manage-
ment Incentive Compensation Plans, and published
articles in many journals, including Management
Accounting, The Journal of Accountancy, The
Accounting Review, Journal of Accounting Research,
Financial Executive, and The Wall Street Journal.
For his research on internal controls, Michael was
awarded the American Accounting Associations
Competitive Manuscript Award and the AICPA
Notable Contribution to Literature Award. He also
received the award for the Outstanding Tax
Manuscript. He received the Annual Outstanding
Teacher Award three times from his students at
the University of Californias Graduate School of
Management and has twice received a special award
for outstanding service. Mahers current research
includes studies in health care costs and corporate
corruption.
Shannon Anderson is an Associate Professor of
Management at the Jesse H. Jones Graduate School
of Management of Rice University and a Principle
Fellow at the University of Melbourne. She previously
taught at the University of Michigan and worked as
an engineer at General Motors Corporation. She
received a doctorate and masters degree in business
economics at Harvard University and a BSE in civil
engineering with a concentration in operations
research at Princeton University.
Shannons research, which focuses on the design and
implementation of performance measurement and
cost control systems, spans the elds of management
accounting and operations research. Her research
on activity-based costing won the 2006 American
Accounting Associations Notable Contribution Award
and the 2003 AAA Management Accounting Sections
Notable Contribution to the Literature Award. She
and Bill won the 2006 AAA Management Accounting
Sections Notable Contribution to the Literature
Award for their study of the performance impact of
electronic data interchange (EDI) systems.
Shannon currently serves on the Editorial Boards of
the Accounting Review; Accounting, Organizations
and Society; Production and Operations Manage-
ment; Management Science; Management Accounting
Research; and the Journal of Management
Accounting Research. She has also served on
numerous committees for the American Accounting
Association and the Management Accounting Section
of the American Accounting Association. Her research,
which has been funded in part by competitive grants
from the AICPA, the Institute of Internal Auditors, and
the Institute of Management Accountants, has been
published by the Accounting Review, Accounting
Organizations and Society, Production and Opera-
tions Management, Management Science, and the
Journal of Management Accounting Research. She is
also coauthor of the award-winning book,
Implementing Management Innovations.
Shannon W. Anderson Michael W. Maher
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x
Navigating through information systems,
ambiguous situations, and value- and
nonvalue-added activities can
be a challenge for students
entering the business world.
Fundamentals of Cost Accounting gives
students a clear view by providing them
with the tools they need to be successful
in a concise, readable, and logical
manner. We want students to discover the
development of cost accounting tools and
techniques as a natural response to deci-
sion making. We emphasize the intuition
behind concepts and work to minimize
the need to memorize. We present the
material from the perspective of both the
preparer of information as well as those
who will use the information. We do this
so that accounting majors as well as stu-
dents who are planning other careers can
become intelligent and informed produc-
ers and consumers of cost accounting
data.
Cost
Accounting:
A Clear
View
Cost
Accounting:
A Clear
View
For years I have considered changing texts, looking for a
one semester text that was easy enough, both in the text and
the end of chapter material, and I nally found it
Norman Sunderman
Angelo State University
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xi
To be effective problem solvers, students
need to learn to ask the right questions.
Fundamentals of Cost Accounting and the
accompanying Web-based Homework
Manager provide a wide range of challeng-
ing and thought-provoking end-of-chapter
material for students to practice their
decision-making skills. Problem material
has been written to precisely match the
presentation of concepts in each chapter;
there are no inconsistent terms or conict-
ing requirements, making homework
seamless for students.
McGraw-Hills Homework Manager and
Homework Manager Plus, the online
homework management solution, contains
end-of-chapter material from the text, in
both static and algorithmic formats, allow-
ing problem material to be used to its full
potential without losing consistency.
Students can practice anytime, anywhere,
with Homework Manager and Homework
Manager Plus.
Each chapter of Fundamentals of Cost
Accounting opens with a real dilemna
faced by a manager in a variety of service
and manufacturing companies. New in the
2nd edition is the Debrief feature that
closes each chapter. The Debrief links the
topics in the chapter to the decision
dilemma faced by the manager in the
opening vignette. In Action boxes in
the text highlight the authors own
experiences with companies where they
have worked or conducted research.
Throughout each chapter, students are
also directed to the texts Online Learning
Center, a free online McGraw-Hill
resource, where they can gain access to a
wealth of audio, video, and digital assets
designed to help bring key topics to life
and provide a real world view of the role
accounting plays in the business world.
Fundamentals of Cost Accountings
chapters are brief and to the point. With
such a concise book, students spend less
time trying to memorize details and more
time analyzing and applying fundamental
principles.
