Indian Institute of Management Bangalore

Postgraduate Programme in Management

Management Accounting
Third Term; January- February 2016
Course Description: This is a course on cost management with an emphasis on strategic
decisions. The course is built around cost competitiveness and cost leadership in the
broad framework of Michael Porters generic competitive strategies. In addition to
conventional topics of cost accounting such as Job and Process costing, Cost-Volume
profit analysis, budgeting, standard costing, cost allocation, the new topics such as
Activity based costing, life cycle costing, theory of constraints, and transfer pricing are
also covered. Overall the course is divided into four modules; Cost estimation, Costing
for Decision making, Strategic Cost Management, and Cost control and performance
evaluation.
Course Objectives:

To explain the use of management accounting information in product

costing, planning and control and strategic decision making

To explain basic tools and techniques required for product costing,

planning, control and decision making

To emphasize the use of relevant accounting information that differs for

different managerial situations

Credits: Two credit course, with 14 sessions of 90 minutes each

Course Procedure/Pedagogy: The format of the course is primarily on lectures
explaining the conceptual frame work demonstrated by solved problems (numerical
exercises) and case studies. Further, cases are assigned to the students and students in
groups are expected to make presentation on each case. This will be followed by
discussion. Students are expected to practice on exercises given in the basic text book for
examination purpose.
Study Material:
Basic Text (BT): (1) James Jiambalvo, Managerial Accounting, Fifth Edition, Wiley
India. Or (2) Ronald W Hilton and David E Platt, Managerial Accounting, Ninth Edition,
McGraw Hill.

Additional Material: A collection of cases and Exercises (one copy per student)

Evaluation:
Case presentation and analysis (20%): Class is divided into group of five members
each case study is allotted to two groups. One group presents the case in detail with
analysis and solution, while the other group comments on it. Twenty minutes time is
allotted for presentation, discussion and comments. The maximum marks for presentation
group is 15% and the commenting group will get maximum marks of 5%. Thus overall
each group will get one case study for presentation and one for analysis. Attendance of all
the group members is compulsory for presenting and commenting groups.
Test-1 (35%): Test duration is 90 minutes.
Final Examination (45%): Test duration is 2 hours.
Assignments for Practice: Problems/exercises will be suggested for practice. Practicing
these assignments will be helpful for taking test and final examinations confidently.
Assignments are not part of evaluation.
Attendance Policy: Will be communicated.
Detailed Description of each module:
Cost Measurement (CM)
This module explains how costs are identified and classified in different business
organisations, which is most importantly used for estimation of value of work in
progress, and finished goods. It covers: Cost Terms, Cost Drivers, Cost pools and Cost
Objects and Classification of costs. The topics covered under this module includes: Job
Costing and Process costing; Costing of services; Tracing direct costs to products and
allocating indirect costs; and different method of cost allocation.
Costing for Decision Making (CDM)
This module discusses the relationship between cost, volume and profit and how the
behaviour of cost affects profit under different volumes. It explains how cost information
and cost behaviour are important for different kinds of decision making. Some of the
decision problems covered under this module are: Understanding cost behaviour,
decisions on make or out source, break even analysis, what if analysis, closing down
unprofitable divisions or product line, alternative sourcing, pricing decision under
different conditions, joint costing, etc.

Strategic Cost Management (SCM)

The various aspects of Strategic Cost Management as propounded by Shank and
Govindarajan, and Robert Kaplan are Competitive Advantage Analysis, Cost Driver
Analysis, and Value Chain Analysis. An important tool of management accounting is
Activity Based Costing (ABC). ABC helps in identifying cost drivers and getting better
idea of cost structure. It is critical to developing Value Chain Analysis, and various
dimensions of SCM like Customer Profitability Analysis, Channel Management, Target
Costing, Product profitability, etc.
Cost Management through Budgeting and Control (CBC)
This module discusses how cost information is used for planning. Topics covered under
this module include: Types of Budgets; Preparation of Master Budget; Role of Standards
in budget preparation; Impact of financial policies on budgets; Preparation of Cash
Budget; Preparation of pro-forma financial statements. This module explains how
management establishes control systems at various levels to measure performance when
various sub-units of organization implement budgets or other plans. The importance of
tools like Variance Analysis is also discussed.
Performance Measurement:
This module focuses on divisional performance measurement concepts like EVA and
Balanced Score card

