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Managerial Accounting: Creating Value in A Dynamic Business Environment 12th Edition Ronald Hilton - Ebook PDF Download
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Managerial
Accounting
Creating Value in a Dynamic
Business Environment
Twelfth Edition
Ronald W. Hilton
Cornell University
David E. Platt
University of Texas at Austin
MANAGERIAL ACCOUNTING: CREATING VALUE IN A DYNAMIC BUSINESS ENVIRONMENT,
12TH EDITION
Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2020 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2017, 2014, and 2011.
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 McGraw-Hill Education, 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 LWI 21 20 19
ISBN 978-1-259-96951-5
MHID 1-259-96951-7
Portfolio Manager: Elizabeth Eisenhart
Product Developers: Erin Quinones and Allie Kukla
Marketing Manager: Katherine Wheeler
Content Project Managers: Pat Frederickson and Brian Nacik
Buyer: Sandy Ludovissy
Design: Matt Diamond
Content Licensing Specialist: Ann Marie Jannette
Cover Image: ©IM_Photo/Shutterstock
Compositor: SPi Global
We are grateful to the American Institute of Certified Public Accountants for allowing the use of adapted mate-
rial from the Uniform CPA Examination (1978–1984, 1987, 1990–1991) as well as to the Institute of Management
Accountants for allowing the use of adapted material from the Certificate in Management Accounting Examinations
(1977–1984, 1987, 1990–2000).
All credits appearing on page or at the end of the book are considered to be an extension of the copyright page.
Library of Congress Cataloging-in-Publication Data
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not
indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee
the accuracy of the information presented at these sites.
mheducation.com/highered
Ronald W. Hilton:
To Meg, Brad, Molly, Tim, Kerry, and Liliana.
David E. Platt:
To Nancy, for her love and patience.
Praise for MANAGERIAL ACCOUNTING
Hilton is a comprehensive managerial accounting text that incorporates a wide variety of applications and examples.
You are certain to find the examples and problems to fit your style. The emphasis of management of the firm and
depth of coverage makes this text worthy of consideration.”
—Todd Jensen, Sierra College
The Hilton 11e text is a fantastic resource for an Introductory Managerial Accounting course. It covers all of the nec-
essary topics in a logical order and with an appropriate level of rigor.”
—Laura Zellers, Wichita State University
“Extremely comprehensive, easy to read managerial accounting textbook that provides well-designed integrated
examples along with coverage of service-based companies.”
—Angela Sandberg, Jacksonville State University
“I am loving the book, and I see the students learning the concepts a lot quicker than my previous experience.”
—Patti Brown, The University of Texas at Austin
“This is an excellent text—well balanced, well organized, and up to date with current topics, including service
industries and state-of-the-art manufacturing environments. I highly recommend it also for the excellent examples
and illustrations through focus companies and contrasting companies.”
—John C. Anderson, San Diego State University
“I’ve been using this text since its second edition, and it gets better each year with continuous improvement.”
—Steve G. Green, United States Air Force Academy
“Major strength is how it relates managerial accounting to the general management function and reveals the
managerial accountant as an important member of the management team.”
—Linda C. Bowen, University of North Carolina–Chapel Hill
“The book goes beyond covering the basics and organizes and integrates contemporary topics nicely.”
—Harrison McCraw, State University of West Georgia
“The technology supplements and instructor resources are top-notch and very appropriate for our students.”
—Marilyn Okleshen, Minnesota State University–Mankato
“The book is very thorough, well written, and still remains student-friendly. The supplements are outstanding.”
—Ben Baker, Davidson College
iv
Preface V
Keeping pace with the speed of modern business, the authors combine their experience and expertise to make
sure Managerial Accounting is the most relevant, accurate, and up-to-date textbook in the field. Managerial
Accounting continues to focus and update content to bridge accounting and management practices.
VI Preface
viii
the depreciation rules (including the Modified them fresh and relevant for today’s students.
Accelerated Cost Recovery System, or MACRS) Many of the quotations are new in this edition.
under the TCJA. Moreover, the lower tax rates These quotes from practicing managers and
under the TCJA extend to Chapter 16’s end-of- managerial accountants portray the important role
chapter assignment material. managerial accounting plays in today’s dynamic
business environment.
Updated Pedagogy
In addition to the specific examples above, many Management Accounting Practice (MAPs)
chapters include streamlined and condensed Many of these real-world examples have been
explanations, and the addition of more current revised and updated to make them more current,
examples and references from the popular busi- and several new examples have been added.
ness press. While some of the MAPs are completely new,
to address the data analytics theme mentioned
Service Industry Examples
above, many of the existing MAPs have been
The service industry continues to play a
updated as well to keep them relevant and accu-
dominant role in the U.S. economy, despite
rate. For example, in the Chapter 1 MAP “Using
continuing emphasis on the importance of manu-
Managerial Accounting to Monetize the Internet,”
facturing. The authors have continued their track
the authors have added a discussion of various
record of finding and integrating examples from
efforts to return journalism to profitability. And
service industry organizations, while making
in Chapter 2, the MAP “Managing Health Care
service industry examples featured in focus and
Costs Through Cost Behavior” has been updated
contrast companies increasingly relevant for
for the current state of the debate over the
students. Widely acknowledged as having the
Affordable Care Act.
most service industry focus of any managerial
Your feedback is crucial in improving each
accounting text, the 12th edition widens the mar-
new edition of Managerial Accounting and has
gin even further.
been the motivation for many changes in this 12th
In Their Own Words edition, including new themes, revised coverage
The authors continually work to update many of of key topical areas, and new pedagogy for the
the quotations in this popular feature, keeping most challenging topics.
ix
X Preface
Flexible.
Managerial Accounting is written in a modular format allowing topics to be covered in
the order you want. For example, some instructors prefer to cover contribution-margin
approaches to decision making and/or relevant costs early in the course. So Chapter 6
(cost behavior and estimation), Chapter 7 (CVP), and Chapter 14 (relevant costs) are written
so they can be covered immediately after Chapter 2, which introduces basic cost concepts.
A table showing the text’s flexibility is in the Introduction to the Instructor’s Manual.
XII Preface
Ron Hilton and Dave Platt use their years COMPANY is The Walt Disney
Company. This entertainment services company is
a giant in the industry with theme parks, feature film
key concepts, and students immediately gerial accounting and its major
themes. Some of you are excited
©Eye Ubiquitous/Superstock
about studying accounting. But
see the significance of the material and even more of you are asking, “Why do I need to
study managerial accounting? I’m not going to be an
sented in the chapter, its logo is shown so and tools to make their deci-
sions. Along the way, we will
quent chapters are not
real companies, but they
are realistic scenarios
©Parinya Suwanitch/123RF
also explore how managerial built on actual company
the student sees its application to the text accountants work in partner-
practices. Whenever
the focus company is
discussed in the chapter,
ship with managers to add
the company logo
value to the organization.
topic. appears in the margin.
