Strategic Management Accounting as an Integral Part of the. Syllabus. Strategic
.... Core Texts. C. Drury / Management and Cost Accounting (6th edition) /.
Professional 1
Paper 3 Strategic Management Accounting Examination Duration: 3.5 Hours
Objective
Focus of Paper
The objective of this subject is to ensure that students have:
The objective of the examination is to asses the students' professional and technical competence. Students are expected to demonstrate an ability to integrate relevant syllabus material from other subjects studied when required. The compulsory questions are generally computational and may require a brief commentary on the computations. The choice questions on the paper are more discursive in style. Students may be expected to write clear and concise memos, reports etc. There may also be a requirement to include calculations in support of the reports.
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Developed sound analytical and critical abilities. A detailed knowledge of the principles and practice of cost accumulation systems. A comprehensive understanding of the role of accounting information in planning and control. A comprehensive understanding of the role of accounting information in decision-making and performance evaluation. An awareness of current development and newly evolving practices in management accounting (including an ability to apply these practices).
Syllabus
Strategic Management Accounting as an Integral Part of the Syllabus Strategic Management Accounting builds on the technical knowledge acquired in the Management Accounting subject.
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COST ACCUMULATION SYSTEMS: (Competency Level 3) ● Review of overhead, concepts of allocation, apportionment and absorption. ● Review of job costing and process costing. (Detailed numerical questions on process costing not asked at this level.) ● Joint product costing to include methods of apportioning joint costs and accounting for byproducts. ● Activity-based costing (ABC). This topic includes an understanding of the limitations of ABC. Activity based costing applications. Understanding of the developing role of ABC (eg. activity based cost management, customer profitability analysis and activity based budgeting).
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INFORMATION FOR DECISION MAKING: (Competency Level 3) ● Cost estimation techniques including the high-low, scattergraph and simple regression methods. Applications of the learning curve. ● Cost-volume profit analysis (CVP) including multiproduct firms, taxation, margin of safety, construction of break-even charts and an understanding of the assumption underlying CVP analysis. ● Cost concepts for decision making, relevant costs, sunk costs and opportunity costs. Applications of these concepts to various decisions such as deleting a segment, make or buy decisions, special selling price decisions, use of discounted cash flow; DCF (IRR is excluded). ● Decision making and the influence of limiting factors. ● Accounting information for pricing decisions, to include economic and cost-based pricing. ● Target costing.
Examination Approach Students should approach the examination of this subject in the knowledge that it requires an ability to demonstrate a high level of professional and technical competence. The vast bulk of the Strategic Management Accounting syllabus requires students to have a detailed understanding (i.e. mastery) of the examinable material. Students have to demonstrate an in-depth knowledge of the syllabus content and be able to integrate the syllabus content with other subjects studied. Examination Format The examination is 3.5 hours duration. The paper has 6 questions. 3 questions are compulsory (Part A). Students are required to answer 2 of the remaining 3 questions (Part B) Marks Allocation Question 1 Question 2 Question 3 Choice of 2 questions out of 3 (20 marks are allocated to each question)
Marks 20 20 20 40 100
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The three competency levels are grouped in ascending order: 1: Knowledge & Understanding (Ability to locate and acquire knowledge). 2: Application & Analysis (The ability to apply knowledge and understanding effectively to the analysis of complex and unfamiliar situations). 3: Synthesis & Evaluation (The ability to integrate knowledge with sound judgment in the critical evaluation of situations to develop creative solutions).
Limitations of cost-based pricing. Decision making under conditions of risk and uncertainty to include the use of probabilities and expected values. (Numerical linear programming questions will not be asked).
INFORMATION FOR PLANNING AND CONTROL: (Competency Level 3) ● Budgetary control: static versus flexible budgeting. An understanding of the limitations of the incrementals approach to budgeting. Zero-base budgeting. Management control structure including cost, profit and investment centres. Control of engineered, discretionary and committed costs. Capital budgeting and investment decisions. Behavioural aspects of budgeting. ● Standard costing and variance analysis: comprehensive analysis of main and subsidiary variances including materials mix and yield variances, sales mix and sales quantity variances. Reconciling budgeted profits and actual profit. Critical appraisal of standard costing in a world class manufacturing environment. ● Planning and operational variances (Including market share and market size variances)
In general, Level 3 is the predominant level for subjects at Professional 2 Stage, with students having progressed though competency levels 2 and 3 in the previous stages of the syllabus. The balance shifts from the lower competency levels to higher levels as students progress through the syllabus. This is not an absolute, as higher competency levels are also required for some topics in the previous stages of the syllabus and lower levels for some topics at the Professional 2 Stage.
Booklist
PERFORMANCE EVALUATION: (Competency Level 3) ● Measuring divisional profitability including an understanding of return on investment and residual income (Annuity Depreciation is excluded). ● Non-financial measures of performance including an understanding of the balanced scorecard. ● The objectives and methods of transfer pricing.
Core Texts C. Drury / Management and Cost Accounting (6th edition) / ISBN 1844800288. C. T. Horngren, A. Bhimani, S. M. Datar & G. Foster / Management and Costing Accounting / (3rd edition) / ISBN 0273687514. Lucey, Cost Accounting (DPP)
CURRENT DEVELOPMENTS IN MANAGEMENT ACCOUNTING: (Competency Level 3) ● Cost of quality management including an understanding of prevention costs, appraisal costs, internal failure costs and external failure costs. ● Activity based cost management. ● Benchmarking. ● Strategic management accounting. ● Total Quality Management (TQM) and Just-in-Time (JIT) Manufacturing.
Supplementary Texts F. R. David / Strategic Management: Concepts and Cases (11th edition) / ISBN 0131869493. A. A. De Waal / Strategic Performance Management: A Managerial and Behavioural Approach / ISBN 1403998841. M. Davis & J. Heineke / Operations Management (5th edition) / ISBN 0071117245.
Competency Levels Each topic in each subject is assigned a competency level. Three levels are defined and these are referenced to the intellectual skills listed in the International Education Standard 3 (IES3) issued by the International Federation of Accountants (IFAC). Questions and case study scenarios in the Professional Stage examinations are framed with reference to real working environments.
Barfield, Raiborn and Kinney, Cost Accounting (5th edition, Thompson/South Western). AccountancyPlus. CPA students’ eBulletin. Useful Websites (as of date of publication) www.cpaireland.ie - Institute of Certified Public Accountants in Ireland. www.ifac.org/ - International Federation of Accountants. www.investmentinternational.com - Investor International. www.accountingeducation.com - Accounting Education.com. www.hoovers.com - Hoovers.com. Companion websites to core and supplementary texts – see texts for addresses and passwords.
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