Class: MBA

Instructor:

Semester: 3rd
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Counselling With Appointment

Hours:

BA-412: MANAGEMENT ACCOUNTING

COURSE DESCRIPTION
The Course deals with examining Management Accounting as a tool for providing
information for manufacturing, internal reporting, external reporting as well as for
managerial decision making. The broad course objectives are to help students to understand
the central concepts of Cost Accounting, the methods of conducting data analysis preparation
of reports for managerial decision making.
INDENTED LEARNING OUTCOMES
After studying this course students will be able to understand:
1. The importance of Cost Accounting as a first step in the Manufacturing process.
2. Cost Accounting and explain its purpose within an organization.
3. The steps involved in the Accumulation of Total Cost in different departments.
4. Cost Behaviour measurement and impact of cost- Volume relationships.
5. Financial accounting and Cost Accounting.
6. Cost data for the decision making of the higher management.
7. Product costing preparation and process costing analysis.
8. Cost of production and cost of goods sold statements for onward reporting to
financial statements.
9. Capital Budgeting Decisions including investment decisions and cash flow models.
10. Standard Cost, Cost Variances & Revenue variances.
COURSE CONTENT
(SEMESTER 3rd)
1

Week 01

Week 02

Week 03

Cost Accounting Concepts and Objectives.

Management Accounting for Managers
A Management Decision Process
The Management Accountants Role
Management Accounting and Service Organizations
Planning and Control for Product Life Cycles and the Value Chain
The Role of the Accountant in the Organization
Management Accounting and Financial Accounting
Financial Statements: The bases for planning and control
The reporting function financial statements in the annual report.
Evaluating the annual results to orient the outsider
Evaluating the annual results to orient the insider
The flow of costs
Planning and controls models
Operational research: Government and private
Costs: Concepts, Uses and Classification
Cost distinctions important to financial accounting; Product and period
cost, Differential cost and revenue.
Costing terms critical in costing system design
Costing system architecture; statement of cost of goods manufactured
and sold statement
Cost terms used to describe and predict cost behaviour; fixed and
variable cost, mixed cost,
Cost terms needed in manufacturing costing systems
Cost terms used in planning and control
Cost terms used in decision-making; direct and indirect cost,
Opportunity and Sunk cost.

Week 04-05

Week 06-08

Job Order Costing, Process Costing:

Job order costing:
Overview of job order costing
Components of a job costing system
Job order costing steps
Actual and normal overhead rates
Choosing the denominator activity and its level
Analysis of activity level choices for the cost driver
Multiple overhead cost pools and system design
Recording manufacturing overhead
Dealing with over-and under-applied overhead
Highlighting idle capacity costs
Variable manufacturing overhead
The accounting entries underlying job order costing
Spoilage, reworked units and scrap
Process costing:
Process costing systems
Process costing steps: Establishing physical flow and equivalent units
Process costing approaches
Weighted average cost flow assumption
Spoilage
Transferred-in costs
First-in first-out (FIFO) cost flow assumption
Hybrid and operations costing systems
Activity Based Costing (ABC) & Just In time (JIT) Costing Techniques
ABC COSTING
Analyze how activity based costing works and where it can bring the
best results.
Describe the differences between traditional methods of applying
overhead and activity based methods as well as the four critical factors
to consider.
Observe the three critical steps for implementing and using activity
based costing in your organization.
Analyze how to select the most appropriate costs driver to apply activity
based costs pools.
Distinguish the types of activities, including unit, batch, product and
facility costs, their hierarchy and relationship to one another.
JIT COSTING

What is JIT and where can it be useful.

Understanding the process of JIT and how to use it in an organization.
Questions to consider before implementing JIT.
Learning how to develop an Effective JIT.
Advantages or disadvantages of JIT
3

Week 09-10

Week 11

Week 12

Week 13

Planning and Control of Factory Overhead.

Procedure of factory overheads including apportionment.
Blanket rate and department FOH rate.
Applied and actual FOH.
Over/Under applied FOH
Changing overhead rates.
Graphic presentation of FOH.
Departmentalization; Production and service department.
Joint and by product costing.
Joint costs, joint products and by-products
Why allocate joint costs?
Joint cost allocation methods
Physical output method
Sales value at split-off method
Net realizable value method
Constant gross margin percentage method
By-products
Planning and Control of Materials.
Procedure for material procurement and
Use Material costing methods
Inventory valuation at cost or market whichever is lower.
Procedure for spoiled, scrap and defective work .
EOQ ,
Inventory level and reserve stocks
Valuation of inventory
Planning materials requirement & Materials control
Planning and Control of Labour.
Productivity and labour costs
Incentive wage plans
Learning curve theory
Organisation for labour cost accounting and control
Overtime plans,
Bonus payments,
vocation pay guaranteed annual wage plans ,
Labour related deductions

Week 14-15

Week 16

Value Cost and Profit Analysis.

The cost- volume- profit model.
Using the cost-volume-profit unit model.
Sensitivity analysis for CVP.
Developing and using the revenue CVP model.
The CVP chart.
Taxes and the CVP equation.
Using the profit equation for what-if-analysis.
Multi product CVP analysis.
Spread sheets.
Scenario Planning.
Differential Cost Analysis
Differential cost studies
Quantitative techniques in Differential cost analysis.
Other cost concepts.
Project/ Presentations

TEXT BOOKS:
1. Matz Usry latest Edition, Cost Accounting: Planning and Control
th
2. Matz, Hammer Usry (1985) 9 edition Cost Accounting South-western
Publishing Co
3. Garrison H.Ray, Noreen W. Eric (2004)10theditionManagerial Accounting,
Irwin