MANAGEMENT ACCOUNTING 2 (ACCT 321)

Introduction Accounting for Management

1. Describe the purpose and role of cost and management accounting within an organisation. (CK1)
2. Compare and contrast financial accounting with cost and management accounting. (CK1)
3. Outline the management processes of planning, decision making  and control.       (CK1) 
4. Explain the difference between strategic, tactical and operational planning. (CK1)

Accounting for Management (continued)

1. Distinguish between ‘data’ and ‘information.’ (CC1)       
2. Identify and explain the attributes of good information. (CC1)
3. Explain the limitations of management information in providing guidance for managerial decision making.  (CC1)

Sources of data and analysis data

1. Describe sources of information from within and outside the organisation (including government statistics, financial press, professional or trade associations, quotations and price list). (CK1)
2. Explain the uses and limitations of published information/data (including information from the internet). (CK1)    

3. Describe the impact of the general economic environment on costs/revenues. (CK1)
4. Explain sampling techniques (random, systematic, stratified, multistage, cluster and quota). (CK1)

5. Choose an appropriate sampling method in a specific situation. (CK1)

Presenting Information

1. Prepare written reports representing management information in suitable formats according to purpose. (CCIT1)
2. Present information using tables, charts and graphs (bar charts, line graphs, pie charts and scatter graphs). (CCIT1)
3. Interpret information (including tables, charts, graphs) presented in management reports. (CCIT1)

Cost Classification

1. Explain and illustrate production and non-production costs. (CC1)
2. Describe the different elements of non-production costs – administrative, selling, distribution and finance. (CC1)
3. Describe the different elements of production costs – materials, labour and overheads. (CC1)
4. Explain the importance of the distinction between production and non-production costs when valuing output and inventories. (CC1)

Cost Classification (continued)

1. Explain and illustrate with examples classifications used in the analysis of the product/service costs including by function, direct and indirect, fixed and variable, stepped fixed and semi-variable costs.  (CC1)
2. Explain and illustrate the use of codes in categorising transaction. (CC1)
3. Explain and illustrate the concept of cost objects, cost units and cost centres. (CC1)
4. Describe the differing needs for information of cost, profit , investment and revenue centre manager. (CC1)

Cost Classification (continued)

1. Explain and illustrate with examples classifications used in the analysis of the product/service costs, including by function, direct and indirect, fixed and variable, stepped fixed and semi-variable costs. (CC1)
2. Describe and illustrate graphically different types of cost behavior. (CC1)

Cost Classification (continued)

1. Use high-low analysis to separate the fixed and variable elements of total costs, including situations involving semi-variable and stepped fixed costs and changes in the variable cost per unit.  (CC1)
2. Explain the structure of linear functions and equations. (CC1) 

Accounting for Materials

1. Describe the different procedures and documents necessary for the ordering, receiving and issuing of materials from inventory. (CK2)
2. Describe the control procedures used to monitor physical and ‘book’ inventory and to minimise discrepancies and losses. (CK2)
3. Interpret the entries and balances in the material inventory account. (CK2)
4. Identify, explain and calculate the costs of ordering and holding inventory (including buffer inventory). (CK2)
5. Calculate and interpret optimal reorder quantities.(CK2) 
6. Calculate and interpret optimal reorder quantities when discounts apply.   (CK2)

Accounting for Materials (continued)

1. Produce calculations to minimise inventory costs when inventory is gradually replenished. (CK2)
2. Describe and apply appropriate methods for establishing reorder levels where demand in the lead time is constant. (CK2)
3. Calculate the value of closing inventory and material issues using LIFO, FIFO and average methods. (CK2)

Accounting for Labour

1. Calculate direct and indirect costs of labour. (CK2)
2. Explain the methods used to relate input labour costs to work done. (CK2)
3. Prepare the journal and ledger entries to record labour cost inputs and outputs. (CK2)
4. Describe different remuneration methods: time-based systems, piecework systems and individual and group incentive schemes. (CK2)

Accounting for Labour (continued)

1. Calculate the level, and analyse the costs and causes, of labour turnover. (CK2)
2. Explain and calculate labour efficiency, capacity and production volume ratios. (CK2)
3. Interpret the entries in the labour account. (CK2)

