COURSE INFORMATION Course Title: COST ACCOUNTING

Code	Course Type	Regular Semester	Theory	Practice	Lab	Credits	ECTS
BUS 331	B	5	3	0	0	3	5

Academic staff member responsible for the design of the course syllabus (name, surname, academic title/scientific degree, email address and signature)	NA
Main Course Lecturer (name, surname, academic title/scientific degree, email address and signature) and Office Hours:	Assoc.Prof.Dr. Alba Kruja akruja@epoka.edu.al , Friday 10:30-12:30
Second Course Lecturer(s) (name, surname, academic title/scientific degree, email address and signature) and Office Hours:	NA
Teaching Assistant(s) and Office Hours:	NA
Language:	English
Compulsory/Elective:	Elective
Study program: (the study for which this course is offered)	Bachelor in Business Informatics (3 years)
Classroom and Meeting Time:	E 214; Tuesday 08:45 - 11:30
Code of Ethics:	Code of Ethics of EPOKA University Regulation of EPOKA University "On Student Discipline"
Attendance Requirement:	yes
Course Description:	Cost Accounting Course is designed to provide an overview of cost concepts and cost calculation methods in contemporary organizations. This course will focus on how costs behave, what relevancy is and how the accurate and timely cost information can be created. While financial accounting provides information for external users, cost accounting provides information for both external and internal users. Cost Accounting will address the usage of cost information which is used for product costing, planning and control processes .
Course Objectives:	The objective of this course is to allow students to understand fundamentals of cost accounting needed for a business or professional accounting career. It provides students with a solid understanding of the principles of cost accounting, and involves both formal cost accounting principles and practical application in a business context.

BASIC CONCEPTS OF THE COURSE

1	Direct materials are raw materials that become an integral part of the finished product and whose costs can be conveniently traced to it. Direct labor consists of that portion of labor cost that can be easily traced to a product. Direct labor is sometimes referred to as “touch labor,” since it consists of the costs of workers who “touch” the product as it is being made. Manufacturing overhead includes all manufacturing costs except direct materials and direct labor. These costs cannot be easily traced to specific units produced (also called indirect manufacturing cost, factory overhead, and factory burden).
2	Manufacturing overhead includes all manufacturing costs except direct materials and direct labor. These costs cannot be easily traced to specific units produced (also called indirect manufacturing cost, factory overhead, and factory burden).
3	An activity base (also called a cost driver) is a measure of what causes the incurrence of variable costs. As the level of the activity base increases, the total variable cost increases proportionally.
4	A manufacturing company incurs many other costs in addition to manufacturing costs. For financial reporting purposes, most of these other costs are typically classified as selling costs and administrative costs. These costs are also called selling, general, and administrative costs, or SG&A. Selling and administrative costs are incurred in both manufacturing and merchandising firms.
5	Product costs include all the costs that are involved in acquiring or making a product. More specifically, it includes direct materials, direct labor, and manufacturing overhead. Consistent with the matching principle, product costs are recognized as expenses when the products are sold. This can result in a delay of one or more periods between the time in which the cost is incurred and when it appears as an expense on the income statement. Product costs are also known as inventoriable costs.
6	Cost behavior refers to how a cost will react to changes in the level of activity within the relevant range. The most commonly used classifications of cost behavior are variable and fixed costs.
7	A variable cost varies, in total, in direct proportion to changes in the level of activity. A fixed cost is constant within the relevant range. In other words, fixed costs do not change for changes in activity that fall within the “relevant range.”
8	Costs and benefits that differ between alternatives are relevant in a decision. All other costs and benefits are irrelevant and can and should be ignored. To make decisions, it is essential to have a grasp on three concepts: differential costs, opportunity costs, and sunk costs.
9	Differential costs (or incremental costs) is a difference in cost between any two alternatives. Differential costs can be either fixed or variable. A difference in revenue between two alternatives is called differential revenue.
10	Opportunity cost is the potential benefit that is given up when one alternative is selected over another. These costs are not usually entered into the accounting records of an organization, but must be explicitly considered in all decisions.

