Advanced Management Accounting KASNEB Notes

Download Advanced Management Accounting KASNEB Notes



This paper is intended to equip the candidate with knowledge, skills and attitudes that will enable him/her to apply advanced management accounting techniques in business decision making.


A candidate who passes this paper should be able to:

  • Use cost estimation data in decision making
  • Apply inventory management techniques to decision making
  • Use financial and non-financial indicators to measure organisational performance
  • Apply environmental management accounting concepts in practice.


Nature of management accounting

  • Introduction to advanced management accounting
  • Scope of management accounting
  • Limitations of management accounting
  • Ethical standards of management accountants

Decision theory

  • Decision process
  • Decision making environment – certainty, risk, uncertainty and competition
  • Decision making under uncertainty – maximin, maximax, minimax regret, Hurwicz decision rule, Laplace decision rule
  • Decision making under risk – expected monetary value, expected opportunity loss, minimising risk using coefficient of variation, expected value of perfect information
  • Decision trees – sequential decision, expected value of sample information
  • Limitations of expected monetary value criteria

Cost estimation and forecasting

  • An overview of the methods of cost estimation and prediction; engineering, simulation and statistical methods, simple and multiple regressions, the statistical properties of regression
  • Interpretation of ANOVA tables
  • Learning curve and its application

Inventory control decisions

  • Cost of holding and ordering inventory
  • Stochastic inventory models
  • Inventory models for perishable items
  • Application of simulation models in inventory control

Pricing decisions

  • External pricing methods
  • Internal pricing methods (transfer pricing)
  • Target costing
  • Life cycle costing

Short-term planning and decision-making

  • Overview of single product and multiple product cost-volume-profit  analysis under conditions of certainty
  • Single product and multiple product cost-volume-profit analysis under conditions of uncertainty
  • Risk assessment
  • Application of marginal costing: product mix decisions, special orders, make or buy decision, pricing decisions and other similar short-run decisions, relevant information in decision making

Download Advanced Management Accounting KASNEB Notes

Budgetary control and advanced variance analysis

  • Flexible and static budget, purpose of budgetary control; operation of a budgetary control system, organisation and coordination of the budgeting function
  • Human aspects (motivational aspects) of budgeting, emerging trends in budgetary control; ERPS, ABB, ZBB, program budgeting
  • Advanced variance analysis and performance evaluation; expost variances and opportunity costs in variances
  • Variance investigation models

Performance measurement and evaluation

  • Linkage between performance measurement and organisational vision
  • Responsibility accounting and responsibility centres, segmented reporting
  • Distinction    between    financial    performance    measures    and    non-financial performance measures
  • Cost of information
  • Methods of evaluating responsibility centre performance such as return on investment (ROI), residual income (RI) and economic value added (EVA) (mportance and limitations of the methods)
  • Other financial/non-financial performance measures: balanced scorecard, performance pyramid, Fitzgerald and Moon’s building block model, performance prism
  • Managerial incentive schemes
  • Performance contracting
  • Performance measures in the service industry

Environmental management accounting

  • Role of accountants in environmental management accounting
  • Using environmental management accounting to manage costs
  • Opportunities for environmental awareness in management accounting

Emerging issues and trends

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