IBSM 2/LOG 2 116 Management Accounting

• Management Accounting is taught under IBSM 2/LOG 2 116 at the German University of Technology in Spring 2025.
• Dr. Farasat Ali Shah Bukhari and Ms. Mirna Faltas are the instructors.

Main Topics

• Cost Flows and Cost Terminology
• Estimating Fixed and Variable Costs
• Activity-based Costing
• Bridging Planning and Control
• Capital Budgeting
• Strategic Planning and Control

Learning Objectives

• Explain basic accounting concepts and define cost categories.
• Describe basic accounting systems.
• Apply and contrast absorption costing, marginal costing, and activity-based costing principles.
• Apply various financial ratios.
• Assess accounting's role in decision making and financial planning.
• Use planning, decision making, and control techniques.

Forms of Assessment and Weighting

• Participation is worth 10%.
• Quizzes are worth 15%, involving outcomes 1-4.
• Quiz 1 is in Week 4, March 19 (Wednesday).
• Quiz 2 is in Week 11, May 6 (Tuesday).
• The Midterm is worth 25%, involving outcomes 1-3.
• The Final Exam is worth 50%, involving outcomes 1, 2, 3, 4, 5, and 6.

Reading Material

• Introduction to Management Accounting, 17th Ed. by Horngren, Sundem, Stratton, Burgstahler, and Schatzberg, is recommended.
• Managerial Accounting: Creating Value in a Dynamic Business Environment, 10th Edition by Hilton and Platt, is also suggested.

Course Pages

• All course materials, including the course description, announcements, and study material, are uploaded on Moodle.
• A Microsoft (MS) Teams class is created; contact Ms. Mirna for additions.
• Office hours will be updated, students can seek appointments via email or Teams.

Management Accounting Introduction

• Managerial accounting is the process of identifying, measuring, analyzing, interpreting, and communicating information.
• It provides information for decision making and planning.
• Managerial accounting assists managers in directing and controlling activities.
• It motivates managers and employees toward organizational goals.
• Managerial accounting measures the performance of subunits, activities, managers, and other employees.
• It also assesses the organization's competitive position.

How Organizations Work

• Organizations acquire resources and hire people.
• They have organized sets of activities.
• These activities involve directing, decision-making, controlling, and planning.

Balanced Scorecard

• Financial Perspective: How do owners see us?
• Customer Perspective: How do customers see us?
• Operations Perspective: In which activities must we excel?
• Innovation Perspective: How can we continue to improve?

Managerial vs Financial Accounting

• Managerial accounting provides information for internal decision making, planning, and controlling.
• Financial accounting focuses on published financial statements for external users.
• The Accounting System accumulates data for both.
• Managerial Accounting users are managers, within the organization
• Financial Accounting users are those interested parties outside the organization

Line and Staff Positions

• A line position is directly involved in achieving the basic objectives of an organization, like a production supervisor.
• A staff position supports and assists line positions, like a cost accountant.

Controller

• The controller is the chief managerial and financial accountant.
• Responsibilities include supervising accounting personnel, preparing managerial and financial reports, analyzing accounting information, and planning/decision making.

Treasurer

• The treasurer is responsible for raising capital and safeguarding the organization’s assets.
• This includes supervising financial institution relationships, working with investors, managing investments, establishing credit policies, and managing insurance coverage.

Internal Auditor

• The internal auditor reviews accounting procedures, records, and reports for both the controller and treasurer.
• They express opinions to top management regarding the effectiveness of the organization's accounting system.

Major Themes in Managerial Accounting

• Behavioral Issues
• Costs and Benefits
• Information and Incentives
• Managerial Accounting
• Evolution and Adaptation

Evolution and Adaptation Factors

• E-Business
• Service vs. Manufacturing Firms
• Emergence of New Industries
• Global Competition
• Focus on the Customer
• Cross-Functional Teams
• Product Life Cycles
• Time-Based Competition
• Information and Communication Technology
• Just-in-Time Inventory
• Total Quality Management
• Continuous Improvement

Cost Management Systems Objectives

• Measure the cost of resources consumed.
• Identify and eliminate non-value-added costs.
• Determine efficiency and effectiveness of major activities.
• Identify and evaluate new activities that can improve performance.

Strategic Cost Management and the Value Chain

• The value chain includes: securing raw materials, research and development, product design, production, marketing, distribution, and customer service.

Theory of Constraints

• This is a sequential process of identifying and removing constraints in a system.
• Constraints are restrictions or barriers that impede progress toward an objective.

Professional Ethics

• Professional ethics include competence, confidentiality, integrity, and credibility.