This course covers the managerial use of accounting, financial, and operating data for planning, control, and decision making. The course is designed for managers and entrepreneurs who need hands-on knowledge and tools in processing, developing, and analyzing financial, cost, and business data for managerial use. Topics include strategic cost management, cost analysis, break-even and contribution analysis, cost behavior analysis, activity-based costing, responsibility accounting and corporate balanced scorecard, budget for profit planning, short-term decisions, and capital budgeting.
Upon successful completion of this course, participants will be able to:
- Define management accounting.
- Distinguish between management accounting and its related fields such as cost accounting and financial accounting.
- Identify the three broad purposes for which the manager needs cost information.
- Identify the role of the controller, the treasurer, and the chief financial officer (CFO).
- Cite the role of the Cost Accounting Standards Board (CASB).
- Identify some new developments that took place in the cost/management accounting discipline over the last two decades.
- List three popular certificates that recognize the expertise in the fields of cost/managerial accounting and internal auditing - the Certified Managerial Accountant (CMA), the Certified in Financial Management (CFM), and the Certified Internal Auditor (CIA).
- Identify and cite examples of each of the basic cost elements involved in the manufacture of the product.
- Define various cost concepts.
- Distinguish between variable costs and fixed costs and explain the difference in their behavior.
- Differentiate between the financial statements of a manufacturer and those of a merchandising firm.
- Differentiate between the traditional income statement and the contribution income statement and their uses.
- Define contribution margin.
- Define job order costing and process costing.
- List the components of a job cost sheet.
- Identify how to prepare journal entries for a job order cost system.
- Identify how to develop a predetermined overhead rate.
- Identify how to dispose of over-applied or under-applied overhead.
- Cite the problems associated with traditional overhead costing methods.
- Cite how activity-based costing (ABC) would enhance product costing accuracy.
- Identify the four-step procedure involved in activity-based costing.
- Classify different cost drivers with different cost pools.
- Define activity-based management (ABM).
- List and define various contribution margin concepts.
- Compute the sales necessary to break even or to achieve a target income.
- Identify how to prepare break-even and profit-volume charts.
- Identify how to perform 'what-if' analysis using the contribution approach.
- Define margin of safety.
- Identify the impact of a change in sales mix on profitability.
- Define and cite examples of variable costs, fixed costs, and mixed costs.
- Identify four methods of estimating cost functions: engineering analysis, account analysis, high-low method, and least-squares regression method.
- List the advantages and disadvantages of the high-low method for developing a cost-volume formula.
- Distinguish between committed and discretionary fixed costs.
- Identify how to develop a formula using the high-low method.
- List the advantages and disadvantages of the least-squares method.
- Identify how to develop a cost-volume formula using the least-squares method.
- Identify various regression statistics such as the coefficient of determination and t-value.
- State the need for multiple regression analysis.
- Define budgeting.
- Cite important aspects of master budget interrelationships.
- Identify how to prepare sales, production, cost, and cash budgets.
- Identify how to develop a pro forma balance sheet and pro forma income statement.
- State how budgets aid in planning and control and how a computer-based financial modeling approach may be used in the planning process.
- Distinguish between traditional budgeting and zero base budgeting (ZBB).
- Define responsibility accounting and state how important it is for managerial control.
- Distinguish between three types of responsibility centers and see how they are evaluated.
- Calculate different types of variances for manufacturing costs--direct materials, direct labor, and manufacturing overhead.
- Prepare a flexible budget and explain its advantage over the static budget format.
- Calculate and properly interpret the fixed overhead spending and volume variances.
- Distinguish between the two-way, three-way, and four-way variance analysis for factory overhead.
- Compute return on investment (ROI) by means of the Du Pont formula and state how changes in sales, expenses, and assets affect the investment center's performance.
- Calculate the residual income (RI) and explain how it differs from ROI in measuring divisional performance.
- Identify how ROI and RI measures affect the division's investment decision.
- Cite the basic features of the Corporate Balanced Scorecard.
- Identify how to establish the right transfer price.
- List the strengths and weaknesses of various transfer prices between segments of an organization.
- Identify the costs that are relevant for a particular decision.
- Identify how to decide if an order should be accepted at below the normal selling price.
- Determine the bid price on a contract.
- Identify how to determine whether to drop or keep a product line or service.
- State why the contribution margin per unit of limited resource is the deciding factor in product mix decisions with limited resources (such as warehouse or display space).
- List and describe the types and special features of capital budgeting decisions.
- Define the time value of money concept.
- List five capital budgeting techniques.
- Identify how to select the best mix of projects with a limited capital spending budget.
- State how income tax factors affect investment decisions.
- Calculate after-tax cash flows, initial outlay, differential cash flows, and terminal cash flow.
- List the types of depreciation methods.
- Identify the effect of Modified Accelerated Cost Recovery System (MACRS) on capital budgeting decisions.