<<<INCONTRAST
In contrast to the entertainment
services setting of The Walt
A Contrast Company is also introduced in house food retailer has over 400 stores around
North America and Europe. Historically a
leader in the area of corporate social responsi-
each chapter. In most cases these highlight bility, Whole Foods Market is frequently faced
with challenging decisions that require them
an industry different from that of the Focus to balance the need to run a profitable busi-
ness, and generate a satisfactory return for
Amazon.com, against the cost of their much-
Company. This feature allows even greater publicized commitment to organic foods and
sustainable produc-
Each chapter also
tion. We will explore
emphasis on service-industry firms and includes a contrast
company. In most
cases, the contrast
managerial accounting’s
company will present contribution to Whole
p g g y
Real-World Examples payment due date, and so on. Now imagine these data for all of the company’s 400-plus
stores around North America and Europe, every day of the year. That’s an intimidating
amount of data! Because of that, companies historically concentrated their efforts on
simply recording this huge volume of data efficiently and accurately. The goal was to
The Hilton & Platt text provides a variety of thought- ©Ed Endicott/Alamy
keep suppliers, customers, and employees happy, and to know what products are on the
shelves and be able to display and price them accurately and effectively.
Today, however, the power and relatively low cost of technology have allowed com-
provoking, real-world examples to focus students panies to move from just recording these data to analyzing them, with the goal of generat-
ing insights about the company’s suppliers, customers, and employees, indeed about their
entire value chain. And as they have put these data to work, and combined them with
on managerial accounting tools and professionals other data that they can collect or acquire, companies have uncovered insights that help
them to operate more effectively and profitably. For example, Whole Foods Market
knows that their customers are 67% more likely to spend recreational time outdoors than
the average grocery customer, and 154% more likely to earn over $200,000 per year.15
as an essential part of the management process. Knowing this helps Whole Foods Market managers, and their parent company Amazon,
to better manage the operations, marketing, and strategy in their value chain. For exam-
ple, they might choose to promote the kinds of foods that appeal to outdoorsy consumers.
Featured organizations include Amazon, Gold’s But even more significantly, they might also try out new product assortments and pricing
strategies to attract more shoppers from the very large population of people who earn less
than $200 000 per year
Gym, Southwest Airlines, Whole Foods Market,
General Electric, FedEx, and many others. These
“Great graphics, exhibits, and illustrations to keep
companies are highlighted in blue in the text. the computer generation interested.”
—Kathy Sevigny, Boston University
In Their Own Words
Quotes from both practicing managers and manage- Florida operations, which entailed choosing among the available alternatives.
ate point in the References. Many references have, Directing Operational Activities
and then “analyze profitability and validate yield assumptions [standards] for complicated d
these boxes. They stimulate student interest and product flows.”
Global biopharmaceutical company AstraZeneca certainly has challenges related to
provide a springboard for classroom discussion. data volume as well. But they also had to tackle a particularly tough problem relating
to the worldwide summarization of financial results, called “the close” by accountants, to
provide standardized information for variance analysis and other purposes. With “facili-
ties in more than 100 countries and $26.1 billion sales . . . [from] thousands of accounts
Focus on Ethics spread across all its global legal entities . . . [and] a total workforce of more than 57,000
people ” doing this efficiently is hard By using cloud-based data analytics and accounting
Practice, which is presented in the Focus on Ethics of an airplane. And, as this chapter discusses, supply chain
management and production controls also play an important
for Boeing’s airplanes in a strong economy flew head-
on into a disrupted production environment caused by
part in managing and controling production costs. But, try as efforts to modernize manufacturing processes, leading
At the end of each Focus on Ethics segment, Corporation, whose board of directors was reluctant to
approve a deal. Finally, the deal went through, and the
drop in Boeing’s stock price would not jeopardize the
McDonnell-Douglas deal.
world’s largest aerospace company was born, a company Moreover, the BusinessWeek article reports that, “Boe-
we link to videos from the well-respected Ethics that could compete in both the commercial and defense
aeronautics markets and even in more speculative flight
ing did more than simply fail to tell investors about its pro-
duction disaster. It also engaged in a wide variety of
ventures like space shuttles and rockets. aggressive accounting techniques that papered over the
118 Chapter 3 Product Costing and Cost Accumulation in a Batch Production Environment
Several exercises and problems in each Each of these inventory balances was 10 percent higher at the end of the year.
Manufacturing Cost Flows Reimel Furniture Company, Inc., incurred the following costs during 20x2.
(LO 3-2, 3-6)
Raw material used................................................................................................................................................ $174,000
Direct labor ........................................................................................................................................................... 324,000
“Good description of managerial accounting During 20x2, manufacturing overhead of $180,000 was applied to production. Products costing
$120,000 were finished, and products costing $132,000 were sold on account for $195,000. There were
tools. Easy to read and understand. Strength is no purchases of raw material during the year. The beginning balances in the firm’s inventory accounts
are as follows:
in the end-of-chapter problems—good variety Raw material ......................................................................................................................................................... $227,000
Management 1 Prepare T-accounts to show the flow of costs through the company’s manufacturing accounts
®
Problems All applicable Problems are available in Connect.
Many problems can be solved using the The following data refer to Twisto Pretzel Company for the year 20x1. Problem 3–42
Schedule of Cost of Goods
Work-in-process inventory, 12/31/x0 ..................... $ 8,100 Utilities for sales and administrative offices .......... 2,500 Manufactured and Sold;
Excel spreadsheet templates found in Selling and administrative salaries ........................ 13,800 Other selling and administrative expenses ........... 4,000 Income Statement
Insurance on factory and equipment ..................... 3,600 Indirect-labor cost incurred .................................... 29,000 (LO 3-6)
Work-in-process inventory, 12/31/x1 ..................... 8,300 Depreciation on factory building ............................ 3,800
Connect. An Excel logo appears in the Finished-goods inventory, 12/31/x0 ...................... 14,000 Depreciation on cars used by sales personnel ..... 1,200
Cash balance, 12/31/x1 ......................................... 6,000 Direct-labor cost incurred ....................................... 79,000
margin next to these problems for easy Indirect material used .............................................
Depreciation on factory equipment .......................
4,900
2,100
Raw-material inventory, 12/31/x1 ..........................
Accounts receivable, 12/31/x1 ..............................
11,000
4,100
1. Total manufacturing
costs: $175,100
Raw-material inventory, 12/31/x0 .......................... 10,100 Rental for warehouse space to store raw material .... 3,100 3. Net income: $7,100
identification. Property taxes on factory .......................................
