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Management Accounting

Course Objectives The course aims at developing a deep and comprehensive understanding of cost and managerial concepts and systems and their practical applications.

Course outlines
Cost accounting introduction Elements of cost * materials, labor and Overhead Costing systems * job cost, contract costing Costing methods and techniques * marginal, absorption and standard cost

Course outlines
Decision making * Cost behavior. * CVP analysis. * Times series analysis. * Limiting factor. * Relevant costing. * Decision making under uncertainty * Pricing.

Course outlines
Performance measurement * measurement of productivity * measurement of profitability and quality * monetary and non- monetary measures Budgeting

References and Reading


Horngren. , Foster and Datar (2000) Cost Accounting: A Managerial Emphasis, 10th ed, Prentice. Hall Inc., USA. Horngren, T. (1999) Introduction to Management Accounting, 9th ed, Prentice-Hall Inc. Upper Saddle River, New Jersey. Helm, C. and John G. (1999) Managerial Accounting. 2nd ed., John Wiley and Sons, USA.

References and Reading


ACCA, Management Accounting ACCA, Financial Information for Management.

Management accounting and financial accounting


Management accounting provides information to all levels of management within the organization. The information is designed to assist management in its policy and decision making, planning and control activities

Management accounting and financial accounting


Cost accounting is part of management accounting. It provides the detailed cost and revenue data for the management accountant use. Financial accounting preparing financial statements for the benefits of shareholders and other external interested parties sharing any increase or decrease in wealth of the business.

Level of management information


Strategic (top) Information used for policy making and long term planning; * investment appraisals. * potential markets. * strategic plans.

Level of management information


Tactical (middle) information used for planning of efficient and effective use of resources. * Forecasting and budgeting * purchasing decision * stock allocation * sales analysis * cash flow projections.

Level of management information


Operational (lower) Information used for planning and control of routine tasks; * debtors and creditors * payroll details * customer complaints * meeting schedules.

Cost classification
(1) Functional analysis of cost * manufacturing cost * administrating cost * selling cost * distribution cost * research cost

Cost classification
The use of functional classification * to produce financial statements * for cost unit calculation * for stock valuation * to implement cost control

Cost classification
(2) Direct and Indirect cost, Prime and Overhead. Direct cost: expenditure which can be directly identified and linked with a specific cost unit or cost centre. Indirect cost: expenditure which can not directly identified and linked with a specific cost unit or cost centre.

Cost classification
Prime Cost: is the aggregate of direct materials cost, direct labor cost, and direct expense.

Overhead cost: is the aggregate of indirect materials cost, indirect labor cost, and indirect expense.

Cost classification
(3) Product cost, and period cost. * product cost is the cost included in stock valuation. * period costs are those costs charged in the profit and loss account for the period and excluded from the stock valuation and calculation of gross profit

Cost classification
(4) Fixed cost and variable cost Fixed costs are costs which are not affected in total by the level of activity. Variable costs are costs which change in total in direct proportion to the level of activity. (5) Avoidable and Unavoidable. (6) Controllable and non controllable.

Cost classification
(7) Other analysis of costs * Cost unit: is a unit of product or service in relation to which costs are ascertained. * Cost centre: is a production or service location, function, activity or item of equipment for which costs can be ascertained. Responsible for cost only. * Revenue centre: is a centre devoted to the raising of revenue, with no responsibility for costs.

Cost classification
Profit centre: is a production or service location, function or activity for which costs and revenue can be ascertained, with responsibility for cost and revenue

Total cost of production


direct materials direct labor direct overhead

Prime cost
Production overhead

Production cost
Administration cost Selling cost Total cost

Example
The following information related to the cost of final product for CTC company. SDG Direct material 10 Direct 29 Direct expenses 3 Factory expenses variable 7 fixed 5 Non- manufacturing costs- variable 2 fixed 4 60 Profit is 33% of total cost

Example
Required 1- what is the final selling price 2- what is variable cost 3- what is the total cost 4- what is the prime cost

1- 80 2- 51 3- 60 4-42