ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD(Department of Business Administration)

COST AND MANAGEMENT ACCOUNTING (568)

CHECKLIST

SEMESTER: AUTUMN 2010

This packet comprises the following material:

1. Text Book (one)2. Course Outline3. Assignment No. 1, 24. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material, please contact at the address given below:

The Deputy RegistrarServices Block No. 28Allama Iqbal Open UniversityH-8, Islamabad

Mahmood-ul-HasanCourse Coordinator

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD(Department of Business Administration)

WARNING1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING

THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.

2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”.

Course: Cost and Management Accounting (568) Semester: Autumn 2010Level: MBA Marks: 100

ASSIGNMENT No. 1(Unit: 1–4)

Note: All questions carry equal marks.Q. 1 In an accounting conference, discussion turned to the possibility of preparing

financial statements from few accounts together with financial ratios. The Assistant Controller provided the following data:

Item Rs.Net Income 1,200,000Rate of return (Income) on Sales 10%Gross Profit rate on Net Sale 40%Rate of Marketing expenses to Sales 15%Total Liabilities 2,000,0005% Bond payable represents 37.5% of the total liabilities –

Required: An Income Statement based on the above information.

Q. 2 Waris Company uses process costing. All materials are added at the beginning of the process. The product is inspected when it is 80% converted, and spoilage is identified only at the point. Normal spoilage is expected to be 5% of good output.

During March 10,500 units were put into process. Current costs were Rs.52,500 for materials, Rs.39,770 for labor, and Rs.31,525 for factory overhead. The 3,000 units still in process at the end of March were estimated to be 90% complete. A total of 7,000 units were transferred to finished goods.Required: prepare a cost of production report for March.

Q. 3 (a) A club purchases 6,000 dozens of tennis balls next year, policy manual of the club prescribes to impute 10% interest on average inventory investment. Other costs associated with storage amount to Rs.21.60 per dozen. The cost involved in handling each purchase order is Rs.300, price quoted by the supplier is Rs.360 per dozen.

Required:i. EOQii. Secretary of the club propose to buy 2,000 dozens tennis balls in each order.

Show how much the club can save by buying in economic order quantity.

2

(b) Mustafa uses EOQ model to help in the planning and control of its inventory. One of the best items jeans is sold to public for Rs.600 per piece (at a markup of 400% of cost). Mustafa expects to buy and sell 1,200 pieces of this item during the year 2000. The relevant costs are:Ordering Cost = Rs.27 per orderCarrying Cost = 15%Required: Determine the EOQ and calculate the total ordering cost and carrying cost at this level.

Q. 4 The following information is available.Normal working day: 8 daysGuaranteed rate of pay (on time basis) Rs.5.5 per hourStandard time allowed to produce 1 unit 3 minutesPiecework price Rs.0.1 per standard

minutesPremium bonus 75% of time saved in

addition to hourly payRequired: For the following levels of out puts produce in a day: 80 units 120 units 210 unitsCalculate the earnings based on:i. Piece work, where earnings are guaranteed at 80% of time based payii. Premium bonus system

Q. 5 The XYZ company factory overhead rate is Rs.2.00 per hour. Budgeted overhead for 3000 hours per month is Rs.8,000 and for 7000 hours is Rs.12,000. Actual overhead for the month is Rs.9,000 and actual volume is 5000 hours.You are required to calculate the following from the data given above:1. Variable rate2. Fixed overhead3. Normal volume4. Applied FOH5. Over or under applied FOH6. Capacity variance7. Spending variance

GUIDELINES FOR ASSIGNMENT No. 1:You should look upon the assignments as a test of knowledge, management skills, and communication skills. When you write an assignment answer, you are indicating your knowledge to the teacher: Your level of understanding of the subject; How clearly you think? How well you can reflect on your knowledge & experience? How well you can use your knowledge in solving problems, explaining situations,

and describing organizations and management? How professional you are, and how much care and attention you give to what you do?

3

To answer a question effectively, address the question directly, bring important related issues into the discussion, refer to sources, and indicate how principles from the course materials apply. You must also be able to identify important problems and implications arising from the answer.

For citing references, writing bibliographies, and formatting the assignment, APA format should be followed.

ASSIGNMENT No. 2(Unit: 1–9) Total Marks: 100

This assignment is a research-oriented activity. You are required to obtain information from a business/commercial organization and prepare a report of about 1000 words on the issue allotted to you to be submitted to your teacher for evaluation.

You are required to select one of the following issues according to the last digit of your roll number. For example, if your roll number is P-3427180 then you will select issue # 0 (the last digit): -

ISSUES : 1. Process Costing Application in a manufacturing concern keeping in view the

treatment of lost units (Normal or abnormal).2. Study an organization and discuss various issues related to Quantitative Tools of

Inventory Management.3. Select a manufacturing organization and discuss its cost accounting cycle and issues

related thereto.4. Appointment of Overheads is a common practice in manufacturing concern. Discuss

with reference to any specific organization.5. Application of budgeting techniques in a manufacturing organization.6. Draft a cost accounting information system of any manufacturing organization7. Application of standard costing in a manufacturing concern keeping in view the

various variances.8. Select any organization (preferably manufacturing0 and study its incentive wage plans.9. Prepare a report on the uses of break even analysis in a specific manufacturing concerns.0. Analysis and application of various cost concepts for decision making.

