MANAGERIAL ACCOUNTING

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1 MANAGERIAL ACCOUNTING PROGRAM COURSE DESCRIPTION AND GOALS The goal of this managerial accounting course is to measure the cost of designing, developing, producing (or purchasing), selling, distributing, and servicing particular products or services. The students must understand the behavior of the resources used in the production process and how they are classified (expenses and costs). We will learn about cost allocation and criteria used and we will also understand the total cost of a product or service- used for various purposes, which include product costing, planning and control, and decision making. Students, as future managers and decision makers, will understand at the end of this course how the resources must be used and allocated, and the implications of the decisions made. It is necessary to interpret cost accounting system outputs; to transform them from data to information and knowledge. Without this understanding, cost accounting data is often mis-interpreted and/or misapplied leading to erroneous decision making. SESSION 1 INTRODUCTION TO MANAGEMENT AND COST ACCOUNTING The need for managerial accounting (definition and differences with financial accounting) Activities and chain value Strategy and company s goals B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 1) SESSION 2 Cost Drivers and Cost Management P.C.: Students must choose an example of a product /service, develop a chain value for the company and allocate the resources used in each of the activities carried out (by groups) B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 2) 1

2 SESSION 3 Basic concepts a) Direct and indirect costs b) Fixed and variable costs c) Relevant and not relevant costs d) Standard and historical Costs e) Total and unit costs P.C.: Students must list the resources used for this MBA to be given and classified them : expenses and costs; direct & indirect costs and variable and fixed costs B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 2) Other: Slides provided by profesor SESSION 4 Direct costs Direct Material and Direct Labour (Definition & Examples) Level Capacity Concepts Downward demand spiral. P.C.: The Terminus Hotel (B) (CG1-130-B-I) P.C.: Real Estate Management Company (provided by professor in the previous session) SESSION 5 Indirect costs Definition and criteria VBC Cost System Allocation of indirect costs to cost object P.C.: Gimeno Chemist (provided in the previous session) SESSION 6 ABC COST SYSTEMS Activity-Based-Costing (ABC); Cost hierarchies; Traditional vs ABC approach to designing a cost system. P.C.: ABC Ice Creams (provided in the previous session) 2

3 SESSION 7 ABC COST SYSTEMS ( MARKETING ACTIVITIES / CUSTOMERS / SERVICES) Several considerations for ABC Cost Systems (Red Wines Example) Activity-Based-Costing (ABC) for Marketing Activities Activity-Based-Costing (ABC) for Customers (with classiffication of activities) Activity-Based-Costing (ABC) for Services. Analysis ABC Products vs. ABC Services P.C.: INTERHOUSE (provided by professor in the prevouis session) SESSION 8 ABC COST SYSTEM Implementation Implementation of ABC COST SYSTEMS : steps Tips for the implementation P.C.: Benidorm Hotel (Provided by professor in the previous session) SESSION 9 FIXED AN VARIABLE COSTS Cost-Volume-Profit (CVP) assumptions; The breakeven point (BEP); The PV graph; Sensitivity analysis and uncertainty; Cost planning and CVP; Effects of sales mix on profit; Contribution margin and gross margin. B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 3) Other: P.C.: Business School Breakeven Exercise (provided by professor in the previous session) SESSION 10 MEASURING RELEVANT COSTS AND REVENUES FOR DECISION-MAKING Information and the decision process. The meaning of relevance; Special orders; Make or buy decisions: Insourcing vs. outsourcing; Add or drop a product, product line or service; B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 11) P.C.: Several Exercises (provided by professor in the previous session) During this week, students will complete a QUIZ 3

4 SESSION 11 TARGET COSTING Pricing of products and services; Target costing and target pricing; Value engineering. B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 12) P.C.: Nissan Motor Co. Ltd.: Target Costing System ( PDF-ENG) SESSION 12 JOB COSTING The building block concept of costing systems; Job costing and process costing. Purpose of cost allocations; Cost-benefit issues and other contextual factors; Allocating costs from one department to another. B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 4) P.C.: REAL ESTATE MANAGEMENT COMPANY ( PART B) (provided in the previous session) SESSION 13 STANDARD COSTS Definition of standard costs and budgeting process Variances: Definition and classification Price and efficiency variances B.C.: Cost Accounting: A Managerial Emphasis, 14th Edition (2011) (Chapter 7) P.C.: STANDARD CANDLES (provided by professor in the previous session) SESSION 14 Students will send ( by groups) an example of a product / service they chose showing that they have understood all the concepts discussed during the course They must: 1. List the resources needed for the company s activity 2. Classified them : expenses / costs indirect / direct relevant / not relevant 3. Show in a simple example (numeric if it is possible) an indirect cost allocation. They will use a VBC or an ABC Cost system they will justify why 4. Show an example of the breakeven concepts (numerical if possible) 5. Show an example of the relevant / non relevant cost concepts (numerical if possible) 6. Show an example of the standard cost concepts (numerical if possible) 7. Any other concept discussed during the course considered by them We will be discussing these analysis in the forum during the week 4

5 EVALUATION METHOD Criteria Score % Class Participation 30% Workgroups 20% Final Exam 25% Intermediate tests 25% 5