Accounting 515 A & U Problems in Managerial & Cost Accounting Winter 2005 Room BLM 304; Tuesday &

Thursday, 3:30 5:20 pm ******************************************************************************

Instructor: Larry L. DuCharme, Ph.D. Office: M-259 Office hours: Tu & Th (2:00 - 3:00 pm) and by mutual arrangement. Office phone: 543-8194 / 543-4368; Home phone: (425) 640-3025;

e-mail: lducharm@u.washington.edu

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TEXT: John K. Shank, Cases in Cost Management: A Strategic Emphasis, South-Western College Publishing, 2d edition, 2001 (referred to below as JSCASES).

Class Schedule:
DATE 01/04 Introduction to the course; Strategic Cost Analysis Prepare: Baldwin Bicycle Company (p. 21-24 in JSCASES). This case should give you an example of the kind of analysis you need to do with cases. Read: 1.1 Be Data LiterateKnow What to Know. [handout] 1.2 Cost/Management Accounting: The 21st Century Paradigm. [handout] 1.3 Management Accounting: In the Era of Electronic Commerce. [handout] 01/06 Cost Analysis Prepare: Berkshire Threaded Fasteners (p. 25-29 in JSCASES) Answer questions in case, plus add 3a: What is the main reason for return to profitability in the first 6 months 1974? ABC/ABM & Relevant Cost Analysis Prepare: Bridgewater Castings [JSCASES, p. 49-52] Question 6a: What is the revised product line profitability for 1985? Question 8: Estimate what income and ROA would be if Tim implemented your adviceso what now? Formulate an action plan for the company. You must go further than just ABC. Read: 4.1 Is ABC Suitable for Your Company? [handout] 4.2 Customer Profitability Analysis: Challenges and New Directions. [handout] 4.4 ABM Lifts Banks Bottom Line. [handout]

01/11

01/13 Prepare: Brunswick Plastics [JSCASES, p. 53-58] 01/18 Value Chain Analysis, Strategic Decisions Prepare: Dairy Pak [JSCASES, p. 78-104] includes Note on Value Chain Analysis. Read: 6.3 Distribution Channel Analysis. [handout] Prepare: Chalice Wines [JSCASES, p. 63-75] This is a hard but very fun case. The repeal of prohibition granted states power to separate manufacturing, distribution, and retailing of alcoholic beverages (so called 3-tier laws). There has been recent activity in this state related to mfg. and sale of wines. What is the current issue? Target Cost Prepare: Montclair--The Deep Color Grades [JSCASES, p. 175-182] Read: 6.4 Target Costing for Cost-plus Pricing Companies. [handout] 7.1 Control Tomorrows Costs through Todays Designs. [handout] 7.2 The Use of Target Costing in Developing the Mercedes-Benz M-Class. [handout] Prepare: Nissan Motor Co., Ltd. [Harvard Case # 9-194-040]

01/20

01/25

01/27

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Budgeting, Variance Analysis Read: For example, Budgetary Planning and Control in Jiambalvo chapter 8. 10.2 Budgeting Gamesmanship. [handout] 10.3 Budgeting Made Easy. [handout] 10.4 Corporate Budgeting is BrokenLets Fix it. [handout] 10.5 Beyond Budgeting. [handout] JSCASES, p. 193-200; A Note on Computing Manufacturing Cost Variances. Prepare and hand in: Boston Creamery [JSCASES, p. 39-48] ***This is your first written assignment.*** This case is about Revenue Variances. You need to prepare a 3-part paper: (1) view of Frank Roberts, (2) view of John Parker, and (3) your unbiased view. Calculation of revenue variances are just part of the assignment. You have to group and interpret the variances to tell three different stories. Part of the answer lies in who is responsible for what? Write a memo to Jim Peterson in which you answer the questions in the case plus what I ask above. Start your memo with an introduction and end with question 4 in the case. Use U or F to indicate Unfavorable or Favorable variances (versus + or variances). Transfer Pricing Prepare: Birch Paper Company [Harvard Case # 9-158-001] Read: Control with Fairness in Transfer Pricing. [HBR, Nov/Dec 1983, No.83606] Getting Transfer Prices Right: What Bellcore Did. [HBR, Sep/Oct, 1989, No. 89507] 12.1 Transfer Pricing with ABC. [handout] Prepare: San Francisco Bay Consulting [Harvard Case # 9-195-096] If you are unfamiliar with a policy that allows outsourcing of internal services and market-based transfer pricing, then you might want to read, At Bell Atlantic, Competing Is Learning From the Inside J.A. Lopez in Wall Street Journal, July 12, 1989. [Handout] Measuring and Driving Performance Prepare: Mobil USM&R (A) [Harvard Case # 9-197-025] This case illustrates linking strategy to objectives and measures. Read: 9.1 Using the Balanced Scorecard as a Strategic Management System. [handout] 9.2 Transforming the Balanced Scorecard from Performance Measurement to: Part I. [handout] 9.3 Transforming the Balanced Scorecard from Performance Measurement to: Part II. [handout] Prepare: Citibank: Performance Evaluation [Harvard Case #9-198-048] Compensation System Design Prepare: Jones Ironworks, Inc. [JSCASES, p. 137-141] Read: 8.2 Why Incentive Plans cannot Work. [handout] 8.3 Six Dangerous Myths About Pay. [handout] Prepare: Purity Steel Corporation [Harvard Case #9-197-082] Optional background reading: The Case Against ROI Control [HBR May/Jun 1969, by John Dearden] Strategic Risk-Control Problems Prepare: Kidder Peabody [Harvard Case #9-197-038] Read: Organizational Alignment: The 7-S Model. [Harvard Case #9-497-045] How Risky is Your Company? [HBR, May-June 1999; reprint #99311] Levers of Control Prepare: Guidant Corporation: Shaping Culture Through Systems [Harvard Case # 9-198-076] This case illustrates the use of a formal MCS as a key lever to communicate and guide strategic implementation. Strategic Positioning Prepare: Levis Personal Pair Jeans (A) [JSCASES, p. 147-151] Research current info. on Levis. Final reading: Transforming Cost Management into a Strategic Weapon. [Handout] This article summarizes and integrates many of the important themes in Management Accounting. Finish course, answer some questions about the final case.

