• Course Introduction

        • Time: 53 hours
        • Free Certificate
        As you know from BUS103: Introduction to Financial Accounting, firms are required to track various forms of data to report to their customers, investors, regulators, business associates, and vendors.

        Business managers use managerial accounting to help make decisions about their future activities: they need more information and detailed than the data they provide in reports to their external stakeholders. They may need data tailored to meet the needs of a particular business unit, which is not applicable to the firm as a whole. While departmental managers have different needs, most management decisions deal with the same key issues: cost, price, and profit.

        In managerial accounting, we examine complex financial decision-making and identify the tools and methods managers use to make informed decisions. We begin by introducing the terms we will reference in later units. We will discuss various methods and theories managers use to track costs and profits. In the final section, we explore how managers report the overall performance of a firm or department for internal use.

        First, read the course syllabus. Then, enroll in the course by clicking "Enroll me in this course". Click Unit 1 to read its introduction and learning outcomes. You will then see the learning materials and instructions on how to use them.

      • Unit 1: Managerial Accounting

        We begin by examining the differences between financial and managerial accounting. The primary difference pertains to the audience: who will read the reports? Financial accounting information is geared toward external users, while managerial accounting is for internal users. Managerial accounting is integral to making operational and strategic decisions. 

        In this unit, we examine the manufacturing process and related financial accounting transactions, so you can differentiate between product costs and selling and administrative costs. The flow of costs in cost accounting mirrors the physical flow of the inventory. For example, a pizza parlor first buys the direct materials they put on their pizzas (cheese, tomatoes, and pepperoni). When a customer orders a pizza, the restaurant assembles the direct materials, bakes (work in process) and completes a pizza (finished goods), and delivers it to the customer.

        Completing this unit should take you approximately 3 hours.

      • Unit 2: Job Costing

        Manufacturing companies assign direct materials, direct labor, and overhead costs to their products. Direct materials and direct labor costs are easily identified and assigned. Overhead costs, however, are not so simple to assign to individual job orders. In this unit, you'll discover a couple of methods upon which companies rely when they need to calculate and allocate overhead costs to jobs. 

         Job costing systems can do more than simply track the costs of each job. Companies also use these systems to track revenue and the resulting profit for each job. Also, a job costing system can be used to identify areas of concern by comparing the cost estimate prepared before starting the job with information on the completed job cost sheet. This type of analysis often leads to changes in the production process and revised estimates for future jobs.

        Completing this unit should take you approximately 7 hours.

      • Unit 3: Process Costing

        In Unit 2, you learned about job costing. A job costing system is used by companies that produce unique products or jobs. In this unit, you'll learn about process costing, a system used by companies that produce similar or identical units of product in batches and employ a consistent process. Process costing systems track costs by processing department, whereas job costing systems track costs by job. Process costing is best used in an assembly-line production environment.

        Completing this unit should take you approximately 3 hours.

      • Unit 4: Cost Behavior Patterns

        This chapter introduces a new way to evaluate costs and make management decisions. Rather than examining direct materials, direct labor, and manufacturing overhead, we rearrange this information as variable costs, fixed costs, and mixed costs (fixed and variable costs combined). 

         For example, in the previous unit we classified a factory worker who earns a salary and annual bonus based on company performance as direct labor. In this unit, we allocate salary to fixed costs, and the bonus to variable costs. We also explore how managers make short-term decisions (what needs to occur during the next hour, day, week, or year). Fixed cost restraints, such as plant size, equipment size, and age, often define short-term decisions. 

        Understanding how these three types of costs variables behave allows business managers to predict revenue, operating income, and changes in sales volume.

        Completing this unit should take you approximately 5 hours.

      • Unit 5: Cost-Volume-Profit Analysis

        In this unit we explore the relationships that revolve around costs, volume, and profit (CVP), and how companies plan for profitability. We examine how business managers use costs, volume, and profit to calculate how much they need to produce to achieve the break-even point and generate future profits. For example, a chief executive officer of a company that manufactures snowboards should know how many boards they need to produce to cover their costs and earn a decent profit by the end the month. 

        Breakeven analysis is synonymous with CVP analysis and identifies how changes in key variables impact financial projections and profitability.

        Completing this unit should take you approximately 5 hours.

      • Unit 6: Using Differential Analysis to Make Decisions

        In this unit we examine how manufacturers decide whether or not to outsource elements of their operation, a decision process that requires making a differential analysis to determine the revenues and costs for alternative courses of action. As you work through this unit, notice you will use the contribution margin income statement format. We will examine both relatively simple and more complex examples to establish the format used to perform differential analysis.

