FINAL COURSE PAPER 5 Strategic Cost Management and Performance Evaluation (100 Marks)

Section Weightage Content Area

I 35% - 40% Strategic Cost Management and Decision Making

Sub Part‒I: Strategic Cost Management [ Max. ~ 25%]

1. Introduction to Strategic Cost Management

(i) Concept of Strategic Cost Management

(ii) Limitations of Traditional Cost Management

(iii) Traditional vs. Strategic Cost Management

2. Modern Business Environment

(i) Introduction/ Characteristics of the Modern Business Environment

(ii) Cost of Quality, Total Quality Management, Business Excellence Model

(iii) Throughput Accounting and Theory of Constraints

(iv) Supply Chain Management (SCM)

(v) Gain Sharing Arrangements

(vi) Outsourcing

3. Lean System and Innovation

(i) Introduction to Lean System

a) Just-in-Time (JIT)

b) Kaizen Costing

c) 5 Ss

d) Total Productive Maintenance (TPM)

e) Cellular Manufacturing/ One-Piece Flow Production Systems

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f) Six Sigma (SS)

(ii) Introduction to Process Innovation and Business Process Re-engineering (BPR)

4. Cost Management Techniques

(i) Cost Control/ Waste Control, Cost Reduction

(ii) Target Costing

(iii) Value Analysis/ Value Engineering

(iv) Pareto Analysis

(v) Life Cycle Costing

(vi) Environmental Management Accounting

5. Cost Management for Specific Sectors

(i) Agricultural Sector

(ii) Information Technology Sector

(iii) Power Sector

Sub Part‒II: Strategic Decision Making [ Max. ~ 15%]

1. Decision Making

(i) Decision Making using CVP Analysis

(ii) Decision Making using Relevant Cost Concepts

(iii) Decision Making using Activity Based Costing

(iv) Ethical and Non-Financial Considerations Relevant to Decision Making

2. Pricing Strategies/ Decisions

(i) Theory & Principles of Product Pricing

(ii) Pricing – New Product, Finished Products & Pricing of Services

(iii) Sensitivity Analysis in Pricing Decisions

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(iv) Pricing Decision under Special Circumstances

(v) Pricing Strategies

II 35%-40% Performance Evaluation and Control

Sub Part‒I: Performance Evaluation and Reporting [ Max. ~ 25%]

1. Performance Measurement and Evaluation

(i) Responsibility Accounting

(ii) Linking Critical Success Factors (CSFs) to Key Performance Indicators (KPIs) and Corporate Strategy; Performance

Measurement Models‒The Balanced Scorecard, The Performance Pyramid, The Performance Prism, The Building Block

Model; Divisional Performance Measures; Benchmarking Schemes

(iii) Performance Measurement in the Not-for-Profit Sector

(iv) Preparation of Performance Reports

2. Divisional Transfer Pricing

(i) Meaning, Purpose and Principles of Transfer Pricing

(ii) Methods of Transfer Pricing

(iii) The Behavioural Consequences arising from Divisional Structures

(iv) International Transfer Pricing

3. Strategic Analysis of Operating Income

(i) Operating Profit Analysis

(ii) Advanced Activity Based Costing, Activity Based Management (ABM), Activity Based Budgeting (ABB)

Sub Part‒II: Managerial Control [ Max. ~ 15%]

1. Budgetary Control

(i) The Concept of Feedback and Feed Forward Control

(ii) Behavioural Aspects of Budgeting – Imposed Style, Participative Budget

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(iii) Behavioural Aspects of Budgetary Control

(iv) Beyond Budgeting

2. Standard Costing

(i) Analysis of Advanced Variances

(ii) Integration of Standard Costing with Marginal Cost Accounting

(iii) Reconciliation of Profit

(iv) Variance Investigation Techniques, Interpretation of Variances, Possible Interdependence Between Variances and

Reporting

(v) Behavioural Aspects of Standard Costing, Limitation of Standard Costing (including its use in the contemporary business

environment)

III 20%-30% Case Study

1. Case Study

(i) Case Study (covering Course Concepts)

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SKILL ASSESSMENT SPECIFICATION UNDER THE REVISED SCHEME OF EDUCATION & TRAINING

