Covers managerial accounting; cost terms; planning and control; using cost data in decision-making. Specific topics include job order costing, process costing, cost behaviour, cost-volume-profit analysis, standard costs, budgeting, pricing products and services, relevant costs and capital budgeting.
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Upon successful completion, the student will be able to:
Managerial Accounting and the Business Environment
Identify the major differences and similarities between financial and managerial accounting.
Understand the role of management accountants in an organization.
Explain the importance of upholding ethical standards.
Cost Terms, Concepts, and Classification
Identify and give examples of each of the three basic manufacturing cost categories.
Distinguish between product costs and period costs and give examples of each.
Prepare a schedule of cost of goods manufactured in good form.
Explain the difference in behaviour of fixed and variable costs.
Define direct and indirect costs.
Examine cost classifications used in making decisions: differential costs, opportunity costs, and sunk costs.
Systems Design: Job-Order Costing
Distinguish between process costing and job-order costing and identify appropriate application of these costing methods.
Compute predetermined overhead rates and apply to the costing process.
Compute under- or over-applied overhead cost and prepare the journal entry to close the balance in Manufacturing Overhead to the appropriate accounts.
Systems Design: Process Costing
Compute equivalent units of production using the weighted average method.
Prepare a process costing production report using the weighted average method.
Cost Behaviour: Analysis and Use
Understand how fixed and variable costs behave and how to use then to predict costs.
Use a scattergram plot to diagnose cost behaviour.
Analyze a mixed cost using the high-low method.
Analyze a mixed cost using the least-squares regression method.
Prepare and interpret an income statement using the contribution format.
Use the contribution margin ratio (CM ratio) to compute changes in contribution margin and net operating income resulting from changes in sales volume.
Show the effects on contribution margin of changes in variable costs, fixed costs, selling price, and volume.
Compute the break-even point.
Determine the level of sales needed to achieve a desired target profit.
Compute the margin of safety and explain its significance.
Compute the degree of operating leverage at a particular level of sales and explain how the degree of operating leverage can be used to predict changes in net operating income.
Understand activity-based costing and how it differs from a traditional costing system.
Assign costs to cost pools.
Compute activity rates for cost pools.
Assign costs to a cost object.
Understand why organizations budget and the processes they use to create budgets.
Prepare the various steps in a master budget.
Explain how direct materials standards and direct labour standards are set.
Compute the direct materials price and quantity variances, and explain their significance.
Compute the direct labour rate and efficiency variances, and explain their significance.
Compute the variable manufacturing overhead spending and efficiency variances, and explain their significance.
Flexible Budgets and Overhead Analysis.
Prepare a flexible budget and explain the advantages of the flexible budget approach over the static budget approach.
Prepare a performance report for both variable and fixed overhead costs using the flexible budget approach.
Use the flexible budget to prepare a variable overhead performance report containing both a spending and an efficiency variance.
Compute and interpret the fixed overhead budget and volume variances.
Differentiate among cost, revenue, profit, and investment centres and explain how performance is measured in each.
Compute and understand the return on investment (ROI) measure.
Compute the residual income and understand the strengths and weaknesses of this method of measuring performance.
Relevant Costs for Decision Making
Distinguish between relevant and irrelevant costs in decisions.
Prepare an analysis showing whether a product line should be dropped or retained.
Prepare a make-or-buy analysis.
Prepare an analysis showing whether a special order should be accepted.
Determine the most profitable use of a constrained resource.
Capital Budgeting Decisions
Evaluate the acceptability of an investment project using the net present value method.
Evaluate the acceptability of an investment project using the internal rate of return method.
Rank investment projects in order of preference.
Include income taxes in a capital budgeting analysis.
Effective as of Spring/Summer 2012
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