Paper F2 Diploma in accounting and business Management accounting (MA/FMA) Pocket Notes
Management accounting British library cataloguing-in-publication data A catalogue record for this book is available from the British Library. Published by: Kaplan Publishing UK Unit 2 The Business Centre Molly Millars Lane Wokingham Berkshire RG41 2QZ ISBN 978-1-78415-844-6 Kaplan Financial Limited, 2017 Printed and bound in Great Britain. The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of Kaplan Publishing. P.2 kaplan publishing
FMA/F2 Contents Chapter 1 Accounting for management... 1 Chapter 2 Sources of information... 9 Chapter 3 Presenting information... 13 Chapter 4 Cost classification... 19 Chapter 5 Accounting for materials... 29 Chapter 6 Accounting for labour... 39 Chapter 7 Accounting for overheads... 47 Chapter 8 Absorption and marginal costing... 57 Chapter 9 Job, batch and process costing... 63 Chapter 10 Service and operation costing... 83 Chapter 11 Alternative costing principles... 87 Chapter 12 Statistical techniques... 93 Chapter 13 Budgeting... 99 Chapter 14 Capital budgeting... 121 Chapter 15 Standard costing... 133 kaplan publishing P.3
Management accounting Chapter 16 Performance measurement techniques... 147 Chapter 17 Performance measurement in specific situations... 155 Chapter 18 Spreadsheets... 159 Index... I.1 P.4 kaplan publishing
FMA/F2 Cost accounting techniques Nature, source and purpose of management accounting Core syllabus areas Budgeting Performance measurement Standard costing kaplan publishing P.5
Management accounting Exam guidance keys to success in this paper The syllabus is assessed by a two-hour paper or computer-based examination. Some questions will involve calculations, others will not. Number of marks Thirty five 2-mark questions 70 Three 10-mark questions 30 Total marks 100 Total time allowed 2 hours Pass mark 50% Divide the time you spend on questions roughly in proportion to the marks allowed. Spend approximately 84 minutes on the 2-mark questions, leaving approximately 36 minutes for the 10-mark questions. The exam is designed to test your understanding of principles, not just whether you can regurgitate information. Read the question carefully and work through any calculations. Watch for words like not for example some questions ask whether something is true and others whether it is not true. Work steadily. Rushing leads to careless mistakes and questions are designed to include answers which results from careless mistakes. P.6 kaplan publishing
FMA/F2 Paper-based exam tips Make sure you complete the Candidates Registration Sheet correctly. Don t worry if there are more options on the answer paper than in the question the answer paper gives 4 options for all questions but some questions may only have 2 or 3 options. If you get stuck on a question, leave it blank and go back later. Some questions may be linked and use the same information for more than one question. Answer these questions in the right order as you may need the answer to the first question before you can answer the second. Computer-based exam tips Make sure you understand the software before you start. If in doubt ask the assessment centre staff to explain it. You can try a CBE Demo if you visit the Exam Support section of the ACCA s website. Don t panic if you realise you have answered a question incorrectly. Getting one question wrong will not mean the difference between passing and failing. You will receive your results immediately at the end of the exam. You can take a CBE at any time in the year you do not have to wait until the June or December exam sitting. kaplan publishing P.7
Management accounting Linear regression n x y - x y r = [ n x 2 - ( x ) 2 ] [ n y 2 - ( y) 2 ] If y = a + bx, n x y - x y y x b = and a = b n x 2 - ( x) 2 n n Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to mykaplanreporting@kaplan.com with full details, or follow the link to the feedback form in MyKaplan. Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions. Economic order quantity Economic order quantity = Economic batch quantity = 2C 0 D 2C 0 D D 1 - R ) C H ( C H P.8 kaplan publishing
chapter 1 Accounting for Management In this chapter Data and information. Planning, decision making and control. Mission statement. Levels of planning. Responsibility centres. The role of management accounting. 1
Accounting for Management Exam focus It is important that you understand the information needs of managers, and in particular the different types of responsibility centres. Data and information Definition Data and information are different. Data consists of numbers, letters, symbols, raw facts, events and transactions which have been recorded but not yet processed into a form suitable for use. Information is data which has been processed in such a way that it is meaningful to the person who receives it (for making decisions). Key Point Attributes of good information: The ACCURATE acronym: A Accurate C Complete C Cost-effective U Understandable R Relevant A Accessible T Timely E Easy-to-use! Planning, decision making and control The main functions of management are planning, decision making and control. 2 kaplan publishing
chapter 1 The process What is it? Information needs Planning First part of the decision What has happened in the past making process Establishing objectives and What might happen in the future formulating strategies to achieve objectives short-term (tactical) or long-term Decision making Considering information Reliable information on different provided and making an courses of action informed decision Choosing between alternatives The consequences of different options Control The second part of the Information on actual results decision making process Comparing information on Plans or targets actual and planned results to take control measures and amend plans Internally-produced feedback kaplan publishing 3
Accounting for Management Mission statement The mission statement is a statement in writing that describes the overall aims of an organisation. There are four main elements: Purpose Strategy Policies and culture Values Levels of Planning Strategic, tactical and operational planning Strategic planning and control Long term objectives and goals Involves senior managers Responsibility centres Definition A responsibility centre is an individual part of a business whose manager has personal responsibility for its performance. The main responsibility centres are: cost centre profit centre investment centre revenue centre. Managers must be able to plan and control the areas of performance on which they are measured. Tactical Short term plans planning for the next year and control Involves senior managers Operational Day-to-day plans planning and Involves all managers control 4 kaplan publishing
chapter 1 Cost centre Profit centre Investment Revenue centre centre What is it? Where might it be found? Part of the business for which costs are identified and recorded Any production or service location, function, activity, item of equipment Part of the business for which costs incurred and revenue earned are identified and recorded Divisions of large organisations. May include several cost and revenue centres A part of the business for which profits and capital employed are measured Business units of large organisations A part of the business for which revenues earned are identified and recorded Sales divisions How is performance measured? Have cost targets been achieved? What profit has been made by the centre? Return on capital employed What revenue has been earned? What are the manager s information needs? Costs incurred and charged to cost centre Information about costs and revenues allocated to the profit centre Information on costs, revenues and capital employed by the investment centre Sales revenue earned by the individual revenue centre kaplan publishing 5
Accounting for Management Cost centre Profit centre Investment Revenue centre centre Example Audit, tax, accountancy departments in an accounting firm Wholesale and retail divisions in a paint company UK and European divisions of a multinational company Regional sales areas within the retail division of a manufacturing company 6 kaplan publishing
chapter 1 The role of management accounting Definition Financial accounting: recording financial transactions and summarising them in periodic statements for external users. Cost accounting: recording data and producing information about the costs of products, activities and responsibility centres. Management accounting: provision of information about historical and future costs of products and services, providing financial and non-financial information to managers. Information mainly produced for Purpose of information Legal requirements Formats Management accounting Internal use: e.g. managers and employees To aid planning, control and decision making None Management decide on the information they require and the most useful way of presenting it Financial accounting External use: e.g. shareholders, payables, lenders, banks, government To record the financial performance in a period and the financial position at the end of that period. Limited companies must produce financial accounts. Limited companies must produce financial accounts. kaplan publishing 7
Accounting for Management Nature of information Time period Management accounting Financial and non-financial Financial accounting Mostly financial Historical and Mainly an forward-looking historical record 8 kaplan publishing