Finished-goods inventory, 12/31/x1 ......................
2,400
15,400
Rental of space for company president’s office ....
Applied manufacturing overhead ...........................
1,700
58,000
Purchases of raw material in 20x1 ........................ 39,000 Sales revenue ......................................................... 205,800
Utilities for factory ................................................... 6,000 Income tax expense ............................................... 5,100
Required:
1. Prepare Twisto Pretzel Company’s schedule of cost of goods manufactured for 20x1.
2. Prepare the company’s schedule of cost of goods sold for 20x1. The company closes overapplied
or underapplied overhead into Cost of Goods Sold.
3. Prepare the company’s income statement for 20x1.
Problem 3–43
Burlington Clock Works manufactures fine, handcrafted clocks. The firm uses a job-order costing sys-
Basic Job-Order Costing;
tem, and manufacturing overhead is applied on the basis of direct-labor hours. Estimated manufacturing
Journal Entries
Excel Simulations Simulated Excel questions, assignable within Connect, allow students to practice
their Excel skills—such as basic formulas and formatting—within the context of managerial accounting.
These questions feature animated, narrated Help and Show Me tutorials (when enabled), as well as
automatic feedback and grading for both students and professors.
Icons identify key business areas in the Problems and Cases in each chapter:
No surprises.
The Connect Calendar and Reports tools keep you on track with the
work you need to get done and your assignment scores. Life gets busy;
Connect tools
ools help you keep learning through it all.
Top: Jenner Images/Getty Images, Left: Hero Images/Getty Images, Right: Hero Images/Getty Images
Acknowledgments
We Are Grateful
We would like to express our appreciation to the many people who have provided assistance in the
development of this textbook. First, our gratitude goes to the thousands of managerial accounting
students we have had the privilege to teach over many years. Their enthusiasm, comments, and
questions have challenged us to clarify our thinking about many topics in managerial accounting.
Second, we express our sincere thanks to the following professors who provided extensive
reviews and contributions for this and prior editions:
John C. Anderson, San Diego State William J. Callahan, CPA, St. Joseph’s Harrison McCraw, State University of
University University West Georgia
Jeffrey Archambault, Marshall University Richard Campbell, University of Rio Metzger Sanjay Mehrotra, Northwestern
Florence Atiase, University of Texas at Grande University
Austin Gyan Chandra, Miami University Jamshed Mistry, Worcester Polytechnic
Rowland Atiase, University of Texas at Marilyn Ciolino, Delgado Community Institute
Austin College Morgan Hamid Mohammadi, St. Xavier
Ben Baker, Davidson College Paul Copley, James Madison University University
K. R. Balachandran, Stern School of Maureen Crane, California State Cynthia Nye, Bellevue University
Business, New York University University, Fresno Marilyn Okleshen, Minnesota State
Frederick Bardo, Shippensburg University Stephen Dempsey, University of Vermont University
Joseph Beams, University of New Orleans Patricia Derrick, George Washington Mohamed Onsi, Syracuse University
Michael Blue, Bloomsburg University University Putnam Michael Thomas Paz, Cornell
Linda Bowen, University of North Carolina Martha Doran, San Diego State University University
Richard Brody, University of New Haven Allan Drebin, Northwestern University Samuel Phillips, Shenandoah University
Wayne Bremser, Villanova University Barbara Durham, University of Central Kamala Raghavan, Texas Southern
Dr. Kathie J. Shaffer, CMA, Frostburg State Florida University
University James Emig, Villanova University Thomas H. Ramsey, Wake Forest
Linda Brown, St. Ambrose University Robert Eskew, Purdue University University
Russell Calk, New Mexico State University Andrew Felo, Pennsylvania State Frederick Rankin, Washington University
Chiaho Chang, Montclair State University University at Great Valley Roy Regel, University of Montana at
Anna Cianci, Drexel University Michael Flores, Wichita State University Missoula
Deb Cosgrove, University of Nebraska Kimberly Frank, University of Nevada at Laura Rickett, Kent State University
at Lincoln Las Vegas Don Samelson, Colorado State
William Eichenauer, Northwest State Alan Friedberg, Florida Atlantic University University
Community College Steve G. Green, United States Air Force Angela Sandberg, Jacksonville State
Amanda Farmer, University of Georgia Academy University
Leslie Fletcher, Georgia Southern University Edward Goodhart, Shippensburg Rebecca Sawyer, University of North
Waqar Ghani, Saint Joseph’s University University Carolina at Wilmington
Marybeth Govan, Sinclair Community Denise Guithues Amrhein, Saint Louis Pamela Schwer, St. Xavier University
College University Shaffer Thomas Selling, Thunderbird,
Ralph Greenberg, Temple University Sueann Hely, West Kentucky The Garvin School of International
Rochelle Greenberg, Florida State Community & Technical College Management
University Susan B. Hughes, University of Vermont Lanny Solomon, University of Missouri
Maggie Houston, Wright State University Todd Jensen, CPA, Sierra College at Kansas City
Melvin Houston, Wayne State University Paul Juras, Wake Forest University Wendy Tietz, Kent State University
Dennis Hwang, Bloomsburg University Sherrie Koechling, Lincoln University Ralph Tower, Wake Forest University
Mike Metzcar, Indiana Wesleyan University Stacey Konesky, Kent State University Mark Turner, Stephen F. Austin State
Christa Morgan, Georgia Perimeter Wikil Kwak, University of Nebraska at University
College Omaha Michael Tyler, Barry University
Karl Putnam, University of Texas at El Christy Larkin, Bacone College Bill Wempe, Texas Christian University
Paso James Lasseter, Jr. University of South James Williamson, San Diego State
Theodore Rodgers, Emory University Florida University
Casey Rowe, Purdue University, West Angelo Luciano, Columbia College Priscilla Wisner, Thunderbird, The Garvin
Lafayette Lois Mahoney, Eastern Michigan University School of International Management
Angela Sandberg, Jacksonville State Ana Marques, University of Texas at Jia Wu, University of Massachusetts,
University Austin Dartmouth
Kathleen Sevigny, Boston College Scott Martens, University of Minnesota Jennifer Yin, University of Texas at San
Lynda Thoman, Purdue University Maureen Mascha, Marquette University Antonio
Michael Thomas, Humboldt State Michele Matherly, University of North Richard Young, Ohio State University
University Carolina at Charlotte Laura Zellers, Wichita State University
xix
We want to thank Beth Woods and Helen Roybark for their thorough checking of the content and solutions
manual for accuracy and completeness.