COURSE OUTLINE

Week	Topics
1	Cost Accounting: Information for Decision Making. We start our discussion with the concepts of value creation and the value chain because in cost accounting our goal is to assist managers in achieving the maximum value for their organizations. Measuring the effects of decisions on the value of the organization is one of the fundamental services of cost accounting. As providers of information (accountants) or as the users of information (managers), we have to understand how the information can and will be used to increase value. We can then come back to questions about how to design accounting systems that accomplish this goal. Using the value chain as a reference, how can cost information add value to the organization? The answer to this question depends on whether the information provided improves managers’ decisions. Suppose a production process is selected based on cost information indicating that the process would be less costly than all other options. Clearly, the information adds value to the process and its products. The measurement and reporting of costs is a valuable activity. Suppose cost information is received too late to help managers make a decision. Such information would not add value. Sources: 1. Fundamental of Cost Accounting; Chapter 1; Pg. 2-35. 2. Introduction to Managerial Accounting; Prologue; Pg. 1-25.
2	Cost Concepts and Behavior. This chapter begins by describing the work of management and the need for managerial accounting information followed by a discussion of the differences and similarities between financial and managerial accounting. Next, we explain that in managerial accounting, the term cost is used in many different ways. The reason is that there are many types of costs, and these costs are classified differently according to the immediate needs of management. For example, managers may want cost data to prepare external financial reports, to prepare planning budgets, or to make decisions. Each different use of cost data demands a different classification and definition of costs. For example, the preparation of external financial reports requires the use of historical cost data, whereas decision making may require predictions about future costs. This notion of different costs for different purposes is a critically important aspect of managerial accounting. Sources: 1. Fundamental of Cost Accounting; Chapter 1; Pg. 36-79. 2. Introduction to Managerial Accounting; Chapter 1; Pg. 26-73.
3	Job-Order Costing. Understanding how products and services are costed is vital to managers because the way in which these costs are determined can have a substantial impact on reported profits, as well as on key management decisions. A managerial costing system should provide cost data to help managers plan, direct and motivate, control, and make decisions. In this chapter, we discuss the details of a product costing system, including the accounting for the flows of costs through the inventory accounts. We describe a job costing system (also called a job-order costing system) used in many service and discrete manufacturing settings. Sources: 1. Fundamental of Cost Accounting; Chapter 7; Pg. 226-267. 2. Introduction to Managerial Accounting; Chapter 2; Pg. 74-123.
4	Process Costing Job-order costing and process costing are two common methods for determining unit product costs. A job-order costing system is used when many different jobs or products are worked on each period. Examples of industries that use job-order costing include furniture manufacturing, special-order printing, shipbuilding, and many types of service organizations. By contrast, process costing is used most commonly in industries that convert raw materials into homogeneous (i.e., uniform) products, such as bricks, soda, or paper, on a continuous basis. Examples of companies that would use process costing include Reynolds Aluminum (aluminum ingots), Scott Paper (toilet paper), General Mills (flour), Exxon (gasoline and lubricating oils), Coppertone (sunscreens), and Kellogg (breakfast cereals). In addition, process costing is sometimes used in companies with assembly operations. A form of process costing may also be used in utilities that produce gas, water, and electricity. Our purpose in this chapter is to explain how product costing works in a process costing system. Sources: 1. Fundamental of Cost Accounting; Chapter 8; Pg. 268-309. 2. Introduction to Managerial Accounting; Chapter 4; Pg. 168-195.
5	Activity-Based Costing. As discussed in earlier chapters, direct materials and direct labor costs can be directly traced to products. Overhead costs, on the other hand, cannot be easily traced to products. Some other means must be found for assigning them to products for financial reporting and other purposes. In the previous chapter, overhead costs were assigned to products using a plantwide predetermined overhead rate. This method is simpler than the methods of assigning overhead costs to products described in this chapter, but this simplicity has a cost. A plantwide predetermined overhead rate spreads overhead costs uniformly over products in proportion to whatever allocation base is used—most commonly, direct labor-hours. This procedure results in high overhead costs for products with a high direct labor-hour content and low overhead costs for products with a low direct labor-hour content. However, the real causes of overhead may have little to do with direct labor-hours and as a consequence, product costs may be distorted. Activity-based costing attempts to correct these distortions by more accurately assigning overhead costs to products. Sources: 1. Fundamental of Cost Accounting; Chapter 9; Pg. 310-384. 2. Introduction to Managerial Accounting; Chapter 3; Pg. 124-167.
