Course Title: Cost Accounting
Course Code: ACC-242
Credit Hours: 3+0
Course Instructor: Asad ur Rehman
Mode of Contact"
You can contact your course instructor in the following ways:
Email:
[email protected]Meeting: By appointment via e-mail
Mode of Contact: Physical Classes
Email:
Meeting: By appointment via e-mail
Prerequisites
This is a core course designed for Bachelors students. Fundamentals of Accounting & Financial Accounting are prerequisites for this course.
Reading Materials
Textbook
Cost Accounting by Matz, Usry Latest Edition
Recommended Textbooks
ACCA F2(MA/FMA) course book by Kaplan Publishers
ACCA F2(MA/FMA) course book by BPP Publishers
ACCA F2(MA/FMA) course book by Beker Publishers
Introduction
This course describes the nature and purpose of cost accounting, analyzes the behavior of various types of costs; highlights common practices related to absorption, marginal, and standard
costing; differentiate between job, batch, and process costing, and involves the preparation of cost statements, and project planning and control. This course builds upon the concepts and
techniques to help plan, prepare, analyze, and control cost-driven activities. It enables the students to acquire the skills necessary to analyze and interpret accounting data.
Course Objectives (COs)
This course aims to provide students with understanding about:
Recognize and apply appropriate theories, principles and concepts relevant to cost accounting.
Exercise appropriate judgment in selecting and presenting information using various methods relevant to cost accounting.
Plan, design and execute practical activities using techniques and procedures appropriate to cost accounting.
Respond to change within the external and internal business environments and its effect on cost accounting.
Develop appropriate effective written and oral communication skills relevant to cost accounting
Course Learning Outcomes
On completion of this course students should be able:
CLO1. To understand various concepts of Cost Accounting.
CLO2. To understand activities related to material, labour, and overheads.
CLO3. To understand Marginal and Absorption costing.
CLO4. To know Job, batch and process
costing. CLO5. To understand about
Budgeting.
Teaching Methodology
There will be lectures, discussions, and presentations as part of the scheduled class activities. It is advised that all students participate in these activities; failing to do so will hurt their
learning and GPAs. According to the course objectives, lectures will feature learning objectives for weekly topics (as mentioned in the weekly schedule), including essential ideas and real-
world examples. Lectures are not a substitute for required readings, even though they will cover the same material. The information covered in the prescribed readings will be specifically
expanded upon and, if necessary, updated throughout the lectures. In addition to lectures, the following learning activities will continue to be the main focus of the students' attention.
Assessment Scheme
Assignments 10%
Quizes 10%
Project
Mid Term Examination 30%
Final Examination 50%
TOTAL 100%
Module Contents
Assessm
Learning Thinking
Lecture Scheduled Topic ent PLOvi CLO
Activity Level
Activity
1 The nature and purpose of cost and management accounting:
Distinguish between data and information
Identify and explain the attributes of good information
Compare and contrast financial accounting with cost and management accounting Lecture PLO 1 CLO 1 Comprehension
Outline the managerial processes of planning, decision making and control
Explain the difference between strategic, tactical and operational planning
2 The nature and purpose of cost and management accounting:
Distinguish between cost, profit, investment and revenue centers
Describe the differing needs for information of cost, profit, investment and revenue centers managers
Lecture PLO 1 CLO 1 Comprehension
Describe the purpose and role of cost and management accounting within an organization’s
management information system
Explain the limitations of management information in providing guidance for managerial decision making.
3 Types of cost and cost behavior:
Explain and illustrate production and nonproduction costs
Describe the different elements of production cost – materials, labor
and overheads Lecture PLO 2 CLO 1 Comprehension
Describe the different elements of nonproduction cost – administrative, selling, distribution
and finance
4 Types of cost and cost behavior:
Explain the importance of the distinction between production and
nonproduction costs when valuing output and inventories
Explain and illustrate with examples classifications used in the analysis Lecture PLO 2 CLO 1 Comprehension
of the product/service costs including by function, direct and indirect,
fixed and variable, stepped fixed and semi variable costs
Describe and illustrate, graphically, different types of cost behavior
5 Types of cost and cost behavior:
Use high/low analysis to separate the fixed and variable elements of
total costs including situations involving semi variable and stepped
fixed costs and changes in the variable cost per unit
Lecture PLO 2 CLO 1 Application
Explain the advantages and disadvantages of using high low method
to estimate the fixed and variable element of costing
6 Accounting for inventory:
Describe the different procedures and documents necessary for the
ordering, receiving and issuing of materials from inventory
Identify, explain and calculate the costs of ordering and holding Lecture PLO CLO 2 Comprehension
inventory (including buffer inventory)
Describe and apply appropriate methods for establishing reorder levels where demand in the lead time is
7 Accounting for inventory:
Calculate and interpret the optimal order quantities
Calculate and interpret the optimal order quantities when quantity Lecture PLO 3 CLO 2 Comprehension
discounts are available
Produce calculations to minimize inventory costs when inventory is gradually replenished
8 Accounting for inventory:
Calculate the value of closing inventory and material issues using
LIFO, FIFO and average methods Assignm
Describe the control procedures used to monitor physical and ‘book’ inventory and to minimize discrepanc Lecture ent 1
PLO 3 CLO 2 Application
losses
Interpret the entries and balances in the material inventory account.
