Management Accounting and Costing
What the exam tests
Cost classification, absorption and marginal costing, CVP analysis, budgeting, standard costing variances, relevant costing and performance measurement. Kazakhstan entities use these techniques for pricing, production planning and transfer pricing decisions.
Core rules
- Contribution = sales − variable costs. Fixed costs are period costs under marginal costing.
- Absorption costing includes fixed production overhead in inventory, so profit differs from marginal costing when inventory moves.
- Material price variance = (standard price − actual price) × actual quantity purchased or used.
- Material usage variance = (standard quantity for actual output − actual quantity) × standard price.
- Relevant costs are future, incremental and cash. Sunk costs and committed costs are irrelevant.
- Break-even units = fixed costs / contribution per unit.
Worked example
Budget: 10,000 units, standard 2 kg at KZT 500/kg. Actual: 9,800 units, 19,800 kg used, cost KZT 9,702,000 (KZT 490/kg). Price variance = (500 − 490) × 19,800 = KZT 198,000 favourable. Standard quantity for actual output = 9,800 × 2 = 19,600 kg. Usage variance = (19,600 − 19,800) × 500 = KZT 100,000 adverse. Total variance = KZT 98,000 favourable: the cheaper price outweighed excess usage.
Traps
Using budgeted output instead of actual output in the usage variance; treating fixed overhead per unit as constant; including sunk costs in decisions; confusing markup with margin; ignoring idle capacity in relevant costing.