CMA 102 Cost Accounting Class Note Jan Jun 2011 Page 01 to 16
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Transcript of CMA 102 Cost Accounting Class Note Jan Jun 2011 Page 01 to 16
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
1 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
Cost Accouting
Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange (DSE),
9/F Motijheel C/A, Dhaka - 1000, Bangladesh.
Email: [email protected]
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
2 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
Subject Code :COA 102 COST ACCOUNTING
Professional Level –I
102.Cost Accounting---100
Course Objectives : To provide the students with an in-depth knowledge of Cost Accounting concepts,
principles and methods to develop ability and skills to prepare and analyses Cost Accounting data to meet the
requirements of different manufacturing concerns. On completion of this course they will be able to:
a. discuss the role of cost accounting and quantitative analysis within the organization.
b. apply the principles relating to the costing and control of the different resource inputs into the business.
c. emonstrate costing methods and techniques appropriate to a variety of different business.
102.01 Introduction to Cost Accounting
Definition of Cost Accounting, Comparison of Cost Accounting and Financial Accounting; The role of Cost
Accounting; Cost Data for Management Purposes; Methods and Techniques of Cost Accounting;
Characteristics of an Ideal Cost Accounting System; Installation of a Cost Accounting System; Modern Trends in
Cost Accounting.
102.02 Cost Concepts, Classifications and Statements
Cost Object; Expenditures, Cost, Expense and Loss; Cost Classifications; Cost Data and Uses; The Chart of
Accounts; Statement of Cost of Goods Manufactured and Sold; Income Statement.
102.03 Costing and Control of Materials
Classification of Materials; Accounting for Materials; Pricing the Issue of Materials Valuation of Inventory;
Periodic Inventory System and Perpetual Inventory System; Inventory Planning; Ordering Cost, Holding Cost
and EOQ; Effect of Quantity Discounts on EOQ; Safety Stock and Reorder Point; Material Control Methods;
Impact of JIT on Inventory Accounting; Materials Requirement Planning System.
102.04 Costing and Control of Labour
Productivity and Labour Costs; Costs included in Labour; Accounting for Labour; Time Keeping, Computation of
total payroll and Allocation of Payroll costs; Journalizing Labour Costs; Special Problems Relating to Accounting
for Labour; Labour cost Control, Labour Turnover and Control of Labour Turnover; Learning Curve Theory.
102.05 Costing and Control of Manufacturing Overhead
Manufacturing Overhead Costs; Actual Vs. Normal Costing of Manufacturing Overhead; Production Capacity,
Predetermined Overhead Rates; Departmental vs. Plant-wise Overhead Rates; Separating Mixed Costs.
Scatter-graph; High-low Method and Regression Analysis; Accounting for Manufacturing Overhead; Analysis
and Disposition of Under-applied-and Over-applied Overhead.
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
3 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
102.06 Service Department Costs Allocation
Service department costs; Volume based costing; Need for cost allocation; Guidelines for cost allocation;
Plant-wise rate vs. departmental rates; Cost allocation methods; Direct method; Step method; Reciprocal
method and linear algebra method; Single and dual rate methods; Determination of costs should be allocated-
budgeted or actual.
102.07 Activity-Based Costing (ABC)
The Contemporary Manufacturing Environment; Limitation of Traditional Costing Systems; ABC Defined;
Identifying Activities that Use Resources; Cost Drivers and Choosing Cost Drivers; Assigning Costs Using
Activity-Based Costing-Benefits of ABC; Criticism of ABC; ABC and strategic Cost Management.
102.08 Cost Accumulation System
Objective of Cost Accumulation; Cost Accumulation Periodic vs. Perpetual; Cost Accumulation-Actual vs.
Standard; Periodic an Perpetual Cost Accounting System; The Factory Ledger.
102.09 Job Order Cost System
Job Order Costing; Job Order Cost System-Illustrated; Spoiled Goods; Defective Goods; Scrap materials and
Waste Materials in a Job order Cost System.
102.10 The Nature and Characteristics of process Cost System
Process Costing Defined; Objective of Process Cost System; Characteristics of a Process Cost System;
Comparison of Job Order and Process Cost Accumulation System; Production by Department; System Flow;
Determination of Equivalent Units; The Cost of Production Report.
Tex Books
1. Cost Accounting – Ralph S. Polimeni, Frank Fabozzi and Arthur H. Adelherg (3rd
edition).
2. Cost Accounting – F. Usry & H. Hammer (13th
edition).
Reference Books
1. Cost Accounting L. Gayle Rayburn (6th
edition).