The supplements are a great deal of work to prepare. We appreciate the efforts of those who developed
them, since these valuable aids make teaching the course easier for everyone who uses the text. Thank
you to Luann Bean, Florida Institute of Technology; Beth Kobylarz, Julie Hankins, James Emig, Villanova
University; Patricia Plumb, User Euphoria; Patti Lopez, Valencia College; Dr. Kay Poston, Francis Marion
University; and Dr. Helen Roybark, Ph.D., CPA, CFE, Radford University for their contributions to the ancillary
products.
We are indebted to Professors Roland Minch and Michael Maher for allowing the use of their case materi-
als in the text. The source for the actual company information in Chapters 1 and 2 regarding The Walt Disney
Company, Whole Foods Market, Procter & Gamble, Walmart, Southwest Airlines, and Gold’s Gym is the com-
panies’ published annual reports and other public materials available on their company websites.
Finally, we wish to express our gratitude to the fine people at McGraw-Hill who so professionally guided
this book through the publication process. In particular, we wish to acknowledge Tim Vertovec, Elizabeth
Eisenhart, Erin Quinones, Pat Frederickson, Allie Kukla, Brian Nacik, Michele Janicek, Katherine Wheeler, and
Matt Diamond.
Ronald W. Hilton
David E. Platt
xx
Focus Company and Contrast Company Used in Each Chapter
Focus Company Focus Company Contrast
Chapter Title Focus Company Logo Industry Company
1. The Crucial Role of Managerial The Walt Disney Company Entertainment Whole Foods
Accounting in a Dynamic Busi- Market, Inc
ness Environment (grocery retailer)
2. Basic Cost Management Concepts Comet Computer Computer manufacturer, Gold’s Gym
Internet sales (fitness service
company)
3. Product Costing and Cost Ac- Blue River Paddle Boards Blue River Manufacturer, stand-up Small World
cumulation in a Batch Production PADDLE BOARDS paddle boards Advertising
Environment (ad agency)
4. Process Costing and Hybrid MVP Sports, Wisconsin Manufacturer, baseball MVP Sports, Minnesota
Product-Costing Systems Div’n gloves Div’n (manufacturer)
8. Variable Costing and Measurement FitDat.com Designer and manufacturer, FitDat.com (designer/
of ESG and Quality Costs smart watches manufacturer)
9. Financial Planning and Analysis: Snowcap Music Festivals Producer of music festivals FestiChair.com
The Master Budget (manufacturer and
Internet retailer)
xxi
Focus Company and Contrast Company Used in Each Chapter
Focus Company Focus Company Contrast
Chapter Title Focus Company Logo Industry Company
10. Standard Costing and Analysis DCdesserts.com Wholesale food service Forest Home
of Direct Costs National Bank
(financial services)
11. Flexible Budgeting and Analysis DCdesserts.com Wholesale food service Upstate Auto
of Overhead Costs Rentals (vehicle
rental services)
12. Responsibility Accounting Aloha Hotels and Resorts Resort hotel chain FLIT FinTech
and the Balanced Scorecard (online financial
services startup)
13. Investment Centers and Suncoast Food Centers Retail grocery chain Suncoast
Transfer Pricing Food Processing
Division
(manufacturing)
15. Target Costing and Cost Analysis Sydney Sailing Supplies Manufacturer, sailboats Sydney Sailing
for Pricing Decisions Marine Services
(contractor)
16. Capital Expenditure Decisions City of Mountainview City government High Country
Department
Stores (retailer)
17. Allocation of Support Activity Riverside Clinic Health care provider International
Costs and Joint Costs Chocolate
Company
(manufacturer)
xxii
Brief Contents
xxiii
Contents
Review Questions 28
Exercises 28
Problems 29
Case 31
Managerial Accounting and the Ethical Climate Review Problems on Cost Classifications 62
of Business 24 Key Terms 63
Review Questions 64
Focus on Ethics: IMA Statement of Ethical
Professional Practice 25 Exercises 65
Focus on Ethics: Conflict of Interest: Ethical Review Problems on Cost Behavior and Estimation 261
Challenges In Making Product Changes 198 Key Terms 262
Chapter Summary 199 Appendix to Chapter 6: Least-Squares Regression Using
Review Problem on Cost Drivers and Product-Cost Microsoft® Excel 262
Distortion 200 Review Questions 264
Contents xxvii
Cost Structure and Operating Leverage 303 Focus on Ethics: Incentive to Overproduce
Operating Leverage 304 Inventory 353
Chapter Summary 354
M.A.P. Operating Leverage Helps Some Web
Companies to be Profitable 305 Review Problem on Absorption and
Variable Costing 355
Cost Structure and Operating Leverage: A Cost-
Benefit Issue 306 Key Terms 356
xxviii Contents
Note: Entries printed in blue denote topics that emphasize contemporary issues in managerial accounting and
cost management.
Design Elements: (mouse): ©Image Source, all rights reserved; (globe): ©Doug Armand/Getty Image; (scale): ©DNY59/Getty Images;
(tablet): ©McGraw-Hill Education; (pen): ©Shutterstock/wrangler
Chapter Openers: (Disney): ©Eye Ubiquitous/Superstock; (tablet): ©Robert Mora/Alamy; (paddle): ©Alexey_Ulyanov/Shutterstock; (baseball glove):
©Photodisc/Getty Images; (drone controller): ©IM_VISUALS/Shutterstock; (donuts): ©Photodisc/PunchStock; (masks): ©Ingram Publishing/Alamy; (watch):
©scanrail/123RF; (mixer): ©mrgarry/123RF; (dessert): ©Elena Veselova/Shutterstock; (hat): ©Shutterstock/Madlen; (snorkel): ©Andrew Paterson/Getty Images;
(grocerys): ©Brand X Pictures/PunchStock; (airplane): ©Ilene MacDonald/Alamy; (sailboat): ©tonobalaguer/123RF; (flowers): ©NPS Photo by Robb Hannawacker;
(blood pressure): ©Siede Preis/Getty Images
Managerial
Accounting
Creating Value in a
Dynamic Business Environment
1 The Crucial Role of
Managerial Accounting in a
Dynamic Business Environment
FOCUSCOMPANY>>>
1-1 Define managerial accounting and describe its role in the management process.
1-2 Explain four fundamental management processes that help organizations attain
their goals.
1-4 Explain the major differences between managerial and financial accounting.
Learning Objectives high- 1-5 Describe the accounting and finance structure in an organization.
light the key topics to be
covered in the chapter. 1-6 Describe the roles of an organization’s chief financial officer (CFO) or controller,
They are repeated in the treasurer, and internal auditor.
margin of the text where
they are discussed. Also, 1-7 Understand and explain the value chain concept.
each end-of-chapter
assignment lists its 1-8 Explain how investments in capacity affect managerial decision making.
learning objectives
in the margin. 1-9 Understand and explain big data and data analytics and how they interact with
managerial accounting.
