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BUSA 323 Details ~ Spring 2011
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Texts & materials ~ Course objectives specific to BUSA 323
Assignment Schedule ~ Summary of graded assignments

Note: All the course information is accessible directly or indirectly from this page. Information common to all my courses can
be found at Course Syllabi: General Information. A Sakai site for this course is also available.

Catalog description: Cost Accounting and Control Systems is a critical examination of systems for product costing and managerial control. Case analyses deal with a variety of traditional and non-traditional product and service costing systems to achieve basic objectives of inventory valuation, planning, and operational control. Emphasis on developing the skills to critique cost systems and to understand the relationship between cost systems and production/service operations, organizational strategy, and performance evaluation and control systems. Prerequisites: MATH 128 (or MATH 151 and 230); CSCI 220; STAT 231; ECON 101; BUSA 202, 203; 4 credits.

This course is about two sets of systems within organizations--cost accounting systems and managerial control systems:

bulletcost accounting is basically about developing financial models which replicate the economic impact of the production processes within an organization. Cost systems ultimately enable us to determine the cost of products or services for inventory valuation and financial reporting. We will use Excel to create models for cost allocation for a variety of organizations [e.g., discrete product manufacturing (think custom made furniture), continuous process production (think making and packaging Cheerios), or services (a law firm)] and using different cost distribution procedures [traditional allocation and activity-based costing].
bulletmanagerial control systems are the systems used by managers to ensure that resources are obtained and used effectively and efficiently in achievement of the organization's objectives. However, cost accounting systems and managerial control systems may work at cross purposes. We will examine situations in which the cost accounting systems have perverse and counter-productive effects on managerial control efforts. Understanding these behavioral impacts is a critical element in systems design.
While basic familiarity with financial statement preparation and organization is essential, please note that this is not a bookkeeping course. Familiarity with basic financial and managerial accounting terminology is assumed. BUSA 202 (Financial Accounting) and BUSA 203 (Managerial Accounting) are prerequisites for this course. BUSA 323 should not be taken concurrently with BUSA 203. An additional requirement for successful completion of BUSA 323 is proficiency in the use of a microcomputer spreadsheet (e.g., Excel); students lacking proficiency in spreadsheet usage usually find the major assignments in this course overwhelming. Students who lack the requisite spreadsheet capability should not enroll in this course.

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Texts and materials:

The text for the course is Cost Accounting: A Managerial Emphasis, by Horngren, Foster, Datar, Rajan and Ittner, 13th edition, Pearson Prentice Hall, 2009. ISBN is 978-0-13-612663-8. I learned cost accounting out of the 3rd edition of this book many years ago and I still think it is the best one available. A note regarding the text: I am well aware of student attempts to save money by buying old editions, “international” editions, etc. In a word, DON”T. You risk sacrificing consistency of content and assignment materials for the sake of a few dollars. Those who pursue this course of action do so at their own risk. I will NOT take responsibility for reconciling the differences between the required text and whatever other edition[s] you may have.

The following materials are available for download in Acrobat format at no charge at a Harvard Business School website [I will give you the URL]; the cost of these materials to PLU is funded through the e-resources service of Mortvedt Library:

  1. Rosemont Hill Health Center
  2. Colorscope
  3. Compagnie du Froid.

Some materials will be available for download directly from the PLU server; hyperlinks will be provided in the assignment list. 

Memory stick: If you do not own a memory stick, jump drive, pen drive or similar device, get one--the bigger the capacity the better [you'll use the extra capacity eventually, if not in this class]; at a minimum I suggest a 1.0 gig model. USB 2.0 compatibility is standard. All of our work this semester will require use of Excel, and it will be essential to have easy access to your work in class, at home, and wherever else you work on a computer. I also recommend that you put your name on your memory stick with a self-adhesive label. I strongly recommend that you bring your memory stick to class daily, simply to ensure that you have it when you need it. I also recommend that you back up your memory stick to your hard drive or other media daily. Memory sticks do fail, and they can get lost.

