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LahoreUniversityofManagementSciences

ACCT130PrinciplesofManagementAccounting
FallSemester2015

Instructor
RoomNo.
OfficeHours
Email
Telephone
Secretary/TA
TAOfficeHours
CourseURL(ifany)

ArslanShahidButt/AhsanShamimChaudhry
TBA
TBA
arslan.butt@lums.edu.pk

04235608394
Secretary:MuhammadUmar/TA:TBA
TBA
http://suraj.lums.edu.pk/~pco/

COURSEBASICS
CreditHours
Lecture(s)
Recitation/Lab(perweek)
Tutorial(perweek)

3
2
Onneedbasis
Onneedbasis

Duration
Duration
Duration

75minutes
Onneedbasis
Onneedbasis

COURSEDISTRIBUTION
Core
Elective
OpenforStudentCategory
CloseforStudentCategory

Elective

COURSEDESCRIPTION

Principles of Management Accounting is a foundation level course which introduces students to basic managerial accounting
conceptsandtoolsusedbycorporatemanagersforintelligentanalysis,planning,controlanddecisionmaking.Theemphasisinthis
courseishowbasicaccountingdataconvertsintoessentialmanagementinformationthusformingthebasisfordecisionmaking
within an organization. Key topics include cost elements, cost behavior, marginal and absorption costing, budgeting, variance
analysis,relevantandirrelevantcostfordecisionmaking.

COURSEPREREQUISITE(S)

ACCT100PrinciplesofFinancialAccounting
Regularattendanceisrequiredinthiscourse.

LahoreUniversityofManagementSciences
COURSEOBJECTIVES&LEARNINGOUTCOMES

Theobjectiveofthecourseistoensurethatstudentsdevelopafunctionalknowledgeofbasicmanagerial
accountingprinciples.Thiswillinclude:

Anunderstandingofthedifferencesbetweenfinancialandmanagerialaccounting

Theabilitytocalculatecostsinbothajoborderandprocesscostaccountingsystemandunderstandthecost
flow

Anunderstandingofthetypesofcostsandhowtheybehaveinordertoconductcostvolumeprofitanalyses

Anunderstandingoftheroleandpurposeofactivitybasedcostingfordecisionmakingpurposesincludingthe
abilitytocalculatecostsunderanABCsystem

Anunderstandingofthedifferenttypesofbudgetsandtheabilitytopreparestaticandflexiblebudgets

Theabilitytoperformstandardcostvarianceanalysesandfixedandvariableoverheadvarianceanalysesand
interprettheseresults

Understandtheroleofaccountinginformationinbusinessdecisionmaking

Understand the basic design of management control system including performance measurement,
responsibilityaccountingetc.

Understandtheroleofethicsinmanagerialaccountingdecisionmaking

UNDERGRADUATEPROGRAMLEARNINGGOALS&OBJECTIVES

GeneralLearningGoals&Objectives
Goal1EffectiveWrittenandOralCommunication
Objective:Studentswilldemonstrateeffectivewritingandoralcommunicationskills
Goal2EthicalUnderstandingandReasoning
Objective:Studentswilldemonstratethattheyareabletoidentifyandaddressethicalissuesinanorganizational
context.
Goal3AnalyticalThinkingandProblemSolvingSkills
Objective:Studentswilldemonstratethattheyareabletoidentifykeyproblemsandgenerateviablesolutions.
Goal4ApplicationofInformationTechnology
Objective:Studentswilldemonstratethattheyareabletousecurrenttechnologiesinbusinessandmanagement
context.
Goal5TeamworkinDiverseandMulticulturalEnvironments
Objective:Studentswilldemonstratethattheyareabletoworkeffectivelyindiverseenvironments.
Goal6UnderstandingOrganizationalEcosystems
Objective:StudentswilldemonstratethattheyhaveanunderstandingofEconomic,Political,Regulatory,Legal,
Technological,andSocialenvironmentoforganizations.

MajorSpecificLearningGoals&Objectives
Goal7(a)DisciplineSpecificKnowledgeandUnderstanding
Objective:Studentswilldemonstrateknowledgeofkeybusinessdisciplinesandhowtheyinteractincluding
applicationtorealworldsituations(includingsubjectknowledge).
Goal7(b)Understandingthesciencebehindthedecisionmakingprocess(forMGSMajors)
Objective:Studentswilldemonstrateabilitytoanalyzeabusinessproblem,designandapplyappropriate
decisionsupporttools,interpretresultsandmakemeaningfulrecommendationstosupportthedecisionmaker

LahoreUniversityofManagementSciences
Indicatebelowhowthecourselearningobjectivesspecificallyrelatetoanyprogramlearninggoalsandobjectives.

