Managerial Accounting

1

Managerial Accounting and the Business Environment

• What Is Managerial Accounting?
• Managerial Accountants in an Organization
• Ethics in Managerial Accounting
• Changing Role of Managerial Accounting

• Discuss ethical standards in an organization and assess their role in the field of managerial accounting.
• Analyze how the changing business environment has led to innovations in managerial accounting.
• Compare and contrast between managerial accounting and financial accounting and assess how managerial accounting affects various management functions.
• Outline the roles and responsibilities of a managerial accountant and describe the fundamental tools and practices used in managerial accounting.

2

Concepts of

Cost Management Accounting for Custom Operations

• Cost Concepts: An Overview
• General Cost Classifications
• Cost Classifications on Financial Statements
• Cost Classifications for Different Purposes

• Define cost and distinguish between product costs and period costs.
• Analyze the fundamental manufacturing cost categories and diagram the flow of product costs in a manufacturing operation.
• Analyze the cost components on financial statements and prepare an income statement and a schedule of cost of goods manufactured for a manufacturer.
• Compare direct and indirect costs and distinguish between variable and fixed costs.

3

Product Costing and Cost Accumulation in the Production Environment

• Product and Service Costing
• Flow of Costs in Manufacturing Firms
• Types of Product-Costing Systems
• Job-Order Cost Accumulation
• Overhead Application
• Extended Illustration of Job-Order Costing: Calculations and Journal Entries
• Financial Schedules
• Further Aspects of Overhead Application

• Discuss the role of product and service costing in manufactur­ing and nonmanufactur­ing firms.
• Diagram and explain the flow of costs through the manufacturing accounts used in product costing.
• Distinguish between job-order costing and process costing.
• Compute a predetermined overhead rate, and explain its use in job-order costing for job-shop and batch-production environments.
• Prepare journal entries to record the costs of direct material, direct labor, and manufacturing overhead in a job-order costing system.
• Prepare a schedule of cost of goods manufactured, a schedule of cost of goods sold, and an income statement for a manufac­turer.
• Describe the two-stage allocation process used to compute departmental overhead rates.
• Describe the process of project costing used in service industry firms and nonprofit organizations.

4

Product and Hybrid Product Costing Systems

• Comparison of Job-Order Costing and Process Costing
• Purpose of product-costing systems
• Differences in manufacturing environments
• Differences in cost accumulation
• Similarities in cost flows
• Equivalent Units in Process-Costing Systems
• Stage of completion of the work-in-process ending inventory
• Equivalent-unit calculations
• Illustration of Reporting in a Process-Cost System
• The departmental production report
• Weighted-average method
• Steps in preparing the departmental production report
• Other Issues in Process Costing
• Actual versus normal costing
• Using a cost driver other than direct labor
• A Hybrid Product-Costing System: Operation Costing for Batch Manufacturing

• List and explain the similarities and important differences between job-order and process costing.
• Prepare journal entries to record the flow of costs in a process-costing system with sequential production departments.
• Prepare a table of equivalent units under weighted-average process costing.
• Compute the cost per equivalent unit under the weighted-average method of process costing.
• Analyze the total production costs for a department under the weighted-average method of process costing.
• Prepare a departmental production report under weighted-average process costing.
• Describe how an operation costing system accumulates and assigns the costs of direct-material and conversion activity in a batch manufacturing process.

5

Activity Based Costing and Management

• Traditional Cost Management
• ABC Management
• Activity-Based Costing and Traditional Costing
• Activity-Based Costing: Key Issues

• Describe traditional volume-based costing system and compute product costs under a traditional volume-based costing system.
• Describe activity-based costing system and compute product costs under an activity-based costing system.
• Analyze how cost drivers and data collection help in addressing issues such as need for a new costing system in activity-based costing.

6

Analysis of Activity, Cost Behavior and Cost Estimation

• Cost Behavior Patterns
• Analyzing Mixed Costs
• Applying Cost Behavior

• Interpret cost behavior patterns using a scattergraph plot.
• Analyze a mixed cost using high-low method and least squares regression method.
• Estimate costs after studying cost behavior patterns.
• Assess the need for contribution approach to income statements and prepare an income statement using the contribution format.

7

Cost-Volume-Profit (CVP) Analysis

• Approaches to CVP Analysis
• Cost-Volume-Profit (CVP) Relationship
• CVP Analysis and Cost Management
• CVP Analysis and Cost Structure

• Graph CVP relationships.
• Compute the break-even point using the contribution-margin and equation approach.
• Apply CVP analysis to demonstrate the effect of changes in variable cost, fixed cost, and sales volume on profit.
• Analyze the impact of cost structure on profit stability and compute the degree of operating leverage at a specific sales level.

