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Improving the cost accounting advantage: often poorly understood by undergraduate students, traditional cost accounting is still a valuable and much needed tool. The challenge for academics is to make it engaging.

If you have a bachelor's degree in accounting or in business administration (with a major in accounting), you will remember having taken (or survived, as the case may be) one or two courses that introduced you to the concepts of traditional cost accounting: normal cost, standard cost, custom work and continuous operation costing, to name a few. Do you still get a rash at the mere mention of the word "allocation"? Truth be told, cost accounting courses aren't a pleasant memory for many of us.

Still, according to Jeff Holloway, operations manager with Robert Half International, there is currently a shortage of accountants who have mastered the concepts of traditional cost accounting.

In many industrial concerns, the cost accounting department is where a new accounting graduate cuts his or her professional teeth and quickly moves on to supervise the work of costing technicians. The new generation of management accountant can therefore ill afford to take cost accounting lightly. Unfortunately, in my experience, undergraduates often fail to grasp the importance of these concepts.

Facts and impressions

My experience is that students find these very technical concepts hard to assimilate. They seem to think that the concepts aren't essential to success in their CMA entrance examination or their future jobs. This may be due to the course of study they're given.

Management accounting has undergone tremendous change over the past 20 years: activity-based costing, just-in-time production, performance indicators and balanced scorecards--the list of changes goes on and on. All of these major items have been added to the management accounting curriculum, even though the number of hours allocated to the curriculum hasn't increased in undergraduate programs. This has led to a reduction in time devoted to traditional cost accounting concepts.


The upshot is that students are losing interest. The concepts and theories in such courses are often retained only long enough to get students through their examinations, instead of being added to their overall accounting literacy. This leads to mediocre examination results. In part, it may be due to the teaching approach used.

The true nature of cost accounting

Cost accounting measures the cost of manufacturing a product, and the resulting information is used to value inventory and to determine a company's performance, and supports planning and control efforts.

The challenge is that cost accounting concepts and theories have to be applied uniquely to individual companies. That's where students often encounter problems. While cost accounting is, as its name suggests, part of the accounting field, it's first and foremost driven by the company's production process, which has been conceived and implemented by the company's own employees. There is, therefore, a unique model for every company, a point that can be hard to grasp: cost accounting reflects, in financial terms, a company's distinctive production process. Once a student understands that cost accounting is very much a grass roots process, they can adapt to it well. Unfortunately, many students, if not the great majority, try to create for themselves a static model similar to the financial accounting model (accounting principles and policies), failing to take into account the nuances of a production process and how it can change dynamically. Service organizations, too, exist in a dynamic setting and demand the same flexibility.


I have been teaching cost accounting for over 20 years and, in all that time, have never given up when confronted with poor exam results. I have tried all kinds of teaching techniques. First, I drew up a detailed plan of each lecture on the blackboard, then used a slide projector from which students could copy notes during the lecture. Later, I used well-designed slides and had the contents of these collected in a casebook that was given to students. All of these techniques, however, were based on a common premise--the traditional lecture.

Unfortunately, I was never able to adapt the traditional lecture enough to improve students' results in my cost accounting courses.

A seminar on problem-based learning (PBL) offered by the faculty of medicine at the University of Sherbrooke, and a major curriculum overhaul of the undergraduate program in accounting in the late '90s, helped change my teaching style.

The seminar taught me that a student retains less than 20% of concepts explained during a three-hour lecture. This shocked me. Since a student is unable to absorb more under these circumstances, he or she must perform a considerable amount of personal work to retain and reorder all of the concepts covered in class. Keener students do so within 12 hours of the end of their class. While they are likely to take advantage of this formula, they are admittedly few in number. How many students pile up class notes for six or seven weeks and use them to cram three or four days prior to an examination?

