UNIVERISTY OF TECHNOLOGY, JAMAICA

FACULTY OF BUSINESS & MANAGEMENT

SCHOOL OF BUSINESS ADMINISTRATION

ACADEMIC YEAR 2010-2011

SYLLABUS OUTLINE

FACULTY Business and Management

SCHOOL/DEPT. SOBA College of Business and Management (COBAM)

COURSE OF STUDY Bachelor of Business Administration (BBA)

STAGE/YEAR Year 4 fulltime/ Year 5 parttime

MODULE TITLE ADVANCED COST & MANAGEMENT ACCOUNTING

MODULE CODE ACC 3009

DURATION 45 HOURS

CREDIT VALUE 3 CREDITS

PREREQUISITES Introduction to Management Accounting & Introduction to

Costing

MODULE DESCRIPTION

This course builds on the basic knowledge and concepts established in introductory management accounting and costing courses.

It seeks to provide further analysis of the critical role of management accounting concepts, models and systems in the development of competitive strategy and performance evaluation in various types of organizations.

The course will be mainly concerned with the examination and evaluation of various costing systems and their use in strategic business decisions, in a changing business environment.

Students are expected to develop critical judgment in applying strategic management accounting techniques in different business contexts.

MODULE APPROACH:

Lectures, class discussions, presentations, textbook reading and independent research by students will help to convey the main body of knowledge and to stimulate critical thinking.

Students are strongly urges to read the relevant chapters of the text (mainly the theoretical sections) of each topic before each class. After classes and before tutorials, students must work problems on tutorial sheets. Tutorials are intended to clear up difficulties student may encounter and not to work problems for students. The instructor will serve manly as the catalyst, facilitator and evaluator in a collaborative learning experience. The assessment procedures will incorporate a major group research assignment, and two written tests and a final examination.

GENERAL OBJECTIVES:

Upon completion of this course, students should be able to:

  1. Develop knowledge and understanding of the operation and maintenance of accounting systems for the capture, measurement and reporting of cost based information.
  1. Assess the relevance, strengths and weaknesses of different costing systems.
  1. Explain the importance of planning, evaluation and control in the management process.
  1. Apply quantitative techniques in problem solving and decision making.
  1. Make written and oral presentations based on management accounting case analysis.

UNIT 1 - INTRODUCTION - the changing business environment & management accounting

Drury chapter 1

At the end this unit students should be able to:

1.  Explain the factors that have influenced the changes in the competitive business environment

2.  Outline and describe the key success factors that directly affect customer satisfaction

3.  Identify and describe the functions of a cost and management accounting system

4.  Provide a brief historic description of management accounting

Unit content:

·  A brief historic review of management accounting

·  Changing business environment

·  Changing product life cycles

·  Focus of customer satisfaction and new management approaches

·  The impact of information technology

·  International convergence of management accounting

UNIT 2a –COSTING SYSTEMS: PROCESS COSTING

Drury – Chapter 5

At the end this unit students should be able to:

1.  Distinguish between Job Costing and Process Costing

2.  Explain situations where the use of process costing is appropriate

3.  Explain the accounting treatment of normal and abnormal losses

4.  Prepare process, normal loss, abnormal loss and abnormal gain accounts when there is no ending work in progress

5.  Explain, and calculate equivalent units

6.  Allocate process costs between work in progress and finished units on the basis

7.  of Weighted Average, FIFO and LIFO methods

Unit content:

·  Flow of production and costs in a process costing system

·  Process cost when all output is fully complete

·  Normal and abnormal losses

·  Process costing with ending work in progress (WIP) partially completed

·  Beginning and ending WIP of uncompleted units

UNIT 2b - COSTING SYSTEMS: CONTRACT COSTING

Drury – Supplement to Chapter 4, Lucey Chapter 3

International Accounting Standard (IAS 11)

At the end this unit students should be able to:

  1. Explain the main issues of revenue and expense recognition as outlined in IAS 11
  2. Describe situations where the use of contract accounting is appropriate
  3. Complete cost records and accounts in contract cost accounting situations
  4. Explain, and illustrate, measures of profit on uncompleted contracts
  5. Calculate the profit attributable to each contract
  6. Calculate contract balances for balance sheet purposes
  7. Explain how changes in economic and other conditions are dealt with in contract accounting.