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Course objectives specific to BUSA 323

Cost accounting and control systems is a professional level course in the accounting concentration; it is not required, but is strongly recommended. My single overriding objective in teaching this course is to have each of you develop a clear understanding of the role of cost accounting and control systems accounting in contemporary organizations, and the ability to apply that knowledge in a practical, professional setting. This means that students who complete this course will be able to do the following 

  1. Product and service costing
    1. Develop and analyze the costs of products or services in a variety of environments
    2. Allocate service department overhead
    3. Determine the values of inventories and cost of goods sold
    4. Explain the strategic and managerial impact of alternative product costing systems
  2. Activity-based costing (ABC): calculate product or service costs using ABC and explain the theoretical rationale for the use of ABC
  3. Performance evaluation
    1. Evaluate organizational and managerial performance; recommend appropriate managerial action
    2. Establish transfer prices which are consistent with organizational strategy
    3. Compute and interpret profit and standard cost variances; explain the implications of the variances for decision making and control; recommend appropriate managerial action 
    4. Explain the strategic implications of managerial control systems

Throughout the course we will be concerned with the concepts and mechanics underlying cost allocation, product costing, and cost analysis. In other words, at least within the constraints imposed by the classroom setting, you will learn to do cost accounting. Additional, equally important concerns are (1) the analysis and evaluation of the impact of alternative cost accounting procedures on decision making, and (2) the relationship between cost management and business strategy.

An additional objective of this course is to dispel the common misconception that public accounting is the only place where the action is, and that positions in cost or managerial accounting are inherently less interesting or rewarding than those in auditing. In fact, cost accounting is a field of exciting developments in which you can play an important role as a professional.

In practical terms, what you take away from this course will be a function of (i) your aptitude for financial analysis, (ii) your aspirations regarding the subject matter, and (iii) the level of sustained effort you put into the course. Success in the course depends on your ability to "put the numbers together," as well as on your ability to understand what "lies behind the numbers." The latter is often addressed in the form of questions such as "Why?" "Who cares?" "So what?" or "What difference will it make?" The inability or unwillingness to address such questions is perhaps the most common characteristic of students who perform poorly in this course.

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Assignment schedule

FYI #1: You will note that there are catch up days scheduled. Please do NOT assume that it is OK to get behind because these are in the schedule. This is a demanding, professional level class and I have purposely included these to ensure that we do cover the assigned material. If we can possible "save" the catch up days, it will be to our advantage to do so.

FYI #3: Only the assignments designated as Graded Assignment are to be handed in.

FYI #2: Some assignment will be designated for electronic submission; for an assignment that is to be submitted electronically, you are to send your Excel file to me at myersgm@plu.edu. For each such assignment I will specify a subject line for the email. Because I will establish email filters to divert all files for an assignment to a specific folder, you MUST use that subject line [and ONLY that subject line] in your message. Also, you MUST use your last name and the name of the problem as the Excel filename. For example, if your last name is Smith and the case is Baker Engineering, your filename would be smithbaker.xls. These procedures are essential to ensure that [1] your message does not wind up in the junk mail folder, and that [2] I can differentiate your file from everyone else's.

Date Day Session No. Readings, problems, cases and other assignments
[assignments are in the Horngren text unless otherwise noted]
02/08 T 1 Course introduction; review of basic concepts from managerial accounting and introduce basic cost accounting material. The slides I will use in class are available at cost accounting intro. Also download Review of Content from Managerial Accounting
02/10 R 2 Preparation for today's class: Review chapters 1, 2, and 3 as needed; review Power Point slides from Tuesday; review Review of Content from Managerial Accounting as needed. Work through the assignment questions in the Seattle Rattle problem, which is on pages 3 and 4 of the Review of Content from Managerial Accounting handout.

Objectives for today's class: The Seattle Rattle Company problem is designed as a review of basic concepts from managerial accounting; it also introduces fundamental material with which we will be working throughout the semester. After doing the Seattle Rattle problem, you should be comfortable working with the following concepts: variable costs, fixed costs, mixed costs, manufacturing costs, direct costs, indirect costs, non-manufacturing costs, contribution margin, gross margin, profit margin, absorption costing, variable costing, and break even points.

