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FL2: INTRODUCTION TO COST ACCOUNTING
Learning Objectives

To equip the students to develop comprehensive understanding of the techniques of cost accounting to support the management in decision making process.

Key Competencies

On successful completion of this exam, the student shall be able to:

  • Identify the costs associated with products and services.
  • Explain the cost classifications. Demonstrate the knowledge of cost accounting systems.
  • Apply cost accounting techniques in decision making process.
  • Prepare budgets and forecasts for management planning & control.
  • Demonstrate the knowledge of standard costing.

GRID Weightage
Purpose of cost accounting and cost classification 15-20
Elements of production cost 30-40
Costing Systems 30-40
Variance Analysis 25-30
Total 100
Components
Cost Accounting

Nature and purpose of Cost Accounting.
  • Define the role of cost accounting in an organization
  • Compare and contrast between Financial Accounting and cost accounting.
  • Describe operational, tactical and strategic planning.
  • Describe the limitations of cost accounting in provision of information for management decisions.

Cost Classification
  • Understanding of various types of costs incurred in an organization.
  • Differentiate between production and non production costs.
  • Classify the costs according to behavior and its relationship with production.
  • Define the basic elements of production cost.

Elements of Production Costs

Obtain in depth knowledge of elements of production cost and their mechanism including

  • Material Valuations methods i.e. FIFIO, Average.
  • Periodic and Perpetual inventory system
  • Economic order quantity
  • Safety Stock
  • Re-order level
  • Production overheads-Actual Vs Applied
  • Treatment of over/under absorbed overheads.
  • Service departments costs allocation/absorption to production departments.
  • Accounting for labour costs and wage remuneration systems.


Costing Systems

Demonstrate the knowledge and understanding of Relevance

  • Marginal Costing
  • Absorption Costing
  • Job order costing
  • Joint and By products


Standard Costing

Develop comprehensive understanding of:

  • Explain the nature and purpose of Standard Costing System
  • Calculation of variances related to elements of cost
  • Interpretation of variances from departmental performance perspective


Management Decisions

Develop understanding of basic concepts in management decision making process including:

  • Opportunity cost
  • Relevant cost
  • Break even analysis