Webcast Final p 5 Advanced Management Accounting
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Transcript of Webcast Final p 5 Advanced Management Accounting
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CA. B. Saravana Prasath, FCA July 13, 2013
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Category 1:
1. CVP Analysis Marginal Costing
2. Budgetary Control
3. Variance AnalysisStandard Costing
4. Relevant Cost Analysis
5. Pricing Concepts, Methods, Strategies
6. Transfer Pricing
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Category 2:
8. Activity Based Costing
9. Target Costing
10.Life Cycle Costing
11.Total Quality Management
12.JIT, MRP, Performance Measurement etc.
13.Costing of Service Sector
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Category 3:
16.Linear Programming
17.Transportation
18.Assignment
19.Simulation
20.Learning Curve
21.Network Analysis CPM & PERT
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PVR, BEP and MOS
Indifference Point
Shut Down Point
Effect of SP / VC not being constant pu
Effect of Step Fixed Costs
Effect of Key Factor Resource Shortage
Effect of NonCost Factors in Decisions
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Production Budget
Material Usage and Cost Budget
Material Purchase and Cost Budget
Manpower Budget in terms of Hours, Cost and Number of Workers
OH Fixed & Flexible Budgets
Zero Base Budgeting
Performance Budgeting
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Analysis of Cost Variances Material, Labour, VOH, FOH
Analysis of Sales Variances Total and Margin Approaches
Reconciliation between Standard, Budgeted and Actual Profits
Accounting and Disposition of Variances Single & Partial Plans
Special Variances Market Size, Market Share,Current conditions, etc.
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Relevant & Irrelevant Costs
Relevant Cost Analysis of Materials, Labour and Other Costs
Lowest Price Quotation for new orders / contracts
Evaluation of two or more options using Relevant Cost Principles
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Pricing Methods and its linkage to Costs
Pricing in different market forms
Pricing Strategies w.r.t. New Product Pricing, Discounts, Price Discrimination, etc.
Pareto Analysis Business Applications
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Objectives of Transfer Pricing
Types of Transfer Pricing
Optimal Transfer Price Range Minimum & Maximum Transfer Prices
Handling Conflicts in Transfer Pricing
International Transfer Pricing
Effects of Transfer Pricing on Company and Divisional Profits
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For Uniform Costing and Inter-Firm Comparison
Meaning & Objectives
Pre-requisites
Merits & Demerits
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Activity, Cost Driver, Cost Object
Activity Classification
Steps in ABC and ABM
Value Added & Non Value Added Activities
Activity Based Budgeting
Activity Based Variance Analysis
Income Statements using ABC
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Steps in Target Costing
Merits & Demerits of Target Costing
Data Sources and Control Points
Value Analysis and Value Engineering
Kaizen Costing
Cost Reduction vs Cost Control vs Cost Management
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Stages / Phases in Product Life Cycle
Merits & Demerits of Life Cycle Costing
Features of Life Cycle Costing
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Concepts of Quality Control, Quality Assurance, Quality Management
Steps in TQM
PRAISE Process in TQM
6 Cs of TQM
4 Ps of TQM
Continuous Process Improvement
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JIT Concept, Benefits, Objectives, Performance Measurement in JIT, Backflush Costing, etc.
MRP Objectives, Benefits, Data needs, Stages,etc.
Production Concepts CAM, BPR, Synchronous Manufacturing
Balanced Score Card Concept
Benchmarking
Responsibility Budgeting
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Peculiarities involved in Costing of Service Sector.
Methods applied by Service Sector Entities to determine their Unit Costs.
Performance Measurement in Service Sector
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Concept of Value Chain
Forms of Competitive Advantage
Different Types of Analysis under Value Chain Concept
Value Chain Analysis vs Traditional Accounting Systems
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Throughput Accounting Concept
Key Measure under TOC Concept
Management of Bottleneck Resources, & Allocation using TOC Concept
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Formulation of LPP & Types
Trial & Error Method of solving LPP
Graphical Method of solving LPP
Simplex Method Maximisation, Minimisation, Equality Constraints,
Degeneracy, Multiple Optimal Solutions, Infeasible Solution, Infinite Solution, etc.
Primal vs Dual Relationship
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Minimum Transportation Cost
Special Situations Prohibited and Preferred Routes
Dealing with Degeneracy, Multiple Optimal Solutions, etc.
Optimality Test for IBFS
Methods of obtaining IBFS
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Hungarian Algorithm for Assignment
Dealing with Maximisation Objective, Multiple Optimal Solutions, Prohibited and Preferred Assignment, etc.
