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401. Management Accounting-IV (Advanced Management Accounting) |
Course Objectives
As an advanced course on Management Accounting, this course must include all the critical points relating to issues covered in the course Management Accounting. Moreover, this course will cover all other contemporary issues in the area of management accounting i.e. (a) Strategic management accounting and (b) Behavioral accounting. Specific objectives of this course are to
a. review the issues like cost concepts, c-v-p pricing, relevant cost, decentralization performance measurement, capital budgeting-variance analysis included in the management accounting course;
b. discuss c-v-p relationship under uncertainty;
e. explain capital budgeting techniques under uncertainty;
f. discuss behavioral implications of management accounting tools and techniques;
d. describe ABM and ABC;
e. discuss critically divisional performance measures – Financial Measures – Non – financial f.measures – and EVA. And
g. explain various forms of incentives and compensation plans.
401.01 Review of issues coursed in course No. 202 Introduction to Management Accounting
Cost concepts CVP – Pricing-Cost Management Systems-Relevant Cost-Decentralization and Performance Measurement TQM – Variance Analysis – Quantitative Tools.
Capital Budgeting and Variance Analysis-Weight- 20%
401.02 Capital Budgeting under Uncertainty Including some Advanced Issues:
DCF methods: NPV. IRR & MIRR – Capital Rationing – Sensitivity Analysis – Portfolio building – Leasing Versus Buying – Capital Budgeting under uncertainty. Capital Budgeting and Linear Programming. Strategic Management of Capital Budgeting. capital budgeting through decision tree under uncertainty and joint probability.
401.03 Variances – An Expanded Treatment :
Production variances – change of standard variances – controllable & uncontrollable variances – Marketing variances – Variances and New Technology – Variance Reporting. Variance Investigation – why do variance occur? – When to investigate – steps after investigation.
CVP Analysis-Weight-15%
401:04 Extension of CVP Analysis
Cost – volume – profit sensitivity analysis – CVP under conditions of uncertainty, Problems with the Normal Random Variable Model – other ways to deal with uncertainty. Perishable Products.
401:05 Information and Human Behavior
Information and data – Human Information processing – personality dimension and Information use – Form, Order, Format of Information – Effects of power on Information – Eliciting of Information – selling of Information – communication of information.
401.06 Behavioral Accounting
Foundations of Behavioral Accounting – Behavior concepts – Assumptions about human behavior. Behavior Aspects of Management Accounting, Behavioral aspects of Responsibility Accounting – Behavioral aspects of profit planning and Budgeting – Behavioral aspects of controlling-Behavioral aspects of performance evaluation – behavioral interpretation of Decentralization – Behavioral Dimensions of Internal control – capital Budgeting.
401.07 Activity Based Management (ABM) and Activity Based Cost Systems
Activity Based Management – product profitability – pricing – ABC and customer profitability – product substitution – product redesign – Improving processes – Technology investment. Assigning service department costs to activities – Activity cost drivers-Designing optimum systems.
Responsibility and Performance Evaluation -Weight-25%
401:08 Organizational Design, Responsibility Accounting and Performance Evaluation
Centralized and Decentralized organizations Responsibility centers and their accounting under decentralization. Developing performance measures for decentralized operating units – problems of goal congruence – problem of externalities – over consumption of perquisites.
401.09 Measures of Performance
Financial measures – Nature of financial control – control in the aggregate using Financial measures – control using non-financial performance measures – Operations control and Management by exception using variance Analysis.
Organization Control using Profit Measures
Profit margin – controllable contribution – segment margin – divisional profit before tax – transfer pricing (TP) and its methods, Impact of TP on profit. transfer pricing in multinational companies. performance measures of responsibility centers. ROI – Material Yield – Labor yield – Equipment yield. Financial Measures of performance : Return on Investment and Economic value – added i.e. Residual Income.
Strategic Management Accounting-Weight - 25%
401.10 The Balanced Scorecard
Measuring Total Business unit performance: The BSC – Financial perspective – customer perspective – internal business process perspective – Learning and Growth perspective. Four perspectives and their sufficiency.
