ma1 - slides j12
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MA-I SlidesTRANSCRIPT
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FIA MA1Management Information2012
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FIA MA1The Syllabus:Cost and management accountingSource documents and codingCost classification and measurementRecording costsProviding informationSpreadsheets
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FIA = MA1The exam:50 multiple choice questions worth 2 marks eachTime allowed: 2 hours2.4 minutes per questionCan be sat as a paper-based or computer-based exam
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Business organisationFunctions of an office:PurchasingSalesControl of inventory, accurate record keepingInformation processingFilingCopying, typing, information
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Business organisationCentralisation:Procedures are done centrally
Decentralisation:Each department has their own, independent office
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Business organisationOrganisation chart:Names of individualsLine structureLevels of authorityLines of communication
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Business informationPersonnel:Managing DirectorSales ManagerMarketing ManagerFinance ManagerProduction ManagerR & D ManagerHR ManagerAdmin ManagerIT Manager
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Business organisationLayout:Open planLandscapedCorridor
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Business organisationOrganisational information:Manual of best practiceOrganisation chartStaff planning chartCompany handbook
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Business organisationDouble-entry bookkeeping:Books of prime entry =PDBPRDBSDBSRDBCBPCBJournals
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Business organisationComputerised accounting:Batch processingReal-time processingIntegrated computerised accounting systems
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Management informationFunctions of management:PlanningControllingOrganisingCommunicatingMotivatingDecision-making
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Management informationEffective management information:RelevantReliableUnderstandableCompleteAccurateTimelyClearConsistentCost effective
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Management informationSources:Internal various department in the company .e.g. Sales, production, personnelExternal Internet, journals, HMRC, banks, competitors, suppliers, customers
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Management informationManagement accounts Internal, futuristic, detailed, monthly, any formatFinancial accounts External, historic, summarised, yearly, prescribed format
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Management informationResponsibility centres:Cost centreProfit centreInvestment centre
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Cost classificationsProduct costPeriod costControllable and uncontrollable costsDirect costsIndirect costsVariable costsFixed costsSemi-variable costsStepped costs
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CodingTypes:BlockHierarchicalFacetedMnemonic
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Materials costTypes of inventory:Raw materialWork in progressFinished goods
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Materials costDirect materials .e.g. Wood in the manufacture of furnitureIndirect materials .e.g. Oil for the lubrication of the wood cutting machine
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Materials costMaterials paperwork:Purchase requisitionPurchase order (PO)Delivery noteGoods received note (GRN)Purchase invoiceMaterials requisition noteMaterials returned noteBin card
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Materials costPricing material issues:First in first out (FIFO)Last in first out (LIFO)Weighted average cost (AVCO)Periodic weighted average cost
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Materials costControlling inventory:Free inventory = Inventory in stores + Inventory on order from suppliers Inventory already requisitioned for use
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Labour costsRecording labour costs:Clock cards / time sheetsHolidaySicknessIdle time
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Labour costsGross pay time related:Time relatedSalaried employeesHourly rated employeesOvertimeOvertime premium
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Labour costsGross pay output related:Piece ratePiece rate with guaranteeDifferential piecework
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Labour costsBonus schemes:Flat ratePercentage bonusTime related
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Labour costsProductivity:The amount of output produced per labour hour
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OverheadsCapital expenditure non-current assets are purchased (not intended for resale) .e.g. A factoryRevenue expenditure expenditure on everyday items .e.g. Rent, rates, insurance
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OverheadsApportionment bases:Overheads which are shared should be split in a fair way across the cost centres that use them .e.g. Rent might be split across four departments on the basis of floor area. The biggest department incurs the most rent.
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OverheadsAbsorption:By unitBy labour hoursBy machine hours
All based on BUDGETED information
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OverheadsAbsorption:
Actual overheadX
Actual labour hours x Budgeted absorption rate(X)Under / over absorptionX
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MC & TACMarginal cost = Variable cost
Contribution = Sales Variable costs
Absorption cost = Sales All costs
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Job costingJob cost card:
Job no. 1Mrs. Smith2nd Jan 2011CostsMaterials100 kg$2 / kg$200Labour4 hours$10 per hour$40Overheads4 hours$1 per hour$4$244
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Batch costingBatch costing is:Job costing divided over the number of units in the batch.
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Process costingT-account:
kg$kg$Material2,5003,500Output2,4004,550Labour600Normal loss100-Overhead4502,5004,5502,5004,550
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Process costingFormula:
Cost per unit of output =
Cost of inputs Normal loss receiptsExpected good output
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Process costingEquivalent units:
Number of physical units x % complete
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BudgetingPrincipal budget factor:
The factor that limits the level of activity for the organisation (usually sales).
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BudgetingProduction budget:UnitsSalesX+ Closing inventoryXOpening inventory (X)ProductionX
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BudgetingPurchases budget:kgProduction requirementX+ Closing inventoryXOpening inventory(X)PurchasesX
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BudgetingFlexible budgets:
Variable costs vary dependent on outputFixed costs remain at the same level as before
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Performance indicatorsComparators:
A performance indicator is useless on its ownNeed a different period, a budget, or a different company to establish whether activity is better or worse
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Performance indicatorsProductivity measures:Production volume ratio =
Actual output in standard hours X 100%Budgeted production hours
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Performance indicatorsCapacity utilisation ratio =
Actual hours worked x 100%Budgeted hours
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Performance indicatorsEfficiency ratio =
Actual output in standard hours x 100%Actual production hours
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Performance indicatorsProfit centre performance:
Profit margin = Profit x 100%Sales
Cost to sales ratio = Direct cost x 100%Sales
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Performance indicatorsInvestment centre performance:
ROCE = Profit before interest and tax x 100%Capital employed
Where capital employed = Non-current assets + current assets current liabilities
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Performance indicatorsResidual income = Investment centre profit (% interest x Capital employed)
Asset turnover = RevenueCapital employed
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VariancesException reporting:
Highlighting for management attention only those variances which exceed a certain limit (by $ or %)
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VariancesMaterials:
Total material cost variance =Original budgeted cost of materialsVActual cost of materials
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VariancesMaterials activity (volume) variance =
Original budgeted cost of materialsvFlexed budgeted cost of materials
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VariancesMaterials price and usage variance =
Flexed budgeted cost of materials vActual cost of materials
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VariancesLabour:
Total labour cost variance =
Original budgeted cost of labourvActual cost of labour
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VariancesLabour activity (volume) variance
Original budgeted cost of labourvFlexed budgeted cost of labour
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VariancesLabour rate and / or efficiency variance =
Flexed budgeted cost of labour vActual cost of labour
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VariancesSales:Total sales variance:
Budgeted sales revenuevActual sales revenue
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VariancesSales activity (volume) variance =Original budget for sales revenuevFlexed budgeted sales revenueSelling price variance =Actual quantity sold @ actual pricevActual quantity sold @ budgeted price
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VariancesCauses:Bad budgetingBad measurement or recordingRandom factorsOperational factors
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VariancesInvestigation:ControllabilityCostSizeInter-relationshipsTrend
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Data presentationPresentation:TablesDiagramsBar chartsPie chartsGraphs
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Data presentationPresentation:NoteLetterEmailMemorandumReport
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SpreadsheetsBasic features:RowsColumnsCopy and pasteEditing and deletingFormattingBorders and shading
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SpreadsheetsFormulae:+ * - /Sum( )