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EAC 3331 Cost Accounting


Course Description

Studies relevant costs for managerial decision making. Includes cost accounting fundamentals used in managerial control functions. (Requirement: Third-year standing in University Alliance.)

Course Description

After completing this course, students will be able to

  • Explain the development and use of accounting information for decision making, planning, and control in organizations
  • Provide specialized accounting information to support management decision making by providing a basic understanding of costs, their behavior, and methods to use this information for planning and control purposes, cost allocations, and budgeting

Week 1


Lecture: Introduction and Course Overview
Lecture: Types of Accounting, Strategic Decisions, the Value Chain, Decision Making, and Ethics
Lecture: Cost Terms, Total and Unit Costs, and Aspects of Inventory
Lecture: Income Statement and Schedule of Cost of Goods Sold: Different Costs for Different Purposes
Lecture: Cost of Goods Manufactured Problem

Outcomes

After completing this module, students will beable to

  • Describe how cost accounting supports management accounting and financial accounting
  • Explain how management accountants affect strategic decisions
  • Describe the set of business functions in the value chain and identify the dimensions of performance that customers are expecting of companies
  • Explain the five-step decision-making process and its role in management accounting
  • Describe three guidelines management accountants follow in supporting managers
  • Explain how management accounting fits into an organization’s structure
  • Explain what professional ethics mean to management accountants
  • Define and illustrate a cost object
  • Distinguish between direct costs and indirect costs
  • Explain variable costs and fixed costs
  • Interpret unit costs cautiously
  • Distinguish among manufacturing companies, merchandising companies, and service-sector companies
  • Describe the three categories of inventories commonly found in manufacturing companies
  • Distinguish inventoriable costs from period costs
  • Explain why product costs are computed in different ways for different purposes
  • Describe a framework for cost accounting and cost management

Week 2


Lecture: Focus on Contribution Margin, Breakeven Point, Target Income, and Cost-Volume-Profit (CVP)
Lecture: Contribution Margin Income Statement Problem

Outcomes

After completing this module, students will beable to

  • Explain the features of cost-volume-profit (CVP) analysis
  • Determine the breakeven point and output level needed to achieve a target operating income
  • Explain how income taxes affect CVP analysis
  • Explain CVP analysis in decision making and how sensitivity analysis helps managers cope with uncertainty
  • Use CVP analysis to plan variable and fixed costs
  • Apply CVP analysis to a company producing multiple products
  • Adapt CVP analysis to situations in which a product has more than one cost driver

Week 3


Lecture: Focus on Job Costing
Lecture: Job Costing Problem
Lecture: Focus on Activity-Based Costing Systems (ABC)
Lecture: Activity-Based Costing Problem

Outcomes

After completing this module, students will beable to

  • Describe the building-block concepts of costing systems
  • Distinguish job costing from process costing
  • Outline the seven-step approach to job costing
  • Distinguish actual costing from normal costing
  • Track the flow of costs in a job-costing system
  • Dispose of underallocated or overallocated manufacturing overhead costs at the end of the fiscal year using alternative methods
  • Apply variations from normal costing
  • Explain how broad averaging undercosts and overcosts products or services
  • Present three guidelines for refining a costing system
  • Distinguish between simple and activity-based costing systems
  • Describe a four-part cost hierarchy
  • Explain cost products or services using activity-based costing
  • Explain how activity-based costing systems are used in activity-based management
  • Compare activity-based costing systems and department costing systems
  • Evaluate the costs and benefits of implementing activity-based costing systems

Week 4


Lecture: Focus on Process Costing and the Weighted Average Inventory Costing Method
Lecture: Focus on Process Costing and the Weighted Average Inventory Costing Method with Beginning Inventory
Lecture: Focus on the FIFO Inventory Costing Method, Using Standard Costs, and Transferred-In Costs
Lecture: Process Costing Problem