C
larity of
C
larity of
P
roblem-
S
S
kills
olving
P
roblem-
S
S
kills
olving
R
elevant to the
R
W
orld
eal
R
elevant to the
R
W
orld
eal
W
riting
W
riting
Students are successful when they can
augment their studies with materials that
t their personal learning style. As an
instructor, you can point your students to
a wide range of audio, visual, and
kinesthetic resources that accompany this
text, including multimedia content created
for the iPod and other MP3/MP4 devices,
interactive Web resources such as narrated
PowerPoints, videos, and quizzing, and
even an e-book.
D
ifferent Students
D
ifferent Students
D
ifferent Learning
Styles
D
ifferent Learning
Styles
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xii
Chapter Opening Cases
Do your students sometimes wonder how
the course connects with their future? Each
chapter opens with a case featuring a real
organization using cost accounting principles.
This sets the stage for the rest of the chapter
and encourages students to think of concepts
in a business context.
Step into the
Real World
Step into the
Real World
3
Chapter Three
Fundamentals of
Cost-Volume-Prot
Analysis
LEARNING OBJECTIVES
After reading this chapter, you should be able to:
L.O.1 Use cost-volume-prot (CVP) analysis to analyze decisions.
L.O.2 Understand the effect of cost structure on decisions.
L.O.3 Use Microsoft Excel to perform CVP analysis.
L.O.4 Incorporate taxes, multiple products, and alternative cost structures into
the CVP analysis.
L.O.5 Understand the assumptions and limitations of CVP analysis.
I opened U-Develop because I love photography and I
wanted to own my own business. I now get to spend most
of my day working with employees and customers mak-
ing sure that the photos they take are the best they can
be. It also gives me a chance to encourage younger peo-
ple who have an interest in photography, because I work
with many of the school groups and after-school clubs
here in town. Thats the fun part of the job.
But I also have to think about the nancial side of
the business. I need a systematic way to understand the
relation between my decisions and my prots.
Jamaal Kidd was discussing the photo-nishi
owns and operates. Starting out ve years a
storefront in the mall offering only photo dev
expanded the business and moved to a larg
town, where he now offers a wide range o
services, some made in his own workshop.
Our theme in this book is that the cost accounting system serves man-
agers by providing them with information that supports good decision making. In this
chapter and the next, we develop two common tools that managers can use to analyze
situations and make decisions that will increase the value of the rm. We begin in this
chapter by developing the relations among the costs, volumes, and prots of the rm. In
the next chapter, we use these relations to make pricing and production decisions that
increase prot.
The Debrief
Ivan Pirov discusses his next steps in rening the cost
accounting system at InShape:
I understand job costing much better after studying
this chapter. I have known the basics for some time,
but there are several things I learned. I am going to
collect some data from the past two or three years and
analyze the costs of our jobs more thoroughly. I am
not sure we are applying overhead in the best way.
Perhaps we might consid
tion bases. I thought abo
makes me consider cha
I worked based on the tw
the difference in revenue
allocate overhead makes
doing the right thing, bo
InShape.
New Debrief
Do your students understand how to apply
the concepts in each chapter to become
better decision makers? All chapters now
end with a Debrief feature that links the
topics in the chapter to the decision-
problem faced by the manager in the
opening vignette.
The Debrief is an excellent addition. I can see myself
using it in class as a way to pull the material together at
the end of a chapter and to show students how much theyve
learned.
Cynthia Phipps
Lake Land College
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xiii
Excel Spreadsheet Practice
Problems
Do your students know how to use
the tools they will use after they
graduate? Many businesses expect
students to know Excel. An icon
denotes selected end-of-chapter
items that come with Excel spread-
sheet templates for students to use
while solving them. The Excel prob-
lems throughout the book help
students practice using the tools
they will be using in the future.
In Action
Do your students
need help connect-
ing theory to appli-
cation? The In Ac-
tion examples are
drawn from contem-
porary journals and
the authors own ex-
periences and illus-
trate how to apply
cost accounting
methods and tools.
(L.O. 5)
(L.O. 3)
Problems Available with McGraw-Hills Homework Manager
1-19. Responsibility for Ethical Action
Dewi Hartono is an assistant controller at Giant Engineering, which contracts with the Defense
Department to build and maintain roads on military bases. Dewi recently determined that the company
was including the direct costs of work for private clients in overhead costs, some of which are charged
to the government. She also discovered that several members of management appeared to be involved
in altering accounting invoices to accomplish this. She was unable to determine, however, whether her
superior, the controller, was involved. Dewi considered three possible courses of action. She could
discuss the matter with the controller, anonymously release the information to the local newspaper, or
discuss the situation with an outside member of the board of directors whomshe knows personally.