Computation of Result Minimum Cost or Maximum Revenue, etc.
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Meaning, Merits & Demerits
Steps in Monte Carlo Simulation
Application of Simulation in different business situations Inventory Management, Capital Budgeting, etc.
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Meaning, Merits & Demerits
Learning Curve Equation, Learning Co-efficient
Application of Learning Curve in different business situations Incremental Order Pricing, Cumulative Cost Computation, etc.
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Basic Terms Activity, Event, Time Duration, Start and Finish Times, Different Types of Float, etc.
Critical Path, Project Time & Cost
Program Evaluation Review Technique Use of Probability in estimating project completion date, etc.
Special Aspects Project Crashing, Resource Levelling, Resource Allocation, etc.
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If Moonlite Limited operates its Plant at normal capacity it produces 2,00,000 units from the Plant Meghdoot. The unit cost of manufacturing at normal capacity is as under
Direct Material - ` 65, Direct Labour - ` 30, Direct Overhead - ` 33, Fixed Overhead - ` 7.
Direct Labour Cost represents the compensation to highlyskilled workers, who are permanent employees of the Company. The Company cannot afford to lose them. One labour hour is required to complete one unit of the product.
Question:
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The Company sells its product for ` 200 per unit with Variable Selling Expenses of ` 16 per unit. The Company estimates that due to economic down turn, it will not be able to operate the Plant at the normal capacity, at least during the next year. It is evaluating the feasibility of shutting down the Plant temporarily for one year.
If it shuts down the Plant, the Fixed Manufacturing Overhead will be reduced to ` 1,25,000. The Overhead Costs are incurred at a uniform rate throughout the year. It is also estimated that additional cost of shutting down will be ` 50,000 & cost reopening will be ` 1,00,000.
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Required: Calculate the minimum level of production at which it will be economically beneficial to continue to operate the Plant next year, if 50% of the Labour hours can be utilized in another activity, which is expected to contribute at the rate of ` 40 per Labour hour. The additional activity will relate to a job which will be offloaded by a Sister Company, only if the Company decided to shut down the Plant. (Assume that the cost structure will remain unchanged next year. Ignore Income Tax and Time Value of Money).
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Solution: Note: Direct Labour Cost is committed & irrelevant, since the Company cannot afford to lose the highly skilled permanent workers. Effective Contribution p.u. = Selling Price p.u. Variable Cost p.u. = ` 200 ` 65 Material ` 33 VOH ` 16 SOH = ` 86 Let required Minimum Output to justify Operation = Q units.
1 M
1 M
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Particulars Continue Close down 1. Benefit = Contribution Q units ` 86 50% 2,00,000 hrs
` 40 p.h = ` 40,00,000
2. Costs (a)Fixed Overhead ` 7 p.u. 2,00,000
units = ` 14,00,000 1,25,000
(a)Shut down and Reopening Costs
` 50,000, + ` 1,00,000 = ` 1,50,000
Net Benefit 86Q 14,00,000 37,25,000 Solving for Q: 86Q 14,00,000 = 37,25,000. 86Q = 51,25,000.
So, Q = 51,25,000 86 = 59,593 Units Inference: Plant can be continued, if expected sales 59,593 units.
1 M
1/2 M
1/2 M
1 M
Total = 5 Marks
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Webcast on Strategy to Qualify & Excel in CA Final Course P 5: Advanced Management AccountingBasic Classification of TopicsBasic Classification of TopicsBasic Classification of Topics1. Marginal Costing Learning Areas2: Budgeting Learning Areas3: Standard Costing Learning Areas4: Relevant Cost Analysis Learning Areas5: Pricing Concepts Learning Areas6: Transfer Pricing Learning Areas7: Uniform Costing and Inter Firm Comparison Learning Areas8: Activity Based Costing Learning Areas9: Target Costing Learning Areas10: Life Cycle Costing Learning Areas11: TQM Learning Areas12: JIT, MRP, Performance Measurement Learning Areas13: Costing of Service Sector Learning Areas14: Value Chain Analysis Learning Areas15: Theory of Constraints Learning AreasChapter 16: Linear Programming Learning AreasCh. 17: Transportation Learning AreasChapter 18: Assignment Learning AreasChapter 19: Simulation Learning AreasChapter 20: Learning Curve Learning AreasChapter 21: Network Analysis Learning AreasSample Presentation for 5 Mark QuestionSample Presentation for 5 Mark QuestionSample Presentation for 5 Mark QuestionSample Presentation for 5 Mark QuestionSample Presentation for 5 Mark QuestionThank You