Management Accounting Ana Marques

Term III Spring 2016

Meeting times: Section A Th and F, 10:00-11:30 (Room L-11)
Section E Th and F, 12:00-13:30 (Room L-21)

Professor: Ana Marques is visiting IIMB. She is an Associate Professor at Nova

School of Business and Economics (Portugal). She holds a PhD in Accounting
(University of Texas at Austin, USA).
Email:
ana.marques@iimb.ernet.in
Office:
B-106
Office hours: Th and F, 8:30-10:00, or by appointment (please send email)

Course Description: This is a course on cost management with an emphasis

on strategic decisions. The course is built around cost competitiveness and cost
leadership in the broad framework of Michael Porters generic competitive
strategies. In addition to conventional topics of cost accounting such as Job and
Process costing, Cost-Volume profit analysis, budgeting, standard costing, cost
allocation, the new topics such as Activity based costing, life cycle costing, theory
of constraints, and transfer pricing are also covered. Overall the course is
divided into four modules: (i) cost estimation, (ii) costing for decision making,
(iii) strategic cost management, and (iv) cost control and performance
evaluation.

Course Objectives:

To explain the use of management accounting information in

product costing, planning and control and strategic decision making

To explain basic tools and techniques required for product costing,

planning, control and decision making

To emphasize the use of relevant accounting information that differs

for different managerial situations

Course Procedures: Two credit course, with 14 sessions of 90 minutes each.

The format of the course is based on lectures, explaining the conceptual
framework, problems (numerical exercises) and case studies.
Students are expected to practice on exercises given in the basic text book for
examination purpose. Problems/exercises will be suggested. These are not
considered in the final grade.
Attendance will not be taken into consideration in students grades. However, it
is the students interests to come to class and participate. If you cant attend a
lecture please get the slides, read the assignments, and dont fall behind.

Study Material:
Text: Ronald Hilton & David Platt, Managerial Accounting, 9th Ed., McGraw Hill
Additional Material: The students will receive a collection of cases and exercises.
The slides used in class, as well as other materials I find relevant (news,
academic articles, reports, etc), will be in Moodle.

Evaluation:
Case presentation and analysis (20%): Class is divided into group of five
members, and each case study is allotted to two groups. One group presents the
case in detail with analysis and solution (15 minutes), while the other group
comments on it (5 minutes). A general discussion follows (5 minutes). The
maximum marks for presentation group is 15% and the commenting group will
get maximum marks of 5%. Thus, each group presents one case and comments
another. On these dates, attendance of all the group members is compulsory. In
order to avoid free riding at the end of the course each student will evaluate the
work of his/her group colleagues. Based on this the individual grades can vary up
to 10%, either up or down. See last page for more instructions.
Mid-term Test (35%): On 23/Jan, with duration of 90 minutes.
Final Examination (45%): On 15/March, with duration of 2 hours. The grade for
the final exam will be disclosed within one week of the exam. Students will have
an opportunity to review their exams and my model answers at my office.
Students must not remove, copy or photocopy their exams or my answers.
Complaints regarding errors in grades will be accepted, if given in writing and
immediately after the time of the exams review. I will then examine these
complaints and make the corrections I deem appropriate.
Finally, I will attribute a number grade point (up to 4), up to the second decimal.

Detailed Description of each module:

Cost Measurement (CM)
This module explains how costs are identified and classified in different business
organisations, which is most importantly used for estimation of value of work in
progress, and finished goods. It covers: Cost Terms, Cost Drivers, Cost pools and
Cost Objects and Classification of costs. The topics covered under this module
includes: Job Costing and Process costing; Costing of services; Tracing direct
costs to products and allocating indirect costs; and different method of cost
allocation.
Costing for Decision Making (CDM)
This module discusses the relationship between cost, volume and profit and how
the behaviour of cost affects profit under different volumes. It explains how cost
information and cost behaviour are important for different kinds of decision
making. Some of the decision problems covered under this module are:
Understanding cost behaviour, decisions on make or out source, break even
analysis, what if analysis, closing down unprofitable divisions or product line,
alternative sourcing, pricing decision under different conditions, joint costing, etc.
Strategic Cost Management (SCM)
The various aspects of Strategic Cost Management as propounded by Shank and
Govindarajan, and Robert Kaplan are Competitive Advantage Analysis, Cost
Driver Analysis, and Value Chain Analysis. An important tool of management
accounting is Activity Based Costing (ABC). ABC helps in identifying cost drivers
and getting better idea of cost structure. It is critical to developing Value Chain
Analysis, and various dimensions of SCM like Customer profitability Analysis,
Channel Management, Target Costing, Product profitability, etc.
Cost Management through Budgeting and Control (CBC)
This module discusses how cost information is used for planning. Topics covered
under this module include: Types of Budgets; Preparation of Master Budget; Role
of Standards in budget preparation; Impact of financial policies on budgets;
Preparation of Cash Budget; Preparation of pro-forma financial statements. This
module explains how management establishes control systems at various levels
to measure performance when various sub-units of organization implement
budgets or other plans. The importance of tools like Variance Analysis is also
discussed.
Performance Measurement:
This module focuses on divisional performance measurement concepts like EVA
and Balanced Score card

Session
#

Topics

Cases

Cost concepts and Estimation (3 sessions)

1
(7/Jan)
2
(8/Jan)

Introduction,
Cost Management Concepts
(Chapters 1 & 2)
Product Costing Job Costing
(Chapter 3)

3
(14/Jan)

Product Costing Process Costing

(Chapter 4)

Case study:
XyberSpace Consulting
Cases for Assignment:
(1) Lipman Bottle company
(2) Huron Automotive Comp.
(3) Delaney Motors
Case for Assignment:
(4)Tech-Tonic Sports Drink

Costing for Decision making (4 sessions)

4 to 7
(15, 21,
22/Jan &
4/Feb)

Cost Analysis for Decision Making:

Break Even Analysis, Marginal Costing,
Differential Costing, Relevant Costing,
Pricing Decisions, Target costing, and
Transfer Pricing
(Chapters 6, 7, 8 & 14)

Case studies:
Primus Industries
Hospital Supply
Cases for Assignment:
(5) Krogs Metalfab
(6) Bill French
(7) Prestige Telephone
(8)Wendys Chili

Strategic Cost Management (3 sessions)

8&9
(5 &
6/Feb)

10
(18/Feb)

Activity Based Costing

(Chapter 5)

Strategic
Cost
Management
Customer Profitability
(Chapter 5)

Case Studies:
Wilkerson Comp.
Pecos Products
Case for Assignment:
(9) Insteel Wire Products
- Case Study:
Spring Distribution Comp.
Case for Assignment:
(10) Dakota Office Products

Cost Control and Performance Evaluation (4 sessions)

11 & 12
(19 &
25/Feb)

Budgeting, Standard Costing and

Variance Analysis
(Chapters 9, 10 & 11)

Case Study:
Web Company
Software Associates
Cases for Assignment:
(11) Danshui Plant2
(12) Midwest Ice cream

13 & 14 Performance Evaluation-responsibility

(26/Feb centers and review
& 3/Mar) (Chapters 12 & 13)
Case Presentations
There will be one case discussion per session, starting from session 3. These are
team projects, and all members of the team must contribute to the team for
preparation of the case study. Groups will be formed by the PGP office and the
schedule of presentation will be announced in class and posted on Moodle. Each
team will present just one case, but is required to actively question and comment
on the remaining cases presented by the remaining teams. Thus, careful
preparation of all cases is important.
Teams should try to organize their presentations to be not more than 15 minutes
in length, followed by the discussion for ten minutes. As you are in the role of a
management consulting team vying for a new client, your peers (who have also
prepared the case) are placed in the role of competing consulting teams. Thus,
they are expected to question, comment on, and challenge (in a collegial way)
your assessments and recommendations during your presentation (in fact, this is
part of their grade). So, presenting teams should be ready to defend and
expound on their assessments and recommendations.
Other than responding to the case requirements and discussing their
recommendations, how a team structures their presentation is entirely up to
them. The presenting team will send me their presentation slides before calss.
The commenting group will send me a report (no more than two pages, plus a
cover page), within two days of case presentation. In this report, the team may
comment on the presenting teams responses to the case requirements, things
you feel they did not address, things that you felt they addressed well, etc. In it,
the team must also identify in three questions or comments that it asked during
the presentation.