Course Description

Decision making implications of information provided by accounting theory; contemporary problems in reporting of financial statements; presentation format of financial statements as required under Belgian and EU financial reporting standards (IFRS/Belgian GAAP), analysis and interpretation of items appearing on the financial statements; methods of financial statement analysis; assigning a project for the analysis of the financial statements of a real Belgian company.

Course Objectives

Managerial Accounting is a sub-area of accounting concerned with information needed to effectively plan and control company operations and make good business decisions. Managerial accounting encompasses the whole organization, from developing strategy to day-to-day planning, marketing to sales, financing to operations. Each business-related discipline is involved: management, marketing, systems, economics, finance, and, of course, accounting. The course will be focused on profit planning, flexible budgets, capital budgeting, product pricing, performance measures and differential analysis

Key Concepts

Managerial Accounting is a field of accounting that provides economic and financial information for managers and other internal users
Cost behavior refers to how a cost will react to changes in the level of activity within the relevant range. The most commonly used classifications of cost behavior are variable and fixed costs.
Costs and benefits that differ between alternatives are relevant in a decision. All other costs and benefits are irrelevant and can and should be ignored. To make decisions, it is essential to have a grasp on three concepts: differential costs, opportunity costs, and sunk costs.
A budget is a quantitative plan for acquiring and using resources over a specified time period. Individuals sometimes create household budgets that balance their income and expenditures for food, clothing, housing, and so on while providing for some savings. Once the budget is established, actual spending is compared to the budget to make sure the plan is being followed.
A flexible budget is an estimate of what revenues and costs should have been, given the actual level of activity for the period. When a flexible budget is used in performance evaluation, actual costs are compared to what the costs should have been for the actual level of activity during the period rather than to the static planning budget. This is a very important distinction. If adjustments for the level of activity are not made, it is very difficult to interpret discrepancies between budgeted and actual costs.
A standard is a benchmark or “norm” for measuring performance. Standards are found everywhere. Your doctor evaluates your weight using standards for individuals of your age, height, and gender. The food we eat in restaurants is prepared using standardized recipes. The buildings we live in conform to standards set in building codes. Standards are also widely used in managerial accounting where they relate to the quantity and cost (or acquisition price) of inputs used in manufacturing goods or providing services.
Decentralized organizations need responsibility accounting systems that link lower-level managers’ decision-making authority with accountability for the outcomes of those decisions. The term responsibility center is used for any part of an organization whose manager has control over and is accountable for cost, profit, or investments. The three primary types of responsibility centers are cost centers, profit centers, and investment centers.
An avoidable cost is a cost that can be eliminated in whole or in part by choosing one alternative over another.
A relevant cost is a cost that differs between alternatives. A relevant benefit is a benefit that differs between alternatives.

