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For Examinations to August 2015
STUDY SYSTEM
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ACCA
Paper F2 | MANAGEMENT ACCOUNTING
Foundations in Accountancy
Paper FMA | MANAGEMENT ACCOUNTING
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ACCA
MANAGEMENT ACCOUNTING F2/FMA
STUDY SYSTEM
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For Examinations to August 2015
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Paper
F2/FMA
Contents
Page
introduction ...............................................................................................v
About this Study System ............................................................................v
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Syllabus.....................................................................................................vi
ACCA Study Guide ......................................................................................ix
Formulae and tables ................................................................................ xv
examination technique ..........................................................................xviii
Sessions
Accounting for Management ................................................. 1-1
2
Sources of data .................................................................... 2-1
3
Cost Classification ................................................................ 3-1
4
Presenting information ........................................................ 4-1
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1
5
Accounting for Materials ....................................................... 5-1
6
Accounting for labour .......................................................... 6-1
7
Accounting for overheads..................................................... 7-1
8
Absorption and Marginal Costing .......................................... 8-1
9
Job, Batch and Service Costing ............................................. 9-1
10
Process Costing ...................................................................10-1
11
Alternative Costing Principles ..............................................11-1
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
iii
Contents
Sessions
Page
Budgeting—Nature, Purpose and Behavioural Aspects .........12-1
13
Statistical techniques ..........................................................13-1
14
Budget Preparation .............................................................14-1
15
Flexible Budgets, Budgetary Control and Reporting .............15-1
16
Standard Costing and Variance Analysis ..............................16-1
17
Capital Budgeting and discounted Cash Flows .....................17-1
18
Performance Measurement ................................................. 18-1
19
Further Aspects of Performance Measurement ....................19-1
20
Glossary ..............................................................................20-1
21
index ..................................................................................21-1
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12
iv
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
Introduction
ABout tHiS Study SySteM
This Study System has been specifically written for the Association of Chartered Certified
Accountant's Papers F2 Management Accounting in the ACCA Qualification and FMA
Foundations of Management Accounting of Foundations in Accounting.
It provides comprehensive coverage of the core syllabus areas and is designed to be used
both as a reference text and interactively with the ATC Learning System to provide you with
the knowledge, skill and confidence to succeed in your ACCA studies.
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About the author: Nick Ryan is ATC International's lead tutor in performance management
and has more than 10 years' experience in delivering ACCA exam-based training.
How to Use This Study System
You should start by reading through the syllabus, study guide and approach to examining the
syllabus provided in this introduction to familiarise yourself with the content of this paper.
The sessions which follow include the following features:
These are the learning outcomes relevant to the session, as published in
the ACCA Study Guide.
Session Guidance
Tutor advice and strategies for approaching each session.
Visual overview
A diagram of the concepts and the relationships addressed in each session.
definitions
illustrations
exhibits
Termsaredefinedastheyareintroducedandlargergroupingsoftermswill
be set forth in a Terminology section.
These are to be read as part of the text. Any solutions to numerical
Illustrations are provided.
These extracts of external content are presented to reinforce concepts and
should be read as part of the text.
These should be attempted using the pro forma solution provided
(where applicable).
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examples
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Focus
Key Points
Attention is drawn to fundamental rules, underlying concepts and principles.
exam Advice
These tutor comments relate the content to relevance in the examination.
Commentaries
These provide additional information to reinforce content.
Session Summary
A summary of the main points of each session.
Session Quiz
These quick questions are designed to test your knowledge of the technical
content. A reference to the answer is provided.
Study Question
Bank
A link to recommended practice questions contained in the Study Question
Bank. At a minimum, you should work through the priority questions
after studying each session. For additional practice, you can attempt the
remaining questions (where provided).
example Solutions
Answers to the Examples are presented at the end of each session.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
v
Session 1
FOCUS
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Accounting for Management
This session covers the following content from the ACCA Study Guide.
A. The Nature, Source and Purpose of
Management Information
1. Accounting for management
a) Describe the purpose and role of cost and management accounting within
an organisation.
b) Compare and contrast financial accounting with cost and management
accounting.
c) Outline the managerial processes of planning, decision-making and control.
d) Explain the difference between strategic, tactical and operational planning.
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e) Distinguish between data and information.
f) Identify and explain the attributes of good information.
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g) Explain the limitations of management information in providing guidance
for managerial decision-making.
Session 1 Guidance
Appreciate the meaning of accounting and financial reporting (s.1, s.2).
Revisit the processes involved in management accounting (s.3).
(continued on next page)
F2 Management Accounting
Becker Professional Education | ACCA Study System
VISUAL OVERVIEW
Objective: To outline and contrast the purposes of cost and management accounting
and financial accounting and to understand the roles of the management accountant
and management information in planning, controlling, decision-making and performance
measurement.
FINANCIAL
ACCOUNTING
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ACCOUNTING
MANAGEMENT
ACCOUNTING
COMPARISON
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•
•
•
•
•
Processes
Planning
Decision-Making
Control
Cost Accounting
(see Sessions 5-11, 16)
• Performance
Measurement
DATA AND
INFORMATION
•
•
•
•
Terminology
Data Processing
Attributes
Limitations
Session 1 Guidance
Understand the difference between data and information and the attributes of useful
information (s.4).
Identify the main areas of difference between management accounting and financial accounting (s.5).
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
1-1
Session 1 • Accounting for Management
1
F2 Management Accounting
Accounting
The primary functions of accounting are:
 To classify and record actual transactions in monetary terms.
 To present and interpret the results of transactions to assess:
performance over a period; and
financial position at a given date.
To project, in monetary terms, future activities arising from
alternative planned courses of action.


2
Financial Accounting
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
Financial accounting involves the following:
 Classifies and records actual transactions in monetary terms in
accordance with established concepts, principles, accounting
standards and legal requirements. For example, in accordance
with the requirements of International Financial Reporting
Standards (IFRS).
 Presents as accurate a view as possible of the effect of those

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
transactions over a period of time and at the end of that time.
That part of financial accounting which is concerned with
the preparation of the financial statements is referred to as
financial reporting.
A set of financial statements consists of:
Management Accounting
3.1
Processes
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3
Management accounting is concerned with the provision of
information to enable management to:






1-2
formulate policies;
plan (set objectives, select strategies);
organise (establish sequence of tasks);
make decisions on alternative courses of action;
control activities (including safeguarding assets);
manage and measure performance (including motivation).
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Session 1 • Accounting for Management
Feedback
and control
Planning
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3.2
 Planning is the setting of goals and selecting the means



of achieving them.
As businesses become large, these will need to be formalised.
Short-term plans such as the annual budget show in detail
the intended results for the forthcoming year.
Long-term plans document the long-term objectives
of the business.
3.2.1 Anthony's Model
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Robert Anthony suggested that the planning process takes
place at three levels within an organisation:
STRATEGIC
TACTICAL
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OPERATIONAL
3.2.2 Strategic Planning
Strategic planning means formulating, evaluating and selecting
strategies for the purpose of preparing a long-term plan of action.
 Time period of planning is long—typically five or more years.
 Decisions taken are "high level"—how to compete, which
products and markets.
 Targets used will be broad—such as achieving a specific

market share, or growth in the market value of the company
or return on capital employed.
Information used in planning will be mainly external
(e.g. competitors, markets).
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
1-3
Session 1 • Accounting for Management
F2 Management Accounting
3.2.3 Tactical Planning
Tactical planning means planning the utilisation of resources to
achieve specific objectives in the most effective and efficient way.




