Course content

Overall goal of the subject: Continuation of Financial Management I. The main focus is on an introduction to budgeting and keeping operating accounts according to the cost-effectiveness and contribution principle, models and theories for use in various business economic decision-making problems, and recommendations based on the relevant theories.

• Models of cost accounting: normal and standard cost according to the variable and absorption costing
• Business decision making problems (relevant costs and revenues for decision making)
• Activity-based costing (ABC) as an alternative to traditional costing
• Different types of budgets and the budgeting process
• Basic estimation of cost functions
• Basic cost allocation
• Internal pricing
• Decentralization and performance measurement

Learning outcome

Block 1:

• Refer to the differences between the cost and contribution principles and prepare an operating account (normal cost accounting and standard cost accounting) according to these principles. Acquire knowledge about a flexible budget. (P-LUB 3)
• Prepare an operating account based on different principles
• Perform the relevant variance analyses in connection with an operating account. (P-LUB 3)

Block 2:

• Define the budgetary relationships. (P-LUB 3)
• Prepare sub-budgets and prepare the three main budgets. (P-LUB 3)

Block 3:

• Analyze and compare different cost drivers using two quantitative methods for estimating cost functions (high-low method and regression), explain the advantages and disadvantages of the methods and interpret the results. (P-LUB 2)
• Define a simple basic inventory management model (EOQ), including being able to make simple calculations in connection with the EOQ model. (P-LUB 3)
• Describe the general long-term pricing models and perform the relevant calculations in connection with pricing (including the allocation of joint manufacturing costs). (P-LUB 1)
• Explain methods for pricing internal deliveries (interpricing), and perform calculations in connection with interpricing. (P-LUB 2)

Knowledge:

• Have an understanding and knowledge of management accounting based on normal cost and standard cost (based on the variable and absorption costing) with variance analysis
• Have knowledge of flexible budgets
• Have knowledge of Activity-based costing (ABC)
• Have knowledge of business decision-making problems
• Have knowledge of the budgeting process
• Have knowledge of different types of budgets
• Have knowledge of responsibility centers and make transfer pricing
• Have knowledge of basic cost estimation
• Have knowledge of basic cost allocation
• Have knowledge of the performance measurement
• Have knowledge of inventory management

Skills:

• Be able to prepare normal cost accounting and standard cost accounting according to the variable and absorption costing principles
• Be able to conduct variance analysis
• Be able to prepare calculation with Activity-based costing
• Be able to distinguish between decision-relevant and decision-irrelevant incomes and costs, and apply these in various decision-making situations
• Be able to prepare budgets, especially cash budget, result budget and balance sheet budget
• Understand the purpose of dividing an organization into responsibility centers, as well as calculating transfer prices
• Have insight into performance measurement

General competence:

• Be able to see the subject in a broader economic context
• Be able to use cost accounting and budgeting in corporate financial management
• Critically assess whether different methods and techniques should be apllied in different contexts, including asess whether the methods promote or inhibit long-term orientation and responsible use of resources
• Be able to acquire updated knowledge within the above mentioned knowledge and skills in the subject areas.

Learning methods and activities

Teaching methods:

Lectures (can be both digital and physical) and group work (including the use of spreadsheets). Digital learning platform will be used to some extent in the exchange of information.

Compulsory assignments

• Mandatory assignment

Specific conditions

Recommended previous knowledge

Continuation of Management Accounting I.

Course materials

Syllabus is given at the start of the semester.