Course Outline

Week	Topics
1	An Overview of Managerial Accounting Course - Cost Concepts and Behavior. This chapter begins by describing the work of management and the need for managerial accounting information followed by a discussion of the differences and similarities between financial and managerial accounting. Next, we explain that in managerial accounting, the term cost is used in many different ways. The reason is that there are many types of costs, and these costs are classified differently according to the immediate needs of management. For example, managers may want cost data to prepare external financial reports, to prepare planning budgets, or to make decisions. Each different use of cost data demands a different classification and definition of costs. For example, the preparation of external financial reports requires the use of historical cost data, whereas decision making may require predictions about future costs. This notion of different costs for different purposes is a critically important aspect of managerial accounting. Sources: 1. Fundamental of Cost Accounting; Chapter 1; Pg. 36-79. 2. Introduction to Managerial Accounting; Chapter 1; Pg. 26-73.
2	Cost-Volume-Profit Analysis. Cost-volume-profit (CVP) analysis is a powerful tool that helps managers understand the relationships among cost, volume, and profit. CVP analysis focuses on how profits are affected by the following five factors:1. Selling prices; 2. Sales volume; 3. Unit variable costs; 4. Total fixed costs; 5. Mix of products sold. Because CVP analysis helps managers understand how profits are affected by these key factors, it is a vital tool in many business decisions. These decisions include what products and services to offer, what prices to charge, what marketing strategy to use, and what cost structure to implement. To help understand the role of CVP analysis in business Decisions. Sources: 1. Fundamental of Cost Accounting; Chapter 1; Pg. 36-79. 2. Introduction to Managerial Accounting; Chapter 6; Pg. 256-317.
3	Cost Structure & Profit Stability. Cost structure refers to the relative proportion of fixed and variable costs in an organization. Managers often have some latitude in trading off between these two types of costs. For example, fixed investments in automated equipment can reduce variable labor costs. In this week, we discuss the choice of a cost structure. We also introduce the concept of operating leverage. Sources: 1. Introduction to Managerial Accounting; Chapter 6; Pg. 318-346.
4	Profit Planning - Ch. 7 - Pp. 306-358 - In this topic, we focus on the steps taken by businesses to achieve their planned levels of profits—a process called profit planning. Profit planning is accomplished by preparing a number of budgets that together form an integrated business plan known as the master budget. The master budget is an essential management tool that communicates management’s plans throughout the organization, allocates resources, and coordinates activities.
5	Preparing Master Budgets - Ch. 7 - Pp. 306-358 - In this topic, we focus on the steps taken by businesses to achieve their planned levels of profits—a process called profit planning. Profit planning is accomplished by preparing a number of budgets that together form an integrated business plan known as the master budget. The master budget is an essential management tool that communicates management’s plans throughout the organization, allocates resources, and coordinates activities.
6	Flexible Budgets and Performance Reports - Ch. 8 - Pp. 358 -395 - In the last topic we explored how budgets are developed before a period begins. Budgeting involves a lot of time and effort and the results of the budgeting process should not be shoved into a filing cabinet and forgotten. To be useful, budgets should provide guidance in conducting actual operations and should be part of the performance evaluation process. However, managers need to be very careful about how budgets are used. In government, budgets often establish how much will be spent and indeed, spending more than was budgeted may be a criminal offense. That is not true in other organizations. In for-profit organizations, actual spending will rarely be the same as the spending that was budgeted at the beginning of the period. The reason is that the actual level of activity (such as unit sales) will rarely be the same as the budgeted activity; therefore, many actual costs and revenues will naturally differ from what was budgeted. Should a manager be penalized for spending 10% more than budgeted for a variable cost like direct materials if unit sales are 10% higher than budgeted? Of course not. In this chapter we will explore how budgets can be adjusted so that meaningful comparisons to actual costs can be made.
7	Standard Costs - Ch.9 - 396- 451 - We encountered performance measures in the last chapter when we investigated flexible budget variances. These variances provide direct feedback concerning how well an organization performed in attaining its financial goals as expressed in the budget.Performance measurement can be helpful in an organization. It can provide feedback concerning what works and what does not work, and it can help motivate people to sustain their efforts.
8	Review Before Midterm Exam
9	Midterm Exam
10	Variance Analysis and Responsibility Accounting - Ch.9 - Pp. 396- 451 -LO1 Explain how direct materials standards and direct labor standards are set. LO2 Compute the direct materials price and quantity variances and explain their significance LO3 Compute the direct labor rate and efficiency variances and explain their significance LO4 Compute the variable manufacturing overhead rate and efficiency variances.
11	Decentralization and Investment Center Performance - Ch. 10 - Pp. 452-507 - In a decentralized organization, decision-making authority is spread throughout the organization rather than being confined to a few top executives. As noted above, out of necessity all large organizations are decentralized to some extent. Organizations do differ, however, in the extent to which they are decentralized. In strongly centralized organizations, decision-making authority is reluctantly delegated to lower-level managers who have little freedom to make decisions. In strongly decentralized organizations, even the lowest-level managers are empowered to make as many decisions as possible. Most organizations fall somewhere between these two extremes.
12	Relevant Costs for Decision Making - Ch. 11 - Pp.508-551 - Managers must decide what products to sell, whether to make or buy component parts, what prices to charge, what channels of distribution to use, whether to accept special orders at special prices, and so forth. Making such decisions is often a difficult task that is complicated by numerous alternatives and massive amounts of data, only some of which may be relevant. Every decision involves choosing from among at least two alternatives. In making a decision, the costs and benefits of one alternative must be compared to the costs and benefits of other alternatives.
13	Incremental Analysis - Ch. 11 - Pp.508- 551 - Costs that differ between alternatives are called relevant costs. Distinguishing between relevant and irrelevant costs and benefits is critical for two reasons. First, irrelevant data can be ignored—saving decision makers tremendous amounts of time and effort. Second, bad decisions can easily result from erroneously including irrelevant costs and benefits when analyzing alternatives. To be successful in decision making, managers must be able to tell the difference between relevant and irrelevant data and must be able to correctly use the relevant data in analyzing alternatives. The purpose of this chapter is to develop these skills by illustrating their use in a wide range of decision-making situations. These decision-making skills are as important in your personal life as they are to managers. After completing your study of this chapter, you should be able to think more clearly about decisions in many facets of your life.
14	Review Before Final Exam

Learning Outcomes

Gain an introduction to accounting techniques used by internal management to aid in planning, directing, controlling, and decision-making activities.
Use accounting data to identify and analyze alternatives with the purpose of making managerial choices to maximize economic benefits to a firm.
Develop technical skills used in problem-solving and analysis, such as measuring production process costs, budgeting, performance reporting, and efficient allocation of a firm's resources.
Gain experience with computerized spreadsheets and other electronic tools used in business problem-solving, budgeting, and financial analysis.
Obtain a working background with accounting tools as a foundation for further study in management, accounting, and other business discipline.

Assessment

Method	Qty	% Each
Midterm Exam(s)	1	35
Quiz	2	7
Final Exam	1	45
Other	1	6

Textbooks

Brewer, Garrison, Noreen. Introduction to Managerial Accounting. 9th Edition. 2021. McGraw-Hill Irvin Weygandt, Kiemmel, Kieso, Managerial Accounting: Tools for Business Decision Making, 1st Edition, Global Edition, Wiley international edition, 2017

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