BACHELOR S DEGREE IN BUSINESS ADMINISTRATION

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1 School of Economics and Business BACHELOR S DEGREE IN BUSINESS ADMINISTRATION Subject Module Character Credits 6 Management Accounting Cross Sectional Formation Compulsory Code Area Attendance 3 Non- Attendance Year Second Semester 4 Accounting for internal users 3 Professor Elena Urquía Javier Pool Department DEPARTMENT OF FINANCIAL ECONOMIC AND ACCOUNTING II Coordinator: Clara Muñoz eurquiag@ccee.ucm.es SYNOPSIS BRIEF DESCRIPTOR Firm s value chain analysis, basic cost calculation, inventory valuation and profit measurement. Cost analysis and decision making. PREVIOUS KNOWLEDGE REQUIRED Basic concepts of Financial Accounting EDUCATIONAL OBJECTIVES 1

2 OBJECTIVES (Learning outcomes) Students have to learn the main process of cost calculation in order to make analytical decisions. COMPETENCES General: CG1, CG2, CG3 Cross-Sectional: CT1, CT4, CT5 Specific: CE3, CE4 CONTENTS (Syllabus) I. BASIC CONCEPTS. 1. Management Accounting: concept, evolution, study focus. Objectives and users. Basic terminology. Similarities and differences with Financial Accounting. 2. Basic cost concepts. Basic magnitudes. Cost subjectivity. The accounting cost process: costs-assets-results. Difference between expense, cost and payment. II. BASIC COST CALCULATION, INVENTORY VALUATION AND PROFIT MEASUREMENT 3. Cost accounting process: Value chain analysis, cost identification, accrual, cost classification and assignment. Resource driver and cost driver definition. The overhead costs complexity. 4. Cost accumulation basic model. Company s organizational structure. Cost assignment with Full Cost Methodology. Analytical income statement: concept and structure. Work in progress and work in process manufacturing and valuation. The equivalent manufacturing concept. III. COST CALCULATION PROCESS ANALYSIS 5. Primary sources data. 6. Cost identification and assignment in responsibility centres. Value chain analysis. Company s organizational analysis and cost centres. Auxiliary centres. 7. Activity Based Costing (ABC) model. Cost drivers in the ABC model. Stages in the ABC model for cost assignment. Benefits and limitations. Activity Based Management. IV. COST ANALYSIS AND DECISION MAKING 8. Activity and capacity as basic concepts for management accounting. Cost behaviour and cost variations. Idle capacity and its impact in the cost and income calculation. Contributions to management accounting. 2

3 9. Variable Costing model as a cost assignment model and as a decision making device in the short term. Basic concepts: variable costs and fixed costs. Cost accumulation and Income statement structure. Break-even point analysis. Other utilities of the model: prices for the products, offering products or services at a low price, accepting or rejecting special orders. V. PLANNING, CONTROL AND PERFORMANCE MEASUREMENT 10. Planning, control and performance measurement. The budgetary cycle. Drawing up a budget. VI. STRATEGIC MANAGEMENT 11. Strategic Management Accounting concept: The Balanced Scorecard TEACHING ACTIVITIES Lectures Total of credits 18% Practical classes Total of credits 22% Other activities Total of credits 60% Includes individual or group tutorials 5%, Assessment activities 5%, Individual or group projects 20%, Study hours 30% ASSESSMENT Exams Percentage of the final mark 60% Other activities One interim exam and exercises Other activities Percentage of the final mark Percentage of the final mark Seminars (oral s, coursework in teams..) ASSESSMENT CRITERIA 20% 20% 80% of class assistance and a minimum mark of 4 out of 10 in the final exam are required in order to be assessed. During the first month and a half period students have the right to choose not to be evaluated. After that period of time, every student will be subject to final evaluation. In any case, if the student fails to pass in February/June and he/she does not attend to the extraordinary exam, he/she will be graded with a NP (not evaluated). 3

4 CHRONOGRAM Standard week Lesson I. BASIC CONCEPTS. Classroom work Work outside classroom 1st, 2 nd 1. Management Accounting: concept, evolution, study focus. Objectives and users. Basic terminology. Similarities and differences with Financial Accounting. 2. Basic cost concepts. Basic magnitudes. Cost subjectivity. The accounting cost process: costs-assets-results. Difference between expense and cost. Presentation of the subject with Power Point support. Class Obtaining study materials Presentation of the Virtual Campus II. BASIC COST CALCULATION, INVENTORY VALUATION AND PROFIT MEASUREMENT 3 rd, 4th 3. Cost accounting process: Value chain analysis, cost identification, accrual classification and assignment. Activity as cost driver. The overhead costs complexity. 4. Cost accumulation basic model: function analysis. Main functions of a company. Cost assignment with Full Cost Methodology. Analytical income statement: concept and structure. Work in Progress and work in process manufacturing and valuation. The equivalent manufacturing concept. Seminar 1: Budgeting process handbook. CV downloads and sending exercises through it. 5 th- 8 th III.COST CALCULATION PROCESS ANALYSIS 5. Primary sources data. 6. Cost identification and assignment in responsibility centres. Value chain analysis. Company s organizational analysis and cost centres. Auxiliary centres. 9. Activity Based Costing (ABC) model. Cost drivers in the ABC model. Stages in the ABC model for cost assignment. Benefits and limitations. Activity Based Management. Short Exam Seminar 2: Budgeting process handbook. CV downloads and sending exercises and seminars through it. 9 th- 14 th IV. COST ANALYSIS AND DECISION MAKING 7. Activity and capacity as basic concepts for management accounting. Cost behaviour and cost variations. Idle capacity and its impact in the cost and income calculation. Contributions to management accounting. 8. Direct Cost model as a cost assignment model and as a decision making device in the short term. Basic concepts: variable costs and fixed costs. Cost accumulation and Income statement structure. Break-even point analysis. Other utilities of the model: prices for the products, offering products or services handbook Case study and Excel 4

5 at a low price, accepting or rejecting special orders. Seminar 3 & 4: Budgeting process V. PLANNING, CONTROL AND PERFORMANCE MEASUREMENT 10. Planning, control and performance measurement. The budgetary cycle. Drawing up a budget. VI. STRATEGIC MANAGEMENT 11. Strategic Management Accounting concept and devices: The Balanced Scorecard discussion discussion handbook. CV downloads and sending exercises 5

6 RESOURCES BASIC BIBLIOGRAPHY URQUIA, E.; MUÑOZ, C.; CAMACHO, M.M.; CANO,E.; CAÑIZARES, M.; CHAMIZO, J.; LORAIN, M.A.; PÉREZ, R. and SOUSA, S. (2011): Accounting for Creating Value in Dynamic International Environments. EDITORIAL UCM. DRURY, C. (2007): Cost and Management Accounting. 7 th Edition. McGraw Hill COMPLEMENTARY BIBLIOGRAPHY ATRIL, P. and MCLANEY, E. (2008): Financial Accounting for Decision Makers. Fifth Edition.. Prentice Hall. Financial Times. OTHER RESOURCES CAMACHO, MM., PÉREZ, R., RIVERO, M.J., URQUIA, E. and ZORNOZA,J. (2010) Business Experiments: Learning Financial and Managerial Accounting PIMCD nº158 (UCM) 6