Performance Management - ACCA - F5
- 1. Prepared by Jessy Chong
- 2. Exam Format Section Total Marks A 20 MCQ x 2 marks (All areas) 40 B 3 Qs x 10 marks (DM, Budgeting & Ctrl, PM) 30 2 Qs x 15 marks 30 100 Formula Sheet is provided during exam. Don’t worry
- 3. Major Topics A Specialist cost and management accounting techniques B Decision-making techniques 1. Activity-based costing 2. Target costing 3. Life-cycle costing 4. Throughput accounting 5. Environmental accounting 1. Relevant cost analysis 2. Cost volume analysis 3. Limiting factors 4. Pricing decisions 5. Make-or-buy and other short-term decisions 6. Dealing with risk and uncertainty in decision making
- 4. Major Topics (Con’) C Budgeting and control D Performance measurement and control 1. Budgetary system 2. Types of budget 3. Quantitative analysis in budgeting 4. Standard costing 5. Material mix and yield variances 6. Sales mix and quantity variances 7. Planning and operational variances 8. Performance analysis and Behavioural aspects 1. Performance management information systems 2. Sources of management information 3. Management reports 4. Performance analysis in private sector organisations 5. Divisional performance and transfer pricing 6. Performance analysis in not-for-profit organisations and the public sector 7. External considerations and behavioural aspects
- 5. Management Accounting Identifying, presenting and interpreting information Formulating strategy Planning and controlling Decision making Optimise the use of resources It can be Qualitative or Quantitative Typically include financial & cost accounting information
- 6. Characteristics of Good MA Information Accurate Complete Cost-beneficial User-targeted Relevant Authoritative (reputable and reliable) Timely Easy to access (channels)
- 7. Responsibility Centre Is a segment of an organisation whose manager is accountable for a specific set of activities and the performance of the segment assigned to him/her. Cost centres Profit centres Investment centres
- 8. Direct Costs These are the costs which are incurred for, and can be allocated accurately with a particular cost unit. Direct Material Cost Direct Labour Cost Direct Expenses Cost Aggregation of DMC, DLC & DEC is also known as PRIME COST
- 9. Indirect Cost A cost that cannot be allocated with accuracy. Production Overheads Non-Production Overheads Indirect Material Costs Indirect Labour Costs Indirect Expenses Costs Administration OH Selling OH Distribution OH Research OH
- 10. Cost Behaviour The effect upon costs of changes in the level of activity. Fixed Costs Variable Costs Mixed Costs Stepped Fixed Costs Think from two different angles: Total Costs & Cost/u
- 11. Marginal Costing A principle whereby variable costs are charged to cost units, and the fixed costs attributable to the relevant periods is written off in FULL against the contribution for that period. Suitable for Performance Evaluation & S/T decision making.
- 12. Absorption Costing Based on full production cost of prime cost and production overhead absorbed (both fixed and variable OH). Would yield a higher valuation than MC valuation. Suitable for external reporting and L/T decision making.
- 13. Profit Statement Marginal Costing Absorption Costing Sales @ SP X Less: Op. stock @MC x Production @ MC X Cl. Stock @ MC (x) Variable Production COS X Add: VNPC X Variable COS (x) Contribution X Less: Fixed costs Production X NPC X (x) Net Profit X Sales @ SP X Less: Op. stock @AC x Production @ AC X Cl. Stock @ AC (x) Production COS (x) Gross Profit X Less: (Over)/under absorption X FNPC X VNPC X (X) Net Profit X
- 14. Overheads Primary Distribution • Allocation • Apportionment (basis of apportionment) Secondary Distribution • Re-apportionment • Without inter-service • With inter-service (repeated distribution or simultaneous equation method) Final Distribution • OAR = Budgeted OHs/Budgeted base • OH absorbed/u = OAR x Actual base/u
- 15. Over/Under absorbed OH absorbed > OH incurred = over-absorbed OH absorbed < OH incurred = under-absorbed Write off to Profit or Loss account
- 16. OAR Blanket Rate Departmental Rate Single OAR is being used for all departments of a company Only suitable if all departments have the same nature and use similar labour and types of OH Different OAR is being used by different department If departments have different nature