STUDY MATERIAL BASED CONTENTS

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2 STUDY MATERIAL BASED CONTENTS Paper 3 Cost and Management Accounting Syllabus Examination Trend Analysis Line Chart Showing Relative Importance of Chapters Table Showing Importance of Chapter on the Basis of Marks 3. Formulae Table C.N Study Chapters Scanner Chapters P.N.. (Chapter ) Introduction to Cost and Management Accounting (Chapter ) (Chapter 3) Employee Cost and Direct Expenses (Chapter ) Overheads (Chapter ) Activity Based Costing (Chapter 6) Cost Sheet (Chapter 7) Cost Accounting System (Chapter ) Unit and Batch Costing (Chapter 9) Job and Contract Costing (Chapter 0) Process Costing (Chapter ) Joint Product & By Product (Chapter ) Service Costing (Chapter 3) Standard Costing (Chapter ) Marginal Costing (Chapter ) Budget and Budgetary Control Complete Question Paper of May Complete Question Paper of November

3 SYLLABUS Paper 3 Cost and Management Accounting (00 marks) (One Paper - Three Hours) Level of Knowledge: Working knowledge Objectives : (a) To develop an understanding of the basic concepts and applications to establish the cost associated with the production of products and provision of services and apply the same to determine prices. To develop an understanding of cost accounting statements. (c) To acquire the ability to apply information for cost ascertainment, planning, control and decision making. Contents:. Overview of Cost and Management Accounting (i) Introduction to Cost and Management Accounting (a) Objectives and Scope of Cost and Management Accounting, The users of Cost and Management Accounting information, Functions of management accounting. (c) Role of cost accounting department in an organisation and its relation with other departments. (d) Installation of Costing System (e) Relationship of Cost Accounting, Financial Accounting, Management Accounting and Financial Management. (f) Cost terms and Concepts (g) Cost Reduction and Cost Control (h) Elements of Costs (i) Cost behavior pattern, Separating the components of fixed, variable, semi-variable and step costs. (j) Methods of Costing, Techniques of Costing. (k) Cost Accounting with use of Information Technology. (ii) Elements of Cost and preparation of Cost Sheets (a) Functional classification and ascertainment of cost Preparation of Cost Sheets for Manufacturing sector and for Service sector 3.

4 . Ascertainment of Cost and Cost Accounting System (i) (a) Procurement procedures-store procedures and documentation in respect of receipts and issue of stock, Stock verification, Valuation of material receipts, (c) Inventory control: Techniques of fixing level of stocks- minimum, maximum, re-order point, safety stock, determination of optimum stock level, Determination of Optimum Order quantity- Economic Order Quantity (EOQ), Techniques of Inventory control- ABC Analysis, Fast, Slow moving and Non moving (FSN), High, Medium, Low (HML), Vital, Essential, Desirable (VED), Just-in-Time (JIT)- Stock taking and perpetual inventory system, use of control ratios, (d) Inventory Accounting (e) Consumption- Identification with products of cost centres, Basis for consumption entries in financial accounting, monitoring consumption. (ii) Employee Cost (a) Attendance and Payroll procedures: Elements of wages- Basic pay, Dearness Allowance, Overtime, Bonus, Holiday and leave wages, Allowances and perquisites. Employee Cost Control (c) Employee Turnover- Methods of calculating employee turnover, causes of employee turnover, effects of employee turnover. (d) Utilisation of Human Resource, Direct and indirect employee Cost, charging of employee cost, Identifying employee hours with work orders or batches or capital jobs. (e) Remuneration systems and incentive schemes: Time Rate System, Piece Rate System, Differential piece rate system, Calculation of wages, Effective Wages. 3.3

5 (iii) Direct Expenses (a) Direct expenses Nature of Direct or Chargeable expenses. (c) Sub-contracting- Control on material movements, Identification with the main product or service. (iv) Overheads (a) Functional analysis- Factory, Administration, Selling, Distribution, Research and Development. Behavioral analysis- Fixed, Variable and Semi- Variable. (c) Allocation and Apportionment of overheads using Absorption Costing Method. (d) Factory Overheads- Primary and secondary distribution, (e) Administration Overheads- Method of allocation to cost centres or products, (f) Selling & Distribution Overheads- Analysis and absorption of the expenses in products/ customers, impact of marketing strategies, cost effectiveness of various methods of sales promotion. (g) Treatment of Research and development cost in cost accounting. (v) Concepts of Activity Based Costing (ABC) (vi) Recording and Accounting of Costs (a) Non-integrated Cost Accounting system- Ledger under non-integral system Integrated (Cost and Financial) Accounting system- Ledgers under integral system. (c) Difference between the Non- integrated and Integrated Accounting system. (d) Reconciliation of profit as per Cost and Financial Accounts (under Non-Integrated Accounting System). 3. Methods of Costing (i) Single Output/ Unit Costing (ii) Job Costing: Job cost cards and databases, collecting direct costs of each job, attributing overheads to jobs, Application of job costing. 3.

