ICAP CA Cost and Management Accounting Syllabus

Cost and Management Accounting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Cost and Management Accounting in ICAP CA, not a summary of it.

1. 1

   Cost Concepts and Classification

   2 topics

   • Cost classification and behaviour
   • Elements of cost
2. 2

   Material, Labour and Overheads

   3 topics

   • Material costing and inventory valuation
   • Labour costing and remuneration
   • Overhead absorption and apportionment
3. 3

   Costing Systems

   3 topics

   • Job and batch costing
   • Process costing
   • Activity-based costing
4. 4

   Marginal and Absorption Costing

   2 topics

   • Cost-volume-profit analysis
   • Reconciliation of profit
5. 5

   Budgeting and Forecasting

   3 topics

   • Preparation of functional and master budgets
   • Cash budgets
   • Flexible budgeting
6. 6

   Standard Costing and Variance Analysis

   3 topics

   • Material, labour and overhead variances
   • Sales variances
   • Operating statements
7. 7

   Decision Making

   3 topics

   • Relevant costing
   • Limiting factor analysis
   • Make or buy and special orders

Cost and Management Accounting flashcards for ICAP CA

24 of 60 cards from the Cost and Management Accounting deck — real questions with worked answers.

1. What is the difference between cost classification by behaviour as 'fixed' versus 'variable'?

   Fixed costs remain constant in total over a relevant range regardless of activity level (but vary per unit), while variable costs change in total in direct proportion to activity level (but stay constant per unit).

2. What is a semi-variable (mixed) cost, and how is it commonly separated into its fixed and variable components?

   A semi-variable cost contains both fixed and variable elements (e.g. electricity with a standing charge plus usage). It is commonly split using the high-low method: variable cost per unit = (Cost at highest activity - Cost at lowest activity) / (Highest units - Lowest units).

3. In cost accounting, what is a 'cost object' and what is a 'cost centre'?

   A cost object is anything for which a separate measurement of cost is required (e.g. a product, service, or department). A cost centre is a location, function, or item of equipment to which costs are accumulated and related for control purposes.

4. What are the three main elements of total cost?

   Materials, labour, and expenses (overheads). Each can be further classified as direct or indirect.

5. How is prime cost calculated?

   Prime cost = Direct materials + Direct labour + Direct expenses (the total of all direct costs).

6. How is total production (factory) cost calculated?

   Production cost = Prime cost + Production (factory) overheads. Adding non-production overheads (admin, selling and distribution) gives total cost.

7. Distinguish between direct costs and indirect costs.

   Direct costs can be specifically and economically traced to a single cost object (e.g. raw material in a product). Indirect costs (overheads) cannot be traced directly and must be shared/apportioned across cost objects.

8. What are the formulas for Reorder Level, Maximum Level, and Minimum Level in inventory control?

   Reorder Level = Maximum usage x Maximum lead time. Maximum Level = Reorder Level + Reorder Quantity - (Minimum usage x Minimum lead time). Minimum Level = Reorder Level - (Average usage x Average lead time).

9. State the Economic Order Quantity (EOQ) formula and what each symbol means.

   EOQ = square root of (2 x C0 x D) / Ch, where C0 = cost per order, D = annual demand, and Ch = holding cost per unit per year. It is the order size that minimises total ordering plus holding costs.

10. Under FIFO inventory valuation, which costs are charged to issues and which remain in closing inventory?

    FIFO (First-In, First-Out) assumes the earliest purchased stock is issued first, so issues are valued at oldest prices and closing inventory is valued at the most recent (newest) prices.

11. How does the weighted average (AVCO) method value inventory issues?

    AVCO values issues at a weighted average cost recalculated after each receipt: Weighted average cost = Total value of inventory / Total units in inventory. Both issues and closing inventory use this average.

12. In a period of rising prices, how do FIFO and AVCO compare in terms of closing inventory value and reported profit?

    With rising prices, FIFO gives a higher closing inventory value and higher profit (issues at old low prices), while AVCO gives a lower closing inventory value and lower profit than FIFO.

13. What is the formula for direct labour efficiency (productivity) ratio?

    Efficiency Ratio = (Standard hours produced / Actual hours worked) x 100. A ratio above 100% indicates better-than-standard efficiency.

14. Define the labour capacity ratio and the activity (production volume) ratio.

    Capacity Ratio = (Actual hours worked / Budgeted hours) x 100. Activity Ratio = (Standard hours produced / Budgeted hours) x 100. Activity Ratio = Capacity Ratio x Efficiency Ratio.

15. What is the difference between a piece-rate and a time-rate remuneration system?

    Under time-rate, workers are paid per hour/day worked regardless of output. Under piece-rate, workers are paid a fixed amount per unit produced, directly linking pay to output.

16. How is labour turnover rate calculated and why is it significant?

    Labour Turnover = (Number of leavers replaced during period / Average number of employees) x 100. High turnover increases recruitment, training, and lost-productivity costs.

17. What is idle time and how is the cost of normal idle time treated?

    Idle time is paid time during which no production occurs (e.g. machine breakdown, waiting). Normal/unavoidable idle time is treated as a production overhead, while abnormal idle time is written off to the costing profit and loss account.

18. What are the three stages of accounting for production overheads?

    1) Allocation - assigning whole cost items to cost centres; 2) Apportionment - sharing common costs across cost centres on a fair basis; 3) Absorption - charging overheads to cost units via an absorption rate.

19. What is the formula for an overhead absorption rate (OAR)?

    OAR = Budgeted overheads / Budgeted level of activity. The activity base may be labour hours, machine hours, units, or a percentage of cost.

20. How is over-absorption or under-absorption of overhead calculated?

    Absorbed overhead = Actual activity x predetermined OAR. If Absorbed > Actual overhead = over-absorption (credit/add to profit); if Absorbed < Actual = under-absorption (debit/deduct from profit).

21. What is reciprocal service apportionment, and name two methods of dealing with it.

    Reciprocal servicing occurs when service cost centres serve each other (e.g. maintenance and stores serve one another). Methods: the repeated distribution (continuous allotment) method and the algebraic (simultaneous equation) method.

22. How does marginal costing differ from absorption costing in valuing inventory?

    Marginal costing values inventory at variable production cost only; fixed production overheads are treated as period costs. Absorption costing includes a share of fixed production overhead in inventory value.

23. How is the difference in profit between marginal and absorption costing reconciled?

    Difference in profit = Change in inventory units x fixed overhead absorption rate per unit. When inventory increases, absorption profit is higher; when inventory decreases, marginal profit is higher.

24. What is job costing and when is it used?

    Job costing is a costing method where costs are collected for each separately identifiable job or order made to a customer's specification. Used for non-repetitive, customised work (e.g. printing, construction, repairs).

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