Preface

XVIII
Managerial Accounting.
The world of business is changing
dramatically. As a result, the role of
managerial accounting is much different than
it was even a decade ago. Today, managerial
accountants serve as internal business
consultants, working side-by-side in cross-
functional teams with managers from all
areas of the organization. For a thorough
understanding of managerial accounting,
students should not only be able to produce
accounting information, but also understand
how managers are likely to use and react to
the information in a range of businesses.
The goal of Managerial Accounting is
to acquaint students of business with the
fundamental tools of management accounting
and to promote their understanding of the
dramatic ways in which the field is changing.
The emphasis throughout the text is on using
accounting information to help manage an
organization.
Hilton Managerial Accounting is recognized
for being:
How does Hilton Managerial Accounting expose
students to a range of businesses?
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Preface
XIX
Relevant.
Focus Companies provide a powerful strategy for
fostering learning, and the integration of Focus
Companies throughout the text is unmatched
by any other managerial accounting book.
Each chapter introduces important managerial
accounting topics within the context of a realistic
company. Students see the immediate impact of
managerial accounting decisions on companies and
gain exposure to different types of organizations.
Balanced.
Managerial Accounting offers the most balanced
coverage of manufacturing and service sector
companies. Recognizing that students will work
in a great variety of business environments
and will benefit from exposure to diverse types
of companies, Managerial Accounting uses a
wide variety of examples from retail, service,
manufacturing, and nonprofit organizations.
Contemporary.
Managerial Accounting continues to be the leader
in presenting the most contemporary coverage of
managerial accounting topics. The traditional tools
of managerial accounting such as product costing
and budgeting have been updated with current
approaches. New topics such as environmental
cost management and responsibility accounting
have been added.
Flexible.
Managerial Accounting is written in a modular
format allowing topics to be covered in the
order you want. For example, Chapter 8 covers
absorption and variable costing. Many instructors
like to cover this topic early in the course. So,
Chapter 8 is written so that it can be assigned right
after Chapter 3. A table showing the texts flexibility
is in the Instructors Resource Manual.
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Preface
XX
FOCUS COMPANY
The Walt Disney Company is a giant in the entertainment services
industry, with theme parks, feature film studios, animation stu-
dios, television
broadcasting,
hotels and re-
sorts, and retail
stores. We will
introduce the
field of managerial
accounting using this
company as an illustra-
tion. We will explore how
management accountants
work in partnership with
managers to add value to
the organization. The ma-
jor themes of managerial
accounting also are intro-
duced, and we will return
to them throughout
the book.
After completing this chapter,
you should be able to:
1 Define managerial accounting
and describe its role in the
management process.
2 Explain four fundamental man-
agement processes that help
organizations attain their goals.
3 List and describe five objec-
tives of managerial accounting
activity.
4 Explain the major differences
between managerial and
financial accounting.
5 Explain where management
accountants are located in an
organization, in terms of for-
mal organization, deployment
in cross-functional teams, and
physical location.
6 Describe the roles of an orga-
nizations chief financial officer
(CFO) or controller, treasurer,
and internal auditor.
7 Briefly describe some of the
major contemporary themes in
managerial accounting.
8 Understand and explain the
concepts of strategic cost man-
agement and the value chain.
9 Understand the ethical
responsibilities of a manage-
ment accountant.
10 Discuss the professional orga-
nizations, certification process,
and ethical standards in the
field of managerial accounting.
Each chapter is built around a Focus Company, in which the chapters key
points are illustrated. (This chapter uses The Walt Disney Company. While
the focus companies in subsequent chapters are not real companies like
Disney, they do allow realistic scenarios based on actual company practices.)
Whenever the focus company is discussed in the chapter, the company logo
appears in the margin.
Learning Objectives highlight the key topics to be covered
in the chapter. They are repeated in the margin of the text
where they are discussed. Also, the learning objectives of
each end-of-chapter assignment are listed in the margin.
IN CONTRAST
In contrast to the entertainment services setting of The Walt Disney
Company , we will turn our attention to Gap, Inc. This major clothing
retailer has over 3,000 stores around the world, which sell Gap , Banana
Republic , and Old Navy . We will explore Gaps value chain, which is
the set of linked, value-creating activities, ranging from securing basic
raw materials and energy to the ultimate delivery of products and
services. As a retailer, Gap focuses on apparel design, marketing, and
sales. All manufacturing of its clothing lines is contracted out to
garment manufacturers around the world.
