UGBA 102B

Managerial Accounting

I went into this course dreading it for what I anticipated to come. UGBA 102A, Financial Accounting, though never technically challenging, boiled down to knowledge of a library of accounting rules set out by GAAP to help companies accurately convey their financial status to external investors and the public. Studying for 102A exams were tedious ordeals that required me to just sit down for a couple hours and memorize/practice a bunch. The concepts taught in that course were less intuitive and could better be classified as learning “generally accepted practices”. UGBA 102B, however, sought to teach accounting from management’s perspective. What this essentially means is, “how does a company keep financial records INTERNALLY, and how does a company use these INTERNAL records to help them make the most economic decision?”. Think about it this way: on a multiple choice test question, what you present to the Professor is only your answer, the neat and simple protocol of filling in the bubble next to a certain answer choice. However, there are many ways to arrive at your answer, and your thought process and scratch work is what went on INTERNALLY in your mind when deducing your answer. I defy you to find a person who completes scratch work nicely and neatly, following perfect notation and penmanship. Yet, the scratch work is where the meat of the problem lies! Therein lies the difference between Financial and Managerial Accounting. The latter is the “scratch work”, the behind-the-scenes messiness that help a company make its decisions. The former are the results of said decisions, nicely presented in a strict format. With a much looser emphasis on rules/formatting and a tighter emphasis on quantifiable ideas and decisions, this course ended up being more up my alley.

Taught by Professor John Briginshaw, the same professor who taught introductory finance to all the prospective Business students my freshman year, this course was truly nothing glamorous. What I mean is this course was not great and not terrible, just truly average. The curriculum was only lightly interesting, and Professor Briginshaw was a good lecturer who brought an energy and uniquely British accent to a subject that many find dull. However, my biggest gripe with this course is actually it’s EASE. I don’t want to come off as arrogant, but I am also not going to hide the fact that this course was just too un-challenging. I felt as if I didn’t need the lecture to do well on the exam. So many of the concepts were deducible on-the-spot to anyone with enough common financial sense. As well, 80 minute lectures contained information that I could absorb on my own in perhaps 20 minutes tops. Thus, I spent much of my time in class sitting in the last row finishing the weekly homework and looking up occasionally just to make it seem like I was paying attention. This probably did not fair well for my participation marks, but I got the grade I wanted regardless.

As a formality, here is my recounting of the curriculum covered. The first unit reviewed basic accounting principles and went over the general roadmap of the different cost factors that go into a product from its raw material constituents all to way to its conception as a finished good. This process involved considering product costs, period costs, manufacturing overhead, and fixed/variable costs. Key metrics covered included Raw Materials Inventory, Works in Process inventory, COGM, and COGS. For this unit, the key was just knowing the chronological flow of a product in terms of financial classification and also knowing what basic metrics certain complex metrics were composed of. Bottom line, if you know how to follow arrows and add, you’re doing great. Next, we moved into how management keeps track of inventory and budgets their purchasing and production. This unit was where the “common-sense carry” came through. If you knew how to weight in-progress products by % completion, or if you knew how to distribute projected sales and production across a few future months, you were golden! The only topic here that perhaps needed some external knowledge was the calculating of budgeting and inventory variances, which is how a company adjusts for differences in budgeted values and what actually happens. Lastly, we dove into relevant costs and how they factor into decision making. This was the unit where “common-sense” fully took the wheel. If you could look at a list of costs, and deem which costs are avoidable and which are not based on the decision at hand, you’re golden. For example: if you’re trying to decide whether to go to McDonalds or the In-N-Out next to it, the cost of gas for you to get there is an irrelevant factor… duh.

I’ve got nothing else left to say about this course. This was a decent course with a decent Professor and somewhat substantial material that I found mostly trivial (hence class being an inefficient use of my time). UGBA 102B is “just another course” that I will not remember taking 10 years down the road. At least I finished another Haas requirement.

Food For Thought

A machine that makes teddy bears has the capacity to make 10,000 bears per month. Currently the company is only selling 8,000 bears per month at $10 per bear. Variable costs per produced bear are $3. Another branch of the company wants to buy 4,000 bears for a stuffed-animal bundle. What is the lowest transfer price per bear for these 4,000 bears that the bear dept. is willing to sell to the bundle dept. ? (Hint: how many bears of the 10,000 capacity are “idle inventory”?)