Lahore University of Management Sciences

ACCT 130 Principles of Management Accounting

Fall Semester 2014
Instructor
Room No.
Office Hours
Email
Telephone
Secretary/TA
TA Office Hours
Course URL (if any)

COURSE BASICS

Credit Hours
Lecture(s)
Recitation/Lab (per week)
Tutorial (per week)

Abdul Rauf/Ayesha Bhatti/Samia Kokhar/Junaid Ashraf

4-18
TBA
abdul.rauf@lums.edu.pk
042-3560-8143
Secretary: Kashif Saeed / TA: TBA
TBA
http://suraj.lums.edu.pk/~pco/

3
2
On need basis
On need basis

Duration
Duration
Duration

75 minutes
On need basis
On need basis

COURSE DISTRIBUTION

Core
Elective
Open for Student Category
Close for Student Category

Elective

COURSE DESCRIPTION
Principles of Management Accounting is a foundation level course which introduces students to basic managerial accounting
concepts and tools used by corporate managers for intelligent analysis, planning, control and decision making. The emphasis in this
course is how basic accounting data converts into essential management information thus forming the basis for decision-making
within an organization. Key topics include cost elements, cost behavior, marginal and absorption costing, budgeting, variance
analysis, relevant and irrelevant cost for decision making.

COURSE PREREQUISITE(S)

ACCT 100 Principles of Financial Accounting

Regular attendance is required in this course.

Lahore University of Management Sciences

COURSE OBJECTIVES & LEARNING OUTCOMES

The objective of the course is to ensure that students develop a functional knowledge of basic managerial
accounting principles. This will include:

An understanding of the differences between financial and managerial accounting

The ability to calculate costs in both a job order and process cost accounting system and understand the cost
flow

An understanding of the types of costs and how they behave in order to conduct costvolume profit analyses

An understanding of the role and purpose of activity based costing for decision making purposes including the
ability to calculate costs under an ABC system

An understanding of the different types of budgets and the ability to prepare static and flexible budgets

The ability to perform standard cost variance analyses and fixed and variable overhead variance analyses and
interpret these results

Understand the role of accounting information in business decision making

Understand the basic design of management control system including performance measurement,
responsibility accounting etc.

Understand the role of ethics in managerial accounting decisionmaking

UNDERGRADUATE PROGRAM LEARNING GOALS & OBJECTIVES

General Learning Goals & Objectives
Goal 1 Effective Written and Oral Communication
Objective: Students will demonstrate effective writing and oral communication skills
Goal 2 Ethical Understanding and Reasoning
Objective: Students will demonstrate that they are able to identify and address ethical issues in an organizational
context.
Goal 3 Analytical Thinking and Problem Solving Skills
Objective: Students will demonstrate that they are able to identify key problems and generate viable solutions.
Goal 4 Application of Information Technology
Objective: Students will demonstrate that they are able to use current technologies in business and management
context.
Goal 5 Teamwork in Diverse and Multicultural Environments
Objective: Students will demonstrate that they are able to work effectively in diverse environments.
Goal 6 Understanding Organizational Ecosystems
Objective: Students will demonstrate that they have an understanding of Economic, Political, Regulatory, Legal,
Technological, and Social environment of organizations.
Major Specific Learning Goals & Objectives
Goal 7 (a) Discipline Specific Knowledge and Understanding
Objective: Students will demonstrate knowledge of key business disciplines and how they interact including
application to real world situations (including subject knowledge).
Goal 7 (b) Understanding the science behind the decision-making process (for MGS Majors)
Objective: Students will demonstrate ability to analyze a business problem, design and apply appropriate
decision-support tools, interpret results and make meaningful recommendations to support the decision-maker

Lahore University of Management Sciences

Indicate below how the course learning objectives specifically relate to any program learning goals and objectives.