401.11 Measuring Customer, Internal Business Process and Employee Performance
Customer perspective
Market and Account share – Customer Retention – Customer Acquisition – Customer satisfaction – Customer profitability meeting customer’s expectation, customers profitability analysis.
Internal Business Perspective
Operations and innovation process – Operational Excellence: Time, Quality and cost measurements – Innovation measures.
Employee Capabilities Core Employee Measurement group – strategic Job coverage.
401.12 Investing to Develop Future Capabilities Technology
Need for new technology, Measuring benefits from new process, Investing in organizational capabilities-external integration, internal integration, flexibility, experimentation, cannibalization.
401.13 Incentives and compensation systems
The expectancy view of Behavior – Intrinsic and Extrinsic Reward – Tying Rewards to performance – Important attributes of compensation systems – Rewarding other organization Members.
401.14 Formal Models in Budgeting and Incentive Contracts
Issues and Terms in Formal Incentive Model – Problems of obtaining information for standards and budgets – the Agency model-the role of insurance.
401.15 Competitor Analysis / Competitor accounting
Importance of competitor accounting – Basic steps of competitor analysis Ingredients of competitor analysis – Sources of information of competitor analysis – problems with competitor accounting – the management accountant’s role in competitor analysis.
401.16 Benchmarking Analysis and Management Accounting:
Meaning – Benefits of Benchmarking analysis – Types of benchmarking – Benchmarking process – TQM and Benchmarking – Management accounting for benchmarking.
401.17 Strategic Management of price, cost, Quality, Time and Productivity
The pricing methods, policies and decisions. Accountants’ and economists’ view pricing; Elasticity and pricing, Variable cost and absorption based pricing, – target costing and pricing– continuous Improvement costing – Quality cost – cost of time – importance of Managing time in a competitive environment. Management of process productivity and Efficiency. Just in time Inventory Management – Reducing Incoming Materials Inventory-Reducing work – in process inventory-Reducing Finished goods Inventory. JIT purchasing verses Holding inventories. JIT’s limitation – Manufacturing Resource Planning.
Productivity concept, productive efficiency, partial productivity measurement, total productivity measurement, measuring changes in activity and process efficiency.
401.18 Environmental Management Accounting
Concept of environmental management accounting (EMA), environmental costs, benefits, eco-efficiency, calculation of eco-efficiency, environmental performance, calculation of environmental performance, environmental regulation and management accounting, environmental product costs, unit based, ABC based environmental cost assignment, strategic based environmental responsibility accounting, Life-cycle cost assessment, preparation of environmental financial report, components of environmental report. Capital investment and environmental considerations.
Management Science-Weight- 15%
401.19 Management Science and Decision Making
Linear programming (LP)-graphical and simplex method, application of LP in manufacturing and service organizations, Decision analysis-decision tables and trees, PERT, CPM and other networks, waiting line theory, game theory, simulation technique & dynamic programming.
Text Books :
1. Advanced Management Accounting 3rd Edition – Kaplan, R. S. and A. A. Atkinson. 1998 (Prentice–Hall).
2. Advanced Management Accounting - Hirsch, M. L. 1988 (PWS – KENT Publishing Company).
3. Behavioral Accounting - Siegal, G., and H. R. Marconi – 1989 (South Westerm Publishing Co).
4. Management Accounting: A strategic Approach - Morse, W. J., J. R. Davis, and A. L. Hartgraves, 2003 (Thomson – South – Western).
5.. Cost Management - Hansen, D. R. and M. M. Mowen 2003 (Thomson – south western).
6. Cost Management: Strategic for Management Decisions - Hilton, R. W. , M. W. Maher, and F. H. Selto, 2003.
7. Fundamentals of Management Science, 6th edition - Turban and Meredith, McGraw Hill.
References
1. Managerial Accounting. 10th Edition - Garrison, R.H. and E.W. Noreen. 2003 (McGraw-Hill-Irwin).
2. Cost Accounting : Using a Cost Management Approach. 6th Edition - Rayburn, L. B. 1982 (Irwin-McGraw).
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