F5 – Performance Management
30 Credits
1 through 2
It is essential that all students have completed module F2 whether this be from the ACCA
course or equivalent qualification.
To provide a link between paper F2 Management accounting and P5 Performance
To develop the knowledge gained from paper F2 which will enable students to apply basic
concepts to management accounting techniques and methods necessary in cost
ascertainment, recording, reporting and decision making.
1. To identify and implement appropriate methods and techniques
2. To understand the significance and meaning of measures calculated.
3. To be aware of the differing needs of management with respect to the different sectors of
business and non business activities.
4. To have a strong grasp of human behaviour in relation to performance management.
5. To select and apply alternative methods of management both financial and quantitative.
6. To co-ordinate aspects of planning control and reporting in not for profit organisations.
7. To display a high level of competence in the analysis and manipulation of data and time
constrained situations.
Specialist cost and management accounting techniques and methods
1. Activity Based Costing
(a) Develop the concepts of absorption costing into activity based costing
(b) Calculate and compare overhead chargeable under both techniques
(c) Explain the impact of A. B. C. on stock valuation, sales pricing and
(d) Evaluate the advantages and disadvantages of ABC.
2. Target Costing
(a) Calculate a target cost in both manufacturing and service activities
(b) Appreciate how a target cost group may be reduced or eliminated using
relevant financial, quantitative or management technique.
(c) Explain the problems and implications of using target costing with
particular reference to market competition.
3. Life Cycle Costing
(a) Understand the reason for using life cycle costing, with particular
reference to traditional periodic profit reporting.
(b) Understand the costs and revenues contained in each section of the life
4. Back-Flush Accounting
(a) Measure the cost implication of using back-flush accounting in
processing costing and other relevant manufacturing procedures.
(b) Identify the advantages, disadvantages and problems associated with
back-flush accounting when compared with traditional costing approaches.
5. Throughput Accounting
(a) Compare throughput accounting with other scarce resource decision
making techniques.
(b) Calculate contribution and fixed costs in achieving a throughput
accounting ratio.
(c) Use throughput accounting as a decision making tool in a multi-product
Decision Making Techniques
1. Linear Programming and Shadow Pricing
(a) Explain the applications of linear programming and shadow pricing.
(b) Decide on allocation of scarce resources using graph and simultaneous
(c) Calculate shadow prices for decision making purposes.
2. Pricing Decisions
(a) Explain equilibrium price and price elasticity of demand.
(b) Explain marketing situations that produce various pricing strategies.
(c) Use a range of methods to decide on cost, revenue and volume change.
(d) Use cost plus, relevant cost and opportunity cost to decide on prices for
special circumstances.
3. Make or buy other short term decisions
(a) Explain the issues involved in make, buy and sub-contract in short term
(b) Details reasons for deciding whether to make or buy.
(c) Apply marginal costing principles used to evaluate continuations of
product, complete shutdown and further processing situations.
4. Dealing with risk and uncertainty in decision making.
(a) Suggest research techniques to reduce risk and uncertainty.
(b) Explain, calculate and apply simulation, expected values, sensibility and
risk analysis to decision making.
(c) Apply Maximax, minimin and mini-regret to decision making.
1. Objectives
(a) Detail the objectives of budgeting for capital (including fixed assets) and
(b) Explain how conflicting factors may be reconciled.
2. Budgetary Systems
(a) Describe and where appropriate use the following type of budget
(i) Fixed and flexible
(ii) Short, Medium and long term
(iii) Incremental and ZBB
(iv) Fixed period and rolling budgets
(v) Planning and control budgets
(b) Explain the procedures for producing budgets
4. Quantitative aid in budgeting
(a) Separate fixed from variable cost using the range method, linear
regression and scatter-graphs.
(b) Use time series; ratio models and index numbers in producing budgets.
(c) Apply the learning curve to predict labour times.
5. Behavioural aspects of budgeting
(a) Explain the problem inherent in the setting of budgets.
(b) Discuss the methods which can be used to achieve goal congruence
(c) Specify how human behaviour may change in response to control
Standard Costing and Variance analysis
(a) Explain how standards for costs and revenues are detrimental.
(b) Explain the relationship between budgets and standards.
(c) Explain the relevance of historical data to the budgeting process.
2. Basic Variances and the Operating Statement
(a) Calculate the following variances from standard and produce a
reconciliation statement between budgeted and actual profit.
(i) Sales price and sales margin quantity variances.
(ii) Direct material price and usage variances.
(iii) Direct Labour rate and efficiency variances.
(iv) Variable production overhead expenditure and efficiency
(v) Fixed production overhead expenditure capacity and efficiency
(b) Calculate standard, actual and budgeted values from analysis of
(c) Explain the relationship between the above variances where appropriate.
(d) Discuss the nature and treatment of idle time and waste when producing
standards and budgets.
(e) Explain when not to investigate a variance.
3. Material mix and yield
(a) Calculate mix and yield variances within a process costing system
(include price variance).
(b) Reconcile mix and usage variances.
(c) Investigate the issues involved in changing a product mix.
4. Planning and Operating Variances
(a) Calculate simple planning and operating variances.
(b) Explain the reasons why planning and operating variances should be
(c) Outline the circumstances under which a budget, of whatever type,
should be revised.
5. Behavioural aspects of standard costing.
(a) Describe how human behaviour could influence the values used to set
(b) Describe how human behaviour may influence the reporting of actual
values when variance analysis is in operation.
Performance Measurement and control
1. The scope of performance management.
(a) Assess financial performance by the use of ratio analysis; and compare
the results with benchmark values.
(b) Suggest and describe non financial performance measures in
manufacturing and service environment.
(c) Explain how the N.F.P.I's and FPI's from (a) and (b) may be adapted for
use in not for profit organisations
(d) Use measures from (a), (b), and (c) above to produce a balanced
scorecard. Explain the Building Block model of Fitzgerald and Moon.
2. Divisional performance and transfer pricing.
(a) Calculate the difficulties of setting transfer prices using a range of bases
(b) Explain the difficulties of setting transfer price which are equitable to both
buyer and seller.
(c) Discuss the various policies which support transfer pricing.
(d) Calculate and compare Return on Investment and the various
interpretations of Return on Capital Employed.
(e) Calculate and explain the effects of gearing on measures of return.
3. Performance Analysis in not for profit organisation and the public sector
(a) Suggest measures to assess the performance in N.F.P.O's and the
public sector
(b) Explain the relevance of benchmarking and the balanced scorecard in
(a) above
(c) Discuss the concepts of values for money and cost effectiveness in
N.F.P.O's and the public sector.
(d) Explain the difficulties of setting indicators and the likely effect on human
4. External considerations and behavioural aspects.
(a) Explain the impact of external forces on specific areas of performance
(b) Explain the influence which stakeholders have on performance
Private Study: 196
Indicative reading:
The latest editions of:
Core Texts
BPP Professional Education
Contact Number: +44(0)20 8740 2222
Website: www.bpp.com/acca
Kaplan Publishing Foulks Lynch
Contact Number: +44(0)118 989 0629
Website: www.kaplanfoulkslynch.com
Additional Reading:
C.Drury, 2004. Management and Cost Accounting (6th Edition), Thomson.
ISBN 1861525362
C.T. Horngren, A.Bhimani, S.M Datar and G. Foster, 2005. Management and Cost
Accounting (3rd Edition), FT Prentice-Hall.
C. Emmanuel, D Otley, Accounting for Management Control, Chapman and Hall
ISBN 186152218
Wider reading, including relevant articles in ACCA's Student Accountant, and other
management accounting journals is encouraged.
For the syllabus of Performance Management it is considered extremely difficult for
students to research and report upon practical industrial and commercial scenarios.
The setting of the project with supplied data would lead to a situation where it is deemed to
be a single correct solution.
The project is designed to encourage students to research material from all areas of the
A weighting of 25% is considered to be adequate considering the fact that both
computational and discursive solutions are required in the examination.
The course assessment will demand skills in report writing on a specified topic which by it’s
nature will necessitate research and information drawn from a wide range of sources
including material from other modules.
The module addresses itself to the areas of business planning, reporting and control, The
module seems to develop and expand upon topics first studied in module. Problem solving
with it’s associated skills in numeracy is seen as the area of major importance. Discursive
topics are seen as a foundation for module P5 advanced performance management.
Timothy Rutt
Brighton Business
School; MIS.
Module Writer(s):
Brian Frost
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