Lifelong Learning for a Brighter World

Jing Zhou, McMaster University Continuing Education Accounting graduate Jing Zhou, McMaster University Continuing Education Accounting graduate

Accounting

Cheques and balances. It all adds up.

Work towards your CPA designation!

ACC 930 - Advanced Management Accounting C31

Academic Credit Value:
3 units
Course Delivery Mode:
Online Self-Study (OSS)
Hours of Study:
42 hours
Course Prerequisite(s):
ACC 925 Introductory Financial Accounting & ACC 929 Intermediate Management Accounting or equivalents. Be advised: Students who do not meet the pre-requisites will be required to withdrawal. In such cases, CCE’s withdrawal/refund policies will apply.
Course Anti-requisite(s):
N/A
Instructor Name:
Glenn Skrubbeltrang MBA, CPA, CMA
Course Dates:
01/15/2019 - 06/15/2019



Required Course Materials:
Text: Cost Accounting - A Managerial Emphasis, 7th Canadian Edition: Horngren/Datar/Rajan et al. Pearson, 2016.
Optional Course Materials:
Handouts and Cases for analysis and reporting (posted to A2L)
Course Description:
You are about to begin an Advanced Management Accounting course that is designed to build on the foundational concepts that you have already learned in previous courses.  The focus is mainly on the application of cost and financial management concepts towards corporate business decisions.
The expectation is that you will bring into this course a solid understanding of the Financial and Managerial Accounting concepts that were taught in the introductory courses.

AMA builds on the competencies of strategic management, risk management and governance, performance management and measurement, financial resource management, and financial reporting that are the core functional competencies of the accounting profession.  AMA also seeks to develop decision making skills that are ethically based to ensure consistency when using interpretation and judgment.  By focussing on planning and control systems, AMA will help you design and execute the goals and objectives of both profit and not-for-profit organizations.

As businesses in the global environment become more focused on developing sustainable competitive advantages, management accounting can be used to supplement management decisions with information that is both relevant and timely.  You will notice that the learning objectives in this textbook are progressive in that they move from basic to more advanced material as you move through the chapter.  Take the time to learn the basic building blocks as they will be essential when you need to answer questions that are more advanced in nature.  By the end of this course you should be able to go beyond basic procedures in management to analyze, use judgment and interpret problems that will require you to think critically.

This course is designed to understand the concepts behind the “Current Best Practices” and their relevance in the managerial decision process. Topics include Planning for Operational Profits based on current Pricing models, Transfer Pricing and performance evaluation in Decentralized Operations, Capital Budgeting for long-term sustainability and Growth.  

Learning Outcomes:
Upon successful completion of this course, students will have demonstrated knowledge and understanding of:
- The ability to think critically when analyzing various business issues.
- Skill sets that will provide value to assessing business decisions.  
- Management accounting from the perspective of strategic and operating decisions.
- Designing and implementing planning and control systems to provide transparency and corporate governance.
Course Evaluation
Distribution of course marks will be as follows: 

 Quizzes (Units 1, 2, 3, 4, 5, 6)   30%
 Term Project (Unit 7)  10%
 Final Examination    60%

NOTE:  A passing grade on the final examination is required to pass the course.

The final exam must be written on or before your course end date/final exam date. Students who have submitted all assignments ahead of schedule may opt to write their final examination prior to the posted examination/course end date. Although students are permitted to accelerate through course material, no student will be permitted to schedule/sit the final examination earlier than two (2) months post course start date. After the final exam is written no further assignment submissions will be accepted. 

Quizzes and Assignment Preparation
The evaluations for this course will be a combination of online quizzes and discussions.  Your course facilitator will post instructions to A2L with respect to the graded component for each Unit.

Submitting Assignments
All assignments are to be submitted to the dropbox course folder in A2L, no later than the specified due date.

Request for Tutoring  
Questions and requests for tutoring should be submitted directly to the course facilitator through Avenue to learn.  Your course facilitator will reply to your request in a timely manner.

Course Format:

This course is designed to present the fundamental concepts and theories in advanced management accounting and promote the application to the workplace and professional practice. Course activities will include instructor presentations, required readings and experiential learning activities (i.e. case studies, group discussions, projects, etc.). 

It is expected that the recommended activities which may practice exercises, quizzes, problems, be completed prior to contributing to any graded discussion forums and/or before submission of formal credit assignments.  Formal credit assignments relate to the materials covered in the courses.  They will be less difficult if the suggested review activities are completed beforehand.  In addition, completing text readings, reviewing suggested resources and completing suggested review activities will enable the student to study more easily for the final exam.

