Module 1 – SLP

ACCOUNTING COST SYSTEMS AND COST BEHAVIOR

You are applying for a managerial position at an innovative and rapidly growing company. This is a dynamic company that wants an individual who adds value to the organization. Managers at this company wear many hats, so the position requires managing products, people, and financial aspects of running the company.

As part of the interview process, you are required to make a presentation covering four different topics, one per module for this course.

You choose the company and the new product that you want to showcase in your presentation. It can be real or fictitious (based on an industry). This is for background purposes only. The presentation is to showcase your abilities and what you can contribute to the organization.

IBIS World (access on the Portal through the Online Classroom & Library, Additional Library Resources link) and BizStats have estimates of cost of goods sold and some other categories of operating expenses. Information about contribution margins is not available, but adding new products typically mean incurring both fixed and variable costs. Consequently, cost of goods sold is a reasonable estimate. Net operating income as a percentage of sales or some variation thereof may also be relevant if the new product is expected to contribute significantly to the bottom line. As a candidate for a position you would not have internal information available, but being resourceful and being a skilled researcher are desired traits for the position. IBIS World also has a wealth of other market statistics that may be helpful. Use listed background material and other resources as needed.

Required:

Include the following items in your presentation.

• Present an idea for a new product.
• Describe the product.
• Show some cost estimates and pricing suggestion for this product based on research.
• What approach would you use to determine selling price (for example cost plus or target costing)? It is important when choosing a design.
• Explain your rationale for the pricing approach.
• Show expectations of growth and potential profit.

SLP Assignment Expectations

Submit a PowerPoint presentation or a Word Document. A PowerPoint presentation should have no more than six slides and a Word document cannot exceed two pages. Use words, tables, and graphs to make a succinct presentation. Document all sources and provide links at the end. It is acceptable to add another slide or page to list the sources.

Module 1 – Background

ACCOUNTING COST SYSTEMS AND COST BEHAVIOR

Modular Learning Objectives

Keep the following objectives in mind as you work through the material in this module:

• Define managerial accounting.
• Describe the role of managerial accounting.
• Differentiate between variable and fixed costs.
• Prepare a contribution margin (variable costing) income statement.
• Recognize various approaches to categorizing costs.
• Prepare and analyze a segmented income statement.

Required Reading

Begin this module by familiarizing yourself with the following sections pertaining to managerial accounting while keeping the above six objectives in mind. Click on the three arrows to explore each topic in more detail.

Check Your Understanding

Check your understanding to make sure that you have a good grasp of the background material. If you are not comfortable with the concepts, review some of the material again or go to the optional resource for more examples.

Click on the quiz icon for an ungraded, 20-question true-or-false self-study quiz to check your progress. If you are not satisfied with the score, review some of the material again. For more in-depth information, review materials listed under optional reading at the bottom of this page.

Final Thoughts Contribution margin income and absorption income are two distinct approaches to assess operating profit. Many companies use both approaches. The two approaches have benefits and limitations. Multiple descriptive names exist for the two methods of costing and computation of income. For example, the contribution margin approach is also known as variable costing, direct costing. or marginal costing. Absorption income and costing are also known as full costing, GAAP income, financial accounting income, or traditional costing. Management mostly uses the information provided by variable costing method for estimates and internal decision-making purposes. Variable costing is appropriate for detailed analysis of a product or service. GAAP is required for publicly released and audited financial statements. Management uses both approaches for internal decision-making. Cost behavior refers to the way different types of production costs change when there is a change in level of production. There are two main types of costs according to their behavior: Fixed Costs: Fixed costs are those, which do not change with the level of activity within the relevant range. These costs will incur even if no units are produced. For example rent expense, straight-line depreciation expense, etc. Fixed cost per unit decreases with increase in production. Variable Costs: Variable costs change in direct proportion to the level of production. This means that total variable cost increase when more units are produced and decreases when less units are produced. Although variable in total, these costs are constant per unit. Rubric Name: MBA/MSHRM/MSL SLP Grading Rubric for Quantitative Business Courses -Timeliness v1 Criteria Level 4 – Excellent Level 3 – Proficient Level 2 – Developing Level 1 – Emerging Assignment-Driven Criteria 9 points Demonstrates mastery covering all key elements of the assignment in a substantive way. 8 points Demonstrates considerable proficiency covering all key elements of the assignment. 7 points Demonstrates partial proficiency covering all key elements of the assignment. 6 points Demonstrates limited or poor proficiency covering all key elements of the assignment. Presentation, Computation, and Relevance of Quantitative Information 7 points Demonstrates mastery in presenting quantitative information in a format appropriate for the discipline. Supporting computations are relevant and accurate. 6 points Demonstrates considerable proficiency in presenting quantitative information in a format appropriate for the discipline. Supporting computations are mostly relevant and accurate. 5 points Demonstrate partial proficiency in presenting quantitative information in a format appropriate for the discipline. Supporting computations are not necessarily relevant and somewhat misleading. 4 points Demonstrates limited or poor proficiency in presenting quantitative information in a format appropriate for the discipline. Supporting computations are not relevant, misleading or absent. Critical Thinking 6 points Analyzes quantitative and qualitative information as the basis for deep and thoughtful discussion, drawing insightful, carefully qualified conclusions from this work. 5 points Analyzes quantitative and qualitative information as the basis for competent and thoughtful discussion, drawing reasonable and appropriately qualified conclusions from this work. 4 points Analyzes quantitative and qualitative information as the basis for workmanlike (without inspiration or nuance, ordinary) discussion, drawing plausible conclusions from this work. 3 points Analyzes quantitative and qualitative information as the basis for tentative or limited discussion; and is hesitant or uncertain about drawing conclusions from this work. Business Writing 5 points Demonstrates mastery and proficiency in written communication to an appropriately specialized audience. 4 points Demonstrates considerable proficiency in written communication to an appropriately specialized audience. 2 points Demonstrate partial proficiency in written communication to an appropriately specialized audience. 0 points Demonstrates limited or poor proficiency in written communication to an appropriately specialized audience. Timeliness 3 points Assignment submitted on time or collaborated with professor for an approved extension on due date. 2 points Assignment submitted 1-2 days after module due date. 1 point Assignment submitted 3-4 days after module due date. 0 points Assignment submitted 5 or more days after module due date. Overall Score Level 4 27 or more Level 3 24 or more Level 2 21 or more Level 1 0 or more