Each chapter also includes a Contrast Company. In most cases, the contrast com-
pany will present a key chapter topic in an industry different from that of the focus
company. In this chapter, the focus company (Walt Disney) is an entertainment
services company, whereas the contrast company (Gap) is a fashion retailer.
How does Hilton help students learn managerial
accounting in the context of business?
FOCUS COMPANIES
Students need to see the relevance of
managerial accounting information in
order to actively engage in learning the
material. The authors have found that by
using Focus Companies to illustrate con-
cepts, they can help students immediately
see the significance of the material and
get excited about the content. Managerial
Accountings integration of Focus Compa-
nies throughout the text is unmatched by
any other managerial accounting textbook.
Each chapter introduces important mana-
gerial topics within the context of a realistic
company.
CONTRAST COMPANIES
A Contrast Company is also introduced in
each chapter. In most cases, these high-
light an industry different from that of the
Focus Company. This feature allows even
greater emphasis on service-sector firms
and other non-manufacturing environ-
ments. The complete list of Focus Compa-
nies and Contrast Companies is featured
on the front endpapers.
Whenever the Focus Company is presented in
the chapter, its logo is shown so the student sees
its application to the text topic.
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Preface
XXI
Organization Chart
Notice that a companys top management group usually consists of the board of
directors, chairman and chief executive officer (CEO), vice-chairman, and chief of
corporate operations.
Line and Staff Positions The other positions in an organization chart are of two types:
line positions and staff positions. Managers in line positions are directly involved in
the provision of goods or services. For example, Disneys line positions include the
chairman and president of Disney Consumer Products , the chairman and president of
Walt Disney Feature Animation , and the chairman and president of Walt Disney
Attractions , which is the division responsible for the companys theme parks in Florida,
California, and Japan. Also in line positions would be the thousands of managers in
the various operating units of the divisions. For example, the general manager of
Disneys Animal Kingdom , the manager of food and beverage services at the Magic
Professional Organizations
To keep up with new developments in their field, management accountants often belong
to one or more professional organizations. Many management accountants belong to
the Canadian Institute of Chartered Accountants , the Certified General Accountants
Association of Canada , or the Society of Management Accountants of Canada . The
latter publishes a journal, entitled CMA Management , and also supports research on
managerial accounting topics through the CMA Canada Research Foundation.
The primary professional association for management accountants in the United
States is the Institute of Management Accountants . Great Britains main professional
organization is the Institute of Chartered Management Accountants, and Australias
organization is the Institute of Chartered Accountants in Australia. In all, over 75
countries have professional organizations for their practising accountants.
Professional Designations
Youve got to know how
to talk to people, express
yourself. And thats oral
and written. You also have
to be able to understand a
lot of different areas, not
necessarily just accounting.
Youve got to understand
the business itself. (1i)
Qwest
MASS CUSTOMIZATION
There is no better way to make, sell, and deliver PCs than the way Dell Inc. does it, and
nobody executes that model better than Dell. The companys machines are made to
order and delivered directly to customers, who get the exact machines they want cheaper
than they can get them from Dells competition. Dell has some 24 facilities in and around
Austin and employs more than 18,000 local workers. Dell is improving its earnings and
gaining market share even in tough economic times. Nevertheless, Michael Dell, the com-
panys restless founder, is constantly looking for ways to improve the companys opera-
tions.
2
In one year alone, Dell cut $1 billion out of its costshalf from manufacturingand
Dell executives vowed to cut another $1 billion.
Visit the Topfer Manufacturing Center in Austin, and its hard to conceive how Dell
could be any more efficient. Workers already scuttle about in the 200,000-square-foot
plant like ants on a hot plate. Gathered in cramped six-person cells, they assemble com-
puters from batches of parts that arrive via a computer-directed conveyor system over-
head. If a worker encounters a problem, that batch can instantly be shifted to another cell,
avoiding the stoppages that plague conventional assembly lines. Dell is constantly tinker-
ing with factory layout and product design to move computers through at a higher veloc
Dell Inc.
M
A
P
anagement
ccounting
ractice
Focus on Ethics
WAS WORLDCOMS CONTROLLER JUST
FOLLOWING ORDERS?
