I am teaching a course titled 'Cost and Management Accounting' in the current semester. This is a 4 credit course offered to the second year (third semester) MBA students. Since the title of this course is abbreviated as CMA, my blog posts related to this course will have CMA as the title. The sessions in this course are a mixture of lectures on the fundamental concepts, practical sessions on solving exercise problems and discussion of few case studies. I plan to post in this blog details of sessions related to the conceptual discussions and case studies. Hence, I am numbering them serially starting with this one, which is Post 1.
Cost and Management Accounting is a basic course offered to all MBA students irrespective of their stream of specialisation. This is the only course dealing with the concepts of costing in the entire programme. The course deals with basic concepts of various costing principles, methods and techniques. Costing concepts are mainly used for three purposes: (a) product/service cost determination (inventory valuation), (b) decision making and (c) budgeting and control. Product/service cost determination is a very important function as it provides information regarding the cost involved in producing one unit of output or providing a specific type of service to the customers. Product cost determination involves the use of costing methods and techniques (some authors have used these terms interchangeably). Costing methods largely depend the type of industry. For example Job Costing is applied in a production system, which is order driven and Process Costing is used in case of continuous manufacturing of standard products. Costing techniques, on the other hand, deal with the types of costs forming part of the product cost. Broadly speaking, there are three costing techniques, namely, Absorption Costing, Marginal (Variable) Costing and Activity Based Costing (ABC). In my course I am only covering the basic concepts related to product/service cost determination, because, I strongly believe that an MBA graduate is neither expected nor competent to understand the complexities involves in product cost determination. A professionally qualified Cost Accountant will be the right person to do this in an organisation. Hence, my focus of the course will be more on the other two functions of costing, decision making and control, which is what a manager is expected to be good at.
Decision making based on costing principles mainly deals with short-term decisions such as accepting a special order, decision to change a supplier, pricing for an export order, temporary suspension of production, changing the production mix etc. These short-term decisions do not consider the impact of time value of money, where as while taking decisions having long term implications, one has to go beyond the principles of costing and apply time value adjusted tools like Net Present Value (NPV), Internal Rate of Return (IRR) etc. Another important application of costing is in the area of control. No organisation can survive in the long run unless and until it has strong internal control systems. Understanding and managing various costs is the most important aspect of an efficient control system. Hence the managers are expected to have expertise in decision making and control aspects of costing and this course helps to build that expertise.
Cost and Management Accounting is a basic course offered to all MBA students irrespective of their stream of specialisation. This is the only course dealing with the concepts of costing in the entire programme. The course deals with basic concepts of various costing principles, methods and techniques. Costing concepts are mainly used for three purposes: (a) product/service cost determination (inventory valuation), (b) decision making and (c) budgeting and control. Product/service cost determination is a very important function as it provides information regarding the cost involved in producing one unit of output or providing a specific type of service to the customers. Product cost determination involves the use of costing methods and techniques (some authors have used these terms interchangeably). Costing methods largely depend the type of industry. For example Job Costing is applied in a production system, which is order driven and Process Costing is used in case of continuous manufacturing of standard products. Costing techniques, on the other hand, deal with the types of costs forming part of the product cost. Broadly speaking, there are three costing techniques, namely, Absorption Costing, Marginal (Variable) Costing and Activity Based Costing (ABC). In my course I am only covering the basic concepts related to product/service cost determination, because, I strongly believe that an MBA graduate is neither expected nor competent to understand the complexities involves in product cost determination. A professionally qualified Cost Accountant will be the right person to do this in an organisation. Hence, my focus of the course will be more on the other two functions of costing, decision making and control, which is what a manager is expected to be good at.
Decision making based on costing principles mainly deals with short-term decisions such as accepting a special order, decision to change a supplier, pricing for an export order, temporary suspension of production, changing the production mix etc. These short-term decisions do not consider the impact of time value of money, where as while taking decisions having long term implications, one has to go beyond the principles of costing and apply time value adjusted tools like Net Present Value (NPV), Internal Rate of Return (IRR) etc. Another important application of costing is in the area of control. No organisation can survive in the long run unless and until it has strong internal control systems. Understanding and managing various costs is the most important aspect of an efficient control system. Hence the managers are expected to have expertise in decision making and control aspects of costing and this course helps to build that expertise.
No comments:
Post a Comment