Author: Robert Holt PhD, CPA

Abstract: The purpose of this course is to give the accounting student a thorough understanding of the principles of managerial accounting, particularly of various costing techniques.

Audience: Undergraduate business majors

Chapter 1 introduces the concept of managerial accounting and contrasts it with financial accounting. The role of the management accountant is reviewed. Flexible budgets are discussed as well as fixed, variable, semi-fixed and semi-variable costs.

Chapter 2 describes job order costing. Direct materials, direct labor and overhead are discussed with a particular emphasis on applied overhead. In addition, the income statement for a manufacturing firm is reviewed as well as documentation for a job order costing system.

Chapter 3 discusses process costing and contrasts it with the job order costing system. Equivalent units for direct labor, direct materials and overhead are reviewed as well as cost per equivalent unit.

Chapter 4 covers cost volume profit relationships. Breakeven analysis and the contribution margin concepts are discussed. Sales mix breakeven as well as operating leverage is reviewed.

Chapter 5 covers variable costing and contrasts it with absorption costing. Income statements using variable costing and absorption costing are reviewed. The impact of production levels on variable costing and absorption costing is discussed with a particular emphasis on the cost of inventory.

Chapter 6 covers budgeting. The chapter goes through the budgeting process beginning with the sales budget, the production budget, the direct materials and the direct labor budgets, the overhead budget, the sales and administrative expenses budget and the budgeted income statement. The chapter ends with a discussion of the budgeted balance sheet.

Chapter 7 covers standards and variances. Calculations for direct materials variances, the direct labor variances and overhead variances are discussed.

Chapter 8 covers activity-based costing. Various costing activities and cost drivers are discussed. Using activity-based costing rates, calculations are made for overhead. The fine-tuning associated with activity-based costing is discussed in detail.

Chapter 9 covers costing for short-term decisions. Concepts such as relevant cost, discontinuing a product, outsourcing, special orders, sale, or process further and pricing are reviewed. Pricing includes cost plus pricing, full cost, product cost, variable cost, and target pricing.

Chapter 10 covers performance measurement. Topics covered include decentralization of responsibility accounting. Responsibility accounting encompasses cost centers, revenue centers, profit centers and investment centers. Transfer pricing, the balanced scorecard and total quality management are reviewed.

Chapter 11 covers capital budgeting. Time value of money is introduced followed by concepts such as incremental cash flows, relevant costs, useful life, residual cash flows and the impact of taxes on the capital budgeting decision. Present value methods of ranking alternatives are covered.