The report should follow the following format:1. Title page2. Acknowledgements 3. An abstract (one page summary of the paper) 4. Table of contents5. Introduction to the issue (brief history & significance of issue assigned)6. Practical study of the organization (with respect to the issue) 7. Data collection methods 8. SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the

issue assigned9. Conclusion (one page brief covering important aspects of your report)10. Recommendations (specific recommendations relevant to issue assigned)11. References (as per APA format)12. Annexes (if any)

4

GUIDELINES FOR ASSIGNMENT No. 2: 1.5 line spacing Use headers and subheads throughout all sections Organization of ideas Writing skills (spelling, grammar, punctuation) Professionalism (readability and general appearance) Do more than repeat the text Express a point of view and defend it.

WORKSHOPS:The workshop presentations provide you opportunity to express your communication skills, knowledge & understanding of concepts learned during practical study assigned in assignment # 2.

You should use transparencies and any other material for effective presentation. The transparencies are not the presentation, but only a tool; the presentation is the combination of the transparencies and your speech. Workshop presentation transparencies should only be in typed format.

The transparencies should follow the following format:1) Title page2) An abstract (one page summary of the paper) 3) Introduction to the issue (brief history & significance of issue assigned)4) Practical study of the organization (with respect to the issue) 5) Data collection methods6) SWOT analysis (strengths, weaknesses, opportunities & threats) relevant to the

issue assigned7) Conclusion (one page brief covering important aspects of your report)8) Recommendations (specific recommendations relevant to issue assigned)

GUIDELINES FOR WORKSHOP PRESENTATION: Make eye contact and react to the audience. Don't read from the transparencies or

from report, and don't look too much at the transparencies (occasional glances are acceptable to help in recalling the topic to cover).

A 15-minute presentation can be practiced several times in advance, so do that until you are confident enough. Some people also use a mirror when rehearsing as a substitute for an audience.

WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT # 2 & WORKSHOP PRESENTATIONS:Assignment # 2 & workshop presentations are evaluated on the basis of theory & its applicability. The weightage of each aspect would be:

Theory: 60%Applicability (practical study of the organization): 40%

5

COST AND MANAGEMENT ACCOUNTINGCourse Outline (MBA-568)

Unit-1 The Conceptual Framework1.1. The Concept of Cost Management1.2. The Organizational Chart, Planning and control1.3. The Scope of Cost Accounting1.4. Distinction between Cost & Mgt Accounting with Financial Accounting1.5. Uses of Cost Accounting Data1.6. The Flow of costs1.7. Cost Accounting Principles and Practices

Unit-2 The Cost Accounting Systems 2.1. The Basics of Cost Accounting Information System2.2. The Manufacturing Cost Accounting Cycle2.3. Cost of goods manufactured statement2.4. Job Order Cost Accumulation Procedures2.5. Process Costing 2.6. The Cost of Production Report2.7. Difficulties Encountered in Process Costing

Unit-3 Material and Labor Costing3.1 Material Procurement and Use3.2 Material Costing Methods3.3 Economic Order Quantity 3.4 Material Controls3.5 Basics of Labor Cost Control3.6 Labor Performance Reports3.7 Recording Labor Costs3.8 Incentive wage plans

Unit-4 Planning and Control of Factory Overhead4.1 Factory Overhead (Pre-determined rate, applied & actual)4.2 FOH Variance Analysis4.3 The Concept of Departmentalization4.4 Departmental Overhead Rates and Variances4.5 Overhead Departmentalization in Non-Manufacturing Business

Unit-5 Cost Behavior – Analysis and Use5.1 Cost Behavior Patterns5.2 Variable Costs – Its Implications5.3 Fixed Costs and Relevant Range5.4 The Contribution Format5.5 Cost Volume Profit Relationships5.6 Cost Structure5.7 Applications of (cost volume profit)CVP Concept5.8 Break Even Analysis5.9 The Margin of Safety

6

Unit-6 Budgeting6.1. The Basic Framework of Budgeting6.2. Difference between Planning and Control6.3. Definition, Advantages of Budgets6.4. Principles of Budgeting6.5. The Budget Committee6.6. The Master Budget – A Network of Inter-relationship6.7. Sales, Production and Cash Budgets6.8. Zero-based Budgeting6.9. Projected Financial Statements6.10. The concept of Flexible Budget – Different Dimensions

Unit-7 Control through Standard Costs7.1. Standard Cost Defined7.2. Comparison of Budgets and Standards7.3. Setting Standards – Ideal Versus Practical Standards7.4. Variances, calculation and analysis 7.5. Responsibility and Control of Variances

Unit-8 Costs in Decision Making8.1. The Absorption Vs Direct costing 8.2. Fixed overhead and Absorption cost of product8.3. Reconciliation of direct costing and absorption costing8.4. The Contribution Approach8.5. Cost Concepts for Decision Making8.6. Identifying Relevant Costs8.7. Make Versus Buy Decision8.8. The Opportunity Costs

Unit-9 Activity Based Costing (ABC)9.1 Limitations of traditional costing systems9.2 ABC process9.3 Activity identification and classification9.4 Assigning costs to activities and products9.5 Comparison of ABC with traditional costing systems

Recommended BooksTitle Author Publisher

1. Cost Accounting – Matz – Usury National Book Foundation,Planning and Control (Latest Edition) Islamabad.

2. Managerial Accounting Ray H. Garrison Irvine, USA.(5th Edition)

3 Cost Management Hansen & MowenAccounting and Control

=======

7