FOUNDATION COURSE Level I Level II

Comprehension & Knowledge

Application

1 Principles and Practice of Accounting 5%-20% 80%-95%

2A Business Laws 50%-65% 35%-50%

2B Business Correspondence and Reporting

100%

3 Business Mathematics and Logical Reasoning and Statistics

100%

4A Business Economics 40%-50% 50%-60%

4B Business and Commercial Knowledge 100%

INTERMEDIATE COURSE Level I Level II

Comprehension &

Knowledge

Analysis &

Application

1 Accounting 5%-15% 85%-95%

2 Part I: Corporate Laws 40%-55% 45%-60%

Part II: Other Laws 35%-55% 45%-65%

3 Cost and Management Accounting 20%-30% 70%-80%

4A Taxation: Income-tax law 5%-20% 80%-95%

4B Taxation: Indirect tax laws 20%-45% 55%-80%

5 Advanced Accounting 5%-15% 85%-95%

6 Auditing and Assurance 30%-55% 45%-70%

7A Enterprise Information System 30%-55% 45%-70%

7B Strategic Management 50%-70% 30%-50%

8A Financial Management 20%-30% 70%-80%

8B Economics for Finance 60%-80% 20%-40%

FINAL COURSE Level I Level II Level III

Comprehension & Knowledge

Analysis & Application

Evaluation & Synthesis

1 Financial Reporting 5%-15% 60%-85% 10%-25%

2 Strategic Financial Management 10%-20% 20%-40% 50%-60%

3 Advanced Auditing and Professional Ethics

20%-35% 45%-70% 10%-20%

4 Part I: Corporate Laws 10%-20% 60%-70% 15%-25%

Part II: Economic Laws 40%-60% 40%-60%

5 Strategic Cost Management and Performance Evaluation

10%-15% 45%-55% 35%-40%

7 Part I: Direct Tax Laws 5%-10% 60%-80% 15%-30%

Part II: International Taxation 15%-25% 75%-85%

8 Indirect Tax Laws

Part-I: Goods and Services Tax 10%-30% 40%-70% 20%-30%

Part-II: Customs & FTP 20%-40% 40%-70% 10%-20%

Note – It may be presumed that the skills specified in Level I are inherent in Level II i.e., only when the candidate possesses Lev el I

skills, he would be able to achieve Level II skills. Likewise, the skills specified in Levels I and II are inherent in Level III i.e., only when

a candidate possesses Level I and II skills, he would be able to achieved Level III skills.

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Skill Level Description of skills Nature of Questions Illustrative verbs

Comprehension

&

Knowledge

Knowledge involves recognizing or remembering facts, terms and basic

concepts. Comprehension involves

demonstrating understanding of facts.

Questions set at this level require recognition and recall of

concepts, principles and provisions.

Such questions may involve recalling a definition, explaining a

concept, describing a process, discussing a provision of law, listing the conditions to be satisfied or classifying under the appropriate

head.

List, State, Define, Describe, Explain, Recognize, Identify,

Classify, Discuss

Analysis

&

Application

Application involves use of acquired

knowledge in problem solving.

Analysis involves identifying issues and examining the same to resolve

problems.

Questions set at this level require applying and analysing

concepts/provisions/theories/principles learnt, in problem solving.

Such questions may involve making computations/ calculations/estimations, examining issues, reconciling bank

statements, solving problems by integrating provisions, identifying

the nature of expenditure or income, determining profit or loss etc.

The level of complexity ranges from low to moderate.

Application:

Apply, Identify, Prepare,

Calculate, Reconcile, Solve

Analysis:

Analyse, Examine,

Compute, Solve, Advise,

Determine, Estimate

Evaluation

&

Synthesis

Synthesis involves integration of data

and information by identifying and

segregating relevant and irrelevant facts. Evaluation involves detailed

analysis of such integrated data to

resolve complex problems and/or

make appropriate judgment.

Questions set at this level involve application of higher order skills

of analysis and integration of two or more provisions/concepts to

resolve complex problems and issues.

Such questions may involve computation of income/profit/loss by

integrating, analysing and applying concepts/

provisions/standards, interpretation of financial statements/provisions of law, evaluation of a proposal for

assessing its viability or recommendation of a course of action.

The level of complexity involved is high.

Compute, Examine, Advise,

Integrate, Decide, Evaluate,

Recommend, Interpret

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06 November 2019 The Chartered Accountant Student

sCMPe

It may be presumed that the skills specified in Level I are inherent in Level II i.e., only when the student possesses Level I skills, he/ she would be able to achieve Level II skills. Likewise, the skills specified in Levels I and II are inherent in Level III i.e., only when a student possesses Level I and II skills, he/ she would be able to achieve Level III skills.