Unit content:

·  Requirements of IAS 11

·  Revenue recognition

·  Contract accounts

·  Attributable profit

·  Estimated profit

·  Balance sheet extracts

·  Contract modifications

·  Disclosures

UNIT3 – PRICING DECISIONS AND PROFITABILITY ANALYSIS

Drury – Chapter 11

At the end this unit students should be able to:

1.  Explain the relevant cost information that should be presented in price setting firms for both short-term and long term-decisions

2.  Describe product and customer profitability analysis and information that should be included for making the product and customer mix

3.  Explain the target costing approach to pricing

4.  Describe and explain the different cost-plus pricing methods for deriving selling prices

5.  Explain the limitations of cost –plus pricing systems

6.  Justify why cost plus pricing is widely used

7.  Identify and describe the different pricing policies

Unit Content:

·  The role of cost information in pricing decisions

·  A price setting facing short-term decisions

·  A price setting facing long-term decisions

·  Pricing customized & non-customized products using target costing

·  Cost- plus pricing

·  Pricing policies

·  Customer profitability

UNIT 4 - CAPITAL INVESTMENT DECISIONS

Colin Drury –– Chapters 13 & 14

At the end this unit students should be able to:

1.  Explain the opportunity cost of an investment

2.  Distinguish between compounding and

3.  Explain the concepts of net present value (NPV) , internal rate of return (IRR) , payback method and accounting rate of return (ARR)

4.  Calculate NPV, IRR, the payback period and ARR

5.  Justify the superiority of NPV over the IRR

6.  Explain the limitations of payback and ARR

7.  Justify why ARR and payback are widely used in practice

8.  Describe the effects of performance measures on capital investment decisions

9.  Explain capital rationing and select the optimum combination of investments when capital is rationed for a single period

10.  Calculate the incremental taxation payments from proposed investments

11.  Describe two approaches for adjusting for inflation when appraising capital projects

12.  Explain how risk-adjusted discount rates are calculated

13.  Describe how sensivity analysis can be applied to investment appraisal

14.  Describe the initiation, authorization and review procedures for investment process

Unit content:

·  Opportunity cost of an investment

·  Compounding and discounting

·  The concept of net present value

·  The IRR model

·  Relevant cashflows

·  Timing of cashflows

·  Comparison of NPV and IRR

·  Techniques that ignore time value of money

·  The effects of performance measures on capital investment decision

·  Qualitative factors

·  Capital rationing

·  Taxation and investment decisions

·  The effect of inflation on capital investment appraisal

·  Calculating risk adjusted discount rates

·  Sensitivity analysis

UNIT 5 - MANAGEMENT CONTROL SYSTEMS AND RESPONSIBILITY

ACCOUNTING - Drury chap. 16

At the end this unit students should be able to:

1.  Describe the three different types of controls used in organizations

2.  Describe and explain the cybernetic control system

3.  Distinguish between feedback and feed-forward controls

4.  Explain the potential harmful side-effects of results controls

5.  Describe the four different types of responsibility centres

6.  Explain the different elements of management accounting control systems

7.  Describe the controllability principle and the methods of implementing it

8.  Describe the different approaches that can be used to determine financial performance targets and discuss the impact on their level of difficulty on motivation and performance

9.  Describe the influence of participation in the budgeting process

10.  Distinguish between the three different styles of evaluating performance and identify the circumstances when a particular style is more appropriate

Unit content:

·  Control at different organizational levels

·  Types of control

·  Cybernetic control systems

·  Feed back and feed forward

·  Harmful effects of control

·  Advantages and disadvantages of different types of control

·  Responsibility canters

·  The nature of management accounting control systems

·  The controllability principle

·  Setting financial performance targets

·  Side effects arising from using accounting information for performance evaluation

·  Contingency theory

UNIT 6 - DIVISIONAL FINANCIAL PERFORMANC MEASURES

Drury chap. 19

At the end this unit students should be able to:

1.  Distinguish between functional and divisional zed organizational structures

2.  Explain why it is preferable to distinguish between managerial and economic performance

3.  Explain the factors that should be considered in designing financial performance measures for evaluating divisional managers

4.  Explain the meaning of return on investment, residual income and economic value added

5.  Compute ROI, RI and EVA

6.  Explain why performance measures may conflict with NPV decision model

7.  Identify and explain the approaches that can be used to reduce the dysfunctional consequences of short-term financial measures

