Management Accounting

Learning Outcomes

1.Cost concepts and cost allocation

1.Understand cost classifications used

    • for assigning cost to cost objects
    • to prepare financial statements.
    • to predict cost behaviours.
    • in decision making.

2.Prepare Income statement for manufacturing and service organizations.


2.Costing systems

  1. Describe the basic difference between Job-Order costing and Process costing.
  2. Identify the types of firms that would use Job-Order and Process Costing.
  3. Describe the cost flow associated with each costing system.
  4. Understand how to handle underapplied and overapplied overheads under each costing system.
  5. Apply knowledge of job order costing and process costing to calculate per unit cost.
  6. Prepare process cost report using weighted average and FIFO method.
  7. Demonstrate knowledge of handling normal and abnormal spoilage in process costing.


3.Activity based product costing

  1. Understand Activity Based Costing and its difference from a traditional costing system.
  2. Demonstrate knowledge of assigning cost to cost pools and computing activity rates.
  3. Application of Activity Based Costing to calculate Product and Customer margins.


4.Cost–Volume–Profit Analysis

  1. Explain how changes in activity level affect contribution margin and net operating income.
  2. Define cost-volume-profit analysis and how managers use it as a tool for planning and control.
  3. Define Breakeven point and use contribution margin to determine breakeven point for multiple products.
  4. Use Cost-Volume-profit analysis to estimate profitability of various products and services.


5.Segment reporting, transfer pricing and ROI

  1. Explain difference between absorption and variable costing.
  2. Prepare segmented income statement.
  3. Explain and calculate Residual Income and Economic Value Added.
  4. Demonstrate knowledge of transfer pricing.
  5. Define and calculate Return on Investment.


6.Budgeting for planning and control

  1. Define budget. Discuss its role in planning, decision making and control.
  2. Identify the major components of a master budget.
  3. Demonstrate understanding and apply knowledge to prepare operating budgets.
  4. Understand flexible budgeting and apply knowledge to prepare performance report.
  5. Prepare budgeted Income statement, Balance sheet and a schedule of Cash Budget.


7.Standard costing and variance analysis

  1. Define standard cost and explain how to compute standard cost per unit.
  2. Explain how managers use variance analysis to control costs.
  3. Apply standard cost knowledge to compute Material, Labour and Overhead variances.
  4. Explain how variance analysis is used to evaluate performance of managers.


8.Differential analysis

  1. Identify relevant and irrelevant costs and benefits in tactical decision making.
  2. Apply differential analysis in a variety of business situations, such as:
    1. a product line of business segment should be added or dropped.
    2. make or buy decision.
  3. a special order should be accepted or rejected.
  4. a joint product should be sold at split-off point or processed further.
  5. Perform differential analysis for sales mix decision that involves constrained resources.


9.Capital budgeting

  1. Define capital budgeting decisions.
  2. Demonstrate understanding of measured used in capital investment decisions.
  3. Evaluate capital investment proposals using Payback period, Internal rate return, Net present value and Profitability Index.
  4. Apply knowledge to rank investment projects in order of preference.


10.Target costing and pricing decisions

  1. Define why managers use various pricing approaches.
  2. Define the concept of economic pricing and explain total revenue and total cost curves.
  3. Demonstrate knowledge of cost-based pricing techniques.
  4. Understand pricing based on target costing.

11. Financial statement analysis

  1. Describe what analytical tools are available to measure financial performance.
  2. Demonstrate thorough understanding of horizontal and vertical analysis, trend and ratio analysis.