Principles of Managerial Accounting

Course Description

ACG2071 / ACG2071C – Principles of Managerial Accounting (also titled Introduction to Managerial Accounting) is a 3-credit lecture course in the Accounting taxonomy of Florida's Statewide Course Numbering System (SCNS). The course introduces students to the use of accounting information by managers for planning, performance evaluation, and decision-making purposes. Students learn to use cost accounting concepts, cost-volume-profit analysis, budgeting, standard costing and variance analysis, capital investment analysis, and financial statement analysis to support managerial decisions. The course distinguishes between financial accounting (external reporting) and managerial accounting (internal decision support).

ACG2071 is the second course in the standard introductory accounting sequence, following ACG2021 (Financial Accounting). The course is offered at 44 Florida public institutions and transfers as equivalent across the state. ACG2071 is required preparation for AACSB-accredited business and accounting programs at all Florida public universities (UF Fisher School of Accounting, FSU College of Business, USF Muma, UCF College of Business, FAU College of Business, FIU College of Business, FAMU School of Business, UNF Coggin, FGCU Lutgert) and is a common prerequisite for upper-division finance, management, and accounting courses.

Learning Outcomes

Required Outcomes

Upon successful completion of this course, students will be able to:

• Distinguish between financial accounting and managerial accounting; understand the basic terminology of cost accounting.
• Classify costs as direct/indirect, product/period, fixed/variable/mixed, and relevant/irrelevant; apply cost-behavior analysis using methods such as the high-low method.
• Apply job order costing: calculate costs and journalize transactions through the manufacturing process.
• Apply process costing: account for equivalent units of production and assign costs to inventory and cost of goods sold.
• Apply activity-based costing (ABC): identify activities and cost drivers, allocate overhead to products or services, and contrast ABC with traditional costing systems.
• Perform cost-volume-profit (CVP) analysis: calculate the break-even point, target profit volume, contribution margin, and margin of safety; analyze the impact of changes in costs, prices, and volume.
• Prepare a master budget, including the sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, cost of goods sold budget, selling and administrative budget, cash budget, budgeted income statement, and budgeted balance sheet.
• Apply standard costing and variance analysis: calculate price and quantity (efficiency) variances for direct materials, direct labor, and manufacturing overhead; interpret and investigate variances.
• Compare absorption costing and variable costing: prepare income statements under each method and reconcile the differences.
• Apply differential (incremental) analysis to short-term decisions including special orders, make-or-buy, sell-or-process-further, and product-line decisions; identify relevant and irrelevant (sunk) costs.
• Apply capital budgeting techniques: net present value (NPV), internal rate of return (IRR), payback period, and accounting rate of return; evaluate long-term investment decisions.
• Analyze the performance of segments using rate of return on investment (ROI), residual income, and profit margin/investment turnover; distinguish cost centers, profit centers, and investment centers.
• Prepare and interpret a statement of cash flows using direct and/or indirect methods.
• Apply financial statement analysis using horizontal, vertical, and ratio analysis (liquidity, solvency, profitability, market ratios).

Optional Outcomes

Depending on institutional emphasis, students may also:

• Apply balanced scorecard performance measurement frameworks.
• Apply concepts of quality costs and just-in-time (JIT) inventory management.
• Apply transfer pricing in decentralized organizations.
• Use Microsoft Excel for budgeting, sensitivity analysis, and financial modeling, including pivot tables and forecasting tools.
• Apply activity-based management (ABM) beyond costing — using activity data for process improvement.
• Examine ethical considerations in managerial accounting, including IMA Statement of Ethical Professional Practice.

Major Topics

Required Topics

• Managerial Accounting and Cost Concepts: Distinguishing financial vs. managerial accounting; cost classifications (direct/indirect, product/period, manufacturing vs. non-manufacturing); flow of costs through inventory accounts; the schedule of cost of goods manufactured.
• Cost Behavior and Cost-Volume-Profit Analysis: Variable, fixed, and mixed cost behavior; high-low method; least-squares regression for cost estimation; contribution margin; break-even analysis; margin of safety; operating leverage; sales mix and multi-product CVP.
• Job Order Costing: Cost flow in job-order systems; calculating predetermined overhead rates; assigning direct materials, direct labor, and applied overhead; over- and under-applied overhead; journal entries for the production process.
• Process Costing: Equivalent units of production (FIFO and weighted-average methods); production cost reports; assigning costs to units transferred and ending work in process.
• Activity-Based Costing: Identifying activities and cost drivers; calculating activity rates; assigning costs to products under ABC; comparing ABC and traditional costing; activity-based management.
• Variable Costing and Absorption Costing: Income statement format under each; treatment of fixed manufacturing overhead; reconciling income differences; impact of inventory changes.
• Master Budget and Operating Budgets: Sales budget; production budget; direct materials, direct labor, and manufacturing overhead budgets; cost of goods sold budget; selling and administrative budget; cash budget; budgeted income statement and balance sheet.
• Flexible Budgets and Standard Costing: Static vs. flexible budgets; standard costs for direct materials, direct labor, and manufacturing overhead; price (rate) and quantity (efficiency) variances; investigating variances.
• Performance Measurement in Decentralized Organizations: Cost, profit, and investment centers; return on investment (ROI); residual income (RI); economic value added (EVA — overview); responsibility accounting.
• Differential (Relevant Cost) Analysis: Concepts of relevant, sunk, opportunity, and avoidable costs; special-order decisions; make-or-buy decisions; sell-or-process-further decisions; product-line drop or keep decisions; constrained-resource decisions.
• Capital Budgeting: Time value of money review; net present value (NPV); internal rate of return (IRR); payback period; accounting rate of return; sensitivity analysis.
• Statement of Cash Flows: Operating, investing, and financing activities; direct and indirect methods of presenting operating activities; preparation and interpretation.
• Financial Statement Analysis: Horizontal (trend) analysis; vertical (common-size) analysis; ratio analysis — liquidity (current, quick), solvency (debt-to-equity), profitability (gross margin, net margin, ROA, ROE), and market ratios (P/E, dividend yield).