Session
1
2

Topics
Cost concepts and Estimation (3 sessions)
Introduction and Cost Management Concepts
Product Costing Job Costing

Product Costing Process Costing

4 to 7

8&9

10

Cases
Case study: Xyber Space
Consulting
Cases for Assignment:
(1) Lipman Bottle company
(2 ) Huron Automotive
Company
(3) Delaney Motors
Cases for Assignment:
(4)Tech-Tonic Sports Drink

Costing for Decision making (4 sessions)

Cost Analysis for Decision Making-Break Case study
Even Analysis, Marginal Costing, Differential Primus Industries
Costing, Relevant Costing, Pricing Decisions, Hospital Supply
Target costing, and Transfer Pricing
Cases for Assignment:
(5) Krogs Metalfab
(6) Bill French
(7) Prestige Telephone
(8)Wendys Chili
Strategic Cost Management (3 sessions)
Activity Based Costing
Case Study Wilkerson
Pecos Products
Cases for Assignment:
(9) Insteel Wire Products
Strategic Cost Management - Customer Case Study : Spring Bottle
Profitability
Company
Cases for Assignment:
(10)Dakota Office Products
Cost
Control
and
Evaluation(4 session)

Performance

11&12
Budgeting, Standard Costing and Variance
Analysis

13&14

Case Study
Web Jackets Company
Software Associates
Cases for Assignment:
(11) Danshui Plant2
(12) Midwest Ice cream

Performance Evaluation-responsibility centers

and review
4

Seminar on Case Presentations

Teams are required to complete the assigned cases during the term, these are team
projects, and all members of the team must contribute to the team for preparation of the
case study. Cases may be prepared in Power point and Excel. Schedule of presentation
will be announced a week before the presentation of the case study. Each team will
present just one case, but is required to actively question and comment on the remaining
cases presented by the remaining teams. Thus, careful preparation of all cases is
important.
Each team will present one case during the course. Teams should try to organize their
presentations to be not more than 15 minutes in length, followed by the discussion for ten
minutes. As you are in the role of a management consulting team vying for a new client,
your peers in the seminar (who have also prepared the case) are placed in the role of
competing consulting teams. Thus, they are expected to question, comment on, and
challenge (in a collegial way) your assessments and recommendations during your
presentation (in fact, this is part of their grade). So, presenting teams should be ready to
defend and expound on their assessments and recommendations. Other than responding
to the case requirements and discussing their recommendations, how a team structures
their presentation is entirely up to them (though all team members must contribute to both
the presentations preparation and delivery).
The commenting group is expected to generate rigorous discussion. The commenting
team has to submit Comment papers. Comment Papers are short assignments. Each
designated team will prepare a paper commenting on the presenting teams case
submission. The length of comment paper should not be more than two pages and
should be submitted within two days of case presentation. In this paper, the team may
comment on the presenting teams responses to the case requirements, their executive
summary, things you feel they did not address, things that you felt they addressed well,
etc. You must also identify in each Comment Paper three questions or comments that you
asked during the presentation (note: individual participation is part of your grade).
Explicitly state these questions/comments at the end of your Comment Paper under a
heading entitled Questions/Comments.
Given the seminar (case discussions) format of this course, substantial and meaningful
discussion is critical to the learning process. As such, it is essential for all participants to
contribute on a frequent and consistent basis. Also, as much of this seminar is teamoriented, your individual participation allows you the chance to demonstrate your
knowledge and understanding of the materials. Thus, your (individual) participation will
play a role in the determination of your final grade.