ACC1

Welcome! prof. Soojin Lee

What is this course about? How to make business decisions using

accounting information Ø  “managerial accounting” is actually

Ø This course is for non-accounting majors: §  manager’s perspective, not accountant’s perspective

(how to use accounting data to make decisions, not how to create accounting data)

MANAGERIAL accounting Our main focus: how to make decisions

The source of data we use to make decisions

Course Logistics •  see syllabus for details •  Textbook:

Ø MANAGERIAL ACCOUNTING, by Balakrishnan, Sivaramakrishnan and Sprinkle, 2nd edition §  loose-leaf version ($181 new at Temple book store)

–  a used copy of the first edition will also work §  do NOT get any supplementary materials

•  Lecture slides: Ø Posted on Blackboard. Please print them out before class.

Course Logistics •  Grading:

Two midterm exams 25% Final exam 25% Five Quizzes (best 4 out of 5) 15% Homework (10 homeworks) 25% Class participation 10% Maximum Possible 100%

The scale for grades is: A >92%; A- 92~90; B+ 89~87; B 86~83;

B- 82~80; C+ 79~77; C 76~73; C- 72~70; D+ 69~67; D 66~60; F<60

Course Logistics •  Exams (midterms/final):

Ø multiple-choice questions (concepts + computational) Ø closed-books, closed-notes Ø cheat sheet (1 sheet, 8.5*11”, two-sided, HANDWRITTEN ONLY) Ø bring a calculator Ø excused absence:

§  MEDICAL/FAMILY EMERGENCIES ONLY §  YOU HAVE TO PROVIDE DOCUMENTATION!!!

•  NO DOCUMENTATION = ZERO POINTS §  let me know BEFORE the exam (I will NOT accept

any excuses after the scheduled exam time) Ø unexcused absence = zero points Ø special accommodations: let me know in advance

Course Logistics •  Final - incompletes:

Ø only for MEDICAL/FAMILY EMERGENCIES §  YOU HAVE TO PROVIDE DOCUMENTATION!!!

•  NO DOCUMENTATION = NO INCOMPLETE §  let me know BEFORE the final (I will NOT accept any

excuses after the scheduled exam time)

Ø do not try to create facts on the ground (e.g., book a flight leaving 2 days before the final) – it is not a sufficient reason for an incomplete

Course Logistics •  Quizzes:

Ø 5 multiple-choice questions (concepts + computational), 15 minutes

Ø closed-books, closed-notes, no cheat sheet Ø bring a calculator Ø excused absence:

§  MEDICAL/FAMILY EMERGENCIES ONLY §  YOU HAVE TO PROVIDE DOCUMENTATION!!!

•  NO DOCUMENTATION = ZERO POINTS §  let me know BEFORE the quiz (I will NOT accept any

excuses after the scheduled quiz time) Ø unexcused absence = zero points Ø special accommodations: let me know in advance

Course Logistics •  Homework:

Ø 10 online algorithmic homeworks at webassign.net §  They charge $22.95 per semester

Ø Due online on (Due date on Syllabus) at 5:00PM sharp, late homeworks will not be accepted by the system §  extensions: only for documented emergencies §  technical problems: let me know BEFORE the homework is due

(I will not accept any excuses after the homework deadline)

§  if webassign is acting weird: make sure your computer complies with the system requirements http://webassign.net/user_support/admin/system_requirements.html

Course Logistics •  Homework (continued):

Ø No partial credit for wrong answers, but you get 5 attempts to answer each question, with instant feedback on right/ wrong answers + practice version of each problem §  an exception is short essay questions: graded manually later so you

get no instant feedback, and you get partial credit for wrong answers as long as they make sense

Ø Solutions will be posted on Blackboard Ø Sign-up details and other technical stuff: later... Ø questions on homework: shoot me an email or come to

office hours(by appointment) Ø missing homeworks can severely reduce your grade!!!

Course Logistics •  Participation part of the grade – mostly

based on attendance Ø  I will use regular pop quizzes to measure

attendance: §  pop quiz grade: 80% for handing it in, 20% for correct

answers §  1-2 questions on current lecture, ~5 minutes §  open books/notes, you may use Google or any other

source, may work in groups (but a separate write-up from each person in group).

Ø  total participation score will be based on max{ % on pop-quizzes, % on the final }

Course Logistics •  1 Page Summary (Optional)

Ø  Prepare 1 page review for extra credit: §  Summary of the last class session §  Handwritten, own style (one sided letter-sized sheet) §  If you miss the last class (or pop quiz), please prepare

summary to review the last class and also any penalty can be waived.

§  Attendance Check!! • Extra credits: None, so plan accordingly.

Course Logistics •  Cheating:

Ø You cheat (& get caught) => you fail (F for the course) •  Contact info & office hours:

Ø  [email protected] Ø  Office hours: Tue, 5:00-5:30pm, Classroom

or by appointment (email preferred) Ø  Tutoring center: Mon-Fri 10am-2pm, Alter 403d Ø  can help with homeworks and practice questions before

exams

Course schedule

Online homework system • To sign up:

Ø  go to webassign.net Ø  click on “Enter Class Key" Ø  enter class key: temple 6965 7910 Ø  choose "I need to create a Webassign

account" (unless you have one already) Ø  choose user name + password, plus enter

your name, email address, student ID §  make sure to use your Temple email address +

your real student ID. Ø  choose "purchase online access" ($22.95) or

"continue my trial period".