1-10 Discuss the professional organizations and certifications in the field of managerial
accounting.
1-11 Describe the ethical responsibilities and ethical standards that apply to managerial
accounting.
Many different kinds of organizations affect our daily lives. Manufacturers, retailers, ser-
vice industry firms, agribusiness companies, nonprofit organizations, and government
agencies provide us with a vast array of goods and services. All of these organizations
have two things in common. First, every organization has a set of goals or objectives.
An airline, such as Qantas or Southwest Airlines, might specify profitability and cus-
tomer service as its goals. The New York Police Department’s goals would include public
safety and security coupled with cost minimization. Second, in pursuing an organiza-
tion’s goals, managers need information. The information needs of management range
across financial, production, marketing, legal, and environmental issues. Generally, the
larger the organization, the greater management’s need for information.
In this chapter, we will explore the role of managerial accounting within the overall
management process. In the remaining chapters, we will expand our study by exploring
the many concepts and tools used in managerial accounting.
managerial accounting. That is why you are here—even if you are not planning to be an
accountant! “As their role moves from
An organization’s management team seeks to create value for the organization by governance to guidance,
managing resources, activities, and people to achieve the organization’s goals effec- [managerial accountants
tively and efficiently. Managerial accounting provides tools and perspectives that help are] turning complex data
managers accomplish this, and for that reason it is important that every business student into actionable insight,
study it. implementing digitally-
Managerial accountants are specialists in using the tools of managerial accounting. enabled business models,
They help the organization and support its managers in running the operation effectively. measuring new KPIs [key
Their knowledge builds from the material in this textbook to include advanced tools as performance indicators] to
well as knowledge and techniques specific to a company and its industry. measure value, managing
The role of managerial accounting is very different now than it was years ago. In rising levels of risk, and
the past, managerial accountants were organized into support departments, often physi- supporting their rapidly
cally separated from the managers for whom they provided reports and information. Now, expanding customer
rather than isolate managerial accountants in a separate department, companies usually bases.” (1a)1
locate them in the operating departments where they are working with other managers to Oracle
make decisions and resolve operational problems. Managerial accountants, often carry-
ing the job title of “analyst,” take on leadership roles on their teams and are sought out
for the valuable information they provide. The role of the accountant in leading-edge
companies “has been transformed from number cruncher and financial historian to being
business partner and trusted advisor.”2 And the tools of managerial accounting can add
value for all managers.
1
In Their Own Words Throughout the text, you will find these quotes from both practicing managers and managerial
accountants. Collectively they portray the important role managerial accounting plays in today’s dynamic business
environment. The references for these quotes appear at the end of the text. The references are organized by chapter;
thus reference (1a) relates to the first quote in Chapter 1, and so forth.
2
Gary Siegel, “The Image of Corporate Accountants,” Strategic Finance 82, no. 2 (August 2000), p. 71.
3
The Walt Disney Company, which is discussed in this chapter, is, of course, a real company, and information about
its mission, structure and leadership can be found at www.thewaltdisneycompany.com/about/. However, the focus
organizations around which subsequent chapters are built are not real organizations. They are instead realistic set-
tings in which to discuss business and managerial accounting issues, and in most cases are based on real organiza-
tions. Similarly, each chapter includes a discussion of a contrast company. Some of these contrast companies, such
as food retailer Whole Foods Market in this chapter, are real companies. Others are fictitious companies that are
based on real organizations. These realistic illustrations and scenarios are intended to help students connect the
business and managerial accounting issues discussed in this book to everyday life.
6 Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment
Decision Making
Recently, Disney’s management and board of directors decided that one of the company’s
growth objectives would be to expand guest and hotel capacity in its Walt Disney World
Resort in Florida. It was not immediately clear, however, how best to do this. Should they
build a new hotel facility on the scarce available land near one of the company’s four
existing Florida theme parks—the Magic Kingdom, Epcot, Disney’s Hollywood Studios,
and Disney’s Animal Kingdom? Or should they build a new type of theme park with its
own hotels, a substantial investment? Should they build new attractions in one or more
of the existing parks, and renovate and expand one of the existing hotel properties? Or
should the company branch out in a new direction with an entirely different type of facil-
ity? How would each of these alternative courses of action mesh with the company’s
mission to provide “creative, innovative and profitable entertainment?” Disney’s top
management team had to make a decision about the best way to expand the company’s
Florida operations, which entailed choosing among the available alternatives.
Planning
Disney’s top management team decided on an aggressive, and expensive, plan to expand the
“What I need is someone company’s Florida operations and profitability by building on the Star Wars brand franchise
who can analyze data, see that the company owns. Their plan included a large expansion of the Disney’s Hollywood
problems and figure out Studios theme park, dedicated to a new attraction called Star Wars: Galaxy’s Edge, with
solutions . . . [just doing] a new “immersive” Star Wars Hotel resort connected to it. Created and designed by Walt
debits and credits and Disney’s Imagineering Division, the 14-acre park expansion would offer guests a chance to
financial statements doesn’t inhabit a planet in the Star Wars galaxy, both visiting it and staying there in the hotel.
really help me.” (1b) Next came the detailed planning phase. How would the rides and simulations
Tente Casters Inc designed by the Imagineering Division be laid out and organized? What food and bever-
age operations would be appropriate? What characters would be present in the attraction,
and how many employees of all types would be needed on a day-to-day basis? What sup-
plies would be required to run the park and hotel? How much would electricity and other
utilities cost for the new attraction? How should the hotel’s rooms be priced? And finally,
what other incremental sales opportunities could be created to help pay for the expensive
project? Disney’s management team had to plan for running Star Wars: Galaxy’s Edge
and the Star Wars Hotel, which meant developing a detailed financial and operational
description of anticipated operations.
Controlling
As the new attraction and the hotel operate, the company can begin to observe the results
of operations. Are Disney’s goals for the attraction and hotel being accomplished? Is the
new attraction “creative, innovative, and profitable?” How do we measure that? Gen-
erally, and most importantly, have operations adhered to the plans developed by man-
agement for achieving the goals? In seeking to answer these questions, management is
engaged in control, which means ensuring that the organization operates in the intended
manner and achieves its goals.
Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment 7
Providing Information for Decision Making and Planning For virtually all major
decisions, Disney’s management team would rely heavily on managerial accounting infor-
mation. For example, the decision to establish the new attraction and hotel would be influ-
enced by estimates of the costs of designing the rides and simulations and maintaining them
throughout the attraction’s life. The theme park’s managers also would rely on managerial
accounting data in formulating plans for the attraction’s operations. Prominent in those plans
would be a budget detailing the projected revenues and costs of operating the attraction.