6	Activity-Based Management. One distinguishing characteristic of activity-based costing is that it requires information about the activities needed to produce the product or service the organization sells. These activities cause the firm to incur costs, and the firm must manage these costs to remain profitable. In the previous week, we discussed the use of activity-based costing to compute the costs of products and services. We now consider the use of these methods to manage the activities to control our costs. This approach is called activity-based cost management. Activity-based cost management does not focus on the detailed calculation of product costs using activity-based costing but explores managers’ use of activity-based costing methods to identify ways to improve operations. Sources: 1. Fundamental of Cost Accounting; Chapter 10; Pg. 385-422. 2. Introduction to Managerial Accounting; Chapter 3; Pg. 124-167.
7	Cost Behavior: Analysis & Use. In the first weeks of this course, we stated that costs can be classified by behavior. Cost behavior refers to how a cost will change as the level of activity changes. Managers who understand how costs behave can predict how costs will change under various alternatives. Conversely, attempting to make decisions without a thorough understanding of cost behavior patterns can lead to disaster. For example, cutting back production of a product line might result in far less cost savings than managers assume if they confuse fixed costs with variable costs. To avoid such problems, managers must be able to accurately predict what costs will be at various activity levels. This chapter briefly reviews the definitions of variable and fixed costs and then discusses the behavior of these costs in greater depth. The chapter also introduces the concept of a mixed cost, which is a cost that has both variable and fixed cost elements. The chapter concludes by introducing a new income statement format—called the contribution format —in which costs are organized by their behavior rather than by the traditional functions of production, sales, and administration. Sources: 1. Fundamental of Cost Accounting; Chapter 5; Pg. 154-197. 2. Introduction to Managerial Accounting; Chapter 5; Pg. 196-73.
8	Review Before Midterm Exam
9	Midterm Exam
10	Cost-Volume-Profit Analysis. Cost-volume-profit (CVP) analysis is a powerful tool that helps managers understand the relationships among cost, volume, and profit. CVP analysis focuses on how profits are affected by the following five factors:1. Selling prices; 2. Sales volume; 3. Unit variable costs; 4. Total fixed costs; 5. Mix of products sold. Because CVP analysis helps managers understand how profits are affected by these key factors, it is a vital tool in many business decisions. These decisions include what products and services to offer, what prices to charge, what marketing strategy to use, and what cost structure to implement. To help understand the role of CVP analysis in business Decisions. Sources: 1. Fundamental of Cost Accounting; Chapter 1; Pg. 36-79. 2. Introduction to Managerial Accounting; Chapter 6; Pg. 256-317.
11	Cost Structure & Profit Stability. Cost structure refers to the relative proportion of fixed and variable costs in an organization. Managers often have some latitude in trading off between these two types of costs. For example, fixed investments in automated equipment can reduce variable labor costs. In this week, we discuss the choice of a cost structure. We also introduce the concept of operating leverage. Sources: 1. Introduction to Managerial Accounting; Chapter 6; Pg. 318-346.
12	Variable Costing & Segment Reporting. This chapter explains how manufacturing companies can prepare variable costing income statements, which rely on the contribution format, for internal decision-making purposes. The variable costing approach will be contrasted with absorption costing income statements, which are generally used for external reports. Ordinarily, variable costing and absorption costing produce different net operating income figures, and the difference can be quite large. In addition to showing how these two methods differ, we will describe the advantages of variable costing for internal reporting purposes and we will show how management decisions can be affected by the costing method chosen. Next the focus will be on explaining how the contribution format can be used to prepare segmented income statements. In addition to companywide income statements, managers need to measure the profitability of individual segments of their organizations. A segment is a part or activity of an organization about which managers would like cost, revenue, or profit data. This chapter explains how to create contribution format income statements that report profit data for business segments, such as divisions, individual stores, geographic regions, customers, and product lines. Sources: 1. Managerial Accounting; Chapter 6; Pg. 236-281.
13	Review before Final Exam
14	Project Presentations

