ICMAP

SYLLABUS 2016
Estd. 1951

GRADUATION LEVEL
G3 - Management Accounting
Weightage
Part-A Management accounting and
Part-E short term decision making 30%
Part-A
Part-B Investment appraisal-long term
Part-D decision making 15%
Part-B
Part-C
Part-C Material and process costing 10%
Part-D Performance measurement and control 35%
Part-E Modern costing techniques 10%

Syllabus Overview: Learning Outcomes:

This is second paper of Management Accounting stream
and covers five parts i.e. short term decision making,
Long term decision making, Material and Process
Costing, Performance management and control and
Modern Costing Techniques.
Part A & B deals with short term and long term decision
making through application of management accounting
techniques. It provides understanding on different factors
that must be considered for decision making. Part C
relates to performance management and control through
budget, standard costing and variance analysis. Part D
deals with material and process costing methods and in
part E students will learn modern costing and
management accounting techniques.
On completion of this course, students will be able to:
l Demonstrate his knowledge in short term decision
making through Activity based costing, Breakeven
analysis, limiting factors, marginal costing and by
matching relevant cost and revenues
l Understand the marginal and absorption costing, its
reconciliation
l Prepare and use performance measurement and
control tools i.e. Budgets and Standard costing
l Understand and clarify the reasons for any variation
through variance analysis
l Apply material and process costing methods
l Evaluate projects for long term decision making
l Apply the modern costing techniques including
activity based costing, throughput and back flush
accounting and environmental costing for better
decision making

Detailed Contents Weightage Level of

in % Study Required
PART-A: MANAGEMENT ACCOUNTING AND SHORT TERM DECISION MAKING
1. Introduction to l Definition of management accounting U
Management l The changing Role of Management Accounting U
Accounting l Data and Information U&A
l The Purpose of Management Information U
l Sources and Categories of Information U
l ICMA Pakistan and its Role for Profession of U
Management Accountancy 30
2. Activity Based l Reasons for the development of ABC U, A & D
Costing l Outline of an ABC system U&A
l Cost Pools and Cost Drivers U&A
l Designing an ABC system U&A
l Absorption costing versus ABC U, A & D
l Marginal costing versus ABC U, A & D
l Benefits of ABC System U&A

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SYLLABUS 2016
Estd. 1951

3. Absorption and l Introduction to Marginal/ Variable Costing U

Marginal Costing, l Principles of Marginal Costing U&A
Single & Multi Product l Marginal Costing Versus Absorption Costing U, A & D
Breakeven Analysis l Product and period cost under both methods U&A
l Calculation of Profit under marginal and U, A & D
absorption costing
l Reconciliation of Profit U, A & D
l Contribution margin and Contribution margin to U, A & D
sales ratio (C/S ratio),
l Break-even in units and value for single product U, A & D
l Margin of safety ratio (M/S ratio) U&A
l Sales to generate target income U &A
l Break-even/ CVP graph U&A
l Breakeven point for multiple products U, A & D
l Breakeven analysis in a multi-product environment U, A & D
l Contribution to sales (C/S) ratio for multiple products U, A & D
l Underlying assumptions, limitations and information U
requirements for CVP analysis
l Multi Product CVP analysis U, A & D
l Sales/Product Mix Decisions U, A & D
l Target Profits for Multiple Products U, A & D
l Margin of safety for multiple products U, A & D
l Sensitivity analysis U, A & D
l Target Profit Analysis for Single and multi products U, A & D
l Basic and Multi product Breakeven chart/CVP Graph U&A
and its analysis
l Limitation of Breakeven analysis U
4. Relevant Costs l Relevant Costs and Revenues U
l Concept of Out of pocket cost, Opportunity Cost, U
Sunk cost
l The Relevant Costs of Material U
l The Relevant Costs of Labour U
l The Relevant Costs of Overheads U
l Application of relevant cost to short and A
long term decision making
5. Decision Making: l Limiting factors an introduction U
Limiting factor l Limiting factors analysis and restricted U, A & D
Analysis and freedom of action
Incremental l Optimum production plan with scarce recourses U, A & D
Analysis l Limiting factors and shadow prices U, A & D
l Using limiting factors analysis U, A & D
l Introduction to incremental analysis U, A & D
l Presentation Guidelines U, A & D
l Acceptance/Rejection of Contracts U, A & D
l Extra Shift Decisions and Overtime U, A & D
l Make or buy decisions U, A & D
l Accept or reject special orders U, A & D
l Dropping a product line or a segment of business U, A & D
6. Joint Products and l Joint Products and By-products U, A & D
By-Products l Dealing with Common Costs U, A & D
Costing l Joint Products in Process Accounts A&D
l Accounting treatment of By- Products U&A
l Methods of Allocation of joint cost U&A
l Decision to sell by-product at the time of D
separation or by further process
PART - B: INVESTMENT APPRAISAL-LONG TERM DECISION MAKING
7. The Time Value l Concept of time value of money A
of Money l Simple and Compound Interest Rates A
l Discounting and Compounding A
l Annuities and Perpetuities 15 A
l Uneven cash flow streams A&D
l Importance of discounting/compounding period A&D
l Effective annual interest rates D
l Loan Amortization D

