HONG KONG UNIVERSITY OF SCIENCE & TECHNOLOGY ACCT 3210 Advanced Management Accounting Spring 2015 Instructor: Office Hours: Prof. Guochang Zhang LSK Business Building 6024 Phone: 2358-7569; E-mail: acgzhang@ust.hk 2-3pm, Wed., or by appointment T.A.: Ms. Carrie Leung (accarrie@ust.hk; 2358-7580; LSK 6066) Class time and venue: L1- Mo 4:30-5:50pm & Fr 12:00-1:20pm; LSK Building 1014 L2- Mo 1:30-2:50pm & Fr 9:00-10:20am; LSK Building 1014 L3- Mo 3:00-4:20pm & Fr 10:30-11:50am; LSK Building 1014 Course website: http://lmes2.ust.hk Course Description: Accounting information is essential for planning and controlling business operations and for making companies strategic and operating decisions. This course is built on the materials you have learned in Principles of Accounting II (ACCT 2200) to introduce more advanced topics and techniques that are important for managing business organizations. This course puts a greater emphasis on applications of management accounting tools to tackle business problems. Topics covered include decision-making techniques, analysis of cost functions, allocation of common and joint costs, use of cost information in operational and strategic decisions, transfer pricing, and performance measurement. Course Objectives: By the end of this course, you should be able to 1. Understand both the importance of management accounting for companies strategic and operational decisions and the pitfalls of misusing management accounting information and techniques. 2. Solve problems arising in business planning, with the aid of mathematical and statistical tools (such as the decision tree, regression analysis, the learning curve, and linear programming). 3. Evaluate various techniques for control and performance evaluation in a decentralized environment, and provide recommendations for an effective control system. The course will also provide you with opportunities to 4. Gain exposure to more complex (and realistic) business problems through real-life based cases. 5. Demonstrate team-work and leadership skills in solving operational and strategic planning problems. 6. Demonstrate presentation and communication skills through team work, case presentations, and class discussions. Detailed learning objectives are listed in the Appendix below. Course Material: Required textbook. Cost Accounting: A Managerial Emphasis (15 th Ed.), by Charles T. Horngren, Srikant M. Datar, and Madhav Rajan. Pearson Education Inc., 2015. Lecture notes (to be made available on the course webpage) Cases (for group case studies, to be reserved in the library) 1
Teaching Methodology: The course is taught in the form of lecture, in-class exercise and discussion, and group case study (with class presentations). Students are required to attend all classes and participate in class discussions and exercises. Readings and discussion problems for each class are assigned in advance. It is important that students read the assigned chapters and problems beforehand so that class time can be used efficiently. Grading: The course grade is based on the following weighted average: Class attendance / participation 5% In class group exercises 5% Homework assignments 7% Case study and presentation 8% Midterm exam 35% (Monday, March 23, 2015) Final exam 40% 100% Course Policy: 1. Attendance and participation. Students are required to attend all classes and arrive on time. They are strongly encouraged to participate in discussions and other activities during classes. It is the spirit of participation that is valued, and students are not penalized for saying something incorrect. On the other hand, talking among students and other behavior that cause disturbances to the class are not permitted. 2. Homework assignments. Students are required to individually hand in homework assignments before the specified deadlines. The assignments will be checked, but not be graded based on the correctness of answers (the purpose is to encourage independent work and true learning). Assignments should be dropped into a designated assignment box by 5:00 pm on the due date. Solutions to each assignment will be made available after it has been submitted. There are 43 assigned problems, and you need to complete at least 35 of the problems (fully answered) to earn the full mark for this category. The submitted assignments are not returned to students during the semester, so for your own record you may want to keep a copy of your assignment work before submitting it. 3. In-class group exercises. There are approximately 8 group exercises to be completed in class, and students are required to submit answers in groups of 3 to 5 students each. All group exercises are equally weighted. 