9 Accounting for Labour:
Calculate direct and indirect costs of labour
Explain the methods used to relate input labour costs to work done
Lecture PLO 3 CLO 2 Comprehension
Prepare the journal and ledger entries to record labour costs inputs
and outputs
Interpret entries in the labour account
10 Accounting for Labour:
Describe different remuneration methods: time-based systems; piecework
systems and individual and group incentive schemes Lecture PLO 3 CLO 2 Application
Calculate the level, and analyse the costs and causes of labour turnover
Explain and calculate labour efficiency, capacity and production volume ratios
11 Accounting for overheads:
Explain the different treatment of direct and indirect expenses
Describe the procedures involved in determining production overhead
absorption rates
Allocate and apportion production overheads to cost centres Lecture Quiz 1 PLO 3 CLO 2 Comprehension
using an appropriate basis
Reapportion service cost center costs to production cost
centres (using the reciprocal method where service cost centres work for each other)
12 Accounting for overheads:
Select, apply and discuss appropriate bases for absorption rates
Prepare journal and ledger entries for manufacturing overheads Lecture PLO 3 CLO 2 Application
incurred and absorbed
Calculate and explain the under and over absorption of overheads
13 Marginal and absorption costing:
Explain the importance of, and apply, the concept of contribution
Demonstrate and discuss the effect of absorption and marginal costing Assignm
Lecture PLO 4 CLO 3 Comprehension
ent 2
on inventory valuation and profit determination
Calculate profit or loss under absorption and marginal costing
14 Marginal and absorption costing:
Reconcile the profits or losses calculated under absorption and marginal costing Quiz
Lecture PLO 4 CLO3 Application
2
Describe the advantages and disadvantages of absorption and marginal costing
15 Job, batch and process costing:
Describe the characteristics of job costing, batch costing, process costing and describe situations in
which each would be appropriate
Lecture PLO 4 CLO 4 Comprehension
Prepare cost records and accounts in job and batch costing situations
Establish job and batch costs from given information for process costing explain the concepts of normal
and abnormal losses and abnormal gains
16 Job, batch and process costing:
Calculate the cost per unit of process outputs
Prepare process accounts involving normal and abnormal losses and abnormal gains
Lecture PLO 4 CLO 4 Comprehension
Calculate and explain the concept of equivalent units
Apportion process costs between work remaining in process and transfers out of a process using the
weighted average and FIFO method
17 Job, batch and process costing:
Prepare process accounts in situations where work remains incomplete
Prepare process accounts where losses and gains are identified at different stages of the process Lecture PLO 4 CLO 4 Application
Differentiate between Job and Process costing
Cost of Production Report
18 Job, batch and process costing:
Distinguish between byproducts and joint products
Lecture PLO 4 CLO 4 Comprehension
Value byproducts and joint products at the point of separation
Prepare process accounts in situations where byproducts and/or joint products occur.
19 Budgeting:
Explain why organizations use budgeting
Lecture PLO 4 CLO 3 Comprehension
Describe the planning and control cycle in an organization
Explain the administrative procedures used in the budgeting process
Describe the stages in the budgeting process
20 Budgeting:
Explain top down, bottom-up approaches to budgeting
Prepare sales budgets Assignm
Lecture PLO 4 CLO 3 Application
Prepare functional budgets (production, raw materials usage and purchases, labor, variable, and fixed ent 3
overheads)
Prepare cash budget
21 Budgeting:
Prepare master budgets (income statement and statement of financial position)
Explain and illustrate 'what if' analysis and scenario planning Quiz
Lecture PLO 4 CLO 4 Application
3
Explain the importance of flexible budgets in control
Explain the disadvantages of fixed budgets in control
22 Standard Costing:
explain the purpose and principles of standard costing
explain and illustrate the difference between standard, marginal and absorption costing Lecture PLO 4 CLO 4 Comprehension
establish the standard cost per unit under marginal costing and absorption costing
23 Standard Costing:
calculate sales price and volume variances
calculate materials total, price, and usage variances
calculate labour total, price, and efficiency variances
calculate the variable overhead total, expenditure, and efficiency variances Lecture PLO 4 CLO 4 Application
calculate fixed overhead total, expenditure and, where appropriate,
volume, capacity, and efficiency variances
interpret the variances
24 Standard Costing:
explain factors to consider before investigating variances (including the relative significance), Assignm
explain possible causes of the variances and
Lecture PLO 4 CLO 4 Comprehension
ent 4
recommend control action (potential action to eliminate variances
explain the interrelationships between the variances
calculate actual figures or standard figures where the variances are given
25 Alternative costing principles:
Explain activity-based costing (ABC)
Explain Target costing Quiz
Lecture PL
4
Explain Life cycle costing and total quality management (TQM)
Differentiate ABC, target costing and life cycle costing from the traditional costing techniques
26 Alternative costing principles:
Compare cost control and cost reduction
Describe and evaluate cost reduction methods Lecture PL
Describe and evaluate value analysis
27 Service and operation costing:
Identify situations where the use of service/operation costing is appropriate Lecture PL
Illustrate suitable unit cost measures that may be used in different service/operation situations
28 Service and operation costing:
Lecture PL
Carry out service cost analysis in simple service industry situations.
