Advanced Cost & Management Accounting

(One Paper-Three Hours-100 Marks)

Advanced Cost & Management Accounting is the seventh paper of CAP-III. It  covers 100 marks in total. It is the Group 2 paper. The syllabus you need to cover in CAP-III under “Advanced Cost & Management Accounting” is as follows: 

Level of Knowledge : Expert

Course objectives :

  • Understand cost accounting in relation to management functions.
  • Provide knowledge of using costing data for decision making, control and understanding of emerging and techniques of performance appraisal and operational research.

Course contents 

Advanced Cost Accounting

Cost concepts and objectives of Costing systems

  • Basic cost concepts
  • Cost classification
  • Cost analysis
  • Costing system
  • Inventory valuation
  • Database for operational control and decision making
  • Cost concept in decision making
  • Application of incremental/differential cost techniques in managerial decision
  • Programmed & non-programmed decisions
  • Steps in decision making
  • Behavioral study of costs for decision making


Marginal Costing and Decision making problems

  • Theory of marginal costing
  • Ascertainment of marginal cost
  • Advantages and limitations of marginal costing
  • Marginal cost equation
  • Important factors in marginal costing decisions
  • Pricing decisions under special circumstances decision making
  • Key factor/limiting factor/budget factor
  • Product mix and Price mix
  • Profit planning


Standard Costing and Variance analysis

  • Definitions and types of standards
  • Setting up of standards
  • Standard product cost sheet
  • Advantages and criticism of standard costing
  • Application of standard costing
  • Control through variance analysis
  • Computation of variances
  • Reporting of variances
  • Disposal of variances
  • Accounting procedure for standard cost
  • Disposition of variances


Budget & Budgetary Control

  • Budgetary control system
  • Types of budgets
  • Preparation of budgets
  • Budget ratios
  • Causes of difference with actual performance
  • Zero based budgeting
  • Responsibility accounting
  • Performance budgeting
  • Participative budgeting


Performance measurement

  • Meaning
  • Importance of performance measurement
  • Evaluation and reporting of performance
  • Balance scorecard and its advantages
  • Four basic business perspectives
  • Benchmarking
  • Advantages of benchmarking
  • Types of benchmarking and process
  • Theory of constraints (TOC)
  • Key measurements required by TOC
  • Five steps in TOC


Activity Based Costing

  • Meaning and definition
  • Stages in activity based costing
  • Purposes and benefits of activity based costing
  • Installation and operation of activity based costing system
  • Activity based cost management
  • Difference between ABC and ABM
  • Cost driver analysis
  • Criticism of ABC System
  • Activity based budgeting


Costing of Service Sector

  • Main characteristics of service sector
  • Collection of costing data
  • Costing methods used
  • Pricing by service sector


Pricing Strategies

  • Pricing of finished products
  • Theory of price
  • Pricing policy
  • Principles of product pricing
  • New product pricing
  • Pricing strategies
  • Pareto analysis
  • Transfer pricing 


Emerging concepts in cost management

Just in time approach

  • Meaning
  • Impact of Just-in-time systems
  • Performance measurement
  • Back flushing in a just-in-time system


Material Requirement Planning (MRP)

  • Meaning and Purpose
  • Data requirements to operate MRP System
  • Methods of Operation
  • Prerequisite for successful operation of MRP System


Enterprise Resource Planning (ERP)

  • Meaning and Features of ERP
  • Benefits of ERP
  • Reasons for implementation of ERP by companies


Total Quality Management (TQM)

  • Introduction
  • Operationalizing TQM
  • Six Cs of TQM
  • Overcoming TQM paralysis
  • Control: The missing link of TQM


Life cycle costing

  • Product life cycle
  • Phases of product life cycle
  • Life cycle costs
  • Life cycle costing and management control
  • Advantages of life cycle costing


Target costing

  • Target cost definitions
  • Four steps approach to target costing
  • Target costing for target pricing
  • Target costing vs. traditional costing


Value chain analysis

  • Meaning & definitions
  • Classification of business activities for VCA
  • Competitive advantage and customer value
  • Value chain approach for assessing competitive advantages
  • Strategic framework for VCA
  • Limitations of VCA
  • Value chain analysis vs. conventional management accounting


Cost Audit

  • Important aspects of cost audit
  • Purpose of cost audit
  • Types of cost audit
  •   Advantages of cost audit
  • Functions of cost auditor


Quantitative Techniques


Linear Programming

  • Introduction
  • Graphical method
  • Trial and error method of solving linear programming problem
  • The simplex method
  • Marginal value of a resource
  • Practical application of linear programming
  • Limitation of linear programming


Transportation Problems

  • Introduction
  • Methods of finding initial solution to transportation problem
  • Optimality test
  • Special cases
  • Maximization transportation problem
  • Prohibited routes


Assignment Problems

  • Introduction
  • The assignment algorithm
  • Unbalanced assignment problems


Network Planning-PERT/CPM

  • General framework of PERT/CPM
  • Advantages of critical path analysis
  • Fundamentals of CPA network
  • Critical path analysis
  • Probability of achieving completion date
  • Comments on assumptions of PERT/CPM
  • Distinction between CPM and PERT
  • Updating the network
  • Project crashing Resource smoothing
  • Resource leveling



  • Introduction
  • Monte carlo simulation
  • Simulation and inventory control


Learning Curve Theory

  • Introduction
  • Distinctive features of learning curve theory in manufacturing environment
  • The learning curve ratio
  • Learning curve equation
  • Learning curve application
  • Limitation of learning curve theory
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