Through a series of mergers and acquisitions, WorldCom,
Inc. grew to become North Americas second-largest long-
distance telecommunications company. WorldComs core
communication services included network data transmis-
sion over public and private networks. Trouble arose for
WorldCom because of the immense overcapacity in the
telecommunications industry due to overly optimistic
growth projections during the Internet boom. The combi-
nation of overcapacity, decreased demand, and high fixed
costs still poses a serious problem for many of the major
players in the industry.
In June 2002, the company disclosed that it had
overstated earnings for 2001 and the first quarter of 2002
to the tune of $3.8 billion. The overstatement arose be-
cause the company incorrectly classified period expenses
as capital expenditures. This manoeuvre had two major
effects on the companys financial statements: the com-
panys assets were artificially inflated and the capitaliza-
tion allowed the company to spread the recognition of its
expenses into the future which increased net income in
alleged accounting scandal. The auditing company main-
tained that the details of the fraud were kept from them by
senior management. WorldComs controller and chief
financial officer (CFO), who was a former KPMG employee,
were fired after the alleged accounting frauds were re-
vealed. WorldComs CEO maintained that he knew noth-
ing of the accounting decisions made by the CFO, but
many observers question how almost $8 billion in ex-
penses could slip by senior management.
14
According to an Associated Press article that ran on
September 27, 2002, the former controller of WorldCom,
Inc. pleaded guilty to securities fraud charges, saying he
was instructed by senior management to falsify records.
His plea was the first admission of guilt to fall from the
largest corporate accounting scandal in U.S. history.
15

Subsequently, WorldComs CFO pleaded guilty to his part
in the accounting scandal.
16
In March of 2005, the com-
panys CEO was convicted by a jury of nine criminal
counts in the accounting fraud, including conspiracy and
securities fraud.
17
The CFO and controller were the top two financial
and managerial accountants in the WorldCom organiza-
Real-World Examples
The text provides a variety of thought-
provoking, real-world examples to focus
students on managerial accounting as an
essential part of the management process.
Featured organizations include FedEx,
WestJet Airlines, TD Canada Trust, Amazon.ca,
Gap, and many others. These companies are
highlighted in blue in the text.
In Their Own Words
Quotes from both practising managers and
managerial accountants are included in the
margins throughout the text. These actual
quotes show how the field of management
accounting is changing, emphasize how the
concepts are actually used, and demonstrate
that management accountants are key players
in most companies management teams.
Management Accounting Practice
The managerial accounting practices of
well-known, real-world organizations are
highlighted in these boxes. They stimulate
student interest and provide a springboard for
classroom discussion.
Focus on Ethics
Focus on Ethics boxes pose an ethical
dilemma, then ask tough questions that
underscore the importance of ethical
management. Some of these are based on
real-world incidents, while others are fictional
but based on well-established anecdotal
evidence.
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Preface
Review Problems on Cost Classifications
Problem 1
Several costs incurred by Myrtle Beach Golf Equipment, Inc. are listed below. For each cost, indicate
which of the following classifications best describe the cost. More than one classification may apply to
the same cost item. For example, a cost may be both a variable cost and a product cost.
Cost Classifications
a. Variable
b. Fixed
c. Period
d. Product
e. Administrative
f. Selling
g. Manufacturing
h. Research and development
i. Direct material
j. Direct labour
k. Manufacturing overhead
Cost Items
1. Metal used in golf clubs
XXII
Key Terms
For each terms definition refer to the indicated page, or turn to the glossary at the end of the text.
activity, 38
average cost per unit, 47
controllable cost, 43
conversion costs, 36
cost, 27
cost driver, 39
cost object, 43
cost of goods manufactured,
36
cost of goods sold, 27
differential cost, 46
direct cost, 43
direct-labour cost, 34
direct material, 34
expense, 27
finished goods, 31
fixed costs, 40
idle time, 35
incremental cost, 46
indirect cost, 43
indirect labour, 35
indirect material, 34
inventoriable cost, 28
manufacturing overhead, 34
marginal cost, 46
mass customization, 32
operating expenses, 29
opportunity cost, 44
out-of-pocket costs, 44
overtime premium, 35
period costs, 28
prime costs, 36
product cost, 27
raw material, 31
schedule of cost of goods
manufactured, 36
schedule of cost of goods
sold, 36
service departments (or
support departments), 35
sunk costs, 45
uncontrollable cost, 43
variable cost, 39
work in process, 31
Review Questions
21. Distinguish between product costs and period costs.
22. Why are product costs also called inventoriable costs?
23. What is the most important difference between a manu-
facturing firm and a service industry firm, with regard
to the classification of costs as product costs or period
costs?
