THE OPEN UNIVERSITY OF TANZANIA
FACULTY OF BUSINESS MANAGEMENT
DEPARTMENT OF ACCOUNTING AND FINANCE
OAF 221: MANAGEMENT AND COST ACCOUNTING
MODULE AIMS
•
•
•
To enable students to have a thorough understanding of cost concepts, cost accumulation
Techniques and the different uses of the costing information for decision making.
To prepare students to examine and demonstrate, the role of management accounting in
provision and interpretation of information required by managers for decision making,
planning and control
To provide students with an exposure of the interrelationships between cost accounting,
management accounting and financial accounting
MODULE CONTENT
Lecture 1: Introduction to Cost Accounting:
Objectives:
At the end of this lecture you will be able to
Explain :- Cost terms, cost Concepts and purposes of costs
(i)
(ii)
Describe the relationship among cost accounting, management accounting and
financial accounting
Explain the nature of cost accounting and management accounting
(iii)
(iv)
Explain the role of Cost Accounting in business decisions
Content
• Cost terms, cost concepts, cost purposes
• Cost accounting, management accounting and financial accounting Relationships
• The nature of cost accounting and management accounting
• The role of cost accounting in business decisions
Lecture 2: Classification of costs
Objectives:
At the end of this lecture you will be able to
(i) Classify costs
(ii) Explain situations where cost is an asset or expense
(iii) Describe cost estimation methods
1
Content:
•
•
•
Classification of costs
Cost as an asset or expense
Cost estimation methods
Lecture 3: Costing for the Elements of Costs and flow of cost through accounts
Objectives:
At the end of this lecture you will be able to
(i) Explain costing for the elements of costs
(ii) Describe the flow of costs through accounts
(iii) Prepare the schedule of cost of goods manufactured
Content
• Costing for the elements of costs
• Flow of costs through Accounts
• Schedule of cost of goods manufactured
Lecture 4: Costing for production Overheads.
Objectives
At the end of this lecture you will be able to
(i) Describe the process of costing for overheads and their problems
(ii) Apportion and allocate overheads
(iii) Treat under and over recovery of overheads
Content
• Costing for overheads and their problems
• Apportionment and Allocation of overheads
• Treatment of Under and over recovery of overheads
Lecture 5: Cost accumulation: Job order/Batch costing
Objectives
At the end of this lecture you will be able to
(i) Describe features of Job/Batch costing
(ii) Explain accounting methods used to collect and report costs.
(iii) Demonstrate ability to accumulate costs by using Job-order cost accounting
Content
•
•
Features of Job/Batch costing system
Accounting methods used to collect and report costs
2
•
Job-order cost accounting, treatments and reporting
Lecture 6: Cost accumulation: Contract costing
Objectives
At the end of this lecture you will be able to
(i) Describe features of contract costing
(ii) Explain accounting methods used to collect and report costs.
(iii) Demonstrate ability to accumulate costs by using contract cost accounting
Content
•
•
•
Features of Contract costing system
Accounting methods used to collect and report costs
Contract cost accounting, treatments and reporting
Lecture 7: Process costing
Objectives
At the end of this lecture you will be able to
(i) Explain the features of process costing
(ii) Explain accounting methods used to collect and report costs
(iii) Describe transfers in Process Costing
(iv) Describe the flow of costs in a process costing system
(v) Explain the concepts of Opening and closing Work in process
(vi) Explain special features of equivalent units of production
(vii) Explain treatments of material losses in manufacturing industries
Describe valuation of stock using Weighted Average and FIFO Methods
(viii)
accounting methods used to collect and report costs
Content
•
•
•
•
•
•
•
•
Features of process costing
Accounting methods used to collect and report costs
Transfers in Process Costing
The flow of costs in a process costing system
Opening and closing Work in process
Equivalent units of production
Material losses in manufacturing industries
Stock Valuation methods
3
Lecture 8: Costing for joint products and By-products
Objectives
At the end of this lecture you will be able to
(i) Describe joint products and By-products and their differences
(ii) Explain Methods of joint product and By-Product costing
(iii) Explain Joint costs, split off point, and subsequent costs treatments
(iv) Demonstrate ability of apportioning joint costs
(v) Explain problems of dealing with joint products in service organization
Content
•
•
•
•
•
Joint products and By-products
Methods of By-Product costing
Joint costs, split off point, and subsequent costs treatments
Methods of apportioning joint costs
Problems of dealing with joint products in service organization
Lecture 9: Income effects of alternative Inventory Valuation Methods
Objectives
At the end of this lecture you will be able to
(i) Classify variable costs and fixed costs for income reporting purposes
(ii) Draft variable costing and absorption costing income statements.