The time frame for planning is typically one year.
Tactical plans aim to contribute to the long-term strategy.
Plans may be very formalised and detailed.
Information used in planning will be a mix of internal
and external.
3.2.4 Operational Planning
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Operational planning means the fully detailed specifications by
which individuals are expected to carry out the predetermined
cycles of operations to meet sector objectives.
 The time frame for planning is short—possibly one week or
even one day.
 Targets set will be "transaction-based" numeric targets—such
as producing a given number of units per hour.
 The information used for planning will be mainly internal.
Illustration 1 Planning
Decision-Making
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3.3
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In a large multinational company, the strategic planning is likely
to be performed by the chief executive officer and the senior
management team. This may involve decisions such as which
markets to invest in and which product areas. Tactical planning
may be carried out by a local team of management within each
geographic area. The team will make plans, such as how many staff
to employ in the next financial year, how much to produce and so
on—often by means of a budget. Operational managers might be
shift managers—their planning may involve items such as staff rotas,
or purchasing of raw materials.
 Decision-making usually involves using the information

provided by the costing system to make decisions concerning:
 long-term goals; and
 day-to-day routine operations.
For decisions to be optimal, management must be provided
with information appropriate to its needs.
3.4
Control
 Strategic control is externally focused comparing the

1-4
strengths, weaknesses and limitations of the organisation
with other businesses in the same industry.
"Management control systems" are mechanisms which
aim to ensure that organisational objectives are achieved.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Session 1 • Accounting for Management
3.4.1 Results or Output Controls
 Control often includes the assessment of performance

by comparing the budgeted results with actual results
(i.e. the outcomes of work effort).*
The output report usually takes the form of an "operating
statement" which breaks down the difference into its
component parts (detailed in Session 16).
3.4.2 Different Types of Controls
 Although budgetary control (through variance analysis) is



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
3.5
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
widely used to influence the decisions of line managers,
other categories of control include:
 action (or behavioural) controls; and
 personnel and cultural controls
(also called "clan and social").
Behavioural control involves the actions of subordinates
being observed (e.g. by a factory foreman).
Behavioural constraints include physical preventive
measures (e.g. bans on international telephone calls
and computer passwords).
Pre-action reviews give prior approval to an action plan
before it is implemented.
The main advantage of action/behavioural controls is that
they prevent deviations, whereas results/output controls
detect them.
Personnel, social and cultural controls rely on underlying
discipline, shared values and codes of conduct.
*Output control
systems require that
performance measures
("standards") be set
as targets and that
actual performance is
measured. Rewards
and punishments
may be important
motivational factors.
Cost Accounting
Cost accounting is that part of management accounting which:
 Establishes budgets, standard costs and actual costs of:
operations/processes;
 departments/products; and
Analyses differences between budgeted or standard
costs and actual costs.
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

3.6
Performance Measurement
Performance measurement is a vital function in organisations.
It provides feedback on what does and does not work, and helps
motivate people to sustain their efforts.
 "Performance" concerns output (e.g. of products and services)

which permits evaluation and comparison with goals, standards,
etc. It can be expressed in non-financial and financial terms.
"Measurement" concerns numerical information which
quantifies input, output, etc. Performance measures might be
simple (i.e. derived from one measurement, such as unit cost)
or composite (e.g. a consumer or retail price index).
Organisations need to match and align suitable performance
measures with their business strategy, structures and corporate
culture. Suitable measures need to strike a balance between
their merits, costs and results.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
1-5
Session 1 • Accounting for Management
F2 Management Accounting
4
Data and Information
4.1
Data Processing Model




Summarising;
Analysing;
Filtering;
Storing.
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Processing may include the following:
Data—facts or pieces of information. These are not useful for
decision-making without being further processed.
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Information—processed data. It is useful for supporting
management in the decision-making process.
Illustration 2 Data Processing
Model
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In a retail business, each sale is recorded, usually by the cash
register. The record of each sale is a piece of data. Without further
processing it does not help managers to make decisions. If members
of senior management were informed every time a sale was made,
they would soon lose focus.
At the end of each month a report might be produced, showing total
sales, analysed by product, with comparisons to the same period last
year. This report is an example of useful information. The report is
prepared by summarising and analysing each individual sale. It tells
management which products are being successful, how the business
is performing compared with the previous year, and so forth.
1-6
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Session 1 • Accounting for Management
4.2 Attributes of Good Information
Good information assists management to make good decisions.
What constitutes good information can be summarised by the
acronym "ACCURATE", as follows:
 Accurate—the degree of accuracy depends on the user. If an
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investor is reviewing a set of financial statements, an error
of $100 in sales might not matter if total sales are $1 million.
However, a cashier in a shop has to count the cash in the cash
register at the end of each shift. A discrepancy of just $1 may
be a cause for concern.
 Complete—all relevant information for the decision should
be included.
 Cost effective—the cost of providing information should be
less than the benefits it provides.
 Understandable—the information should be free from
technical jargon.
 Relevant—if a manager is provided with a long report that
contains a lot of superfluous information, it is difficult for the
manager to identity the important information.
 Available—information should be available to the appropriate
managers when they need it.
 Timely—the later information is received, the less likely it is
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to be useful.
 Easy to use—information should be presented in a professional
way, with summaries and diagrams.
4.3 Limitations of Information in DecisionMaking
 The quality of information (output) is dependent on the quality
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of raw data (input). If historic financial data is not reliable,
then management accounting cannot make an appropriate
analysis of it for decisions about the future.
 Managers involved in the decision-making process must
have relevant knowledge and a proper understanding of
the information and principles (e.g. statistics, economics)
which underlie it.
 Managers may make intuitive decisions on a course of action
(e.g. to avoid a lengthy decision-making process) which limits
the use of management accounting information.
 Management accounting provides information—not decisions.
Managers must take the part of decision-maker and ensure
their implementation.
 Obtaining good-quality information for decision-making may
be too costly for smaller businesses.
 Interpretation of information often will depend on the personal
judgement of the manager. This can be affected by bias
(e.g. aversion to risk) or other personal prejudices which will
affect the objectivity of decisions.
 Decision-making on management information alone ignores such
personal factors as attitude (e.g. to risk), morale and motivation.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
1-7
Session 1 • Accounting for Management
5
F2 Management Accounting
Comparison of Management and Financial Accounting
Management Accounting
Financial Accounting
Management only
Shareholders, banks, creditors,
potential investors, customs and
excise, government, taxation
authorities
Format of
information
Can take any form
Presentation regulated by law
(e.g. Companies Acts) and
accounting standards (e.g. IFRS)
Content
Includes future predictions
(e.g. in budgets)
A summary of mainly historic
information
Level of detail
More detailed (e.g. costs and
revenues by department/ product)
As prescribed by users,
legislation, etc
Frequency of
preparation
Quarterly, monthly (even weekly)
Usually annually (more frequently
for certain types of "public interest"
companies)
Purpose of
information
Useful to plan, control and make
decisions
Stewardship and investment
decisions
Basis of
valuation
Relevant for decision-making
(e.g. replacement cost)
Historical costs (as modified by
revaluation of certain fixed assets)
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Users of
information
1-8
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
Session 1
Summary
Accounting aims to record, present and interpret the results of transactions to reflect the
financial performance of an organisation over a given period, and to present its financial
position at the end of the period.

Financial accounting is performed for the purpose of external users, and presents information
in accordance with a specified set of rules or standards (e.g. IFRS).

The purpose of management accounting is to provide internal information to managers for
planning, decision-making and control purposes.

Accounting involves data processing, which is the process of converting raw data into
information.

The characteristics of good information can be remembered using the acronym "ACCURATE".
Session 1 Quiz
Estimated time: 10 minutes
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
List the SIX processes involved in management accounting. (3.1)
2.
True or false? Tactical planning is typically for a period of several years. (3.2.3)
3.
State THREE categories of management controls. (3.4.2)
4.
Define "information". (4)
5.
List EIGHT attributes of good information. (4.2)
6.
List FIVE areas of difference between management accounting and financial accounting. (5)
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1.
Study Question Bank
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Estimated time: 15 minutes
Priority
Q2
Management
information functions
Estimated Time
Completed
15 minutes
Additional
Q1
Sigma
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
1-9
Session 2
FOCUS
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Sources of Data
This session covers the following content from the ACCA Study Guide.
A. The Nature, Source and Purpose of
Management Information
2. Sources of data
a) Describe sources of information from within and outside the organisation
(including government statistics, financial press, professional or trade
associations, quotations and price list).
b) Explain the uses and limitations of published information/data (including
information from the Internet).
c) Describe the impact of general economic environment on costs/revenue.
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d) Explain sampling techniques (random, systematic, stratified, multistage,
cluster and quota).
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e) Choose an appropriate sampling method in a specific situation.
Session 2 Guidance
Note that this is a theoretical session dealing with a concept of data—its nature, types, complexity
and source.
Familiarise yourself with the miscellaneous classifications of data (e.g. primary/secondary, discrete/
continuous, etc). Use Example 1 to check your understanding of section 1.
F2 Management Accounting
Becker Professional Education | ACCA Study System
VISUAL OVERVIEW
Objective: To describe sources of information and explain sampling techniques.
TYPES OF DATA
Quantitative Data v Qualitative Data
Discrete Data v Continuous Data
Primary Data
Secondary Data
Raw Data v Aggregated Data
INTERNAL SOURCES
•
•
•
•
•
•
•
•
•
EXTERNAL SOURCES
Government Statistics
Professional and Trade Associations
Commercial Services
National and International Institutions
Financial Press
General Economic Environment
Internet
Uses of Published Information/Data
Limitations of Published Information/Data
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• Management Information
System (MIS)
• Accounting Records
• Company Records
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•
•
•
•
•
SAMPLING
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• Terminology
• Why Sample?
• Stages in Sample Data Collection
•
•
•
•
•
SELECTION METHODS
Random Selection
Systematic Selection
Stratified Sample
Multi-stage Selection
Non-random
Session 2 Guidance
Understand the different internal and external sources of data (s.2 and s.3), including the type
and nature of data that an entity will be able to collect.
Know why sampling (s.4.1) is required and the steps involved in a sampling process (s.4.2). Use
the Illustrations and Example 2 in section 5 to test your understanding of choosing an appropriate
sampling method.
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2-1
Session 2 • Sources of Data
F2 Management Accounting
1
Types of Data
1.1
Quantitative Data v Qualitative Data
Quantitative Data
Is capable of numerical
measurement (e.g. time,
distance, cost, weight, age).
Discrete Data v Continuous Data
Discrete Data
This increases "in jumps", i.e.
takes specific (usually integer)
values but none in-between (e.g.
number of children in families).
1.3
Continuous Data
Increases continuously to
any fraction of accuracy
(e.g. distance, weight).
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1.2
Qualitative Data
Reflects distinguishing
characteristic (e.g. gender,
colour, nationality).
Primary Data
This is data collected by an investigator to be used for a
specific purpose. Therefore, it is more difficult, costly and time
consuming to collect than secondary data.
1.4
Secondary Data
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This is not specifically collected for the purpose for which it is
being used but taken from the data of others. It may be entirely
appropriate and wholly adequate to draw conclusions so that the
collection of primary data is rendered unnecessary.
However, it must be used with care because the background to

its original collection is often unknown.
Its main attraction is that it is far cheaper and quicker to
obtain than primary data. Internet data, for example, is
immediately available.
1.5
Raw Data v Aggregated Data
Aggregated Data
Collected and summarised in
some way (e.g. rearranged in
order of size, date, etc and/or
grouped in class intervals).
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Raw Data
In its original form, this is
recorded as received and
unprocessed.
Example 1 Data Classification
Classify the following data:
Solution
(a) Data collected by the Department of Education of
your government which you use for your own survey.
(b) The manufacturer's make of mobile phones used by
your work colleagues.
(c) Data collected from a sample survey.
(d) The speed of a car passing a certain point in the road.
(e) The shoe sizes of your colleagues.
2-2
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Session 2 • Sources of Data
2
Internal Sources of Data
2.1
Management Information System
A management information system (MIS) is designed to provide
management with its information needs at every level (i.e.
operational, tactical, and strategic).
 A good MIS provides suitably detailed reports in an accurate,
consistent and timely manner.
 It continuously gathers relevant data (both internal and
2.2
Accounting Records
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
external) which is processed, updated and made available to
all who have the authority to access it.
It incorporates external data into internal data. For example,
the cost of a component purchased for the manufacture of
a product may be a published price (e.g. on a price list) but
the standard cost of the product (as determined by the cost
accountant) will be confidential internal information.
Accounting records are all the records of assets and liabilities and
monetary transactions. They include the "books" (e.g. ledgers
and asset registers) which will most likely be computerised and
the supporting documentation.
 Supporting documentation will include all that is raised
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
internally (e.g. goods received notes, sales invoices, payslips,
tax returns) and documentation received from external parties
(e.g. invoices from suppliers, tax demands, bank statements).
Information from existing and potential suppliers of goods and
services will typically include:
 technical specifications;
 retail prices and discounts available;
 terms of delivery;
 payment terms;
 after-sales services;
 product warranties.
2.3
Company Records
Although much of the information created within an organisation
will be confidential (and access to it will be restricted) many
organisations must make certain information public by filing it
with an authority.*
 Many listed companies choose to provide much more
information and may publish in an annual report:
key data (e.g. revenue, earnings, expenditure on research,
dividends per share);
 mission statement (see Session 18);
 chairman's report (essentially a letter to the shareholders);
 board of management (the chairman and other key
executives);
 investor information (e.g. explanation of stock market
movements, share price, etc);

© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
*Limited companies in
the UK must file with
Companies House an
annual return which
includes audited
financial statements.
2-3
Session 2 • Sources of Data
F2 Management Accounting
information (e.g. development in
technology);
"green" issues (e.g. measures to reduce carbon emissions);
highlights (e.g. new chairman, acquisitions, expansion into
new territories);
five-year financial summary (e.g. a summary income and
statement and statements of financial position with four
years of comparative information).
Such annual reports therefore provide information which may
be used to:
identify key executives (e.g. to "headhunt");
research companies (e.g. with a view to acquiring);
improve pre-meeting planning;
gain competitive intelligence;
target new customers;
analyse financials;
view key industry trends.
3
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industry-related
External Sources of Data
The main sources of external secondary sources are:
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government (federal, state and local) statistics;
professional trade associations;
commercial services;
national and international institutions;
financial press;
Internet.
3.1 Government Statistics
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A large-scale survey undertaken by a government or international
agency may provide more accurate data than can be obtained
through customised surveys based on relatively small sample sizes.
Information from governments may include:
population censuses;
social surveys, family expenditure surveys;
import/export statistics;
production statistics;
agricultural statistics.
3.2 Professional and Trade Associations
Professional and trade associations differ widely in the extent to
which they collect data and disseminate information.
Trade associations typically produce a trade (members)
directory and a yearbook along with perhaps periodic
newsletters.
Professional associations tend to publish information more
broadly to a range of stakeholders. For example, ACCA
provides resources for its students, members, learning
partners and employers.
2-4
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Exhibit 1
Session 2 • Sources of Data
ACCA
The following are ACCA publications for members including a range of magazines,
factsheets and booklets. Source: http://www2.accaglobal.com/members/publications/
Accounting and Business
ACCA's monthly global magazine for members, which addresses critical issues affecting
the business and finance world and contains the latest in news analysis and features.
Sector specific magazines and booklets
A range of publications tailored to your specific sector of business in the UK and Ireland.
Titles include In Practice, In Practice Ireland, Corporate Sector Review, Public Eye,
Financial Services Review and Health Service Review.
3.3
Commercial Services
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Technical factsheets
A range of factsheets on key technical matters.
Published market research reports and other publications
(e.g. results of clinical trials) are available from a wide range
of organisations which charge for their information.
Typically, marketing people are interested in media statistics
3.4
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and consumer information which has been obtained from
large-scale consumer panels.
The publishing organisation:
funds the collection of the data (which is wide-ranging in
its content);
makes money by selling this data to interested parties.
National and International Institutions
International agencies (e.g. World Bank, International
Sa
Monetary Fund (IMF), Organisation for Economic Co-operation
and Development (OECD), etc) produce secondary data in
abundance.
National sources include:
bank economic reviews;
university research reports;
medical journals.
3.5
Financial Press
The financial press reports daily, for example, on market prices
of securities of publicly traded corporations and is an important
and influential source of information in many sectors of the
community:
Investors rely on it for information about how their shares are
performing;
Stockbrokers are interested in what is happening in the share
market;
Politicians should see how their policies are affecting the
market (and, in turn, the economy); and
People in business are interested in how their companies are
perceived and how other companies are performing.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
2-5
Session 2 • Sources of Data
F2 Management Accounting
Although the financial press is a quick and relatively cheap way of
obtaining information, it must be remembered that it is a source
of both:
facts (as derived from official announcements, etc); and
opinions (usually expressed in columns written by financial
journalists, politicians, stockbrokers, advisers or other
prominent industry figures).
3.6 General Economic Environment
One of the main reasons for "following the financial news" is to
understand the current economic environment:
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The level of growth in gross domestic product influences
demand for products and services. Management needs
to consider the effect of government actions on economic
growth. For example, an increase in rates of profits tax or
cuts in government spending is likely to lead to a reduction of
aggregate demand in the economy.
If inflation is high or rising, governments may increase interest
rates in an attempt to control it. This will have the effect of:
aggregate demand in the economy (consumers will
spend less because they have to pay higher interest on loans);
 increasing the cost of finance for companies.
If the domestic currency strengthens as a result of higher
interest rates, exporters may be forced to reduce their prices
and imports will be cheaper.
reducing
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3.7Internet
The Internet links the computers of organisations, governments and
even individuals to transmit, exchange and/or receive information
quickly and inexpensively. Much of the information which can be
obtained, however, is not approved before it is made public.
Users of information from the Internet should consider, before
using it, whether it is:
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accurate (i.e. current, comprehensive and with a stated
purpose);
credible (e.g. authored by a known organisation);
reasonable (i.e. balanced, objective, moderated, internally
consistent); or
supported (e.g. corroborated by other sources).
3.8 Uses of Published Information/Data
Published data is widely used in the exploratory phase of
research. For example, a preliminary analysis of available
data may help:
in understanding market conditions; and
identifying lines of inquiry and/or alternative courses of
action that might be pursued.
Published sources are particularly helpful in defining
populations and in structuring samples to be taken from them.
Information obtained from published sources is used in decisionmaking (e.g. setting prices, deciding whether to make or buy a
product or lease or buy an asset), comparing performance (e.g.
with competitors), negotiating pay settlements, etc.
2-6
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
3.9
Session 2 • Sources of Data
Limitations of Published Information/Data
Sampling
4.1
Terminology
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4
Limitations concern
the quality of both
the data and its
source and how the
data is used.
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Particular attention must be paid to definitions of terms in the
original information. For example, "ownership" of assets may
mean legal ownership and/or physical control (e.g. of a leased
asset). A "billion" may be a thousand million or a million
million!
Users of secondary data may require a different level of
accuracy than that which was required in its original collection.
Those involved in the original research may have had vested
interests in their findings, resulting in source bias (e.g.
inflating estimates of market shares).
The system of data collection may change over time (e.g.
geographical boundaries may be changed by government
or the basis for stratifying a sample may be altered). Other
factors that may affect the reliability of secondary data
include sample size, response rate, questionnaire design, etc.
Most censuses take place at 10-year intervals, so data from
this and similar published sources may be out-of-date by the
time it is published. Also, the period for which data was first
compiled may have a substantial effect on the nature of the
data (e.g. whether it is a census "snapshot" or collected over
a period).
Population: the group of people/items about which information
is to be collected. This must be clearly defined (e.g. meaning of
"student").
Sample: a group of items drawn from a population for
examination.
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Descriptive Statistics: methods of describing large masses of
data. For example, measures of centrality (e.g. arithmetic mean)
and spread (e.g. standard deviation).
Inferential (analytical) Statistics (covered in Session 13):
methods enabling a conclusion to be drawn from data (e.g.
correlation and regression).
4.2
Why Sample?
Populations are generally too big and/or individual items
too inaccessible to be examined entirely. Examining whole
populations can be too time consuming and costly.
The full extent of a population may not be known (e.g. people
with unsuspected diabetes, victims of crime).
Examination may result in the destruction of items (e.g.
testing flammability).
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
2-7
Session 2 • Sources of Data
4.3
F2 Management Accounting
Stages in Sample Data Collection
The stages in a statistical enquiry are illustrated as follows:
Define Problem
• Define population
Design Sample
• Sample size
• Selection method
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Draft Questionnaire
• Conduct pilot survey
Collect and Check Data
• Code responses for tabulation
Organise, Analyse and
Interpret Data
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• Tabulate/graph, etc
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Report Findings
• Recommend a course of action
5
Selection Methods*
5.1
Random Selection
A random sample is selected in such a way that all items have an
equal chance of being included in the sample (e.g. using random
number tables or random number generator).
*The syllabus refers to the selection methods described in this
section as "sampling techniques". Remember, "sampling" is an
entire process which starts with defining a population and ends
with drawing a conclusion about the population. The ways in which
a sample may be drawn are just one stage in the process—the
selection method.
2-8
If conclusions
relating to the whole
population are to be
drawn, samples must
be free of bias.
The derivation of
random samples is
not examinable.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Session 2 • Sources of Data
To use this method:
number of items in the population must be known;
must be possible to match each item in the population
uniquely against each random number generated;
random numbers should not be duplicated.
the
it
Illustration 1 Random Sample
6082
4860
5465
5971
3308
5326
4259
5319
1920
3407
4656
3379
4494
4351
2794
4609
2722
2343
5067
5155
3143
1867
5928
5938
5912
5686
4042
6340
1757
2684
3321
5901
3266
1728
6230
2660
3115
2384
2508
5584
2886
6596
3697
3615
3701
2184
3399
3025
5469
5889
2880
5503
1898
4528
3752
6480
5299
3263
4213
4036
5852
6553
6296
4573
4262
6292
5536
5139
2079
5047
4413
5628
4646
1862
5905
3996
3223
4841
2317
4333
1957
5970
3682
2457
6493
4892
3695
4890
4191
5317
1913
4902
6363
4849
3362
1837
6515
3934
2430
Simple random
sampling is most
appropriate when the
entire population from
which the sample is
taken is homogeneous.
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6162
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A sample of 100 invoices is to be selected from the 5,000 invoices
referenced A1611 to A6610. A random integer generator is used to
select 100 numbers between 1611 and 6610 for sample selection:
Because of the time it takes to sort the random numbers and
match each to an item "quasi-random" methods are often
used in practice. For practical purposes they are considered
random.
5.2
Systematic Selection
This quasi-random method uses a constant interval between items
selected from a random start. It is also called "interval" sampling.
The interval may be:
a number of items (see Illustration 2); or
a monetary value (see Illustration 3).
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
2-9
Session 2 • Sources of Data
F2 Management Accounting
Illustration 2 Systematic Selection—
a Number of Items
A sample of 100 invoices is to be selected from the 5,000 invoices in Illustration 1.
Select every
5,000
100
= 50th invoice
Start at a random point between 1 and 50, e.g. 22.
So, select the 22nd invoice followed by the 72nd, 122nd, etc until 100 have been
selected. Because the first invoice in the population is numbered A1611, this will
correspond to selecting invoice numbers: A1632, A1682, A1732 and so forth.
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Illustration 3 Systematic Selection—
a Monetary Value*
A sample of 100 invoices is to be selected from the 5,000 invoices in Illustration 1.
Invoices range in value from $10 to $1,200. A higher proportion of the monetary
value of the invoices will be examined if a value-weighted selection is made from
the monetary value of the population which is $2.15m.
Interval is therefore
$2,150,000
100
= $21,500
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Start at a random point between 1 and $21,500, e.g. $1,900.
The invoices will be summed in order. The first invoice selected will be the one
which takes the cumulative amount to $1,900 (i.e. contains the 1,900th $). The
next one selected will contain the 23,400th $ and so on.
Systematic selection is widely used in audit sampling (i.e. the
application of audit procedures to less than 100% of items in
order to form a conclusion on the population).
5.3
Stratified Sample
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If there are factors which divide up the population into identifiable
sub-populations ("strata") with different characteristics, a more
representative sample of the population may be obtained by
selecting items within each sub-population ("stratum").
*Systematic selection
based on monetary
value is also called
cumulative monetary
amount or "CMA"
selection.
The proportion of each stratum in the sample should be the same
as in the population.
Illustration 4 Stratified Sample
A quality controller wishes to check, for defects, the output of a product which
is manufactured on three machines. Machines A, B and C have outputs of
100, 60 and 40 units an hour, respectively. To obtain a total sample of 60
items, the quality controller takes 30, 18 and 12 items from machines A, B and
C, respectively. This will provide a more accurate estimate of defects in the
population than if 60 items were randomly selected.
5.4
Multi-stage Selection
A multi-stage random sample can be constructed by taking a
series of simple random samples in stages.
This often is more practical for "on location" analysis (e.g. doorto-door surveys).
2-10
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
F2 Management Accounting
Session 2 • Sources of Data
For example, the steps might be:
1. A large geographic area (e.g. UK) is first divided into smaller
regions (e.g. counties) and a random sample of these is collected.
2. A random sample of smaller areas (e.g. boroughs) is taken
from within each of the regions chosen in the first stage.
3. A random sample of even smaller areas (e.g. wards) is taken
from within each of the areas chosen in the second stage.*
5.5
Non-random
5.5.1 Quota Sampling
*The number of steps
in multi-stage selection
will depend on how
small the areas are
needed for the purpose
of the study.
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Alternative sample selection methods may be used when random
or quasi-random methods are not feasible (e.g. due to constraints
of cost or time or the whole population not being known).
The method of selecting a quota of subjects is widely used in opinion
polling and market research. Interviewers or canvassers are each
given a quota of subjects of specified type (e.g. to select 20 adult
men, 20 adult women, 10 teenage girls and 10 teenage boys).
Illustration 5 Quota Sampling
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An internal auditor checking sales invoices to ensure that they are
correct might select, for example:
5 invoices < $100
15 invoices in the $100–$2,000 range
30 invoices > $2,000
5.5.2 Cluster Sampling
The entire population is divided into small areas ("clusters")
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from which a random sample is selected.
All items in the selected clusters are included in the sample.
It is typically used when:
a researcher cannot get a complete list of the members of
a population but can get a complete list of "clusters" within
the population;
when a random sample would produce a list of subjects so
widely scattered that the cost of surveying them would be
prohibitive.
Example 2 Selection Methods
Suggest the most appropriate selection method in each of the following situations:
Solution
(a) Population groups are spread across distant cities.
(b) Whole population is available.
(c) Demographic groups are to be investigated.
(d) A stream of representative people is available
(e.g. in the street).
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
2-11
Summary
Data may be quantitative or qualitative; discrete or continuous; primary or secondary; raw or
aggregated; or internal or external.
Internal sources of data and information include the management information system (MIS),
accounting records and company records.
A good MIS provides reports which are suitably detailed, accurate, consistent and timely.
There are many external sources of data (e.g. government, publications, the Internet, etc)
which are widely used in research, decision-making and performance evaluation.
how the data is used.
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Limitations of published information concern the quality of both the data and its source and
Sample selection is only one stage in the sampling process.
conclusions are to be made about the population.
Samples must be free of bias if
Simple random sampling is most appropriate when the entire population from which the
sample is taken is homogeneous.
Quasi-random selection methods include systematic, stratified and multi-stage.
Quota sampling and cluster sampling are non-random sampling methods.
Session 2 Quiz
m
Estimated time: 15 minutes
State the major difference between primary and secondary data. (1.3, 1.4)
2.
State THREE characteristics of a strong management information system. (2.1)
3.
List SIX items of information that may be published in an annual report. (2.3)
4.
List SIX external sources of data. (3)
5.
Describe the limitations of published information and data. (3.9)
6.
Explain why it is important to sample. (4.2)
7.
Identify and describe FOUR sampling methods. (5)
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1.
Study Question Bank
Estimated time: 30 minutes
Priority
Q3
Sample Selection
Estimated Time
Completed
30 minutes
Additional
Q4
2-12
Public Opinion
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
Session 2
EXAMPLE SOLUTIONS
Solution 1—Data Classification
Secondary
(b) The manufacturer's make of mobile phones used by
your work colleagues.
Qualitative
(c) Data collected from a sample survey.
Primary
(d) The speed of a car passing a certain point in the road.
Quantitative and continuous
(e) The shoe sizes of your colleagues.
Discrete
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(a) Data collected by the Department of Education of
your government which you use for your own survey.
Solution 2—Selection Methods
(a) Population groups are spread across distant cities.
Cluster
(b) Whole population is available.
Simple random
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(c) Demographic groups are to be investigated.
(d) A stream of representative people is available
(e.g. in the street).
Stratified
Systematic
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Although other methods might be used, these are the most suitable in the absence of further information.
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
2-13
Index
B
Abandonment stage ........................ 11-12
ABC, See Activity-based costing
ABC coding systems.......................... 5-21
Abnormal gains/losses ...................... 10-5
Absorption .........................................7-2
bases .............................................7-3
rates ............................................ 7-13
service departments....................... 7-12
under and over .............................. 7-15
Absorption costing
operating statement ..................... 16-20
standard costing ..............................8-3
Account entries
labour ............................................6-4
materials ........................................5-8
overheads..................................... 7-14
process accounts ........................... 10-4
Accounting ........................................1-2
payroll ...........................................6-2
records................................... 2-3, 12-4
responsibility................................. 15-8
Accounts payable/receivable days ....... 18-8
Acid-test ratio .................................. 18-7
Activity
level ............................................ 15-2
ratios ................................... 6-14, 18-7
Activity-based costing (ABC) .............. 11-2
Additive model ............................... 13-10
Adverse variance ............. 12-8, 15-7, 16-22
Aggregate index ............................. 13-18
Aggregated data.................................2-2
Algebraic reapportionment ................. 7-11
Allocation ……………………………………………….7-2
Analytical reports ...............................4-2
Annual
holding/order costs ........................ 5-11
percentage rate (APR) .................... 17-5
reports ...........................................2-4
Annuities ......................................... 17-5
Annuity factor ................................ 17-13
Anthony's Model .................................1-3
Apportionment
joint costs................................... 10-15
overheads.......................................7-6
APR, See Annual percentage rate
Arithmetic mean ............................... 13-4
Asset turnover ................................. 18-7
Audit sampling ................................. 2-10
Audits ............................................. 17-2
Average, See Arithmetic mean
Average increment method .............. 13-15
Avoidable costs .......................... 3-9, 17-9
Backward variances ........................ 16-11
Balanced scorecard ........................... 19-5
Bar charts .........................................4-5
Base 100 ....................................... 13-16
Basic standard ................................. 16-3
Batch costing .....................................9-3
Behaviour
cost ............................................. 15-3
human ......................................... 12-9
Behavioural controls ...........................1-5
Benchmarking ................................ 19-11
Best fit line ...................................... 13-4
Bin cards ...........................................5-5
Blanket rates ................................... 7-13
Block coding systems ..........................3-5
Bonus schemes ........................ 6-10, 12-9
Bottom-up budgeting ........................ 12-9
Budget
cash............................................. 14-9
flexible ......................................... 15-3
functional ..................................... 14-3
officer .......................................... 12-4
preparation ................................... 14-2
rolling .......................................... 15-6
Budget-constrained........................... 12-7
Budgetary control ............................. 15-2
Budgeted income statement............... 14-5
Budgeting
capital .......................................... 17-2
process ........................................ 12-3
Buffer inventory ............................... 5-10
By-products ................................... 10-18
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F2 Management Accounting
C
Capacity
ratio ...................................6-15, 18-16
variance ..................................... 16-16
Capital expenditure........................... 17-2
Cash
budget ......................................... 14-9
flows ............................................ 17-8
Causal relationship ........................... 13-8
Charts...............................................4-5
Clock cards ........................................6-7
Closing WIP ..................................... 10-7
Cluster sampling .............................. 2-11
CMA, See Cumulative monetary amount
Coding system ...................................3-4
Coefficient of determination (r2) ......... 13-3
Committed costs .............................. 17-9
Company records ...............................2-3
Competitive performance................... 18-4
Compound
bar charts .......................................4-6
interest ........................................ 17-3
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F2 Management Accounting
Session 21 • Index
D
Data
processing ......................................1-6
sources .................................. 2-2, 12-4
Day work remuneration .......................6-8
DCF, See Discounted cash flow
Decision-making
computer spreadsheets ................ 13-19
cost classification .............................3-7
management accounting ...................1-4
Decision rule
net present value ......................... 17-11
internal rate of return ................... 17-15
Delivery notes ....................................5-2
Demotivation ................................... 12-8
Departmental rates ........................... 7-12
Dependent variables ......................... 13-2
Descriptive statistics ...........................2-7
Design stage .................................. 11-12
Determination .................................. 13-3
Development stage ......................... 11-11
Dewey Decimal Classification ...............3-6
Direct
costs ........................................ 3-3 9-2
labour .............................. 3-4, 6-2, 16-2
materials ................................ 3-4, 16-2
method ..........................................7-7
Discount factor
annuity ...................................... 17-13
simple .......................................... 17-6
Discounted cash flow (DCF) ............... 17-7
Discounted payback period .............. 17-21
Discrete data .....................................2-2
Distribution costs ...............................3-3
Draft budgets................................... 12-5
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Computer spreadsheets ................... 13-18
Continuous
budgets ........................................ 15-6
data ...............................................2-2
inventory taking ............................ 5-21
reapportionment ............................ 7-10
Contract costing ............................. 18-11
Contribution ......................................8-2
Control..............................................1-4
actions ....................................... 16-23
budgetary ..................................... 15-2
capital investment ......................... 17-2
costs ............................................ 3-11
cycle ............................................ 12-2
inventory ........................................5-9
ratios ............................................ 18-15
reports ............................................ 15-9
Controllable costs ..................... 3-12, 15-9
Conversion costs .............................. 5-10
Corporate planning ........................... 12-2
Correlation ...................................... 13-7
Correlation coefficient (r) ................... 13-3
Cost
absorption ......................................8-5
accounting ............................... 1-5, 6-2
avoidable ................................ 3-9, 17-9
behaviour ..........................................3-7
capital ........................................ 17-11
centre .......................................... 3-12
classification ...................................3-3
control ....................................... 18-12
driver ........................................... 11-2
labour turnover ............................. 6-12
marginal .........................................8-2
opportunity ................................... 17-9
payroll ...........................................6-2
per effective unit (CPEU) ................... 10-7
reduction .................................... 18-12
relevant........................................ 5-11
service ...........................................9-6
shared ......................................... 17-9
standard .........................................8-4
units ..............................................9-5
Costing
activity-based ............................... 11-2
batch .............................................9-3
product ..........................................3-6
service ...........................................9-4
standard ....................................... 16-2
See also Absorption costing
CPEU, See Cost per effective unit
Critical success factors (CSFs) ............ 19-3
Cumulative discount factor............... 17-13
Cumulative monetary amount
(CMA) ....................................... 2-10
Current ratio .................................... 18-6
Current standard .............................. 16-4
Cyclical variations ............................. 13-9
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
E
EAIR, See Effective annual interest rate
Economic
batch quantity (EBQ)...................... 5-15
environment ...................................2-6
order quantity (EOQ)...................... 5-10
review period ................................ 5-20
Economy ....................................... 18-14
Effective annual interest rate (EAIR) ... 17-5
Effective units .................................. 10-7
Effectiveness ................................. 18-14
Efficiency ...................................... 18-14
ratios .......................... 6-14, 18-7, 18-15
variances .................................... 16-12
Employee deductions ..........................6-3
EOQ model, See Economic order
quantity
Expected standard ............................ 16-4
21-1
Session 21 • Index
F2 Management Accounting
Expenditure
capital........................................... 17-2
variance........................................ 16-6
External
information.................................... 12-4
sources of data.................................2-4
Extrapolation.................................... 13-7
Extrinsic rewards............................... 12-9
Heterogeneity................................... 19-8
Hierarchical coding systems..................3-6
Hierarchy, See Performance hierarchy
High-low analysis........................ 3-9, 13-2
Holding costs.................................... 5-10
Hopwood, A.G................................... 12-7
F
I
Faceted coding systems........................3-6
FIFO, See First in, first out
Finance costs......................................3-3
Financial accounting...................... 1-2, 1-8
performance measures.................... 18-4
position......................................... 14-8
press..............................................2-5
reporting.........................................1-2
Finished units................................... 10-7
First in, first out (FIFO)
inventory.........................................5-5
process costing.............................. 10-8
Fixed-asset turnover.......................... 18-7
budgets......................................... 15-2
costs...............................................3-7
overheads............... 7-14, 8-3, 16-3, 16-15
salaries...........................................6-8
Flexed budgets................. 13-19, 15-4, 16-5
Flexibility.................................. 18-5, 19-7
Flexible budgets................................ 15-3
Forecasting
budgeting process.......................... 12-5
product life cycle.......................... 11-11
regression analysis........................ 13-6
time series................................... 13-14
Functional budgets............................ 14-3
IAS 2 Inventory.......................... 8-2, 16-3
Ideal standard.................................. 16-3
Idle time.......................................... 6-17
IFRS, See International Financial
Reporting Standards
Incentive schemes............................. 12-9
Income
residual....................................... 18-19
statement................................ 8-4, 14-5
Independent variable......................... 13-2
Index numbers................................ 13-16
Indirect costs......................................3-3
job costing.......................................9-2
labour.............................................6-2
Individual bonuses..................... 6-10, 12-9
Inferential statistics.............................2-7
Inflation........................................... 17-7
Information................................. 1-6, 4-2
external........................................ 12-4
published.........................................2-6
Inseparability.................................... 19-8
Intangibility...................................... 19-8
Intercept............................................3-9
Interest rates.................................... 17-5
Internal
benchmarks................................. 19-12
business process perspective.......... 19-15
data.............................................. 12-4
rate of return (IRR)....................... 17-15
services...........................................9-7
sources of data.................................2-3
International Financial Reporting
Standards (IFRS)...........................1-2
Internet.............................................2-6
Interval sampling................................2-9
Intrinsic rewards............................... 12-9
Inventory.................................... 5-5, 8-7
cards..............................................5-4
control............................................5-9
costs...............................................3-2
marginal costing...............................8-3
records.......................................... 5-21
turnover........................................ 18-7
valuation............................ 3-2, 5-5, 8-3
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Gearing ratio.................................... 18-9
GDP, See Gross domestic product
Goal congruence............................... 12-2
Goods received notes (GRNs)................5-2
Government
regulation...................................... 18-3
statistics..........................................2-4
Gradual replenishment....................... 5-14
Graphs...............................................4-9
GRNs, See Goods received notes
Gross domestic product (GDP)..............2-6
Gross profit margin............................ 18-6
Group bonus schemes................ 6-10, 12-9
21-2
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F2 Management Accounting
Session 21 • Index
Investment
appraisal....................................... 17-2
centres.................................3-13, 18-19
IRR, See Internal rate of return
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JIT, See Just in time
Job cards............................................6-7
Job costing.................................. 6-5, 9-2
Joint products................................. 10-15
Just in time (JIT)............................... 5-20
Kaplan, Robert.................................. 19-5
Key budget....................................... 14-3
Key performance indicators (KPIs)....... 19-3
L
Managerial
incentive schemes.......................... 12-9
performance................................ 19-10
Manufacturing environment.............. 18-17
Marginal costing........................ 8-2, 16-19
Market conditions.............................. 18-3
Master budgets........................ 13-19, 14-4
Materials..................................... 3-4, 5-2
budgets........................................... 14-3
requisitions.........................................5-2
variances....................................... 16-10
Maturity stage ................................ 11-11
McGregor, Douglas............................. 12-9
Mean of price relatives..................... 13-18
MIS, See Management information
system
Mission statement............................. 18-2
Mnemonic coding systems....................3-6
Motivation........................................ 12-6
Moving average............................... 13-10
Multiple bar charts...............................4-6
Multiplicative model......................... 13-12
Multistage selection........................... 2-10
N
National Insurance...............................6-3
Net present value (NPV)................... 17-11
Net profit margin............................... 18-6
Net realisable value (NRV)................ 10-15
Nominal interest rates........................ 17-5
Non-accounting management style...... 12-7
Non-controllable costs........................ 3-12
Non-financial performance measures.... 19-2
Non-profit sector............................... 19-9
Normal loss...................................... 10-2
Not-for-profit.................................... 18-4
NPV, See Net present value
NRV, See Net realisable value
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budgets......................................... 14-3
cost accounting................................6-2
turnover........................................ 6-12
variances..................................... 16-12
Lagging indicators............................. 19-5
Last in, first out (LIFO).........................5-5
Lead time................................... 5-9, 5-19
Leading indicators............................. 19-6
Least squares criterion....................... 13-4
Ledger entries
labour.............................................6-6
overheads...................................... 7-14
Liabilities.......................................... 17-7
Life cycle costing........................ 11-9, 13-2
LIFO, See Last in, first out
Line graphs........................................4-9
Line of best fit................................... 13-4
Linear correlation.............................. 13-8
interpolation................................ 17-18
regression..................................... 13-3
Liquidity
preference..................................... 17-7
ratios............................................ 18-6
Long-term asset turnover................... 18-7
Losses............................................. 10-2
M
Management
accounting.......................................1-2
by exception........................... 12-2, 16-3
control systems................................1-4
information system (MIS)..................2-3
styles............................................ 12-7
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O
Opening WIP..................................... 10-7
Operating profit margin...................... 18-6
Operating statements...................... 16-18
Operation cost....................................9-3
Operational
objectives...................................... 18-3
planning.................................. 1-4, 12-2
Opportunity costs.............................. 17-9
Order costs....................................... 5-10
Output controls...................................1-5
Overheads
accounting.......................................7-2
budget.......................................... 14-3
indirect costs............................ 3-4, 7-2
over absorption........................ 7-15, 8-8
variances..................................... 16-22
Overtime.......................................... 6-11
21-3
Session 21 • Index
F2 Management Accounting
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Partial units...................................... 10-7
Participative approach ..................... 12-10
Payback period................................ 17-20
Payroll accounting...............................6-2
Payslips..............................................6-3
Performance
hierarchy....................................... 18-3
improvement schemes.................... 12-9
indicators.................................... 18-14
management.................................. 12-6
managerial.................................. 19-11
measurement....................1-5, 18-2, 19-5
monitoring..................................... 19-9
utilisation.................................... 18-17
Period costs........................................3-2
Periodic
average cost....................................5-5
budgets......................................... 15-6
review system................................ 5-20
Perishability...................................... 19-8
Perpetual inventory methods............... 5-21
Perpetuities.................................... 17-16
Pie charts...........................................4-8
Piecework rates...................................6-8
Pivot tables.................................... 13-19
Planning..................................... 1-3, 17-2
control cycle.................................. 12-3
scenario...................................... 14-12
stage.......................................... 11-12
Plant-wide rates................................ 7-13
Populations.........................................2-7
Post-completion audit........................ 17-2
Precautionary motive...........................5-9
Predetermined overhead absorption
rates.......................................... 7-13
Premium bonus schemes.................... 6-10
Present value.................................... 17-6
Pre-separation costs........................ 10-15
Price
index.......................................... 13-17
materials variance........................ 16-10
retail........................................... 13-16
sales variance................................ 16-9
standard........................................ 16-2
Primary data.......................................2-2
Principal budget factor....................... 14-2
Process costing.................. 3-6, 10-2, 18-11
Procurement costs............................. 5-10
Product costs........................ 3-2, 9-3, 11-2
Product life cycle............................. 11-12
Production
budgets.................................. 12-2, 14-3
costs...............................................3-3
overheads................................. 6-6, 8-3
volume ratio.................................. 6-14
Profit............................................... 17-7
absorption costing............................8-7
centres.......................................... 3-13
margin................................... 16-5, 18-6
marginal costing...............................8-7
reconciliation.......................... 8-7, 16-20
variances..................................... 16-10
Profit-conscious management style...... 12-7
Profit-related pay schemes................. 12-9
Profitability ratios.............................. 18-6
Purchase invoicing...............................5-2
Qualitative data...................................2-2
Quality of service.............................. 19-7
Quality performance.......................... 18-4
Quantitative data................................2-2
Quantity
discounts....................................... 5-17
index.......................................... 13-17
standards...................................... 16-2
Quick ratio........................................ 18-7
Quota sampling................................. 2-11
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elements....................................... 13-9
selection..........................................2-8
Rate variance
labour......................................... 16-12
variable overhead......................... 16-14
Raw data............................................2-2
Reciprocal methods............................ 7-10
Records, See Accounting records
Regression analysis........................... 13-3
Remuneration methods........................6-8
Reorder level.................................... 5-19
Reorder quantity............................... 5-11
Reports
analytical.........................................4-2
control.......................................... 13-9
responsibility.................................... 15-9
Requisitions........................................5-2
Research and development................. 17-2
Residual income.............................. 18-19
Resource utilisation............................ 18-5
Responsibility
accounting..................................... 15-8
centres.......................................... 3-12
reports.......................................... 15-9
Return on capital employed (ROCE)..... 18-5
Return on investment (ROI)............. 18-19
Revenue
centres.......................................... 3-13
expenditure................................... 17-2
21-4
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F2 Management Accounting
Session 21 • Index
Reward scheme................................. 12-9
ROCE, See Return on capital employed
ROI, See Return on investment
Rolling budgets................................. 15-6
S
T
Tables................................................4-4
Tactical
objectives...................................... 18-3
planning..........................................1-4
Target costing................................... 11-6
Time
series analysis................................ 13-9
sheets.............................................6-7
value of money.............................. 17-7
Top-down budgeting.......................... 12-9
Total absorption costing.................... 16-20
Total quality management (TQM)....... 11-14
Trade associations........................ 2-4, 2-5
Trends............................................. 13-9
Turnover
asset............................................. 18-7
labour........................................... 6-12
Two-bin systems............................... 5-20
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Salaries..............................................6-8
Sales.................................................8-2
price........................................... 16-10
variances....................................... 16-5
Sampling............................................2-7
Scatter diagrams......................... 4-9, 13-2
Scenario planning............................ 14-13
S-curve model ............................... 11-10
Seasonal variation........................... 13-10
Secondary
apportionments................................7-6
data................................................2-2
Selection............................................2-8
Selling costs.......................................3-3
Semi-variable costs.............................3-7
Sensitivity analysis.......................... 13-19
Sequential coding systems....................3-5
Serial coding systems..........................3-5
Service and abandonment stage........ 11-12
Service
cost analysis....................................9-6
costing..................................... 3-6, 9-4
departments....................................7-6
environment................................ 18-17
industries.........................9-6, 11-9, 19-8
reciprocal...................................... 7-10
Share option schemes........................ 12-9
Shortage costs.................................. 5-10
Short-term planning.......................... 12-2
Simple
aggregative index......................... 13-18
bar charts........................................4-5
discount factor............................... 17-6
interest......................................... 17-3
Simultaneity..................................... 19-8
Slope.................................................3-9
Social insurance..................................6-3
Specific-order cost...............................3-6
Speculative motive..............................5-9
Split-off point.................................. 10-15
Spreadsheets.................................. 13-18
Spurious correlation........................... 13-8
Standard
cost card.........................................8-4
costing.......................................... 16-2
prices............................................ 16-2
Statement of financial position............ 14-8
Step-down apportionment....................7-7
Stepped costs............................. 3-8, 3-11
Stockouts......................................... 5-19
Store record cards...............................5-4
Strategic
control............................................1-4
objectives...................................... 18-3
planning.................................. 1-3, 12-2
Systematic selection............................2-9
Systems costs................................... 5-10
© 2014 DeVry/Becker Educational Development Corp. All rights reserved.
U
Unavoidable costs................................3-9
Uncontrollable costs........................... 15-9
Uncorrelated variables........................ 13-7
Under absorption......................... 7-15, 8-8
Uneven cash flows........................... 17-17
Unit contribution.................................8-2
Unit costs....................................... 18-11
Usage variance............................... 16-10
V
Valuation, See Inventory valuation
Value analysis................................. 18-13
Value for money (VFM).............. 18-4, 19-10
Variable costs.....................................3-7
Variable overhead variances.............. 16-14
Variables.......................................... 13-2
Variance
analysis................................ 13-19, 16-6
investigation................................ 16-21
VFM, See Value for money
Volume
ratio............................................. 6-14
variance........................................ 16-6
21-5
Session 21 • Index
F2 Management Accounting
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WAC, See Weighted average cost
Wage
rates............................................. 16-2
routines...........................................6-7
Waiting time..................................... 6-17
Weighted average cost (WAC)............. 10-8
Weighted average valuation..................5-5
What-if analysis..................... 13-19, 14-12
Work-in-process (WIP)....................... 10-7
Written reports....................................4-2
21-6
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This ACCA Study System has been reviewed by ACCA's examining team and includes:
An introductory session containing the Syllabus and Study Guide and approach to examining the
syllabus to familiarise you with the content of this paper
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Comprehensive coverage of the entire syllabus
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Focus on learning outcomes
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Visual overviews
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Definitions of terms
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Illustrations and exhibits
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Examples with solutions
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Key points
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Exam advice
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Commentaries
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Session summaries
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End-of-session quizzes
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A bank of questions
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