Because of the complexity and importance of this decision, Disney’s managers and
accountants would work together on teams as decisions were made and plans formulated “What we’re seeing is less
for the new attraction’s operations. transactional and more
decision support type of
work. More analytical,
Assisting Managers in Directing and Controlling Operational Activities Direct-
more . . . option analysis.
ing and controlling day-to-day operations require a variety of data about the process of
Looking at the whole
providing entertainment services. For example, in directing operational activities, the
spectrum of options in
park’s management team would need data about customer food-service demand patterns
helping management make
in order to make sure appropriate staffing was provided in the theme park’s various food
decisions.” (1d)
venues. In controlling operations, management would compare actual costs incurred with
Boeing
those specified in the budget.
Managerial accounting information often assists management through its attention-
directing function. Managerial accounting reports do not necessarily solve a decision
problem. Most often, they direct managers’ attention to an issue that requires their skills
and then, ideally, provide the data that is relevant in helping them to solve the problem. To
illustrate, suppose Star Wars: Galaxy’s Edge incurred electricity costs that significantly
exceeded the budget. This fact does not explain why the budget was exceeded, nor does
8 Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment
it tell management what action to take, but it does direct management’s attention to the
situation. Suppose that upon further investigation, the accounting records reveal that the
rate Disney pays for electricity has increased substantially. This information will help man-
agement in framing the decision problem. Should steps be taken to conserve electricity?
Should they seek out a different electric power provider? Perhaps management should con-
sider investing in a more sophisticated air conditioning system to manage the Florida heat.
M anagement For any company operating online, monetizing the Internet means finding a way to gener-
F
a revenues from users in order to make a profit after the costs of providing the Internet
ate
A ccounting
s
service or content. Creating a successful revenue model is one of the biggest challenges
P ractice
f
faced by Internet companies, and managerial accounting information and techniques are
Facebook, Walmart, a crucial part of finding and managing the correct model. Here are some examples of how
REI, Amazon, Fox c
companies are trying to monetize the Internet.
News, The New
York Times, The Targeted Content
T
Wall Street Journal, F
Four months after Facebook’s initial public offering (IPO) of its stock on May 18, 2012, with its
LinkedIn sshares trading more than 50% below their $38 per share initial offering price, investors
w
were demanding answers to a question they had begun asking soon after the IPO: “How
w
will [Facebook] continue to monetize its more than 900 million users on a consistent
basis?”4 Many changes in Facebook’s site during the following months and years have
been intended to do exactly that, with managerial accountants analyzing the costs and
The managerial account- benefits of different courses of action. For example, design changes in March 2013 were
ing practices of well intended to “help the company increase monetization by improving its ability to target con-
known, real-world organi- tent to users with increased precision based on ‘likes.’”5 In subsequent years, Facebook
zations are highlighted in seems to have solved the Internet monetization problem, becoming highly profitable with
these boxes. You will see its stock trading by mid-2018 at five to six times the IPO price.
how topics in the chapter
are actually used. Actual Competing with Amazon
companies are indicated Walmart was slow to embrace Internet sales because of their investment in bricks-and-
in blue whenever they mortar stores. But they and other companies that invest in physical stores, such as REI, see
are referenced. an opportunity to monetize the Internet in conjunction with their stores by providing what
competitor Amazon cannot. “Walmart touches 90% of all Americans within 10 miles of a store
[and] has demand to justify third-party sellers on its marketplace to ship products to ‘for-
ward deployed’ warehouses (read: ‘stores’).”6 By offering customers the opportunity to have
purchases shipped free of charge to its stores, Walmart could see cost efficiencies from
using its existing supply chain to bring products to consumers. And when consumers visit a
store to pick up their purchases, they are likely to purchase other products, an incremental
profit opportunity not available to Amazon. Moreover, stores can deliver services to con-
sumers along with the packages they have ordered online. “Stores are fighting back with
what has always defined specialty retail: service and community . . . REI has offered events,
skills clinics [and] last summer it created 1,000 more aimed squarely at women.”7 But when
services are provided free of charge, they must demonstrate that they drive increased sales
to result in an overall net profit. Managerial accounting tools help provide that insight.
(continues)
4
Steven Russolillo and Kaitlyn Kiernan, “MarketBeat: Facebook Shares Fall Below $30,” Wall Street Journal,
May 29, 2012.
5
Andrew Tonner, “What Does Facebook’s Redesign Mean for Investors?” The Motley Fool, March 7, 2013, http://
www.fool.com/investing/general/2013/03/07/what-does-facebook-redesign-mean-for-investors.aspx.
6
Alex Moazed, “Walmart is Coming for Amazon–and Winning,” Inc., October 11, 2017.
7
Mya Frazier, “Amazon’s War on Gear,” Outside, July 11, 2018.
Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment 9
8
Pete Brown, “Platforms and Publishers: No Sign of Retreat,” Columbia Journalism Review, February 23, 2017;
Deepa Seetharaman and Lukas I. Alpert, “Facebook Nears Deals on News Shows for Video Platform ‘Watch’,” The
Wall Street Journal, May 31, 2018.
10 Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment
The activities that make an enterprise successful today may no longer be sufficient next year.
A crucial role of managerial accounting is to continually assess how an organization stacks
up against the competition, with an eye toward continuously improving. Among the ques-
tions asked in assessing an organization’s competitive position are the following:
“Accounting was always
an analytical profession
ģ How well is the organization doing in its internal operations and business processes?
[but] the kinds of numbers ģ How well is the organization doing in the eyes of its customers? Are their needs
you’re analyzing has being served as well as possible?
changed from strict debits ģ How well is the organization doing from the standpoint of innovation, learning,
and credits to analyzing and continuously improving operations? Is the organization a trendsetter that
your processes.” (1e) embraces new products, new services, and new technology? Or is it falling behind?
Koch Industries ģ How well is the organization doing financially? Is the enterprise viable as a con-
tinuing entity?
9
The balanced scorecard concept was developed by Robert S. Kaplan and David P. Norton. See Robert S. Kaplan
and David P. Norton, The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New
Business Environment (Boston: Harvard Business School Press, 2001).
Chapter 1 The Crucial Role of Managerial Accounting in a Dynamic Business Environment 11
ģ Disney’s management team must be concerned with the quality of the company’s
business processes as well as its entertainment services.
ģ Management must continually monitor the needs of its customers and assess
their level of satisfaction with the services provided.
ģ The company’s overall financial strength also must be prominent in manage-
ment’s thinking.
ģ Management must ask if the company possesses the skills it needs to continually
adapt as the entertainment industry changes.
The balanced scorecard is an important managerial accounting concept. We will pro-
vide an extensive discussion of the balanced scorecard in Chapter 12.
