In the 21st century, managers will continue to face global competition, sophisticated information technology and continuous process improvement initiatives. As cross-functional teams do their work, management accounting information will play an integral role in supporting the teams decision-making processes. How can accounting educators prepare students for such a future? At New Mexico State University, we have our students use the latest techniques to understand emerging business issues and to actively learn. To accomplish these goals, we use LEGO building materials to help teach management accounting concepts.
The context is Extraterrestrial Transport, Inc. (ET 2 ), a hypothetical business that manufactures and sells 21st century lunar transportation vehicles. This setting sparks students imaginations about business in the future while they learn—in simulations—to integrate management accounting concepts with marketing, engineering, purchasing and production issues. To help do this, we create production line simulations with untrained workers, unbalanced workloads, end-of-shift inspections and unreliable suppliers. Students identify prevention and appraisal activities that could help avoid the high cost of failing to do a job right the first time. This lets the students see the value of measuring the cost of poor quality.
Award Winning Program
At the August 1996 meeting of the American Accounting Association in Chicago, Sherry K. Mills and Cathleen S. Burns received the 1996 AAA award for innovation in accounting education for their development of the ET 2 program.
HOW IT ALL WORKS
ET 2 helps students realize that management accounting serves managers in a variety of situations within a single business context. Moving through this context, students learn cost terms and concepts, job order costing, activity- based costing, just-in-time manufacturing, target costing, budgeting, costs of quality, break-even analysis, capital budgeting and short-term decision making. Various case study assignments help to develop students critical thinking, team interaction and communication skills. For example, students work in teams of two or three to complete master budget spreadsheets that assume ET 2 will close or expand one of its production plants or that the company will experience a dramatic decrease in sales for its most profitable product line.
Management accounting topics are taught progressively in one semester. Assignments increase in difficulty as students become more familiar with ET 2 s products, accounting information systems and operating environment. Exhibits 1 and 2, pages 58 and 60, list each activity and its purpose in management accounting courses taught to undergraduate business students and to MBA and graduate manufacturing engineering students. Undergraduates complete the basic core modules. Graduate students use more creativity and higher-level thinking processes in assignments that are less structured and extend beyond the basic core modules. For example, MBA students team up with engineering students to develop a computer-aided design of a vehicle based on their translation of customer needs to design specifications.
Students learn product costing while building product prototypes with LEGO construction materials. They simultaneously create job cost sheets and build work-in-process inventory. As students attach a part to the lunar vehicle chassis, they also add material, labor and overhead costs to the product. Throughout the semester, students work in roles such as assembly workers and managers to plan, control and make operating decisions that influence ET 2 . For instance, while part of the class participates in a production line simulation at the front of the classroom, others complete observation sheets to accumulate information about waste and inefficiency. During a debriefing session or in a formal memo, students offer ways to continuously improve operations and reduce non-value-added costs.
Beyond management accounting. ET 2 assignments also have been used in other courses.
- All accounting majors take an accounting information systems course. One of the computer assignments requires students to work in the context of ET 2 to develop a materials inventory status reporting system with a users manual. Students demonstrate the systems viability in class.
- In a production operations management course, students redesign ET 2 s traditional factory layout and assembly process to eliminate any non-value-added activities.
- In a general education course on accountability for quality, a production line simulation shows students how prevention and appraisal activities decrease failure costs. Students relate these concepts to actual service organizations they interview for a research project. Because fast food, health care and banking institutions share many of the same qualities of a production lines sequential process, students can easily transfer their manufacturing knowledge to a service organization setting.
|Exhibit 1: ET 2 Activities for Undergraduate Business Students|
|Exhibit 2: ET 2 Activities for MBA and Master of Engineering Students|
PAST, PRESENT, AND FUTURE
ET 2 has promoted active student learning of accounting and related business concepts for over 2,000 students in the past five years. Students from rural areas and culturally diverse populations have benefited from the classroom factory experience. We are currently designing modules to train employees using the same approach. In the future, ET 2 will be used to provide a case-based approach in an active learning environment. In one setting, case assignmentswith audio-visual componentswill be sent via the Internet. Students will see an officer of ET 2 discuss product costing issues. Students also will use information databases to solve problems and use e-mail to send the instructor a written memo. In a two-way audio-visual environment, the instructor will use ET 2 and product prototypes made with LEGO building materials to teach students at multiple sites.
ET 2 has been very successful. We have presented the project to CPAs, CMAs, U.S. and international accounting educators and to civil, industrial and mechanical engineers. All applaud the learning process stimulated by the ET 2 instructional strategy. In this futuristic business context, adult learners build and account for the product that is designed, manufactured and marketed by ET 2 .
Students say they acquire a sense of ownership and familiarity with the big picture of a single entity. One MBA student described his experience as a classroom internship. Students say they understand accountings role in a business and in the competitive marketplace because of the general systems perspective that ET 2 promotes.
The programs futuristic setting encourages students to explore creative solutionsa skill they will need as they manage businesses in the 21st century. Based on feedback from ET 2 alumni, classroom experiences have been similar to what former students say they are experiencing in their jobs. Many graduates are now managers who have taken the initiative to change or introduce new accounting methods in the workplace.
Cathleen S. Burns, CPA, PhD, is assistant professor of
accounting at New Mexico State University, Las Cruces.
Sherry K. Mills, CPA, PhD, is associate professor of accounting at New Mexico State University.