MAPPING OF OBJECTIVES
PROGRAM LEARNING GOALS
AND OBJECTIVES

Goal 1 Effective Written and Oral

Communication
Goal 2 Ethical Understanding and
Reasoning
Goal 3 Analytical Thinking and
Problem Solving Skills
Goal 4 Application of Information
Technology
Goal 5 Teamwork in Diverse and
Multicultural Environments
Goal 6 Understanding
Organizational Ecosystems
Goal 7 (a) Discipline Specific
Knowledge and Understanding

COURSE LEARNING OBJECTIVES

Understand the role of ethics in managerial

COURSE ASSESSMENT ITEM

Quizzes, Project, Final Exams, CP

accounting decisionmaking

An understanding of the differences between

financial and managerial accounting

The ability to calculate costs in both a job

order and process cost accounting system and
understand the cost flow

An understanding of the types of costs and

how they behave in order to conduct
costvolume profit analyses

An understanding of the role and purpose of

activity based costing for decision making
purposes including the ability to calculate
costs under an ABC system

An understanding of the different types of

budgets and the ability to prepare static and
flexible budgets

The ability to perform standard cost variance

analyses and fixed and variable overhead
variance analyses and interpret these results

Understand the role of accounting

information in business decision making

Understand the basic design of management

control system including performance
measurement, responsibility accounting etc.

Understand the role of ethics in managerial

accounting decisionmaking

Quizzes, Project, Final Exams, CP

Goal 7 (b) Understanding the

science behind the decisionmaking process

Lahore University of Management Sciences

Understand the role of accounting

information in business decision making

Understand the basic design of management

control system including performance
measurement, responsibility accounting etc.

Quizzes, Project, Final Exams, CP

GRADING BREAKUP AND POLICY

Quizzes: 25% (n-2 will apply)
Attendance: 10%
Midterm Examination: 25%
Final Examination: 40%

EXAMINATION DETAIL

Midterm
Exam

Yes/No: YES
Combine Separate: N/A
Duration: 2 Hours
Preferred Date:
Exam Specifications: MCQs and / or Short Questions

Final Exam

Yes/No: YES
Combine Separate: N/A
Duration: 2 Hours
Exam Specifications: MCQs and / or Short Questions

SN.

TOPICS

SESSION OBJECTIVES

Managerial
Accounting and the
Business
Environment

Cost Terms,
Concepts, and
Classifications

Identify the major differences and similarities between financial and managerial
accounting.
Understand the role of management accountants in an organization.
Understand the basic concepts underlying JustInTime (JIT), Total Quality Management
(TQM), Process Reengineering and the Theory of Constraints (TOC).
Understand the importance of upholding ethical standards.
Identify and give examples of each of the three basic manufacturing cost categories.
Distinguish between product costs and period costs and give examples of each.
Prepare an income statement including calculation of the cost of goods sold.
Prepare a schedule of cost of goods manufactured.
Understand the differences between variable costs and fixed costs.
Understand the differences between direct and indirect costs.
Define and give examples of cost classifications used in making decisions: differential
costs, opportunity costs, and sunk costs.

Lahore University of Management Sciences

SN.

TOPICS

SESSION OBJECTIVES

Systems Design:
JobOrder Costing

Distinguish between process costing and joborder costing and identify companies that
would use each method.
Identify the documents used in a joborder costing system.
Compute predetermined overhead rates and explain why estimated overhead costs
(rather than actual overhead costs) are used in the costing process.
Apply overhead cost to jobs using a predetermined overhead rate.
Determine under applied or over applied overhead.
Use the direct method to determine cost of goods sold
Understand how fixed and variable costs behave and how to use them to predict costs.
Use a scatter graph plot to diagnose cost behavior.
Analyze a mixed cost using the highlow method.
Prepare an income statement using the contribution format.
Explain how changes in activity affect contribution margin and net operating income.
Prepare and interpret a costvolumeprofit (CVP) graph.
Use the contribution margin ratio (CM ratio) to compute changes in contribution and net
operating income resulting from changes in sales volume.
Show the effects on contribution margin of changes in variable costs, fixed costs, selling
price, and volume.
Compute the breakeven point in unit sales and sales dollars.
Determine the level of sales needed to achieve a desired target profit.
Compute the margin of safety and explain its significance.
Compute the degree of operating leverage at a particular level of sales and explain how it
can be used to predict changes in net income.
Compute the breakeven point for a multi product company and explain the effects of
shifts in the sales mix on contribution margin and the breakeven point.
Explain how variable costing differs from absorption costing and compute unit product
costs under each method.
Prepare income statements using both variable and absorption costing.
Reconcile variable costing and absorption costing net operating incomes and explain why
the two amounts differ.
Understand the advantages and disadvantages of both variable and absorption costing.
Record the flow of materials, labor, and overhead through a process costing system.
Compute the equivalent units of production using the weighted average method.
Prepare a quantity schedule using the weightedaverage method.
Compute the costs per equivalent unit using the weighted average method.
Prepare a cost reconciliation using the weightedaverage method.
Compute the equivalent units of production using the FIFO method.
Prepare a quantity schedule using the FIFO method.
Compute the costs per equivalent unit using the FIFO method.
Prepare a cost reconciliation using the FIFO method.
Understand activitybased costing and how it differs from a traditional costing method.
Assign costs to cost pools using a firststage allocation.
Compute activity rates for cost pools.
Assign costs to a cost object using a secondstage allocation.
Use activitybased costing to compute product and customer margins.