Optional Topics

• Balanced Scorecard: Four perspectives (financial, customer, internal process, learning and growth); strategy maps; key performance indicators (KPIs).
• Quality and Cost Management: Costs of quality (prevention, appraisal, internal failure, external failure); just-in-time (JIT) inventory; lean accounting.
• Transfer Pricing: Cost-based, market-based, and negotiated transfer prices in decentralized organizations.
• Excel for Managerial Accounting: Budget modeling; sensitivity analysis; what-if scenarios; financial functions (NPV, IRR, PMT).
• Pricing Decisions: Cost-plus pricing; target costing; activity-based pricing; customer profitability analysis.
• Managerial Accounting Ethics: IMA Statement of Ethical Professional Practice; ethical dilemmas in managerial reporting and decision-making.

Resources & Tools

• Standard Textbooks: Managerial Accounting by Garrison, Noreen, and Brewer (McGraw-Hill — most widely adopted in Florida); Managerial Accounting by Braun and Tietz (Pearson); Managerial Accounting by Hilton and Platt (McGraw-Hill); Managerial Accounting: The Cornerstone of Business Decision Making by Mowen, Hansen, and Heitger (Cengage); OpenStax Principles of Accounting Vol. 2: Managerial Accounting (free, openstax.org)
• Online Homework Platforms: McGraw-Hill Connect (Garrison); Pearson MyLab Accounting; Cengage MindTap; Microsoft Excel (most courses include Excel-based budgeting and analysis projects)
• Required Software: Microsoft Excel — used heavily for budgets, variance analyses, and financial modeling; basic Excel proficiency is essential.
• Calculator: Financial calculator (Texas Instruments BA II Plus or HP 10bII) recommended for capital budgeting; scientific calculator sufficient at most institutions.
• Free Online Resources: Khan Academy Accounting; AccountingCoach (free, accountingcoach.com); Edspira (YouTube); Tony Bell's Accounting Stuff (YouTube); UF Fisher School of Accounting and FSU College of Business public lectures.
• Professional Resources: Institute of Management Accountants (IMA, imanet.org) — professional body that issues the Certified Management Accountant (CMA) credential; American Institute of Certified Public Accountants (AICPA, aicpa.org).

Career Pathways

ACG2071 is a foundational course for business, accounting, finance, and management pathways:

• Associate in Arts (A.A.) Transfer Pathway – Required for transfer to AACSB-accredited business programs at all Florida public universities; common prerequisite for upper-division business coursework.
• Accounting Major – Foundation of the accounting B.S. major; prerequisite for upper-division courses including Cost Accounting (ACG3341), Intermediate Accounting (ACG3101/ACG3111), Auditing, and Tax. UF Fisher School of Accounting requires both ACG2021 and ACG2071 with a minimum grade of B for entry to upper-division accounting coursework, plus a 70% on the Managerial Competency Assessment.
• Finance Major – Required preparation; foundational for corporate finance, investment analysis, and financial planning.
• Management and Marketing Majors – Required preparation; managerial accounting concepts (CVP, budgeting, ABC) underlie strategic and operational decision-making.
• Professional Certifications – Foundation for the Certified Management Accountant (CMA), Certified Public Accountant (CPA), Chartered Financial Analyst (CFA), and Certified Internal Auditor (CIA) credentials.
• Florida Industry Application – Managerial accounting is practiced across Florida's healthcare (AdventHealth, HCA Florida Healthcare, BayCare), tourism and hospitality (Disney, Universal, Marriott, Hilton), aerospace, finance and banking (BankUnited, Truist, Bank of America regional operations), real estate, and professional services sectors.

Special Information

Prerequisite

Students must successfully complete ACG2021 (Financial Accounting) with a minimum grade of C as a prerequisite. ACG2021 introduces the financial statements (balance sheet, income statement, cash flows, equity), debits and credits, and the accounting cycle — foundational knowledge required for ACG2071.

Course Variants

ACG2071 is offered as ACG2071 (3 credits) at most institutions and as ACG2071C (typically integrated lecture/lab format) at others. Some institutions, including UF, classify ACG2071 as a 4-credit course. The course transfers as equivalent across Florida public institutions regardless of the credit-hour count.

Workload and Time Expectations

Most institutions expect 6-9 hours of weekly out-of-class work, including textbook reading, online homework (McGraw-Hill Connect or equivalent), Excel-based projects (master budget, variance analysis), and 3-4 mid-term examinations. UF's ACG2071 includes a comprehensive Excel budget project worth a significant portion of the grade.

Foundation for Upper-Division Coursework

ACG2071 is a prerequisite for upper-division accounting and business courses including Cost Accounting / Cost Management Systems (ACG3341), Intermediate Accounting (ACG3101), Financial Management (FIN3403), and management courses that require quantitative business analysis. Mastery of CVP analysis, budgeting, and capital budgeting is particularly important for finance and accounting career paths.

Excel Skills

Proficiency in Microsoft Excel is essential for success in ACG2071 and beyond. Most exams and projects require Excel for budget preparation, variance computations, and ratio analysis. Students should also become familiar with financial functions (NPV, IRR, PMT, FV) for capital-budgeting work.