MAPPINGOFOBJECTIVES
PROGRAMLEARNINGGOALS
ANDOBJECTIVES
Goal1EffectiveWrittenandOral
Communication
Goal2EthicalUnderstandingand
Reasoning
Goal3AnalyticalThinkingand
ProblemSolvingSkills
Goal4ApplicationofInformation
Technology
Goal5TeamworkinDiverseand
MulticulturalEnvironments
Goal6Understanding
OrganizationalEcosystems
Goal7(a)DisciplineSpecific
KnowledgeandUnderstanding

COURSELEARNINGOBJECTIVES

COURSEASSESSMENTITEM

Understand the role of ethics in managerial Quizzes,Project,FinalExams,CP


accountingdecisionmaking

Anunderstandingofthedifferencesbetween Quizzes,Project,FinalExams,CP
financialandmanagerialaccounting

The ability to calculate costs in both a job


orderandprocesscostaccountingsystemand
understandthecostflow

An understanding of the types of costs and


how they behave in order to conduct
costvolumeprofitanalyses

Anunderstanding of the role andpurposeof


activity based costing for decision making
purposes including the ability to calculate
costsunderanABCsystem

An understanding of the different types of


budgets and the ability to prepare static and
flexiblebudgets

Theabilitytoperformstandardcostvariance
analyses and fixed and variable overhead
varianceanalysesandinterprettheseresults

Understand the role of accounting


informationinbusinessdecisionmaking

Understand the basic design of management


control system including performance
measurement,responsibilityaccountingetc.

Understandtheroleofethicsinmanagerial
accountingdecisionmaking

LahoreUniversityofManagementSciences
Goal7(b)Understandingthe
sciencebehindthedecision
makingprocess

Understand the role of accounting Quizzes,Project,FinalExams,CP


informationinbusinessdecisionmaking

Understand the basic design of management


control system including performance
measurement,responsibilityaccountingetc.

GRADINGBREAKUPANDPOLICY

Quizzes:25%(n2willapply)
Attendance:10%
MidtermExamination:25%
FinalExamination:40%

EXAMINATIONDETAIL

Midterm
Exam

FinalExam

Yes/No:YES
CombineSeparate:N/A
Duration:2Hours
PreferredDate:
ExamSpecifications:MCQsand/orShortQuestions

Yes/No:YES
CombineSeparate:N/A
Duration:2Hours
ExamSpecifications:MCQsand/orShortQuestions

SN.

TOPICS

SESSIONOBJECTIVES

Managerial
Accountingandthe
Business
Environment

CostTerms,
Concepts,and
Classifications

Identifythemajordifferencesandsimilaritiesbetweenfinancialandmanagerial
accounting.
Understandtheroleofmanagementaccountantsinanorganization.
UnderstandthebasicconceptsunderlyingJustInTime(JIT),TotalQualityManagement
(TQM),ProcessReengineeringandtheTheoryofConstraints(TOC).
Understandtheimportanceofupholdingethicalstandards.

Identifyandgiveexamplesofeachofthethreebasicmanufacturingcostcategories.
Distinguishbetweenproductcostsandperiodcostsandgiveexamplesofeach.
Prepareanincomestatementincludingcalculationofthecostofgoodssold.
Prepareascheduleofcostofgoodsmanufactured.
Understandthedifferencesbetweenvariablecostsandfixedcosts.
Understandthedifferencesbetweendirectandindirectcosts.
Defineandgiveexamplesofcostclassificationsusedinmakingdecisions:differential
costs,opportunitycosts,andsunkcosts.

LahoreUniversityofManagementSciences
SN.

TOPICS

SESSIONOBJECTIVES

SystemsDesign:
JobOrderCosting

CostBehavior:
AnalysisandUse

CostVolumeProfit
Relationships

VariableCosting:A
Toolfor
Management

SystemsDesign:

ProcessCosting(FIFO
Method)

