Managerial Accounting

Creating Value in a Dynamic

Business Environment

Chapters Overview
Ch Topics No. of Time - Material
Slides Plan
1 The Changing Role of 26 50 mins PPT/Homework
Managerial Accounting
in a Dynamic Business
Environment
2 Basic Cost Management 42 60 mins PPT/Homework
Concepts
3 Product Costing and 48 60 mins PPT/Homework
Cost Accumulation in a
Batch Production
Environment
4 Process Costing and 37 60 mins PPT/Homework
Hybrid Product-Costing
Systems
5 Activity-Based Costing 33 120 mins PPT/Homework
and Management
Ch Topics No. of Time - Material
Slides Plan
6 Activity Analysis, Cost 42 105 mins PPT/Homework
Behaviour and Cost
Estimation
7 Cost-Volume-Benefit 49 105 mins PPT/Homework
Analysis
8 Variable Costing and the 45 90 mins PPT/Homework
Costs of Quality and
Sustainability
9 Financial Planning and 48 120 mins PPT/Homework
Analysis: The Master
Budget
10 Standard Costing and 52 90 mins PPT/Homework
Analysis of Direct Costs
11 Flexible Budgeting and 35 90 mins PPT/Homework
Analysis of Overhead Costs
Assessment Individual Group

SDL Participation 5%

Class Participation 5%

Homework – 16 x 0.5% 8%

Continuous Assessment 2 5%

Open-ended questions 3 x 4% 12%

Mini-assignment presentation 15%

Final written exam 50%

Total 73% 27%

Princples of Accounting II 4
Date Day AM/ Type of Content(Topic)- Assessment
PM Session C=Chapter
Nov 9 Mon AM “I” 课 1 L1C1C2 Homework 1, 2
L2C2

Nov 9 Mon PM “E” 学 1 Homework 1, 2

Class Q&A
Polling questions
Nov 10 Tues AM “I” 课 2 L3C3 Homework 3,4
L4C4 Open-ended questions – 1

Nov 10 Tues PM “E” 学 2 Homework 3,4

Open-ended questions – 1
Class Q&A
Polling questions
Nov 11 Wed AM “I” 课 3 L5C4C5 Homework 5,6
L6C5 Open-ended questions – 2

Nov 11 Wed PM “E” 学 3 Homework 5,6

Open-ended questions – 2
Class Q&A
Polling questions
Date Day AM/ Type of Content(Topic)- Assessment
PM Session C=Chapter
Nov 12 Thur AM “I” 课 4 L7C6 Homework 7, 8
L8C6C7

Nov 12 Thur PM “E” 学 4 Homework 7, 8

Class Q&A
Polling questions
Nov 13 Fri AM “I” 课 5 L9C7 Homework 9, 10
L10C7C8 Open-ended questions – 3

Nov 13 Fri PM “E” 学 5 Homework 9,10

Open-ended questions – 3
Class Q&A
Polling questions
Nov 14 Sat Self study Revision for Mini-Test

Work on mini-assignment 2
Nov 15 Sun Self study Revision for Mini-Test

Submit mini-assignment 2 draft

for review/checking
Date Day AM/ Type of Content(Topic)- Assessment
PM Session C=Chapter
Nov 16 Mon AM “I” 课 6 L11C8 Homework 11, 12
L12C9

Nov 16 Mon PM “E” 学 6 Homework 11, 12

Class Q&A
Polling questions
Nov 17 Tues AM “I” 课 7 L13C9 Homework 13, 14
L14C10 Mini-test

Nov 17 Tues PM “E” 学 7 Homework 13, 14

Class Q&A
Polling questions
Nov 18 Wed AM “I” 课 8 L15C10C11 Homework 15, 16
L16C11

Nov 18 Wed PM “E” 学 8 Homework 15, 16

Class Q&A
Polling questions
Date Day AM/ Type of Content(Topic)- Assessment
PM Session C=Chapter
Nov 19 Thur PM “E” 学 9 Chapters revision
Students - Q&A
Mini-assignment 2 presentation
Nov 20 Fri PM “E” 学 10 Mini-assignment presentation
1. The Changing Role of Managerial Accounting in
a Dynamic Business Environment
 How Managerial Accounting Adds Value to the Organisation
 Ethical Professional Practice

