UNIVERSITY COLLEGE OF THE CARIBBEAN. Cost & Management Accounting

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1 Cost & Management Accounting Course Title: Cost & Management Accounting Course Code: ACT 203 Credits/duration: 3/2 term Total Hours: 45 Pre-requisites: Financial Accounting Course Description This course will provide students with a foundation in the skills necessary for further accounting studies, office work and for managing their own business. These skills are important for any student planning to major in business in college or to effectively enter into the business world. The course will assist students in developing an appreciation for the role of accounting in managing a successful business. It covers basic Cost and Management accounting concepts and introduces students to techniques which will enable them to analyze the efficiency and profitability of an organization. General Objectives: To expose the participants to current cost and management accounting theory and practice, so that they use accounting data in planning and controlling business activities. The course is intended to provide students with an introduction to cost behavior, variance analysis, break-even analysis, stock control, marginal and absorption and budgeting. Major topics/units to be covered: INTRODUCTION TO COST AND MANAGEMENT ACCOUNTING PLANNING - SYSTEM CONCEPTS COST CLASSIFICATION COST BEHAVIOR WORKING CAPITAL MANAGEMENT PRICING DECISIONS STOCK VALUATION ABSORPTION VS. MARGINAL COSTING JOB, BATCH AND CONTRACT COSTING PROCESS COSTING COST-VOLUME-PROFIT ANALYSIS 2 hours 2 hours 4 hours 4 hours 5 hours 2 hours

2 INTRODUCTION TO STANDARD COSTING AND BASIC VARIANCE ANALYSIS ACCOUNTING FOR OVERHEADS 2 hours INTRODUCTION TO BUDGETING Assessment Type of Assessment Date Percentage Grade Mid-Module Exam 20 ** In Class Assessments 10 Final Project 10 End of Term Exam 60 TOTAL 100 ** Mid Module to be administered between week 7 & Week 8. CLASS OUTLINE Week 1 Introduction to Cost and Management Accounting Definition and Scope Comparison of Management Accounting and Financial Accounting Explain what is managerial accounting Distinguish between managerial accounting and financial accounting Explain how the functions of management are carried out by planning and control decisions Week 1-2 Week 2 PLANNING - SYSTEM CONCEPTS Cost Classification Total product/service Direct and indirect Long -Term Planning Long-Term Strategic Planning How is the Corporate Developed Advantages and Disadvantages of the Corporate Plan Identify the various ways that can be classified Describe how are used

3 Functional Costs Fixed and variable Other cost classifications in planning and controlling operations and in income measurement Explain what is total product/service Distinguish between direct and indirect Distinguish between fixed and variable Explain what is functional Week 2-3 Week 3 Week 4 Cost Behavior Importance of understanding cost behavior Cost behavior and levels of activity Cost behavior patterns Determining the fixed and variable elements of semi-variable WORKING CAPITAL MANAGEMENT Stock Valuation Why stock valuation is problematic FIFO LIFO Weighted average pricing Explain what is functional Explain why it is important to understand cost behavior Discuss how cost behavior is influenced by the level of activity Discuss the main cost behavior patterns Identify semi-variable Determine the fixed and variable elements of semivariable Inventory Management Accounts Receivable Management Cash Management Working Capitalist Analysis Compute the cost of inventory using the First-in, First-out method Compute the cost of inventory using the Last-in, Last-out method Compute the cost of inventory using the weighted Number of days sales in inventory = (Inventory COS) x 365

4 average pricing method Compare and contrast the use of the three inventory methods Compute and interpret the inventory turnover ratio and the number of days sales in inventory Inventory turnover ratio= Cost of sales for the period Average inventory for the period Week 5 PRICING DECISIONS *Establishing the Theoretical Optimal Price *Price Elasticity of Demand *Cost Plus Pricing *Full Cost Pricing *Rate of Return Pricing *Transfer Pricing Week 6 Week 7 Absorption vs. Marginal Costing Absorption Costing Marginal cost and marginal Contribution The principles of marginal Marginal and absorption compared Job, Batch and Contract Costing Job Batch Introduction to contract Profit and losses on contracts Explain what is absorption Explain what is marginal Explain what is contribution Outline the principles of marginal Compare and contrast marginal and absorption Outline the process of job Cost a Job Outline the process of batch Cost a contract Determine whether a profit or a loss has been made on a contract Distinguish between job, batch