24. List, describe, and give an example of each of the five
different types of production processes.
25. The words mass and customization in the term mass
customization seem contradictory. Do you agree or
disagree? Explain.
26. Why is the cost of idle time treated as manufacturing
overhead?
27. Explain why an overtime premium is included in man-
ufacturing overhead.
217. Which of the following costs are likely to be control-
lable by the chief of nursing in a hospital?
a. Cost of medication administered
b. Cost of overtime paid to nurses due to scheduling
errors
c. Cost of depreciation of hospital beds
218. Distinguish between out-of-pocket costs and opportu-
nity costs.
219. Define the terms sunk cost and differential cost.
220. Distinguish between marginal and average costs.
221. Think about the process of registering for classes at
your college or university. What additional information
would you like to have before you register? How would
it help you? What sort of information might create
information overload for you?
Managerial Accounting is known for its comprehensive and reliable end-of-chapter material.
Review Problems present both a
problem and a complete solution
allowing students to review the
entire problem-solving process.
Key Terms are bolded in the text
and repeated at the end of the
chapter with page references.
The books Web site at the
Online Learning Centre, at
www.mcgrawhill.ca/olc/hilton,
also includes a complete
Glossary for these Key Terms.
End-of-Chapter Assignment
Material Each chapter includes
an extensive selection of
assignment material, including
Review Questions, Exercises,
Problems, and Cases. Our
problem and case material
facilitates class discussions.
How can my students use Hilton to master the concepts
of managerial accounting?
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Preface
Icons identify key business areas in the problems and cases in each chapter:
Ethical Issues
International Issues
Group Work
Business
Communication
Internet
Research
Excel
Template
XXIII
facturing activities, that is, producing goods and waiting for customer orders to arrive?
The following selected information was extracted from the 20x1 accounting records of Surgical Prod-
ucts, Inc.:
Raw material purchases........................................................................................................................ $ 350,000
Direct labour ......................................................................................................................................... 508,000
Indirect labour ...................................................................................................................................... 218,000
Selling and administrative salaries ......................................................................................................... 266,000
Building depreciation* ........................................................................................................................... 160,000
Other selling and administrative expenses .............................................................................................. 380,000
Other factory costs................................................................................................................................ 688,000
Sales revenue ($260 per unit)................................................................................................................ 2,990,000
*Seventy-five percent of the companys building was devoted to production activities; the remaining 25 percent was used for selling and
administrative functions.
Inventory data:
January 1 December 31
Raw material ........................................................................................................ $ 31,600 $ 36,400
Work in process .................................................................................................... 71,400 124,200
Finished goods* .................................................................................................... 222,200 195,800
*The January 1 and December 31 finished-goods inventory consisted of 1,350 units and 1,190 units, respectively.
Required:
1. Calculate the companys manufacturing overhead for the year.
2. Calculate the companys cost of goods manufactured.
3. Compute the companys cost of goods sold.
4. Determine net income for 20x1, assuming a 40 percent income tax rate.
5. Determine the number of completed units manufactured during the year.
6. Build a spreadsheet: Construct an Excel spreadsheet to solve all of the preceding requirements.
Show how the solution will change if the following data change: indirect labour is $221,000 and
other factory costs amount to $679,000.
Problem 238
Financial-Statement
Elements: Manufacturer
(LO 5, 6)
4. Gross margin: $1,137,200
P bl 2 39
3. Is it important to follow up on favourable variances, such as those shown in the report? Why?
McCartney Company manufactures guitars. The company uses a standard, job-order cost-accounting system
in two production departments. In the Construction Department, the wooden guitars are built by highly
skilled craftsmen and coated with several layers of lacquer. Then the units are transferred to the Finishing
Department, where the bridge of the guitar is attached and the strings are installed. The guitars are also tuned
and inspected in the Finishing Department. The diagram below depicts the production process.

Construction Department
(Basic guitar built from
veneered wood.)
Finishing Department
(Bridge and strings
attached; guitar tuned
and inspected.)
