Fundamentals of Management Accounting




Fundamentals of Management Accounting paper introduces candidates to core management accounting topics such as cost determination, breakeven analysis, standard costing, cost and accounting systems and financial planning and control.

Indicative syllabus content:

• classification of costs and the treatment of direct costs (specifically attributable to a cost object) and indirect costs (not specifically attributable) in ascertaining the cost of a cost object eg a product, service, activity, customer.
• cost measurement: historical versus economic costs.
• accounting for the value of materials on FIFO, LIFO and AVCO bases.
• overhead costs: allocation, apportionment, re-apportionment and absorption of overhead costs. Note: The repeated distribution method only will be examined for reciprocal service department costs.
• marginal cost pricing and full cost pricing to achieve specified return on sales or return on investment.

Note: Students are not expected to have a detailed knowledge of activity-based costing (ABC)

Indicative syllabus content:

• fixed, variable and semi-variable costs
• step costs and the importance of timescale in analysing cost behaviour
• high low and graphical methods to establish fixed and variable elements of a semi-variable cost. Note: regression analysis is not required
• contribution concept and CVP analysis
• breakeven charts, profit volume graphs, breakeven point, profit target, margin of safety, contribution/sales ratio.
• limiting factor analysis

Indicative syllabus content:

• principles of standard costing.
• preparation of standards for the variable elements of cost: material, labour, variable overhead.
• variances: materials - total, price and usage; labour - total, rate and efficiency; variable overhead - total, expenditure and efficiency; sales - sales price and sales volume contribution. Note: Students will be expected to calculate the sales volume contribution variance.
• reconciliation of budgeted and actual contribution.
• piecework and the principles of incentive schemes based on standard hours versus actual hours taken. Note: the details of a specific incentive scheme will be provided in the examination.

Indicative syllabus content:

• manufacturing accounts including raw material, work-in-progress, finished goods and manufacturing overhead control accounts.
• integrated ledgers including accounting for over and under absorption of production overhead.
• the treatment of variances as period entries in integrated ledger systems.
• job, batch, process and contract costing. Note: Only the average cost method will be examined for process costing but students must be able to deal with differing degrees of completion of opening and closing stocks, normal gains and abnormal gains and losses, and the treatment of scrap value.
• subjective, objective and responsibility classifications of expenditure and the design of coding systems to facilitate these analyses.
• cost accounting statements for management information in production and service companies and not-for-profit organisations.