4. Case studies. Case studies and presentations take place near the end of the semester. Each group will be assigned to one case, and is required to analyze the case and make a short presentation in class. More details will be provided later in the semester. 5. Examinations. The midterm examination is scheduled to be in the evening of Monday, March 23, 2015. All students are required to take the midterm exam at this pre-scheduled time, and there will be no make-up exam for it. Students absent from the midterm exam will receive zero mark for this component, except for highly unusual circumstances that cannot be controlled and avoided by the student---in which case the grade weight on the midterm exam will be loaded to the final examination component. 6. Academic honesty. It is important that students follow university regulations on academic integrity and honesty. Academic dishonesty will not be tolerated and will be dealt with in accordance with university rules, which can be accessed at http://www.ust.hk/vpaao/integrity. 2
Schedule Session 1. Session 2. Sessions 3-5. Session 6. Sessions 7-9. Introduction (Ch.1) Discussion: Breezy Boat Decision-making under uncertainty (Ch.3 Appendix) Discussion: Ajax Industries Homework: 3-32; Jaro Co.; SFK Estimation and applications of cost functions (Ch.10 and Appendix) Discussion: Brenham Hospital; Collins; United Packaging Homework: 10-20; 10-21; 10-23; 10-25; 10-42; 10-43 Learning curve (Ch.10) Discussion: Bromley Homework: 10-35; 10-36 Product mix decisions and theory of constraints (Ch.11 pp. 462-466, and Appendix) Discussion: ABC Ltd.; 11-40 Homework: Info Tech; 11-38; 11-39; KL Manufacturing Homework assignment #1 due date: March 2 [Problems: 3-32; Jaro Co.; SFK; 10-20; 10-21; 10-23; 10-25; 10-42; 10-43; 10-35; 10-36] Sessions 10-11. Strategic income analysis and productivity analysis (Ch.12 and Appendix) Discussion: Alligator T-shirt Homework: 12-19; 12-20; 12-21; 12-40; 12-41 Sessions 12-13. Sales variance analysis and customer profitability analysis (Ch.14) Discussion: 14-29; Sorensen Homework: 14-18; 14-25; 14-30; 14-36; 14-37 Homework assignment #2 due date: March 16 [Problems: Info Tech; 11-38; 11-39; KL Manufacturing; 12-19; 12-20; 12-21; 12-40; 12-41] Sessions 14. Midterm exam (Monday, March 23, 2015) Sessions 15-17. Allocation of support department costs (Ch.14; Ch.15) Discussion: 14-21; Manes Co. Homework: 14-16; 14-32; 15-21; 15-22; 15-27 Session 18. Allocation of joint costs (Ch.16) Discussion: EPOD Homework: 16-20; 16-23; 16-25; 16-31 Sessions 19-20. Transfer pricing (Ch.22) Discussion: Nicosia; 22-32 Homework: 22-20, 22-29; 22-30; 22-36 Homework assignment #3 due date: April 20 [Problems: 14-18; 14-25; 14-30; 14-36; 14-37; 14-16; 14-32; 15-21; 15-22; 15-27; 16-20; 16-23; 16-25; 16-31] 3
Sessions 21-22. Performance measurement, incentives and compensation (Ch.23) Discussion: Paris Co.; Darmen Corp.; 23-31 Homework: 23-17; 23-19; 23-30; 23-34; 23-37 Sessions 23-24. Case presentations and discussions Homework assignment #4 due date: May 4 [Problems: 22-20, 22-29; 22-30; 22-36; 23-17; 23-19; 23-30; 23-34; 23-37] Homework Assignment Due Dates Assignment Due Date Problems 1 2 3 4 March 2 (session 8) March 16 (session 12) April 20 (session 20) May 4 (session 23) 3-32; Jaro Co.; SFK; 10-20; 10-21; 10-23; 10-25; 10-42; 10-43; 10-35; 10-36 Info Tech; 11-38; 11-39; KL Manufacturing; 12-19; 12-20; 12-21; 12-40; 12-41 14-18; 14-25; 14-30; 14-36; 14-37; 14-16; 14-32; 15-21; 15-22; 15-27; 16-20; 16-23; 16-25; 16-31 22-20, 22-29; 22-30; 22-36; 23-17; 23-19; 23-30; 23-34; 23-37 4
