Lesson Plan For Applied Learning Unit In Cost A ✓ Solved

Lesson plan for applied learning unit/module in Cost A

Lesson plan for applied learning unit/module in Cost Accounting: variable costing and capital expenditure decision-making.

Learning objective: Through active experimentation with variable costing income statements and capital expenditure projects, students will be able to make managerial decisions to accept or reject a proposed capital expenditure.

Learning activities: Use a case study requiring students to analyze variable costing income statements at current and proposed output levels, review sales forecasts, and consider a plant expansion project.

Steps: (1) conduct an analytical review of provided data; (2) determine current and proposed output levels based on sales data and forecasts; (3) prepare a variable costing income statement; (4) receive different plant expansion scenarios requiring evaluation of estimate validity and justification; (5) present results and discuss how estimate origins affect managerial decisions.

Conditions: Group work in teams of four; two 50-minute class periods (one for case work, one for discussion); groups work independently; activity may be done entirely in class or partly assigned as homework.

Procedures: Follow the steps above; provide instructor facilitation and time for presentations and class discussion.

Paper For Above Instructions

Overview

This lesson plan presents an applied learning module for a Cost Accounting course focused on variable costing and managerial decisions about capital expenditure (capex). The module uses an active-experimentation approach where student teams analyze a realistic case, prepare variable costing income statements for current and proposed output levels, evaluate a proposed plant expansion using different scenario assumptions, and present a reasoned decision to accept or reject the capex. The design aligns with best practices for experiential learning and managerial decision training (Garrison, Noreen, & Brewer, 2018; Horngren, Datar, & Rajan, 2015).

Learning Objective

By the end of the module, students will be able to (1) construct variable costing income statements, (2) analyze how changes in output affect contribution margin and operating income under variable costing, and (3) apply quantitative and qualitative judgment to accept or reject a proposed capital expenditure, articulating the influence of forecast assumptions and estimate origins on the decision (Drury, 2013; Zimmerman, 2014).

Materials and Pre-class Preparation

• Instructor-prepared case packet with: historical costs, current production/output, sales forecasts, capacity constraints, and a proposed plant expansion with cost estimates and financing options.
• Spreadsheet template for variable costing income statements and sensitivity analysis.
• Whiteboard or projector for group presentations.
• Reading on variable costing principles (selected chapter from Garrison et al. or Horngren et al.).

Students should be assigned the reading before class to ensure familiarity with variable costing concepts and contribution margin analysis (Kaplan & Atkinson, 1998).

Class Structure and Timing

The activity spans two 50-minute class periods. Recommended breakdown:

• Class 1 (50 minutes): Introduction (10 min), group work on data analysis and preparing variable costing statements (35 min), instructor check-in and redistribution of scenario packets (5 min).
• Between classes (optional homework): Finalize analyses and prepare presentation slides (if not completed in class).
• Class 2 (50 minutes): Group presentations (35 min total, 7 min per group for four teams), whole-class discussion and debrief (15 min).

Step-by-Step Procedures

1. Form teams of four and distribute the case packet and spreadsheet template.
2. Analytical review: Teams examine historical data, fixed and variable cost behaviors, and sales forecasts to identify key drivers (Horngren et al., 2015).
3. Output determination: Using sales forecasts, teams estimate current and proposed output levels and note capacity constraints and seasonal variation affecting production.
4. Variable costing statements: Teams prepare variable costing income statements for current output and for projected output after the proposed expansion, showing contribution margin, fixed costs, and operating income under each scenario (Drury, 2013).
5. Scenario evaluation: Each group receives a unique expansion scenario (e.g., optimistic demand, conservative forecasts, higher financing costs, longer implementation lag). Teams assess the validity of the estimates, perform sensitivity analysis (break-even and margin-of-safety), and document qualitative risks (supply chain, market shifts, estimation bias) (Zimmerman, 2014; Brigham & Ehrhardt, 2016).
6. Decision and justification: Each team makes a managerial recommendation to accept or reject the capex, explicitly linking quantitative results and the provenance of key estimates to their judgement.
7. Presentation and discussion: Teams present their analyses and decisions; instructor guides a discussion on how different assumptions produce divergent managerial outcomes and highlights ways to improve estimate quality and decision robustness (Kaplan & Atkinson, 1998; Ross, Westerfield, & Jaffe, 2013).

Instructor Facilitation Tips

The instructor should circulate during class 1 to probe reasoning, ask teams to justify assumptions, and ensure correct variable costing application (Hilton & Platt, 2013). During presentations, the instructor should challenge groups on sensitivity of their recommendation to small changes in key estimates and draw attention to the managerial implications of using contribution margin-based analysis for short-run decisions versus full absorption costing for long-run performance (Horngren et al., 2015).

Assessment and Learning Outcomes

Assessment focuses on demonstrated analytical competence (accuracy of variable costing statements and sensitivity analyses), the quality of judgment regarding estimate validity, and clarity of communication during presentations. Expected outcomes include improved ability to map cost behavior to decision-relevant income statements, enhanced sensitivity analysis skills, and deeper appreciation for how estimate origin and uncertainty affect managerial decisions (Drury, 2013; Zimmerman, 2014).

Sample Case Structure

A succinct case includes: company background, historical sales and production data, breakdown of fixed and variable costs, sales department forecasts for the next three years, capacity and lead-time details, and a proposed plant expansion with capital cost, expected incremental capacity, and financing terms. Provide blank fields and alternate parameter sheets so groups can run “what-if” analyses quickly in the spreadsheet template (Brigham & Ehrhardt, 2016).

Debrief and Transfer to Practice

The final class discussion should summarize lessons: variable costing is useful for short-term decision-making and contribution margin analysis, but managers must scrutinize forecast origins, bias, and variability. Encourage students to connect the exercise to real-world capital budgeting frameworks and to integrate qualitative risk assessment with quantitative models (Ross et al., 2013; Kaplan & Atkinson, 1998).

Conclusion

This applied module blends technical accounting practice with managerial judgment training. By working with realistic data, constructing variable costing income statements, and confronting differing scenario assumptions, students gain hands-on experience in making defensible capex decisions while appreciating the centrality of estimate quality and sensitivity analysis in managerial accounting (Horngren et al., 2015; Garrison et al., 2018).

References

• Brigham, E. F., & Ehrhardt, M. C. (2016). Financial Management: Theory & Practice. Cengage Learning.
• Drury, C. (2013). Management and Cost Accounting. Cengage Learning.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting. McGraw-Hill Education.
• Hilton, R. W., & Platt, D. E. (2013). Managerial Accounting: Creating Value in a Dynamic Business Environment. McGraw-Hill Education.
• Horngren, C. T., Datar, S. M., & Rajan, M. V. (2015). Cost Accounting: A Managerial Emphasis. Pearson.
• Kaplan, R. S., & Atkinson, A. A. (1998). Advanced Management Accounting. Prentice Hall.
• Ross, S. A., Westerfield, R. W., & Jaffe, J. (2013). Corporate Finance. McGraw-Hill Education.
• Zimmerman, J. L. (2014). Accounting for Decision Making and Control. McGraw-Hill Education.
• Johnson, H. T., & Kaplan, R. S. (1987). Relevance Lost: The Rise and Fall of Management Accounting. Harvard Business Review Press.
• Bragg, S. M. (2015). Cost Accounting Fundamentals: Fifth Edition. AccountingTools, Inc.