Cost Management For Bangalore University (As per CBCS Syllabus 2014-15 as Revised in March 2017) B.COM VI SEMESTER

280 Pages·2018·2.026 MB·English

by  V. Rajesh Kumar

Cost Management
For Bangalore University
(As per CBCS Syllabus 2014-15 as Revised in March 2017)
B.COM VI SEMESTER
About the Authors
Dr. V. Rajesh Kumar is an M.Com graduate from Bangalore University. He obtained
his doctorate in the area of Strategy. While accounting and taxation are his areas of
expertise, finance is his area of passion. He has 25 years of experience in teaching at
graduate, postgraduate and professional levels and has served at various institutions in
different capacities—Mount Carmel Institute of Management, Department of Commerce,
Bangalore University, and Alliance Business Academy to name a few. He is a faculty for
Strategic Financial Management and Tax Laws at the Institute of Chartered Accountants of
India, Bangalore. He has co-authored textbooks on Accounting and Taxation for the requirements of various
universities. He has presented papers at various national and international conferences and published articles
in reputed Journals. His paper on Capital Asset Pricing Model was selected for an International Conference
at Harvard University, Cambridge, United States of America, during May–June 2011.
Dr. Rajesh also has a rich experience in research, consultancy and training—both at the academic level and
corporate level. He has conducted student development programmes and faculty development programmes
in various educational institutions and has conducted training programmes for executives and managers of
various companies like Wipro, Godrej, FCG, Honeywell, KPCL, Fouress Engineers, Triveni Engineering,
Tyco Electronics, etc., in the area of accounting, finance and taxation. He is associated as resource person
for the Finance for Non-finance Executives Programme at the Institute of Chartered Accountants of India,
Bangalore.
He is the Founder of Vittam Pravina Gurushala (Finance Expert Academy)—an academy engaged in spreading
the knowledge of finance to students, faculty, corporate and all others interested in the area of finance.
Presently, he is working as a finance and academic consultant and visits different management institutions for
teaching finance courses, in and outside India.
Dr. R. K. Sreekantha is an M.Com graduate from Bangalore University. He obtained
his PhD from Bangalore University in the area of Marketing. While he has deep and
practical knowledge in most areas of commerce and management, accountancy, taxation
and marketing are his areas of interest, passion and expertise, which he has been teaching
at different levels—from graduation to postgraduation.
Dr. Sreekantha has been serving at B.S.V. Arts and Commerce College for Women over
the past 32 years. He is one among the most sought professors in Bangalore by various
institutions and has been invited to deliver guest lectures to students and faculty members on various areas
of commerce and management.
He has participated in various seminars, workshops, national and international conferences and FDPs in
various capacities. His acumen in research is highly appreciated and the papers presented by him at various
conferences have been acclaimed in the respective domains.
Cost Management
For Bangalore University
(As per CBCS Syllabus 2014-15 as Revised in March 2017)
B.COM VI SEMESTER
V. Rajesh Kumar
Professor and Managing Partner
Vittam Pravina Gurushala
Bangalore
R. K. Sreekantha
Associate Professor in Commerce
B.S.V. Arts and Commerce College for Women
Bangalore
McGraw Hill Education (India) Private Limited
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Cost Management
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Dedicated to
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Preface
The most technologically efficient machine man has ever invented is the book
—Northrop Frye
Keep reading books, but remember that a book is only a book, and you should learn to think for yourself
—Maxim Gorky
One of the major challenges for any business enterprise is to keep cost under control and if possible, reduce
it. This is the need of the hour. While the knowledge of cost control and cost reduction is the foundation, the
skill for its application is what business enterprises are seeking for. Cost Management deals with the tools
and techniques of cost control and cost reduction. This book consists of some of the traditional and modern
tools and techniques used in control and reduction of cost, and provide a complete insight of some select
techniques. It is written for the specific requirements of the syllabus prescribed by Bangalore University,
and hence does not cover the entire ambit of the subject. However, the topics covered are presented in a
systematic and meticulous manner, providing the reader a ‘feel-good’ factor about the subject.
Complete care has been taken to make the book error-free. However, mistakes might have crept in
inadvertently. We request our readers to bring to our notice, any such errors, omissions and mistakes, for
enabling us to rectify in our future editions.
We thank Dr. M. Ramachandra Gowda, Registrar, Bangalore Central University and Dr. K.N. Pushpalatha,
General Secretary, BSVP Trust, who have encouraged us and extended support in carrying out this work.
We thank Suman Sen of McGraw Hill Education (India) for giving us this opportunity and constant
encouragement to pursue this project, Amit Chatterjee for his innovative ideas, constant support, follow up
and guidance in bringing out quality content, and Atul Gupta for his excellent DTP and production work.
Our acknowledgments are also due to Mrs. Meera Rajesh, Mrs. Savitha and Mr. Nischal S Kanth, without
their support and sacrifice, this work would not have been completed by the deadline.
Last but not the least, our acknowledgements are due to the Almighty who has blessed us with the knowledge
and given us strength for spreading the same.
Dr. V. Rajesh Kumar
Dr. R. K. Sreekantha

Syllabus
Cost Management
VI Semester
Bangalore University
(As per CBCS Syllabus 2014-15 as Revised in March 2017)
Chapter
AC.6.6. Cost Management (VI Semester) (IA: 30 M + Written: 70M)
in the Book
Unit 1: COST CONTROL AND COST REDUCTION
Meaning of cost control and cost reduction, areas covered by cost control and cost reduction – product
Chapter 1
design, target costing, value analysis, value engineering, value chain analysis, business process
re-engineering (theory only).
Unit 2: MARGINAL COSTING
Absorption costing, cost classification under absorption costing, meaning and definition of marginal
costing – absorption costing versus marginal costing – need for marginal costing, arguments against and Chapter 2
in favor of marginal costing – marginal cost equation – uses and limitations of Marginal Costing – break
even analysis – problems on break even analyses.
Unit 3: STANDARD COSTING
Historical costing – introduction – meaning and definition of standard cost and standard costing –
advantages and disadvantages of standard costing – preliminaries in establishing system of standard Chapter 3
costing – variance analysis – material variance, labour variance and overheads variance – problems on
material variances and labor variances.
Unit 4: BUDGETARY CONTROL
Introduction – meaning and definition of budget and budgetary control – objectives of budgetary
control – essential requirements of budgetary control – advantages and disadvantages of budgetary Chapter 4
control – meaning, types of functional budgets – flexible budgets, cash budgets, sales budget and
production budget, problems on flexible budgets and cash budgets.
Unit 5: ACTIVITY BASED COSTING
Introduction – weakness of conventional system – concept of ABC – Kaplan and Cooper’s approach –
cost drivers and cost pools – allocation of overheads under ABC – characteristics of ABC – steps in the Chapter 5
implementation of ABC – benefits from adaptation of ABC system – difficulties faced by the industries
in the successful implementation of ABC – problems on ABC.
Skill Development
∑ Preparation of Income Statement using Absorption Costing and Marginal Costing Technique
∑ Illustrate make or buying decisions helps in decision making
∑ Preparation of Sales Budget with Imaginary Figures
∑ List any 10 industries where Standard Costing is used