2. Cost Management – Blocher, Chen & Lin (1st
edition).
3. Cost Accounting – C. T. Horngren & Others (11th
edition).
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
4 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
Subject Code :COA 102 COST ACCOUNTING
(ONE PAPER - 3 HOURS - 100 MARKS)
Professional Level –I Class Plan
No.
Class Course Contents
1 Introduction and describe career plan with long vision
2
102.01
Introduction to
Cost Accounting
-Definition of Cost Accounting,
-Comparison of Cost Accounting and Financial Accounting;
-The role of Cost Accounting;
-Cost Data for Management Purposes;
-Methods and Techniques of Cost Accounting;
-Characteristics of an Ideal Cost Accounting System;
-Installation of a Cost Accounting System;
-Modern Trends in Cost Accounting.
3
102.02
Cost Concepts,
Classifications and
Statements
-Cost Object;
-Expenditures,
-Cost,
-Expense and Loss;
-Cost Classifications;
-Cost Data and Uses;
-The Chart of Accounts;
-Statement of Cost of Goods Manufactured and Sold;
-Income Statement.
4 & 5
102.03
Costing and
Control of
Materials
-Classification of Materials;
-Accounting for Materials;
-Pricing the Issue of Materials Valuation of Inventory;
-Periodic Inventory System and Perpetual Inventory System;
-Inventory Planning;
-Ordering Cost,
-Holding Cost and EOQ;
-Effect of Quantity Discounts on EOQ;
-Safety Stock and Reorder Point;
-Material Control Methods;
-Impact of JIT on Inventory Accounting;
-Materials Requirement Planning System.
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
5 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
6, 7 & 8
102.04
Costing and
Control of Labour
-Productivity and Labour Costs;
-Costs included in Labour;
-Accounting for Labour;
-Time Keeping,
-Computation of total payroll and Allocation of Payroll costs;
-Journalizing Labour Costs;
-Special Problems Relating to Accounting for Labour;
-Labour cost Control,
-Labour Turnover and Control of Labour Turnover;
-Learning Curve Theory.
9, 10 &
11
102.05
Costing and
Control of
Manufacturing
Overhead
-Manufacturing Overhead Costs;
-Actual Vs. Normal Costing of Manufacturing Overhead;
-Production Capacity,
-Predetermined Overhead Rates;
-Departmental vs. Plant-wise Overhead Rates;
-Separating Mixed Costs.
-Scatter-graph;
-High-low Method and Regression Analysis;
-Accounting for Manufacturing Overhead;
-Analysis and Disposition of Under-applied-and Over-applied Overhead.
12,13 &
14
102.06
Service
Department Costs
Allocation
-Service department costs;
-Volume based costing;
-Need for cost allocation;
-Guidelines for cost allocation;
-Plant-wise rate vs. departmental rates;
-Cost allocation methods;
-Direct method;
-Step method;
-Reciprocal method and linear algebra method;
-Single and dual rate methods;
-Determination of costs should be allocated-budgeted or actual.
15,16&
17
102.07
Activity-Based
Costing (ABC)
-The Contemporary Manufacturing Environment;
-Limitation of Traditional Costing Systems;
-ABC Defined;
-Identifying Activities that Use Resources;
-Cost Drivers and Choosing Cost Drivers;
-Assigning Costs Using Activity-Based Costing-Benefits of ABC;
-Criticism of ABC;
-ABC and strategic Cost Management.
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
6 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
18,19&
20
102.08
Cost Accumulation
System
-Objective of Cost Accumulation;
-Cost Accumulation Periodic vs. Perpetual;
-Cost Accumulation-Actual vs. Standard;
-Periodic an Perpetual Cost Accounting System;
-The Factory Ledger.
21,22 &
23
102.09
Job Order Cost
System
-Job Order Costing;
-Job Order Cost System-Illustrated;
-Spoiled Goods;
-Defective Goods;
-Scrap materials and Waste Materials in a Job order Cost System.
24,25,26
& 27
102.10
The Nature and
Characteristics of
process Cost
System
-Process Costing Defined;
-Objective of Process Cost System;
-Characteristics of a Process Cost System;
-Comparison of Job Order and Process Cost Accumulation System;
-Production by Department;
-System Flow;
-Determination of Equivalent Units;
-The Cost of Production Report.
28 Review Class
29 Class Test
30 Class Test
Class -1
Introduction and describe career plan with long vision ………………………………….
