Instructor’s Manualto accompany

First Canadian Edition prepared by Linda Lindsay

University of Lethbridge

Instructor’s Manual to accompany Cornerstones of Managerial Accounting, First Canadian Edition

By Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger, George A. Gekas, and David J. McConomy

Instructor’s Manual prepared by Linda Lindsay, University of Lethbridge

Available on Instructor’s Resource CD ISBN 0176616888 and at www.mowen1ce.nelson.com

COPYRIGHT © 2012 by Nelson Education Ltd. Nelson is a registered trademark used herein under licence. All rights reserved.

For more information contact Nelson, 1120 Birchmount Road, Toronto, Ontario M1K 5G4. Or you can visit our Internet site at www.nelson.com.

ALL RIGHTS RESERVED. No part of this work covered by the copyright hereon may be reproduced or used in any form or by any means—graphic, electronic, or mechanical, including photocopying, recording, taping, web distribution or information storage and retrieval systems—without the written permission of the publisher

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PART 1: PlanningChapter 1 Introduction to Managerial Accounting.......................................................1-1

Chapter 2 Basic Managerial Accounting Concepts ....................................................2-1

Chapter 3 Cost Behaviour...........................................................................................3-1

Chapter 4 Cost-Volume-Profit Analysis: A Managerial Planning Tool.........................4-1

PART 2: CostingChapter 5 Job-Order Costing......................................................................................5-1

Chapter 6 Process Costing.........................................................................................6-1

Chapter 7 Activity-Based Costing and Management..................................................7-1

Chapter 8 Absorption and Variable Costing, and Inventory Management .................8-1

PART 3: Control Chapter 9 Budgeting, Production, Cash, and Master Budget ....................................9-1

Chapter 10 Standard Costing: A Managerial Control Tool........................................10-1

Chapter 11 Flexible Budgets and Overhead Analysis...............................................11-1

Chapter 12 Performance Evaluation and Decentralization.......................................12-1

PART 4: Short- and Long-Term Decision MakingChapter 13 Short-Run Decision Making: Relevant Costing .....................................13-1

Chapter 14 Capital Investment Decisions.................................................................14-1

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CONTENTSCONTENTS

PREFACE

This Instructor’s Manual is intended to complement Cornerstones of Managerial Accounting, by Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger, George A. Gekas, and David J. McConomy. The Instructor’s Manual is part of an extensive teaching package that includes the following resources (most of which are available on the Instructor’s Resource CD, ISBN 13: 978-0-17-661688-5 / ISBN 10: 0-17-661688-8).

1. Solutions Manual. The Solutions Manual contains the complete solutions to the discussion questions, multiple-choice exercises, Cornerstone exercises, end-of-chapter exercises, problems, cases, and CMA problems.

2. Microsoft® PowerPoint®. Key concepts from Cornerstones of Managerial Accounting are presented in PowerPoint format, including key figures and tables from the text.

3. Image Library. Exhibits from the text are provided, allowing instructors to create their own presentations.

4. Nelson Education Testing Advantage (NETA) Test Bank and computerized ExamView® Test Bank, with over 1,100 multiple choice, true/false, matching, problems, and essay questions, plus answers and page references to the text. (NETA is a Nelson initiative that ensures that subject-matter experts who author test banks have had training in avoiding common errors in test construction and in developing multiple-choice test questions that assess higher-level thinking. See the Test Bank for details.)

5. Spreadsheet Solutions. The complete solutions to the Excel-based Spreadsheet Exercises in the textbook.

6. Solution Transparency Masters. Also included are separate files for the Solution Transparency Masters.

7. Chapter Opening Videos. A separate DVD (0-17-662882-7), featuring videos showing how companies use managerial accounting to improve business performance, is also available. It contains manufacturing and service examples to connect the text concepts to the business world.

8. Day One—Prof InClass PowerPoint® presentation that instructors can customize to orient students to the class and their text at the beginning of the course.

This manual was adapted by Linda Lindsay at the University of Lethbridge. It includes the following:

LEARNING OBJECTIVESThis section provides an overview of the main learning objectives for the chapter along with a brief summary of each.

CORNERSTONESThis section provides an overview of the Cornerstones in the chapter. Cornerstones are boxed examples in the textbook that offer students step-by-step instructions to help them understand concepts and complete related homework assignments.