Exhibit 1–3
Differences between Managerial Accounting Financial Accounting
Managerial and Financial
Accounting Users of Information Managers, within the organization. Interested parties, outside the organization.
Regulation Not required and unregulated, since it is Required and must conform to generally
intended only for management. accepted accounting principles. Regulators
include the International Accounting Standards
Board, the Financial Accounting Standards
Board (U.S.), and the U.S. Securities and
Exchange Commission.
Source of Data The organization’s core accounting system, Almost exclusively drawn from the organi-
plus various other sources, provide financial zation’s core accounting system, which accu-
data as well as nonfinancial data such as mulates financial information.
product defect rates, quantities of material
and labor used in production, occupancy
rates in hotels, and average take-off delays
in airlines.
Nature of Reports Reports often focus on subunits within the Published reports focus on the enterprise in
and Procedures organization, such as departments, divisions, its entirety. Generally consolidated from the
geographical regions, or product lines. reports of geographic or business segment
Based on a combination of historical data, divisions, and based almost exclusively on
estimates, and projections of future events. historical transaction data.
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believed that nothing would so effectually stop the pauperising of the
people by indiscriminate charity as the trained nurse in the homes of
the sick poor, who would teach her patients how best to help
themselves. “To carry out,” continues Miss Nightingale, “the practical
principles of preventing disease by stopping its causes and the
causes of infections which spread disease. Last but not least, to
show a common life able to sustain the workers in this saving but
hardest work under a working head, who will personally keep the
training and nursing at its highest point. Is not this a great success?
“District nursing, so solitary, so without the cheer and the
stimulus of a big corps of fellow-workers in the bustle of a public
hospital, but also without many of its cares and strains, requires what
it has with you, the constant supervision and inspiration of a genius
of nursing and a common home. May it spread with such a standard
over the whole of London and the whole of the land.”
Two years later (1876) Miss Nightingale made an eloquent plea
in a long letter to The Times for the establishment of a Home for
Nurses in connection with the National Society for Providing Trained
Nurses for the Poor. This letter was later reprinted as a pamphlet on
Trained Nursing for the Sick Poor. In specially pleading for a Central
Home for Nurses, she wrote, “If you give nurses a bad home, or no
home at all, you will have only nurses who live in a bad home, or no
home at all,” and she emphasises the necessity for the district nurse
to have a knowledge of how “to nurse the home as well as the
patient,” and for that reason she should live in a place of comfort
herself free from the discomforts of private lodgings.
Miss Nightingale’s plea bore fruit in the establishment of the
Central Home for Nurses, 23, Bloomsbury Square, under the able
management of Miss Florence Lees. Nothing pleased Miss
Nightingale better than to get reports of the experience of the district
nurses amongst the poor, and to hear how the people received their
visits and what impression they were able to make on the habits of
the people. She was specially delighted with the story of a puny slum
boy who vigorously rebelled against a tubbing which Miss Lees was
administering.
“Willie don’t like to be bathed,” he roared; “oo may bath de debil,
if oo like!” The implication that Miss Lees was capable of washing
the devil white Miss Nightingale pronounced the finest compliment
ever paid to a district nurse.
She has always impressed upon district nurses the need not
only of knowing how to give advice, but how to carry it out. The
nurse must be able to show how to clean up a home, and Miss
Nightingale used frequently to quote the case of a bishop who
cleansed the pigsties of the normal training school, of which he was
master, as an example—“one of the most episcopal acts ever done,”
was her comment.
At first the district nurses were recruited almost entirely from the
class known as “gentlewomen,” as it was thought both by Miss
Nightingale and Miss Lees that it required women of special
refinement and education to exercise influence over the poor in their
own homes. Also, one of the objects of the National Association was
to raise the standard of nursing in the eyes of the public. It was soon
proved that the lady nurses did not shirk any of the disagreeable and
menial offices which fall to the lot of the district nurse. Broadly
speaking, it is only the educated women with a vocation for nursing
who will undertake such duties; the woman who merely wants to
earn an income will choose hospital or private nursing. In the earlier
stages of the movement the district nurses received high
remuneration, and on this question of fees the Queen of Nurses may
be quoted:—
“I have seen somewhere in print that nursing is a profession to
be followed by the ‘lower middle-class.’ Shall we say that painting or
sculpture is a profession to be followed by the ‘lower middle-class’?
Why limit the class at all? Or shall we say that God is only to be
served in His sick by the ‘lower middle-class’?
“It appears to be the most futile of all distinctions to classify as
between ‘paid’ and unpaid art, so between ‘paid’ and unpaid nursing
—to make into a test a circumstance as adventitious as whether the
hair is black or brown, viz., whether people have private means or
not, whether they are obliged or not to work at their art or their
nursing for a livelihood. Probably no person ever did that well which
he did only for money. Certainly no person ever did that well which
he did not work at as hard as if he did it solely for money. If by
amateur in art or in nursing are meant those who take it up for play, it
is not art at all, it is not nursing at all. You never yet made an artist by
paying him well; but an artist ought to be well paid.”
A most important outcome of the introduction of a system of
trained nurses for the sick poor was the establishment of the
Queen’s Jubilee Nurses. Queen Victoria, moved by the great benefit
which the National Nursing Association had conferred, decided, on
the representations of the Committee of the Women’s Jubilee Fund,
furthered by Princess Christian, to devote the £70,000 subscribed, to
D
the extension of this work. The interest of the fund, amounting to
£2,000 per annum, was applied to founding an institution for the
education and maintenance of nurses for tending the sick poor in
their own homes, with branch centres all over the kingdom. The
charter for the new foundation was executed on September 20th,
1890.
D
Mrs. Dacre Craven had in 1877 proposed, in
a letter laid before Queen Victoria, that a part of
the fund of St. Katharine’s Royal Hospital should
be devoted to founding a Training Institute for
District Nurses of gentle birth, to be called
“Queen’s Nurses.”
When a noble life has prepared old age, it is not the decline that it
reveals, but the first days of immortality.—Madame de Stael.
Miss Nightingale’s work for the profession which her name and
example had lifted into such high repute continued with unbated
energy. The year 1871 brought what must have seemed like the
crowning glory of her initial work when the Nightingale Home and
Training School was opened as an integral portion of the new St.
Thomas’s Hospital, the finest institution of its kind in Europe. This
circumstance added greatly to the popularity of nursing as a
profession for educated women.
Queen Victoria had laid the foundation-stone of the new hospital
on May 13th, 1868, on the fine site skirting the Thames Embankment
opposite the Houses of Parliament. It was erected on the block
system, which Miss Nightingale has always recommended, and she
took a keen interest in all the model appliances and arrangements
introduced into this truly palatial institution for the sick.
