Cost Management
Accounting 406
2 Credit Hours
Spring 2007
Instructor:
Phone:
Fax:
E-mail:
Office:
Office Hours:
Class Meets:
Melanie Nelson, MBA
(760) 723-1806
(760) 750-4264 (support staff)
(760) 723-2720
melaniemba@roadrunner.com; mnelson@csusm.edu
MARK 436
Mondays:
1:15 pm – 2:15 pm
Tuesdays:
10:00 am – 11:00am AND 5:45 pm – 6:45 pm
Wednesdays:
4:00 pm – 5:00 pm
Tues
8:00 – 9:50 am
MARK 107
Required Materials:
Cooper & Kaplan; The Design of Cost Management Systems, Second Edition, Prentice Hall.
(1999).
Optional Materials:
Lecture notes and additional information will be available through WebCT:
http://courses.csusm.edu
Course Objectives:
This course will explore the use of accounting systems as a tool to understand and manage
costs in an organization. Managerial accounting information needs presumably are as varied as
the products produced, the processes used, the services provided and the personalities of the
managers who manage them. Using the case-study discussion approach, students will be
exposed to a variety of situations where cost information was used to improve one or more
aspects of management control.
Prerequisites:
Students enrolled in this class must have completed all lower-division pre-business core, Acct
306, or HTM 304 and HTM 305, or SSM 304 and SSM 305. Note: A grade of C- is not a
passing grade in the College of Business Administration. The prerequisites for this course are
listed in the course catalogue. The instructor reserves the right to administratively drop, at any
point, any student who has not met the prerequisites. Students choosing to withdraw from this
course are responsible for doing so according to university procedures and deadlines.
Class Structure:
Classes will be conducted on a lecture-discussion-problem-solving basis. Students will take
turns presenting information about the assigned case study, which will serve as a starting point
for the class discussion. Student participation in class discussions is crucial to the success of
the class; therefore participation will comprise 20% of the final grade.
Homework:
Homework assignments will include discussion questions and problems relating to one or more
of the case studies from the assigned chapter. Homework will be checked for completeness.
Late homework will be accepted for a reduced grade.
In addition, each chapter will require a one-page deliverable in “presentation format”. Written
aids and oral presentations are important communication skills in management. The
presentation format assignments in this course will increase your ability to get your ideas across
to others and provide a useful starting point to class discussion of the reading materials.
Students should plan to present their presentation slides to the class at least three times during
the semester.
Exams:
There will two equally weighted exams: one midterm and a final. Exams will be problem and
essay format. Lined writing paper will be provided for essays. You may use any resources you
wish (textbooks, lecture notes, etc.) except for a consultant. Makeup exams will be permitted
in extenuating circumstances provided the student contacts the instructor prior to the start of the
exam. The exam MUST be made up before the next class meeting.
Writing Requirement:
The University writing requirement will be fulfilled through the written homework
assignments, essay exam questions, guest speaker write-ups, and the presentation format
assignments.
Guest Speakers:
At least two guest speakers will address the class during the semester. Please come prepared to
ask at least one question. Please note that attendance, participation and write-up of the guest
speaker sessions will comprise 10% of the final grade. Be aware that due to the busy
schedules of our guest speakers, the schedule may require last minute changes.
Grading:
The course grade will be weighted as follows:
Homework
Presentation Format Assignments
Guest Speaker attendance & write-up
Class Participation
Exams
Total
10%
20%
10%
20%
40%
100%
Grades will be assigned based on the normal curve, as illustrated on the next page. Homework
quality will be the deciding factor in borderline cases. In the event that the percentage grade
exceeds the curved grade, students will be assigned the percentage grade.
Mean
One Standard
Deviation Below
Mean
C’s
B’s
One Standard
Deviation Above
Mean
D’s and F’s
-1
A’s
0
Percent
Grade
90 - 100
80 - 89
70 - 79
60 - 69
0 - 59
A
B
C
D
F
1
Academic Integrity:
In order to fairly evaluate each student’s performance in this class, it is imperative that all work
submitted be your own. Therefore the following will be strictly enforced:
1)
2)
3)
There will be no talking allowed during quizzes or exams. If you finish your quiz early,
please sit quietly (bring reading material if necessary.)
Any suspicious quizzes or exams will be assigned a grade of zero. BEWARE: Either
giving or receiving help during quizzes and exams is dishonest. In other words, if you
allow someone to copy your work, you are just as guilty of cheating as the other party.
If you have studied hard for an exam or quiz, don’t risk it! Cover your work.
Plagiarism will not be tolerated. All direct quotes must be noted as such. Any ideas,
claims or opinions that are not your own must also be cited. For example, to state that
“AAA Inc. leads the way in the widget industry,” would require either citing the data
that led you to form that opinion, or the source document that made the claim.
Exceptions: Since homework is only graded for completeness, I do allow students to work
together. However, each student must submit his or her own work to receive credit. Please let
me know if you have a study partner or group. You may also find it useful to have another
student review your term paper before submitting it. This is acceptable, and even desirable, as
someone else will be able to spot errors you might have missed. However, the work you
submit must be your own.