2. Basic Cost Management Concepts

 Type of Costs
 The different purposes

3. Product Costing and Cost Accumulation in a

Batch Production Environment
 Types of product-costing systems
 Cost allocation
4. Process Costing and Hybrid Product-Costing
Systems
 Job-Order Costing vs Process Costing
 Hybrid Product-Costing Systems
 Equivalent units

5. Activity-Based Costing and Management

 Identify Cost Drivers
 Customer-Profitability Analysis

6. Activity Analysis, Cost Behaviour and Cost

Estimation
 Cost Behaviour
 Cost Estimation
7. Cost-Volume-Benefit Analysis
 Break-even point
 Target Profit
 CVP Analysis

8. Variable Costing and the Costs of Quality and

Sustainability
 Absorption Costing
 Variable Costing

9. Financial Planning and Analysis: The Master

Budget
 Financial Planning
 Budget and Forecasting
10. Standard Costing and Analysis of Direct Costs
 Setting standards
 Cost Variance Analysis

11. Flexible Budgeting and Analysis of Overhead

Costs
 Flexible Overhead Budget
 Overhead Cost Variances
1. The Changing Role of Managerial Accounting in a
Dynamic Business Environment

 suggest some accounting information needs that they feel managers

have in the current business environment.
 how much does my product or service cost?
 How much inventory should I have on hand?
 At what point does my business breakeven?
 How do I put together a budget?
 How do I project cash flows?
 "How can we calculate the cost to produce a product or service?"
 In summary, by the end of the class, students should have a basic
understanding of managerial accounting's purpose and appreciate the
need to study the discipline.
 Professional ethics require high standards of conduct from
management accountants in the areas of competence, confidentiality,
integrity, and credibility.
2. Basic Cost Management Concepts

 expand the way in which costs are defined and viewed.

 functional costs (depreciation, utilities, and commissions) is useful
information to an outside creditor or investor, it is insufficient with
respect to helping internal managers do their jobs effectively.
 Managers must also consider cost behavior, controllability, costs
incurred by smaller segments, and so on.
 additional ways of viewing financial information.
 even if a student does not plan to work in production management,
he or she may well work in accounting, finance, or marketing for a
company that makes a product. Therefore, being conversant in the
language and concepts of cost accounting will be useful.
 Accounting techniques in manufacturing are frequently transferable to
the service sector.
 In summary, Chapter 2 discusses the many ways that costs can be
categorized. Chapter 3 then follows with a discussion of a system to
track product costs and answers the age-old question, “How much
does this cost?
3. Product Costing and Cost Accumulation in a
Batch Production Environment
 Cost systems must be designed to meet a firm's unique needs.
 The two traditional system models, job order and process costing,
give users the ability to build-in various modifications for use in actual
situations.
 Job costing  concept of manufacturing overhead.
 Different terminology, namely:
Estimated = budgeted
Applied = allocated Incurred = actual
 sequence of procedures for overhead application:
1) calculating predetermined overhead rates,
2) using the rates, and adjusting the over- or underapplied amount.
 "Why use an imperfect predetermined overhead rate when I have all
the totally correct, actual data?"
 How and when information becomes available in the real world.
 Journal entries required to handle a sale. Two entries are needed:
one to transfer the cost of units sold from finished goods to cost of
goods sold; another is needed to record revenue.
4. Process Costing and Hybrid Product-Costing
Systems
 Process costing similar objective to job costing: efficient accumulation
of costs and assignment of costs to individual products.
 why it isn't possible to determine per-unit product cost with the
following calculation:
Per-unit cost = Total production cost ÷ Total number of units
 The units are different in size, shape, and other features.
 Although the units are alike, not all units are 100% complete on the
last day of the period. In a sense, therefore, the units are not all
alike. The formula must be modified.
 Discuss the concept of equivalent units. This involves the conversion
of physical units at various stages of completion into units expressed
as "equivalently complete."
 Prepare production reports. putting the report into a business context:
what it measures, how it tracks unit costs, how one department's
report links to that of the next department, and how one month's
report links to that of the next month.
5. Activity-Based Costing and Management

