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302. Management Accounting-III (Advanced Cost Accounting) |
Management Accounting-III (Advanced Cost Accounting)
Course Objectives
This course is designed to fulfill the following objectives. These are to
a. explain the role of management accountant in an organization;
b. explain the ways to identify relevant information;
c. explain the various capital budgeting techniques;
d. describe the methods of performance measurement in decentralized organization;
e. explain the relationship between cost – volume – profit; and
f. measure the cost of quality.
Costing Methods-Weight-40%
302.01: Brief review of 102: Introduction to Cost Accounting:
Objectives of Cost Accounting – Costing method – Job Costing – Proceed Costing – Historical Costing – normal Costing – Standard Costing – variable costing – Absorption Costing – Various Cost concepts. Target costing – Kaizen costing – the life cycle costing.
302.02: Job and Batch Costing:
Brief discussion about job and Batch costing – Economic Batch quantity – Back flush costing – treatment spoilage, scrap and defective units.
302.03: Process Costing:
Weighted – Average costing; FIFO process costing – Materials Issued at various stages – process costing with multiple departments. Journal entries for process costing – Impact of Flexible Manufacturing system and JIT on process costing.
302.04: Process Costing: [Special Production issues]
Accepted Quality Level [AQL] – Lost Units – Continuous loss – Discrete loss – Accounting for cost units – method of neglect – Normal loss – Abnormal loss – Defective units – Defects and spoilage –rework. – Accretion – controlling quality to minimize lost units. Inter – process profit.
302.05: Joint Product & By –Product Accounting:
Joint Cost: Basic – Approaches to allocating joint costs – sales value at split off method – Physical Measure Method – Estimated net Realizable value at split off method – constant Gross Margin Method – Comparison of methods – Irrelevance of joint costs for Decision Making. Sell or Process further – joint cost Allocation and performance Evaluation. Accounting for By-products – By-products recognized at time of production – By-products recognized at time of sale.
302.06: Service Costing / Operation or Operating Costing / Output Costing:
Service costing / operation costing: Basic Principle Nature of operation costing – Motor Transport costing – Hotel costing – Hospital costing – Power House costing – Staff canteen costing. Single or output costing.
302.07: Variable Costing and Absorption Costing:
Full – absorption costing and variable costing – variable costing for decision making – Traditional Format Income statement – contribution format income statement – causes for differences in income. Advantages of variable costing and criticisms of full-absorption costing.
Budgeting-Weight- 20%
302.08: Budget – An Annual Profit Plan:
Basic Framework of Budgets: Meaning and types – fundamentals of budgeting – the budgeting process – Budget Committee – Budget Manual – Budget period – Imposed Budgets – Participative Budgets – Advantages and disadvantages of budgeting.
Master Budgets :
Functional / Operating Budgets: Sales Forecast – Sales Budget – Production Budget – Purchase Budget – Labour Cost Budget – Marketing and Administrative Cost Budget – Budgeted Income statement.
Financial Budget:
Cash Budget – Budgeted Balance sheet – Capital Expenditure Budget. Budgeted Cash Flow statement.
Special Types of Budgets:
Static Budget – Flexible Budget – Zero Base Budgets – Activity Based Budgeting – Kaizen Budgeting – Program Planning Budgeting System (PPBS).
Costing Systems-Weight - 20%
302.09: Standard Costing System :
General concept of standard costing: Meaning-Advantages of Standard Costing System – types of standards – considerations in establishing standard. Recording under a standard costing system – Partial plan – Modified Partial Plan – Single Plan Dual plan. – Standard cost card.
Standard costing for different elements of production cost:
i)Direct material: Setting standards – Material variances – Quantity Variance – Price Variance and Mix Variance. Variances in Job order and process costing. Recording of variances.
ii)Direct labour: Setting standard – Direct labour variances – Efficiency Variance – Rate Variance and Gang Variance. Variances in Job order & process costing. Recording of variances.
iii)Overhead Variances- Variable overhead variances – Efficiency variance – Spending Variance.
Fixed Overhead Variances: (1) Traditional Variances – Efficiency, Capacity and Spending variances. (2) Recent approach to variance analysis – Static Budget variance – Flexible Budget Variance – volume variance and spending variance-Recording variances.
Disposition of variances: Transfer to Income statement – Allocation variances among cost of goods sold; Inventory of finished goods and Inventory of work-in-process. – Transfer to reserve accounting – Mixed Treatment: Transfer of controllable variance to Income statement – allocation of uncontrollable variances.
302.10 Gross Profit Analysis :
Causes of gross profit change, Gross profit analysis based on previous period, based on budget. Calculation of variances- sales price, volume, cost price, volume, sales mix and final volume variance. Uses of gross profit analysis.
Costing Tools-Weight- 20%
302.11 Activity – Based Costing :
Meaning of ABC – stages and flow of costs in ABC – Cost Drivers classification of activities in manufacturing organizations – customer cost hierarchy – comparison of ABC with traditional product costing – Advantages and disadvantages of ABC – ABC in service organization.
302.12 Miscellaneous Issues:
Target costing – Value Engineering – Kaizen Costing – Life Cycle Costing – Theory of Constraints – Strategic Cost Management: Creating and sustaining a competitive advantage. Value Chain Analysis. Contract Account – IAS # 11. Marketing Cost Analysis – Discretionary Costs Control.
Suggested Text Books:
1. Cost Accounting: A managerial emphasis. 10th Edition - Horngren C. T., G. Foster and S. (Prentice–Hall).
2. Cost Accounting. - Barfield , J. T., C. A. Raiborn and M. R. Kinney, 2001 (South Western.).
3. Cost Accounting: Using on Cost Management concept, 6th Edition - L. G. Rayburn, 1996 (McGraw Hill- Irwrin).
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