Managerial Accounting and Decision Making

2019-2020 Term 3

Sessions 1-5 Sessions 6-10

Professor Shiva Sivaramakrishnan Professor Nandu J. Nagarajan

Henry Gardiner Symonds Professor of Accounting Accounting Alumni Professor
Jones Graduate School of Business Department of Accounting
Rice University College of Business
Houston, TX 77252-2932 University of Texas at Arlington
Phone: 713 348 4653 Arlington, TX 76010
Email: [email protected] Email: [email protected]
Professor Ramji Balakrishnan Professor Sudarshan Jayaraman
C. Woody Thompson Professor of Accounting Wesray Professor of Business Administration
Henry B. Tippie School of Business Simon Business School
The University of Iowa University of Rochester
Iowa City, IA 52242-1000 Rochester, NY 14627
Phone: 319 335 0958 Phone: (585) 275-3491
Email: [email protected] Email: [email protected]

Office Hours: Will be announced in due course

1. Objectives
This course examines managerial decision-making as it relates to both the internal organization of a
firm's activities and the firm's relationship with its external environment. The primary focus is on how
managers can use accounting data and other related information in making better planning and control
decisions. Because this is an introductory course, we will also cover the basic vocabulary and mechanics
of managerial accounting through the text, problems and cases. A significant portion of the class
discussions will focus on the economic basis for managerial accounting techniques and the problems
and limitations involved in their use.

2. Required Course Materials

Text: Managerial Accounting by Ramji Balakrishnan, Geoff Sprinkle and K. Sivaramakrishnan, 2nd edition,
John Wiley and Sons.

Course Packet: Cases and readings. This will be available in the form of an e-Coursepack available on
LMS.

We plan to distribute additional materials as we go along.

3. General guidelines
a) Professors Balakrishnan and Sivaramakrishnan will teach the first five sessions (first half).
Professors Jayaraman and Nagarajan will teach the next five sessions (second half).
b) The first half of the course focuses on tools and techniques required to address a large variety of
decision contexts relating to the planning of operations. The second half of the course focuses
on control -- incentive and coordination problems in organizations.

4. Grading
Grades for the course will be as follows:
Two individual in-class quizzes 30%
Two individual online homework assignments 10%
Class participation 10%
Mid-term examination (Scheduled time and place TBD) 25%
Final Exam (Scheduled time and place TBD) 25%
Total 100%

Group Instructions on
Take- Soft/hard Mark
Assignm word limit and Coding
Component Dates home or copy Release
ent format of Scheme
in-class submission date
(Y/N) submission
July 26 In-class
Two
(Friday) Within 3-4
individual in- N N/A N/A 4N
August 17 days
class quizzes
(Saturday)
July 28 Take-
Two (Sunday, home
individual 10 PM) (timed)
Within 3-4
online August 11 N N/A N/A 2N-c
days
homework (Sunday,
assignments 10 PM)

Class
N/A N/A N/A N/A N/A N/A
participation
As per In-class A week
Mid-term
ASA N N/A N/A after the 4N
exam
schedule exam
As per In-class A week
Final Exam ASA N N/A N/A after the 4N
schedule exam

While active class participation is encouraged, it is the “quality” rather than the “quantity” of
participation that enhances the learning experience for participants. Consequently, thoughtful and
constructive class participation is valued highly.

We expect everyone to contribute to the case discussions. Your prior preparation for cases may include
group discussions, research using internet, etc. You might be subject to “cold calls” in class to share your
analysis. Your response to these questions will count towards class participation.

We will monitor attendance and absences will count against class participation. Late arrivals are
disruptive to the class environment. Therefore, please ensure that you are in class before the scheduled
start time. Attendance, by itself, is not sufficient to ensure credit for class participation.

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The two individual in-class quizzes will last approximately 1 hour for quiz 1, and 1 hour for quiz 2,
respectively. These quizzes will be closed book and closed notes (coding scheme 4N). The mid-term
and the final exams are closed book and closed notes (coding scheme 4N).

5. What to expect from class sessions

a) Workload is somewhat high but nothing that you cannot manage. We strongly recommend that
you come prepared to class after studying the assigned chapters and by making a serious
attempt to solve the assigned problems before class. The lectures will cover a large volume of
material relatively quickly and are interrelated. If you fall behind, it will be difficult to catch
up.
b) We will often discuss issues in greater depth and complexity in class than what is covered in the
textbook. We have designed the course with the expectation that students would have read the
assigned materials before class and would be fully prepared for discussions.
c) We follow a directed case study approach. Thus, questions relating to cases will be quite specific
and you will need to know case facts well to answer them.
d) We also note that the attached syllabus represents a tentative plan for what we intend to
discuss in class. Therefore, like all plans, the syllabus is subject to change and adaptation as we
proceed with the course.

6. Study Strategy.
One possible strategy to study the materials for this course is given below:
a) Read the assigned chapters from the text and any “notes” provided, that focus on more
significant portions of the material. The objective here is to understand the conceptual
underpinnings of the given area.
b) Study the real life world examples described in the textbook.
c) Do problems to assimilate such applications.
d) Analyze any assigned cases.
e) Skim through “additional readings” depending on available time.
f) After the class, review the HW problems to make sure that you know how to handle them.
Practice from doing problems ON YOUR OWN is the key to success in this class.

