SYLLABI – PART C (Professional Programme I)

COST AND MANAGEMENT ACCOUNTING

1. AIM
The aim of this module is to instil the knowledge, key skills and
competencies necessary to act in a Cost and Management Accounting
function.

2. LEARNING OUTCOMES
At the conclusion of this module the candidate will be able to.

 Understand the framework of Cost and Management Accounting.

 Perform cost accounting functions using the various costing methods.
 Advise Management on business decisions based on cost and
management accounting concepts.
 Analyse the cost accounts and use variance analysis to guide decision
making.
 Develop suitable costing systems for the organization.

PRE-REQUISITE LEARNING
Evidence of assessed pre-requisite knowledge and understanding in the
following disciplines must be demonstrated through the Institute’s
examinations, or those of equivalent qualifications which have been
approved as meeting the Institute’s qualifications.

 All of Part A
 Taxation
 Financial Accounting
LEARNING CONTENT

4.1. Distinction between cost accounting, management accounting

and financial accounting.
4.2. Elements of cost
Their nature and classification. Cost centres and cost units.
Relationship between costs and financial accounts. Double entry theory
applied to cost accounting records, interlocking and integral accounts.
1

Classification of materials
Purchasing stores. Basic controls applied to purchasing (including economic
order quantity), pricing of stores issues and inventory valuation, valuation of
work in progress.

Quality and Control

Just In Time Purchasing and Manufacturing
Total Quality Management

Remuneration
Principles of wages control including the learning curve and payroll routine.

Overheads
Analysis and classification of overhead expenses, their apportionment to cost
centres and absorption into cost units. Activity based approaches to Cost
Analysis.

Product costing
Principles applied to job, process and service type industries.
Conversion cost and accounting for material losses
Problems of common cost
Joint products, by products
Activity based costing – use of cost drivers and activities

Budgetary Control
Objectives of budgetary control, evaluation of budget systems
Al types of budgets including:
Fixed and flexible budgets, cash flow budgets, use of variances,
Quantitative aids to budgeting, use of computer based models,
Behavioural implications of budgeting and budgetary control.

Marginal costing
Theory and practice. Contribution concept.
Break even analysis. Profit/volume ratios. Margin of safety. Profit graphs.
Relevant costs, limiting factors, including problems requiring elementary
linear programming solutions, decisions about alternatives, such as make or
buy, and shutdown.

Standard costing
Types of standards – (basic, normal, current, expected and ideal standards)

Setting standards, Variance analysis, two, three and four variance analysis,
treatment and utilization of variances.
Significance and relevance of variances, planning and operational variances.
Behavioural of implications.
Patterns of cost behaviour
Influence of volume of activity
The preparation of profit reconciliation statements using either standard
marginal costing or absorption costing principles.

Divisional Performance Evaluation

Functional and divisionalised organizational structure
Profit centres and investment centres
Advantages and disadvantages of divisionalization
Return on Investment
Residual Income
Transfer pricing in divisionalized companies – transfer pricing manipulation
and tax havens.

Decision Theory
Decision making under:- Risk, uncertainty, centainty
Probability distributions and expected value
Network Analysis / Critical Path Method (CPM)
Project Evaluation and Review Techniques (PERT)
Cost reduction schemes
Back flush accounting
Through put Accounting
Decision Tree Analysis
Use of cost information for pricing decisions under conditions of uncertainty
3

4.3. Quantitative Techniques in Management Accounting

(Statistical replacement methods i.e. vehicle replacements, other
replacements, inventory control
models, transportation models).
Presentation of Information to Management
Operating statements, variance reports, ratios, inter-firm and inter-divisional
or departmental comparisons using such methods as tables and graphs.
* In addition, candidates will be expected to make comments concerning
the non-quantitative aspects of the decision being made. Candidates
may also be required to use knowledge gained in other subjects of the
course.

NOTE:
Candidates may make use of hand-held, self-powered, silent, non-
programmable calculators but
intermediate working steps must be shown

ASSESSMENT SCHEME
Three hour examination paper

RECOMMENDED READING

Lucey T (2004) Costing 6th Bookpower London

Edition
Drury C (2004) Management and Thompson London
Cost Learning
Accounting
(6th Edition)