Table Of ContentManagerial
Accounting
Managerial
Accounting
F o u r t e e n t h E d i t i o n
Ray H. Garrison , D.B.A., CPA
Professor E meritus
Brigham Young U niversity
Eric W. Noreen , Ph.D., CMA
Professor E meritus
University of Washington
Peter C. Brewer , Ph.D., CPA
Miami U niversity—Oxford, O hio
MANAGERIAL ACCOUNTING
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Library of Congress Cataloging-in-Publication Data
Garrison, Ray H.
Managerial accounting / Ray H. Garrison, Eric W. Noreen, Peter C. Brewer. — 14th ed.
p. cm.
Includes index.
ISBN-13: 978-0-07-811100-6 (alk. paper)
ISBN-10: 0-07-811100-5 (alk. paper)
1. Managerial accounting. I. Noreen, Eric W. II. Brewer, Peter C. III. Title.
HF5657.4.G37 2012
658.15’11—dc22 2010045770
www.mhhe.com
Dedication
To our families and to our many
colleagues who use this book.
About the
Authors
Ray H. Garrison
is emeritus professor of
accounting at Brigham Young University, Provo, Utah. He
received his BS and MS degrees from Brigham Young University
and his DBA degree from Indiana University.
As a certified public accountant, Professor Garrison has been
involved in management consulting work with both national
and regional accounting firms. He has published articles in
The Accounting Review, Management Accounting, and other
professional journals. Innovation in the classroom has earned Professor Garrison the
Karl G. Maeser Distinguished Teaching Award from Brigham Young University.
Eric W. Noreen
has held appointments at
institutions in the United States, Europe, and Asia. He is emeritus
professor of accounting at the University of Washington.
He received his BA degree from the University of Washington
and MBA and PhD degrees from Stanford University. A
Certified Management Accountant, he was awarded a Certificate
of Distinguished Performance by the Institute of Certified
Management Accountants.
Professor Noreen has served as associate editor of The Accounting Review and the
Journal of Accounting and Economics. He has numerous articles in academic journals
including: the Journal of Accounting Research; The Accounting Review; the Journal of
Accounting and Economics; Accounting Horizons; Accounting, Organizations and Society;
Contemporary Accounting Research; the Journal of Management Accounting Research;
and the Review of Accounting Studies.
Professor Noreen has won a number of awards from students for his teaching.
vi Garrison Noreen Brewer
Peter C. Brewer
is a professor in the
Department of Accountancy at Miami University, Oxford, Ohio.
He holds a BS degree in accounting from Penn State University,
an MS degree in accounting from the University of Virginia, and
a PhD from the University of Tennessee. He has published more
than 30 articles in a variety of journals including: Management
Accounting Research, the Journal of Information Systems, Cost
Management, Strategic Finance, the Journal of Accountancy,
Issues in Accounting Education, and the Journal of Business Logistics.
Professor Brewer is a member of the editorial board of the Journal of Accounting
Education and has served on the editorial board of Issues in Accounting Education. His
article “Putting Strategy into the Balanced Scorecard” won the 2003 International
Federation of Accountants’ Articles of Merit competition, and his articles “Using
Six Sigma to Improve the Finance Function” and “Lean Accounting: What’s It All
About?” were awarded the Institute of Management Accountants’ Lybrand Gold and
Silver Medals in 2005 and 2006. He has received Miami University’s Richard T.
Farmer School of Business Teaching Excellence Award and has been recognized on
two occasions by the Miami University Associated Student Government for “making
a remarkable commitment to students and their educational development.” He is a
leading thinker in undergraduate management accounting curriculum innovation and
is a frequent presenter at various professional and academic conferences.
Prior to joining the faculty at Miami University, Professor Brewer was employed
as an auditor for Touche Ross in the firm’s Philadelphia office. He also worked as
an internal audit manager for the Board of Pensions of the Presbyterian Church
(U.S.A.). He frequently collaborates with companies such as Harris Corporation,
Ghent Manufacturing, Cintas, Ethicon Endo-Surgery, Schneider Electric, Lenscrafters,
and Fidelity Investments in a consulting or case writing capacity.
Managerial Accounting Fourteenth Edition vii
Garrison
Let be Your Guide
For centuries, the lighthouse has provided guidance and safe passage
for sailors. Similarly, Garrison/Noreen/Brewer has successfully guided
millions of students through managerial accounting, helping them sail
It is the ‘Bible’ of
smoothly through the course.
Managerial Accounting.
Decades ago, lighthouses were still being operated manually. In these
Mark Motluck ,
Anderson University days of digital transformation, lighthouses are run using automatic lamp
changers and other modern devices. In much the same way, Garrison/
Noreen/Brewer has evolved over the years. Today, the Garrison book
An excellent choice
not only guides students—accounting majors and other business majors
for a fi rst course in
alike—safely through the course but is enhanced by a number of powerful
managerial accounting.
new tools to augment student learning and increase student motivation.
Steven Huddart ,
Penn State McGraw-Hill’s C onnect™ Accounting offers a number of features to
facilitate student learning. Embedded within Connect Accounting, our
NEW intelligent technology, LearnSmart, offers flashcards that personalize
Garrison is
the study experience by constantly adapting, emphasizing the concepts a
the gold standard
student still needs to master. N EW animated, narrated Guided Examples
of all accounting texts.
connected to practice exercises within C onnect Accounting provide a
Gene Johnson ,
step-by-step walkthrough of a similar exercise, assisting students when they
Clark College
need it most. C onnect Accounting’s NEW Self-Quiz and Study provides a
study plan that recommends specific readings from the text, supplemental
narrated PowerPoints, and practice exercises that will improve students’
understanding of each learning objective. Finally, the student library
within Connect gives students access to additional resources, such as
forms for the N EW Applying Excel feature, Interactive Presentations for
each learning objective, an electronic version of the textbook, and more.