Outcomes

After completing this module, students will beable to

  • Identify the situations in which process-costing systems are appropriate
  • Describe the five steps in process costing
  • Calculate equivalent units and understand how to use them
  • Use the first-in, first-out (FIFO) method of process costing
  • Incorporate standard costs into process-costing systems
  • Apply process-costing methods to situations with transferred-in costs

Week 5


Lecture: Developing Master Budgets
Lecture: Budgeted Financial Statements, Cash Budgets, and Responsibility Accounting
Lecture: Master Budget Problem
Lecture: Flexible Budgets, Direct Cost Variances, and Management Control
Lecture: Flexible Budget Problem

Outcomes

After completing this module, students will beable to

  • Describe the master budget and explain its benefits
  • Describe the advantages of budgets
  • Prepare the operating budget and its supporting schedules
  • Use computer-based financial planning models in sensitivity analysis
  • Explain kaizen budgeting and how it is used for cost management
  • Describe responsibility centers and responsibility accounting
  • Explain how controllability relates to responsibility accounting
  • Recognize the human aspects of budgeting
  • Distinguish a static budget from a flexible budget
  • Develop flexible budgets and compute flexible-budget variances and sales-volume variances
  • Explain why standard costs are often used in variance analysis
  • Compute price variances and efficiency variances for direct-cost categories
  • Understand how managers use variances
  • Perform variance analysis in activity-based costing systems
  • Describe benchmarking and explain its role in cost management

Week 6


Lecture: Flexible Budgets, Overhead Cost Variances, and Management Control
Lecture: Overhead Flexible Budget Problem

Outcomes

After completing this module, students will beable to

  • Explain the similarities and differences in planning variable overhead costs and fixed overhead costs
  • Develop budgeted variable overhead cost rates
  • Compute the variable overhead flexible-budget variance, the variable overhead efficiency variance, and the variable overhead spending variance
  • Develop budgeted fixed overhead cost rates
  • Compute the fixed overhead flexible-budget variance, the fixed overhead spending variance, and the fixed overhead production-volume variance
  • Show how the 4-variance analysis approach reconciles the actual overhead incurred with the overhead amounts allocated during the period
  • Calculate overhead variances in activity-based costing

Week 7


Lecture: Inventory Costing and Capacity Analysis
Lecture: Inventory Costing Problem
Lecture: Determining How Costs Behave
Lecture: Linear Cost Estimation Using the High-Low Method Problem

Outcomes

After completing this module, students will beable to

  • Identify what distinguishes variable costing from absorption costing
  • Compute income under absorption costing and variable costing, and explain the difference in income
  • Explain how absorption costing can provide undesirable incentives for managers to build up inventory
  • Differentiate throughput costing from variable costing and absorption costing
  • Describe the various capacity concepts that can be used in absorption costing
  • Examine the key factors in choosing a capacity level to compute the budgeted fixed manufacturing cost rate
  • Describe how attempts to recover fixed costs of capacity may lead to price increases and lower demand
  • Explain the two assumptions frequently used in cost-behavior estimation
  • Describe linear cost functions and three common ways in which they behave
  • Understand various methods of cost estimation
  • Outline six steps in estimating a cost function using quantitative analysis
  • Describe three criteria used to evaluate and choose cost drivers
  • Explain and give examples of nonlinear cost functions
  • Distinguish the cumulative average-time learning model from the incremental unit-time learning model
  • Discuss data problems encountered in estimating cost functions

Week 8


Lecture: Decision Making and Relevant Information
Lecture: Product Selection with Constrained Resources Problem and Special Order Problem

Outcomes

After completing this module, students will beable to

  • Use the five-step decision-making process to make decisions
  • Distinguish relevant from irrelevant information in decision situations
  • Explain the opportunity-cost concept and why it is used in decision making
  • Explain how to choose which products to produce when there are capacity constraints
  • Discuss factors managers must consider when adding or dropping customers or segments
  • Explain why book value of equipment is irrelevant in equipment-replacement decisions
  • Explain how conflicts can arise between the decision model used by a manager and the performance-evaluation model used to evaluate the manager

The course description, objectives and learning outcomes are subject to change without notice based on enhancements made to the course. November 2013