Lahore University of Management Sciences

ACCT 130 – Principles of Management Accounting

Fall Semester 2020-21

Instructor Ayesha Bhatti

Room No. 4-14, SDSB, 4th floor
Office Hours TBA
Email Ayesha.bhatti@lums.edu.pk
Telephone Ext 8087, 8023
Secretary/TA Kashif.saeed@lums.edu.pk
TA Office Hours TBA
Course URL (if any)

Course Teaching Methodology (Please mention following details in plain text)

 Teaching Methodology: blend of synchronous and asynchronous  

 Lecture details: Presentations and videos to be uploaded before the class sessions. Class sessions would be utilized to discuss short problems/caselets and to
address students’ questions and concerns.

Course Basics
Credit Hours 3
Lecture(s) Nbr of Lec(s) Per Week 2 Duration 75 minutes
Recitation/Lab (per week) Nbr of Lec(s) Per Week Duration
Tutorial (per week) Nbr of Lec(s) Per Week Duration

Course Distribution
Core Core
Elective
Open for Student Category
Close for Student Category

COURSE DESCRIPTION
Managerial accounting is a pivotal ingredient to business performance and governance. Management styles are evolving as a
consequence of shift in the global economic power in favor of emerging economies, continuous technological improvements and
rise in regulation demanding greater disclosure. This raises efficacy of internally generated economic information (costing-oriented)
which is at the heart of managerial accounting.

This course highlights this information’s use towards efficient planning, key/strategic decision-making and effective financial
control. Core cost concepts culminate into intelligent costing methodologies and decision-making tools; thereby preparing students
to become informed executives and managers as they enter the competitive business environment.

The course aims to discuss a variety of established as well as more dynamic and encompassing management accounting and
financial control strategies.

COURSE PREREQUISITE(S)
ACCT 100 Principles of Financial Accounting
 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 cost‐volume 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 decision‐making

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
 Lahore University of Management Sciences
decision-support tools, interpret results and make meaningful recommendations to support the decision-maker
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
Goal 7 (b) – Understanding the
“science” behind the decision-
making process
COURSE LEARNING OBJECTIVES COURSE ASSESSMENT ITEM
 Understand the role of ethics in managerial Quizzes, Project, Final Exams, CP
accounting decision‐making
 An understanding of the differences between Quizzes, Project, Final Exams, CP
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 cost‐
volume 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 decision‐making
 Understand the role of accounting Quizzes, Project, Final Exams, CP
information in business decision making
 Understand the basic design of management
control system including performance
measurement, responsibility accounting etc.
Lahore University of Management Sciences
 Lahore University of Management Sciences
GRADING BREAKUP AND POLICY

6 Online real-time quizzes (2 Lowest scoring quizzes will be dropped.): 100%

Examination Detail

Yes/No: No
Combine Separate:
Midterm
Duration:
Exam
Preferred Date:
Exam Specifications:

Yes/No: No
Combine Separate:
Final Exam
Duration:
Exam Specifications:

     
SESSIONS CHAPTER: TITLE SESSION OBJECTIVES
1 Chapter 1:  Identify the major differences and similarities between financial and managerial
Managerial accounting.
Accounting: An  Understand the role of management accountants in an organization.
Overview  Understand the importance of upholding ethical standards.
2, 3 Chapter 2:  Identify and give examples of each of the three basic manufacturing cost categories.
Managerial  Distinguish between product costs and period costs and give examples of each.
Accounting and Cost  Understand the differences between variable costs and fixed costs.
Concepts  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.
4 QUIZ 1 Chapters 1-2
5 Chapter 3: Job-Order  Compute a predetermined overhead rate.
Costing  Apply overhead cost to jobs using a predetermined overhead rate.
 Compute the total cost and the unit product cost of a job using a plantwide
predetermined overhead rate.
 Compute the total cost and the unit product cost of a job using multiple
predetermined overhead rates
 Understand the flow of costs in a job-order costing system and prepare appropriate
journal entries to record costs.
 Use T-accounts to show the flow of costs in a job-order costing system.
 Prepare schedules of cost of goods manufactured and cost of goods sold and an
income statement.
 Compute underapplied or overapplied overhead cost and prepare the journal entry to
close the balance in Manufacturing Overhead to the appropriate accounts.
6 Materials Planning /  Quantitative models for the planning and control of stocks and relevant costs
Accounting for Direct  Calculating Economic Order Quantity, Re-Order Level and Safety Stock
Materials (Part II,  Assumptions of the EOQ formula
Chapter 3, Colin  Materials requirement planning
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SESSIONS CHAPTER: TITLE SESSION OBJECTIVES
Drury)
7 Chapter 5: Cost‐  Explain how changes in activity affect contribution margin and net operating income.
Volume‐Profit  Prepare and interpret a cost‐volume‐profit (CVP) graph.
Relationships  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 break‐even 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.
 Analyze a mixed cost using the high‐low method.
 Prepare an income statement using the contribution format.
8 QUIZ 2 Chapters 3, 5 and Material Planning (Drury)
9 Chapter 6: Variable  Explain how variable costing differs from absorption costing and compute unit product
Costing and Segment costs under each method.
Reporting: Tools for  Prepare income statements using both variable and absorption costing.
Management  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.
 Prepare a segmented income statement that differentiates traceable fixed costs from
common fixed costs and use it to make decisions.
 Compute companywide and segment break-even points for a company with traceable
fixed costs.
10, 11, 12 Chapter 4: Process  Record the flow of materials, labor, and overhead through a process costing system.
Costing  Compute the equivalent units of production using the weighted average method.
 Prepare a quantity schedule using the weighted‐average method.
 Compute the costs per equivalent unit using the weighted average method.
 Prepare a cost reconciliation using the weighted‐average 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.
13 QUIZ 3 Chapters 4 and 6
14, 15 Chapter 7: Activity‐  Understand activity‐based costing and how it differs from a traditional costing method.
Based Costing: A Tool  Assign costs to cost pools using a first‐stage allocation.
to Aid Decision  Compute activity rates for cost pools.
Making  Assign costs to a cost object using a second‐stage allocation.
 Use activity‐based costing to compute product and customer margins.
16, 17 Chapter 8: Master  Understand why organizations budget and the processes they use to create budgets.
Budgeting  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 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.
 Lahore University of Management Sciences
SESSIONS CHAPTER: TITLE SESSION OBJECTIVES
 Prepare a budgeted balance sheet.
18 QUIZ 4 Chapters 7-8
19 Chapter 9: Flexible  Prepare a planning budget and a flexible budget and understand how they differ from
Budgets and one another.
Performance Analysis  Calculate and interpret activity variances.
 Calculate and interpret revenue and spending variances.
 Prepare a performance report that combines activity variances and revenue and
spending variances.
 Prepare a flexible budget with more than one cost driver.
 Understand common errors made in preparing performance reports based on budgets
and actual results.
20, 21 Chapter 10:  Explain how direct materials standards and direct labor standards are set.
Standard Costs and  Compute the direct materials price and quantity variances and explain their
Variances significance.
 Compute the direct labor rate and efficiency variances and explain their significance.
 Compute the variable manufacturing overhead spending and efficiency variances.
22 QUIZ 5 Chapters 9-10
23 Chapter 11:  Compute return on investment (ROI) and show how changes in sales, expenses, and
Performance assets affect ROI.
Measurement in  Compute residual income and understand its strengths and weaknesses.
Decentralized  Compute throughput time, delivery cycle time, and manufacturing
Organizations  cycle efficiency (MCE).
 Understand how to construct and use a balanced scorecard.
24 Appendices 11A:  Determine the range, if any, within which a negotiated transfer price should fall.
Transfer Pricing
25 Chapter 12:  Identify relevant and irrelevant costs and benefits in a decision.
Differential Analysis:  Prepare an analysis showing whether a product line or other business segment should
The Key to Decision be dropped on retained.
Making  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 split‐off
point or processed further.
26 QUIZ 6 Chapters 11-12

TEXTBOOK(S)/SUPPLEMENTARY READINGS

 Managerial Accounting, 15th edition, Garrison, Noreen, & Brewer, McGraw Hill.
 Further supplementary material (Materials Planning chapter 3: Cost and Management Accounting, 6 th Edition, Colin Drury).