 overview product costing, integrate the managerial aspects of doing

business (e.g., the ramifications of under- and overcosting of goods),
particularly in competitive marketplaces.
 added feature of analysis, software is currently available to take care
of the related number crunching.
 Discussion with a focus on how business has changed in the last ten
years and the impact of various continuous-improvement techniques.
 Discuss the elimination of non-value-added activities, a theme that is
common to both service businesses and manufacturing
organizations.
 Customer profitability analysis, the fact that some customers are
more costly to service than others. A high cost-to-service customer
can easily destroy whatever gross margin is generated on a hard-
earned sale.
6. Activity Analysis, Cost Behaviour and Cost
Estimation
 various cost-estimation methods. The pros and cons of each method
Exercise 6-34 (estimating cost behavior by various methods)
 Problem 6-35 (cost behavior patterns in a variety of settings)
7. Cost-Volume-Benefit Analysis

 CVP analysis, to predict the break-even point or calculate an

appropriate sales price.
 CVP and the sales mix, how to weight the unit contribution margins.
 Why the weighting is necessary rather than just using a simple
average.
CVP problems can be solved many different ways
 contribution-margin approach,
 equation approach,
 contribution margin ratio,
 and so on
Logic and understanding are important; an exact solution match is not.
 Sensitivity analysis is illustrated, basic concept and the ability to
change variables (i.e., dollar amounts).
8. Variable Costing and the Costs of Quality and
Sustainability
 difference between absorption costing and variable costing
 Absorption-costing income statement fluctuates with production
levels.
 a manager is awarded a bonus based on absorption-costing income,
and all the manager does to earn the bonus is step up production and
"hide" fixed manufacturing overhead on the balance sheet.
Even with the same sales level as in the previous period, bottom-line
performance is improved and the bonus is awarded.
Variable costing where income varies with sales.
 Variable costing provides distinct benefits in the area of performance
evaluation by eliminating the impact of inventory changes.
 Problem 8-24
9. Financial Planning and Analysis: The Master
Budget

 switch from accrual-basis accounting on the pro-forma financial

statements to cash-basis accounting on the cash budgets, pay
significant attention to detail in-between.
 Budget preparation whether it is for an employer or on a personal
basis?
 how information flows from one budget to another (e.g., how sales
logically feeds into production, how production logically feeds into direct-
material purchases, and so forth)
cash budget and its importance in pinpointing cash excesses and
deficiencies.
 Discuss the process and behavioral aspects of budgeting.
 Exercise 9-25 (production and direct-materials purchases),
 Exercise 9-27 (budgetary slack),
 Problem 9-33 (budget schedules)
10. Standard Costing and Analysis of Direct Costs

 how standards are set (parties involved and level) to whether

variances should be investigated.
 Direct material/Direct labor Variance calculation
 visualizing what problems may be behind the numerous variances in
a given situation
 variance analysis is a tool used to spot problems and gather
intelligent questions, not to get immediate answers.
 Someone within the organization usually has to assume the role of a
detective to track down the cause of any variances that arise.
 use of financial and nonfinancial measures as well as the balanced
scorecard. The disastrous outcome is highly predictable
 For a business example, a company that focuses solely on
maximization of market share, and how such a strategy can lead to
large customer write-offs and problems with profitability and cash
flows.
 Problem 10-33 (variance analysis).
 Problem 10-40 (setting cost standards).
11. Flexible Budgeting and Analysis of Overhead
Costs
 the construction and use of a flexible budget
 analysis of overhead variances.
 variance computation.
 fixed cost items and variable cost items cannot be analyzed by using
the same model.
 (AH x SVR) calculation that is used for variable overhead cannot be
used for fixed overhead (use allowed Hr at actual activity x SR).
 Problem 11-40 (budgets and performance evaluation).
 Exercise 11-22 (overhead variances).
 Problem 11-39 (overhead calculation and variance interpretation).