Assignment Submission:
Course assignments are submitted to the appropriate A2L Assignment folder by the specified due date
Late Coursework:
Late assignments will be subject to a 2% per day late penalty (includes weekends and holidays) for up to seven (7) days. After this date, no assignments will be accepted and a grade of zero (0) will be applied. Extensions for course work must be approved by the instructor before the due date (see Academic Regulations below), and will be granted for illness or emergencies only. Students may be asked to submit supporting documentation for an extension request.  NOTE:  This policy applies to assignments and other hand in type coursework only.  This policy does not apply to discussion board topics/postings which do not allow for late postings/contributions. 

Policy & Procedures:

Academic Regulations (Attendance, Coursework, Tests/Exams):
In accordance with McMaster University’s General Academic Regulations, “it is imperative that students make every effort to meet the originally scheduled course requirements and it is a student’s responsibility to write examinations as scheduled.” Therefore, all students are expected to attend and complete the specific course requirements (i.e. attendance, assignments, and tests/exams) listed in the course outline on or by the date specified.  Students who need to arrange for coursework accommodation, as a result of medical, personal or family reasons, must contact the course instructor within 48 hours of the originally scheduled due date. It is the student’s responsibility to contact the Program Manager/Program Associate to discuss accommodations and procedures related to deferred tests and/or examinations within 48 hours of the originally scheduled test/exam, as per policy.  Failure to contact the course instructor, in the case of missed coursework, or the Program Manager/Program Associate, in the case of a missed test/examination, within the specified 48 hour window will result in a grade of zero (0) on the coursework/exam and no further consideration will be granted.  

*Note: Supporting documentation will be required but will not ensure approval of accommodation(s).

Academic Integrity
You are expected to exhibit honesty and use ethical behaviour in all aspects of the learning process. Academic credentials you earn are rooted in principles of honesty and academic integrity. Academic dishonesty is to knowingly act or fail to act in a way that results or could result in unearned academic credit or advantage. This behaviour can result in serious consequences, e.g. the grade of zero on an assignment, loss of credit with a notation on the transcript (notation reads: “Grade of F assigned for academic dishonesty”), and/or suspension or expulsion from the university.

It is your responsibility to understand what constitutes academic dishonesty. For information on the various types of academic dishonesty please refer to the Academic Integrity Policy, located at http://www.mcmaster.ca/academicintegrity/

The following illustrates only three forms of academic dishonesty:
Plagiarism, e.g. the submission of work that is not one’s own or for which other credit has been obtained.
Improper collaboration in-group work.
Copying or using unauthorized aids in tests and examinations. 
Academic Accommodations:
Students with disabilities who require academic accommodations must contact the Student Accessibility Centre (SAS) to meet with an appropriate Disability Services Coordinator. To contact SAS, phone 905-525-9140 ext. 28652, or email sas@mcmaster.ca. For further information, consult McMaster University’s Policy for Academic Accommodation for Students with Disabilities.
On-line Elements:
In this course, we will be using on-line elements, which may include email, Avenue to Learn, WebEX, and external web sites.  Students should be aware that, when they access the electronic components of this course, private information such as first and last names, user names for the McMaster e-mail accounts, and program affiliation may become apparent to all other students in the same course. The available information is dependent on the technology used. Continuation in this course will be deemed consent to this disclosure. If you have any questions or concerns about such disclosure please discuss this with the course instructor.

An extra online resource that the student has to utilize that is included with textbook purchase is MyAccountingLab.  Your textbook will come with a student access code that you can use to register for this additional resource.  You are encouraged to use this resource as it will provide you with value added items that will augment the course guide.

Turnitin.com:
Course Changes:
The instructor reserves the right to modify elements of the course and will notify students accordingly.
Course Withdrawal Policy:
Policies related to dropping a course and course withdrawals are posted to the Centre for Continuing Education’s program webpage, FAQs & Policies (https://www.mcmastercce.ca/cce-policies#Dropping). 
Storm Closure Policy:
In the event of inclement weather, the Centre for Continuing Education will abide by the University’s Storm Closure Policy: https://www.mcmaster.ca/policy/Employee/storm_emergency_policy.pdf, and will only close if the University is closed. All in-class courses, exams and room bookings by internal and external clients will be cancelled if the Centre for Continuing Education is closed. On-line courses will take place as scheduled.
Grading Scale:
 Grade Equivalent
Grade Point
Equivalent Percentages
A+ 12 90-100
A 11 85-89
A- 10 80-84
B+ 9 77-79
B 8 73-76
B- 7 70-72
C+ 6 67-69
C 5 63-66
C- 4 60-62
D+ 3 57-59
D 2 53-56
D- 1 50-52
F 0 0-49
Course Schedule:
Unit 1:  Organizational Profitability and Pricing

Required Reading, Chapters 1, 3, 5, 6, 10 and 11.

