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C02

Managerial Accounting & Control

The numbers managers use inside the company: costing, budgets, variances and incentives.

Start the course →22 lessons · first 2 free
  1. Cost BehaviourTrailhead Bikes sells $50M of bikes a year and still loses $4M. Before anyone can fix it, someone has to know how each cost moves when volume moves. Sort Trailhead's costs into fixed, variable, step and mixed, split a mixed cost with the high-low method, and see why 'cost per bike' is a moving target. · 13 minFree
  2. Cost-Volume-Profit AnalysisHow much must Trailhead sell to stop losing money, and does it matter which bikes? Work out the contribution margin ratio, break-even revenue and the sales needed for a profit target, then discover why selling more of the 'exciting' e-bike pushes break-even further away. · 14 minFree
  3. Relevant CostsA hotel chain offers to buy 2,000 City bikes at $450, below their 'full cost' of $823. Sort costs into the ones that change with the decision and the ones that don't, ignore money already spent, count the opportunity you give up, and find out the order is worth $120,000. · 14 min🔒 VIP
  4. Contribution Margin and ConstraintsSpring demand is booming and the paint shop can't keep up. The E-Cargo bike earns the most per bike, so the sales team wants it first. Rank the bikes by contribution per hour of the bottleneck instead, build the best plan, and find out what one extra paint-shop hour is worth. · 14 min🔒 VIP
  5. Make or BuyTrailhead builds its own E-Cargo battery packs. A supplier offers them at $650 each. Count only the costs that would really disappear, find the volume where making wins, add the value of the space you'd free up, then weigh what numbers can't show: quality, dependence and know-how. · 14 min🔒 VIP
  6. Keep or Drop a ProductThe cost report says E-Cargo loses $4M a year, the whole of Trailhead's loss. The CEO wants it gone. Split costs into those the product causes and those it merely shares, find its segment margin, and discover that dropping E-Cargo would make the loss bigger, not smaller. · 14 min🔒 VIP
  7. Job and Process CostingA police department wants 40 custom patrol bikes, while the factory keeps turning out thousands of identical City bikes. Cost the custom job with a job cost sheet and an overhead rate, cost the flowing line with equivalent units, and find out why quoting the standard E-Cargo price for the police bikes would lose money. · 15 min🔒 VIP
  8. Absorption vs Variable CostingTrailhead's new plant manager is paid a bonus on operating profit. Their plan: build 12,000 more bikes than dealers buy. Without selling a single extra bike, the loss shrinks by $1.9M. See where that 'profit' hides, why the rules for outside reports allow it, and how variable costing keeps managers honest. · 14 min🔒 VIP
  9. Allocating Shared and Joint CostsThree departments share one maintenance team, and one aluminium run makes tubes for two different frames. Split shared costs with sensible drivers, see how a fixed cost 'moves' when one department uses less, try two ways to split a joint cost, and learn why none of it should change a sell-or-process decision. · 14 min🔒 VIP
  10. Activity-Based CostingTrailhead spreads $9.6M of factory overhead by labour hours, so each E-Cargo carries $450. But E-Cargo bikes hog the paint shop, need tiny batches with many setups, and fill the inspectors' days. Trace overhead to the activities that cause it, and watch E-Cargo's overhead nearly double while City's falls. · 15 min🔒 VIP
  11. Customer ProfitabilityTwo dealers each buy 2,000 City bikes a year. One earns Trailhead $362,100; the other loses money. Same bikes, same list price: the difference is discounts, tiny orders, rush deliveries and returns. Build a customer P&L, draw the whale curve, and fix a costly customer without firing them. · 15 min🔒 VIP
  12. The Cost of Unused CapacityTrailhead's factory can build 55,000 bikes but makes 49,000, so every bike quietly carries a share of the empty space. Watch what happens when sales fall and the overhead rate climbs: the death spiral. Then rate overhead on capacity, show unused capacity as its own line, and decide what to do with it. · 14 min🔒 VIP
  13. Pricing and Target CostingTrailhead wants a commuter e-bike to fill its empty factory. Cost-plus pricing says $2,062; the market says $1,800. Work backwards from the price customers will pay to the cost you must hit, then close a $210 gap with value engineering before a single frame is welded. · 15 min🔒 VIP
  14. BudgetsTheo builds Trailhead's 2027 budget: sales by model, the bikes to build, the result, and the cash quarter by quarter. The plan halves the loss, but the cash budget finds a hole in March that the profit plan never shows. Build it, fund it, and learn how budgets get gamed. · 15 min🔒 VIP
  15. Flexible Budgets and Variance AnalysisCity bikes earned $1.04M less contribution than budgeted. The sales team blames the factory, the factory blames sales. Flex the budget to the bikes actually sold, then split the miss into volume, price, labour rate and labour efficiency, and find out who really owns each piece. · 16 min🔒 VIP
  16. Responsibility CentresLarkfield wants every Trailhead manager paid on their own numbers. The first factory report says the plant came in $230,000 under budget, and the plant manager expects a bonus. Split Trailhead into cost, revenue, profit and investment centres, judge each manager only on what they control, and find out what the factory really did. · 15 min🔒 VIP
  17. ROI, Residual Income and EVALarkfield pays its division heads on return on investment. So the Bikes division turns down a robot that earns 15%, and E-Cargo wants a tester that earns 8%. Both are wrong for Larkfield, and both are right for their bonuses. Measure the divisions with ROI, residual income and EVA, and see why the measure changes the decision. · 15 min🔒 VIP
  18. Transfer PricingTrailhead's frame shop wants $360 for each E-Cargo frame. An outside supplier quotes $310, so Kai is about to buy outside, and Trailhead is about to lose $240,000. Find the range of prices that keeps both divisions happy, see what changes when the frame shop is full, and set a rule that makes every division's best choice the company's best choice. · 15 min🔒 VIP
  19. Balanced ScorecardE-Cargo's profit report tells Kai he's losing, but not why or what to do on Monday. Build a balanced scorecard: train technicians, build bikes right first time, deliver on time, and watch the money follow. Then find the measure the team learned to game. · 15 min🔒 VIP
  20. Incentives and GamingTwo weeks before year end, sales are $750,000 short of the target, and the sales director's whole $40,000 bonus depends on hitting it. The plan: push 700 Trail bikes onto dealers at a discount, with the right to send them back. See what the bonus plan makes people do, what the push costs Trailhead, and how to design a bonus that's hard to game. · 15 min🔒 VIP
  21. Management Control SystemsA cheaper brake supplier saved $120,000 a year and helped cause a recall of 8,000 e-bikes. Nobody broke a rule, because there wasn't one. After the recall and the December push, Larkfield asks Theo to design Trailhead's control system: which controls to add, which to refuse, and how leaders should use them. · 15 min🔒 VIP
  22. Boss: Fix a Loss-Making Product LineFriday is the board meeting. The allocated report says E-Cargo loses $4M, the CEO wants it dropped, and Kai has a shortcut that would wreck next year. Use everything from the course to build a real turnaround plan that makes E-Cargo earn its cost of capital, then defend it against three tempting wrong answers. · 18 min🔒 VIP