• Course Introduction

        • Time: 71 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: Cost Measurement and Estimation

        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 that you can differentiate between costs assigned to products and costs assigned to a period of time. The flow of costs in accounting mirrors the physical flow of the inventory. For example, a pizza parlor 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), completes a pizza (finished goods), and delivers it to the customer.

        Completing this unit should take you approximately 5 hours.

      • Unit 2: Cost Management

        This unit focuses on three categories of cost management: job costing, activity-based costing, and process/production costing. For a company that produces items for a job order, it is easy to identify the direct materials and direct labor needed to complete a specific job. However, how do you determine direct materials if the company uses a continuous assembly line? It would be inefficient to track each unit of production separately.

        In this unit, we also address how to allocate manufacturing overhead. Manufacturing overhead consists of costs not directly related to the product, but necessary to run the production process. This includes, but is not limited to, factory equipment, factory rent, and utilities for the factory.

        Completing this unit should take you approximately 19 hours.

      • Unit 3: Short-Term Decision-Making

        This unit 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 6 hours.

      • Unit 4: Cost-Volume-Profit Analysis

        This unit explores 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 of the month.

        Breakeven analysis is synonymous with CVP analysis and identifies how key variables affect financial projections and profitability.

        Completing this unit should take you approximately 3 hours.

      • Unit 5: Differential Analysis

        In this unit, we examine how manufacturers decide whether to outsource elements of their operation. This decision process requires making a differential analysis to determine the revenues and costs for alternative courses of action. To do this, we will use the contribution margin income statement format. We will examine 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 6: Budgeting

        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 that is part of the company. Once the master budget is complete, the company can measure how actual performance compares with the budget.

        Completing this unit should take you approximately 5 hours.

      • Unit 7: Variance Analysis

        In this unit, we examine how managers analyze their budgets and actual results to make better decisions. We will explore various methods for rationalizing the master budget for actual results. When actual sales volume is higher than planned in the master budget, variable costs should also be higher. For example, we will follow how Jerry’s Ice Cream modifies its planned master budget during long, hot summers. We will also 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 7 hours.

      • Unit 8: Capital Budgeting

        Now that we understand how businesses create budgets to manage the day-to-day operations of a business, let's focus on how they use capital budgeting to evaluate long-term investments. For example, should a company replace its machinery now, or wait another three years to make a major investment when revenue may be greater and the equipment may cost less? Business managers typically prepare their capital budget process when they create their master budget. They base their decision to choose or reject various projects on the time value of money and discounted cash flows.

        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, organizational departments, and 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. It often bases the compensation given to managers on the financial performance of the divisions they manage. We will consider the issues Game Products encounters when it evaluates the performance of three divisional managers who oversee sporting goods, board games, and computer games.

        Completing this unit should take you approximately 3 hours.

      • Unit 10: Cash Flow Preparation and Use

        In this unit, we will 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 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 this lag time between revenues and expenses, so they can pay their bills in a timely manner. In this unit, we focus on preparing a statement of cash flows, which gives important information about performance measures, cash on hand, and cash needed.

        Completing this unit should take you approximately 7 hours.

      • Unit 11: Using Managerial Accounting: Trends and Ratios

        This unit examines 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 in the company's financial sphere, such as sales and earnings from one year to the next. Then, 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 7 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.