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Performance Management Study Text PDF

405 Pages·2009·4.98 MB·English
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S T U D Y PAPER F5 T E X PERFORMANCE MANAGEMENT T In this edition approved by ACCA (cid:120) We ddiscuss the bbest strategies for studying for ACCA exams (cid:120) We hhighlight the mmost important elements in the syllabus and the kkey skills you will need (cid:120) We ssignposthow each chapter linksto the syllabus and the study guide (cid:120) We pprovidelots of eexam focus points demonstrating what the examiner will want you to do (cid:120) We eemphasise key points in regular ffast forward summaries (cid:120) We ttest your knowledge of what you've studied in qquick quizzes (cid:120) We eexamine your understanding in our eexam question bank (cid:120) We rreference all the important topics in our ffull index BPP'si-Learnandi-Passproducts also support this paper. FOR EXAMS IN DECEMBER 2009 AND JUNE 2010 First edition 2007 Third edition June 2009 ISBN 9780 7517 6367 6 (Previous ISBN 9780 7517 4726 3) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library All our rights reserved. No part of this publication may be Published by reproduced, stored in a retrieval system or transmitted, in BPP Learning Media Ltd any form or by any means, electronic, mechanical, BPP House, Aldine Place photocopying, recording or otherwise, without the prior London W12 8AA written permission of BPP Learning Media Ltd. www.bpp.com/learningmedia We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past Printed in the United Kindgom examination questions. The suggested solutions in the exam answer bank have been prepared by BPP Learning Media Ltd, except where otherwise stated. Your learning materials, published by BPP Learning Media Ltd, are printed on paper sourced from sustainable, managed forests. © BPP Learning Media Ltd 2009 ii Contents Page Introduction How the BPP ACCA-approved Study Text can help you pass v Studying F5 vii The exam paper and exam formulae viii Part A Specialist cost and management accounting techniques 1 Costing 3 2a Activity based costing 21 2b Target costing 35 2c Lifecycle costing 41 2d Backflush accounting 49 2e Throughput accounting 55 Part B Decision-making techniques 3 Limiting factor analysis 69 4 Pricing decisions 91 5 Short-term decisions 117 6 Risk and uncertainty 131 Part C Budgeting 7 Objectives of budgetary control 147 8 Budgetary systems 163 9 Quantitative analysis in budgeting 179 Part D Standard costing and variances analysis 10 Budgeting and standard costing 211 11 Variance analysis 231 12 Behavioural aspects of standard costing 259 Part E Performance measurement and control 13 Performance measurement 277 14 Divisional performance measures 303 15 Further performance management 319 Exam question bank 335 Exam answer bank 349 Index 387 Review form and free prize draw Contents iii A note about copyright Dear Customer What does the little © mean and why does it matter? Your market-leading BPP books, course materials and e-learning materials do not write and update themselves. People write them: on their own behalf or as employees of an organisation that invests in this activity. Copyright law protects their livelihoods. It does so by creating rights over the use of the content. Breach of copyright is a form of theft – as well as being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics. With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media: (cid:120) Photocopying our materials is a breach of copyright (cid:120) Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to facebook or emailing them to your friends is a breach of copyright You can, of course, sell your books, in the form in which you have bought them – once you have finished with them. (Is this fair to your fellow students? We update for a reason.) But the e-products are sold on a single user licence basis: we do not supply ‘unlock’ codes to people who have bought them second-hand. And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website. A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that do. If they act illegally and unethically in one area, can you really trust them? iv How the BPP ACCA-approved Study Text can help you pass your exams – AND help you with your Practical Experience Requirement! NEW FEATURE – the PER alert! Before you can qualify as an ACCA member, you do not only have to pass all your exams but also fulfil a three year practical experience requirement (PER). To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature. You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement. Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments. The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success. Developing exam awareness Our Texts are completely focused on helping you pass your exam. Our advice on Studying F5 outlines the content of the paper, the necessary skills the examiner expects you to demonstrate and any brought forward knowledge you are expected to have. Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future. Using the Syllabus and Study Guide You can find the syllabus, Study Guide and other useful resources for F5 on the ACCA web site: www.accaglobal.com/students/study_exams/qualifications/acca_choose/acca/professional/pm/ The Study Text covers all aspects of the syllabus to ensure you are as fully prepared for the exam as possible. Testing what you can do Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt. We include Questions – lots of them - both within chapters and in the Exam Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content. Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic. Topic list Tells you what you will be studying in this chapter and the Topic list Syllabus reference relevant section numbers, together the ACCA syllabus references. Puts the chapter content in the context of the syllabus as Introduction a whole. Study Guide Links the chapter content with ACCA guidance. Highlights how examinable the chapter content is likely to Exam Guide be and the ways in which it could be examined. What you are assumed to know from previous Knowledge brought forward from earlier studies studies/exams. Summarises the content of main chapter headings, FAST FORWARD allowing you to preview and review each section easily. Demonstrate how to apply key knowledge and Examples techniques. Definitions of important concepts that can often earn you Key terms easy marks in exams. Tell you when and how specific topics were examined, or Exam focus points how they may be examined in the future. Formulae that are not given in the exam but which have to Formula to learn be learnt. This is a new feature that gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER). Give you essential practice of techniques covered in the Question chapter. Case Study Provide real world examples of theories and techniques. Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review. A quick test of your knowledge of the main topics in the Quick Quiz chapter. Found at the back of the Study Text with more Exam Question Bank comprehensive chapter questions. Cross referenced for easy navigation. vi Introduction Studying F5 The examiner of F5 wants candidates to have an ability to apply management accounting in business environments. The key question you need to be able to answer is 'what does it all actually mean?' Modern technology is capable of producing vast amounts of management accounting information but it has to be used to help managers to make good decisions and manage effectively. The emphasis in this paper is therefore on practical elements and application to the real world. The examiner does not want to trick you and papers will be fair. 1 What the paper is about The aim of this syllabus is to develop knowledge and skills in the application of management accounting techniques. It covers modern techniques, decision making, budgeting and standard costing, concluding with how a business should be managed and controlled. F5 is the middle paper in the management accounting section of the qualification structure. F2 concerns just techniques and P5 thinks strategically and considers environmental factors. F5 requires you to be able to apply techniques and think about their impact on the organisation. 2 An explanation of the skills you are expected to demonstrate (cid:120) You are expected to have a core of management accounting knowledge from your previous studies eg papers 1.2 (old syllabus) or F2 (new syllabus) (cid:120) You will be required to carry out calculations, with clear workings and a logical structure (cid:120) You will be required to interpret data (cid:120) You will be required to explain management accounting techniques and discuss whether they are appropriate for a particular organisation (cid:120) You must be able to apply your skills in a practical context 3 How you can improve your chances of passing this paper (cid:120) There is no choice in this paper, all questions have to be answered. You must therefore study the entire syllabus, there are no short-cuts (cid:120) Practising questions under timed conditions is essential. BPP's revision kit contains 20 mark questions on all areas of the syllabus (cid:120) Questions will be based on simple scenarios and answers must be focused and specific to the organisation (cid:120) Answer plans will help you to focus on the requirements of the question and enable you to manage your time effectively (cid:120) Answer all parts of the question. Even if you cannot do all of the calculation elements, you will still be able to gain marks in the discussion parts (cid:120) Make sure your answers focus on practical applications of management accounting, common sense is essential! (cid:120) Keep an eye out for articles as this is a new paper and the examiner will use Student Accountant to communicate with students (cid:120) Read journals etc to pick up on ways in which real organisations apply management accounting and think about your own organisation if that is relevant Introduction vii 4 Brought forward knowledge You will need to have a good working knowledge of basic management accounting from 1.2 (old syllabus) or F2 (new syllabus). Chapter 1 of this Study Text revises costing and brought forward knowledge is identified throughout the text. If you struggle with the examples and questions used to revise this knowledge, you must go back and revisit your previous work. The examiner will assume you know this material and it may form part of an exam question. The exam paper The exam is a three-hour paper containing fivecompulsory 20 mark questions. There will be a mixture of calculations and discussion and the examiner's aim is to cover as much of the syllabus as possible. Analysis of past papers Below provides an overview of the syllabus and details of when each element has been examined. Further details can be found in the Exam Focus Points in the relevant chapters. Covered in Text Dec June Dec Pilot chapter 2008 2008 2007 Paper SPECIALIST COST AND MANAGEMENT ACCOUNTING TECHNIQUES 2a Activity based costing 4 1 2b Target costing 1 2c Life cycle costing 4 2d Backflush accounting 2e Throughput accounting DECISION-MAKING TECHNIQUES 3 Multi-limiting factors and the use of linear programming and 2 shadow pricing 4 Pricing decisions 5 Make-or-buy and other short-term decisions 4 6 Dealing with risk and uncertainty in decision-making 2 BUDGETING 7 Objectives 8 Budgetary systems 8 Types of budget 4 9 Quantitative analysis in budgeting 3 3 7 Behavioural aspects of budgeting STANDARD COSTING AND VARIANCE ANALYSIS 10 Budgeting and standard costing 4 11 Basic variances and operating systems 1 3 2 11 Material mix and yield variances 2 12 Planning and operational variances 3 12 Behavioural aspects of standard costing PERFORMANCE MEASUREMENT AND CONTROL 13 The scope of performance measurement 1 3 2 4 14 Divisional performance and transfer pricing 1 15 Performance analysis in not-for-profit organisations and the public sector viii Introduction Exam formulae Set out below are the formulae you will be given in the exam. If you are not sure what the symbols mean, or how the formulae are used, you should refer to the appropriate chapter in this Study Text. Chapter in Study Text Learning curve 9 Y = axb Where y = average cost per batch a = cost of first batch x = total number of batches produced b = learning factor (log LR/log 2) LR = the learning rate as a decimal Regression analysis 9 y = a + bx n(cid:166)xy(cid:16)(cid:166)x(cid:166)y b = n(cid:166)x2 (cid:16)((cid:166)x)2 (cid:166)y b(cid:166)x a = (cid:16) n n Demand curve 4 P = a – bQ changeinprice b = change in quantity a = price when Q = 0 Introduction ix

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How the BPP ACCA-approved Study Text can help you pass . F5 is the middle paper in the management accounting section of the qualification
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