Required
a. Does Dewi have an ethical responsibility to take a course of action?
b. Of the three possible courses of action, which are appropriate and which are inappropriate?
(CMA adapted)
1-20. Cost Data for Managerial Purposes
Tops Tools has offered to supply the Department of the Army with screwdrivers at cost plus
20 percent. Tops Tools operates a manufacturing plant that can produce 220,000 cases of screw-
drivers per year, but it normally produces 200,000. The costs to produce 200,000 cases of
screwdrivers follow:
mhhe.com/lanen2e
End-of-Chapter
Material
Being able to assign
end-of-chapter material
with condence is
important. The authors
have tested the end-of-
chapter material over
time to ensure quality
and consistency with
the chapter content.
Integrative Cases
Cases can generate classroom
discussion or be the basis for
good team projects. These
involving cases ask students
to apply the different tech-
niques they have learned to
a realistic situation.
Critical Analysis and Discussion Questions
2-11. Materials and labor are always direct costs, and supply costs are always indirect. What is
your opinion of this statement?
2-12. The cost per seat-mile for a major U.S. airline is 13.7. Therefore, to estimate the cost of
ying a passenger from Detroit to Los Angeles, we should multiply 1,980 miles by 13.7.
Do you agree?
2-13. In evaluating product protability, we can ignore marketing costs because they are not con-
sidered product costs. Do you agree?
2-14. You and two friends drive your car to Texas for spring break. A third friend asks if you
can drop her off in Oklahoma. How would you allocate the cost of the trip among the four
of you?
2-15. Pick a unit of a hospital (for example, intensive care or maternity). Name one example of
a direct materials cost, one example of a direct labor cost, and one example of an indirect
cost.
Exercises Available with McGraw-Hills Homework Manager
2-16. Basic Concepts
For each of the following statements, indicate whether it is true, false, or uncertain. Explain why.
Give examples in your answer.
(L.O. 1, 5)
Different cost structures lead to different decisions that rms
make concerning operations and investments. Consider the
following two statements:
1. Ahold now has about $23 billion in sales among its six
U.S. supermarket chainslarge but uncomfortably be-
hind giants such as Wal-Mart, Kroger, and Albertsons.
The logic of consolidation is that, in a business with
such slim prot margins, bigger companies gain impor-
tant competitive advantage by being able to negotiate
better terms and prices from suppliers, better rents from
landlords and better advertising deals from media out-
lets (Washington Post, February 8, 2004).
2. Many experts say the airlines throw planes on a route
to grab market share from rivals. Robert L. Crandall, the
former chief executive of American Airlines, said that
airlines added planes because growth spreads xed
costs over more passenger miles. If everybody is grow-
ing to keep their costs down, then theres constantly a
great deal of capacity in the market, Mr. Crandall said.
So long as theres lots of capacity, people have an in-
centive to cut prices (New York Times, December 9,
2003).
In the case of rms with low operating leverage, such as gro-
cery chains, the prot margins are small, so rms do what
they can to improve those marginseven small savings
translate to large improvements in prots. In the case of
rms with high operating leverage, such as airlines, each
additional unit (seat-mile) sold provides a large contribution
to prot, so the emphasis is on increasing volume.
Effect of Cost Structure on Operating
and Investing Decisions
In Action
S
Integrative Case
13-41. Prepare Cash Budget for Service Organization
The board of directors of the Cortez Beach Yacht Club (CBYC) is developing plans to acquire
more equipment for lessons and rentals and to expand club facilities. The board plans to purchase
about $50,000 of new equipment each year and wants to begin a fund to purchase a $600,000 piece
of property for club expansion.
The club manager is concerned about the clubs capability to purchase equipment and expand
its facilities. One club member has agreed to help prepare the following nancial statements and
help the manager ascertain whether the plans are realistic. Additional information follows the
nancial statements.
(L.O. 4, 5, 6, 7)
CORTEZ BEACH YACHT CLUB
Statement of Income (Cash Basis)
For the Year Ended October 31
Year 9 Year 8
Cash revenues
Annual membership fees . . . . . . . . . . . . . . . . . . . . . $ 710,000 $600,000
Lesson and class fees . . . . . . . . . . . . . . . . . . . . . . . 468,000 360,000
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 3,000
_________ ________
Total cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,182,000 $963,000
_________ ________
(Continued)
S
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xiv
Each chapter of Fundamentals of Cost
Accounting clearly establishes learning
objectives, highlights numerous real-world
examples, and identies where ethical issues
arise and how to think about these issues. The
most noticeable revision to the 2nd edition is that
we have split Chapter 3 of the rst edition into
two chapters. In the second edition, Chapter 3
discusses cost-volume-prot analysis and Chapter
4 discusses cost analysis for decision making.
