Module Code and Title:   ACT308 Management Accounting II

Programme:                          Bachelor of Commerce

Credit:                                    12

Module Tutor:                       Madhav Verma, Arindam Ghosh, Laxmikanth Dhakal,

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

Module Coordinator:            Arindam Ghosh

General objective: The module presents management accounting techniques in more strategic perspective to enhance quality and cost control metrics in organization, and the overall performance of the organization. The module further aims at developing a critical and responsible organization based on such value drivers and ethical practices enabled by clearly defined contemporary management accounting principles and techniques.

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

1. Discuss the interrelationship between the three branches of accounting namely Financial Accounting, Cost Accounting and Management Accounting
2. Explain and identify value proposition in Just in Time production system
3. Explain the concepts and establish the relationship between Target Costing, Kaizen Costing and Life Cycle Costing, and determine how these support corporate strategic goals
4. Apply target costing, kaizen costing and life cycle costing methods in organization, and describe how that will lead to cost reduction and enhanced customer value
5. Identify and assess different approaches to transfer pricing
6. Perform cost-volume-profit analysis to determine production and profitability outcomes
7. Compare and Contrast Activity Based Costing and Traditional Costing
8. Analyse the product cost computed under traditional absorption costing and ABC Costing Method
9. Apply theory of constraints to maximize profit
10. Analyse how cost structure of a firm affects managerial decisions and organizational performance
11. Discuss the need for ethics in management accounting and describe the standards of ethical conduct that apply to this profession

Teaching and Learning Approach:

Assessment Approach:

1. Written Assignment: Portion of Final Mark: 10%

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

1. Problem Solving Exercises (Business Situation-based Application): Portion of Final Mark: 25%

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

1. Quizzes: Portion of Final Mark: 15%

Each student will complete two short written individual quizzes of 30 min duration each, covering 2 weeks of subject matter. Each quiz worth 7.5% will be fact-based in-class quizzes to evaluate their knowledge of specific cost and management accounting concepts and techniques. 

1. Class Participation and Preparedness: Portion of Final Mark: 5%

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.

1. Midterm Examination: Portion of Final Mark: 20%

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

1. Semester-End Examination: Portion of Final Marks: 30%

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: ACT305 Management Accounting I

Subject matter:

1. Introduction
   • Nature & Scope of Management Accounting
   • The Management Process and Role of Management Accounting
     • Planning
     • Controlling
     • Evaluating
   • Management accounting process
   • The relationship between management accounting, cost accounting and financial accounting: the interrelationship between Management, Cost and Financial Accounting, and how three branches of accounting support business in making different internal and external business related decisions.
   • Role of ethics in Management Accounting
   • Role of Management Accounting with developments in the business environment:
     • Cost Measures
       • Engineering cost performance
       • Rework and scrap costs
       • Cost versus benefits delivered
       • Life Cycle Costs
       • Target Costs
       • Activity Costs
     • Quality Measures
       • Total Quality Management
       • Quality of supplier’s product
       • Warranty Returns
       • Service and support events
       • Alignment with customer expectations
       • Waste, scrap and rework rate
     • Time Measures
       • Just In Time
       • On time deliver
       • Master Schedule Stability
       • New Product Development cycle time
       • Rework and other non-value added time

2. Cost Volume Profit Analysis and decision making
   • Introduction
   • Cost Volume Profit Analysis for Single-Product Companies
   • Cost Volume Profit Analysis for Multiple-Product Companies
   • Using Cost Volume Profit Models for Sensitivity Analysis
   • Impact of Cost Structure on Cost Volume Profit Analysis
     • Cost Structure and Profit Stability
     • Operating leverage
   • Using a Contribution Margin when faced with Resource Constraints
   • Income Taxes and Cost Volume Profit Analysis