How to Get the Most Out of This Course
1.
Do not miss class. We will be covering a lot of material in each session. It is critically
important to stay current on assignments.
2.
Experiment with and grow your presentation capabilities. Although it may seem
threatening to present in class, your presentations on the job are actually much more important
to your careers.
3.
Participate in class discussion. It is more interesting for all concerned to have class
interaction. Bring your experiences and learn from others’.
Accounting 406 - Tentative Schedule
Date
Assigned
Reading
Lecture Topic
23-Jan
Course Introduction
30-Jan
Cost and Performance Management Systems
Ch1
6-Feb
Traditional Stage II Cost Systems
Ch2
13-Feb
Stage III Systems for Learning and Improvement
Ch3
20-Feb
Activity-Based Costing: Introduction
Ch4
27-Feb
Measuring the Cost of Resource Capacity
Ch5
6-Mar
Midterm Exam
--
13-Mar
Guest Speaker
--
20-Mar
Operational and Strategic Activity-Based Management in
Manufacuring Companies
Ch6
27-Mar
Spring Break - No Class Meeting
3-Apr
Strategic Activity-Based Management for Customer and Suppliers
10-Apr
Guest Speaker
17-Apr
Strategic Activity-Based Management: Product Development
Ch8
24-Apr
Applying ABC to Service Industries
Ch9
1-May
Stage IV: Integrated Cost Systems
Ch10
8-May
Stage IV: Using ABC for Budgeting and Transfer Pricing
Ch11
15-May
Tues., May 15
7:00 am
Ch7
Acct 406 Homework Schedule
Chapter Case Study Problems/Discussion Questions
1
Bridgeton Industries
1) Calculate the OH allocation rate based on Direct
Labor dollars for model years 1987-1990. Are
the changes significant? Why have they
occurred?
2) Consider two products in the same product line:
#1
#2
Expected selling price
$62
$54
Std. material cost
16
27
Std. labor cost
6
3
Presentation Format
Describe an accounting system
with which you are familiar and
classify it as I, II, III or IV. Give
reasons for your classification.
Calculate the expected gross margins as a percentage of
selling price on each product based on 1988 and 1990
model year budgets, assuming price, material and labor
cost do not change from standard.
3) Assuming that selling prices, volumes, and
material costs for the 1991 model year will not
change for fuel tanks, doors, and manifolds,
prepare an estimated model year budget for ACF
for 1991
(a) if no additional products are dropped and
(b) if the manifold product line is dropped.
4) Would you outsource manifolds form ACF in
1991? Why or why not? What more
information would you want before reaching a
final decision?
2
Seligram, Inc – Electronic Testing Operations
1) What caused the existing system at ETO to fail?
2) Calculated the reported costs of the five
components described in
a. The existing system
b. The system proposed by the accounting
manager
c. The system proposed by the consultant
3) Which system is preferable? Why?
4) Would you recommend any changes to the
system you prefer? Why?
5) Would you treat the new machine as a separate
cost center or as part of the main test room?
Describe how inaccurate and
misleading cost information can
negatively impact cost
management
3
4
Texas Eastman Company
1) Describe the Quality Management program
initiated ad Texas Eastman. What role did the
new information systems play in the quality
program?
2) Identify the strengths and weaknesses in the
existing financial reporting system. What was
the value of the period Departmental Cost Sheets
(see exhibit 8) in the information-rich operating
environment of Texas Eastman?
3) How have the operators in Briley’s 3B Cracking
Plant been using the new Daily Income Report?
Why is this report useful to them?
4) What were the information requirements for the
new report? Which factors change daily, and
which data stay the same from day-to-day?
Why?
5) What should Pat Kinsey, the chief accountant, do
next? How should the reporting environment in
the Texas Eastman plant be modified in light of
the experience in thee 3B Cracking Plant? What
role should be played by the central accounting
and finance group?
Read The Classic Pen Company and complete the
requirements at the end of the case
Read Western Dialysis Clinic and complete the
requirements at the end of the case
Describe how a “Pseudo Profit
Center” affects cost management
How does Siemens new cost
system support the strategy of the
firm in ways that the traditional
system cannot?
Read Siemens Electric Motor Works (A)
1) Calculate the cost of the five orders in Exhibit 4
under the traditional and new systems.
2) Calculate traditional and new system costs for
each order if 1 unit, 10 units, 20 units or 100
units are ordered. Graph the product costs
against volume ordered
5
Lehigh Steel
1) Compute profits for the five sample products
under ABC and TOC
2) Identify the differences in assumptions between
Standard Costing, ABC and TOC
3) Identify a fourth method of calculating profits
that corrects assumptions identified above that
are inappropriate to Lehigh’s business situation
4) Based on profit calculations and other business
considerations, make recommendations for
Lehigh’s product mix in 1993
How does Capacity impact cost
analysis and cost system design?