COM 2502 Cost and Management Accounting

Cost accounting is a type of accounting process that aims to capture a company’s costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment. Cost accounting will first measure and record these costs individually, then compare input results to output or actual results to aid company management in measuring financial performance.


Management accounting is concerned with the provisions and use of accounting information to managers within organizations, to provide them with the basis to make informed business decisions that will allow them to be better equipped in their management and control functions.

  • To provide students with basic concepts of cost accounting and management accounting and the usefulness of internal accounting system.
  • To provide students with the capability to apply knowledge in decision-making scenarios;
  • To require students to more fully develop their critical thinking skills.
  • To inculcate professionalism and to make learning accounting both interesting and fun.

Upon completion of this course, the students will be able to:

  • Understand salient principles, concepts and practices in functional disciplines of cost and management accounting.
  • Explain the aims, functions, uses and influence of cost and management accounting in society and managerial decision-making.
  • Explain the selecting of projects using different techniques with resources constraints.

1. An introduction to Cost Accounting, cost terms and concepts.
1.1 Nature and usefulness of cost Accounting
1.2 Cost objects
1.3 Direct and Indirect costs
1.4 Cost behaviour
1.5 Relevant and irrelevant costs and revenue
1.6 Avoidable and unavoidable costs
1.7 Sunk costs and opportunity costs
1.8 Job costing and process costing system

2. Accounting for Material
2.1 Need for holding inventory
2.2 Materials control cycle
2.3 Calculation of inventory value
2.4 Different pricing Methods
2.5 Ways to optimize investments in inventory

3. Accounting for Labour
3.1 Importance of labour cost
3.2 Remuneration Methods
3.3 Preparation of payroll and Accounting for it

4. Accounting for Overheads
4.1 Importance of overheads
4.2 Collection, allocation, absorption of overheads
4.3 Overhead absorption rates and under / over absorption of overheads

5. Job costing and Process Costing
5.1 Accounting entries for a job costing system
5.2 Interlocking Accounting
5.3 Defining process costing
5.4 Indentifying process costing systems
5.5 Preparation of process Account
5.6 Losses in process
5.7 Process costing for decision-making and control

6. Joint and by-product costing
6.1 Distinguishing between joint products and by-products
6.2 Methods of allocating joint costs
6.3 Accounting for by-products
7. Introduction to Management Accounting
7.1 Nature and usefulness of Management Accounting
7.2 Functions of Management Accounting
7.3 The decision making process and role of management accounting in making decisions

8. Cost – Volume – Profit analysis
8.1 Relationship between cost, volume and profit
8.2 Single product Break-even-point analysis
8.3 Constructing a break-even-chart
8.4 Multi-product break even point analysis
8.5 Assumptions and limitations of the cost-volume-profit analysis

9. Measuring relevant costs and revenues for decision – making
9.1 The relevant cost approach to decision making situations
9.2 Importance of qualitative factors
9.3 Special pricing decisions
9.4 Product mix decisions when capacity constraints exist
9.5 Replacement of equipment
9.6 Make or buy decisions
9.7 Discontinuation decisions
9.8 Misconceptions about relevant costs

10. Capital investment decisions
10.1 Objectives of capital budgeting
10.2 Compounding and discounting
10.3 The concept of Net Present Value and calculating Net Present Value
10.4 The Internal rate of return
10.5 Relevant cash flows and timing of cash flows
10.6 Profitability index
10.7 Payback Method and Accounting rate of return
10.8 Importance of qualitative factors

11. The budgeting process
11.1 Multiple functions of budgets
11.2 Preparation of budgets  sales budget, production budget, material usage budget, Material purchase budget, direct Labor budget, overhead budgets, cash budget, Master budget
11.3 Advantages and disadvantages of budgeting
12. Standard costing and variance analysis
12.1 Establishing cost standards
12.2 Types of cost standards
12.3 Advantages and disadvantages of standard cost systems
12.4 Variance analysis
12.4.1 Material variances
12.4.2 Labour variances
12.4.3 Variable overhead variances
12.4.4 Fixed overhead variances
12.4.5 Sales variances
12.5 Reconciling budgeted profit and actual profit

Lectures, seminars, course manuals, workshops, assignments, self study.

  1. Management and Cost Accounting, Colin Drury, 7th
  2. Management and Cost Accounting, Colin Drury, 6th Edition.