Table of Contents
Chapter 1 – Introduction to Management Accounting
Financial Accounting vs. Management Accounting
The Work of Management
Cost Accounting vs. Management Accounting
The Organizational Aspect of Management Function
Cost Accounting Standards Board
Managerial Accounting in the New Production Environment
Total Quality Management and Quality Costs
Continuous Improvement (CI) and Benchmarking
Business Process Reengineering (BPR)
Corporate Balanced Scorecard
Theory of Constraints (TOC) and Bottlenecks Management
The Certified Management Accountant (CMA)
The Certified Internal Auditor (CIA)
Chapter 1 – Review Questions
Chapter 2 – Cost Classifications and Profit Concepts
Costs by Management Function
Product Costs and Period Costs
Direct Costs and Indirect Costs
You Should Remember
Variable Costs, Fixed Costs, and Mixed Costs
Unit Costs and Total Costs
Costs for Planning, Control, and Decision Making
Merchandising vs. Manufacturing Organizations
Income Statements and Balance Sheets-Manufacturer
The Contribution Income Statement
Chapter 2 – Review Questions
Chapter 3 – Accumulation of Costs-Job Order Costing
Job Order Costing and Process Costing Compared
Job Order Costing
Job Cost Records
Factory Overhead Application
Predetermined Factory Overhead Rate
Disposition of Under- and Over-Applied Overhead
Plant-wide vs. Departmental Overhead Rates
Chapter 3 – Review Questions
Chapter 4 – Activity-Based Costing and Activity-Based Management
Composition of Product Cost
Overhead Costing: A Single-Product Situation
Overhead Costing: A Multiple-Product Situation
Plant-Wide Overhead Rate
Plant-wide Rate vs. Departmental Rates
Problems with Costing Accuracy
Why Volume-Related Cost Drivers Fail
Activity-Based Product Costing
Comparison of Product Costs
The Choice of Cost Drivers
Using Activity-Based Costing To Make Marketing Decisions
Process Value Analysis
Understanding What Causes Costs
Value-Added and Nonvalue-Added Activities
Activity Drivers and Categories
The Value Chain of the Business Functions
Strategic Cost Analysis
Chapter 4 – Review Questions
Chapter 5 – Break-Even and Cost-Volume-Profit Analysis
Questions Answered by CVP Analysis
Contribution Margin (CM)
Graphical Approach in a Spreadsheet Format
Determination of Target Income Volume
Impact of Income Taxes
Margin of Safety
Some Applications of CVP Analysis and What-If Analysis
Sales Mix Analysis
Assumptions Underlying Break-Even and CVP Analysis
Chapter 5 – Review Questions
Chapter 6 – Analysis of Cost Behavior and Cost Estimation
A Further Look at Costs by Behavior
Types of Fixed Costs—Committed or Discretionary
Analysis of Mixed (Semi-variable) Costs
The High-Low Method
Correlation Coefficient (R) and Coefficient of Determination (R2)
Use of a Spreadsheet Program for Regression
Using Regression on Excel
Excel Regression Output
Chapter 6 – Review Questions
Chapter 7 – Budgeting for Profit Planning and Financial Modeling
Types of Budgets
The Sales Budget
Monthly Cash Collections from Customers
The Production Budget
Inventory Purchases—Merchandising Firm
The Direct Material Budget
The Direct Labor Budget
The Factory Overhead Budget
The Ending Finished Goods Inventory Budget
The Cash Budget
The Budgeted Income Statement
The Budgeted Balance Sheet
Chapter 7 – Review Questions
Chapter 8 – Responsibility Accounting and Cost Control through Standard Costs
Responsibility Accounting and Responsibility Center
Standard Costs and Variance Analysis
Variable Overhead Variances
Flexible Budgets and Performance Reports
Fixed Overhead Variances
Methods of Variance Analysis for Factory Overhead
Nonfinancial Performance Measures
Chapter 8 – Review Questions
Chapter 9 – Performance Evaluation, Transfer Pricing and Decentralization
Rate of Return on Investment (ROI)
The Breakdown of ROI - Du Pont Formula
ROI and Profit Planning
Residual Income (RI)
Residual Income and Economic Value Added
Investment Decisions under ROI and RI
Corporate Balanced Scorecard
Cost-Based Price—Variable or Full Cost
These transfer pricing strategies are summarized in Figure 3.
Chapter 9 – Review Questions
Chapter 10 – Relevant Costs and Short-Term Decisions
Relevant Costs Defined
Pricing a Special Order
Outsourcing: The Make-or-Buy Decision
The Sell-or-Process-Further Decision
Keeping or Dropping a Product Line
Product Mix Decisions in the Presence of Limited Resources
Theory of Constraints
Chapter 10 – Review Questions
Chapter 11 – Long-Term Investment and Capital Budgeting Decisions
What Are the Types of Investment Projects?
What Are the Features of Investment Projects?
Understanding the Concept of Time Value of Money
How Do You Calculate Future Values—How Money Grows?
Future Value of an Annuity
What Is Present Value—How Much Money Is Worth Now?
Present Value of an Annuity
Use of Financial Calculators and Spreadsheet Programs
How Do You Measure Investment Worth?
Accounting Rate of Return
Internal Rate of Return
Net Present Value
Can a Computer Help?
Summary of Decision Rules Using Both IRR and NPV Methods
How to Select the Best Mix of Projects with a Limited Budget
Chapter 11 Review Questions
Chapter 12 – A Further Look at Capital Budgeting
How Do Income Taxes Affect Investment Decisions?
The Long and Short of After-Tax Cash Flows
Initial Investment—Incremental Investment
Tax Effects of Disposal
Differential Flows over the Project's Life
Terminal Cash Flow
Types of Depreciation Methods
Sum-of-the-Years'-Digits (SYD) Method
Double-Declining-Balance (DDB) Method
Units of Production Method
Which Method to Use
How Does MACRS Affect Investment Decisions?
Chapter 12 Review Questions
Review Question Answers and Rationales
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