Cost and Management Accounting

Introduction to Cost and Management Accounting

Objectives and Scope, The users of Cost and MIS, Role of cost accounting department,  Installation of Costing System, Relationship of Cost Accounting, Financial Accounting, Management Accounting and Financial Management.

Cost terms and Concepts, Cost Reduction and Cost Control, Elements of Costs.

Methods and techniques of Costing.

Cost Accounting with use of Information Technology.

Elements of Cost and preparation of Cost Sheets

a) Functional classification and ascertainment of cost

b) Preparation of Cost Sheets for Manufacturing and Service sector

Ascertainment of Cost and Cost Accounting System

(i) Material Cost

a) Procurement procedures- Store procedures and documentation in respect of receipts and issue of stock, Stock verification,

b) Valuation of material receipts,

c) Inventory control- minimum, maximum, re-order point, safety stock, determination of optimum stock level, Determination of EOQ, Techniques of Inventory control- ABC Analysis, VED, JIT- Stock taking and perpetual inventory system, use of control ratios,

d) Inventory Accounting

e) Consumption

(ii) Employee Cost

a) Attendance and Payroll procedures, Employee Cost Control , Employee Turnover

b) Utilization of Human Resource, Direct and indirect employee Cost, charging of employee cost, Identifying employee hours with work orders or batches or capital jobs.

c) Remuneration systems and incentive schemes- Time Rate System, Piece Rate System, Differential piece rate system, Calculation of wages, Effective Wages.

 (iii) Direct Expenses

Direct expenses, Nature of Direct or Chargeable expenses, Sub-contracting.

(iv) Overheads

a) Functional and Behavioral analysis

c) Allocation and Apportionment of overheads using Absorption Costing Method.

d) Factory Overheads, Administration Overheads, Selling & Distribution Overheads

g) Treatment of Research and development cost in cost accounting.

 (v) Concepts of Activity Based Costing (ABC)

(vi) Recording and Accounting of Costs

a) Non-integrated Cost Accounting system- Ledger under non-integral system

b) Integrated (Cost and Financial) Accounting system- Ledgers under integral system.

c) Difference between the Non- integrated and Integrated Accounting system.

d) Reconciliation of profit as per Cost and Financial Accounts (under Non-Integrated Accounting System).

Methods of Costing

(i) Single Output/ Unit Costing

(ii) Job Costing: Job cost cards and databases, collecting direct costs of each job, attributing overheads to jobs, Application of job costing.

(iii) Batch Costing: Determination of optimum batch quantity, Ascertainment of cost for a batch, Preparation of batch cost sheet, Treatment of spoiled and defective work.

(iv) Process/ Operation Costing

a) Process cost recording, Process loss, Abnormal gains and losses, Equivalent units of production, Inter-process profit, Valuation of work in process.

b) Joint Products and By-Products

(v) Costing of Service Sectors

a) Determination of Costs and Prices of: Transport, Toll roads, Hospitals, Canteen/ Restaurants, Hotels/ Lodges, Educational Institutions, Financial Institutions/ Banks, Insurance, IT sector and other services.

(vi)Contract Costing

a) Ascertainment of cost of a contract, Progress payment, Retention money, Escalation clause, Cost plus contract, Value of work certified, Cost of Work not certified.

Cost Control and Analysis

(i) Standard Costing

a) Setting up of Standards, Types of Standards, Standard Costing as method of performance measurement.

b) Calculation and Reconciliation of Cost Variances- Material Cost Variance, employee Cost Variance, Variable Overheads Variance and Fixed Overhead Variance.

 (ii) Marginal Costing

a) Basic concepts, Contribution margin, Break-even analysis, Break –even and profit volume charts, Contribution to sales ratio, Margin of Safety, Angle of Incidence, CVP, Multi- product break- even analysis, Consideration of Limiting factor (key factor),

b) Determination of Cost of a product/ service under marginal costing method, determination of cost of finished goods, WIP,

c) Comparison of Marginal costing with absorption costing method- Reconciliation of profit under the both methods,

d) Short term decision.

(iii) Budget and Budgetary Control

a) Meaning of Budget, Essentials of Budget, Budget Manual, and Budget setting process, Preparation of Budget and monitoring procedures, use of budget in planning and control

b) Flexible budget, Preparation of Functional budget for operating and non- operating functions, Cash budget, Master budget,

c) Introduction to Principal/ Key budget factor, ZBB, Performance budget, Control ratios and Budget variances.