Skill ASSeSSmentThe questions/ cases are based on Skill Assessment. An illustrative list of the verbs that appear in the requirements for each question/

case is given below. It is important that students answer according to the definition of the verb:

Comprehension & Knowledge

Analysis & Application

Evaluation & Synthesis

Level Learning Objective Illustrative Verbs Definition/ Explanations1 III EVALUATION

How are you expected to use your learning to evaluate, make decisions or recommendations?

Recommend ♦ To recommend you must: ♦ Identify and explain any reasonable options → evaluate each → conclude → recommend.

Evaluate ♦ ‘Evaluate’ means balanced assessment including both the positive and negative aspects of an issue.

♦ It might mean computations, but it might not. ♦ It is important to emphasise something is in qualitative terms, as well as monetary.

Advise ♦ ‘Advise’ requires to build up a good, comprehensive, argument that leads to one or more choices for the owners or managers to consider.

II ANALYSISHow are you expected to analyse the detail of what you have learned?

Produce ♦ Begin with very little or nothing to make something or bring something into existence. Prioritise ♦ To decide which of a group of things are the most important so that you can deal with them first.

Here, you’ll also have to elucidate/ clarify, for each item, why you put it, where you did in the list of ‘priorities’.

Interpret ♦ Generally, ‘Interpret’ is translation of one form of words to another, where the latter is more clear in its exact sense than the former.

♦ This is often the second stage of ‘analyse’. Discuss ♦ There needs to be an ‘argument’.

♦ You need two or more differing or conflicting viewpoints. Also, any discussion should, if possible, end in an outcome.

♦ For example; advantages vs. disadvantages → outcome; Or reasons why vs. why not → outcome; Or maybe this vs. maybe that → outcome.

Construct ♦ As ‘prepare’, but maybe with an elucidation as to why you put things.Compare and contrast

♦ An elucidation of the similarities and differences between two or more things.

Categorise ♦ To put things into groups with the same features with an explanation after each item saying why you put it in that particular group and not one of the others.

Analyse ♦ Taking apart information or data to discover relationships, causes, patterns and connections.♦ This is about a series of detailed explanations.

APPLICATIONHow you are expected to apply your knowledge?

Tabulate ♦ An arrangement of facts and numbers in rows or blocks.Solve ♦ Generally, ‘Calculation’ is how to do something.

♦ ‘Solve’ leave you to select the most suitable technique or process.Reconcile ♦ To find a way in which two situations (often the results of calculations) that are opposed to each

other can agree and exist together.Prepare ♦ ‘Prepare’ is used where there is a fair amount of numerical data given in the question.

♦ You have to consider the relevant data, process it by calculations or rearranging it, then provide it in a specific form.

Demonstrate ♦ ‘Demonstrate’ is consistent with situations where there is only one correct answer.♦ You need to show something to be correct, apart from any doubt, by giving proof.

Calculate ♦ Ascertain or reckon mathematically.Apply ♦ Applying the facts, rules, concepts, and ideas.

♦ This is not just talk about it in theory, do it for real i.e. new situations.I COMPREHENSION

What you are expected to understand?

Illustrate ♦ Give an example.Identify ♦ Recognise, establish or select after consideration.Explain ♦ To make something clear or easy to understand by describing or giving information about it.

♦ Write a sentence that makes point → Then write another to clarify why the sentence is so → If point still isn’t clear, write another sentence that makes it clearer.

Distinguish ♦ To recognize the difference between two things.♦ List the features of each of the things that make them unlike from each other.

Describe ♦ What it is? ♦ This is next step from list, state, define. ♦ You might need to give a short paragraph covering the issues.

KNOWLEDGEWhat you are expected to know?

Define ♦ Just give a textbook or dictionary definition, you may use your own words instead. ♦ This is simply a test of memory.

State ♦ What is...?♦ Convey what need to say in brief. ♦ No need to explain, unless it isn’t clear.

List ♦ How many...?♦ Just give a list.♦ Each of the points on ‘list’ should be stated in terms of a full sentence, for clarity, but there’s no

requirement to go any further than that.

Strategic Cost management and Performance evaluation

Important