ACC513 Managerial Accounting Lesson 2 – Managing Costs and Short-Term Decision Making
This lesson provides an overview of managerial accounting and introduces the idea that managerial accounting affects virtually everyone within an organization. It shows how decision makers use managerial accounting information to better manage their organizations.
Different types of organizations account for their production costs in different ways. This lesson explores manufacturing costs and shows how the accounting system records and reports the flow of costs in organizations. It provides a comparison of alternative production methods, such as job, process, and operations costing, as well as a comparison of the cost flows using the different production methods. It explains how cost methods are adapted to just-in-time production methods and how job costing is applied to service organizations.
Finally, this lesson explores activity-based costing and management (ABCM), activity based management (ABM), allocation of indirect costs to products, and how ABM affects managerial decisions. It explains the concept of value chain and how it relates to ABM. This lesson also compares product costing using activity-based costing (ABC), to traditional cost allocation methods. Examples show the impact of the new production environment on activity bases and how ABM and ABC can be used to eliminate non-value added costs.
Lesson Learning Objectives
By the conclusion of this Lesson you should be able to:
- Compare the costs of quality control to the costs of failing to control quality.
- Explain how activity-based management can reduce customer response time.
- Distinguish between variable costs and fixed costs, between short run and long run, and define the relevant range.
- Explain the costs, benefits, and weaknesses of the various cost estimation methods.
- Describe how analysts estimate cost behavior using regression, account analysis, and engineering methods.
- Interpret the results of regression analyses.
- Describe the use of financial modeling for profit-planning purposes.
- Perform cost-volume-profit analysis.
- Explain the effect of taxes on financial modeling.
Study Chapters 4 through 6 of the text.
The following assignments should be completed and submitted to the course faculty via the learning platform for evaluation and grading. Whenever possible, submit your responses to all assignment questions in one WORD document.
Short Answer Questions
- What are the three factors that relate to meeting customer requirements?
- The quality-based view focuses on higher long-run Why?
- What are the two costs of controlling quality? What are the two costs of not controlling quality?
- Name three methods of cost estimation. Which method does not rely primarily on historical cost data? What are the drawbacks of this method?
- Comment on the following statement, “Simplification of all costs into only fixed and variable costs distort the actual cost behavior pattern of a firm. Yet businesses rely on this method of cost classification.”
- Suggest ways that one can compensate for the effects of inflation when preparing cost estimates.
- Define the term contribution margin.
- Name three common assumptions of a linear cost-volume-profit analysis.
- Compare cost-volume-profit analysis with profit-volume analysis. How do they differ?
- When would the sum of the break-even quantities for each of a company’s products not be the break-even point for the company as a whole?
Professional Development Questions
- In chapter 4 of the text (page 131), answer the case study question #34 a. through d. (Custom frames, quality )
- In chapter 5 of the text (page 174), answer the case study question #38 a. and b. (Graphing costs and interpreting regression output)