Module Code and Title:   ACT203 Cost Accounting

Programme:                          Bachelor of Commerce

Credit Value:                         12

Module Tutor:                       Madhav Verma, Arindam Ghosh, Laxmi Kanth Dhakal, 

                                               Dilli Ram Sharma, Ritu Barna Adhikari , Tshering Pemo, Nawang Yangden 

Module Coordinator:            Arindam Ghosh

General objective: The module will provide students with an intermediate level understanding of how accounting as an information system generates useful cost data and information to assist managers in efficient day-to-day functioning of an organization. With the introduction to various methods, tools and techniques of cost accounting like ABC costing, EOQ, Marginal Costing and others, students will acquire basic skills required in analysing and applying cost information for cost ascertainment, price determination, solving business problems. Lastly the module also provides students with knowledge about how costing data will be used for planning, control and decision-making.

Learning outcomes – On completion of the module, students will be able to:

1. Identify different types of costs for making managerial decisions.
2. Distinguish between cost accounting and financial accounting.
3. Apply the unit costing method of costing to ascertain past cost and forecast future cost of productions.
4. Compute product cost under activity based costing.
5. Apply the EOQ technique of inventory control for the effective management and control of materials and their cost.
6. Account for and analyse labour costs associated with labour turnover, idle time and over time to control such costs.
7. Apply allocation, apportionment and absorption of overheads to compute estimated and actual overhead rates.
8. Apply process costing, job costing and contract costing methods of costing to determine costs under various types of businesses.
9. Prepare income statements using marginal and absorption techniques of costing.
10. Analyse cost accounting information and communicate outcomes in the most appropriate forms for management decision-making.
11. Evaluate cost accounting information to facilitate effective decision-making.

Teaching and Learning Approach:

Assessment Approach:

Individual written assignment of 750 words (or equivalent in calculations, tables, management use of data) on emerging topics related with management and cost accounting.

4%       Content relevancy and appropriateness.

4%       Reaching reasonable conclusions using appropriate business analysis and technique.

2%       Overall effectiveness of the writing style- use of proper academic style

Five in-class problem solving exercises of 45 min duration each, requiring students to solve situation-based business related problems using different techniques and tools of accounting covered under each units. Out of 5 problem solving exercises, 2 will be held in a computer lab based for solving problems using spreadsheets. Each problem solving exercise worth 5% will be assessed on the following criteria.

1%       identifying the problem

3%       choosing the right approach for the analysis and solving the problem

1%       drawing the correct conclusion with a recommendation

Each student will complete two short written individual quizzes of 30 min duration each, covering 2 weeks of subject matter. Each quiz worth 5% will be fact-based in-class quizzes to evaluate their knowledge of specific cost and management accounting concepts and techniques.  

Each student will be assessed based on their participation and preparedness in the class by contributing to the class discussions by answering questions, stating their opinions, listening to others and solving in class exercises during the sessions.

Students will take a written exam of 2 hours duration covering topics up to the mid-point of the semester.

The module will have a semester-end exam for 2 hours covering the entire syllabus. The question will be divided into two parts – Part A (carrying 40% of the exam weightage) will be mostly of short answer including objective questions. Part-B (carrying almost 60% of the exam weightage) will be mostly of essay type or an extended response to the given question. This part of the question requires students to apply, analyse, and evaluate or construct knowledge and skills. Cases will also be used to test the levels of knowledge.

Pre-Requisites: ACT101 Financial Accounting

Subject matter:

1. Introduction                                                                                       
   1. An overview of cost accounting 
   2. Objectives and importance of cost accounting
   3. Differences between cost accounting and financial accounting
   4. Different methods and techniques of costing
   5. Cost center and cost unit
   6. Classification of cost
      1.  Factors affecting direct/indirect cost
   7. Cost Drivers & Revenue Drivers
   8. Installation of costing system.
   9. Overview of Application of cost accounting to different business problems
   10. Unit costing
       1. Cost sheet-meaning its purpose and application in Business
   11. Problem solving on preparation of cost sheet
   12. Problems related with Tenders and Quotations

