Week 1 | Managerial Accounting: Manufacturing Costs & Job order costing
Welcome to this course on management accounting. This course is designed to provide you with the tools to become a more effective manager.
This first week in Session 1, you will be introduced to a field of accounting known as management or managerial accounting. Throughout this course, we use the operations of a manufacturing company to apply the management concepts you will learn but these concepts apply to all types of organizations.
Therefore in Session 1, you are also introduced to the three different categories of manufacturing costs incurred by manufacturing companies in the production of its product.
In session 2, we begin the study of cost accumulation systems. The traditional systems of job costing and process costing are presented in this session; the more contemporary activity-based costing system will be in Session1 of next week’s lectures. These cost accumulation systems are used by businesses to accumulate the cost of producing their product or service.
Week 2 | Activity Based Costing and Activity Based Management
During this week, the second week we will further explore the cost allocation problem which was first introduced in week one. Recall that in job order costing we trace the direct material and direct labor to the job but we assign the overhead by allocating it to jobs based on labour costs, labour hours, or machine hours. This system was adequate for past manufacturing systems when the breakdown of product costs would approximate Direct material 40%, Direct Labour 40%, and Manufacturing Overhead – 20%. Today the manufacturing process is more capital intensive and the cost to produce a product is would approximate Direct Material 40%, Direct Labour – 20 %, and Manufacturing overhead 40%. Therefore allocating overhead based on direct labour costs or hours would lead to serious problems in determining the true cost to produce a product.
In session 1, we will examine the design and application of an activity-based system. In session 2, we will extend the idea of costing production activities to costing period costs such as selling and administration costs and perform customer profitability analysis. This concept is referred to as Activity-Based Management
Week 3 Cost Behavior: Contribution Margin And Break-even
Managers need a good understanding of costs and how costs will change in total as business activities decrease or increase.
This week we begin in Session 1, analyzing all costs incurred in a business to determine if that cost is a variable cost, a fixed cost, or a mixed cost. The cost volume profit income statement is introduced. In Session 2, we use our understanding of cost behaviour and develop the break-even model, and the target net income model used by management to predict the effect on profits of different courses of action. The concept of Margin of Safety is introduced.
Week 4 | Sales Mix and Operating Leverage and Midterm Exam
In session1, we cover two topics. Firstly, we learn how to apply the CVP model to a company that sells a number of different products. The weighted average contribution margin is introduced. Secondly, we examine the effect cost structure has on operating leverage and the effect operating leverage has on a companies profits.
Session 2 will be the midterm exam.
Week 5 | Incremental Analysis & Budget Planning
Decision-making is a major part of a manager’s role. In session 1, we examine the tools used by managers to make a decision. Incremental analysis is a decision-making tool in which the relevant costs and revenues of one alternative are compared to the relevant costs and revenues of another alternative.
Relevant costs may be defined as those future cash flows ( inflows & outflows) that are different between alternatives.
Week 6 | Budget Control and Standard Costing
In this course, you have learned how managers use accounting information to plan and control business operations as well as make effective business decisions that add value to the organization.
You understand cost accumulation systems (job cost and ABC); how to plan future operations and determine the level of sales need to break even and then achieve a target net income; budget planning and the use of incremental analysis. in making decisions.
In Session 1, we cover manage control systems such as the use of flexible budget and responsibility accounting to evaluate management performance in Session1. In Session 2, we conclude by looking at the use of standard costs to control operations and finally the Balanced Scorecard which is a strategic tool that evaluates management performance by using metrics tied to the key factors for organization objectives