Each finished guitar contains seven kilograms of veneered wood. In addition, one kilogram of wood
is typically wasted in the production process. The veneered wood used in the guitars has a standard price
of $12 per kilogram. The other parts needed to complete each guitar, such as the bridge and strings, cost
$15 per guitar. The labour standards for McCartneys two production departments are as follows:
Construction Department 6 hours of direct labour at $20 per hour
Finishing Department 3 hours of direct labour at $15 per hour
The following pertains to the month of July:
1 There were no beginning or ending work-in-process inventories in either production department
Problem 1061
Comprehensive Problem on
Variance Analysis
(LO 1, 2)
1. Construction, total standard
cost of direct material:
$72,000
3. Finishing, direct-labour rate
variance: $2,355 U
Several exercises and problems in each
chapter include an optional requirement
for students to Build a Spreadsheet to
develop the solution.
Many problems can be solved using the
Excel spreadsheet templates contained
on the texts Web site. An Excel

logo
appears in the margin next to these
problems for easy identification.
Excel

Spreadsheets
Spreadsheet applications are essential to contemporary accounting practice. Students must
recognize the power of spreadsheets and know how accounting data are presented in them.
Excel

applications are discussed where appropriate in the text.

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Preface
XXIV
New to the Canadian Edition
Major Revisions and Reorganizations
Based on input from users and reviewers, the activity-based costing and activity-based
management coverage has been heavily revised, reorganized, and condensed into a single
chapter. Chapter 5, Activity-Based Costing and Management, covers all aspects of ABC
and ABM in a single comprehensive Focus Company illustration.
Similarly, standard costing and flexible budgeting coverage has been reorganized and
condensed into a single chapter. Chapter 10 covers all aspects of standard costing and
groups all cost variances into a single Focus Company illustration.
Chapter 11, Cost Management Tools, regroups the most contemporary management
tools and techniques such as balanced scorecard, operational performance measures,
kaizen costing, quality cost reporting, and environmental cost management.
Online Chapters and Supplements
Additional chapters and supplements on special topics are available on the Online Learning
Centre (OLC). These bonus chapters and supplements include:
Capital Expenditure Decisions (Chapter 15)
Allocation of Support Activity Costs and Joint Costs (Chapter 16)
Process Costing: The First-In, First-Out Method (Supplement 4A)
Process Costing in Sequential Production Departments (Supplement 4B)
Hybrid Product-Costing Systems: Operation Costing in Batch Manufacturing
Processes (Supplement 4C)
Management Accounting Practice
New Management Accounting Practice boxes have been added and several real-world
examples have been updated to give a Canadian flavour to the examples.
Emphasis on the Service Sector
A greater effort has been made to point out the relevance of managerial accounting
concepts and tools in service-sector settings. Many examples are given throughout the text
of real-world service-sector firms using managerial accounting information.
End-of-Chapter Assignment Material
Several new problems have been added, and virtually all of the exercises, problems, and
cases contain new data.
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Preface
XXV
Chapter-by-Chapter Changes
Chapter 1: A Management Accounting Practice box explains how new technology is making it
easier for Canadian companies to conduct business. All three Canadian professional designations
are discussed, and the Focus on Ethics section relates to the Code of Professional Ethics of CMA
Ontario. Because of its wide appeal, The Walt Disney Company is the Focus Company, and the
Contrast Company is Gap, an apparel retailer. References are made in this chapter to several
Canadian firms, such as Canadian Direct Insurance, London Drugs, and WestJet Airlines.
Chapter 2: The Focus Company is Comet Computer Company, a manufacturer, and the Contrast
Company is Midas, an automotive service company. References are made in this chapter to several
Canadian firms, such as Fairmont Hotels & Resorts, Manulife Insurance, TD Canada Trust, and Tim
Hortons.
Chapter 3: The Focus Company is Rocky Mountain Outfitters, a manufacturer of canoes and small
boats, and the Contrast Company is Metro Advertising Agency, an advertising services company.
References are made in this chapter to several Canadian firms, such as Air Canada and Bank of Mon-
treal. Discussion of radio frequency identification systems includes a reference to Bell Canada and
CN, the Canadian National Railway Company. A review problem on job-order costing in included.
Chapter 4: The Focus Company is the Alberta division of MVP Sports Equipment Company, a manu-
facturer, and the Contrast Company is MVPs Ontario division. A Management Accounting Practice
box describes the British Columbia wine industry. Three online supplements are associated with this
chapter: Process Costing: The First-In, First-Out Method; Process Costing in Sequential Produc-
tion Departments; and Hybrid Product-Costing Systems: Operation Costing in Batch Manufacturing
Processes.