This facilitates teaching these two topics at
different points in the course.
We have added material that discusses the use
of Microsoft Excel and presented many of the
tables throughout the text using Excel. We have
introduced over 100 new items in the end-of-
chapter practice material and revised the
remaining material. Throughout the revision
process, we retained the clear writing style that
was frequently cited as a strength of the rst
edition.
1 Cost Accounting: Information for Decision
Making
Enhanced development of the role of the value
chain in value creation.
Signicantly revised topics in cost accounting
linked to the stages of the value chain,
including how cost accounting is used in:
R&D
Design
Purchasing
Production
Marketing
Distribution
Customer service
Added discussion on ethics and cost
accounting.
Added end-of-chapter assignments on ethics.
Whats New
in the Second
Edition?
2 Cost Concepts and Behavior
New In Action feature related to how
organizations are a mix of both manufacturing-
type and service-type activities, illustrating how
cost accounting information is important for
both.
Revised exhibit illustrating prime and
conversion costs clearly.
Added three new end-of-chapter problems
dealing with service rms and revised 25 other
questions.
3 Fundamentals of Cost-Volume-Prot
Analysis
Revised the approach to CVP analysis by
starting with the break-even problem and then
extending the analysis to cases where the target
prot is different from zero.
Expanded coverage of operating leverage and
margin of safety.
Added illustration showing how to use Excel to
solve CVP problems.
Added discussion on CVP analysis with
alternative cost structures, such as step-xed
costs.
Added discussion on the assumptions and
limitations of CVP analysis.
Added 25 new end-of-chapter questions,
exercises, and problems, including problems
using Excel and revised 10 other exercises and
problems.
4 Fundamentals of Cost Analysis for
Decision Making
Added new discussion on legal issues and the
pricing decision.
Added discussion illustrating the use of Excel to
solve differential cost problems.
Added discussion illustrating the use of Excel to
solve product mix problems.
Revised and moved discussion on Theory of
Constraints to the chapter body.
Added 18 new end-of-chapter questions,
exercises, and problems and added a new
integrative case.
5 Cost Estimation
Added new discussion on data problems in
regression analysis.
Added new discussion on the learning
phenomenon and cost estimation.
Added an appendix on learning curves and
costs.
Added 16 new end-of-chapter questions,
exercises, and problems.
Whats New
in the Second
Edition?
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xv
6 Fundamentals of Product and Service
Costing
Added new material to motivate this overview
chapter.
Added seven new end-of-chapter questions,
exercises, and problems and revised 10 other
exercises and problems.
7 Job Costing
Added new learning objective on ethical issues
in job costing.
Revised ow of development of chapter
illustration.
Added new discussion of alternative methods of
recording and applying overhead.
Added material on misrepresenting costs and
ethical issues.
Added ve new end-of-chapter questions,
exercises, and problems.
8 Process Costing
Added new In Action item on equivalent units
and fraud.
Added new illustration of process costing using
a series of Excel worksheets.
Added new end-of-chapter problem/short case
on ethics and process costing.
9 Activity-Based Costing
Added new exhibits illustrating ABC using Excel
worksheets.
Added new problem on ethics and ABC.
Added new end-of-chapter case on activity-
based costing.
10 Fundamentals of Cost Management
Added new In Action item on the cost of
customers at Best Buy.
Added eight new end-of-chapter exercises,
problems, and cases.
11 Service Department and Joint Cost
Allocation
Expanded discussion of net realizable value and
terminology.
Added two new end-of-chapter problems.
12 Fundamentals of Management Control
Systems
Added new learning objective on internal
controls.
Added new material to motivate this overview
chapter.
Added material for the In Action item Beware
of the Kink, which describes the effect of
performance evaluation on a broad sample of
rms.
Added 10 new end-of-chapter exercises and
problems and a new case on ethics at PepsiCo
and GE.
13 Planning and Budgeting
Added new illustration of the development of
budgets using a series of Excel worksheets.
14 Business Unit Performance Measurement
Added new In Action item on EVA at Best Buy.
Added new end-of-chapter case.
15 Transfer Pricing
Expanded discussion of how to determine the
optimal transfer price.
16 Fundamentals of Variance Analysis
Added new In Action item on how favorable
variances might not be good news, based on
events at a for-prot health care company.
Added new illustration of variances using Excel
worksheets.