Just as the lighthouse continues to provide reliable guidance to seafarers,
the Garrison/Noreen/Brewer book continues its tradition of helping students
sail successfully through managerial accounting by always focusing on
three important qualities: relevance, accuracy, and clarity.
viii Garrison Noreen Brewer
Garrison’s Managerial
Accounting text is one of
RELEVANCE. the best introductory texts
Every effort is made to help students
available today. It provides
relate the concepts in this book to the decisions made by working
students with the tools and
managers. In the fourteenth edition, the authors have written a
information needed to help
new Chapter 1 with the goal of helping all business students better them successfully learn this
understand why managerial accounting is relevant to their future material in an interesting
careers. New and revised In Business boxes throughout the book and engaging manner.
link chapter concepts to pertinent real-world examples. Service The Garrison text is the
only option.
industry references appear throughout the chapter narrative and
end-of-chapter material to provide students with relevant context Tracy Campbell Tuttle ,
San Diego Mesa Community College
for the material they are learning. The robust Connect Accounting
technology package is populated with new and exciting tools to
help keep students engaged in the learning process. For these
reasons and many more, a student reading Garrison should Good service industry
never have to ask “Why am I learning this?” materials. The more
I read the book, the more
ACCURACY. I appreciated this information.
The Garrison book continues to set the
The homework . . . directed
standard for accurate and reliable material in its fourteenth
toward service business
edition. With each revision, the authors evaluate the book and expands the relevance of the
its supplements in their entirety, working diligently to ensure material to the student.
that the end-of-chapter material, solutions manual, and test Don Lucy ,
bank are consistent, current, and accurate. Indian River State College
CLARITY.
Generations of students have praised
Garrison for the friendliness and readability of its writing, but A well-done text that is a
that’s just the beginning. In the fourteenth edition, the authors pleasure to teach from.
have rewritten various chapters with input and guidance from Joseph Gerard ,
University of Wisconsin—Whitewater
instructors around the country to ensure that teaching and
learning from Garrison remains as easy as it can be. In addition,
the authors have taken an active role in building out Connect
Accounting, carefully reviewing its various components to ensure It’s still the best book on the
clarity and consistency with the textbook. market, and my students
continually tell me what a
The authors’ steady focus on these three core elements has led
great book it is.
to tremendous results. Managerial Accounting has consistently led
Charles Caliendo ,
the market, being used by over two million students and earning
University of Minnesota
a reputation for reliability that other texts aspire to match.
Managerial Accounting Fourteenth Edition ix
Garrison’s
Managerial Accounting
includes pedagogical elements
that engage and instruct students without cluttering the pages or interrupting
student learning. Garrison’s key pedagogical tools enhance and support students’
understanding of the concepts rather than compete with the narrative for their
attention.
NEW to the fourteenth edition of Garrison!
Job-Order Costing 113
Applying Excel Applying Excel
Available with McGraw-Hill’s Connect™ Accounting . LEARNING OBJECTIVES 1, 4, 7
The Excel worksheet form that appears below is to be used to recreate part of the example on This NEW and exciting end-of-chapter feature links
page 104. Download the workbook containing this form from the Online Learning Center at www.
mhhe.com/garrison14e. On the website you will also receive instructions about how to use this
worksheet form. the power of Excel with managerial accounting
concepts by illustrating how Excel functionality can
be used to better understand accounting data. Applying
Excel goes beyond plugging numbers into a template by
providing students with an opportunity to build their
own Excel worksheets and formulas. Students are then
asked “what if” questions in which they analyze not
You should proceed to the requirements below only after completing your worksheet. only h ow related pieces of accounting data affect each
Required:
1 . CDhaetac ka ryeoa utro w60o,r0k0sh0e meta bcyh inche-ahnoguinrsg, tkheee peisntigm aaltle odf ttohtea lo athmeor udnatt ao ft hteh es aamlloec aasti oinn tbhaes oe riing itnhael other but why they do. Applying Excel immediately
example. If your worksheet is operating properly, the predetermined overhead rate should
now be $5.00 per machine-hour. If you do not get this answer, find the errors in your work-
s heetH aonwd cmorurcehc ti sth tehme .underapplied (overapplied) manufacturing overhead? Did it change? precedes the Exercises in twelve of the fifteen chapters
Why or why not?
2. Determine the underapplied (overapplied) manufacturing overhead for a different company
with the following data: in the book and is also i ntegrated with McGraw-
Allocation base. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Machine-hours
EEssttiimmaatteedd mtoatanlu afamcotuurnint go fo vtheerh aelalodc acotiostn .b . a. s.e . .. .. .. .. .. .. .. .. .. .. .. $ 1 0500,,000000 machine-hours Hill’s Connect™ Accounting, allowing students to
Actual manufacturing overhead cost . . . . . . . . . . . . . . . . . . $90,000
Actual total amount of the allocation base . . . . . . . . . . . . . . 40,000 machine-hours
practice their skills online with algorithmically generated
datasets.
An excellent pedagogical feature that helps further reinforce students’ knowledge of key
concepts in the text book, while strengthening students’ Excel skills that are so important in
the work place. This will further enhance an already excellent text.
Marianne L. James , California State University, Los Angeles
[Applying Excel is] an excellent way for students to programmatically develop
spreadsheet skills without having to be taught spreadsheet techniques by the
instructor. A signifi cant associated benefi t is that students gain more exposure to the
dynamics of accounting information by working with what-if scenarios.
Earl Godfrey , Gardner–Webb University
x Garrison Noreen Brewer