Appendix: Learning objectives. After completing the course, you should be able to: 1. Understand how management accountants affect strategic decisions. 2. Understand the set of business functions in the value chain. 3. Understand what professional ethics mean to management accountants. 4. Understand that managers make decisions in an uncertain environment and describe ways to measure uncertainty. 5. Use the five-step decision-making process to make decisions. 6. Describe the five steps to perform quantitative analysis in a decision model. 7. Use decision tables and decision trees to make decisions under uncertainty. 8. Understand how information helps to resolve uncertainty and determine the value of information. 9. Perform CVP analysis for problems that explicitly incorporate uncertainties. 10. Explain how conflicts can arise between the decision model used by a manager and the performance-evaluation model used to evaluate the manager. 11. Explain the two assumptions frequently used in cost-behavior estimation. 12. Describe linear cost function and three common ways in which they behave. 13. Understand various methods of cost estimation. 14. Outline six steps in estimating a cost function using quantitative analysis. 15. Describe three criteria used to evaluate and choose cost drives. 16. Explain and give examples of nonlinear cost functions. 17. Distinguish the cumulative average-time learning model from the incremental unit-time learning model. 18. Be aware of data problems encountered in estimating cost functions. 19. Understand the usefulness of the linear programming (LP) technique for business managers. 20. Formulate business planning problems as LP models that are subject to one or multiple constraints. 21. Solve LP problems by the graphic and the trial-and-error approach. 22. Perform sensitivity analysis in LP problems to aid business decisions. 23. Recognize which of two generic strategies a company is using. 24. Analyze changes in operating income to evaluate strategy. 25. Distinguish engineered costs from discretionary costs. 26. Identify unused capacity and explain how to manage it. 27. Identify four purposes for allocating costs to cost objects. 28. Understand criteria to guide cost-allocation decisions. 29. Discuss decisions faced when collecting costs in indirect-cost pools. 30. Discuss why a company s revenues can differ across customers purchasing the same product. 31. Apply the concept of cost hierarchy to customer costing. 32. Discuss why customer-level costs differ across customers. 33. Understand how an ABC system with a customer focus is important for managing customers. 34. Subdivide the sales-volume variance into the sales-mix variance and the sales-quantity variance. 35. Subdivide the sales-quantity variance into the market-share variance and the market-size variance. 36. Distinguish the single-rate method from the dual-rate method. 37. Understand how the uncertainty users face is affected by the choice between budgeted and actual cost-allocation rates. 38. Allocate support-department costs using the direct method, the step-down method, and the reciprocal method. 39. Allocate common costs using the stand-alone method and the incremental method. 40. Identity the splitoff point in a joint-cost situation. 41. Distinguish joint products from byproducts. 42. Explain why joint costs are allocated to individual products. 43. Allocate joint costs using four methods. 44. Explain why the sales value at splitoff method is preferred when allocating joint costs. 45. Explain why joint costs are irrelevant in a sell-or-process-further decision. 46. Describe the benefits and costs of decentralization. 47. Explain transfer prices and four criteria used to evaluate them. 48. Calculate transfer prices using three methods. 49. Illustrate how market-based transfer prices promote goal congruence in perfectly competitive markets. 50. Understand how to avoid making suboptimal decisions when transfer prices are based on full cost plus a markup. 51. Describe the range over which two divisions negotiate the transfer price when there is unused capacity. 52. Apply a general guideline for determining a minimum transfer price. 53. Incorporate income tax considerations in multinational transfer pricing. 54. Select financial and nonfinancial performance measures to use in a balanced scorecard. 55. Design an accounting-based performance measure. 56. Use segment reporting to evaluate the performance of a profit center. 57. Analyze return on investment (ROI) using the DuPont method. 58. Use the residual-income (RI) measure and understand its advantages. 59. Describe the economic value added (EVA) method. 60. Indicate the difficulties that occur when the performance of divisions operating in different countries is compared. 5