02/03

02/08

02/10

02/15

02/17 02/22

02/24

03/01

03/03

03/08

03/10

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03/15

Final Case paper due: Wellington Chemicals [JSCASES, p. 257-258] ***This is your second and last written assignment*** Read: 3.3 The Outsourcing Decision. [handout] Venkatesan, R., Sourcing: To Make or not to Make, Harvard Business Review, Nov.-Dec., 1992, pp.98-107. No.92610

Course materials: Case book is available in the University Bookstore. The Harvard cases and readings are available on the web at: http://harvardbusinessonline.hbsp.harvard.edu/ Class code = 044369 Refer to the managerial text that you used in Acctg.225, Acctg.311, Acctg.501, 503 or BA502 (e.g., James Jiambalvos Managerial Accounting) I will hand out readings in advance of class sessions. For some cases, I will post case questions/hints on my web site prior to the class discussion in which we will discuss the case.

I will frequently leave messages/hints/additional case questions for students on my class web page: http://faculty.washington.edu/lducharm/classes.htm

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Course Overview This course allows students to reinforce their understanding of and their ability to use some key tools and thinking patterns of management accounting. The focus is on maximization of the overall performance of an organization (both for- and not-for-profit). A manager must not only master techniques (tools), he/she must also be able to evaluate the relevance of the tools/approaches and know when to use them appropriately for decision making. The purpose of management accounting (an essential part of the managerial information system) is to support the value creation process and the growth of the organization. Many of the cases in this course challenge students to diagnose a whole situation, to lend order to a somewhat unstructured picture, and then apply useful analytical frameworks to deal with the issues. Answering the questions that arise in the cases should go beyond the application of techniques and help students work through the whole connection between raw data, data analysis, and managements particular information needs. Case Method Analyzing cases is really a process of asking and answering questions. In studying cases, the art and skill of asking the right questions is as important as being able to answer them. Some of the case questions will be obvious, but for most questions there will be more questions to explore than were at first apparent. You need to make a list of questions for yourself. After you have answered these questions, you might ask: What things might be done to improve the enterprise? What seems most promising? And so on. The process is like peeling an onion to get at the heart of the matter. This will help you think about the management part of management accounting.William
Rotch

A case typically contains several issues. Some issues are evident, but most of the time you will have to identify the key issues. You have to identify the issues before getting into your tool bag of techniques for analysis. Cases provide specific context in which to answer some interesting questions. Data available for formulating a solution to a complex situation are never orderly and systematically presented. In the real world you have billions of pieces of information available and at times are missing some critical information (information overload with missing critical pieces). Missing information is especially present in cases. It is your responsibility to identify the missing information and research for the info or make some reasonable assumptions to make up for missing information. No case has a single solution. The important part is that all students have a rigorous, logical, and well articulated method of analysis. For a manager, the decision (even if prepared with a group of peers, partners or subordinates) is a personal commitment. One approach to preparing for a case discussion: First, read the case quickly completely throughWhat is this case all about? Carefully read the case with underlining and note taking; make some notations/computations. Develop your own view about the case. Discuss your ideas with your small study group; purpose is NOT for a group solution. The final discussion of a case takes place in the scheduled class session, where, with the assistance of the instructor, the collective views and opinions and judgments of everyone in the class are explored. It is the goal of the class session to identify strong or weak analysis NOT to say what (or who) is right or wrong. Remember, what actually happened or what one person thought ought

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to be done is of no great significance; what is important is the analytical process that you followed as you developed your own answers to the case! Course Grade Your final grade will be based on the following weights: % of grade First case analysis 30 Class participation 40 Second case analysis 30 100%

Class Procedures The learning process in this course relies on the active participation and contribution of everyone. Raising questions or suggesting answers are equally important. Listening to others and building on prior observations are key to a constructive discussion in the class room. I want you to challenge ideas and not people--behave professionally at all times. In order to contribute to the class, you need to be present. Please e-mail me about any planned absence from class. You are expected to submit any work done in class that you missed (by email or hardcopy, before or after missed class, individual typewritten analysis of the assignment for that sessionproblems, case analysis, summary of readings). Failure to submit missed class material may lead to reduction in your individual participation score.

Procrastination is like a credit card: its a lot of fun until you get the bill.Christopher Parker

Good luck--Larry
ver.: 12/29/04