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 8

Implementing the Simulation

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

mmachin1@valenciacollge.edu

5/18/2012

Prepared by Mabel Machin - Valencia College 11

Managerial Accounting Simulation Activity

Mabel M Machin, CPA, MPAC, CGMA

Valencia College