Accounting for Overheads

1. Explain the different treatment of direct and indirect expenses. (CK2)
2. Describe the procedures involved in determining production overhead absorption rates. (CK2)
3. Allocate and apportion production overheads to cost centres using an appropriate basis. (CK2)
4. Reapportion service cost centre costs to production cost centres (using reciprocal method where service cost centres work for each other). (CK2)

Accounting for Overheads (continued)

1. Select, apply and discuss appropriate bases for absorption rates. (CK2)
2. Prepare journal and ledger entries for manufacturing overheads  incurred and absorbed. (CK2)
3. Calculate and explain the under and over absorption of overheads. (CK2)

Absorption and Marginal Costing

1. Explain the importance of, and apply, the concept of contribution. (CC2)
2. Demonstrate and discuss the effect of absorption and marginal costing on inventory valuation and profit determination. (CC2)
3. Calculate profit and loss under absorption and marginal costing. (CC2)

Absorption and Marginal Costing (continued)

1. Reconcile the profits or losses calculated under absorption and marginal costing. (CC2)
2. Describe the advantages and disadvantages of absorption and marginal costing. (CC2)

Job, Batch and Service Costing

1. Describe the characteristics of job and batch costing. (CC1)
2. Describe the situations where the use of job or batch costing would be appropriate. (CC1)
3. Prepare cost records and accounts in job and batch costing situations. (CC1)
4. Establish job and batch costs from given information. (CC1)

Job, Batch and Service Costing (continued)

1. Identify situations where the use of service/operation costing is appropriate. (CC1)
2. Illustrate suitable unit cost measures that may be used in different service/operation situations. (CC1)
3. Carry out service cost analysis in simple service industry situations. (CC1)

Process Costing

1. Describe the  characteristics of process costing. (CC1)
2. Describe the situations where the use of process costing would be appropriate. (CC1)
3. Explain the concepts of normal and abnormal losses and abnormal gains. (CC1)
4. Calculate the cost per unit of process outputs. (CC1)
5. Prepare process accounts, involving normal and abnormal losses and abnormal gains. (CC1)
6. Calculate and explain the concept of equivalent units. (CC1)

Process Costing (continued)

1. Apportion process costs between work remaining in process and transfers out of a process using the weighted average and FIFO methods. (CC1)
2. Prepare process accounts in situations where work remains incomplete. (CC1)
3. Prepare process accounts where losses and gains are identified at different stages of the process. (CC1)
4. Distinguish between by-products and joint products. (CC1)
5. Value by-products and joint productions at the point of separation. (CC1)
6. Prepare process accounts in situations where by-products and/or joint products occur. (CC1)

Service and operation costing

1. Identify situations where the use of service/operating costing is appropriate

Service and operation costing (continued)

2. Illustrate suitable unit cost measures that may be used in different service/operation situations
3. Carry out service cost analysis in simple service industry situations

Alternative Costing principles

1. Explain activity based costing (ABC), target costing, life cycle costing and total quality management (TQM) as alternative cost management techniques. (CC1)
2. Differentiate ABC, target costing and life cycle costing from the traditional costing techniques (calculations are not required). (CC1)

Forecasting

1. Explain the advantages and disadvantages of using the high low method to estimate the fixed and variable element of costing. (CC3)

1. Construct scatter diagrams and lines of best fit. (CC3)
2. Analysis of cost data. (CC3)

1. Adjust historical and forecast data for price movements. (CC3)
2. Explain the advantages and disadvantages of linear regression analysis. (CC3)
3. Describe the product life cycle and explain its importance in forecasting. (CC3)
4. Explain the principles of time series analysis (Cyclical, trend, seasonal variation and random elements). (CC3)
5. Explain the purpose of index numbers. (CC3)
6. Calculate simple index numbers for one or more variables. (CC3)

Forecasting (continued)

1. Explain the principles of time series analysis (Cyclical, trend, seasonal variation and random elements). (CC3)
2. Calculate moving averages. (CC3)
3. Calculation of trend, including the use of regression coefficients. (CC3)
4. Use trend and seasonal variation (additive and multiplicative). (CC3)
5. Explain the advantages and disadvantages of time series analysis. (CC3)
6. Explain the purpose of index numbers. (CC3)
7. Calculate simple index numbers for one or more variables. (CC3)

