CIMA Revision Cards Management Accounting Performance Evaluation (CIMA Managerial Level 2008) (CIMA Managerial Level 2008) PDF
Preview CIMA Revision Cards Management Accounting Performance Evaluation (CIMA Managerial Level 2008) (CIMA Managerial Level 2008)
CIMA REVISION CARDS Management Accounting Performance Evaluation Bob Scarlett Managerial Level Paper P1 AMSTERDAM l BOSTON l HEIDELBERG l LONDON l NEW YORK l OXFORD PARIS l SAN DIEGO l SAN FRANCISCO l SINGAPORE l SYDNEY l TOKYO ElsevierButterworth-Heinemann LinacreHouse,JordanHill,OxfordOX28DP 30,CorporateDrive,Burlington,MA01803 Firstpublished2006 Copyright(cid:1)2006,ElsevierLtd.Allrightsreserved Nopartofthispublicationmaybereproducedinanymaterialform(includingphotocopyingorstoringinanymediumbyelectronicmeansand whetherornottransientlyorincidentallytosomeotheruseofthispublication)withoutthewrittenpermissionofthecopyrightholder,exceptin accordancewiththeprovisionsoftheCopyright,DesignsandPatentsAct1988,orunderthetermsofalicenceissuedbytheCopyrightLicensing AgencyLtd,90TottenhamCourtRoad,London,EnglandW1T4LP.Applicationsforthecopyrightholder’swrittenpermissiontoreproduceanypart ofthispublicationshouldbeaddressedtothepublisher. PermissionsmaybesoughtdirectlyfromElsevier’sScience&TechnologyRightsDepartmentinOxford,UK:phone:(+44)1865843830,fax:(+44) 1865853333,e-mail:permissions@elsevier.co.uk.Youmayalsocompleteyourrequeston-lineviatheElsevierhomepage (http://www.elsevier.com),byselecting‘CustomerSupport’andthen‘ObtainingPermissions’ BritishLibraryCataloguinginPublicationData AcataloguerecordforthisbookisavailablefromtheBritishLibrary LibraryofCongressCataloginginPublicationData AcataloguerecordforthisbookisavailablefromtheLibraryofCongress ISBN10:0750681233 ISBN13:9780750681230 ForinformationonallElsevierButterworth-Heinemannpublicationsvisitourwebsiteathttp://books.elsevier.com PrintedandboundinGreatBritain Welcome toCIMA’sOfficial RevisionCards. Thesecards have beendesigned to: . Save youtime bysummarisingthesyllabus inaconcise form . Jog your memorythroughtheuse ofdiagrams andbulletpoints . Follow thestructure oftheCIMA OfficialLearningSystems . Refer torelevant questions found within thePreparing for theExamination section oftheLearningSystem . Provide you withplenty ofexam tipsandhints Ensure examsuccess byrevising withtheonly revisioncards endorsed byCIMA. TABLE OF CONTENTS 1. Costaccounting systems.............................................................. 1 2. Thetheory andpractice of standard costing........................................ 21 3. Standard costingand performance evaluation...................................... 37 4. Basicaspects of management accounting.......................................... 51 5. Thetheory andpractice of budgeting................................................ 63 6. Budgetary control....................................................................... 81 7. Budgetingand performance evaluation.............................................. 93 8. Developments inmanagement accounting..........................................107 9. Responsibility centres andtransfer pricing..........................................119 Cost Accounting Systems Topics Key learning system . Absorptioncosting concept questions . Marginalcostingconcept 2.7 Valuation ofcompletedwork . Costingconceptscompared 6.6 Marginalcosting andprofit . Costinginjob, batch andprocessindustries 35 Costing systemsand . Productioncost perUnit inprocessindustries decisionmaking . Valuationofprocess losses 1 Cost Accounting Systems Absorption costing concept Definitions Absorptioncosting–anapproachtocostingthatassignsproductionoverheadstoproductsthroughtheuseof an overhead absorptionrate Overheadabsorptionrate–themeansofattributingoverheadcoststoindividualproducts,basedontheUnits produced, labour hoursusedorsome suchbasis Predeterminedoverheadabsorptionrate–anoverheadabsorptionrate,basedonbudgetedoverheadandthe budgeted levelof outputand/oractivity Under/over absorptionof overheads–thedifferencebetween overheadsabsorbed andoverheads incurred Key points K Theoverheadabsorptionrateadoptedshouldbetheonewhichmostmeaningfullyreflectsthemannerinwhich overhead costsareincurred. Forexample, ifmostoverheads relatetotheemployment oflabour, thendirect labourhours providetheappropriate overhead absorptionrate (‘OAR’) 2 Cost Accounting Systems Absorption costing concept K Anunder/overabsorptionofoverheadsariseswheretheactualoverheadsincurreddiffersfromtheoverheads absorbed. Thiscan happen because(1) actual fixedoverheadsdiffer from thatbudgeted forand/or(2) the actual levelof activitydiffersfrom thatbudgeted for 3 Cost Accounting Systems Absorption costing concept Example ABCLtdproducestheUnit.Budgetdetailsforperiod99include–£1,000fixedoverheads,100Unitsoutputandsold (givinganOARof£10perUnit),£5variablecostperUnitand£20sellingpriceperUnit.Actualresultsfortheperiod are£1,000fixedoverheads,110Unitsoutput,£550variablecosts,105Unitssoldand£2,100salesrevenue.Aprofit statementforperiod 99,usingtheabsorption costing principle,appearsas follows: Salesrevenue £ 2,100 Production costs: Variable 550 Fixed(110 Units@ £10) 1,100 1,650 Closingstock(5Units @£15) 75 (w1) Cost ofsales 1,575 Gross profit 525 Over/(under) absorption of overheads 100(w2) Netprofit 625 Workings: (w1) cost perUnit is£5 variableplus £10fixed (predetermined)per Unit¼£15 (w2) £1,100 absorbed(110 Units @£10)fixedoverheads less £1,000 actualfixedoverheads 4 Cost Accounting Systems Marginal costing concept Definitions Marginalcost–thepartoftheproductioncostofoneUnitofaproductthatwouldbeavoidedifthatUnitwere notproduced, ortheamountby whichcost wouldincrease ifoneextra Unitwere produced Marginalcosting–theaccountingsysteminwhichvariablecostsarechargedtocostUnitsandfixedcostsof theperiod arewritten offin fullagainstcontribution Contribution–salesrevenuelessmarginalcostofUnitssold.Contributionmaybeexpressedasatotalfigure, as perUnitfigure orasapercentageof salesrevenue Key points K Contribution isarrived atbydeducting thevariable cost only oftheUnitssold from thesalesrevenuefigure 5
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