COST MANAGEMENT
ACC 387.3
Charl J. De Villiers Fall 2000
02590
E-mail: charl.devilliers@bus.utexas.edu Tuesday 6:00-9:00
Campus phone: 232 9158 CBA 4.328
Campus office hours: Tuesdays 4:00-6:00 or by appointment
Campus office: CBA S6.304 B
Course Syllabus
Purpose:
The purpose of this course is to expand and enhance the student's knowledge of accounting
information by the analysis, discussion and challenge of the practical uses of management
accounting and cost information. The principal focus will be on the design and implementation of
management planning and control systems, with emphasis on operational planning and control.
Objectives:
Develop analytical skills and judgment with respect to cost accounting numbers and non-
financial indicators.
Become familiar with the criticisms of traditional cost accounting systems.
Become familiar with current and emerging practices in cost management.
Understand the importance of the organization's competitive environment and human
factors when developing recommendations based on cost data.
Develop presentation skills to be used in selling recommendations to management.
Be familiar with planning and control systems.
Understand how management accounting control systems are designed.
Scope:
This is not a course in the detailed design of cost systems. However, it will develop an
understanding of standard cost systems, activity based cost systems, requirements, and planning
considerations necessary for the successful implementation of control systems.
Approach:
We will use case studies combined with articles and other publications on cost management,
individual and team group exercises with specific deliverables, lecture, and class discussion of
relevant topics including the practical use of management control systems.
Subjects/Topics:
Activity Based Costing (ABC)
Capacity (cost & assignment)
Cost Management
Cost Control & Cost Reduction
Critical Success Factors
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Financial vs. Management Reporting
Systems for Operational Control & Performance Measurement
Value Chains
Balanced Scorecard
Economic Value Added (EVA)
Required Text & Materials:
Shank, John K. 2001. Cases in Cost Management: A Strategic Emphasis – second edition, South-
Western College.
Each student should have in their own personal library, a current text on financial accounting and a
text on managerial accounting topics.
Articles, assignments and some notes will be handed out in class. If you are unable to attend a
class, you should arrange with another student to pick up copies of any handouts for you.
Other Recommended Readings:
Fortune magazine.
Grading Policy:
The grade for the course will be determined using the following proportional breakdown:
Class Participation 20%
Case Analysis (presented in class) 20%
Individual Assignments 20%
Group Consulting Project 40%
There are no exams for this course. Performance of an outside group consulting project is a
requirement for this course. I will assign students to specific teams for the group consulting project
- 4 to 6 students per team.
For the group consulting project, you are encouraged to find your own client/project. A project at
the employer of one of the team members is ideal for this purpose. Contact the client and develop
an engagement. Review the issue/problem, develop your findings, and recommend improvements.
The team will prepare a formal report and present their report to the class and the client (20-25
minutes) during the last class week. Formal business attire will be required at the presentation.
The project requirements will be discussed in more depth at the first and second class meetings. A
self-evaluation will be performed after the project completion, and if a team member's contribution
to the team is rated as "consistently inadequate" by the other members of the team, that individual's
grade may be reduced by one full letter grade. I will grade the project with input from the client.
The consulting project will require several days of fieldwork by each student, plus time for
planning, analysis, recommendations, presentation of findings & recommendations, and a final
report.
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Cases:
You will find it beneficial to analyze and discuss the cases in assigned teams prior to each class.
The individual case grade (20% of total grade) will be based on each individual's analysis and
answers to the questions asked in the assignment and discussed in class. There will be 1-2 cases
per class.
Active class participation:
is required. Participation (20% of grade), is required for discussion of reading assignments, cases
and class topics. You can't participate if you do not attend class. You can't participate (to any
meaningful or worthwhile extent) if you have not read the assigned material or prepared the
assignments in advance. I expect that you will ask questions, participate in discussions, and share
your experiences with the rest of the class. Please note: I will cut you off if I believe you are
talking just to hear your own voice or if your discussion is not relevant to the matter at hand.
Individual Assignments:
Individual written assignments (20% of grade) are as noted in the course assignments material.
Students may work and confer with their team members, but each student is to submit their own
work. Individual assignments are a summary document that answers the questions asked in the
assignment and required according to the schedule below. The assignments must be typed, single-
spaced, #12 font - except exhibits, which may be submitted in neat, handwritten form and are in
addition to the 4 page maximum set for each assignment.
Name cards:
A name card must be displayed in front of you for every class.
About the Instructor:
Charl de Villiers
Chartered Accountant (South Africa), MBA, Doctor of Commerce (PhD equivalent)
Professor in the Department of Accounting and Finance, University of Pretoria, South Africa and
visiting professor at the University of Texas at Austin.
Teaching: Managerial Accounting and Finance at 3rd year, 4th year and masters levels both to
specialized accounting students and MBA students.
Research interest: environmental accounting.
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Schedule:
S Date Topics Cases for discussion Ind. Hand-in Group Project
1 Sept, 5 Introduction 4 Baldwin Bicycles Discuss L.o.U.(1)
Incremental cost
Strategic analysis
2 Sept, 12 Cost analysis 5 Berkshire Threaded F. Assign groups
Relevant cost 27 Reichard Machinen A1: Q 5 & 6
3 Sept, 19 Relevant cost 32 Tashtego
Contribution margin 10 California Products A2: Q 5
4 Sept, 26 Cost allocation 31 Societe Bonlieu
Joint costs 34 Unitron A3: Q 5
5 Oct, 3 Flexible budgets 7 Boston Creamery Draft L.o.U. due
6 Oct, 10 Process costs 28 Ringo Rag Company Final L.o.U. due
Learning curves 17 Jones Ironworks A4: Q 3
7 Oct, 17 Read handouts on Balanced Scorecard and EVA
Standard costs 25 Petersen Pottery (incl. supplement)
8 Oct, 24 Life cycle costing 24 OSRAM, North Am. Progress report (2)
New products 13 Dansk Minox
9 Oct, 31 Segment profits 20 M-L Fasteners A5: Q 7
10 Nov, 7 Target cost 23 Montclair (p.175)
11 Nov, 14 Joint costs 1 Ajax Petroleum Progress report (2)
12 Nov, 21 Read: “Note on value chain analysis” pp. 93-104
Value chain, ABC 11 Chalice Wines
Relevant cost 29 Skyview Manor A6: Q 6 & 7
13 Nov, 28 New venture 15 Forbes and White
Direct cost 6 Booker Jones
14 Dec, 5 Presentation of group consulting project (invite your client to class)
No final exam
(1) - L.o.U. = Letter of understanding or appointment letter
(2) – Typed (1 pages), handed in and presented to class
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