Management Accounting kasneb new syllabus notes



This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply the principles of cost estimation and cost and management accounting techniques and methods for decision making.


A candidate who passes this paper should be able to:

  • Estimate the cost of goods and services
  • Analyse product costs for manufacturing and non-manufacturing activities
  • Prepare marginal and absorption cost statements
  • Analyse an organisation’s activities through budgetary control process
  • Analyse variances for decision making


  1. The context of management accounting:

    • Definition and scope of Cost and Management accounting
    • Role of Management Accounting in decision making
    • Users of Management accounting information
    • Cost accounting as a subset of management accounting
    • Management accounting and financial accounting
    • Difference between management accounting and financial accounting
    • Relationship between Management accountant and other managers
    • Limitations of management accounting
  1. Costing terms and concepts

    • Cost definition and identification
    • Cost classification
    • Cost classification bases; by time; by behaviour; by function; identification with stock; by relevance for decision making; by management control
    • Types of cost systems
    • Maintaining a cost database

  1. Introduction to cost estimation

    • Non-mathematical methods
      • Accounts Analysis method
      • High-Low method
      • Industrial Engineering method
    • Mathematical methods
      • Scatter graph method
      • Ordinary Least Square method (simple regression only)
  1. Cost accumulation

    • Accounting for direct material cost
      • Introduction to Material costing
      • Objectives of material control
      • Essential requirements of material control system
      • Centralised and decentralized purchasing
      • Periodic inventory system
      • Perpetual inventory system
      • Setting stock levels
      • Factors influencing stock levels
      • Relevant cost for inventory management
      • The Economic Order Quantity
  • Valuing inventory issues using FIFO, LIFO, standard cost method, weighted average, simple average and replacement cost method
  • Accounting for direct labour cost
    • Methods of labour remuneration
    • Bonus schemes
    • Factors influencing wages
  • Accounting for overhead cost
    • Overhead apportionment
    • Primary overhead distribution
    • Secondary overhead distribution methods (continuous allocation method, algebraic method, direct allocation method, sequential allocation method)
    • Absorption of overheads
  1. Activity based costing

    • Meaning of activity-based costing
    • Distinction between activity-based costing and the Traditional absorption costing
    • Classification of cost drivers
    • The hierarchy of cost drivers
    • Overhead absorption rates – ABC
    • Income statements – one unit
    • Income statement – total output/sales
  1. Product costing methods

    • Introduction to costing methods
    • Specific order costing; Job order costing; Batch costing
    • Continuous operation costing; Process costing (normal process losses; abnormal process losses/gains); treatment of closing work in progress; treatment of opening work in progress (FIFO and Weighted Average cost methods); Process costing for joint products and by-products; distinction between joint-products and by-products
    • Service costing
  1. Marginal and absorption costing

    • Differences between marginal costing and absorption costing
    • comparative income statements
    • Arguments for the use of marginal costing
    • Arguments for the use of absorption costing
    • Reconciliation statement
  1. Cost-volume profit analysis (break-even analysis)

    • Introduction to C-V-P analysis
    • Assumptions of C-V-P analysis
    • Break-even chart
    • Profit-volume chart
    • Single product C-V-P analysis
    • Multiple product C-V-P analysis
    • Limitations of C-V-P Analysis
    • Applications of marginal costing in decision making (make/buy decisions; discontinue a product; choice of a product where limiting factor exists; acceptance of a special offer); overriding considerations to the above decisions
  1. Budgetary control

    • Introduction to budgets
      • Essential features of a budget
      • Objectives of budgetary control
      • Difference between forecasts and budgets
    • Types of budgets
      • Classification based on time (long-term budgets, short-term budgets and current budgets)
      • Classification based on functions (functional/subsidiary budgets, master budgets)
      • Classification based on capacity (fixed budgets, flexible budgets)
    • Preparation of budgets
      • Functional budgets including cash budget and master budget
      • Fixed and flexible budgets
  1. Standard costing and variance analysis

    • Introduction
      • Types of standards (basic standards, ideal standards, attainable standards)
      • Advantages and disadvantages of standard costing
    • Variance analysis
      • Material cost variances (usage variance, price variance)
      • Labour cost variances (efficiency variance, rate variance)
      • Variable overhead variances (expenditure variance, efficiency variance)
      • Fixed overhead variances (expenditure variance, capacity variance, efficiency variance and volume variance)
      • Sales variances
    • Causes of the various variances and remedies

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