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Each Cornerstone includes three sections: The Information portion provides the necessary data to arrive at a solution. The Required section outlines each step that must be completed. The Solution ends each Cornerstone, showing the calculations for each of the

required steps in the problem.Each Cornerstone has an online video offering a step-by-step presentation of each part of the Cornerstone example. These videos provide students with visual and auditory reinforcement of the content.

CHAPTER OUTLINEThis section provides an overview of the entire chapter, in outline format. Important equations and instructions for how to best use the Cornerstones are provided throughout, as well as Teaching Tips.

APPLICATIONSThis section outlines each of the ways in which the concepts in the textbook can be applied in practice. Each Multiple-Choice Exercise, Cornerstone Exercise, Exercise, and Problem is listed along with the applicable AACSB and IMA tag (see Tagging Guidelines Below).

In addition, a Video Integration Guide outlining how to best use the videos that accompany each chapter-opening vignette is included. These videos centre on cutting-edge success, showing how progressive companies use managerial accounting to fuel better business performance. They include both service and manufacturing company examples to connect concepts to the business world. This series features top companies such as:

BuyCostumes.com – Business Strategy EasyWash – Cost Behaviour Boyne Resorts – Cost-Volume-Profit Analysis Creating Dinners – Job Order Costing BP – Process Costing Tim Hortons/Cold Stone Creamery – Activity-Based Costing The Second City – Overhead Analysis High Sierra Sport Company–Profit Planning Navistar – Standard Costing and Relevant Costs Hard Rock Café – Capital Investment

Critical thinking exercises accompany each video to test student comprehension and stimulate class discussion.

Suggested Follow-up Experiential Exercises are also provided to help you refresh your approach to the course and further engage students.

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TAGGING GUIDELINESAssurance of learning outcomes in business schools is now considered a general faculty responsibility to ensure that students learn critical skills and acquire knowledge deemed important and appropriate by college faculty members. As part of the program-level measurement of learning outcomes, the measurement of specific program-level and course-level learning goals needs to occur in multiple university and college-level core courses at various levels (freshman, sophomore, junior, and senior).

To assist educators in assessing student performance and to assist schools with the accreditation process, the assignments in Cornerstones of Managerial Accounting are tagged to outcomes suggested by the Association to Advance Collegiate Schools of Business (AACSB) and the IMA (Institute of Management Accountants). Using this information can help illustrate the effectiveness of a business program in addressing these learning standards and can help the program gain accreditation.

The tagging guidelines used in assessing the content in Cornerstones of Managerial Accounting for these accrediting bodies are listed below.

Association to Advance Collegiate Schools of Business (AACSB):LABEL / TAG Related General Knowledge & Skill Area:

AACSB Communication

Communication abilities. Organization of Ideas and Factual Information. An ability to organize ideas and

factual information into coherent, logical sequences that convey the intended message as effectively as possible.

Written Presentation Skill. An ability to prepare written documents that are free of mechanical errors, have sophisticated sentence and paragraph structure, and adhere to APA or other appropriate guidelines.

Oral Presentation Skill. An ability to speak before an audience without embarrassment or affectation and to use appropriate volume, inflection, pace, posture, body language and other components of competent public speaking.

Graphical Presentation Skill. An ability to create images to communicate quantitative and qualitative ideas and factual information. Graphics for quantitative information include graphs of all types: pie, bar, line, scatter, box-and-whisker, histogram, Gantt charts, etc. Students are expected to prepare graphs with appropriate axes, symbols, legends, titles, annotations, use of colour, animation, sound effects, etc. to elicit clear understanding on the part of the viewer. Graphics for qualitative information include the design of presentation media such as PowerPoint slides, symbolic images such as flow charts and organizational charts, and photographic or artistic images that evoke emotional responses appropriate to the intended message.

AACSB Ethics Ethical understanding and reasoning abilities. Legal Responsibilities. Knowledge of legal responsibilities relevant to the

student’s profession and the ability to fulfill those responsibilities in professional practice.

Codes of Ethics. Knowledge of the codes of ethics of relevant professional organizations as well as current theories of personal ethics and the ethics of societies and organizations.

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Ethical Decision Making. An ability to recognize ethical conflicts in real-world environments, apply analytical tools to understand the consequences of various options, and take action consistent with ethical integrity.

AACSB Analytic Analytic skills Economics. An understanding of how value is created through the integrated

production and distribution of goods, services, and information, and an ability to analyze (compare and contrast, show causality, examine assumptions of) economic systems.