The hospital extends from the foot of Westminster Bridge along
the river to Lambeth Palace, and has a frontage of 1,700 ft. It is built
in eight separate blocks or pavilions. The six centre blocks are for
patients, the one at the north end next Westminster Bridge is for the
official staff, and the one at the south end is used for lecture rooms
and a school of medicine. Each block is 125 ft. from the other, but
coupled by a double corridor. The corridor fronting the river forms a
delightful terrace promenade. Each block has three tiers of wards
above the ground floor. The operating theatre is capable of
containing six hundred students. A special wing in one of the
northern blocks was set apart for the Nightingale Home and Training
School for Nurses. All the arrangements of this wing were carried out
in accordance with Miss Nightingale’s wishes.
The hospital contains in all one thousand distinct apartments,
and the building cost half a million of money. It was opened by
Queen Victoria on June 21st, 1871, and The Times in its account of
the proceedings is lost in admiration of “the lady nurses, in their
cheerful dresses of light grey [blue is the colour of the Sisters’
dresses], ladies, bright, active, and different altogether from the old
type of hospital nurse whom Dickens made us shudder to read of
and Miss Nightingale is helping us to abolish.” The new building
gave increased accommodation and provided for forty probationers.
The rules for admission remained practically the same as when the
Training School was first started at the old St. Thomas’s.
At a dinner to inaugurate the opening of the new hospital, the
Chairman, Sir Francis Hicks, related that Miss Nightingale had told
him that she thought it “the noblest building yet erected for the good
of our kind.”
But our interest centres in the Nightingale wing. The dining hall is
a pleasant apartment which contains several mementoes of the lady
whose name it bears. One is a unique piece of statuary enclosed in
a glass case and standing on a pedestal. To the uninitiated, it might
stand for a representation of a vestal virgin, but we know it to have a
nobler prototype than the ideal of womanly perfection sacred to the
Romans. That statuette is not the blameless priestess of Vesta, “the
world forgetting, by the world forgot,” but our heroine, whom the
sculptor has modelled in the character of “The Lady with the Lamp.”
She stands, a tall, slim figure, in simple nurse’s dress, holding in one
hand a small lamp—such as she used when going her nightly rounds
at Scutari hospital—which she is shading with the other hand. There
is also a bust of Miss Nightingale in the hall, a portrait of her brother-
in-law, the late Sir Harry Verney, for many years the Chairman of the
Council of the Nightingale Fund, and a portrait of Mrs. Wardroper,
the first head of the Nightingale Home when originally founded.
There is also a clock presented by the Grand Duchess of Baden,
sister of the late Emperor Frederick of Germany, who was a great
admirer of Miss Nightingale’s work and herself an active organiser of
relief for the sick soldiers during the Franco-German War.
The dining-hall leads into the nurses’ sitting-room. Each nurse
has her own private room.
The number of probationers slightly varies from year to year, but
is usually fifty-two, and there are always more applicants than can be
entertained. They are divided into Special probationers, who are
gentlewomen by birth and education, daughters of professional men,
clergymen, officers, merchants, and others of the upper and middle
classes, age from twenty-four to thirty, and Ordinary probationers.
The Special probationers are required to be trained to be future
heads of hospitals, or of departments of hospitals. They learn every
detail of a nurse’s work, and also the duties to fit them for
responsible posts as matrons, etc. The Ordinary probationers are
trained to be efficient nurses, and after some years’ service may
obtain superior appointments.
All nurses who have passed through St. Thomas’s are united by
a special tie to Miss Nightingale, who rejoices in their successes,
and likes to hear from time to time of the progress of their work in the
various hospitals and institutions of which they have become heads.
Mr. Bonham Carter, her old and valued friend, remains the
secretary of the Nightingale Fund, and Miss Hamilton is the matron
of the hospital, and has control of the Nightingale Home.
In the same year (1871) that the new Nightingale Home and
Training School was opened, Miss Nightingale published a valuable
work on Lying-in Hospitals, and two years later she made a new
literary departure by the publication in Fraser’s Magazine of two
articles under the heading “Notes of Interrogation,” in which she
dealt with religious doubts and problems. Miss Nightingale from her
youth up has shown a deeply religious nature, and her attempt to
grapple with some of the deep questions of faith, as she had thought
them out in the solitude of her sick-room, merit thoughtful
consideration.
Miss Nightingale has lived so entirely for the public good that her
private family life is almost lost sight of. But her affections never
ceased to twine themselves around the homes of her youth. After
busy months in London occupied in literary work and the furthering
of various schemes, came holidays spent at Lea Hurst and Embley
with her parents, when she resumed her interest in all the old
people, and ministered to the wants of the sick poor. Though no
longer able to lead an active life and visit amongst the people, she
had a system of inquiry by which she kept herself informed of the
wants and needs of her poorer friends. She was particularly
interested in the young girls of the district, and liked to have them
come to Lea Hurst for an afternoon’s enjoyment as in the days gone
by. It was soon known in the vicinity of her Derbyshire or Hampshire
home when “Miss Florence” had arrived.
In January, 1874, Miss Nightingale sustained the first break in
her old home life by the death of her father. He passed peacefully
away at Embley in his eightieth year and was buried in East Willows
Churchyard. His tomb bears the inscription:—
WILLIAM EDWARD NIGHTINGALE,
of Embley in this County, and of Lea Hurst,
Derbyshire.
Died January 5th, 1874, in his eightieth year.
“And in Thy Light shall we see Light.”—Ps. xxxvi. 9.
After her father’s death, Miss Nightingale spent much of her time
with her widowed mother at Embley and Lea Hurst, between which
residences the winter and summer were divided as in the old days. It
was well known that “Miss Florence’s” preference was for Lea Hurst,
and she would linger there some seasons until the last golden leaves
had fallen from the beeches in her favourite “walk” in Lea Woods.
Some of the old folks had passed away and the young ones had
settled in homes of their own, but no change in the family history of
the people escaped Miss Florence. She ministered through her
private almoner to the wants of the sick, and bestowed her name
and blessing on many of the cottage babes. By her thoughtful
provision a supply of fresh, pure milk from the dairy of Lea Hurst was
daily sent to those who were in special need of it. People on the
estate recall that before she left in the autumn “Miss Florence”
always gave directions that a load of holly and evergreens should be
cut from Lea Woods and sent to the Nurses’ Home at St. Thomas’s,
the District Nurses’ Home in Bloomsbury Square, and the Harley
Street Home, for Christmas decoration.
CLAYDON HOUSE, THE SEAT OF SIR EDMUND VERNEY, WHERE THE
“FLORENCE NIGHTINGALE” ROOMS ARE PRESERVED.
(Photo by Payne, Aylesbury.)
[To face p. 320.