1. Material Costing                                                                   
   1. Material/inventory control –concepts and techniques
   2. Classifications and codification of materials 
   3. Accounting for control of purchases, storage and issue of materials
   4. Documents authorizing movement of materials
   5. Methods of pricing the issuance of materials
      1. Standard cost
      2.  Simple average
      3.  Weighted average
   6. Treatment of material losses.
   7. EOQ simple model
   8. EOQ with price break   

1. Labour Costing                                                                     
   1. Labor cost- Meaning, Direct and Indirect labor
   2. Accounting and control of labour cost.
      1. Time keeping and time booking.
   3. Labor turnover:
      1. Meaning and its causes
      2. Measurement of Labour turnover
         1.  Separation Method
         2.  Replacement Method
         3.  Flux Method
      3. Causes and Ways of Preventing High Labour Turnover Cost
   4. Labor Idle Time
      1. Causes of labour idle time
      2. Treatment of labour idle time
         1. Normal idle time
         2. Abnormal idle time
   5. Overtime payment
      1. Overtime payment policies in Bhutan
      2. Treatment of overtime payment in books of accounts

1. Overhead Costing                            
   1. Meaning, classification and codification of overhead cost
   2. Allocation, apportionment and absorption of overheads
      1. Bases of Apportionment; Exercises on allocation and apportionment
      2. Apportionment to production department only
      3. Apportionment to both production and service department
      4. Absorption of overhead: Causes of under or over absorption of overheads
   3. Activity Based Costing
      1. Introduction to the concept of ABC Costing
      2. ABC Costing Procedure
      3. Applicability of ABC Costing
      4. Advantages and disadvantages.
      5. Problem solving on Activity Based Costing

1. Methods of costing                                                                          
   1. Process costing
      1.  Meaning and essential characteristics of process costing
      2. Process Costing Procedure
      3. Treatment of normal and abnormal losses (except Equivalent Production)
   2. Contract costing
      1. Meaning and objectives of Contract costing
      2. Contract Costing Procedure
      3. Cost plus contract 
   3. Job Costing
      1. Meaning and objectives of Job costing
      2. Job costing procedure
      3. Job Costing V. Unit Costing

1. Introduction to the concept of Marginal costing 
   1. Introduction to Marginal costing, and Absorption Costing
   2. Income measurement under Absorption Costing and Marginal Costing
   3. Advantages and limitations of Absorption Costing and Marginal Costing
   4. Marginal Costing Vs Absorption Costing
   5. Marginal costing Vs Differential costing

Reading List:

1. Essential Reading
   1. Taschner, A. &Charifzadeh, M. (2017). Management and Cost Accounting. India, Wiley.
   2. Lanen, W., Anderson, S. & Maher, M. (2016). Fundamentals of Cost Accounting. McGraw-Hill Education.
   3. Weygandt, J. J., Kimmel, P. D.. &Kieso, D. E. (2017). Managerial Accounting: Tools for Business Decision Making, International Student Version (7th Ed.) India. Wiley.
   4. Hongren, C.T. (2017). Cost Accounting: A Managerial Emphasis (14^th Ed.). New Delhi, India, Pearson Education.

1. Additional Reading
   1. Cooper, Robin; Kaplan, Robert S. (1988). How Cost Accounting Distorts Product Costs. Management Accounting; Montvale69.10 (Apr 1988): 20.
   2. The Management Accountant. (Recent Journal Issues). The Institute of Cost Accountants of India. Retrieved from: http://icmai.in/icmai
   3. Cost Accounting Standards (Most recent revision). Cost Accounting Standards Board, The Institute of Cost Accountants of India. Retrieved from: http://casbicwai.org/
   4. Anne Loft (1986). Towards a critical understanding of accounting: The case of cost accounting in the U.K., 1914–1925. Accounting, Organizations and Society, Vol. 1(2), pp. 137-169
   5. Ellul, A. , Jotikasthira, C. , Lundblad, C.T. & Wang, Y. (2015). Is Historical Cost Accounting a Panacea? Market Stress, Incentive Distortions, and Gains Trading. The Journal of American Finance Association. DOI: 10.1111/jofi.12357

Date: July, 2017