Finance. An understanding of current financial theories and markets; an ability to analyze markets and financial reports; and an ability to prepare financial reports in accordance with professional standards.

Organizational Behaviour. An understanding of group and individual dynamics in organizations, and an ability to analyze business policies from the perspective of organizational behaviour.

Statistics and Management Science. An ability to use statistical data analysis and management science to support decision-making processes throughout an organization.

AACSB Technology

Use of information technology. Technological Literacy. An ability to use current technology: Word Processing,

Spreadsheets, Presentation Software, Databases, Web Browsers, Search Engines, Statistical Analysis Packages, Project Resources Planning Packages, Tax Preparation Packages, Management Information Systems, and other software relevant to the discipline, and an ability and desire to learn new technologies as they become available.

Technological Security. An understanding of the threats to information systems and knowledge of how to minimize those threats.

Technology and Organizations. An understanding of how information technologies influence the structure and processes of organizations and economies and how they influence the roles and techniques of management.

AACSB Diversity Multicultural and diversity understanding. An understanding of and respect for the cultural diversity of the United States

and knowledge of the historical context of our diverse nation. An understanding of and respect for non-Western cultures. An understanding of the domestic and global economic environments of

organizations.AACSB Reflective Thinking

Reflective thinking skills. An understanding that knowledge is constructed from evidence and can be

changed and reconstructed with the appearance of new evidence, perspectives, or methods of inquiry; and the ability to “construct knowledge” by examining evidence and assumptions and applying logical and reasoning to determine the most likely meaning of a particular situation.

An ability and desire to regularly reexamine past experiences to clarify their meaning, especially with respect to personal responses, behaviours and actions.

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Institute of Management Accountants (IMA):LABEL / TAG Related General Knowledge & Skill Area:

IMA-Business Economics Business Analysis - Business EconomicsThe candidate should be knowledgeable of micro economics and should be able to demonstrate an understanding of the laws of supply and demand. The candidate should be able to define and apply knowledge of various costs including fixed, variable, and marginal.The candidate should be able to identify and understand pure competition, monopoly, monopolistic competition, and oligopoly. The candidate will be able to explain resource planning and the cost of resources.The candidate should be knowledgeable of macro economics and should be able to demonstrate an understanding of inflation, unemployment and economic growth. The candidate should be define and calculate Gross Domestic Product (GDP). The candidate will be knowledgeable of the business cycle and demonstrate an understanding of fiscal monetary policies.

IMA-Global Business Business Analysis - Global BusinessThe candidate should be able to define terms associated with global trade, including net exports and net imports. The candidate should be knowledgeable of foreign currency terms and policies and be able to apply calculations relevant to foreign monetary exchanges. The candidate should be aware of the functions of the World Bank and International Monetary Fund and be able to identify legal and ethical issues in conducting business worldwide.

IMA-Internal Controls Business Analysis - Internal ControlsThe candidate should be able to demonstrate an understanding of risk assessment and the management of risk and be able to define inherent risk, control risk, and detection risk. The candidate should be able to define and give examples of segregation of duties.The candidate should be able to define the internal audit function and recognize that the internal audit function provides information concerning activities reviewed to assist management.The candidate should be able to identify threats to information systems and be knowledgeable of controls to limit the threats. The candidate should understand and be capable of implementing a disaster recovery plan.

IMA-Quantitative Methods Business Analysis - Quantitative MethodsThe candidate should be able to show an understanding of the regression equation and identifying assumptions of simple regression analysis. The candidate should be able to demonstrate an understanding of the objectives of linear programming and demonstrate the mathematical formulation of a constraint.

IMA-FSA Business Analysis - Financial Statement AnalysisThe candidate should be able to demonstrate an understanding of the development of accounting standards and the distinct

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responsibilities of management and of auditors for the financial statements.The candidate should be able to identify related provisions of the Sarbanes-Oxley Act of 2002 and the related rulings of the Public Company Accounting Oversight Board (PCAOB).The candidate should be able to calculate financial ratios and use the information to measure the organization's financial performance.

IMA-Budget Preparation Management Accounting and Reporting – Budget PreparationThe candidate should understand budgeting concepts and should be familiar with budgeting systems. The candidate should be able to use the knowledge of budgeting concepts and budgeting systems to prepare operational, financial, and capital budgets and pro forma financial statements.

