An introduction to Management Accounting: Costing
This unit provides students with the knowledge and skills needed to understand the role of cost and management accounting in an organisation, and how organisations use such information to aid management decision making. This unit takes students from Elements of Costing at Foundation level and gets them ready to prepare organisational budgets and report on performance at Professional level.
On successful completion of this unit, students should be able to carry out costing procedures in an organisation’s accounting department with minimal supervision. They will be able to gather, analyse and report cost and revenue information to support managerial planning, control and decision making.
Students will develop a deeper understanding of the fundamental principles that underpin management accounting: costing methodology and techniques, how costs are handled in organisations, and why different organisations treat costs in different ways. They will be able to recognise different approaches to management accounting and provide informed and reasoned judgements to guide management. They will also learn how to apply these principles and appreciate why effective cost accounting is crucial to any organisation.
Students will learn the techniques required for dealing with direct costs and revenues, and with the treatment of short-term overhead costs. These include inventory control methods; direct labour costing; allocation and apportionment of indirect costs to responsibility centres; calculation of overhead absorption rates, including under absorptions and over absorptions; and prime, marginal and absorption costing calculations.
They will also learn the techniques required for decision making, using both short-term and long term estimates of costs and revenues. These include: estimating changes in unit costs and profit as activity levels change; segmented profit or loss by products; break-even (cost volume profit – CVP) analysis; limiting factor decision making; job, batch, unit, process and service costing; reconciling budgeted and actual costs and revenues by means of flexible or fixed budgets; and capital investment appraisal techniques.
This unit builds on the knowledge and skills that students develop at Foundation level in Elements of Costing and prepares them for the Professional level units, Management Accounting: Budgeting and Management Accounting: Decision and Control. Together, these units give students an underpinning understanding of cost and management accounting principles and the ability to apply relevant techniques.
Management Accounting: Costing is a mandatory unit in this qualification.
Learning outcomes for Management Accounting: Costing
1. Understand the purpose and use of management accounting within an organisation
2. Apply techniques required for dealing with costs
3. Apportion costs according to organisational requirements
4. Analyse and review deviations from budget and report these to management
5. Apply management accounting techniques to support decision making