Course Outline: Session/Module/Reading Material

Sessions 1: Introduction to Management Accounting and decision making process

Session Coverage

Decision making process

Planning and control cycles
Differences between management accounting and financial accounting

Sessions 2 and 3: Cost terminologies and cost classification

Session Coverage

Principles of controllability and relevance of costs

Sunk Costs
Cost flows in manufacturing, merchandizing, and service organizations
Product vs. Period Costs
Direct Vs. Indirect Costs
Variable Vs. Fixed Costs

Sessions 4 and 5: Cost behaviour and Cost estimation

Session Coverage

Cost behaviour based on variability

Techniques for estimating fixed and variable costs

Case discussion: Burns Jr., W.J., and HertenStein, J. (2005). Salem Telephone Company. HBS 9-104-086

Leading Questions:
1. Analyze the cost behaviour and make the cost equation.
2. Compute the Break even number of hours considering that STC has to service 205 intra company hours.

Sessions 6, 7 & 8: Cost Volume Profit Analysis

Session Coverage

Contribution Margin Statement

Profit Function
Break-even point
Break-even sales
Estimating sales for a targeted profit
Margin of Safety
Operating Leverage
Multiproduct profit planning

1
Case discussion: Sarkar, R. (2000). Hollydazzle.com. HBS 9-100-066

Leading Questions:
1. Evaluate the projected income statement for Hollydazzle.
2. Analyse the cost behaviour and compute the cost function.
3. Compute the break even sales for Holly Dazzle.

Session 9, 10 and 11: Decision making on short term

Session Coverage
Distinction between short term and long term decision based on capacity
Excess supply and excess demand decisions
Accepting or rejecting special order
Make vs. buy decisions
Outsourcing
Product Mix
Pricing of product

Case discussion: Aguilar, F.J. (1994). Catawba Industrial Company. HBS 9-191-053

Leading questions:
1. Is the company correct in its practice of not manufacturing standard model compressors on Sundays because of
the accounting loss incurred on each unit?
2. If Marge McPhee decides to manufacture ten light weight compressors ach week and to sell them at a price of
$8,000, how much better or worse off financially would Catawba be?
3. What weekly production plan for standard and light weight compressors would result in highest financial return
for Catawba?

Mid Term exam will be conducted after session 10

Session 12 & 13: Cost Allocations

Session Coverage

Traditional system of cost allocations

Incentives and cost allocations
Allocation methods for support activity costs

AOL Assessment: As per sub-goal 3.2 will be taken after session 13.

Sessions 14, 15 and 16: Activity based costing and management

Session Coverage

Cost pools and cost drivers

Computing product costs
Implementing ABC systems
Activity based cost management

2
*Case Discussion Kaplan, R.S. (1998). Classic Pen Company: Developing an ABC Model. HBS 9-198-117

Leading Questions:
1. Calculate the revised product costs for the four pens, based on the activity information collected by Dempsey.
2. What actions are stimulated by the ABC product costs?

Session 17 & 18: Budgetary planning and control

Session Coverage

Master budget
Budgeted income statement
Budgeted balance sheet
Cash budget
Flexible budgets

Sessions 19 & 20: Variance Analysis

Session Coverage
Total variance, Sales volume variance, Flexible budget variance
Material cost variance
Labour cost variance
Overhead variances
Interpreting and using variances

Case Discussion Burns Jr., W.J. (2004). Waltham Motors Division. HBS 9-184-169

Leading Questions:
1. Using the budgeted data, how many motors would have to be sold for Waltham Motors Division to break even.
2. Comment on the performance report and the plant accountant’s analysis of results.
3. How would you suggest the performance report to be changed before sending it on to the division manager and
Marco Corporation Headquarters.