SEMESTER - 4

MANAGEMENT ACCOUNTING [BAF-401]

INTRODUCTION make forecasts, prepare budgets including functional
This course is designed to focus on planning and decision- budgets, master budgets and flexible budgets,
making techniques used for raising short-term finance and use the standard costing,
investing in the project. learn budgetary control and perform ance evaluation
methods.
OBJECTIVE
calculate, analyse, interpret and reconcile the variances,
To provide the students with a detailed knowledge of Cost and
get acquainted with the different project appraisal
Managem ent Accounting, to enable them to:
methods,
use the present and traditional approaches of cost
use the cost analyses techniques like break-even etc.,
accounting in different contexts, and
apply the modern costing techniques including activity
apply the cost and m anagem ent accounting techniques,
based costing, throughput and back flush accounting
and evaluate the desired results in the light of the
and environmental costing,
outcomes.
Learn cost reduction techniques.
OUTCOMES Understanding of Cost accounting records for different
On com pletion of this course, students should be able to: industries

INDICATIVE GRID
PART SYLLABUS CONTENT AREA WEIGHTAGE
FORECASTING AND BUDGETING TECHNIQUES
A 1. Forecasts 15%
2. Budgeting
PERFORMANCE MEASUREMENT
B 3. Budgetary Control 10%
4. Performance Evaluation
ADVANCED VARIANCE ANALYSIS
C 5. Standard Costing 15%
6. Variance Analysis, Interpretation and Profit Reconciliation
PROJECT APPRAISAL METHODS
D 7. Capital Investment Decisions 10%
8. DCF Techniques of Investm ent Appraisal
D E C IS I O N M A K IN G
9. Break Even Analysis of a Single product
E 10. Limiting factor Analysis 30%
11. Inventory Managem ent
MODERN COSTING TECHNIQUES
12. Activity Based Costing
F 13. Throughput and Back flush Accounting 10%
14. Environm ental costing
15. Cost Reduction Techniques
G COST ACCOUNTING RECORDS 10%
TO TA L 100%

Note: The weightage shown against each section indicates, study time required for the topics in that section. This weightage does not
necessarily specify the number of m arks to be allocated to that section in the examination.

CONTENTS Sales Budgets

Production Budget and related budgets
PART - A Preparation of Cash Budgets
FORECASTING AND BUDGETING TECHNIQUES Preparation for Com plete Master Budgets
Interaction between component and master budgets
1. Forecasts Capital Expenditure Budgets
Forecasting using historical data Fix and flexible budgets
Linear regression analysis Monitoring procedures
Scatter diagrams and correlation Preparation of projected income statem ent
Sales forecasting Preparation of projected statem ent of financial
Regression and forecasting position
Components of tim e series
Finding the trend PART - B
Finding the seasonal variations PERFORMANCE MEASUREMENT
Time series analysis and forecasting
3. Budgetary Control
2. Budgeting Budgetary Control
Functional budgets Flexible Budgets and Budgetary Control
Budgetary Planning and Control system System design

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 Rolling Budgets Discounted payback
Alternative approaches to budgeting i.e. incremental, Allowing for taxation
zero based and Activity based budgeting Capital rationing
Behavioural implications of budgeting
Budget Participation PA R T - E
Use of Budgets as Targets DECISION MAKING
Budget and Motivation
Beyond Budgeting 9. Break Even Analysis of a Single Product
Breakeven Analysis and Contribution
4. Performance Evaluation Breakeven Point of single product
Financial Perform ance Indicators (KPIs) Contribution/Sales (C/S) Ratio
Non-Financial Performance Indicators (KPIs) Margin of Safety
The Balanced Scorecard Breakeven arithmetic and profit targets
Benchm arking Breakeven charts and cost, profit/volume graphs and
Ethical Issues relating to the preparation, analysis
presentation and interpretation of inform ation for Lim itation of Breakeven analysis
the m anagem ent
10. Limiting factor Analysis
PART - C Lim iting factors
ADVANCE VARIANCE ANALYSIS Lim iting factor analysis and restricted freedom of
action
5. Standard Costing Make or buy decisions and scarce resources
Advantages and disadvantages of Standard costing Lim iting factors and shadow prices
Setting standard for manufacturing Using lim iting factors analysis
Setting standard in service industries
Updating standards 11. Inventory Management
Budgets and standard com pared Managing inventories
Criticism on standard costing Econom ics order quantity
Decision for availing bulk quantity purchase discount
6. Variance Analysis, Interpretation and Profit Deciding for Safety Stock quantity
Reconciliation USE ABC Plan for inventory control
Direct material cost variances Cost of estim ation error in econom ic order quantity
Direct labour cost variances
Variable overhead variances PART - F
Fixed overhead variances MODERN COSTING TECHNIQUES
Sales variances
Operating statem ents 12. Activity Based Costing
Variances in a standard marginal costing Reasons for the developm ent of ABC
Deriving actual data from standard cost details and Outline of an ABC system
variances Absorption costing versus ABC
Inter-relationships between variances Marginal costing versus ABC
Working backwards approach to variance analysis Introducing an ABC system
Material m ix and yield variances
Labour mix and yield variances 13. Throughput and Back flush Accounting
Sales m ix and quantity variances The theory of constraints (TOC)
Investigate variance or not to investigate variance Throughput accounting
Variance investigation model
Controllability principle in Joint Variances 14. Environmental Costing
Interpretation of variances The importance of environmental costs
Profit reconciliation Environmental footprints
T y p e s of c os t
PART - D Environmental cost accounting
PROJECT APPRAISAL METHODS
15. Cost Reduction Techniques
7. Capital Investment decisions Learning Curve
Process of investm ent decision m aking Life Cycle Costing
Post Audit Target Costing
Payback Method Value Analysis &Functional Analysis

8. DCF techniques of investment appraisal PART - G

The Tim e Value of Money COST ACCOUNTING RECORDS
Relevant Cash Flows Textile Industry
The net present value method Petroleum Industry
The internal rate of return method Pharmaceutical Industry
NPV and IRR compared Fertilizer Industry
Modified IRR Sugar Industry

TEACHING METHODOLOGY: The faculty is advised to teach the topics in the m ode of case studies based on problem solving and
decision-m aking with practical approach.

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RECOMMENDED BOOKS
CORE READINGS
TITL E A UTH O R PUBLISHER
CIMA, UK Study Text --- BPP
Relevant Study Text --- Kaplan Publishing
Managem ent and Cost Accounting Colin Drury Cengage Learning
Milton F. Usry / Lawrence Hammer /
Cost Accounting South Western / Thomson
Adolph Matz
Charles T. Horngren, Srikant M. Datar, &
Cost Accounting: A Managerial Emphasis Prentice Hall / Pearson / Financial Tim es
George Foster
Managem ent Accounting Performance
PBP Professional Business Publications, Lahore.
Evaluation
ADDITIONAL READING
Managerial Accounting Ronald W. Hilton McGraw-Hill
Managerial Accounting Ray H. Garrison / Eric W. Noreen McGraw-Hill

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