PBL emphasizes student teamwork. During the seminar, we were able to observe a PBL class in action. A group of second-year students used a simulation exercise to perform a preliminary diagnosis, which led them to study, on their own, a particular pathology and to search for appropriate treatments. Their only support in this was an instructor, who was able to answer occasional questions.

This approach gives students the opportunity to develop their methodical and analytical skills. PBL is also designed to develop self-confidence and autonomy in students. Although it is best used only with very small groups, I thought I might be able to adapt it for my class of 55 cost accounting students.

A new course

Using the basic premises of PBL and a new direction in our undergraduate accounting program, I analyzed the themes in the cost accounting course. I was able to identify more technical themes that lent themselves to self-directed learning (job order costing, process costing and standard costing, for the technical portion) and other themes that could be studied in theme-based simulation exercises (cost behaviour, actual cost, budgeted cost and standard cost for the portion devoted to variance analysis). Meanwhile, lectures would be used for two sessions (primary and secondary allocation of factory overhead and study of co-products and by-products). These latter themes are well covered in the reference text, and failure to master them isn't as detrimental as a failure to master the basic concepts of normal cost accounting that are at the heart of standard costing and, to a certain extent, of activity-based costing.

In all, there would be five three-hour sessions devoted to self-directed learning, and five sessions dedicated to teamwork. Teamwork and self-directed learning are the value-added attributes of this course. In the self-directed learning section, the professor is replaced by a facilitator (usually a top prior year student) who resolves assigned problems from the textbook. The students know before the self-directed learning session which problems will be discussed, so they can choose whether or not they wish to attend. These sessions are purposely designed so the student isn't obliged to attend, to assure independent learning, without the reliance on a professor. This autonomy is shown to build self-confidence in students. For the teamwork sessions, I split the group in two, with half in the morning and the other half in the afternoon. This meant that I would have only 5 or 6 teams to supervise, which is quite manageable.

To ensure the success of the program, an Internet site dedicated to the distribution of information and documents was created, as were mini-cases for the various themes. This site provides a theoretical overview of the course content for each week to help the students prepare. There is also courseware in management accounting (CD-ROM) for the self-directed learning sessions. The CD-ROM contains three themes (production on demand, uniform production and standard costing) and each theme includes problems for students to solve. The objective of these problems isn't to measure acquired knowledge but rather to help students learn on their own. For example, students have multiple choice questions and problems to solve. If they answer a question incorrectly, a detailed explanation (with calculations) will be displayed. This gives students an opportunity to learn from their mistakes, and has been an effective tool.

Students have adapted well to the simulations, formulating and structuring solutions for each case on their own. A student who puts a lot into solving a simulation exercise is really reflecting an interest in his or her own learning. And things can get pretty lively. Discussions get heated, people participate. Most importantly, the results demonstrate a higher level of student involvement and motivation as well as improved grade point averages.


Since I've adopted this approach, in the fall of 2000, results have improved markedly, both in terms of success rates (the failure rate has dropped from 29% to 13%) and from the standpoint of marks earned (the proportion of students with at least an A- average has grown from 12% to 29%). Results have improved even though examinations have become more difficult. In fact, each examination (mid-term and final) requires students to solve a mini-case. This new requirement is a source of dread for students, who aren't used to answering a question whose required portion reads: "Prepare the report requested by the president."

I believe that, overall, the program's success is due to the increased involvement of students in their own training, and to constant effort. With this new approach, students are more interested in the concepts of traditional cost accounting and exhibit much greater mastery of them.

Pierre Giguere is a professor at the Ecole des sciences de la gestion at the University of Quebec in Montreal and is co author of the Management Accounting manual (Laval University) as well as a cost accounting simulation program. Richard Fontaine, CMA, and Jacques Sarremejeanne, CMA, who helped prepare this article, are professors at UQAM and are currently pursuing PhDs.
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Title Annotation:University of Quebec in Montreal
Author:Giguere, Pierre
Publication:CMA Management
Geographic Code:1CQUE
Date:Apr 1, 2006
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