(iii) Reconcile incomes reported under variable and absorption costing
Content
•
•
•
Classification of variable costs and fixed costs for income reporting
Variable costing and absorption costing income statements
Reconciliation of incomes reported under variable and absorption costing
Lecture 10: Cost Volume Profit Relations
Objectives
At the end of this lecture you will be able to.
(i) Describe cost volume profit (C-V-P) analysis
(ii) State the uses, assumptions and limitation of cost volume profit analysis.
(iii) Describe and apply the methods of computing break-even point
(iv) Demonstrate the concept of:- Margin of safety, traditional break even chart,
Contribution break even chart, Profit charts and Multi product profit charts
(v) Differentiate between the accountant's and economist's break-even charts.
(vi) Explain the concepts of Uncertainty and Sensitivity analysis
4
(vii) Identify and explain cost and revenue drivers
Content
• Cost Volume Profit (C-V-P) analysis
• Uses, assumptions and limitation of cost volume profit analysis.
• Methods of computing break-even point
• Margin of safety, traditional break even chart, Contribution break even chart, Profit volume
charts and Multi product profit volume charts
• Differences between the accountant's and economist's break-even charts.
• Uncertainty and Sensitivity analysis
• Cost and revenue drivers
Lecture 11: Budgeting
Objectives
At the end of this lecture you will be able to
(i) Explain the objectives, advantages, and challenges of Budgeting
(ii) Describe stages in the planning process
(iii) Describe the budgeting process
(iv) Identify and demonstrate types of Budgets
(v) Explain the concept of:- Planning programming and Budgeting System (PPBS),
Uncertainty in Budgeting, Budget Committee, Budgeting Factor, Budgeting Manual
(vi) Explain Problems in Budgeting.
Content
•
•
•
•
•
•
Objectives, advantages, and challenges of Budgeting
Stages in the planning process
Budgeting Process
Types of Budgets
Planning programming and Budgeting System (PPBS), Uncertainty in Budgeting, Budget
Committee, Budgeting Factor, Budgeting Manual
Problems in Budgeting.
Lecture 12: Budgetary Control including behavioral issues
Objectives
At the end of this lecture you should be able to
(i)
(ii)
(iii)
(iv)
(v)
(vi)
Explain the concept of responsibility Accounting
Identify and Explain types of Responsibility Centers
Explain the concept of Controllability
Explain the problem of Dual Responsibility
Explain the concept of Feed Forward and Feedback reports
Consider non-Monetary Factors in budgeting process
5
(vii) Explain Control of different types of Costs
(viii)
Explain the concept of Participation in the Budgetary Process
(ix) Explain the conflicting roles of budget
(x) Explain Communication Aspects of Budgeting
(xi) Explain Motivational Aspects of Budgeting
(xii) Explain dysfunctional Aspects of Budget Systems
Content
•
•
•
•
•
•
•
•
•
•
•
•
Responsibility Accounting
Types of Responsibility Centers
The concept of Controllability
Problem of Dual Responsibility
The concept of Feed Forward and Feedback reports
Consideration of non-Monetary Factors in budgeting process
Controlling of different types of Costs
Participation in the Budgetary Process
Conflicting roles of budget
Communication Aspects of Budgeting
Motivational Aspects of Budgeting
Dysfunctional Aspects of Budget Systems
Lecture 13: Standard Costing and Variance Analysis
Objectives
At the end of this lecture you will be able to
(i) Define standards
(ii) Explain the nature and Objectives of Standards
(iii) Differentiate between:- a budgetary System and a Standard Cost system, flexible
Budget and standard costing
(iv) Identify and explain types of standards
(v) Explain uses of standards
(vi) Describe the setting of Standards
(vii) Explain Importance of behavioral aspects of standard costing
(viii)
Describe the principle of variance analysis
(ix) Describe the relationships of variances
(x) Identify, explain and compute various types of variances
(xi) Identify and explain the difficulties in interpreting variances
(xii) Reconcile budgeted profit and actual results.
(xiii)
Make decisions of whether to investigate or not to investigate variances.
(xiv) Explain advantages and disadvantages of standard costing
Content
• The concepts of standards
6
•
•
•
•
•
•
•
•
•
•
•
•
•
Nature and Objectives of Standards
Differences between :-budgetary System and a Standard Cost system, flexible Budget and
standard costing
Types of standards
Uses of standards
Setting of Standards
Behavioral aspects of standard costing
The principle of variance analysis
Relationships of variances
Types of variances
Difficulties in interpreting variances
Reconciliation between budgeted profit and actual results.
Decisions of whether to investigate or not to investigate variances.