8

Absorption and Variable Costing

• Product Cost and Fixed Manufacturing Overhead
• Absorption-costing income statements
• Variable-costing income statements
• Reconciliation of Absorption- and Variable-Costing Income
• No change in inventory levels
• Increase in inventory levels
• Decrease in inventory levels
• Overall Evaluation of Absorption and Variable Costing
• Throughput Costing

• Explain the accounting treatment of fixed manufacturing overhead under absorption and variable costing.
• Prepare an income statement under absorption costing.
• Prepare an income statement under variable costing.
• Reconcile reported income under absorption and variable costing.
• Explain the implications of absorption and variable costing for cost-volume-profit analysis.
• Evaluate absorption and variable costing.
• Explain the rationale behind throughput costing.
• Prepare an income statement under throughput costing.

9

Profit Planning and Activity-Based Budgeting

• Framework of Budgeting
• Budgets as a Planning Tool
• Preparing the Master Budget
• Activity-Based Budgeting

• Create a diagram showing the steps taken to create a budget and describe the different types of budgets.
• Prepare different types of budgets and budget schedules for the master budget.
• Demonstrate how activity-based budgeting operates using an example and assess the need for an activity-based budgeting system.
• Describe the elements of a budgeting framework and assess the importance of budgeting in an organization.

10

Operational Performance Measures: Standard Costing and Balanced Scorecard

• Setting Performance Measures
• Cost Variance Analysis
• Using Standard Costs for Evaluation
• The Balanced Scorecard

• Describe the various ways to set performance standards and assess the role of performance standards in cost management.
• Assess the significance of cost variances in setting standards.
• Compute the material price and quantity variances and the labor rate and efficiency variances and prepare journal entries to record cost variances.
• Analyze the role of a balanced scorecard in developing strategies.

11

Flexible Budgeting: Managing Overhead and Support Activity Costs

• Flexible Budgets: An Overview
• Overhead Variance
• Overhead Analysis
• Activity-Based Flexible Budgets

• Create a diagram showing the components of a flexible budget and assess the importance of flexible budgeting in an organization.
• Diagram variable overhead spending and efficiency variances using graphs and compute variable overhead variances.
• Interpret variable overhead variances and prepare an overhead cost performance report and a flexible overhead budget.
• Compare and contrast activity-based flexible budgeting and traditional flexible budgeting.

12

Responsibility Accounting: Quality and Environmental Cost Control

• Responsibility Accounting: An Overview
• Segment Reporting
• Decentralization
• Segment Performance Evaluation

• Prepare performance reports for various responsibility centers and a segmented income statement.
• Define decentralization and discuss its advantages and disadvantages.
• Use the return on investment and residual income approaches to measure an investment center's performance.
• Explain how responsibility accounting can achieve set goals and list the responsibility centers.

13

Investment Centers and Transfer Pricing

• Capital Budgeting Decisions: An Overview
• Screening Decisions: Net Present Value Method
• Screening Decisions: Internal Rate of Return Method
• Ranking Decisions
• Screening Decisions: Economic Value Added (EVA)

• Describe the key decision areas in capital budgeting and explain the concept of time value of money.
• Explain the net present value method of making capital budgeting decisions and use it to evaluate an investment proposal for acceptability.
• Explain the internal rate of return method of making capital budgeting decisions and use it to evaluate an investment proposal for acceptability.
• Grade investment proposals using the profitability index.

14

Allocation of Support and Joint Costs

• Service Department Cost Allocation: A General Overview
• Methods of Service Department Cost Allocation
• Direct method
• Step-down method
• Reciprocal-services method (appendix)
• Dual-Cost Allocation
• Today's Advanced Manufacturing Environment
• Joint Product Cost Allocation

• Allocate service department costs using the direct method and the step-down method.
• Use the dual approach to service department cost allocation.
• Explain the difference between two-stage cost allocation with departmental overhead rates and activity-based costing (ABC).
• Allocate joint costs among joint products using each of the following techniques: physical-units method, relative-sales-value method, and net-realizable-value method.
• Describe the purposes for which joint cost allocation is useful and those for which it is not.
• Allocate service department costs using the reciprocal-services method.

15

Decision Making: Relevant Costs and Benefits

• The Decision-Making Model
• Identifying Relevant Costs and Benefits
• Aspects of Decision Making
• Activity-Based Costing and Relevant Costs

• Determine the criteria that decide the relevance of a cost or a benefit and explain the concepts of sunk costs, opportunity costs, and unit costs.
• Prepare analyses of various decision categories using relevant costs and benefits.
• Assess the importance of activity-based costing in relevant-cost analysis.
• Demonstrate the steps in the process of decision making using an example and distinguish between quantitative and qualitative analyses in decision making.

16

Review

• Review

• Complete a review of key content covered in this course.