British Columbia Institute of


FMGT 2110 - Financial Management 2

Financial Management Part-time Studies Course

School of Business

Course Details

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.


FMGT 1110



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Learning Outcomes

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.

Cost-Volume-Profit Relationships

  • 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.

Activity-Based Costing

  • 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.

Standard Costs

  • 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.

Segment Reporting

  • 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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