ActivityBased

Costing:ATooltoAid
DecisionMaking

Midterm
ProfitPlanning

Distinguishbetweenprocesscostingandjobordercostingandidentifycompaniesthat
woulduseeachmethod.
Identifythedocumentsusedinajobordercostingsystem.
Computepredeterminedoverheadratesandexplainwhyestimatedoverheadcosts
(ratherthanactualoverheadcosts)areusedinthecostingprocess.
Applyoverheadcosttojobsusingapredeterminedoverheadrate.
Determineunderappliedoroverappliedoverhead.
Usethedirectmethodtodeterminecostofgoodssold
Understandhowfixedandvariablecostsbehaveandhowtousethemtopredictcosts.
Useascattergraphplottodiagnosecostbehavior.
Analyzeamixedcostusingthehighlowmethod.
Prepareanincomestatementusingthecontributionformat.
Explainhowchangesinactivityaffectcontributionmarginandnetoperatingincome.
Prepareandinterpretacostvolumeprofit(CVP)graph.
Usethecontributionmarginratio(CMratio)tocomputechangesincontributionandnet
operatingincomeresultingfromchangesinsalesvolume.
Showtheeffectsoncontributionmarginofchangesinvariablecosts,fixedcosts,selling
price,andvolume.
Computethebreakevenpointinunitsalesandsalesdollars.
Determinethelevelofsalesneededtoachieveadesiredtargetprofit.
Computethemarginofsafetyandexplainitssignificance.
Computethedegreeofoperatingleverageataparticularlevelofsalesandexplainhowit
canbeusedtopredictchangesinnetincome.
Computethebreakevenpointforamultiproductcompanyandexplaintheeffectsof
shiftsinthesalesmixoncontributionmarginandthebreakevenpoint.
Explainhowvariablecostingdiffersfromabsorptioncostingandcomputeunitproduct
costsundereachmethod.
Prepareincomestatementsusingbothvariableandabsorptioncosting.
Reconcilevariablecostingandabsorptioncostingnetoperatingincomesandexplainwhy
thetwoamountsdiffer.
Understandtheadvantagesanddisadvantagesofbothvariableandabsorptioncosting.
Recordtheflowofmaterials,labor,andoverheadthroughaprocesscostingsystem.
Computetheequivalentunitsofproductionusingtheweightedaveragemethod.
Prepareaquantityscheduleusingtheweightedaveragemethod.
Computethecostsperequivalentunitusingtheweightedaveragemethod.
Prepareacostreconciliationusingtheweightedaveragemethod.
ComputetheequivalentunitsofproductionusingtheFIFOmethod.
PrepareaquantityscheduleusingtheFIFOmethod.
ComputethecostsperequivalentunitusingtheFIFOmethod.
PrepareacostreconciliationusingtheFIFOmethod.
Understandactivitybasedcostingandhowitdiffersfromatraditionalcostingmethod.
Assigncoststocostpoolsusingafirststageallocation.
Computeactivityratesforcostpools.
Assigncoststoacostobjectusingasecondstageallocation.
Useactivitybasedcostingtocomputeproductandcustomermargins.

Understandwhyorganizationsbudgetandtheprocessestheyusetocreatebudgets.
Prepareasalesbudget,includingascheduleofexpectedcashcollections.
Prepareaproductionbudget.
Prepareadirectmaterialsbudget,includingascheduleofexpectedcashdisbursements

LahoreUniversityofManagementSciences
SN.

TOPICS

10

StandardCostsand
theBalanced
Scorecard

11

FlexibleBudgetsand
OverheadAnalysis

SESSIONOBJECTIVES

12

SegmentReporting
andDecentralization

13
14

TransferPricing
RelevantCostsfor
DecisionMaking

15

MaterialPlanning
(EconomicOrder
Quantity,ReOrder
LevelandSafety
Stock)

forpurchasesofmaterials.
Prepareadirectlaborbudget.
Prepareamanufacturingoverheadbudget.
Prepareasellingandadministrativeexpensebudget.
Prepareacashbudget.
Prepareabudgetedincomestatement.
Prepareabudgetedbalancesheet.
Explainhowdirectmaterialsstandardsanddirectlaborstandardsareset.
Computethedirectmaterialspriceandquantityvariancesandexplaintheirsignificance.
Computethedirectlaborrateandefficiencyvariancesandexplaintheirsignificance.
Computethevariablemanufacturingoverheadspendingandefficiencyvariances.
Understandhowabalancedscorecardfitstogetherandhowitsupportsacompanys
strategy.
Computedeliverycycletime,throughputtime,andmanufacturingcycleefficiency(MCE).
Prepareaflexiblebudgetandexplaintheadvantagesoftheflexiblebudgetapproachover
thestaticbudgetapproach.
Prepareaperformancereportforbothvariableandfixedoverheadcostsusingtheflexible
budgetapproach.
Useaflexiblebudgettoprepareavariableoverheadperformancereportcontainingonlya
spendingvariance.
Useaflexiblebudgettoprepareavariableoverheadperformancereportcontainingboth
aspendingandefficiencyvariance.
Computethepredeterminedoverheadrateandapplyoverheadtoproductsinastandard
costsystem.
Computeandinterpretthefixedoverheadbudgetandvolumevariances.
Prepareasegmentedincomestatementusingthecontributionformatandexplainthe
differencebetweentraceablefixedcostsandcommonfixedcosts.
Computereturnoninvestment(ROI)andshowhowchangesinsales,expenses,andassets
affectROI.
Computeresidualincomeandunderstanditsstrengthsandweaknesses.
Determinetherange,ifany,withinwhichnegotiatedtransferriceshouldfall.
Identifyrelevantandirrelevantcostsandbenefitsinadecision.
Prepareananalysisshowingwhetheraproductlineorotherbusinesssegmentshouldbe
droppedonretained.
Prepareamakeorbuyanalysis.
Prepareananalysisshowingwhetheraspecialordershouldbeaccepted.
Determinethemostprofitableuseofaconstrainedresourceandthevalueofobtaining
moreoftheconstrainedresource.
Prepareananalysisshowingwhetherjointproductsshouldbesoldatthesplitoffpointor
processedfurther.
CalculatingEconomicOrderQuantity,ReOrderLevelandSafetyStock
Usingtheaboveinformationinmaterialplanningoftheorganization

LahoreUniversityofManagementSciences
TEXTBOOK(S)/SUPPLEMENTARYREADINGS

ManagerialAccounting,12thedition,Garrison,Noreen,&Brewer,McGrawHill.
Furthersupplementarymaterialwillbeprovidedduringthedurationofthecourse.