IMA-Cost Management Management Accounting and Reporting - Cost ManagementThe candidate should know and be able to apply terminology related to cost principles. The candidate should demonstrate an understanding of cost behaviour cost drivers. The candidate should be able to apply this knowledge to inventorialable costs, cost of goods sold and other cost applications. The candidate should be able to implement various cost accumulation systems, including job, process, activity, lifecycle and other costing methods. The candidate should understand the nature of overhead expenses; the nature of cost drivers and other relevant principles applicable to overhead.

IMA-Information Management Management Accounting and Reporting - Information ManagementThe candidate should be able to identify the different types of business information processing systems and recognize that information systems support the business functions of accounting, finance, marketing, operations management, and human resources.The candidate should be able to demonstrate an understanding of the technology of information systems including networks, applicable software, electronic commerce and enterprise-wide planning systems.

IMA-Performance Measurement Management Accounting and Reporting - Performance MeasurementThe candidate should be able to design procedures for measuring operational goals through a variety of methods and be able to apply analysis of variances in using standard cost techniques.The candidate should be able to recognize responsibility centres and reporting segments. The candidate should understand and be able to apply transfer pricing to organizational segments.The candidate should be able to apply the concepts and applications related to balanced scorecard.

IMA-Reporting Management Accounting and Reporting - External Financial ReportingThe candidate should be able to identify the objectives of external financial reporting; identify and demonstrate an understanding of

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basic accounting assumptions and conventions; identify financial statement elements for each of the financial statements and be knowledgeable of special accounting topics.The candidate should be able to identify the two major Acts establishing the SEC and its powers; and demonstrate knowledge of the major provisions of each Act; identify and explain the major provisions of the Sarbanes-Oxley Act of 2002; and be identify the functions and responsibilities of the Public Company Accounting Oversight Board (PCAOB)The candidate should be able to identify the basic components of the annual report; demonstrate an awareness of the Audit Committee’s level of responsibility for the integrity of the financial information presented in the annual reports; and identify and describe the other sections in the annual report

IMA-Strategic Planning Strategic Management - Strategic PlanningThe candidate must be knowledgeable of various manufacturing paradigms including just-in-time manufacturing, MRP, theory of constraints, and capacity managementThe candidate must be able to assess business process performance. The candidate will be familiar with value chain analysis; understand value added concepts; process analysis; benchmarking; activity based management; and continuous improvement concepts.

IMA-Strategic Marketing Strategic Management - Strategic MarketingThe candidate should be able to identify the interrelationships between strategy and marketing and recognize the critical importance of customer value and customer satisfaction. The candidate should be able to identify marketing information needs.The candidate should be able to distinguish between products and services; classify products and services; demonstrate an understanding of product line decisions and product mix decisions; demonstrate an understanding of new product development strategy and product life-cycle strategies.The candidate should be able to identify internal and external factors affecting pricing decisions; demonstrate an understanding of general pricing approaches; demonstrate an understanding of product mix pricing strategies; and recognize that public policy can influence pricing decisions.

IMA-Corporate Finance Strategic Management - Corporate FinanceThe candidate should be able to calculate rates of return ; demonstrate an understanding of the different types of risk; and define hedging and demonstrate how hedging can be used to manage financial risk.The candidate should be able to define and identify the characteristics of various financial instruments; value bonds, common stock, and preferred stock using discounted cash flow methods; and recognize how income taxes impact financing decisions.

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The candidate should be able to define the cost of capital and demonstrate an understanding of its applications in capital structure decisions.

IMA-Decision Analysis Strategic Management - Decision AnalysisThe candidate should identify and demonstrate an understanding of the steps needed to reach a decision. The candidate should be able to identify and apply concepts relevant to decision analysis, including sunk costs and opportunity costs.The candidate must be able to use cost/volume/profit analysis.The candidate will be able to apply marginal analysis for making decisions related to special orders and pricing; make versus buying decisions; sale or process further decisions; and to determine if a segment should be added or dropped. Finally, the candidate will be able to apply concepts and knowledge related to setting prices and target costing.

IMA-Investment Decisions Strategic Management - Investment DecisionsThe candidate must be able to develop information to assist management in making investment decisions. In order to do this in candidate must be knowledgeable of capital budgeting; discounted cash flow analysis; payback and discounted payback; and ranking of investment projects.

IMA-Business Applications Business ApplicationsThe candidate will be familiar with the provisions of "Standards of Ethical Conduct for IMA Members" in the evaluation and resolution of relevant ethical issues.All topics from parts 1, 2, and 3, plus organization management, organization communication, behavioural issues, and ethical considerations.

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