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.

Budgeting

• 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