Unit 1 - Overview
This unit will provide an overview of the previously covered chapters 1, 3, 5, 6, 10 and 11.  In this unit you will be asked to read these five chapters and review the concepts that are developed therein.  This should be a quick overview as you have already covered this material in previous courses.  It is, however, very important to understand these concepts and therefore we begin this course by reviewing them.  This unit will then develop the case analysis model that will be used throughout the remainder of the course.  

Unit 1 – Learning Outcomes
- Review material from previous courses that will be required knowledge
- Develop a framework for case analysis

Unit 2:  Strategy and Balanced Scorecard Perspectives

Required Reading, Text Chapter 13

Unit 2 – Overview
Chapter 13 continues the expanded view of the role of cost accounting for an organization. To fully grasp the significance and vital role of management accounting, one needs to look to the whole of the organization. Accounting as an information and communication system provides the organization a means to implement a company-wide strategy and the tools by which to evaluate the success of that strategy.

Two generic strategies are defined and illustrated—cost leadership and product differentiation. The tool used for implementing either of these strategies is the balanced scorecard. The balanced scorecard serves to provide a broad perspective of critical factors: financial, customer, internal business process, and learning and growth.

To be deemed successful, any endeavor has to be evaluated by some meaningful measure(s). The balanced scorecard here, too, provides what is useful. Though all of the factors are incorporated in the evaluation, the one measure—operating income—serves a profit-seeking organization the best. With the analysis format presented in the chapter, using the three components of growth, price recovery, and productivity, operating income of the current year in comparison to the prior year, will yield specific information for judging the success of a cost leadership or product differentiation strategy. Operating income is, of course, the product of the accounting system and its use demands that the cost/management accountant understand its purpose in the specific situation as well as the broader context of strategy implementation and evaluation.

A helpful discussion of capacity needs comes at the end of the chapter. Strategic management that may include reengineering (an across-functions company-wide approach) will cause change within a company. One of those changes may be more effective and efficient use of existing capacity, thereby causing excess. Identifying and managing unused capacity are addressed

Unit 2 – Learning Outcomes
- Develop an understanding of the components of the Balanced Scorecard
- Understand the factors in implementing a Balanced Scorecard


Unit 3:  Multinational Performance Measurement

Required Reading, Text Chapter 22

Unit 3 – Overview
Performance measurement is the underlying motivation for managers and is the focus that management accountants want to support their organization in preparing the balanced scorecard.

The result from optimizing the organizations decisions about what accounting system to use and the information that system yields will be revealed in these measures.  These measures have a significant impact on the investor who in the end has to be satisfied.

One of the most pervasive accounting measures from an investor’s perspective is the return on investment as it embodies both the income statement and the balance sheet accounts.  More importantly ROI can be expanded using the DuPont Method of Profitability Analysis to reveal the impact of the asset turnover ratio and the return on sales percentage in the overall calculation.  Given these two insights into their impact on the ROI, managers can see where they can make operating improvements and what the change to the ROI will be.  This in turn gives managers the opportunity to make detailed changes to their short-term operating plans and the implementation strategies to make a difference on a daily basis, “go to work tomorrow and do it”!

We look at other measures which emphasize the return to the investor.  Residual income imputes a cost that is not part of the income statement, required rate of return on investment times the investment.  This measure uses a hurdle rate that the investor demands for his investment and imputes it on the company’s investment base to determine whether the operating income is sufficient to achieve the desired return to the investor(s).

Next we examine a refinement of the investor measurements, namely, Economic Value Added (EVA).  In this measurement we refine the residual income measurement by taking an income tax effect into consideration, using a required rate of return that matches the company’s debt and equity structure.

From this refinement the contribution to the shareholders (investors) can be more clearly seen.  It is the ultimate test whether the cumulative results of all the decisions made by management have been effective.  

Finally, the chapter examines the ways and means of creating employee and executive compensation programs with the necessary balance of controls in light of the recent history of companies that have “gone out of control” and are no longer in existence.

Unit 3 – Learning Outcomes
- Develop an understanding of the tools for performance measurement
- Be able to use measurement tools to assess business performance

 

Unit 4:  Pricing and Profitability Decisions

Required Reading, Text Chapter 12

Unit 4 - Overview
Chapter 12 demonstrates the broader sphere of influence for cost accounting. Pricing decisions are influenced primarily by costs, customers, competitors, and specific market factors of demand and supply.

This chapter does not present another costing system for determining product cost for use in pricing but utilizes concepts necessary to manage those costs.  