6 (iii) Batch Costing: Determination of optimum batch quantity, Ascertainment of cost for a batch, Preparation of batch cost sheet, Treatment of spoiled and defective work. (iv) Contract Costing (a) Ascertainment of cost of a contract, Progress payment, Retention money, Escalation clause, Cost plus contract, Value of work certified, Cost of Work not certified. Determination Value of work certified, Cost of work not certified, Notional or Estimated profit from a contact. (v) Process/ Operation Costing (a) Process cost recording, Process loss, Abnormal gains and losses, Equivalent units of production, Inter-process profit, Valuation of work in process. Joint Products- Apportionment of joint costs, Methods of apportioning joint cost over joint products, (c) By-Products- Methods of apportioning joint costs over byproducts, treatment of By-product cost. (vi) Costing of Service Sectors (a) Determination of Costs and Prices of services of following sectors/ Industries: Transport, Toll roads, Hospitals, Canteen/ Restaurants, Hotels/ Lodges, Educational Institutions, Financial Institutions/ Banks, Insurance, IT sector and other services.. Cost Control and Analysis (i) Standard Costing (a) Setting up of Standards, Types of Standards, Standard Costing as method of performance measurement. Calculation and Reconciliation of Cost Variances: Variance, Employee Cost Variance, Variable Overheads Variance and Fixed Overhead Variance. 3.

7 (ii) Marginal Costing (a) Basic concepts of marginal costing, Contribution margin, Break-even analysis, Break even and profit volume charts, Contribution to sales ratio, Margin of Safety, Angle of Incidence, Cost-Volume-Profit Analysis (CVP), Multi- product break- even analysis, Consideration of Limiting factor (key factor), Determination of Cost of a product/service under marginal costing method, determination of cost of finished goods, work-in-progress, (c) Comparison of Marginal costing with absorption costing method-reconciliation of profit under the both methods, (d) Short term decision making using the above concepts (basic / fundamental level). (iii) Budget and Budgetary Control (a) Meaning of Budget, Essentials of Budget, Budget Manual, Budget setting process, Preparation of Budget and monitoring procedures. The use of budget in planning and control (c) Flexible budget, Preparation of Functional budget for operating and non- operating functions, Cash budget, Master budget, (d) Introduction to Principal/ Key budget factor, Zero Based Budgeting (ZBB), Performance budget, Control ratios and Budget variances. 3.6

8 Examination Trend Analysis Paper 3 Cost and Management Accounting Question Paper Based Contents of Last Five Examinations Years Q. No. Compulsory Chapter Marks Category Page No. No. Name 06 Nov... (a) 3. (a). (a). (a) 6. (a) 7. (a) (d) (ii) {C} Marginal Costing Cost Accounting System Service Costing Budget and Budgetary Control Introduction to Cost and Management Accounting Standard Costing Job and Contract Costing Introduc tion to Cost and Management Accounting 6 Practical Practical Short Notes May. (a). (a). (a). (a) 6. (a) 7. (a) {C} {C} Employee Cost and Direct Expenses Standard Costing Process Costing Cost Accounting System Introduction to Cost and Management Accounting Budget and Budgetary Control Introduction to Cost and Management Accounting Practical Practical Dt. Between

9 07 Nov.. (a). (a) 3. (a). (a). (a) 7. (a) (c) {C} {C} Employee Cost and Direct Expenses Job and Contract Costing Joint Product & By Product Standard Costing Marginal Costing Introduction to Cost and Management Accounting Cost Accounting System Job and Contract Costing Budget and Budgetary Control Practical Dt. Between May. (a) (c) (d). (a) 3. (a). (a).(a)(i) (ii) 6. (a) (c) (d) (e) (i) (ii) {C} Employee Cost and Direct Expenses Marginal Costing Cost Accounting System Cost Sheet Job and Contract Costing Employee Cost and Direct Expenses Process Costing Activity Based Costing Service Costing Standard Costing Marginal Costing Introduction to Cost and Management Accounting Budget and Budgetary Control Unit and Batch Costing Introduction to Cost and Management Accounting Practical

