402 Strategic Management Accounting

ICMAB

402 Strategic Management Accounting ¾ 100

Course Objectives: To provide the students with an in-depth knowledge of management accounting to  make them competent to prepare and analyses accounting data, apply it to a range of planing, control and decision-making situations and adopt it to accommodate changes. On completion of this course they will be able to:

a. apply management accounting techniques in planning, control and decision-making situations.

b. apply and evaluate alternative methods of investment appraisal.

c. apply and evaluate techniques for allocating and managing resources.

d. discuss and evaluate performance of strategic management accounting decisions.

e. apply quantitative models for management planning and control.

 

402.01 Capital Budgeting

Capital Budgeting-An Investment Concept; Capital Budgeting Process; Cash Flow Estimation; Capital Budgeting Evaluation Methods: Discounted Cash Flow Methods and Non-discounted Cash Flow Methods; The Ranking of Investment Projects; Post-investment Audit.

 

402.02 Advanced Capital Budgeting Topics

The Effect of Depreciation on After-Tax Cash Flow; Sensitivity Analysis for Capital Budgeting Decisions Under Uncertainty; Inflation in the Capital Budgeting Process; Ranking Multiple Capital Projects; Ranking Projects Under Capital Rationing; Capital Budgeting in the Contemporary Manufacturing Environment; Strategic Cost Management and Capital Budgeting; Behavioral Issues in Capital Budgeting.

 

402.03 Responsibility Accounting and Transfer Pricing in Decentralized Organization

i.          Decentralization; Advantages and Disadvantages of Decentralization; Responsibility Accounting System; Types of Responsibility Centres; Traditional vs. Contemporary Responsibility Accounting; Limitations of Traditional Responsibility Accounting: Activity Based Management.

ii.         Transfer Pricing: Transfer Price; Objectives of Transfer Price; Transfer Pricing Methods: Cost-Based Transfer Prices, Market-Based Transfer Prices, Negotiated Transfer prices, Dual Transfer Pricing; Choosing the Right Transfer Pricing Method; Transfer price for Service Departmens; Multinational Transfer pricing; Behavioral Implications of Transfer Pricing.

 

402.04 Measuring Organizational Performance

Traditional Financial performance Measures: Divisional Profits, Cash Flow, Return on Investment, Residual Income; Limitations of Traditional Methods for Evaluating Segment performance; Non-financial Performance Measures; Throughput as a Non-financial performance Measure; Activity-Based Costing and performance Evaluation; Performance Evaluation in Multinational Selling. 

 

402.05 Total Quality Management

Definition of Quality; TQM Implementation Guidelines; Types of Conformance; Costs of Quality-Types of Quality Cost(QC), Distribution of  QC, Reporting Quality Costs; TQM in Service Organizations; TQM and Management Accountants.

 

402.06 Managing Productivity

Definition Productivity; Measuring Productivity: Partial and Total; Measuring Changes in Activity Efficiency: Activity Productivity Analysis, process productivity Analysis; Quality and Productivity.

 

402.07 Inventory Management and JIT

Pull-System, Setup and carrying costs, The JIT Approach, Due-date Performance, The JIT Solution, Avoidance of Shutdown and Process Reliability-The JIT Approach; Discounts and Price Increases, JIT Purchasing Versus Holding Inventories; JIT’s Limitations Manufacturing Resource Planning (MRP-II).

 

402.08 Quantitative Models for Planning and Control

Linear Programming - Effects of Constraints, Linear Programming Requirements, Optimal Solution under LP using Graph and simplex, Critical Path Method; Network Models: PERT; PERT-Cost Analysis; Queuing theory; Decision Tree Analysis; Discounted Expected Value of Decision, Game theory and investment analysis, Transportation model, shadow price and sensitivity analysis.

 

402.09 Management Control

Definition of Management Control; Objectives of Management Control; Operational Control vs. Management Control; Design of Management Control Systems: Informal Systems and Formal Systems; Open and closed Loop Control System, Feedback: Positive and Negative Feedback; Behavioral Aspects of the Control process.

 

402.10 The Balanced Scorecard, Benchmarking, EMA and Six Sigma  

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. 

 

Benchmarking: Meaning – Benefits of Benchmarking analysis – Types of benchmarking – Benchmarking process – TQM and Benchmarking – Management accounting for benchmarking.

 

Environmental Management Accounting (EMA) – Six Sigma.

 

402.11 Strategic risk, Operational risk, Reporting risk and Compliance risk

 

Definition and distinguishing among strategic risk, operational risk, reporting risk, and compliance risk for a given organization.

The external risks related to the organization's strategic objectives, the impact of those risks, and the necessity for risk management.

 

Potential shifts in the external environment and implications of such shifts for a given organization's exposure to risk.

An appropriate risk response strategy, including procedures for managing risk, for a given organization.

Reporting mechanisms for compliance and risk issues (e.g. risk reporting, whistle blowing) within the context of a given organization.

 

Methods of measuring organizational performance in relation to internal operational goals set by the planning and budgeting function.

 

Best practices and emerging issues in performance measurement in a given industry (e.g. strategy mapping, target setting, performance-based budgeting).

Texts Books

1. Advanced Management Accounting 3rd Edition – Kaplan, R. S. and A. A. Atkinson. 1998 (Prentice–Hall).

2. Cost Management: Strategic for Management Decisions - Hilton, R. W., M. W. Maher, and F. H. Selto, 2003.

3. Cost Accounting, - L. Gayle Rayburn (6th edition)

 

4. Managerial Accounting: R.H. Garrison (10th edition)

5. Management Science  - Turburn & Merdith (6th edition)

Reference Books

1.         Cost Management - Blocher, Chen & Lin (1st edition) - 1999

2.         Cost Management: Hansen and Mowen (4th edition)

3.         Cost Accounting: Barfield, Raiborn and Kinney (3rd edition)

4.         Introduction to Management Accounting – C.T. Horngren (12th edition)

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