Cost accounting is a quantitative method that accumulates, classifies, summarizes and interprets
information for the following three major purposes:
� Operational planning and control
� Special decisions
� Product decisions
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
7 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
CMA
Professional Level –I 102: Cost Accounting
Class
No. 2
102.01
Introduction to
Cost Accounting
-Definition of Cost Accounting,
-Comparison of Cost Accounting and Financial Accounting;
-The role of Cost Accounting;
-Cost Data for Management Purposes;
-Methods and Techniques of Cost Accounting;
-Characteristics of an Ideal Cost Accounting System;
-Installation of a Cost Accounting System;
-Modern Trends in Cost Accounting.
� Definition of Cost Accounting:
� The process of identifying and evaluating production costs.
� System for recording and reporting measurements of the cost of manufacturing goods and performing
services in the aggregate and in detail. It includes methods for reorganizing, classifying, allocating,
aggregating, and reporting actual costs and comparing them with standard costs. Determination of
unit cost to make a product or render a service is needed to establish a selling price or fee to be
charged. Also, costs for manufacturing a product for inventory valuation need to be known to prepare
the balance sheet and income statement. Cost accounting systems include job order, process,
standard, and direct costing.
� Branch of accounting concerned with providing the information that enables the management of a
firm to evaluate production costs.
Objectives of Cost Accounting
1. Cost Ascertainment
2. Determining Selling Price
3. Cost Control
4. Cost Reduction
5. Determining and Controlling Efficiency
6. Facilitating Preparation of Financial and Other Statements
7. Providing Basis for Operating Policy
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
8 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
9 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
� Comparison of Cost Accounting and Financial Accounting:
No. Basis Financial Accounting Cost Accounting
1. Objective Financial performance and position
Ascertain cost and cost control
2. Costs and profits Shows overall costs and profit / loss
Shows details for each product, process, job, contract, etc
3. Control / Report Emphasis on reporting Emphasis on control and reporting
4. Decision making Limited use Designed for decision making
5. Responsibility Does not fix responsibility Can effectively fix responsibility
6. Time frame Focus on historical data Focus on present and future
7. Type of reports General reports like P&L Account, Balance Sheet, Cash Flow Statement
Can generate special reports and analysis
8. Legal need Statutory requirement Voluntary, except for some cases
9. Transactions Records external transactions Records internal and external transactions
10. Reader Everybody Internal management
11. Formats Standard, as per law Tailor made
12. Access Everybody, except for some Very limited access
13. Unit of value Monetary Monetary and physical
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
10 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
� The role of Cost Accounting:
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
11 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
12 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
13 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
� Cost Data for Management Purposes:
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
14 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
� Methods and Techniques of Cost Accounting:
� The Methods of Cost Accounting
1. Job Costing
2. Process Costing
3. Farm Costing
� The Techniques of Cost Accounting
Following are the main types or techniques of costing for ascertaining costs:
No. Costing Technique Description
1. Marginal Costing Charging variable costs to operations, processes or products and writing off all fixed costs against profits in the period in which they arise.
2. Direct Costing Charging all direct costs to operations, processes or products and writing off all indirect costs against profits in the period in which they arise.
3. Absorption Costing
Charging all variable costs and fixed production overheads to operations, processes or products and writing off selling, distribution and administration overheads against profits in the period in which they arise.
4. Uniform Costing
Using the same costing principles and / or practices by a number of firms in the same industry. Helps in inter-firm comparison, price fixation, cost control / reduction and seeking government tax relief / protection.
5. Standard Costing System which involves fixation of cost standards, ascertain variances of actual cost with standard cost, variance analysis and presentation for corrective action and decision making.
6. Budgetary Control System which involves establishment of budgets, comparison of actual with budget, variance analysis and corrective action.
7. Historical Costing Actual cost ascertained after it has been incurred.
1.1 Batch Costing
1.2 Terminal or Contract Costing
1.3 Multiple or Composite Costing
2.1 Signal or Output Costing
2.2 Operation Costing
2.3 Operating Costing
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
15 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
� Characteristics of an Ideal Cost Accounting System:
The Institute of Cost and Management Accountants of Bangladesh Course Teacher:
Md.Monowar Hossain MBA,ACMA, ACS,
Deputy General Manager
Finance Division,
Dhaka Stock Exchange Ltd.
Class note for
Professional Level –I
102 – Cost Accounting
16 Md.Monowar Hossain ACMA, ACS
Dy. General Manager
Finance Division
Dhaka Stock Exchange Ltd.
� Installation of a Cost Accounting System:
Before installing a costing system have to consider the following ….
1. Consideration of the size, layout and nature of the undertaking
2. Study of the production nature, methods and stage
3. Study of the organizational activities
4. Study of the present departments and their work
� Modern Trends in Cost Accounting: