# Syllabus of S4 – STRATEGIC MANAGEMENT ACCOUNTING

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## Detailed Syllabus Contents:

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PART – A

COST PLANNING, ANALYSIS AND TECHNIQUES

1. Cost Planning

• Learning Curve

o What is learning curve theory?

o Its application in budgeting, variances and product costing including reverse calculation e.g. calculation of learning rate if cost is given at a certain level

• Life Cycle Costing

o Concept of life cycle costing

o Application of target costing principles in service industry and its problems.

• Value Analysis

o Concept of value analysis, what is value, types of values.

• Functional Analysis

o Calculation of product life cycle cost and life cycle cost per unit (Note: Ignore time value of money in calculation of life cycle costs.)

• Target Costing

o What is target costing and target cost?

o Calculation of Target cost gap

o How to close target cost gap? i.e. techniques for minimizing target cost gap.

o Application of learning curve in calculation of target cost of a product.

• Sell or process further decisions

2. Cost Analysis

• Activity Base Costing (ABC)-only theory
• Activity Base Management (ABM-)only theory
• Direct Product Profitability (DPP-)only theory
• Customer Profitability Analysis (CPA)- theoretical and numeric
• Distribution Channel Profitability- only theory
• Activity-based profitability analysis comparison of profit per unit if in ABC and Traditional system
• Pareto analysis -only theory and graphical presentation

3. Cost Management Techniques

• Traditional vs Modern Manufacturing Philosophy-only theory
• Just-in-time (JIT)-only theory
• Kaizen Costing -only theory
• Total Quality Management

o What is quality management

o Cost of quality

o Types of cost of quality

• Business Process Re-engineering- only theory

4. Externally Oriented Cost Management Techniques

• The Value Chain

o What is value chain analysis

o Concept of primary and secondary value chain

o Role of management accountants in value chain for optimization of profit.

• Supply Chain Management -only theory
• Outsourcing

o Concept of outsourcing and its application in short term decisions.

• Partnering, incentives and gain-sharing arrangements- only theory

PART – B

PRICING AND PRODUCT DECISIONS

5. Relevant Costs

• Relevant Costs and Revenues
• Opportunity Cost
• The Relevant Cost of Materials
• The Relevant Cost of Labour
• The Relevant Cost of Overheads
• Relevant cost of Machinery used in contracts including increase or and decrease in its market value after the contract

6. Short-term decisions

• Presentation guidelines
• Acceptance/rejection of contracts
• Minimum pricing or special contract pricing
• Extra shift decisions and overtime
• Either/or problems
• Shutdown problems
• Choosing between options
• Allocation of joint costs

7. Risk and uncertainty

• Risk and uncertainty in decision making
• Probability analysis and expected values
• Data tables
• The maximin, maximax and minimax regret bases for decision making
• Using the standard deviation to measure risk
• Decision trees
• The value of information

o Concept of value of information

o Calculation of value of perfect information

• Sensitivity analysis in short term decisions
• Simulation models- only theory

8. Linear programming: the graphical method

• Concept of constraints and bottle necks, conceptual difference of single limiting factor and multiple limiting factors (only theory), Concept of slack and shadow price and their calculation.
• Graphical method
• Graphical method using simultaneous equations
• Simplex method

9. Linear programming: the simplex method

• Principles of the simplex method (Linear programming should only be tested for two products only)

10. Multi-product breakeven analysis

• Drawing a basic breakeven chart
• Drawing a basic Profit volume chart
• Breakeven point for multiple products
• Contribution to sales (C/S) ratio for multiple products
• Sales/product mix decisions
• Target profits for multiple products
• Margin of safety for multiple products
• Multi-product breakeven chart and profit volume chart
• Further aspects of breakeven analysis

11. Pricing decisions and pricing strategies

• Demand base pricing
• Other(Nonfinancial) issues that influence pricing decisions
• Deriving the demand curve

o Deriving Demand equation

o Calculation of optimum profit using demand equation

o Calculation of profit maximizing price and profit maximizing output using demand curve

• Full cost pricing
• Marginal cost-plus/Mark-up pricing
• Pricing based on mark-up per unit of limiting factor
• Different Pricing strategies for new products

PART – C

PERFORMANCE MANAGEMENT AND RESPONSIBILITY CENTRE

12. Budgetary Control

• Flexible Budgets and Budgetary Control
• System design
• Rolling Budgets
• Behavioral implications of budgeting
• Budget Participation
• Use of Budgets as Targets
• Budget and Motivation
• Beyond Budgeting

13. Performance Evaluation

• Financial Performance Indicators
• Non-Financial Performance Indicators
• The Balanced Scorecard
• Benchmarking -only theory
• Performance evaluation in service industry using building block

14. Measuring performance in divisionalised businesses

• Responsibility Centers
• Return on Investment (ROI)
• ROI and decision making
• Residual Income (RI)

15. Transfer pricing

• Basic principles of transfer pricing
• General rules
• Use of market price as a basis for transfer prices
• Transfer pricing with an imperfect external market
• Transfer pricing when there is no external market for the transferred item
• Transfer pricing and changing costs/prices
• Identifying the optimal transfer price
• Negotiated transfer prices
• International transfer pricing

Focus:

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