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Kasneb CPA Syllabus
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PAPER NO. 5 COST ACCOUNTING |
GENERAL OBJECTIVE |
| To develop the candidate's knowledge of costing and budgeting techniques |
4.0 SPECIFIC OBJECTIVES |
A candidate who passes this paper should be able to:
- Explain costing terms and concepts
- Apply cost estimation techniques
- Analyse product costs for manufacturing and non-manufacturing techniques
- Evaluate marginal and absorption cost statements and their applications
- Analyse an organisation's activities through budgetary control process
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CONTENT |
5.1 Nature and purpose of cost accounting
- The nature of cost accounting and coting terms
- The role of cost accounting in management
- The purposes of cost accounting information
- The scope of cost accounting
- Relationship between cost, financial and management accounting
- Selection of an ideal cost accounting system
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5.2 Cost classification and estimation
- The purpose of cost classification
- Methods of cost classification
- By nature/elements of manufacturing costs: Material, labour and overheads
- Functional classification: Production, administration, selling and distribution
- Behavioural classification: Variable versus fixed, direct versus indirect costs
- Controllability: Controllable and uncontrollable costs
- Normality: Normal and abnormal costs
- Time: Historical and predetermined costs
- Financial accounting: Capital versus revenue costs
- Identification with inventory: Period and product costs
- For decision making: Sunk costs, marginal costs, replacement costs, standard costs and budgeted costs
- Methods of cost estimation: High-low, visual fit (scatter) and account analysis, industrial engineering and regression analysis (simple)
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5.3 Cost accumulation
- Determination of costs in manufacturing, service and retail industries
- Accounting for material and inventory; material cost records, purchasing procedures, receipt and issues of material, methods of valuing material issuese, inventory control procedures; economic order quantity (EOQ) and economic batch quantity (EBQ) models, just in time (JIT) and backflush
- Accounting for labour: Methods of labour remuneration, labour control procedures, maintenance of labour records
- Accounting for overheads: Types of overheads, manufacturing, distribution and administration, service departmental cost allocation and apportionment, overheads analysis, overheads absortion rates, over or under absorption
- Activity based costing
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5.4 Cost bookkeeping and methods
- The flow of costs in a business enterprise
- Cost bookkeeping-integrated systems
- Costing methods: Job order costing, batch costing, process costing (including work in progress(WIP), joint and by-product), service and unit costing
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5.5 Marginal and absorption costing
- Distinction between marginal and absorption costing
- valuation of products under marginal and absorption costing
- Preparation of marginal and absorption statements; cost of production and profit determination
- Reconciliation of marginal profits and absorption profits
- Applications of marginal costing: Break-even analysis and charts (single product)
- Simplified decision problems; accept or reject, special order, dropping a product, make or buy
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5.6 Budgeting and budgetary control
- Nature and purposes of budgets
- Preparation of budgets; master budgets, functional (department budgets, cash budgets), proforma financial reports (income statements and balance sheets), fixed and flexible budgets
- Purpose of budgetary control; operation of a budgetary control system, organisation and coordination of the budgeting function
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5.7 Standard costing
- Types of standards
- Principles of setting standards
- Standard cost card
- Behavioural aspects of standard costing
- Generation of standard cost information
- Materials, labour and overheads variances; price and efficiency variances
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5.8 Cost management
- Value chain-research and development-design-production-marketing-distribution and customer care
- Just in time (JIT)
- Advanced manufacturing technology (AMT)
- Material resource planning (MRP)
- Use of computers in costing, job costing, inventory management, labour costing, cost centre analysis, coding, budgeting and decision making
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| Previous: Economics Next: Auditing and assurance |
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