Concepts presented are those of relevant costs in relation to a time horizon (short run or long run), strategy of product positioning (market-based pricing or cost-based pricing), value engineering (relationship of product design and timing of cost incurrence), the lifecycle of a product (“cradle-to-grave”), and legal considerations in pricing decisions.  Target pricing and target costing are an example of market-based pricing. Implementation of target prices and target costs is illustrated through a four-step process. Target costs are costs that the company aims to achieve. Costs are managed to reduce the cost of products and processes. Value engineering is used to reduce the nonvalue-added activities/costs and achieve greater efficiency in value-added activities. This type of cost management, lower costs, efficiency improvements, elimination of nonvalue-added activities, and more cost control, is used to develop cost leadership, a type of strategy used by some companies (described in Chapter 13).  

Cost-plus pricing, also known as cost-based approach to pricing, is described as a starting point for pricing decisions. Though cost is a key factor in pricing a product or service, other factors must be considered. Some non-cost factors are considered for their impact on pricing decisions.  An example of life-cycle pricing and costing is used to highlight the importance of full costs for pricing.

Unit 4 – Learning Outcomes
- Develop a greater understanding of pricing decisions and the methods to determine various pricing
  strategies.
- Case analysis: discussion and developing viable solutions for case reporting

 

Unit 5:  Transfer Pricing

Required Reading, Text Chapter 21

Unit 5 – Overview
Chapter 21 examines management control systems of organizations with emphasis on the role of a subsystem, that of the accounting information system. In Chapter 6 the concept of management control systems was introduced through the budgeting process. The three key properties of a management control system are described in this chapter.

The goal of a management control system is improving the collective decisions within an organization in an economically feasible manner. Throughout the text the importance of providing relevant and reliable information to decision makers via the accounting information system has been emphasized. Again that purpose is illustrated using transfer pricing in a decentralized organization as a way that accountants provide information to improve managers’ decisions.

This chapter progresses from a notation of a key property of the management control system—“designed to fit the organization’s structure and the decision-making responsibility of individual managers”—to a closer look at organizational structure— centralized or decentralized—to a detailed study of the role of transfer prices for a decentralized organization. Included are multinational aspects and the impact of governmental levies, especially income taxes.

Unit 5 – Learning Outcomes

- Develop an in-depth understanding of transfer pricing
- Understand tax implications for international firms


Unit 6:  Capital Expenditure Decisions  

Required Reading, Text Chapters 20

Unit 6 – Overview
Chapter 20 examines the role of accounting data in the decision models for capital budgeting with emphasis on a life-cycle framework, not accrual accounting. Capital budgeting is defined and six stages in capital budgeting are identified. These stages are identification, search, information-acquisition, selection, financing, and implementation and control. Discounted cash flow [DCF] methods are explained.

The two primary DCF methods - net present value and internal rate of return are described, illustrated and compared. Sensitivity analysis is discussed as a method used to account for uncertainty in the expected values of cash flows.

The payback method is described and illustrated. The accrual accounting rate-of-return method is described and illustrated. The key difficulties with these methods as well as their benefits are described.
A section on breakeven time and capital budgeting for new products is included. Some of the complexities of capital investments are discussed. The conflicts between using DCF methods for the capital investment decision and using accrual accounting based measures for the evaluation of a manager’s performance are discussed.

The impact of income taxes on operating cash flows and the tax effects of investment expenditures in capital equipment are illustrated. Amortization expense and its relationship to Capital Cost Allowance (CCA) is discussed, with an illustration of CCA and the use of the tax shield formula (including the half-year adjustment). Illustrations differentiate between the total project and the differential approach in capital budgeting decisions.

The impact of inflation on capital budgeting is discussed with illustrations of the nominal and real approaches to incorporating inflation in capital budgeting models. The effects of risk on the required rate of return are discussed, recognizing alternative approaches to recognizing risk in capital budgeting.
The applicability of the models to nonprofit organizations is discussed. Capital rationing and the use of the excess present value index is discussed and illustrated. The chapter concludes with a discussion of the potential for conflict when using the internal rate-of-return and the net present value techniques in ranking mutually exclusive projects with unequal lives or investments.

Unit 6 – Learning Outcomes
- Understand the time value of money when making long term decisions
- Understand the CCA implications on capital budgeting


Unit 7:  Planning and Controls in Non-Profit Organizations

This section will develop an understanding of how Non-Profit Organizations are categorized.  This section will also look at the general characteristics of Non-Profit Organizations and the control mechanisms that are characteristically seen therein.

Unit 7 – Learning Outcomes
- After studying this unit, a student should be able to:
- Identify the different categories of Non-Profit Organizations
- Understand the basic characteristics of Non-Profit Organizations
- Understand the planning and design of budgeting priorities