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5/18/2012
Prepared by Mabel Machin - Valencia College 1
Managerial Accounting Simulation Activity
Mabel M Machin, CPA, MPAC, CGMA
Valencia College
Objectives
5/18/2012
Prepared by Mabel Machin - Valencia College 2
Introduction: Why?
My course:
Principles of Managerial Accounting focus developing concepts of planning, control and decision making.
My Challenges: • Limited or no manufacturing production experience/no planning or control experience,
• Limited knowledge of the cost basic concepts,
• Poor retention and understanding of basic accounting concepts,
• Lack of critical thinking skills,
• Difficulty applying the managerial concepts (job costing/drivers/tracing cost),
• Inability to collaborate and communicate effectively in groups,
• Difficulty learning managerial concepts with limited understanding of production (manufacturing) process
What should I do? • Create interactive group-based activity to increase the understanding and assess the
course basic objectives.
Objectives
The students will be able to:
• Experience, create, develop and execute a manufacturing production
environment.
• Manage, debate, integrate and implement a job costing process.
• Classify, identify and quantify cost elements such as direct and indirect
costs, product cost and value analysis.
• Explain the difference between costs allocation and cost incurred
• Generate a complete and accurate job cost or production report.
Objectives (cont.)
The students will be able to:
• Identify and calculate
• Direct materials inventory and direct materials used (quantity and $
amount)
• Direct labor (quantity hours and $ amount)
• Manufacturing overhead costs ( application based on driver)
• Utilize a job-cost sheet to calculate total and per unit job costs
• Use a single cost driver to allocate manufacturing overhead costs
• Determine efficiency, total cost and profit per model.
5/18/2012
Prepared by Mabel Machin - Valencia College 3
Methodology
Methodology: How to do this?
• Steps:
• The classroom is divided in groups of 5-6 employees (students)
• Each cell group needs the following roles:
• Line supervisor/ Process or product manager
• Inventory Manager/Purchasing/Procurement
• Assemblers
• Accountants
• Quality control supervisor ( faculty)
• Specifics: • Each student must be assigned a role based on their capacity/strengths or experience.
• Penalty for Idle employees or non-assigned roles
• Employee may have more than one role
Methodology
• Each group is given:
• A bag of LEGO® pieces
• One fully assembled ‘prototype’ of the vehicle to assemble
• An inventory of the needed LEGO® pieces
• A materials pricing sheet
• A job cost card
• Roles
• Rubrics
5/18/2012
Prepared by Mabel Machin - Valencia College 4
Methodology: Artifacts
A bag of LEGO® pieces
• Bag has enough pieces for
3 vehicles out of 3 different
models…
• Reality show twist?
• You MAY have all the
pieces or you may need
to buy pieces (supply
chain concept)
Methodology: More artifacts…..
One fully assembled ‘prototype’ of the vehicle to assemble
No assembly instructions • Employees must determine best
production process to apply
Only one prototype • If you “brake it, you pay for it”
• An extra charge is added to the cost
• NO changes to the models are allowed ( no substitutes are allowed) any changes will result in rework.
Quality control: • The models must be exact
functional working replicas of the prototype.
.
Methodology: More Steps and Artifacts
Inventory of the needed LEGO® pieces: Purchasing or procurement
inventory list with parts number and required number of pieces of
raw materials.
5/18/2012
Prepared by Mabel Machin - Valencia College 5
Methodology: Others Artifacts
A materials pricing sheet:
1. Purchase Original mater pricing sheet
2. Verify parts numbers
3. Parts needed/purchased
4. Parts or raw materials pricing
Line #1 - Production cost report Material Pricing / Cost requisition sheet
QTY MAT CODE PRICE EACH
306924 $ 2.00
362324 $ 1.50
371024 $ 2.00
486524 $ 3.75
4501109 $ 4.00
287724 $ 2.00
302024 $ 1.00
302224 $ 1.50
407026 $ 5.00
302326 $ 1.25
4519849 $ 3.00
379526 $ 5.00
4514560 $ 3.10
4170457 $ 2.05
Methodology: Artifacts
A job cost card
Includes:
• Raw materials inventory
• Materials used (quantity/$ )
• Direct Labor (hours/quantity)
• Overhead application
• Timing:
• Production
• Assembly
Methodology: more artifacts……
• Instructions:
• Produce three additional models
• Time entire project/assemblers/all roles
• Identify roles and evaluate role performance
• Calculate: Job cost report
• Direct material
• Direct labor
• Overhead
• Efficiency
• Total cost per model
• CVP (per unit)
• Contribution margin Income statement
5/18/2012
Prepared by Mabel Machin - Valencia College 6
The Activity
The Activity The Activity • Chaos
• Complete breakdown of communication
• Some groups cannot build any vehicles
• Frustration
• Failure
Why the Failure?