5 Week 8 Process Costing The distinguishing features of process Simple process Normal loss and abnormal loss or gain Accounting for scrap Equivalent Units (FIFO Method) and contract. Distinguish between job order and process Explain and illustrate the physical flows and cost flows for a process manufacturer Prepare a cost of production report Prepare journal entries for transactions of a process manufacturer Week 9 Cost-Volume-Profit Analysis C-V-P Analysis Break-even analysis and break-even point Break-even analysis and the C/S ratio Break-even arithmetic The margin of safety Break-even, contribution and profit/volume charts Limitations of break-even analysis Explain break-even analysis Compute the contribution margin, the contribution margin ratio, and the unit contribution margin Explain how the contribution margin, the contribution margin ratio and the unit contribution margin can be used by managers Determine the break-even point and the volume necessary to achieve a target profit Compute the margin of safety Explain how managers use the margin of safety List the assumption underlying the cost-volumeprofit analysis Draw break-even, contribution and profit/volume charts Discuss the limitations of break-even analysis

6 Week 10 Week 11 Week 13 Introduction to Standard Costing and Basic Variance Analysis The uses of standard Setting standards The advantages and disadvantages of standard What is a variance? Material cost Labour cost The reasons for cost Accounting for overheads Overheads Overhead Allocation Overhead Apportionment Overhead Absorption Introduction to budgeting Budgetary planning and control systems The sales budget Production and related budgets Cash budgets Explain the concept of standards Describe the types of standards and how they are established for business Identify the advantages of a standard cost accounting system Explain how standards are used in budgeting Distinguish between tight standards and lax standards and identify which type is more appropriate in a given situation Explain what a variance is Calculate and interpret material price and quantity Calculate and interpret labour rate and time Explain why there are cost Explain what are overheads Describe budgeting State the objectives of budgeting Outline the basic elements of the budget process Identify the major types of budgeting

7 Prepare the basic income statement for a business Prepare balance sheet budgets for a business. Week 13 REVISION Final Project will be given in week 9. This project must be submitted in Week 13. Prescribed Text: Financial & Managerial Accounting 6 th ed. Warren, Reeve and Fess-South Western Publishers Recommended Texts Cost Accounting by Hanson and Mowen South Western Publishers Management Accounting 6 th ed. H. Garrison Irwin Modern Management Accounting by A. Tom Nelson Management Accounting by John Dearden Prentice Hall Cost and Management Accounting by Duncan Williamson- SouthWestern Management Accounting by T. Lucey DP Publications Costing Lucey, T: IMPORTANT NOTE ON PLAGIARISM Plagiarism is a form of intellectual theft. If you fail to acknowledge your sources or make it appear that someone else s work is your own, you are guilty of plagiarism. The scholarly world operates by exchanging information and crediting the sources of that information. If you violate that process, you have committed a crime in the academic community. If you are having difficulty completing a paper on time, or need some additional help, or are unsure of how or where to document a source, please contact your lecturer or go to the librarian for help so you can avoid inadvertently or intentionally plagiarizing a source. You will be charged with plagiarism if you: Copy from published sources without adequate documentation. Intentionally or unintentionally appropriate the ideas, language, key terms, or findings of another without sufficient acknowledgment that such material is not your own and without acknowledging the source. Purchase a pre-written paper (either by mail or electronically). Let someone else write a paper for you.

8 Reproduce someone else s project. Submit as your own someone else s unpublished work, either with or without permission Incorrectly cite or neglect to cite borrowed materials Consequences of Plagiarism If the final work you submit all of it is not yours, it does not matter how you came by it. Charges of plagiarism are brought to the attention of Academic Affairs, which initiates an investigation that may lead to formal charges. The process for the investigation and adjudication of charges may be accessed at the Dean of Students Office. Plagiarism is a serious offense that can result in a variety of sanctions (failure of the course in which the plagiarism occurred and suspension from UCC among them).. Appropriate Uses of Sources A mark of strong academic writing is demonstrated when one appropriately identifies sources in his/her arguments and analyses. This practice is called documentation. Guidelines for how to correctly cite materials used within your writing and assembling the list of works that you cite in your paper are available in style manuals. Information from these style manuals can be accessed in UCC s Library & Information Centre Whenever you draw on another s work, you must specify what you borrowed, whether facts, opinions, or quotations, and where you borrowed them from. Avoiding Plagiarism Contact your lecturer and honestly discuss a strategy for completing an assignment rather than risk humiliation and legal charges. Become thoroughly acquainted both with the various ways in which plagiarism is construed, and with sources of proper documentation. See Gibaldi, Joseph. MLA Style Manual and Guide to Scholarly Publishing. 2 nd. ed, New York: MLA, For further information, contact Academic Affairs or UCC s Library and Information Centre ( )