3. Activity Based Costing and Quality Management:
   • Activity Based Costing (ABC Costing):
     • Introduction: activities, resources, cost drivers, resource drivers and activity cost drivers
     • How costs are treated under ABC Costing:
       • Non-manufacturing costs and ABC Costing
       • Manufacturing costs and ABC Costing
       • The costs of idle capacity in ABC Costing
     • Designing an Activity Based Costing System:
       • Step 1: Identify and define Activities and Activities Cost Pools
       • Step 2: Whenever possible, directly trace overhead costs to activities and cost objects
       • Step 3:Assign costs to activity cost pools
       • Step 4:Calculate Activity Rates
       • Step 5:Assign costs to cost objects
       • Step 6:Prepare management reports
     • Comparison of Traditional and ABC Product costs:
       • Computation of product cost under traditional absorption costing and ABC Costing Method
       • Analysis of product cost computed under traditional absorption costing and ABC Costing Method
     • Activity Based Management:
       • Meaning
       • Business application of Activity Based Management: Value added and non-value added activities
       • Targeting process improvements along with ABC Costing
     • Applications of ABC Costing in manufacturing industry and service sectors
     • Activity Based Costing and External Reports
     • ABC at Coca Cola Enterprises Belgium

4. Total Quality Management & Just in Time:
   • Total Quality Management
     • Introduction
     • Total Quality Management & Management Accounting
     • Cost of Quality
       • Prevention Costs
       • Appraisal Costs
       • Internal Failure Costs
       • External Failure Costs
     • TQM at Tata Steel, General Electric Company and Motorola Inc.
   • Just In Time (JIT):
     • Meaning and Aim of JIT System
     • Features of JIT
     • Impact of JIT Systems on:
     • Waste Costs
     • Overhead Costs
     • Other Costs
     • Product Prices
     • Study of JIT followed by Mahindra & Mahindra

• Target costing, Theory of Constraints and Life Cycle Costing
  • Target Costing:
    • Definition
    • Purpose of Target Costing
    • Characteristics of Target Costing
    • Process used to implement a Target Costing System
    • Advantages and Disadvantages of Target Costing
    • Application of Target Costing in Manufacturing & Non Manufacturing Companies
  • Kaizen Costing:
    • Definition
    • Characteristics of Kaizen Costing
    • Kaizen Costing Application Process
    • Relationship between Target Costing & Kaizen Costing
    • Kaizen Costing Vs. Standard Costing System
  • Life Cycle Costing
    • Meaning and Concept of Life Cycle Costing
    • Benefits of Life Cycle Costing
    • Features of Life Cycle Costing
    • Why Life Cycle Costing is important?
    • Relationship between Life Cycle Costing, Kaizen Costing and Target Costing:
  • Theory of Constraints:
    • Meaning & Definition
    • Application: The Five Steps of the Theory of Constraints
    • Theory of Constraints analysis

• Transfer Pricing
  • Introduction
  • Objectives of transfer pricing
  • Approaches to/ Methods of setting the transfer price:
    • Cost Based Transfer Pricing
    • Full Cost Method
    • Standard Cost Method
    • Cost Plus Mark Up Method
    • Market Price Based Transfer Pricing
    • Negotiated Transfer Pricing
    • Dual Rate of Transfer Pricing
    • Shared profit in relation to cost
  • Potential interpersonal conflicts in transfer pricing
  • The selling divisions lowest acceptable transfer price
  • The purchasing division highest acceptable transfer price
  • Selling division with idle capacity, no outside supplier, transfer at the cost to the selling division, transfer at market price
  • International aspects of transfer pricing

Reading List:

1. Essential Reading
   • Course Pack comprising of compilation of all the units mentioned above
   • Kurt, H., Hoyle, J. (2012). Accounting for Managers (e-book). Retrieved from: http://2012books.lardbucket.org/books/accounting-for-managers/index.html
2. Additional Reading
   • Machado, C.& Davim, J. P. (2013). Management and Engineering Innovation. India, Wiley
   • Garrison, R.H., Noreen, E.W. & Brewer, P.C. (2012). Managerial Accounting. McGraw Hill Education.
   • Ramanathan, S. (2014). Accounting for management (1st ed.). New Delhi, New Delhi: Oxford University Press.
   • Saxena, V.K. & Vashist, C.D. (2015). Advanced Cost and Management Accounting. Sultan Chand and Sons.
   • The Management Accountant. (Recent Journal Issues). The Institute of Cost Accountants of India. Retrieved from: http://icmai.in/icmai
   • The institute of Chartered Accountants of India, Volume I: Study Materials: Developments in Business Environment. Retrieved from:

http://resource.cdn.icai.org/18905sm_finalnew_cp1a.pdf

Date: July, 2017