Arthur Morris

Assistant Professor at the Hong Kong University of Science and Technology (HKUST).

Syllabus and Schedule

Canvas

  • All assignments should be turned in via the course canvas site.
  • All content related questions should be submitted via canvas, grading questions should be directed to the TA via email, other questions can be submitted to me via email. Please include “ACCTG 3210” and your section number in the subject of the email.

Lecture Notes and Examples

Notes will be posted before class, and examples afterward.

Section 1: Tools

Lecture 1: Expectations and Conceptual Framework

This lecture reviews the syllabus, and presents a conceptual framework for the course.

Lecture 2: The Nature of Costs

In this lecture on cost analysis, we explore cost-volume-profit analysis and its strategic role, emphasizing the understanding of total cost, including fixed and unit costs. The session covers key concepts such as linear relationships, emphasizing that these relationships only apply within finite bounds (the relevant range). We continue by discussing various cost types, including estimated fixed costs, step costs, and semi-variable costs, and show how synergies complicate these models. The conclusion highlights the practical application of incremental cost using Excel and Python, encouraging students to navigate uncertainty in decision-making while underscoring the importance of calculus in managerial accounting.

Python resources

Lecture 3: Cost Estimation

In this lecture we discuss techniques for using data to estimate cost functions. We emphasize the workflows used by Data Scientists, Statisticians and Managerial Accountants. Includes demonstrations of regressions in Python and Excel.

Lecture 4: Non-linear programs

In this lecture we introduce a simple optimization problem facing a multi-product firm. The example we use highlights both the benefits and complexities of sharing capital between products. We also cover techniques for visualizing these optimization problems using matplotlib and solving these optimization problems using GEKKO. This lecture emphasizes Python-based tools for working through these problems, though the critical steps of (1.) identifying choice variables, (2.) writing down an objective function, (3.) and incorporating constraints, apply to any set of tools you may use. We will review how to implement these techniques using Microsoft Excel in subsequent lectures.

Lecture 5: Linear Programs

Here we continue our work on optimization!

Lecture 6: Review

This is an entire lecture dedicated to all possible versions of the question: “Dr. Morris” will you please tell me exactly what is going to be on the exam?”

… the answer is probably something like: “Focus on setup and interpretation, but not the calculations.”

At this point in the course, a lot of you will be interested in clarifying the role of ‘coding’ in the course. I’ve put together a small summary on this topic here:

Section 2: Theory

In this section of the course we shift our focus from the tools that we use to address questions within the firm to the theories that shape our approach to these questions.

Lecture 7: Capital Budgeting

This lecture reviews the fundamentals of interest rates and the time value of money. We’ll work through simple calculations using Python and Excel, and emphasize that, while textbook examples often ignore when things happen, timing matters!

Lecture 8: Taxation of Returns

In this lecture we enrich the perspective of the previous lecture by incorporating taxes into the analysis. We use the variation in tax rates actoss U.S. states, and across assets to provide examples. Though the Hong Kong tax system is much more streamlined than the U.S. system, there are still many opportunities for tax planning. The Hong Kong IRD has a list of resources about these, though the details of either system are beyond the scope of this course. Our objective is to illustrate how differential tax rates shape demand, and returns, creating implicit taxes.

Lecture 9: Tax Shields and Taxation of Real and Financial Assets

In our final lecture on taxes we show that depreciation deductions create incentives for investment, and potential for arbitrage.

Lecture 10: The Economics of Agency: Incentives, Effort, Risk, and Organizational Structure

In this lecture we discuss the problems that arise when owners hire others to make business decisions on their behalf. We begin with a simple example of an entrepreneur, and discuss how incentive problems arise and vary as the business grows.

Lecture 11: The Economics of Agency - How things go wrong

Today we discuss examples of how well intentioned compensation plans fail, when employees simply do what they are paid to do.

Lecture 12: Mid-term review

Back by popular demand: Another entire lecture devoted to the question: “Please tell me in detail exactly what will be on the exam, and leave nothing out. Also what are the answers?”

Section 3: Cost Allocation

Lecture 13: The first lecture of the cost accounting portion of the course

We introduce the concept of transfer pricing, emphasizing it’s connection to the economics of agency. We also discuss basic terms and methods. In this lecture we ignore taxes and focus on the role of transfer prices in reducing agency costs.

Lecture 14

In this lecture we consider how taxes complicate our choice of transfer prices and limit our ability to use them to solve agency problems.

Lecture 15

  • Exam Solution Review (No slides)

Lecture 16: Cost Allocation

In this lecture we introduce the topic of cost allocation and present both introductory methods, and their pitfalls.

Lecture 17: Course Feedback Session

No lecture and no attendance today. Now that you have had a chance to review the midterm, today’s class will be devoted to giving me feedback about how the course is going. The survey will be posted on the canvas site, and will be used for the participation score (attendance) today. In addition to this survey, please also take a few minutes to watch some of the videos for the course and provide feedback on them. This will allow me to adapt the course to better meet your needs for the final exam.

Lecture 18

Lecture 19

Lecture 20

Lecture 21

Lecture 22

Lecture 23

  • Standard Costs and Variances

Lecture 24

  • Exam Review