• Undergraduate courses ( Cost and Managerial)
• Inability to implement production process
• Ineffective collaboration
• Poor organization skills
• Lack of leadership or too much of it!
• Unable to follow rules
• Unable to discuss and implement process and instructions
Graduate courses • Six Sigma black b, and Yes! Even my “real life” Rocket scientists
• Failure to collaborate
• Unable to simplify process
• Process not defined and unable to adapt to new process.
Summary: Students think they understand the concepts but they have no idea how to apply them
5/18/2012
Prepared by Mabel Machin - Valencia College 7
The Learning Process: My goal!
• Post mortem:
• Share what works
• Share what went wrong
• Feedback from entire group
• Open ended question survey
• Anonymous questionnaire
• Why additional simulations?
• Increases process complexity
• Increase collaboration production process
• Defined and specific roles are present
• Increase accuracy of all accounting records
• Improved efficiency and communication channels
• Correcting faulty manufacturing procedures
Assessment and Learning Process:
Activity Managerial Objectives Assessment
Roles assignments Planning/ Responsibility Accounting Proper roles assignment and successful execution of
assigned roles
Process (primary) What to do? How to do it ? Performing Successful and timely completion of required models
Organize and compare Parts/inventory Inventory accounts Accurate Quantity and amount
Learn to properly classify costs (production report) Cost classification When to start and stop calculating DL hours, roles
classified as OH, etc.
Job cost card Job Costing / OH application Accurate calculation of DM , DL and OH.
Timing Efficiency, capacity and idle concepts Increase cost due to idle of inefficiency of assemblers
Post-mortem Evaluation Class Presentation
Survey Communication Feedback/survey
Second/Third Interaction Continuous improvement Decrease cost of labor and increase efficiency
Overhead application OH plant-wide rate Proper calculation on job cost card
Total cost Production costs Accurate calculation of DM+DL +OH
Group communication Reporting /Variances Efficiency increases with improved communication
Timing of labor Cost and labor classification Proper quantity of labor cost and amount
Final cost and pricing CVP Complete the Contribution <margin approach
Organize process to increase productivity ( proximity, cell working) Value-added systems Observation of physical organization
The Results
• Improved communication • Teamwork • Success
5/18/2012
Prepared by Mabel Machin - Valencia College 9
Activity Design
• The group-based activity is designed to:
• Implement effective problem-solving skills
• Utilize decision making and goal-setting strategies
• The activity requires that all students:
• Plan how they are building
• Plan how materials are accounted for
• Decision making is done based on their time constraints
Student Learning Outcomes
• The students will be able to understand the manufacturing
environment utilizing their creativity and analytical skills to
complete the simulation
• The students will simulate the process of job costing in the
manufacturing environment
• The students will analyze their communication skills and
strengths in a group-based activity
Other Basic Learning Outcomes
• Explain the difference between costs being incurred and costs
being allocated
• Identifying and calculating direct materials used
• Explain and calculate direct material, direct labor, and
manufacturing overhead costs
• Utilize a job-cost sheet to calculate total and per unit job costs.
• Use a single cost driver to allocate manufacturing overhead
costs
5/18/2012
Prepared by Mabel Machin - Valencia College 10
Purchase and Materials
• The Lego sets are purchased in
bulk so all groups are utilizing the
same type of pieces and
materials.
• This design allows for interactions
and simulation flexibility while
keeping the same set of pieces
and materials available to
assemble different prototypes
and change the simulation
outcomes.
Questions?
Questions? Mabel Machin, CPA, MPA, CGMA