KSh 550.00
Description
MANAGEMENT ACCOUNTING
GENERAL OBJECTIVE
This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable
him/her to apply management accounting principles and concepts in business
LEARNING OUTCOMES
A candidate who passes this paper should be able to:
– Estimate the cost of goods and services
– Analyse product costs for manufacturing and non-manufacturing activities
– Prepare marginal and absorption cost statements
– Analyse an organisation’s activities through budgetary control process
– Analyse variances for decision making
– Use computers in cost management
CONTENT
1. Nature and purpose of cost and management accounting
– The nature of cost accounting and costing terms
– The role of cost accounting in management
– The purposes of cost accounting information
– Scope of cost accounting
– Meaning of management accounting, scope, limitations, applications
– Relationship between cost, financial and management accounting
– Selection of an ideal cost accounting system
2. Cost classification
– Definition and purpose of cost classification
– Methods of cost classification: By nature/elements of manufacturing costs; Functional
classification; Behavioral classification; Controllability; Time; Financial accounting;
Identification with inventory; For decision making
3. Cost estimation
– Meaning of cost estimation
– Methods of estimating cost; non-mathematical methods like engineering method, accounts
analysis method and high-Iow method; mathematical methods like scatter graph method, OLS
regression method (simple linear regression only)
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4. Cost accumulation
– Accounting for materials and inventory; material cost records, purchasing procedures, receipt
and issues of material, methods of valuing material issues, inventory control procedures;
economic order quantity (EOQ) and economic batch quantity(EBQ) models and back flush
– Accounting for labour: Methods of labour remuneration, labour control procedures,
maintenance of labour records
– Accounting for overheads: Types of overheads, manufacturing, distribution and
administration, service departmental cost allocation and apportionment, overheads analysis,
overhead absorption rates, over or under absorption
– Activity based costing
5. Cost bookkeeping
– The flow of costs in a business enterprise
– Cost bookkeeping- interlocking and integrated ledger systems
6. Costing methods
– Job order costing
– Batch costing
– Process costing (including work in progress; joint and by-products)
– Service costing
– Unit costing
7. Marginal and absorption costing.
– Distinction between marginal and absorption costing
– Valuation of products under marginal and absorption costing
– Preparation of marginal and absorption statements; cost of production and profit
determination
– Applications of marginal costing: Break-even analysis and charts (single product)
– Simplified decision problems; accept or reject, special order, dropping a product, make or buy
– Operating statements
8. Budgeting and budgetary control
– Nature and purposes of budgets
– Preparation of budgets; master budgets, functional (department budgets, cash budgets),
proforma financial reports (income statements and balance sheets)
– Purpose of budgetary control; operation of a budgetary control system, organisation and
coordination of the budgeting function
– Distinction between budgeting and budgetary control in the private and public sectors
9. Standard costing
– Types of standards
– Principles of setting standards
– Standard cost card
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– Behavioural aspects of standard costing
– Generation of standard cost information
– Materials, labour and overheads variances; price and efficiency variances
10. Cost management
– Value chain-research and development-design-production-marketing distribution and
customer care
– Just in time (JIT)
– Use of computers in costing; job costing, inventory management, labour costing, cost entre
analysis, coding, budgeting and decision making
11. Overview of Performance Measurement
– Purpose of performance measurements
– Financial performance measures: profitability, liquidity, activity and gearing
– Non-financial performance measures. The balanced score card perspective
12. Emerging issues and trends
