NEW YORK UNIVERSITY
STERN SCHOOL OF BUSINESS
C10.0002 PRINCIPLES OF MANAGERIAL ACCOUNTING
Professor K. R. Balachandran
KMEC 10-78; Tel: 212-998-0029
E-mail: kbalacha@stern.nyu.edu
Fall 2008
Office Hours: Tuesdays and Thursdays 5:00 -6:00P.M. and by appointment
This first course on cost management begins with explaining how data is
structured for use by decision-makers inside a firm. The data should enable the
management to determine product costs accurately so that it can be used effectively for
strategic managerial decisions. Towards this end, we discuss the traditional and current
practice and discuss how the system can and should be improved. Beyond the traditional
approaches to product costing in a manufacturing setting, we consider the activity-based
analysis as a methodology to improving the accuracy and making the data useful for
financial and other service industries.
A cost management system should also provide information that is useful for
decision making such as pricing of individual products, make or buy decisions for
components of products, continue or discontinue further processing and special order
decisions. Approaches to determine relevance of data for specific decision making
situations will be considered. The relationships among cost, production volume and profit
will be developed and analyzed.
Cost management is a dynamically evolving field and the course will bring in the
changes that have taken place to accommodate the changing business environment due to
globalization of competition in pricing and quality of products.
Course material:
Hansen and Mowen, Management Accounting, Thompson Learning, Custom
Publishing.
Evaluation:
Makeup of Course Grade:
Final Exam
Quizzes
Attendance & Class-blackboard Participation
Homework Assignments
1
50 %
30%
10%
10 %
Undergraduate Grading Guideline for Core Courses:
At Stern, we want to ensure fair and consistent grading across core courses. As such,
grades for this course will be distributed following the Stern Grading Guidelines for Core
Courses at the Undergraduate College.
25-35% A’s – awarded for excellent work
50-70% B’s – awarded for good or very good work
5-15% C’s (or below) – awarded for adequate or below work
Reading/Homework
Students are expected to come to class prepared having read the text and assigned
readings prior to class. Assigned problems in the text are not home work problems for
submission. They are, instead, for your practice. Homework and other assignments are
expected to be completed and handed in on time. Exams and quizzes must be taken at the
time given. Quizzes will be for 20 minutes at the start of the class on the dates stated.
Late comers will not be given any additional compensatory time. I will count the best two
scores out of the three quiz scores towards the final grade. Absences from quizzes may be
excused only in the case of documented serious illness, family emergency, religious
observance, or civic obligation. If you will miss a quiz for religious observance or civic
obligation, you must inform me no later than the first week of class. In case of an
approved absence from a quiz, the other two quizzes will be counted for the final grade.
If you miss more than one quiz, a zero will be assigned for the missed quizzes. No make
up quizzes are given.
Late Assignments and Make-up Policy
Late assignments will not be accepted unless due to documented serious illness
or family emergency.
Exceptions will be made for religious observance or civic obligation only when
the assignment cannot reasonably be completed prior to the due date and the student
makes arrangements for late submission with the professor in advance.
ETHICAL GUIDELINES
Student Code of Conduct
All students are expected to follow the Stern Code of Conduct
(http://www.stern.nyu.edu/uc/codeofconduct)
A student’s responsibilities include, but are not limited to, the following:
A duty to acknowledge the work and efforts of others when submitting work as
one’s own. Ideas, data, direct quotations, paraphrasing, creative expression, or any other
incorporation of the work of others must be clearly referenced.
A duty to exercise the utmost integrity when preparing for and completing
examinations, including an obligation to report any observed violations.
2
STUDENTS WITH DISABILITIES
Students whose class performance may be affected due to a disability should
notify the professor immediately so that arrangements can be made in consultation with
the Henry and Lucy Moses Center for Students with Disabilities http://www.nyu.edu/csd/
to accommodate their needs.
Blackboard Participation
Solutions to selected problems from the text (not necessarily those listed on the
schedule) are placed on the blackboard. In addition to using the solutions provided, you
are encouraged to participate on the blackboard by writing class summaries after my class
lectures. You can also use this media to raise questions about points that were not clear
in the lecture and/or the homework problems and answering other students’ questions.
Power point slides related to lectures are posted on the blackboard.
Class Attendance
Class attendance is mandatory and part of a student’s grade. Absences may be
excused only in the case of documented serious illness, family emergency, religious
observance, or civic obligation. If you will miss class for religious observance or civic
obligation, you must inform me no later than the first week of class. Recruiting activities
are not acceptable reasons for class absence.
Course Schedule
Session 1:
September 2
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