Understand why organizations budget and the processes they use to create budgets.
Prepare a sales budget, including a schedule of expected cash collections.
Prepare a production budget.
Prepare a direct materials budget, including a schedule of expected cash disbursements

Cost Behavior:
Analysis and Use

CostVolumeProfit
Relationships

Variable Costing: A
Tool for
Management

Systems Design:
Process Costing (FIFO
Method)

ActivityBased
Costing: A Tool to Aid
Decision Making

Mid term
Profit Planning

SN.

Lahore University of Management Sciences

TOPICS

10

Standard Costs and

the Balanced
Scorecard

11

Flexible Budgets and

Overhead Analysis

SESSION OBJECTIVES

12

Segment Reporting
and Decentralization

13
14

Transfer Pricing
Relevant Costs for
Decision Making

15

Material Planning
(Economic Order
Quantity, Re-Order
Level and Safety
Stock)

for purchases of materials.

Prepare a direct labor budget.
Prepare a manufacturing overhead budget.
Prepare a selling and administrative expense budget.
Prepare a cash budget.
Prepare a budgeted income statement.
Prepare a budgeted balance sheet.
Explain how direct materials standards and direct labor standards are set.
Compute the direct materials price and quantity variances and explain their significance.
Compute the direct labor rate and efficiency variances and explain their significance.
Compute the variable manufacturing overhead spending and efficiency variances.
Understand how a balanced scorecard fits together and how it supports a companys
strategy.
Compute delivery cycle time, throughput time, and manufacturing cycle efficiency (MCE).
Prepare a flexible budget and explain the advantages of the flexible budget approach over
the static budget approach.
Prepare a performance report for both variable and fixed overhead costs using the flexible
budget approach.
Use a flexible budget to prepare a variable overhead performance report containing only a
spending variance.
Use a flexible budget to prepare a variable overhead performance report containing both
a spending and efficiency variance.
Compute the predetermined overhead rate and apply overhead to products in a standard
cost system.
Compute and interpret the fixed overhead budget and volume variances.
Prepare a segmented income statement using the contribution format and explain the
difference between traceable fixed costs and common fixed costs.
Compute return on investment (ROI) and show how changes in sales, expenses, and assets
affect ROI.
Compute residual income and understand its strengths and weaknesses.
Determine the range, if any, within which negotiated transfer rice should fall.
Identify relevant and irrelevant costs and benefits in a decision.
Prepare an analysis showing whether a product line or other business segment should be
dropped on retained.
Prepare a make or buy analysis.
Prepare an analysis showing whether a special order should be accepted.
Determine the most profitable use of a constrained resource and the value of obtaining
more of the constrained resource.
Prepare an analysis showing whether joint products should be sold at the splitoff point or
processed further.
Calculating Economic Order Quantity, Re-Order Level and Safety Stock
Using the above information in material planning of the organization

Lahore University of Management Sciences

TEXTBOOK(S)/SUPPLEMENTARY READINGS

Managerial Accounting, 12th edition, Garrison, Noreen, & Brewer, McGraw Hill.
Further supplementary material will be provided during the duration of the course.