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Management Accounting
Course Objectives
The course aims at developing
a deep and comprehensiveunderstanding of cost and
managerial concepts and systems
and their practical applications.
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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
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Course outlines
Decision making
* Cost behavior.
* CVP analysis.
* Times series analysis.
* Limiting factor.
* Relevant costing.
* Decision making under uncertainty
* Pricing.
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Course outlines
Performance measurement
* measurement of productivity
* measurement of profitability and quality* monetary and non-
monetary measures
Budgeting
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References and Reading
Horngren. , Foster and Datar (2000) CostAccounting: A Managerial
Emphasis, 10th ed,Prentice. Hall Inc., USA.
Horngren, T. (1999) Introduction toManagement Accounting, 9th
ed, Prentice-HallInc. Upper Saddle River, New Jersey.
Helm, C. and John G. (1999) ManagerialAccounting. 2nd ed., John
Wiley and Sons,USA.
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References and Reading
ACCA, Management Accounting
ACCA, Financial Information forManagement.
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Management accounting and
financial accounting
Management accounting
provides information to all levels ofmanagement within the
organization. Theinformation is designed to assistmanagement in its
policy and decisionmaking, planning and control activities
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Management accounting and
financial accounting
Cost accountingis part of managementaccounting. It provides the
detailed cost andrevenue data for the management accountant
use. Financial accounting
preparing financial statements for the benefits ofshareholders
and other external interestedparties sharing any increase or
decrease inwealth of the business.
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Level of management information
Strategic (top)
Information used for policy making andlong term planning;
* investment appraisals.
* potential markets.
* strategic plans.
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Level of management information
Tactical (middle)
information used for planning of efficientand effective use of
resources.
* Forecasting and budgeting
* purchasing decision
* stock allocation
* sales analysis
* cash flow projections.
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Level of management information
Operational (lower)
Information used for planning and controlof routine tasks;
* debtors and creditors
* payroll details
* customer complaints* meeting schedules.
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Cost classification
(1) Functional analysis of cost* manufacturing cost
* administrating cost
* selling cost
* distribution cost
* research cost
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Cost classification
The use of functional classification
* to produce financial statements
* for cost unit calculation* for stock valuation
* to implement cost control
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Cost classification
(2) Direct and Indirect cost, Prime andOverhead.
Direct cost: expenditure which can bedirectly identified and
linked with a specificcost unit or cost centre.
Indirect cost: expenditure which can notdirectly identified and
linked with a specificcost unit or cost centre.
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Cost classification
Prime Cost: is the aggregate of directmaterials cost, direct
labor cost, and directexpense.
Overhead cost: is the aggregate of indirectmaterials cost,
indirect labor cost, and
indirect expense.
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Cost classification
(3) Product cost, and period cost.
* product cost is the cost included in stockvaluation.
* period costs are those costs charged inthe profit and loss
account for the periodand excluded from the stock valuation
andcalculation of gross profit
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Cost classification
(4) Fixed cost and variable cost
Fixed costs are costs which are notaffected in total by the
level of activity.
Variable costs are costs which change intotal in direct
proportion to the level ofactivity.
(5) Avoidable and Unavoidable.
(6) Controllable and non controllable.
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Cost classification
(7) Other analysis of costs
* Cost unit: is a unit of product or service in relationto which
costs are ascertained.
* Cost centre: is a production or service location,function,
activity or item of equipment for whichcosts can be ascertained.
Responsible for costonly.
* Revenue centre: is a centre devoted to theraising of revenue,
with no responsibility forcosts.
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Cost classification
Profit centre: is a production or servicelocation, function or
activity for which costsand revenue can be ascertained, with
responsibility for cost and revenue
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Total cost of production
direct materials
direct labor
direct overhead
Prime cost Production overhead
Production cost
Administration cost
Selling cost
Total cost
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Example
The following information related to the cost of finalproduct
for CTC company.
SDGDirect material 10
Direct 29Direct expenses 3Factory expenses variable 7
fixed 5Non- manufacturing costs- variable 2
fixed 460
Profit is 33% of total cost
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Example
Required
1- what is the final selling price
2- what is variable cost3- what is the total cost
4- what is the prime cost
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1- 80
2- 51
3- 604-42
