Rift Valley University Bale Robe Campus

Department of Accounting and Finance

Program BA degree in Accounting & Finance

Objective of the This module will cover cost accumulation concepts and techniques for Product and
module Service Costing and Planning and Control, as well as Non-routine Managerial
Decisions. Modern management accountants are not only concerned with how cost
data are transformed into cost accounting information but more importantly how to
use cost accounting information to aid managerial goals. It is the case, however, that
one cannot effectively use cost information without a good understanding of how
various cost accounting information are generated.
The module should develop the student's understanding, skill, and analytical ability
in cost and management accounting to the level where he or she can function
effectively (and efficiently) as a professional cost and management accountant in
industry, public accounting, management consulting, government, or personal
business management.

Courses of the Module

Course Title Cost & management Accounting II

ETCTS Credits 5

Contact Hours 3
(per week)
After successfully completing this course, students will be able to:
Course Objectives  Apply managerial accounting and its objectives in a way that
& Competences to demonstrates a clear understanding of ethical responsibilities.
be Acquired
 Analyze cost-volume-profit techniques to determine optimal managerial
decisions.
 Prepare a master budget and demonstrate an understanding of the
relationship between the components.
 Perform cost variance analysis and demonstrate the use of standard costs
in flexible budgeting.
 Prepare analyses of various special decisions, using relevant costing and
benefits.
Course Description Cost accounting course concerns with fundamental cost concepts, behavior, and
analysis and the use of cost information to develop superior decision making process
and outputs. This course introduces the production, communication, and the use of
accounting information within the context of business activities.
.

Course Contents

1
1. Cost-Volume-Profit Analysis, Absorption, and Variable Costing
1.1 Absorption versus Direct Costing
1.2 The concept of profit contribution
1.3 Cost-volume-profit (CVP) analysis: understanding the concepts of break-even and margin of safety
1.4 Cost Volume Profit Analysis under Absorption Costing
1.5 The use of linear, curvilinear and step functions and how their calculations are used to analyze cost behavior
1.6 The concepts of cost units, cost centers and profit centers
2. Relevant information and Decision Making
2.1 Relevant and irrelevant information
 Explain the concept of relevant costs and relevant revenues and how this is potentially different
from the notion of fixed and variable costs.
 Explain ‘sunk costs’ and why they are considered irrelevant to decisions.
 Explain such terms as ‘opportunity costs’, ‘avoidable costs’, ‘differential costs’ and ‘incremental
costs’.
2.2 Marketing Decisions
2.3 Production Decisions
3. Information for budgeting, planning and control purposes
3.1 Objectives and concepts of budgetary systems
 Budgeting as a multi-purpose activity,
 Budgeting and behavioral influences,
 Quantitative aids in budgeting: learning curve theory and application; limiting factors and linear
programming,
 Activity-based budgeting,
 Control theory and budgeting,
 Uncertainty and budgeting,
 Identification of relevance, strengths and weaknesses of budgeting and budgetary control
3.2 Types of budgetary systems: fixed and flexible budgets, zero-based budgets, and incremental, periodic and
continuous budgeting, Short-term vs. long-term budgets
3.3 Monitoring and controlling performance; the calculation of variances; the determination of the causes of
variances
3.4 Master budgets
 Manufacturing Businesses
 Merchandising Businesses
4. Standard Costing, Flexible Budgeting and Variance Analysis
4.1 The uses and limitations of standard costing methods
4.2 The determination of standards
4.3 Flexible budgets and variances
4.4 Identification and calculation of variances: sales variances (including quantity and mix); cost variances
(including mix and yield); absorption and marginal approaches
4.5 Identification of significant variances and their interrelationship
4.6 The uses of planning and operational variances
4.7 Trends, materiality and controllability of variances
4.8 Uncertainty and variance analysis
4.9 Identification of relevance, strengths and weaknesses of standard costing and variance analysis for performance
and control
5. The pricing of goods and services
5.1 Target and minimum pricing.
5.2 Price /demand relationships,
5.3 The pricing of special orders and short-life products,
5.4 Pricing in service industries,
5.5 Transfer Pricing
o Transfer Pricing: General Rule for Optimal Transfer Price
o Transfer Pricing: Imperfectly Competitive Intermediate Product Markets

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 6. Responsibility Accounting
6.1 Responsibility Accounting
6.2 Responsibility centers
6.3 Performance Measurement
Assessment/Evaluation The evaluation scheme will be as follows:
Component Weight coverage
Test 1 20% Chapter 1 &2
Test 2 20% Chapter 3 & 4
Assignment 1 10% Chapter 1 &2
Assignment 2 10% Chapter 3-6
Final Exam 40% All chapters
Text Book:
Text and reference  Horngren, Foster, &Datar. Cost Accounting: A Managerial
books Emphasis. 9th Ed. 1997
 Horngren, Sunden& Stratton. Introduction to Management
Accounting. 11th Ed. 1999
Reference Books
 C.T Homgren, Introduction to Management Accounting 4th to 8 th editions,
1999 USA
 C.T. Homgren, Cost Accounting: A Managerial Emphasis 5th to 8th
ecitionsprentice Hall Inc. 1982 to 1994
 Homgren, foster, &Datar, Cost Accounting A Managerial Emphasis. 10
thEcition
 L.E. Heitger Managerial Accounting 1th and 2 nd editions, McGraw Hill ,
1998, India
 GetuJemaneh, Management Accounting 1996.
 Ray H.Garrison, Managerial Accounting. 6th edition
 Caluinengler, Managerial Accounting 2nd edition
 L. Gayle Rayburn Principles of cost Accounting using a cost Mangement
Approach 4th edition Richard DIR WIN Inc. 1989.
 Robert X. Kaplan Advanced Management Accounting 1st and 2nd edition
prentice Haill, Inc, 1982 and 1989 (Chapters 2, 11,12, and 13 only)