Updated 45 end-of-chapter exercises and
problems.
17 Additional Topics in Variance Analysis
Revised chapter illustration so actual production
is no longer the same as the master budget.
Updated 22 end-of-chapter exercises and
problems.
18 Nonnancial and Multiple Measures
of Performance
Added new discussion of strategy maps tied to
the balanced scorecard.
Added new In Action item on the use of
scorecards for evaluating suppliers and tying
back to the value chain.
Added new end-of-chapter exercises, problems,
and a case, and updated some existing exercises
and problems.
lan26720_fm.qxd 8/9/07 3:47 PM Page xv
xvi
Total Teaching
Package for
Instructors
Use These McGraw-Hill Digital
Assets and Course Management
Tools to Enhance Your
Classroom, Online, or Hybrid
Course
McGraw-Hills Homework
Manager Plus
You and your students have access to a large
library of digital assets which complete the
textbook, including McGraw-Hills Homework
Manager, Topic Tackler Plus, and an online version
of the textbook . . . using only one access code.
McGraw-Hills Homework
Manager
Web based resources duplicate prob-
lems directly from the textbooks end-
of-chapter material, use algorithms to provide a
limitless supply of online self-graded practice
problems for students, and create assignments and
tests with unique versions of every problem.
The enhanced version of McGraw-Hills Home-
work Manager integrates all of Fundamental of
Cost Accountings online and multimedia assets.
Students can do a lot online as they prepare for
their class: brush up on topics, gather prepopu-
lated hints and feedback, and take quizzes. You
can create tests, grade them online, and record the
results in the same grade book as your homework
assignments. You even have an option for
incorporating an online version of the textbook, so
that students will have access to course material
and their textbook even when they are away from
campus.
McGraw-Hills Homework Manager is also a use-
ful grading tool. All assignments can be delivered
over the Web and are graded automatically, with the
results stored in your private grade book. Detailed
results let you see at a glance how each student
does on an assignment or an individual problem
you can even see how many tries it took them to
solve it.
Students receive full access to McGraw-Hills
Homework Manager when they purchase
McGraw-Hills Homework Manager Plus, or you
can have Homework Manager pass codes
shrinkwrapped with the textbook. Students can
also purchase access to Homework Manager
directly from your course home page.
McGraw-Hills Homework Manager is powered
by Brownstone.
Online Learning Center (OLC)
www.mhhe.com/lanen2e
We offer an Online Learning Center (OLC) that
follows Fundamentals of Cost Accounting chapter
by chapter. It doesnt require any building or
maintenance on your part. Its ready to go the
moment you and your students type in the URL.
As your students study, they can refer to the OLC
Web site for such study resources as:
Self-grading quizzes
iPod downloadable content
Links to text references
Links to professional resources
Chapter overviews and learning
objectives
PowerPoint Presentations
Videos
Online Learning Center Instructor Site
(www.mhhe.com/lanen2e)
Password-protected instructor supplements are
available online. A secured Instructor Resource
Center stores your essential course materials to
save you prep time before class. The Instructors
Manual, Solutions, PowerPoint Slides, and sample
syllabi are now just a couple of clicks away. You
will also nd useful packaging information and
transition notes.
Total Teaching
Package for
Instructors
lan26720_fm.qxd 8/9/07 3:47 PM Page xvi
Topic Tackler Plus
Topic Tackler Plus is a complete
multimedia tutorial focusing on the
most difcult cost accounting topics
in each chapter. It combines video
clips, PowerPoint slides, interactive
exercises, and self-grading quizzes
into a strong study and review tool.
Students can access Topic Tackler
Plus through the Online Learning
Center.
iPod
iPod
iQuiz.
Using our EZ Test Online you can make test and quiz content available for
a students Apple iPod.
Students must purchase the iQuiz game application from Apple for 99 in
order to use the iQuiz content. It works on the iPod fth generation iPods
and better.
Instructors only need EZ Test Online to produce iQuiz ready content.
Instructors take their existing tests and quizzes and export them to a le
that can then be made available to the student to take as a self-quiz on
their iPods. Its as simple as that.
lan26720_fm.qxd 8/9/07 3:47 PM Page xviii
xix
Total Study
Package for
Students
Use These McGraw-Hill Digital
and Print Resources to Help
You Get a Good Grade in Cost
Accounting
Online Learning Center
www.mhhe.com/lanen2e
Go online and nd Chapter Summaries, Online
Quizzing, Key Term Reviews, Internet Exercises,
PowerPoint Presentations, Excel Templates, Home-
work Manager, Topic Tackler Plus, NY Times,
Links to Professional Resources, and Text Updates.
iPod