Advanced Management Accounting kasneb new syllabus notes

PAPER NO. 16 (S3) ADVANCED MANAGEMENT ACCOUNTING

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UNIT DESCRIPTION

This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply advanced management accounting tools and techniques for decision making in the context of organisational strategy.

LEARNING OUTCOMES

A candidate who passes this paper should be able to:

• Use cost estimation data in decision making
• Apply advanced management accounting techniques to aid in organizational strategic decision making
• Use financial and non-financial indicators to measure organisational performance
• Apply environmental management accounting concepts in practice.

CONTENT

1. Strategic management accounting information

• Sources of strategic management accounting information
• Role of strategic management accounting in strategic planning and control
• Governance and control of strategic management accounting information
• Scope and limitations of management accounting
• Ethical standards for management accountants

2. Cost estimation and interpretation

• Ordinary least square (OLS) method. Single and multiple predictors; tests of significance (goodness of fit, ANOVA/P-Value, economic plausibility tests, significance of independent variable/t-test)
• Specifications/assumptions of OLS (implications of serial correlation, multi-colinearity)
• Computer output and technical versus managerial interpretation of OLS results
• Learning curve models and their application

3. Planning and decision making techniques

• 3.1       Cost volume profit analysis (CVP) for single and multiple products under conditions of uncertainty
• 3.2       Decision making under environments of uncertainty and risk, using conditional payoff tables and decision trees.
• 3.3       Expected value of perfect information
• 3.4       Relevant cost analysis
• 3.5       Application of marginal costing (Non-routine decisions): Limiting factor analysis,
• 3.6       Throughput accounting, make or buy decision, continue or discontinue/drop decisions, special order decisions and other short term decisions.

4.     Pricing decisions

• 4.1       External pricing methods
• 4.2       Transfer pricing in divisionalised companies: Domestic and international transfer pricing
• 4.3       Product life cycle costing, Target costing and Kaizen costing

5. Strategic performance measurement

• 5.1       Functional and divisionalisedorganisational structures
• 5.2       Responsibility accounting, responsibility centers and segmental reporting
• 5.3       Divisional performance measures such as profit margin, asset turnover, return on investment(ROI), return on capital employed(ROCE), residual income(RI), accounting rate of return(ARR) and economic value added(EVA)
• 5.4       Non-financial performance indicators
• 5.5       Alternative performance measures such as balanced scorecard, performance pyramid, Fitzgerald and Moon’s building block model.

6. Inventory control decisions

• 6.1       Applications of certainty inventory models (EOQ and EBQ) in decision making
• 6.2       Stochastic inventory models with and without stock out cost
• 6.3       Marginal analysis for perishable stock items
• 6.4       Application of simulation models in inventory control (with and without backorders)
• 6.5       Application of strategic management decisions in inventory control: Just-in-time purchasing(JIT), ABC analysis and material requirement planning(MRP)

7. Budgetary control techniques

• 7.1       Applications of budgetary control systems: Top-down, bottom-up, rolling, zero-based(ZBB), activity-based(ABB), incremental, feedback and feed-forward controls.
• 7.2       Use of operational variances in reconciling original budget with actual performance
• 7.3       Advanced variance analysis, planning and operational analysis(Ex-post)
• 7.4       Application of learning curve model and ABC in variance analysis
• 7.5       Investigation models for variances.

8. Environmental management accounting

• 8.1       Role of accountants in managing and accounting for environmental cost
• 8.2       Use of management accounting techniques in identification and allocation of environmental costs (Inflow/Outflow analysis, Flow cost accounting, Environmental lifecycle costing and Environmental Activity Based Costing).