I. General Information

1. Course Title:
Cost Accounting I

2. Course Prefix & Number:
ACCT 2161

3. Course Credits and Contact Hours:

Credits: 3

Lecture Hours: 3

Lab Hours: 0

4. Course Description:

This course provides a practical knowledge of cost and managerial accounting systems. These systems are used by organization to analyze their product costs and internal cost structures, and provide other pertinent information used in management decision making. Specific topics include job and standard costing, as well as activity-based costing and budgeting.

5. Placement Tests Required:

6. Prerequisite Courses:

7. Other Prerequisites

8. Prerequisite (Entry) Skills:
Understand the foundation of Managerial Accounting.

9. Co-requisite Courses:

II. Transfer and Articulation

1. Course Equivalency - similar course from other regional institutions:

III. Course Purpose

1. Program-Applicable Courses – This course fulfills a requirement for the following program(s):

Accounting, AAS Degree

IV. Learning Outcomes

1. College-Wide Outcomes

2. Course Specific Outcomes - Students will be able to achieve the following measurable goals upon completion of the course:

• Compare how service, retail, and manufacturing organizations report costs on their financial statements and how they account for inventories.
• Define cost classification, cost allocation and explain how cost objects, cost pools, and cost drivers are used to assign overhead costs.
• Calculate product or service unit cost using the traditional method and activity-based costing of allocating overhead costs.
• Estimate cost equations using various cost modeling approaches.
• Analyze accounting data using Cost-Volume-Profit (CVP) analysis and CVP graphing.
• Calculate and understand the uses of Break Even Point (BEP) and changes in BEP.
• Create a series of budget projections culminating in a cash flow budget, and revise the budget projections to reflect changing assumptions.
• Prepare a Statement of Cost of Goods Manufactured, Job Cost Sheets, Income Statement.
• Performance Report, and Pro-forma financial statements.
• Apply IMA Ethical Standards to situational decision-making activities.

V. Topical Outline

Listed below are major areas of content typically covered in this course.