Advantages and disadvantages of standard costing
Lecture 14: Advanced Variances
Objectives
At the end of this lecture you will be able to
(i) Explain and compute mix and yield variances
(ii) Explain and compute the sales margin variances
Content
• Mix and yield Variances
• Sales margin variances
Lecture 15: Measuring Costs and Benefits for D-Making
Objectives
At the end of this lecture you will be able to
(i)
(ii)
(iii)
(iv)
Identify and provide the meaning of relevant and irrelevant cost
Explain the benefits of relevant costs in decision making
Identify quantitative and qualitative factors in decision making
Make short term decision using relevant costs
Content
•
•
•
•
Relevant and irrelevant cost
Benefits of relevant costs in decision making
Quantitative and qualitative factors in decision making
Relevant costs and short term decisions
- make or buy a component
7
-
sell or process further
Acceptance/rejections of special Order
Temporary shut down
Equipment replacement
Lecture 16: Pricing Decisions
Objectives
At the end of this lecture you will be able to
(i) Explain Pricing Objectives
(ii) Identify pricing policies
(iii) Explain factors influencing pricing decisions
(iv) Identify and explain pricing strategies and methods
(v) Identify and use relevant costs for pricing decisions
Content
• Pricing Objectives
• Pricing policies
• Major factors influencing pricing decisions
• Pricing Strategies and methods
• Relevant costs for pricing decisions
Lecture 17: Decision Making under Uncertainty
Objectives
At the end of this lecture you will be able to
(i) Describe a decision making model
(ii) Identify risk and uncertainty in decision making
(iii) Demonstrate the application of probability distribution in decision making under
uncertainty
(iv) Use decision trees as a model in decision making
(v) Use cost information for pricing under conditions of uncertainty
(vi) Make decisions for buying perfect and imperfect information
(vii) Apply max min, maxi max and regret criteria
Content
• Decision making model
• Risk and uncertainty in decision making
• Application of probability distribution in decision making under uncertainty
• Decision trees as a model in decision making
• Cost information for pricing under conditions of uncertainty
• Decision for buying perfect and imperfect information
• Max min, maxi max and regret criteria.
8
Lecture 18: Divisional performance Measures
Objectives
At the end of this lecture you will be able to
(i) Explain the importance of performance appraisal and its necessity in professionalized
concerns
(ii) Describe the benefits and problems of decentralization
(iii) Identify and describe cost centers, profit centers and investment centers
(iv) Explain and calculate various types of profitability measures used for performance
appraisal
(v) Explain the advantages and disadvantages of the various methods of performance
measurement.
Content
• The importance of performance appraisal
• Benefits and problems of decentralization
• Cost centers, profit centers and investment centers
• Profitability measures used for performance appraisal
• Advantages and disadvantages of the various methods of performance measurement.
Lecture 19: Transfer pricing
Objectives
At the end of this lecture you will be able to
(i) Provide the meaning and objectives of transfer pricing
(ii) Describe the theoretical economic background to transfer pricing
(iii) Explain the importance of transfer pricing
(iv) To establish the optimal transfer pricing using various transfer pricing strategies
Content
• Meaning and objectives of transfer pricing
• The theoretical economic background to transfer pricing
• Importance of transfer pricing
• Optimal transfer pricing
Lecture 20: Applications of Qualitative methods to management accounting
Objectives
(i)
(ii)
(iii)
(iv)
At the end of this lecture you will be able to
Describe and apply correlation and regression analysis to management accounting
Describe and apply quantitative models for planning and control of stocks
Describe and apply linear programming to management accounting
9
Content
Correlation and regression analysis
Quantitative models for planning and control of stocks
Linear programming
Comments:
To master this Module, you are expected to have working knowledge of arithmetic and algebra. In
addition you are required to practice reading and computing on a daily basis
You are expected to have computational devices such as calculators and text books.
Assessment
You will be assessed through a compulsory student progressive portfolio (ungraded), timed test
(30%) and final examination (70%). Pass mark shall be 40%.
Other Requirements
Library visits, group discussions, use of other sources of information/materials including eresources, and lectures where possible.
Recommended readings:
Anthony, B. & Deaden (1995) Management control systems, tests and cases.. New York: Richard
Irwin
Drury, C. (2004) Management and Cost Accounting. 6th Edition. London: BookPower
Hongreen, C. & Ittner, G. Poster (2009). Cost Accounting: A Managerial Emphasis,
Horngreen, C. T., Bhimani, A., Foster, G. M. & Strikant, M. D (2005) Management and cost
accounting. 2nd Edition. Europe: Prentice Hall
Lucey, T. (2003) Management accounting. 5th Edition. London: Book Power
Prentice Hall. New York
Ray Proctor, Management Accounting for Business Decisions: Financial Times /Prentice Hall
Web resources:
http://www.tutor2u.net
http://www.accaglobal.co.uk
10