        Completing this unit should take you approximately 4 hours.

      • Unit 7: Budgets

        In this unit we explore the components for preparing a master budget and its underlying performance schedules. Business managers create budgets to plan for future operations, create benchmarks to measure progress, and maintain necessary accounting controls. The budget process involves coordination among every department within a company. Once the master budget is complete, the company can measure how well their actual performance compares with their budget.

        Completing this unit should take you approximately 7 hours.

      • Unit 8: Variance Analysis

        In this unit, we examine a variety of methods utilized by managers to analyze their budgets compared to actual results to assist them in making decisions. When actual sales volume is higher than what was planned in the master budget, variable costs should also be higher. For example, in one thread we follow how Jerry’s Ice Cream modifies its planned master budget during long, hot summers. In another thread, we watch Tony Bell consider various "problems" that explain variance, and how to use accounting for variance to improve ongoing management decisions.

        Completing this unit should take you approximately 5 hours.

      • Unit 9: Performance Evaluation

        This unit describes how businesses use managerial accounting to evaluate company performance – for the entire company, their organizational departments, and their individual employees. How do you evaluate the productivity of each division manager in a decentralized company? How well does each division use the company's assets to create profits? Responsibility accounting assumes someone is responsible for every cost the company incurs. They often base the compensation they give their managers on the financial performance of the divisions they manage.

        Completing this unit should take you approximately 4 hours.

      • Unit 10: Statement of Cash Flows

        Now, let's explore how companies manage cash flow. Most companies use the revenues they generated yesterday to pay today's and tomorrow's expenses. For example, some companies manage their cash and maintain enough reserves to pay their expenses when they are due. Others must obtain capital loans to pay their bills, because they have highly seasonal sales or experience rapid growth and do not have enough savings to pay for the upfront costs to fund their expansion. While the company's income statement and balance sheet help monitor performance and their current financial condition, neither statement provides information about cash activity during a given time period.  

        Companies must manage their cash wisely to accommodate the lag time between revenues and expenses so they can pay their bills in a timely manner. In this unit, we focus on how to prepare a statement of cash flows, which will provide important information about performance measures, cash-on-hand, and cash needed.

        Completing this unit should take you approximately 5 hours.

      • Unit 11: Using Managerial Accounting: Trends and Ratios

        In this unit we examine the three-pronged approach managerial accountants and potential investors typically use to analyze a company’s financial information. First, we use trend analysis and common-size analysis to examine trends the company has experienced within its own financial sphere, such as sales and earnings from one year to the next. Secondly, we compare the company's financial measures with its main competitors in the industry. Finally, we compare the company's financial ratios with industry-wide averages or standards.

        Completing this unit should take you approximately 6 hours.

      • Study Guide

        This study guide will help you get ready for the final exam. It discusses the key topics in each unit, walks through the learning outcomes, and lists important vocabulary. It is not meant to replace the course materials!

      • Course Feedback Survey

        Please take a few minutes to give us feedback about this course. We appreciate your feedback, whether you completed the whole course or even just a few resources. Your feedback will help us make our courses better, and we use your feedback each time we make updates to our courses.

        If you come across any urgent problems, email contact@saylor.org or post in our discussion forum.

      • Certificate Final Exam

        Take this exam if you want to earn a free Course Completion Certificate.

        To receive a free Course Completion Certificate, you will need to earn a grade of 70% or higher on this final exam. Your grade for the exam will be calculated as soon as you complete it. If you do not pass the exam on your first try, you can take it again as many times as you want, with a 7-day waiting period between each attempt.

        Once you pass this final exam, you will be awarded a free Course Completion Certificate.

      • Saylor Direct Credit

        Take this exam if you want to earn college credit for this course. This course is eligible for college credit through Saylor Academy's Saylor Direct Credit Program.

        The Saylor Direct Credit Final Exam requires a proctor and a proctoring fee of $25. To pass this course and earn a Proctor-Verified Course Certificate and official transcript, you will need to earn a grade of 70% or higher on the Saylor Direct Credit Final Exam. Your grade for this exam will be calculated as soon as you complete it. If you do not pass the exam on your first try, you can take it again a maximum of 3 times, with a 14-day waiting period between each attempt.

        Once you pass this final exam, you will be awarded a Credit-Recommended Course Completion Certificate and an official transcript.