Chapter 5: The Focus Company is Patio Grill Company, a manufacturer of gas barbeque grills,
and the Contrast Company is the Toronto General Hospitals Ambulatory Care Clinic, a health-care
provider. This chapter covers activity-based costing and activity-based management. References
are made in this chapter to several Canadian firms, such as TELUS and BMO Financial Group. An
appendix to this chapter covers JIT inventory and production management.
Chapter 6: The Focus Company is Tasty Donuts, a restaurant chain, and the Contrast Company is
Cosmos Communications Technology, a manufacturer of communications satellites. References are
made in this chapter to several Canadian firms, such as WestJet Airlines and Chapters. The coverage
of regression analysis reflects less emphasis on manual calculations and more focus on the use of
Excel

regression commands.
Chapter 7: The Focus Company is Toronto Contemporary Theatre, a nonprofit theatre organization,
and the Contrast Company is AccuTime, a manufacturer of digital clocks. References are made in
this chapter to several Canadian firms, such as CBC, Toronto Maple Leafs, and WestJet Airlines.
Chapter 8: Only one company is used in this shorter chapter to illustrate absorption and variable
costing. Quikmath.com is a manufacturer of hand-held calculators. A review problem is included to
help students understand the two costing methods. The placement of this chapter is appropriate fol-
lowing CVP analysis that emphasizes contribution margin, and this chapter may easily be skipped for
instructors who prefer not to cover this topic.
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XXVI
Chapter 9: The Focus Company is CozyCamp.ca, a manufacturer of camping equipment, with
online sales, and the Contrast Company is Canadian Fitness Cooperative, a fitness club. Introduction
of activity-based budgeting ties with the materials in Chapter 5. A Management Accounting Practice
box makes reference to the budget administration at a Canadian university.
Chapter 10: The Focus Company is DCdesserts.com, a producer of fresh fancy desserts with
emphasis on e-commerce, and the Contrast Company is Tri-Cities Auto Rentals, a car-rental service
company. This chapter covers all aspects of standard costing, and includes variance analysis for direct
material, direct labour, and variable and fixed manufacturing overhead, with a related discussion of
flexible budgeting. Included in two appendices are the preparation of journal entries in a standard
costing system and a discussion of sales variances.
Chapter 11: The Focus Company is the Canadian Pacific Bank, a financial-services bank, and
the Contrast Company is Handico, a manufacturer of cordless phones. References are made
in this chapter to several Canadian firms, such as CIBC, Torontos Hospital for Sick Children,
Rogers Wireless Communications, and Scotia Bank. This chapter regroups various cost manage-
ment tools and starts with a discussion of the balanced scorecard and operational performance
measures. It describes concepts of kaizen costing, benchmarking, reengineering, and the theory
of constraints. It also discusses quality cost reporting and environmental cost management.
Chapter 12: The Focus Company is Aloha Hotels and Resorts, a hotel and resort chain, and the
Contrast Company is Suncoast Food Centres, a grocery retailer. References are made in this chapter
to some Canadian firms, such as Royal Bank of Canada, and a governmental agency (CRA). Intro-
duction of activity-based responsibility accounting ties with the materials in Chapter 5. This chapter
covers segmented reporting, performances measures (ROI, residual income, and EVA), and transfer
pricing between segments of an enterprise.
Chapter 13: The Focus Company is Worldwide Airways, an international airline, and the Contrast
Company is International Chocolate Company, a chocolate producer. An appendix to this chapter
describes the use of linear programming in product-mix decisions.
Chapter 14: The Focus Company is Sydney Sailing Supplies, a manufacturer of sailing supplies and
equipment, and the Contrast Company is the Marine Services Division of Sydney Sailing Supplies.
References are made in this chapter to several Canadian firms, such as Bell Canada, TELUS, and
Fido. This chapter assumes students have covered basic economic principles in a microeconomic
course and focuses on pricing decisions.
Chapter 15 (Online): The Focus organization is the City of Mountainview, a city government, and
the Contrast Company is High Country Department Stores, a retailer. This online chapter covers
discounted-cash-flow analysis (net present-value method and internal-rate-of-return method) and
alternative methods (payback method and accounting-rate-of-return method). Income tax issues
related to CCA are covered at the end of the chapter and can be easily omitted for instructors who
prefer to eliminate this more complex topic.
