Objective
1. To develop an understanding of the basic concepts and applications to establish the cost associated with the production of products and provision of services and apply he same to determine prices.
2. To develop an understanding of cost accounting statements
3. To acquire the ability to apply information for cost ascertainment, planning, control and decision making
Contents
1. Overview of Cost and Management Accounting
i. Introduction to Cost and Management Accounting
a. Objectives and scope of Cost and Management Accounting
b. The users of Cost and Management accounting information and Functions of Management Accounting
c. Role of cost accounting department in an organization and its relation with other departments
d. Installation of costing system
e. Relationship of Cost Accounting, Financial Accounting, Management Accounting and Financial Management
f. Cost terms and concepts
g. Cost reduction and cost control
h. Elements of Costs
i. Cost behavior pattern, Separating the components of fixed, variable, semi-variable and step costs.
j. Methods of costing, techniques of costing
k. Cost Accounting with use of Information technology
ii. Elements of Cost and preparation of Cost Sheets
a. Functional classification and ascertainment of costs
b. Preparation of Cost Sheets for Manufacturing sector and for Service sector.
2. Ascertainment of Costs 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
-Techniques of fixing levels of stocks 0 minimum, maximum, re-order point, safety stock, determination of optimum stock levels
- Determination of Optimum Order Quantity- Economic Order Quantity (EOQ)
- Techniques of Inventory Control - ABC Analysis, Fast, Slow moving and non moving (FSN), High, Medium, Low (HML), Vital, Essential, Desirable (VED), Justin[Time (JIT)- Stock taking and perpetual inventory system, use of control ratios.
d. Inventory Accounting
ii. Employee Cost
a. Attendance and payroll procedures
- Elements of wages - basic pay, Dearness Allowance, Overtime, Bonus, Holiday and leave wages, Allowances and perquisites.
b. Employee cost control
c. Employee Turn over- Methods of calculating employee turn over, causes of employee turn over, effects of employee turn over.
d. Utilisation of Human resource, Direct and Indirect Employee cost, Charging of Employee Cost, Identifying employee hours with work orders or batches or capital jobs.
e. Remuneration Systems and incentive schemes
- Premium Bonus Method (Halsey Plan and Rowan Plan)
iii. Overheads
a. Functional analysis - factory, Administration, Selling, Distribution, Research and Development
b. Behavioural analysis - Fixed, Variable and Semi-Variable
c. Allocation and Apportionment of Overheads using Absorption Method
d. Factory Overheads - Primary and Secondary Distribution
e. Administration Overheads - Method of allocation to cost centres or products
f. Selling & Distribution Overheads - Analysis and absorption of the expenses in products / customers, impact of marketing strategies, cost effectiveness of various methods of sales promotion.
g. Treatment of Research and Development cost in decision making.
iv. Concepts of Activity Based Costing (ABC)
v. 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. Differences between Non-integrated and Integrated Accounting System
d. Reconciliation of profit as per Cost and Financial Accounts (under Non-Integrated Accounting System)
3. 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 costs for a batch, preparation of batch cost sheet, treatment of spoiled and defective work
iv. 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.
b. Determination of Value of work certified, Cost of work not certified, Notional or Estimated profit from a contract.
v. Process / Operation costing
a. Process cost recording, Process loss, Abnormal gains and losses, Equivalent Units of Production, Inter-process profit, Valuation of Work in progress
b. Joint products- Apportionment of Joint Costs, Methods of apportioning joint cost over joint products
c. By-products- Methods of apportioning joint costs over by-products, treatment of By-product cost
v. Costing of Service Sectors
Determination of Costs and prices of services
4. 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 and Fixed Overheads variances
ii. Marginal Costing
a. Basic concepts of Marginal costing, contribution margin, Break-Even Analysis, Break-even and profit volume charts, Contribution to Sales Rati, Margin of Safety, Angle of Incidence, Cost-Volume-Profit Analysis (CVP), Multi product break-even analysis, Consideration of Limiting Factor (Key factor)
b. Determination of Cost of a product / service under marginal costing, determination of cost of finished goods, work-in-progress
c. Comparison of Marginal costing with absorption costing method- Reconciliation of profit under both the methods
d. Short term decision making using the above concepts (basic / fundamental level)
iii. Budget and Budgetary Control
a. Meaning of Budget, Estimates of Budget, Budget Manual, Budget setting process, Preparation of Budgets and monitoring process
b. The use of Budget in planning and control
c. Flexible budget, Preparation of Functional budget for operating and non-operating functions, Cash budget, Master budget
d. Introduction to Principal / Key budget factor, Zero based budgeting (ZBB), Performance Budget, Control ratios and Budget variances.