Download - Performance Management - ACCA - F5
F5 – Performance Management
Prepared by Jessy Chong
Exam FormatSection 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
Major TopicsA
Specialist cost and management accounting techniques
B Decision-making techniques
1. Activity-based costing2. Target costing3. Life-cycle costing4. Throughput accounting5. Environmental accounting
1. Relevant cost analysis2. Cost volume analysis3. Limiting factors4. Pricing decisions5. Make-or-buy and other short-term
decisions6. Dealing with risk and uncertainty in
decision making
Major Topics (Con’)C
Budgeting and controlD
Performance measurement and control1. Budgetary system2. Types of budget3. Quantitative analysis in budgeting4. Standard costing5. Material mix and yield variances6. Sales mix and quantity variances7. Planning and operational variances8. Performance analysis and Behavioural
aspects
1. Performance management information systems
2. Sources of management information3. Management reports4. Performance analysis in private sector
organisations5. Divisional performance and transfer
pricing6. Performance analysis in not-for-profit
organisations and the public sector7. External considerations and
behavioural aspects
Management AccountingIdentifying, presenting and interpreting information
Formulating strategyPlanning and controllingDecision making Optimise the use of resources
It can be Qualitative or QuantitativeTypically include financial & cost accounting information
Characteristics of Good MA InformationAccurateCompleteCost-beneficialUser-targetedRelevantAuthoritative (reputable and reliable)TimelyEasy to access (channels)
Responsibility CentreIs 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 centresProfit centresInvestment centres
Direct CostsThese are the costs which are incurred for, and can be
allocated accurately with a particular cost unit.Direct Material CostDirect Labour CostDirect Expenses Cost
Aggregation of DMC, DLC & DEC is also known as PRIME COST
Indirect CostA cost that cannot be allocated with accuracy.
Production Overheads Non-Production Overheads
Indirect Material CostsIndirect Labour CostsIndirect Expenses Costs
Administration OHSelling OHDistribution OHResearch OH
Cost BehaviourThe effect upon costs of changes in the level of activity.
Fixed CostsVariable CostsMixed CostsStepped Fixed Costs
Think from two different angles: Total Costs & Cost/u
Marginal CostingA 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.
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.
Profit StatementMarginal Costing Absorption CostingSales @ 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
Overheads
Primary
Distributio
n
•Allocation
•Apportionment (basis of apportionment)
Secondar
y Distributio
n
•Re-apportionment•Witho
ut inter-service
•With inter-service (repeated distribution or simultaneous equation method)
Final Distributio
n
•OAR = Budgeted OHs/Budgeted base
•OH absorbed/u = OAR x Actual base/u
Over/Under absorbedOH absorbed > OH incurred = over-absorbed OH absorbed < OH incurred = under-absorbedWrite off to Profit or Loss account
OARBlanket Rate Departmental RateSingle OAR is being used for all
departments of a companyOnly 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