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8. Capital Budgeting , l Overview of Capital Budgeting process U

Estimating Cash l Generating Investment Project Proposals U, A & D
Flows and l Estimating Project - After Tax Incremental Operating A&D
Techniques of Cash Flows
Capital Budgeting l Calculating incremental cash flows (asset expansion, U, A & D
asset replacement)
l Payback Period Method U, A & D
l Discounted Payback Period Method U, A & D
l Accounting Rate of Return Method U, A & D
l The net present value method U, A & D
l Internal rate of return method U, A & D
l NPV and IRR comparison U, A & D
l Modified IRR U, A & D
PART - C: MATERIAL AND PROCESS COSTING
9. Material Costing & l Inventory Control Levels U&A
Controls l Economic Order Quantity Model U, A & D
l ABC Controls for inventory U&A
10. Process Costing l Losses in Process Costing U&A
l Treatment of normal loss, abnormal loss A&D
l Normal and abnormal losses with scrap value and U, A & D
waste with Disposal Cost 10
l Addition of units and effect on cost U&A
l Treatment of Abnormal gain in process costing U&A
l Adjustment of WIP at start: Valuing Work in Process U&A
inventory at start with FIFO and average methods
l Accounting for spoilage, re work and scrap U&A
PART - D: PERFORMANCE MEASUREMENT AND CONTROL
11. Budgeting l Factors to be considered while preparing realistic U&A
forecasts
l Forecasting using historical data U&A
l Linear regression analysis U&A
l Time Series analysis U&A
l Classification of Cost into Fixed and Variable through U, A & D
high and low method
l Purpose of Budgeting including planning, U
communication, coordination, motivation,
authorization, control and evaluation
l Functional budgets U&A
l Budgetary Planning and Control system U, A & D
l Sales Budgets 35 U&A
l Production Budget and related budgets U&A
l Material Requirement Planning U, A & D
l Preparation of Complete Master Budget U, A & D
l Interaction between component and master budget U&A
l Preparation of Cash Budgets U, A & D
l Capital Expenditure Budgets U, A & D
l Preparation of projected income statement U&A
l Preparation of projected statement of financial position U&A
l Budgeting process for non manufacturing organizations U&A
l Use of Budgeting for Preparation of Feasibility Reports U&A
12. Budgetary Control l Introduction to Budgetary Control System U&A
l Fixed and flexible budgets, Monitoring procedures U&A
l Flexible Budgets and Budgetary Control U&A
l Rolling Budgets U&A
l Alternative approaches to budgeting i.e. incremental, U, A & D
zero based and Activity based budgeting
l Behavioral implications of budgeting U

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SYLLABUS 2016
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l Participative budgets and pros and cons of U&A

participative budgeting
l Use of Budgets as Targets U, A & D
l Budget and Motivation U, A & D
l Criticism on traditional budgeting and pros and cons of U
“Beyond Budgeting”
13. Standard costing l Purpose of Using Standard Costing Variance Analysis U
l Comparison between budget & standard U&A
l Establishing cost standards U&A
l Direct material standards U&A
l Direct labour standards U&A
l Overhead standards U, A & D
l Basic cost standards, ideal standards and currently U&A
attainable standards
l Setting standard in service industries U&A
14. Variance Analysis, l Variances Analysis for Cost: U, A & D
Interpretation and – Direct material cost variance, material quantity and
Profit rate variance, Material mix and yield variances
Reconciliation – Direct labour cost variance, labour rate and
efficiency variances, labour mix and yield variances
– Variable overhead variances
– Fixed overhead variances
l Responsibility analysis for cost variances U
l Sales/Revenue variances, U, A & D
l Sales volume and price variances, sales mix and yield U, A & D
variances
l Comparison of Variances in a standard marginal costing U&A
and standard absorption costing systems
l Deriving actual data from standard cost details and U&A
variances and Working backwards approach to
variance analysis
l Recording standard costs in the accounts U&A
l Reconcile standard profit and actual profit using U&A
absorption and marginal costing systems
l Accounting disposition of variances U&A
l Significance of variances to decide Investigate U, A & D
variance or not to investigate variance
l Variance investigation model A
l Controllability principle in Joint Variances U&A
l Interpretation of variances and Inter-relationships A&D
between variances
l Updating/revising standards A&D
l Planning and operational variances U, A & D
l Advantages and disadvantages of Standard costing U
l Criticism on standard costing U
PART - E: MODERN COSTING TECHNIQUES
15. JIT Production, l Just-in-time (JIT) and impact of JIT production A&D
Throughput and l The benefits of just in time production U, A & D
Back flush l The theory of constraints (TOC) U, A & D
Accounting l Throughput accounting and Throughput accounting U, A & D
(TA) ratio, accounting entries for a JIT manufacturing
system (Back flush) 10
16. Environmental l Introduction to Environmental Accounting U&A
Accounting l The importance of environmental costs U
l Environmental footprints U
l Types of cost U
l Environmental cost accounting U
TOTAL WEIGHTAGE 100
NOTE:-
U = Understanding
A = Application
D = Decision
Institute of Cost and Management Accountants of Pakistan
(Constituted under Cost and Management Accountants Act, 1966) 85