This 21-page document is the third of four exercise books that corresponds directly with the Budgeting and Decision Making textbook by Walther and Skousen. The seven exercises relate specifically to Part 3. Exercises focus on reporting techniques in support of managerial decision making. The exercises cover variable versus absorption costing, segment reporting, residual income, and allocation of service department costs.
Type of Material:
Exercises to accompany a free online book offered by Bookboon.com.
Recommended Uses:
Can be used for in class demonstration and/or group work or as an outside homework assignment.
Technical Requirements:
Adobe Acrobat reader to read pdf file and requires submission of e-mail to access the download.
Identify Major Learning Goals:
Upon completion users should be able to:
Compute the value of ending inventory and cost of goods sold using variable and absorption costing and prepare income statements under both methods (Problems 1, 2 and 6).
Prepare an income statement for a reporting segment information showing controllable margin and segment margin (Problem 3).
Compute residual income (Problem 4).
Allocation service department costs using the direct and step down methods (Problem 5).
Evaluate the effect that elimination of a segment will have on overall profitability (Problem 7).
Target Student Population:
Managerial Accounting course (introductory and upper level).
Prerequisite Knowledge or Skills:
Users need a basic understanding of decision making concepts covered in the exercises (variable vs. absorption costing, contribution margin income statement, segment reporting, residual income, allocation of service department costs, and elimination of a product/division). Users should read corresponding material in the on-line textbook before attempting to complete the problems.
Content Quality
Rating:
Strengths:
The assignments are clear and concise as well as grounded in the discipline. They are both current and relevant, and integrate the concepts well. The materials were designed to be used for homework assignments and inlcude worksheets and solutions. While no discussion of the material is present, users are referred to the online textbook to use for reference. Users must refer to this online resource to have the skills needed to complete the problems.
Concerns:
Some of the solutions have errors.
Problem 1: The variable costing income statement uses the amount of cost of goods manufactured ($3,250,000) instead of the correct amount for cost of goods sold ($3,000,000) which results in the wrong amount of net income on the variable costing income statement. The author points out that the difference between income under variable costing and absorption costing is the same as the difference between ending inventory. If the cost of goods sold is corrected, the net income will be correct and support this statement.
Problem 2: The amount of total manufacturing cost listed for absorption costing is correct ($15,125,000). The calculation for cost of goods sold shows the amount as $14,625,000 but actually uses the correct amount in the calculation.
Problem 5 – In the solution for the step down method the amount allocated from “Clinic” to “Cutting” needs to be rounded down (263,414) to make all of the totals correct.
Problem 6: The difference in net income under variable vs. absorption does not equal the difference in ending inventory because of beginning inventory. The difference is the amount of fixed overhead included in the units that were produced but not sold this period. An explanation would be beneficial.
Potential Effectiveness as a Teaching Tool
Rating:
Strengths:
This series of problems provides for additional practice to complement discussion of managerial concepts including variable vs. absorption costing, residual income, and segment reporting. Instuctors could easily use these problems as a model for developing other problems. The set of problems are an efficient mechanism for providing student practice.
Concerns:
Learning objectives are not explicity stated, but the requirements/instructions for each problem provide guidance as to what the learning objectives would be. In addition, no prerequisite knowledge has been identified, but the user will need a basic knowledge of the concepts covered in the exercises in order to complete them.
Ease of Use for Both Students and Faculty
Rating:
Strengths:
The material is easy to use, because it can be printed. An instructor can use the template as a basis for providing additional practice by changing information in the problems. The problems do allow for repetition of the processes learned/discussed in class or from reading the online textbook. The instructions for each problem are clearly stated and easy to understand.
Concerns:
The materials are not very engaging or visually appealing. They are not interactive or of high design quality from a graphic arts perspective. Worksheets are provided and then answers are provided to anyone who downloads the materials. Advertisements in the pages are distracting. Accidentally clicking on one causes redirection to another site. Errors also reduce the overall usefulness of the material.
Other Issues and Comments:
The number of errors in the problems significantly impact the value of the materials.
Creative Commons:
Search by ISBN?
It looks like you have entered an ISBN number. Would you like to search using what you have
entered as an ISBN number?
Searching for Members?
You entered an email address. Would you like to search for members? Click Yes to continue. If no, materials will be displayed first. You can refine your search with the options on the left of the results page.
Searching for Members?
You entered an email address. Would you like to search for members? Click Yes to continue. If no, materials will be displayed first. You can refine your search with the options on the left of the results page.