Moving from Financial to Managerial accounting focus
Overview of managerial functions
Managerial informational needs
Management accounting's role in servicing these needs
Differences between the informational needs of managers and
outsiders
Assignment: HM – chapter 1
Session 2:
September 4


Product definition for manufacturing, service and retail industries
Need for accurate determination of product costs
3
 Tracing costs to activities – direct traceability and indirect traceability
 Cost concepts: directly traceable, indirectly traceable with reference to
cost objects
 Cost drivers for activities
 Definitions of product costs – inventoriable product costs, whole
product (or value chain) cost, lifetime product cost, customer’s view of
product cost
 Product cost and period costs for external reporting
 Direct vs. Indirect Costs
 Product vs. Period Costs
 Manufacturing cost concepts
Assignment: HM – chapters 2: Problems: 2-1, 2. 6, 7, 10, 11
Session 3:
September 9
 Cost of goods manufactured, cost of goods sold and inventory
balances
 Manufacturing product cost calculations
 Simple income statements
Assignment: HM – chapters 2: Problems: P2-13, 17, 18, 19, 20, 22
HOME WORK 1 DUE
Session 4:
September 11
 Product cost calculations for external reporting
 Unit product costs
Assignment: HM-Chapter 6 (up to page 225); Problems: 6- 3, 4, 6, 7, 8, 9
Session 5:
September 16 QUIZ 1



Cost behavior- fixed, variable and mixed
Flexible and committed resources
Concept of unused capacities and their importance in applying fixed
costs to products.
Assignment: HM- chapter 3 (omit the sections from least squares method)
Problems: 3-1, 4, 5, 7, 9, 10
HOME WORK 2 DUE
Session 6:
September 18


Overhead cost application
Over and under applied overhead costs and their accounting
4
 Activity based costing systems
Assignment: HM-Chapter 4. Problems: 4-1, 4, 5
Session 7:
September 23
 Accumulating activity costs
 Determining cost driver rates
 Simplifying using cost pools
 Determining product costs
Assignment: HM-Chapter 4. Problems: 4- 2, 6, 7, 11, 12
HOME WORK 3 DUE
Session 8:
September 25 QUIZ 2

Approximations to ABC systems – combining batch level, product
sustaining level and facilities level into one overhead pool
 Plant wide and departmental wide rates for cost application
Assignment: HM-Chapter 4. Problems: 4-14, 16, 21, 22
Session 9:
September 30
 Absorption format income statement for financial reporting
 Variable (Direct) costing format income statement for decision making
Assignment HM-chapter 10 (pages 422-427): Problems: 10-2, 3, 4, 5,18.
Session 10:
October 2
Session 11:
October 7
 Analyzing survivability and profit maximization
 Assumptions behind elementary breakeven analysis
 Breakeven formula derivation and significance
Assignment: HM- chapter 11: Problems: 11-2, 3, 4, 5, 6, 7, 8, 9, 10, 13.
HOME WORK 4 DUE
QUIZ 3
 Profit- volume graphs and its usefulness
 Contribution margin and contribution margin ratio- interpretations
 Multiple products
Assignment: HM-chapter 11: Problems: 11- 11, 14, 17, 19, 20, 21, 22
Session 12:
October 9

Relevance of past costs, present costs and future costs for decision
making
5

Effects of taxation , time value of money and opportunity costs on the
concept of relevance
 How to choose alternatives and decide on the minimal information
needed for decision making
Assignment: HM- chapter 12; Problems: 12-2, 3, 4, 5
Session 13:
October 16


Typical keep or sell and make or buy decisions- information needs
Role of cost allocation in product costing and the need for better
decision making
 Decisions using incremental analysis, contribution margin per unit and
contribution margin per unit resource consumed
 Historical costs, sunk costs, opportunity costs
Assignment: Problems: 12-6, 7, 9, 10, 12, 13, 20, 24
HOME WORK 5 DUE
Session 14
October 21
FINAL EXAMINATION
6