02/15 T 3 Preparation for today's class: read ch. 4; complete the Targon Sprinkler case; the assignment questions are at the end of the case.
Objectives for today's class:
gain practice in recording costs in a simple job order cost system; relate cost accounting information to decision making.
02/17 R 4 Preparation for today's class: work problems 4-32 and 4-33
Objectives for today's class:
develop skill in calculating overhead rates and in explaining a cost accounting system's design, including the specification of overhead pools and the choices of allocation bases.
02/22 T 5 Preparation for today's class: Read pages 540 - 550 [top of the page]. Work the Baker Engineering case; download file here
Objectives for today's class:
develop skill in modeling cost systems using Excel. Careful attention to the details in the case and the spreadsheet model will ensure that you understand where the numbers come from, what they mean, and what role they play in calculating product costs.
For-credit assignment: You have the solution to the Baker Engineering assignment in the Power Point slides we used in class. Your assignment is to REPLICATE the entire Baker Engineering cost accounting model in Excel and reproduce the numbers. It may be tempting to pass this off as so much busy work, but those who do will find that this is a slippery slope, at the bottom of which is a deep hole filled with D and F grades.
02/24 R 6 Preparation for today's class: Review ch. 15 as needed; work problem 15-30, before doing the first two requirements as given, determine the plantwide overhead rate. When you get to requirement 3, calculate the cost of jobs 88 and 89 using the plantwide rate as well as the departmental rates derived in requirements 1 and 2. How would the knowledge of the impact of the plantwide rate affect your answer to requirement 4? Also work Baker Engineering, part 2; details TBA
Objectives for today's class:
Today's assignments "close the loop." We'll use predetermined overhead rates to apply costs to production, and in Baker, part 2, we'll record product costs for the subsequent fiscal period and then reconcile the overhead applied and overhead control account balances.
03/01 T 7 Objectives for today's class: wrap up of ch. 15 material; day one on Rosemont Hill Health Center case. READ the case and make decisions about the cost pools. Determine the description of each cost pool and the cost numbers in each pool for the first stage of the allocation in the Rosemont case. There are complications in dealing with the costs in nursing and social work, and we need to determine which departments are "service" and which are "production." The decisions we make will have a significant impact on the eventual cost allocation. Be prepared to hand in a ONE PAGE summary of your decisions and the justification[s] for them. By the end of class, we will try to agree on 2 or 3 cost pool combinations. Your assignment for March 1 will be to  use one of those combinations to calculate the anticipated cost per visit. Each of you will have a specific cost pool to work with.
03/03 R 8 Preparation for today's class: Rosemont Hill Health Center; assignment details to be announced
03/08 T 9 Prepare for today's class: Read ch. 17; review process costing model, print Tom's Tomato Cannery problem; download process costing template here [pdf]; the printout of the template includes the numerical solution for the first month for both departments; make as much progress as you can setting up the first month cost information for both departments. Use cell referencing EVERYWHERE. Bring hardcopies of all materials and your Excel file to class.
Objectives for today's class: hands on session with Excel working on process costing problems. By the end of class you should have the Tom's Tomato Cannery problem finished [both periods; both departments]. This should give you a good grasp of the flows of both costs and product in a process costing environment.
03/10 R 10 Prepare for today's class: work problems 17-30 and 17-33
Objective for today's class: Reinforce the mechanics of process costing.
03/15 T 11 Prepare for today's class: be prepared for an in-class quiz on process costing, after which we'll begin coverage of standard costing [ch. 7]
03/17 R 12 Preparation for today's class: read ch. 7; set up Widget Works [download here]
Objective for today's class
