Lahore University of Management Sciences
ACCT 130 – Principles of Management Accounting
Fall Semester 2015
Instructor
Room No.
Office Hours
Email
Telephone
Secretary/TA
TA Office Hours
Course URL (if any)
Waqar Ali/Ahsan Shamim Chaudhri
TBA
TBA
TBC
042-3560-8394
Secretary: Muhammad Umar/ TA: TBA
TBA
http://suraj.lums.edu.pk/~pco/
COURSE BASICS
Credit Hours
Lecture(s)
Recitation/Lab (per week)
Tutorial (per week)
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
Core
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 (costingoriented) 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
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
COURSE ASSESSMENT ITEM

Quizzes, Project, Final Exams, CP
Understand the role of ethics in managerial
accounting decision‐making

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
Quizzes, Project, Final Exams, CP
Lahore University of Management Sciences
Goal 7 (b) – Understanding the
“science” behind the decisionmaking process

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 (Lowest scoring quiz will be dropped) 20%
Midterm Exam
30%
Class Participation / Attendance
5%
Assignments
5%
Final Exam
40%
Course Instructions:


This course encourages active reading on part of students to best comprehend technical and diverse management
accounting concepts. Class lectures would augment this base reading. Therefore attendance is of high importance. After 3
absences, a proportionate grade reduction would apply for every further absence.
The assignment / presentation would be around ICAEW (Institute of Chartered Accountants of England & Wales) published
content around key concepts learned in the course. It will be a group presentation with a number of groups assigned a
unique ICAEW article to study, further research on and develop a response in the form of a presentation.
EXAMINATION DETAIL
Midterm
Exam
Final Exam
Yes/No: YES
Combine Separate: N/A
Duration: 2 Hours
Preferred Date:
Exam Specifications: MCQs, Short & Structured Questions
Yes/No: YES
Combine Separate: N/A
Duration: 2 Hours
Exam Specifications: MCQs, Short & Structured Questions
Lahore University of Management Sciences
Lectures
Chapter: Title
SESSION OBJECTIVES
1
Chapter 1:
Managerial
Accounting and the
Business
Environment




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 Just‐In‐Time (JIT), Total Quality Management
(TQM), Process Reengineering and the Theory of Constraints (TOC).
Understand the importance of upholding ethical standards.
2, 3
Chapter 2: Cost
Terms, Concepts, and
Classifications







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.
4, 5
Chapter 3: Systems
Design: Job‐Order
Costing

Distinguish between process costing and job‐order costing and identify companies that
would use each method.
Identify the documents used in a job‐order 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 high‐low 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 cost‐volume‐profit (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 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.
Compute the break‐even point for a multi product company and explain the effects of
shifts in the sales mix on contribution margin and the break‐even point.
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
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.
6
Chapter 5: Cost
Behavior: Analysis
and Use
7, 8
Chapter 6:
Cost‐Volume‐Profit
Relationships
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9, 10
Chapter 9: Profit
Planning




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
Lahore University of Management Sciences
Lectures
11
Chapter: Title
Chapter 7: Variable
Costing: A Tool for
Management
12, 13
Chapter 4: Systems
Design: Process
Costing (FIFO
Method)
14
Pre-Mid Review
Mid term
Chapter 8:
Activity‐Based
Costing: A Tool to Aid
Decision Making
16, 17,
18
19 / 20
Chapter 10:
Standard Costs and
the Balanced
Scorecard
21 / 22
Chapter 11: Flexible
Budgets and
Overhead Analysis
SESSION OBJECTIVES

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

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

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23
24
25 / 26
Chapter 12: Segment
Reporting and
Decentralization
Appendices 12A&B /
Transfer Pricing
Chapter 13: Relevant







Prepare a budgeted income statement.
Prepare a budgeted balance sheet.
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 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.
Review: Mid
Understand activity‐based costing and how it differs from a traditional costing method.
Assign costs to cost pools using a first‐stage allocation.
Compute activity rates for cost pools.
Assign costs to a cost object using a second‐stage allocation.
Use activity‐based costing to compute product and customer margins.
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 company’s
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.
Determining the range, within which negotiated transfer price should fall.
Understand wider business implications of such.
Identify relevant and irrelevant costs and benefits in a decision.
Lahore University of Management Sciences
Lectures
Chapter: Title
SESSION OBJECTIVES
Costs for Decision
Making


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 split‐off point or
processed further.
Article Presentations

Article Presentations
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27
ICAEW insights
(CP intensive)
ICAEW insights
(CP intensive)
Pre-Final Review
28
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.