1. Lecture Sessions

1. The Changing Business Environment
• Distinguish management accounting from financial accounting and explain the role of management accounting in the management cycle.
• Describe the value chain and its usefulness in analyzing a business.
• Identify the management tools used for continuous improvement and describe how they work to meet the demands of global competition and how management accounting supports them.
• Explain the balanced scorecard and its relationship to performance measures.
• Prepare an analysis of nonfinancial data.
• Identify the standards of ethical conduct for management accountants.
2. Cost Concepts and Cost Allocation
• Describe how managers use information about costs.
• Explain how managers classify costs and how they use these cost classifications.
• Compare how service, retail, and manufacturing organizations report costs on their financial statements and how they account for inventories.
• Describe the flow of costs through a manufacturer’s inventory accounts.
• Define product or service cost and compute the unit cost of a product or service.
• Define cost allocation and explain how cost objects, cost pools, and cost drivers are used to assign overhead costs.
• Using the traditional method of allocating overhead costs, calculate product or service unit cost.
• Using activity-based costing to assign overhead costs, calculate product or service unit cost.
3. Costing Systems:  Job Order Costing
• Discuss the role information about costs plays in the management process and explain why unit cost is important.
• Distinguish between the two basic types of product costing systems and identify the information each provides.
• Explain the cost flow in a manufacturer’s job order costing system.
• Prepare a job order cost card and compute a job order’s product unit cost.
• Apply job order costing to a service organization.
• Distinguish between job order costing and project costing
4. Costing Systems:  Process Costing
• Describe the process costing system, identify the reasons for its use, and discuss its role in the management process.
• Relate the patterns of product flows to the cost flow methods in a process costing environment
• Explain the role of the Work in Process Inventory accounts in a process costing system.
• Define equivalent production and compute equivalent units.
• Prepare a process cost report using the FIFO costing method.
• Prepare a process cost report using the average costing method.
• Evaluate operating performance using information about product cost.
5. Activity-Based Systems:  ABM and JIT
• Explain the role of managers in activity-based systems.
• Define activity-based management (ABM) and discuss its relationship to the supply chain and the value chain.
• Distinguish between value-adding and nonvalue-adding activities, and describe process value analysis.
• Define activity-based costing and explain how a cost hierarchy and a bill of activities are used.
• Define the just-in-time (JIT) operating philosophy and identify the elements of a JIT operating environment.
• Identify the changes in product costing that result when a firm adopts a JIT operating environment.
• Define and apply backflush costing, and compare the cost flows in traditional and backflush costing.
• Compare ABM and JIT as activity-based systems.
6. Cost Behavior Analysis
• Define cost behavior and explain how managers use this concept.
• Identify variable, fixed, and mixed costs, and separate mixed costs into their variable and fixed components.
• Define cost-volume-profit (C-V-P) analysis and discuss how managers use it as a tool for planning and control.
• Define breakeven point and use contribution margin to determine a company’s breakeven point for multiple products.
• Use C-V-P analysis to project the profitability of products and services.
7. The Budgeting Process
• Define budgeting and explain management’s role in the budgeting process.
• Identify the elements of a master budget in different types of organizations and the guidelines for preparing budgets.
• Prepare the operating budgets that support the financial budgets.
• Prepare a budgeted income statement, a cash budget, and a budgeted balance sheet.
8. Performance Management and Evaluation
• Describe how the balanced scorecard aligns performance with organizational goals.
• Discuss performance measurement, and state the issues that affect management’s ability to measure performance.
• Define responsibility accounting, and describe the role that responsibility centers play in performance management and evaluation.
• Prepare performance reports for cost centers using flexible budgets and for profit centers using variable costing.
• Prepare performance reports for investment centers using traditional measures of return on investment and residual income and the newer measure of economic value added.
• Explain how properly linked performance incentives and measures add value for all stakeholders in performance management and evaluation.
9. Standard Costing and Variance Analysis
• Define standard costs and describe how managers use these costs.
• Explain how standard costs are developed and compute a standard unit cost.
• Prepare a flexible budget and describe how variance analysis is used to control costs.
• Compute and analyze direct materials variances.
• Compute and analyze direct labor variances.
• Compute and analyze manufacturing overhead variances.
• Explain how variances are used to evaluate managers’ performance.
10. Short-Run Decision Analysis
• Describe how managers make short-run decisions.
• Define incremental analysis, and explain how it applies to short-run decision making.
• Perform incremental analysis for outsourcing decisions.
• Perform incremental analysis for special order decisions.
• Perform incremental analysis for segment profitability decisions.
• Perform incremental analysis for sales mix decisions involving constrained resources.
• Perform incremental analysis for sell or process-further decisions.
11. Pricing Decisions, Including Target Costing and Transfer Pricing
• Identify the objectives and rules used to establish prices of goods and services, and relate pricing issues to the management process.
• Describe economic pricing concepts including the auction-based pricing method used on the Internet.
• Use cost-based pricing methods to develop prices.
• Describe target costing and use that concept to analyze pricing decisions and evaluate a new product opportunity.
• Describe how transfer pricing is used for transferring goods and services and evaluating performance within a division or segment.
12. Capital Investment Analysis
• Define capital investment analysis and describe its relation to the management process.
• State the purpose of the minimum rate of return and identify the methods used to arrive at that rate.
• Identify the types of projected costs and revenues used to evaluate alternatives for capital investment.
• Apply the concept of the time value of money.
• Analyze capital investment proposals using the net present value method.
• Analyze capital investment proposals using the payback period method and the accounting rate-of-return method
13. Quality Management and Measurement
• Describe a management information system, and explain how it enhances management decision making.
• Define total quality management (TQM) and identify financial and nonfinancial measures of quality.
• Use measures of quality to evaluate operating performance.
• Discuss the evolving concept of quality.
• Recognize the awards and organizations that promote quality.
14. Allocation of Internal Service Costs and Joint Product Costs
• Discuss the allocation of internal service costs.
• Define the two kinds of responsibility centers used in the allocation of service costs.
• Use the direct method to assign service costs.
• Use the step method to assign service costs.
• Describe other methods of service cost allocation, including the two-step method, the simultaneous equation method, the ability to pay method, and the physical measures method.
• Explain how service cost allocation relates to overhead rates.
• Apply allocation methods to the costs associated with joint products.
15. Financial Performance Measurement – Time Value of Money Calculations
• Describe the objectives, standards of comparison, sources of information, and compensation issues in measuring financial performance.
• Apply horizontal analysis, trend analysis, vertical analysis, and ratio analysis to financial statements.
• Apply ratio analysis to financial statements in a comprehensive evaluation of a company’s financial performance.