Budgeting

1. Nature and purpose 
   1. Explain why organisations use budgeting. (CC3) 
   2. Describe the planning and control cycle in an organisation. (CC3) 

2. Statistical techniques

1. 1. Explain the role and features of a computer spreadsheet system. (CC3)
   2. Identify applications for computer spreadsheets and their use in cost and management accounting. (CC3)

3. Budget preparation 

1. 1. Explain and illustrate ‘what if’ analysis and scenario planning. (CC3) 

Budgeting

2. Flexible budgets

1. 1. Explain the importance of flexible budgets in control. (CC3)
   2. Explain the disadvantages of fixed budgets in control. (CC3)
   3. Identify situations where fixed or flexible budgetary control would be appropriate. (CC3)
   4. Flex a budget to a given level of volume.(CC3)

6. Budgetary control and reporting

1. 1. Define the concept of responsibility accounting and its significance in control. (CC3) 
   2. Explain the concept of controllable and uncontrollable costs. (CC3)
   3. Prepare control reports suitable for presentation to management. (CC3)

Budgeting

1. Nature and purpose of budgeting
   1. Explain the administrative procedures in the budgeting process. (CC3) 
   2. Describe the stages in the budgeting process (includes relevant data, planning and agreeing draft budgets, and the purpose of forecasts and how they link to budgeting.) (CC3)

Budgeting

1. Budget preparation
   1. Explain the importance of the principal budget factor in constructing the budget. (CC3)
   2. Prepare sales budgets. (CC3)
   3. Prepare functional budgets (production, raw materials usage and purchases, labour, variable and fixed overheads.) (CC3)
   4. Prepare cash budgets. (CC3)
   5. Prepare master budgets (statement of profit or loss and statement of financial position). (CC3)

Budgeting

1. Behavioural aspects of budgeting
   1. Explain the importance of motivation in performance management. (CC3)
   2. Identify factors in a budgetary planning and control system that influence motivation. (CC3)
   3. Discuss managerial incentive schemes. (CC4)

Budgeting

1. Behavioural aspects of budgeting
   1. Discuss the advantages and disadvantages of a participative approach to budgeting. (CC3)
   2. Explain top down, bottom up approaches to budgeting. (CC3)

Capital Budgeting

1. Discuss the importance of capital investment planning and control. (CC3)
2. Define and distinguish between capital and revenue expenditure. (CC3)
3. Outline the issues to consider and the steps involved in the preparation of a capital expenditure budget. (CC3)

Capital Budgeting

1. Explain and illustrate the difference between simple and compound interest, and between nominal and effective interest rates. (CC3)
2. Explain and illustrate compounding and discounting. (CC3)
3. Explain the distinction between cash flow and profit and the relevance of cash flow to capital investment appraisal. (CC3)
4. Identify and evaluate relevant cash flows for individual investment decision. (CC3)
5. Explain and illustrate the net present value (NPV) and internal rate of return (IRR) methods of discounted cash flow. (CC5)

Capital Budgeting (continued)

1. Calculate present value using annuity and perpetuity formulate. (CC3)
2. Calculate NPV, IRR and payback (discounted and non discounted) (CC4)
3. Interpret the results of NPV, IRR and payback calculates of investment viability. (CC5)

Standard Costing

1. Explain the purpose and principles of standard costing. (CC4)
2. Explain and illustrate the difference between standard, marginal and absorption costing. (CC4)
3. Establish the standard cost per unit under absorption and marginal costing.(CC4)

Standard Costing

1.  Variance Calculations and analysis
   1. Calculate materials total, price and usage variance. (CC4)
   2. Calculate labour total, rate and efficiency variance. (CC4)
   3. Calculate variance overhead total, expenditure and efficiency. (CC4)
   4. Calculate fixed overhead total, expenditure and, where appropriate, volume, capacity and efficiency variances. (CC4)
   5. Interprete the variances. (CC4)
   6. Explain factors to consider before investigating variance, explain possible causes of the variances and recommend control action. (CC4)
   7. Explain the interrelationships between the variances. (CC4)