: Widget Works provides a comprehensive example of reconciliation between budgeted and actual net income. There is enough information in the case to provide opportunity for speculation on the reasons for the variances. Students gain practice in modeling the required analysis and interpreting the results, including the potential reasons for the variances.
For-credit assignment: As with Baker Engineering, you have the solution to this problem. Replicate the Widget Works model in Excel. 
03/22 T 13 Preparation for today's class: continue with Widget Works as needed; read ch. 8; work problems 7-29, 7-30
Objective for today's class: Continue analysis of variances; by the end of class today, you should understand the structure of the variance analysis model and be able to apply it in a simple setting
03/24 R 14 Preparation for today's class: review ch. 7 & 8 as needed; work problems 8-27, 8-22, 8-32
Objective for today's class: Ensure that everyone is up to speed on the variance calculations. Problem 8-32 is a good test of your understanding of this material.
03/28 T 15  
03/30 R 16 Take home exam on standard costs and variance analysis: Thayer's Bears case; download the data file here; detaisl to be announced
Spring Break
04/12 T 17 Preparation for today's class: Read ch 9; work problems 9-28, 9-31, 9-32, 9-33
Objective for today's class: One of the major drawbacks of absorption costing is the impact of fluctuating production levels on managerial incentives and the resulting buildup of inventory.
14/14 R 18 Preparation for today's class: Review ch 9 as needed;  work problems 9-39, 9-40, Kitsap Kandle Compnay [Handout]
Objective for today's class: One of the major drawbacks of absorption costing is the impact of fluctuating production levels on managerial incentives and the resulting buildup of inventory. After today's class you should have a clear understanding of these issues.
04/19 T 19 Quiz in class on cost accounting systems [absorption vs. variable, standard costing & variances, etc.]
04/21 R 20 Preparation for today's class: read ch. 13, including the appendix on productivity; work problems 13-30 and 13-31
Objective for today's class: introduce the notion of a balanced scorecard and develop familiarity with the measures used to conduct a strategic analysis of operating income; continue discussion with 13-32 and 13-33 as time permits
04/26 T 21 Preparation for today's class: read ch. 5; work problems 5-28, 5-29, 5-30
Objectives for today's class: our objective for today is to develop an understanding of the conceptual foundation for activity-based costing and the mechanics of derivation of ABC costs.
04/28 R 22 Preparation for today's class: read pp. 500 - 515; work problems 14-21 and 14-22
Objective for today's class: today's class focuses on the use of Activity-based costing to evaluate customer profitability
05/03 T 23 Colorscope case; details TBA
05/05 R 24 Preparation for today's class: read pp. 515 - 521; work problems 14-32, 14-33
Objectives for today's class: by the end of class today, you should be able to calculate sales mix, sales quantity and market share variances
05/10 T 25 Preparation for today's class: read ch. 22; work problems 22-30, 22-31
Objectives for today's class: understand the conflicts that can arise with interdivisional transfers
05/12 R 26 Preparation for today's class: read ch. 23; work problems 23-32 and 23-33
Objectives for today's class: develop a basic understanding of issues involving compensation and bonuses
05/17 R 27 Final case is tentatively changed to Charley's Steak House [B]. Details to follow.
05/19 R 28 Catch up day; course wrap up; discussion of final; course evaluations
05/19; 8:00 am Final exam

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Summary of graded assignments

Description Approximate % of final grade Dates Notes and comments
Baker Engineering, part 1; modeling cost systems in Excel 5.0% 2/22 Individual submission
Rosemont Hill Health Center, part 1: cost allocation decisions 5.0% 3/1 Individual submission
Rosemont Hill Health Center, part 2: cost allocation and the 2-stage model 15.0% 3/3 Individual submission
Quiz on process costing 10.0% 3/15 Individual submission
Thayer's Bears [variance analysis and control systems] 15.0% 3/30 Group submission [2/group]
Colorscope [Activity-based costing and decision making] 10.0% 4/28 Individual submission
Final project [Compagnie du Froid case]

20.0%

5/19

Group submission [2/group]
Participation

20.0%

Daily Participation means that you are actively involved in the class. Attendance does NOT constitute participation.

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Copyright © 2010 Gerald M. Myers
Last modified: 1/31/2011; 17:24