7. Honor Code
We expect you to adhere strictly to the correct classroom etiquette and the ISB honor code. If you feel
you need some clarification about what aspect of your behavior might run the risk of violating the
classroom etiquette or ISB’s honor code, please feel free to talk to any of the teaching assistants or
instructors for the course.

8. Learning Goals
The learning goals for this course are
a) Awareness of global issues affecting business,
b) Critical and integrative thinking and
c) Effective oral communication.

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9. Attendance & Punctuality

Learning is an interactive process. ISB students are admitted partly based on the experiences they
bring to the learning community and what they can add to class discussions. Therefore, attendance
is an important aspect of studying here.

The ISB expects students to attend all class sessions in every module. However, if due to completely
unavoidable reasons a student is forced to miss a class session. The school policy is below:

1. If a student misses 20% of sessions in a course; there will be no grade penalty.

2. If a student misses 30% of sessions in a course, s/he will obtain a letter grade lower than that
awarded by the faculty for that course.

3. If a student misses 40% of sessions in a course, the student will receive a letter grade that is two
levels lower.

4. If a student misses 50% of sessions or more in a course, the student will receive an ‘F’ grade for
that course.

Note: For half credit courses, 30% may not be applicable given it will equate to one and a half
sessions.

Course Schedule

Session Topic Assignment

1 Overview Text:
1. Decisions Chapters 1 (skim), Chapter 2, Chapter 3
(Relevant and controllable costs)
2. Cost terminology – cost structure
(variability and traceability) Discussion case:
3. Costs in accounting documents Phelps Industries
(product and period costs)
4. The need for allocations and Practice problems:
terminology 1.36, 3.36, 3.38, 3.39, 3.62

2 Cost-Volume-Profit (CVP) Analysis Text: Chapter 5

1. Break-even analysis Articles (skim):

2. Applications 1. Break-even analysis…franchise. (Franchising
3. Extension to multiple products World)
4. Evaluating risk in cost structure 2. Note on break-even analysis in marketing.
(HBS -9-578-072)
3. Natural gas cost structure

Discussion Cases:
Forrest Gump

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 Carousal Motors

Practice problems:
5.33, 5.38, 5.39, 5.41, 5.43, 5.46, 5.48, 5.62

3 Text: Chapter 4 (skim) and Chapter 6

Short-term decisions (Relevant Cost
Analysis) Articles (skim):
1. The outsourcing decision (RMA)
2. Variable vs. fixed costs for the supply chain: a
sound approach to future growth (Third-party
Logistics)
3. Oil-tanker operators… (WSJ)

Discussion case: Phelps Industries (again)

Practice problems:
1.38, 1.41, 1.56, 2.28, 2.37, 2.51, 5.44, 5.54, 6.32,
6.44, 6.45, 6.54

4 Short-term decisions (contd.) Text:

Chapter 9 (pages: 360-370)

Discussion cases:
Reichard Maschinen

Product costing for long-term decisions Articles:

1. Role of cost allocations 1. Fallacy of the overhead quick fix (HBR- 91403)
2. Two stage allocation systems
(traditional) Discussion Case:
Color Graphics

Practice problems:
9.33, 9.35, 9.44, 9.53, 9.54

5 1. Modern costing systems: Activity- Text:

based costing (ABC) Chapter 10
2. Summary and wrap up of module 1
Articles:
1. Tapping the full potential of ABC (HBR-95408)
2. Manage customers for profit (HBR-87513)
3. Measuring and managing customer Profitability
(RMA)

Discussion Case:
Zeus Opticals

Practice Problems:

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 10.39, 10.53

6 1. Activity-based management (ABM) Text:

2. ABC and ABM in the service sector Chapter 10
3. Customer profitability management
Articles:
1. ABM lifts Banks (RMA)
2. Unbundling the cost of Hospitalization (RMA)
3. Time-Driven ABC (HBR-9-106-068)

Discussion Cases:
Buckeye National Bank

Practice Problems:
10.57, 10.54, 10.49, 10.47, 10.51

7 1. Profit planning and budgeting Text:

2. Decentralization and performance Chapter 7, Chapter 12 (pp. 501-507)
measurement
Discussion Case:
To be decided
Practice Problems:
7.46, 7.48, 7.49, 7.60, 7.54, 7.46, 7.47

8 1. Variance analysis Text:

Chapter 8

Discussion Case:
Danshui Plant #2 (HBS 9-913-525)

Practice Problems:
8.49, 8.50, 8.52, 8.55, 8.56, 8.65, 8.69

9 1. Transfer pricing Text:

2. Multinational considerations in Chapter 12 (pp. 518-529)
transfer pricing
Articles:
1. How Xerox’s Plan to Reduce Taxes…
2. A New Twist on Tax Avoidance…

Discussion case:
Economics of international transfers – a simple
illustration

Practice problems:
12.46, 12.48, 12.49, 12.50, 12.65

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10 1. Measuring business unit Text:
performance: Return of investments Chapter 12 (pp. 510-517)
and residual income
2. Overview of the second-half of the Article:
course Coming Up Short on Non-Financial Performance
Measurement (HBR-R0311F)

Discussion Case:
Executive Inn

Practice problems:
12.42, 12.43, 12.54, 12.55