Online homework system • To log in later:

Ø  go to webassign.net Ø  enter your user name, enter temple for

institution, password Ø  if you chose free trial period during sign-up,

you'll have to pay at some point §  choose "purchase online access" (not "enter an

access code")

Online homework system • Homework mechanics:

Ø  5 attempts to answer each question, with instant feedback (V or X) §  # attempts computed separately for each answer =>

get a correct answer for part (a) before entering part (b) etc

§  to see # attempts used, click on "+" in question header §  practice version of each problem (different numbers) -

unlimited #attempts but no credit §  no partial credit for wrong answers

Ø  short essay questions: §  graded manually later (=> no instant feedback) §  the system automatically assigns full credit, so your

grade may go down after manual grading §  partial credit for wrong but reasonable answers

Online homework system • Homework mechanics (continued):

Ø  enter negative numbers with a minus sign: §  i.e., enter negative $100 as -100, not ($100) or (100)

Ø  answers with percentages, millions of dollars, etc - read the answer format instructions next to the answer box

Ø  remember to hit "Submit" (not "Save") to get instant feedback + credit for each question

Ø  the system does not allow submissions after the deadline (5:00pm)

Ø  technical issues: shoot me an email or come to office hours

Chapter 1

Introduction to managerial accounting

Managerial Accounting: What is this course about?

How to make business decisions using accounting information Ø  “managerial accounting” is actually

Ø Manager’s perspective, not accountant’s perspective

MANAGERIAL accounting Our main focus: how to make decisions

The source of data we use to make decisions

Managerial Accounting: How is it different from Financial Accounting?

Financial Accounting • Serves decision-makers outside

the firm (shareholders/creditors/IRS) Ø useful for decisions like:

* Buy/sell stocks of the firm? * Lend money to the firm? * How much tax the firm owes?

• Standardized financial statements (balance sheet, income statement, etc, annual/quarterly basis) Ø must follow specific standards:

GAAP and FASB guidelines Ø aggregate data for the entire firm

Managerial Accounting • Serves decision-makers inside

the firm (managers of the firm) Ø useful for decisions like:

* Which products to offer? * How to price them? * What equipment to purchase?

• Flexible format & periodicity (whatever is most useful to make a particular decision) Ø do not have to follow any specific

standards Ø much more detailed data

BUT I’M NOT AN ACCOUNTING MAJOR.

WHY DO I HAVE TO TAKE AN

ACCOUNTING COURSE?

Here’s why: It’s your decision, not your accountant’s

Some examples: •  you’re a production manager. You’ll face issues like:

Ø  where are your costs coming from, and how to cut them? Ø  produce in-house or outsource? Ø  invest in new equipment? §  it’s your job as a production manager to make these decisions, not your

accountant’s job •  you’re a sales manager. You’ll face issues like:

Ø  how to price products? cut prices or increase advertising? Ø  which products are profitable/unprofitable? Ø  which customers are profitable/unprofitable? §  it’s your job as a sales manager to make these decisions, not your

accountant’s job •  you’re a CEO. You’ll face issues like:

Ø  what strategy should the company follow? Ø  is the strategy working well (and who should be fired if not)? §  it’s your job as CEO to make these decisions, not your accountant’s job

Making a decision

Making a Decision – general framework •  You choose among several decision options •  For each option, compute Value = Benefits – Costs •  Choose the best option (highest value)

Ø  max(benefits–costs), NOT max(benefits), NOT min(costs)

•  For for-profit firms, Benefits = Revenue in $, Value = Revenue – Costs = Profit Ø  maximize profit, NOT max(revenue) or min(costs)

•  When you make a decision (choose an option), you give up other options that you could have chosen Ø  Opportunity cost = value of what you give up by making a

decision (value of the best other option)

Example: Value & opportunity cost of decision options

•  You are considering several part-time jobs for the summer: Ø  job A: $250 salary Ø  job B: $50 salary + $250 tips Ø  job C: $350 salary, but you’ll have to spend $70 on transportation

•  Question 1: What is the value of each option?

•  Question 2: Which option should you choose? •  Question 3:

Ø  what is the opportunity cost of job A? Ø  what is the opportunity cost of job B?

job A job B job C benefits $250 $50+$250 $350 costs $0 $0 $70 value $250 $300 $280 = benefits-costs

Option B

$300 $280

Example: Opportunity costs are not out-of-pocket costs, but they are just as real

•  You have inherited $100,000 from a very rich (and very dead) uncle.

•  You do not need the money now. For now, you keep it in your checking account (0% interest).

•  The yield on short-term government bonds is 1.5% a year (ignore other investment opportunities).

•  Question: How much money are you not making if you keep the money in your checking account?

Takeaway

•  Managerial Decision (Cost-Benefit Analysis)

•  Opportunity cost •  Homework 1&2 – Due on Sep 6.

•  Sign up webassign.net

•  Please do not miss the class!