Standard Costing

1. Budgetary control and reporting
   1. Calculate sample variances between flexed budget, fixed budget and actual sales, costs and profits. (CC4)
   2. Discuss the relative significance of variance. (CC4)
   3. Explain potential action to eliminate variances. (CC4)

Standard Costing

1. Budgetary control and reporting
   1. Explain potential action to eliminate variances. (CC4)
2. Variance calculations and analysis
   1. Calculate sales price and volume variance. (CC4)
   2. Calculate actual or standard figures where the variances are given. (CC4)
   3. Reconciliation of budgeted profit with actual profit

1. 1. Reconcile budget profit with actual profit under standard absorption costing. (CC4)
   2. Reconcile budgeted profit or contribution with actual profit or contribution under standard marginal costing. (CC4)

Performance Measurement 1.Performance measurement overview

1. Discuss the purpose of mission statements and their role in performance measurement. (CK2)
2. Discuss the purpose of strategic and operational and tactical objectives and their role in performance measurement. (CK2)
3. Discuss the impact of economic and market conditions on performance measurement. (CK2)
4. Explain the impact of government regulation on performance measurement. (CK2)

Performance Measurement

1. Performance measurement – application

1. Discuss critical success factors and key performance indicators and their link to objectives and mission statements. (CK2)
2. Establish critical success factors and key performance indicators in a specific situation. (CK2)

2. Monitoring performance and reporting

1. Discuss the relationship between short-term and long-term performance.(CK2) 
2. Discuss the role of benchmarking in performance measurement. (CK2)

1. Performance measurement-application

1. Discuss and calculate measures if financial performance (profitability, liquidity, activity and gearing) and non-financial measures. (CK2)
2. Profitability
   1. Calculate return on investment and residual income. (CK2)
   2. Explain the advantages and limitations of return on investment and residual income. (CK2)

1. Cost reductions and value enhancement

1. Compare cost control and cost reduction. (CK2)
2. Describe and evaluate cost reduction methods. (CK2)
3. Describe and evaluate value analysis. (CK2)

2. Monitoring performance and reporting

1. Discuss measures that may be used to assess managerial performance and the practical problems involved. (CK2)

Performance Measurement

1. Performance measurement – overview

1. Explain the impact of government regulation on performance measurement. (CK2)

2. Performance measurement – application

1. Perspectives of the balance score card
   1. Discuss the advantages and limitations of the balanced scorecard. (CK2)
   2. Describe performance indicator for financial success., customer satisfaction, process efficiency  and growth. (CK2)
2.  Economy, efficiency and effectiveness
   1. Explain the concepts of economy, efficiency and effectiveness. (CK2)
   2. Describe performance indicators for economy, efficiency and effectiveness. (CK2)
   3. Establish performance indicators for economy, efficiency and effectiveness in a special situation. (CK2)
   4. Discuss the meaning of each of the efficiency, capacity and activity ratios. (CK2)
   5. Calculate the efficiency, capacity and activity ratios in a specific situation. (CK2)

Performance Measurement

1. Performance measurement – application
   1. Unit costs
      1. Describe performance measures which would be suitable in contract and process costing environments. (CK2)
   2.  Resource utilisation
      1. Describe measures of performance   utilisation in service and manufacturing environments. (CK2)
      2. Establish measures of resource utilisation in a specific situation. (CK2)
   3.   Quality of Service

1. Distinguish performance measurement issues in service and manufacturing environments. (CK2)
2. Describe performance measures appropriate for service industries. (CK2)

1. Monitoring  performance and reporting

1. Discuss the importance of non-financial performance measures. (CK2)
2. Discuss the relationship between short term and long term performance. (CK2)
3. Discuss the measurement of performance in non profit seeking and public sector organizations.(CK2)

Spreadsheets

1. Explain the role, features and uses of a spreadsheet package

Spreadsheets

1. Identify applications for computer spreadsheets and their use in cost management

Guest Lecture

1. Budgeted planning
2. Financial and nonfinancial performance measurement