10 0 Nov.. (a) (c) (d). (a) 3. (a). (a). (a) (i) (ii) 6. (a) (c) (d) (e) {C} {C} {C} {C} Standard Costing Process Costing Job and Contract Costing Cost Sheet Marginal Costing Unit and Batch Costing Activity Based Costing Cost Accounting System Service Costing Budget and Budgetary Control Employee Cost and Direct Expenses Overheads Introduction to Cost and Management Accounting Overheads Joint Product & By Product Activity Based Costing Practical

11 Line Chart Page 3.0

12 Table Showing Importance of Chapter on the Basis of Marks Ch. No. Chapter Name Years May Nov. May Nov. 6 May 6 Nov. 7 May 7 Nov. May Nov. Total Ave.. Introduction to Cost Employee Cost and Direct Expenses Overheads Activity Based Costing Cost Sheet Cost Accounting System Unit and Batch Costing Job and Contract Costing Process Costing Joint Product & By Product 9.9. Service Costing Standard Costing 9.9. Marginal Costing Budget and Budgetary Control 0. 3.

13 Formulae Table Chapter - Basic Formulas. Maximum Level = Reorder Level + Reordering Quantity - Minimum Consumption during the period required to obtain delivery. Or RL + RQ - MnC Or Safety Stock + EOQ. Minimum Level = Reorder Level - (Normal usage per period Average delivery time) 3. Average Stock Level = Minimum Level +/ Reorder Quantity. Reorder Level = Maximum Reorder period Maximum Usage = Normal Usage (Minimum Stock Period + Average Delivery Time) = Safety Stock + Lead Time Consumption. Danger Level = Minimum Consumption Emergency Delivery Time 6. EOQ = 7. Ordering Cost =. Carrying Cost = Cost expressed as % of average Inventory 9. Inventory Turnover Ratio = 0. Inventory Turnover Period = 36 Inventory Turnover Ratio 3.

14 Formulae Table O 3.3. To decide whether discount on purchase of material should be availed or not, compare total inventory cost before discount and after discount. Total inventory cost will include ordering cost, carrying cost and purchase cost.. Safety Stock = 3. Total Inventory Cost = Ordering Cost + Carrying Cost + Purchase Cost Chapter - 3. Time Rate System Earnings = Hours worked Rate per hour. Straight Piece Rate System Earnings = Number of units Piece rate per unit 6. Differential piece Rate System (a) F.W. Taylor s System Efficiency Payment Less than 00% 3% of the normal piece rate or 0% of piece rate when below standard. Either 00% or More than 00%% of the normal piece rate or 0% of piece rate when at or above standard Merrick differential Piece Rate System Efficiency Payment Up to 3% Ordinary Piece rate 3% to 00% 0% of Ordinary piece rate (0% above the ordinary piece rate) Above 00% 0% or 30% of Ordinary piece rate (0% to 30% of ordinary piece rate) 7. Combination of Time and Piece Rate (a) Gantt Task and Bonus System Output Payment Output below standard Guaranteed time rate Output at standard 0% of time rate Output above standard 0% of piece rate

15 3. O Solved Scanner CA Inter Gr. I Paper - 3 (New Syllabus) Emerson Efficiency System Earning is calculated as follows : Efficiency Payment Below 66-/3% No bonus, only guaranteed time rate is paid. 66-/3% to 00% Worker is paid by hourly rate for the time he actually worked plus in increase in bonus according to degree of efficiency on the basis of step bonus rates. Bonus rate can be up to 0%. Above 00% 0% of time wage rate plus additional bonus of % for each % increase in efficiency. (c) Bedaux Point System Earnings = Hours worked Rate per hour + (d) Haynes Manit systems This system is similar to Bedaux Point system. Instead of Bedaux Points saved, MANIT (Man-minutes) saved are measured for payment of bonus. Bonus is distributed as follows : 0% bonus to the workers 0% bonus to the supervisors 0% bonus of the employer (e) Accelerated Premium System In this system individual employer makes his own formula. The following formula may be used for a general idea of the scheme: Y = 0. x Where, y = wages x = efficiency

16 Shuchita Prakashan Solved Scanner CA Intermediate (New Syllabus) Group-I Paper-3 Cost And Management Accounting For May 09 Exam 0% OFF Publisher : Shuchita Prakashan ISBN : Author : Dr. Arpita Ghose, Gourab Ghose Type the URL : Get this ebook