Study Scheme 2018

(Updated in 2023)

M5 – ADVANCED MANAGEMENT ACCOUNTING MANAGERIAL LEVEL-2

INTRODUCTION  Perform regression analysis, identify components of

This course is designed to focus on the identification and time series;
application of advanced management accounting  Identify steps in budget preparation and get
techniques for decision-making in a specific area. This acquainted with the different types of budgets;
course also enables the management accountant to  Realize the uses of standard costing and variances
identify the deviation during performance measurement analysis;
of cost centres, revenue and profit centres for taking  Comprehend capital investment decisions and
remedial action of the management. calculate NPV and IRR and discounted payback period;
 Calculate sensitivity of a project;
OBJECTIVE  Calculate breakeven point and apply breakeven
To provide the students with an in-depth knowledge of analysis
management accounting, to enable them to:  Prioritise projects that mutually exclusive, involve
 Apply management accounting techniques for unequal lives and are subject to capital rationing;
analysing the information, and presenting it to  Differentiate between absorption and ABC costing and
management for decision-making and control realize the reasons for the development of ABC;
purposes, and  Apply the modern costing techniques including
 Formulate strategic plans for achieving efficiency and activity-based costing, throughput and back flush
effectiveness in the operation of business. accounting and environmental costing for better
decision making,
LEARNING OUTCOMES  Calculate working capital, working capital ratios, cash
On completion of this course, students will be able to: flows and profit;
 Comprehend the purpose of forecasting, planning and  Realize the importance of cash flow and working
budgeting; capital management;

INDICATIVE GRID
PART SYLLABUS CONTENT AREA WEIGHTAGE
FORECASTING AND BUDGETING TECHNIQUES
1. Forecasts
A 15%
2. Budgeting
3. Budgetary Control
STANDARD COSTING AND VARIANCE ANALYSIS
B 4. Standard Costing 15%
5. Variance Analysis, Interpretation and Profit Reconciliation
PROJECT APPRAISAL METHODS
6. Capital Investment decisions
C 7. DCF techniques of investment appraisal 20%
8. Taking account of taxation and inflation
9. Additional aspects of investment decision making
COST ANALYSIS
D 10. Break Even Analysis 15%
11. Limiting factor Analysis
MODERN COSTING TECHNIQUES
12. Marginal Cost Analysis
E 13. Activity Based Costing 20%
14. Throughput and Back flush Accounting
15. Environmental costing
MANAGING SHORT-TERM FINANCE
16. Working Capital Management
F 17. Cash Management 15%
18. Receivables & Payables Management
19. Inventory Management
TOTAL 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 marks to be allocated to that section in the examination.
DETAILED CONTENTS
PART - A  Finding the seasonal variations
FORECASTING AND BUDGETING TECHNIQUES  Time series analysis and forecasting Using
spreadsheet packages to build business models
1. Forecasts
 Forecasting using historical data 2. Budgeting
 Linear regression analysis  Why do organizations prepare budgets
 Scatter diagrams and correlation  Framework for budgeting
 Sales forecasting  Steps in Budget preparation
 Regression and forecasting  Functional budgets
 Components of time series  Budgetary Planning and Control system
 Finding the trend  Sales Budgets
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 Study Scheme 2018
(Updated in 2023)

 Production Budget and related budgets  The internal rate of return method
 Cash Budgets  NPV and IRR compared
 Master Budgets
8. Taking account of taxation and inflation
 Capital Expenditure Budgets
 Allowing for inflation (Adjusting cash flows for
 Monitoring procedures
inflation)
 Fix and flexible budgets (static/planning budget
and Flexible budget)
 Preparing flexible budgets (Calculation of
9. Additional aspects of investment decision making
Spending and Revenue variances are included)
 Mutually exclusive projects with unequal lives
 Preparation of projected profit and loss account
 Asset replacement
and balance sheet
 Project abandonment
 Capital rationing
3. Budgetary Control
 Sensitivity analysis
 Flexible Budgets and Budgetary Control
 Probability analysis and long-term decisions
 System design
 Using Spread sheets to build business models
 Rolling Budgets PART - D
 Behavioral implications of budgeting COST ANALYSIS
 Budget Participation
 Use of Budgets as Targets 10. Break Even Analysis
 Budget and Motivation  Breakeven Analysis and Contribution Margin
Beyond Budgeting  Breakeven Point in units and value for single
product
PART - B  Contribution/Sales (C/S) Ratio
STANDARD COSTING AND VARIANCE ANALYSIS  Margin of Safety and Margin of Safety Ratio
 Breakeven arithmetic and profit targets
4. Standard Costing  Breakeven charts and profit/volume graphs
 Uses of Standard costing  Limitation of Breakeven analysis
 Setting standards for manufacturing cost i.e.,
material, labour and manufacturing overheads 11. Limiting factor Analysis
 Basic standards, ideal standards and attainable  Limiting factors
standards  Limiting factor analysis and restricted freedom of
 Setting standard in service industries action
 Updating standards  Optimum production plan with scarce recourses
 Comparison of budget and standard  Make or buy decisions and scarce resources
 Criticism of standard costing  Limiting factors and shadow prices
 Using limiting factors analysis
 Sell or process further decisions
5. Variance Analysis, Interpretation and Profit
 Accept or reject special orders
Reconciliation
 Dropping a product line or a segment of business
 Variances
 Direct material cost variances
 Direct labour cost variances PART - E
 Variable overhead variances MODERN COSTING TECHNIQUES
 Fixed overhead variances
 Planning and operational variances 12. Marginal Cost Analysis
 Sales variances  Marginal Costing as a tool for business decision
 Operating statements making
 Variances in a standard marginal costing  Concept of marginal cost and total cost with
 Working backwards approach to variance respect to business decision making
analysis 13. Activity Based Costing
 Material mix and yield variances  Reasons for the development of ABC
 Labour mix and yield variances  Outline of an ABC system
 Sales mix and quantity variances  Absorption costing versus ABC
 Investigate variance or not to investigate  Marginal costing versus ABC
variance  Introducing an ABC system
 Variance investigation model  Benefits of ABC system
 Controllability principle in Joint Variances
 Interpreting variances 14. Throughput and Back flush Accounting
 Profit reconciliation (standard absorption  The theory of constraints (TOC)
costing and standard marginal costing systems)  Throughput accounting
15. Environmental costing
PART - C
 The importance of environmental costs
PROJECT APPRAISAL METHODS
 Environmental footprints
6. Capital Investment decisions  Types of cost
 Process of investment decision making  Environmental cost accounting
 Payback Method
 Post Audit PART - F
MANAGING SHORT-TERM FINANCE
7. DCF techniques of investment appraisal
 Discounted payback 16. Working Capital Management
 The net present value method
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 Study Scheme 2018
(Updated in 2023)

 Working capital 18. Receivables & Payables Management

 Working capital ratios  What is credit control?
 Cash Conversion Cycle  Total credit
 The credit cycle
17. Cash Management  Payments terms and settlement discounts
 Budgeting for borrowings  Maintaining information on receivables
 Overdrafts  Collecting debts
 Loans  Credit insurance, factoring and invoice
 Trade payables as a source of finance discounting
 Export finance  Managing payables
 Cash surpluses
 Cash investments: bank and building society 19. Inventory Management
accounts  Managing inventories
 Marketable securities: prices and interest rates  Inventory controls systems
 Other types of investment