Prerequisite(s):	NA
Textbook(s):	Fundamentals of Cost Accounting, 6th Edition, 2020, By William Lanen and Shannon Anderson and Michael Maher Introduction to Managerial Accounting, 8th Edition, 2019, By Peter Brewer and Ray Garrison and Eric Noreen, McGraw-Hill Irvin Managerial Accounting, 17th Edition, 2021, By Ray Garrison and Eric Noreen and Peter Brewer
Additional Literature:	Cost Accounting: A Managerial Emphasis 16th Edition Hongren-Datar-Foster, Prentince Hall Managerial Accounting: Tools for Business Decision Making, 8th Edition, 2017, Weygandt-Kimmel-Kieso, Wiley
Laboratory Work:	NA
Computer Usage:	yes
Others:	No

COURSE LEARNING OUTCOMES

1	Describe cost accounting and its relationship to managerial and financial accounting.
2	Analyze, record and report transactions for manufacturing businesses.
3	Demonstrate the ability to use cost information to support operating decisions and strategic decisions regarding products, customers and technology.
4	Prepare reports for use by management in decision-making.
5	Demonstrate the ability to understand how accounting can facilitate planning, control, and decision-making.
6	Solve business problems using information provided by cost and managerial accounting.
7	Summarize and apply financial, cost, and managerial accounting terms, concepts, and principles.

COURSE CONTRIBUTION TO... PROGRAM COMPETENCIES (Blank : no contribution, 1: least contribution ... 5: highest contribution)

No	Program Competencies	Cont.
Bachelor in Business Informatics (3 years) Program
1	Identify activities, tasks, and skills in management, marketing, accounting, finance, and economics.	5
2	Apply key theories to practical problems within the global business context.	4
3	Demonstrate ethical, social, and legal responsibilities in organizations.	5
4	Develop an open minded-attitude through continuous learning and team-work.	5
5	Integrate different skills and approaches to be used in decision making and data management.	5
6	Combine computer skills with managerial skills, in the analysis of large amounts of data.	3
7	Provide solutions to complex information technology problems.	3
8	Recognize, analyze, and suggest various types of information-communication systems/services that are encountered in everyday life and in the business world.	3

COURSE EVALUATION METHOD

Method	Quantity	Percentage
Midterm Exam(s)	1	25
Project	1	20
Final Exam	1	40
Other	1	15
	Total Percent:	100%

ECTS (ALLOCATED BASED ON STUDENT WORKLOAD)

Activities	Quantity	Duration(Hours)	Total Workload(Hours)
Course Duration (Including the exam week: 16x Total course hours)	16	3	48
Hours for off-the-classroom study (Pre-study, practice)	16	3	48
Mid-terms	1	9	9
Assignments	5	2	10
Final examination	1	10	10
Other			0
Total Work Load:			125
Total Work Load/25(h):			5
ECTS Credit of the Course:			5

CONCLUDING REMARKS BY THE COURSE LECTURER

https://epoka.edu.al/mat/codes/01-Code%20of%20Ethics.pdf