The objective of this course is to familiarize students with basic costing concepts and tools used in cost accounting
Course Outcome (COs):
Course |
Learning outcome (at course level) |
Learning and teaching strategies |
Assessment Strategies |
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Paper Code |
Paper Title |
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AAF 112 |
Cost Accounting |
Upon successful completion of this course, the student will be able to:
CO 6: Devise the basic concepts and processes used to determine product costs. CO 7: Formulate methods to interpret cost accounting statements. CO 8: Evaluate the concept of relevant and irrelevant costs and make decisions related to product and production using marginal costing and differential costing techniques. CO 9: Analyze and evaluate the information for cost ascertainment, planning, control, and decision making. CO 10: Outline different types of activity-based management tools through the preparation of estimates. |
Approach in teaching: Interactive Lectures, Discussion, Tutorials, assignments.
Learning activities for the students: Self-learning assignments, Effective questions, Giving tasks, Solving numerical problems
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Class test, Semester end examinations, Quiz, Solving problems in tutorials, Assignments, Individual projects |
Cost classification
Production and nonproduction costs. Elements of non production costs- administrative, selling, distribution and finance. Elements of production cost- materials, labour and overheads. Importance of the distinction between production and non production costs when valuing output and inventories. Classification of cost- direct and indirect, fixed and variable, stepped fixed and semi variable costs. Graphical presentation of types of cost behavior Use high/low analysis to separate the fixed and variable elements of total costs Structure of linear functions and equations. Concept of cost objects, cost units and cost centres. Distinguish between cost, profit, investment and revenue centres. Needs for information of cost, profit, investment and revenue centre.
Accounting for materials- Procedures for the ordering, receiving and issuing of materials. Control procedures to minimise discrepancies and losses of material. Material inventory account Identify, explain and calculate the costs of ordering and holding inventory (including buffer inventory) Optimal reorder quantities (including discounts) Calculations to minimize inventory costs when inventory is gradually replenishes Reorder levels Valuation of closing inventory and material issues using LIFO, FIFO and average methods.
Accounting for Labour- Direct and Indirect Labour cost journal and ledger entries to record labour cost inputs outputs, remuneration methods- individual plans and group incentive schemes Cost and causes of labour turnover, calculation of labour efficiency, capacity and production volume ratios.
Accounting for overheads-
Treatment of direct and indirect expenses, production overhead absorption rates Allocation, apportionment and absorption of production overheads. Under and over absorption of overheads
Process costing-
Characteristics, concept, use of process costing Normal and abnormal losses and abnormal gains Calculate the cost per unit of process outputs, process accounts involving normal and abnormal losses and abnormal gains Concept of equivalent units Prepare process accounts in different situations where work remains incomplete. Distinguish between by-products and joint products. Value by-products and joint products at the point of separation Absorption and marginal costing Importance and concept of contribution Calculate and reconcile profit or loss under absorption and marginal costing Advantages and disadvantages of absorption and marginal costing
Cost accounting methods
Job and batch costing: Meaning, concept, characteristics and use of job and batch costing Alternative Cost Accounting principles Activity based costing (ABC), target costing, life cycle costing and total quality management (TQM) Differentiate ABC, Target costing and life cycle costing from the traditional costing techniques Service/operation costing- Use of service/operation costing is appropriate. Carry out service cost analysis in simple service industry situations
Note- The candidate shall be permitted to use battery operated pocket calculator that should not have more than 12 digits, 6 functions and 2 memories and should be noiseless and cordless.