Unit content:

·  Functional and divisional zed organization structures

·  Profit centers and investment centers

·  Managerial and economic performance of divisions

·  Alternative divisional profit measures

·  ROI, RI, EVA

·  Determine which assets should be included in the investment base

·  Dysfunctional consequences of short-term financial performance measures

UNIT 7 – TRANSFER PRICING IN DECENTRALIZED COMPANIES

Colin Drury –- Chapter 20

At the end this unit students should be able to:

1.  Describe the different purposes of a transfer pricing system

2.  Identify and explain the five different transfer pricing methods

3.  Explain why the correct transfer price is the external market price when there is a perfectly competitive market for intermediate product

4.  Explain why cost-plus transfer prices will not result in optimum output being achieved

5.  Explain the two methods of transfer pricing that have been advocated to resolve the conflict s between the decision-making and performance evaluation objectives

6.  Discuss the additional factors that must be considered whet setting transfer prices for multinationals

Unit content:

·  Purpose of transfer pricing

·  Alternative transfer pricing methods

·  Market based transfer prices

·  Marginal cost transfer prices

·  Full cost transfer pricing

·  Cost-plus transfer prices

·  Negotiated transfer prices

·  Marginal cost plus opportunity cost

·  Proposals for resolving transfer pricing conflicts

·  Domestic transfer pricing recommendations

·  International transfer pricing

UNIT 8 - COST MANAGEMENT

Drury Chap 21

At the end this unit students should be able to:

  1. Distinguish between the features of a traditional management accounting system and cost management
  2. Explain life-cycle costing and describe the typical pattern of cost commitment and cost incurred during the three stages of a product life cycle
  3. Discuss the target costing approach to cost management
  4. Describe tear-down analysis, value engineering and functional analysis
  5. Distinguish between target costing and kaizen costing
  6. Describe activity-based cost management
  7. Distinguish between value added and non-value added activities
  8. Explain the purpose of cost of quality report
  9. Describe how value chain analysis can be used to increase customer satisfaction and manage costs more effectively
  10. Explain the role of benchmarking within the cost management framework
  11. Describe and explain the importance of environmental cost management in today’s business environment
  12. Outline the main features of a just-in-time philosophy

Unit content:

·  Life cycle costing

·  Target costing

·  Kaizen costing

·  Activity based management

·  Business process engineering

·  Cost of quality

·  Value chain analysis; bench marking

·  Environmental cost management

·  JIT systems

UNIT 9 - STRATEGIC MANAGEMENT ACCOUNTING

Drury Chap 22

At the end this unit students should be able to:

  1. Describe the different elements of strategic management accounting
  2. Describe three competitive strategies that a firm can adopt to achieve sustainable competitive advantage and explain how they influence management accounting practices
  3. Describe the balance scorecard and explain each of its four perspectives
  4. Provide illustrations of performance measures for each of the four perspectives
  5. Explain how the balanced scorecard links strategy formulation to financial outcomes

Unit content:

·  What is strategic management accounting

·  Survey of strategic management accounting practices

·  The balanced scorecard

Preparation for lectures

The course is anchored around the required text to make it easier for students to follow, however, supplemental material may be required for certain topics. It is essential that students acquire and read the text recommended for the course, in order to get a fuller understanding of each topic. In addition other reading material are posted to the website: http://www.markjacksonsnr.webs.com/acma

Most of the course material is also posted to email address: ; password: student123

ASSESSMENT PROCEDURES

-  Two written problem solving tests - 36%

-  Two written case analyses to be discussed in tutorials;

- Prepared and handed in for grading* - 14%

- Class participation** - 10%

-  Final examination - 50%

Total 110%

* Written case analyses: Cases provide realistic settings in which to apply decision-making and accounting concepts. They also are excellent vehicles for developing problem-solving and management skills. You will prepare written case analyses before tutorials as group assignments. You will be asked to read the case and, guided by the assignment questions, to prepare your analysis of the case for presentation in tutorials and handed in for grading. Both class presentation and written assignment will be graded.

** Class participation marks are bonus marks which will serve to make up students grades. consists of attendance at tutorials, active involvement in the form of discussion of topics and problem sets, evidence that all problems on the tutorial sheets have been attempted and active attendance and participation in group assignments.