Unit Title: Managerial Accounting Unit Reference Number: D/502/4812 Guided Learning Hours: 160 Level: Level 5 Number of Credits: 18

Transcription

1 Unit Title: Managerial Accounting Unit Reference Number: D/502/4812 Guided Learning Hours: 160 Level: Level 5 Number of Credits: 18 Unit objective and aim(s): This unit aims to give learners a comprehensive understanding of: the essential requirements of a managerial accounting system including control systems how to classify and analyse cost data according to the activity costs for short-term decision making, marginal and absorption costing budgetary control and working capital management standard costing and variance analysis capital investment project appraisal Learning Outcome 1 The learner will: Understand the essential requirements of a management accounting system and the control systems required for materials, labour and overheads. 1.1 Describe and explain the essential requirements of a management accounting system Describe and explain the essential requirements of a management accounting system. 1.2 Describe and explain the different types of cost centre and their uses and the different types of cost units Describe and explain the nature of costs, their behavioural aspects and their classification Describe and explain different types of cost centres, such as production and service cost centres and their uses Describe and explain different types of cost units. Some examples include (but are not limited to) cars (cost per vehicle), garment manufacture (cost per garment), oil extraction (cost per barrel). 1.3 Describe and explain the methods of allocation and apportionment of overheads, pricing of materials and the impact upon profits of the different methods available Describe and explain the methods of allocation and apportionment of overheads Describe and explain the pricing of materials Describe and explain the impact of the different methods of allocation and apportionment available on profits Describe and explain service department costs. 1.4 Describe and explain the problems and costs associated with labour Describe and explain the problems and costs associated with labour turnover.

2 turnover Calculate labour turnover from a set of given figures. 1.5 Calculate overhead recovery rates and discuss the suitability of different bases of recovery available Calculate overhead recovery rates Discuss the suitability of the different bases of recovery available. Learning Outcome 2 The learner will: Know how to classify and analyse cost data and understand how cost systems differ by activity, i.e. job, process and contract costing. 2.1 Describe and explain cost volume profit analysis and the assumptions on which such analysis is based Describe and explain cost volume profit analysis Explain the assumptions on which such analysis is based and the validity of these assumptions. 2.2 Describe and explain the characteristics of process costing, equivalent units and normal and abnormal losses including the treatment of normal and abnormal losses within the accounts of a business Describe and explain the characteristics of process costing Describe and explain the concept of equivalent units Describe and explain normal and abnormal losses and their treatment within the accounts. 2.3 Describe and explain the difference between joint products and byproducts including methods of apportioning joint costs, and the use of activity-based costing methods Describe and explain the difference between joint products and by-products Describe and explain methods of apportioning joint costs Describe and explain the use of activity-based costing. 2.4 Calculate the cost and selling price of a product or service Calculate the cost and selling price of a product or service. Learning Outcome 3 The learner will: Understand costs for short-term decision-making and know the difference between marginal and absorption costing.

3 3.1 Explain contribution theory and limiting factors and calculate the maximum profit in a limiting factor situation Describe and explain contribution theory Explain what is meant by limiting factors Calculate the maximum profit in a limiting factor situation Calculate whether to make or buy Calculate an appropriate selling price Calculate whether or not to close a department or cease the manufacturing or selling of a particular product. 3.2 Explain the different types of cost that have an influence on short-term decision-making and calculate prices on a relevant cost basis Explain sunk costs, opportunity costs, differential and incremental costs Discuss and explain the influence of the above on shortterm decision-making Explain and calculate prices on a relevant cost basis. 3.3 Prepare marginal costing and absorption costing profit statements and explain and reconcile the differences in profits between these two statements Prepare profit statement using marginal costing Prepare profit statement using absorption costing Explain and reconcile the differences in profits between these two statements. 3.4 Explain the reason for, and significance of, an under- or over-absorption of fixed costs Explain the reason for, and significance of, an under- or over-absorption of fixed costs. Learning Outcome 4 The learner will: Understand the purpose of budgetary control including the purpose and importance of working capital management. 4.1 Describe the objectives, benefits and limitations of budgets and budgetary control and construct budgets for Describe the objectives and benefits of budgets and budgetary control Describe and construct budgets for planning and control purposes including functional, master and cash budgets.

4 planning and control and calculate and use profitability ratios Contrast cash budgets with cash flow statements Explain the management of budgets Explain and demonstrate the use of flexible budgets as a control technique Calculate, use and comment upon profitability ratios, examples of which include (but are not limited to): gross and net profit margins, return on capital employed and capital turnover. 4.2 Describe and explain the working capital operating cycle and the funding and control of each of the elements of working capital, including the problems and costs associated with having too much or too little of each element Describe, explain and calculate the working capital operating cycle Describe and explain the funding and control of each of the elements of working capital Describe and explain the problems and costs associated with having too much or too little of each element. 4.3 Calculate and use solvency ratios and economic material order quantity in order to control working capital Calculate and discuss the use of solvency ratios, examples of which include (but are not limited to): working capital or current ratio, acid test, stock turnover, debtors collection period and creditors payment period Calculate and discuss the economic material order quantity in the control of working capital. Learning Outcome 5 The learner will: Understand the purpose of standard costing and variance analysis. 5.1 Describe and explain the significance and interrelationship of the different types of variances Describe and explain the significance of, and the interrelationship between, the different types of variances Describe and explain the causes of these variances Calculate the following variances: Labour rate and efficiency variances Material price and usage variances Sales price and volume variances Variable overhead expenditure and efficiency variances Fixed overhead expenditure and volume variances 5.2 Explain the value of the investigation of Explain the value of the investigation of variances.

5 variances, including the differences between fixed and variable cost variances Describe and explain the differences between fixed and variable cost variances. 5.3 Describe types of standards and their suitability Describe the types of standards and their suitability Describe and explain control ratios and their relationship to variances. Learning Outcome 6 The learner will: Know how to appraise capital investment projects. 6.1 Explain the financial and non-financial factors involved in investment decisions, differentiating between profit and cash flow and outlining the significance of non-cash items Demonstrate knowledge of the time-value of money Explain the financial and non-financial factors involved in investment decisions Explain the difference between profit and cash flow Explain the significance of non-cash items. 6.2 Calculate and explain a range of investment appraisal techniques Calculate and explain the accounting rate of return Calculate and explain payback Calculate and explain net present value Explain the Internal Rate of Return calculations will not be required. 6.3 Explain the strengths and weaknesses of the different methods of investment appraisal Explain the strengths and weaknesses of the different methods of investment appraisal. Assessment: Assessment method: written examination (unless otherwise stated). Written examinations are of three hours duration. All learning outcomes will be assessed. Recommended Reading:

6 Managerial Accounting ABE Study Manual Please refer to the Qualifications section of the ABE website ( for lists of further recommended reading books.