Chapter 16 (Online): The Focus organization is Riverside Clinic, a health-care provider, and the
Contrast Company is International Chocolate Company, a chocolate producer. This online chapter
covers the allocation of support activity costs and joint costs.
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Preface
XXVII
Enriched Learning with Technology
Lyryx Assessment for
Managerial Accounting
Lyryx Assessment for Managerial Accounting
is a Web-based teaching and learning tool that
has captured the attention of post-secondary
institutions across the country. Lyryx Assess-
ment is a leading-edge online assessment
system that delivers significant benefits to both
students and instructors.
Please contact your iLearning Sales Specialist
for additional information on Lyryx Assessment for Managerial Accounting.
After registering their course with us, instruc-
tors can create Labs of their choice by select-
ing problems from our test bank and setting
deadlines. Instructors have access to all the
students marks and can view their best Labs.
At any time, instructors can download the
class grades for their own programs to analyze
individual and class performance.
The assessment takes the form of a home-
work assignment called a Lab. The Labs are
algorithmically generated and automatically
graded, so students get instant scores and
feedbackno need to wait until the next
class to find out how well they did!
If students are doing their managerial
accounting practice and homework, they
will improve their performance in the
course. Recent research regarding the use
of Lyryx has shown when Labs are tied to
assessment, even if worth only a small per-
centage of the total grade for the course,
students will do their homeworkand more
than once. The result is improved student
success in managerial accounting!
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Preface
XXVIII
Connect Accounting
McGraw-Hill Ryersons Connect Accounting is a
Web-based assignment and assessment platform
that gives students the means to better connect
with their coursework, with their instructors, and
with the important concepts they will need to
know for success now and in the future.
In partnership with Youthography, a Canadian
youth research company, and hundreds of
students from across Canada, McGraw-Hill Ryer-
son conducted extensive student research on
student study habits, behaviours, and attitudes
we asked questions and listened . . . and we heard
some things we didnt expect. We had two goals:
to help faculty be more efficient in and out of the
classroom by providing a study tool that would
help them improve student engagement and to
help students learn their course material and get
better grades. Through this research, we gained a
better understanding of how students studyand
how we could make vast improvements to our cur-
rent online study tools. The result is a study tool that
students overwhelming said is better and theres
nothing else like it out there. Connect really is the
first study tool built by students for students. Getting
better grades really is only a click away!
Study Plan
An innovative tool that helps students custom-
ize their own learning experience. Students can
diagnose their knowledge with a pre and post
test, identify the areas where they are weak,
search contents of the entire learning package
for content specific to the topic theyre study-
ing and add these resources to their study
plan. Students told us the act of creating a
study plan is how they actually study and that
having the opportunity to have everything in
one place, with the ability to search, customize
and prioritize the class resources, was criti-
cal. No other publisher provides this type of
tool and students told us without a doubt, the
Study Plan feature is the most valuable tool
they have used to help them study.
eText
Now students can search the textbook
online, too! When struggling with a concept
or reviewing for an exam, students can con-
duct key word searches to quickly find the
content they need.
Homework Assessment
Connect Accounting assessment activi-
ties dont stop with students. Instructors
can deliver assignments, quizzes, and tests
online. They can edit existing questions
and add new ones; track individual student
performanceby question, assignment, or
in relation to the class overallwith detailed
grade reports; integrate grade reports easily
with Learning Management Systems such as
WebCT and Blackboard; and much more.
Please contact your iLearning Sales Specialist for
additional information on Connect Accounting.
Online Learning Centre
(www.mcgrawhill.ca/olc/hilton)
The Student Centre of this Web site includes
additional online content and an interactive
student component with Excel

templates (for
selected problems as identified in the text by
the appropriate icon), self-study multiple-choice
questions, and more.
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Preface
XXIX
COMPREHENSIVE SUPPORT
Hilton offers a complete, integrated supplements
package. All available on the Instructor area of the
Online Learning Centre (www.mcgrawhill.ca/olc/
hilton), the instructor supplements include:
Instructors Manual: This comprehensive
manual includes chapter outlines, summa-
ries, and teaching overviews.
Solutions Manual: This manual, prepared
by the author, contains complete solutions
to all the texts end-of-chapter review
questions, exercises, problems, and
cases.
Computerized Test Bank: This test bank
contains multiple-choice questions, essay,
and short problems. Each test item is
coded for level of difficulty and learning
objective.
PowerPoint

Presentations: These slides

cover key concepts found in each chapter
using outlines, summaries, and visuals.
SUPERIOR SERVICE
Your Integrated Learning Sales Specialist is a
McGraw-Hill Ryerson representative who has
the experience, product knowledge, training,
and support to help you assess and integrate
any of our products, technology, and services
into your course for optimum teaching and
learning performance. Whether its using our
test bank software, helping your students
improve their grades, or putting your entire
course online, your iLearning Sales Specialist
is there to help you do it. Contact your local
i Learning Sales Specialist today to learn how
to maximize all of McGraw-Hill Ryersons
resources!
iLEARNING SERVICES PROGRAM
McGraw-Hill Ryerson offers a
unique i Services package
designed for Canadian faculty. Our mission
is to equip providers of higher education
with superior tools and resources required
for excellence in teaching. For additional
information visit www.mcgrawhill.ca/
highereducation/iservices.
COURSESMART
CourseSmart brings together
thousands of textbooks across hundreds of
courses in an e-textbook format providing unique
benefits to students and faculty. By purchasing an
e-textbook, students can save up to 50 percent
off the cost of a print textbook, reduce their
impact on the environment, and gain access to
powerful Web tools for learning including full-text
search, notes and highlighting, and e-mail tools
for sharing notes between classmates. For faculty,
CourseSmart provides instant access to review
and compare textbooks and course materials
in their discipline area without the time, cost,
and environmental impact of mailing print exam
copies. For further details contact your iLearning
Sales Specialist or go to www.coursesmart.com.
PRIMIS
Through McGraw-Hill Ryersons
custom publishing division, Primis, instructors
are able to select cases to accompany Managerial
Accounting in a number of ways. Create your
own case set, or browse the selection of cases
that correspond to the chapter material. Contact
your McGraw-Hill Ryerson iLearning Sales
specialist for more information.
What Other Resources are Available to Instructors?
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Preface
XXX
Acknowledgments
REVIEWERS
Marcia Annisette, York University
Robert Bergquist, Nipissing University
Brent Bertrand, University of Toronto
Ann Bigelow, University of Western Ontario
Lynn Carty, Wilfrid Laurier University
Liang Chen, University of Toronto Scarborough
Elliott Currie, University of Guelph
Dennis Dober, College of the North Atlantic
Gerry Dupont, Carleton University
Clinton Free, Queens University
David Hoffman, Seneca College
Sylvia Hsu, York University
Marg Johnson, Thompson Rivers University
Ferdinand Jones, University of Ontario Institute of Technology
Anita Lakra, University of Calgary
D. L. Losell, University of Toronto
Abbe Nielsen, Langara College
Pamela Quon, Athabasca University
Todd Rose, Memorial University of Newfoundland
Naqi Sayed, Lakehead University
Ken Sutley, Grant MacEwan College
Shu-Lun Wong, Memorial University
I am grateful . . .
I would like to express my appreciation to people who have provided assistance in the development
of this textbook. First, my gratitude goes to the thousands of accounting students I have had the privi-
lege to teach over many years. Their enthusiasm, comments, and questions have challenged me to
clarify my thinking about many topics in managerial accounting.
Second, I express my sincere thanks to the following professors who provided extensive reviews
for this first Canadian edition:
I also want to thank Susan Cohlmeyer and Elliott Currie and for their thorough checking of the text and
solutions manual for accuracy and completeness.
The supplements are a great deal of work to prepare. I appreciate the efforts of those who prepared
them, since these valuable aids make teaching the course easier for everyone who uses the text.
I acknowledge the Institute of Management Accountants for permission to use problems from Certified
Management Accountant (CMA) examinations. I also acknowledge the American Institute of Certified
Public Accountants for permission to use problems from the Uniform CPA Examinations, Questions,
and Unofficial Answers. I am indebted to Professors Roland Minch, David Solomons, and Michael
Maher for allowing the use of their case materials in the text. The source for the actual company infor-
mation in Chapters 1 and 2 regarding The Walt Disney Company, Caterpillar, Wal-Mart, and WestJet
Airlines was the companies published annual reports.
Finally, I wish to express my gratitude to the fine people at McGraw-Hill Ryerson who so professionally
guided this book through the publication process. In particular, I wish to acknowledge Denise Foote,
Leslie Mutic, Rhondda McNabb, Jessica Barnoski, and Rodney Rawlings.
Michael Favere-Marchesi
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