AA205 BRIGHTON BUSINESS SCHOOL MOULSECOOMB MODULAR SCHEME TITLE: F5 – Performance Management CREDIT RATING: 30 Credits SUBJECT AREA: MODULE TYPE: Double SEMESTER OFFERED: 1 through 2 PRE-REQUISITES: It is essential that all students have completed module F2 whether this be from the ACCA course or equivalent qualification. AIMS: To provide a link between paper F2 Management accounting and P5 Performance Management. 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. LEARNING OUTCOMES: 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. CONTENT OF TEACHING PROGRAMME: 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 budgeting. (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 cycle. 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 business. 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 equations. (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 situation. (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. Budgeting 1. Objectives (a) Detail the objectives of budgeting for capital (including fixed assets) and revenue. (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 systems 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 variances. (v) Fixed production overhead expenditure capacity and efficiency variances. (b) Calculate standard, actual and budgeted values from analysis of variances. (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 calculated. (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 standards. (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 behaviour. 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 measures. TEACHING & LEARNING STRATEGIES: Classes: Private Study: 196 Assessment: Total: 44 60 300 LEARNING SUPPORT: 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. ISBN 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. ASSESSMENT: 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 syllabus. 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. BRIEF DESCRIPTION OF THE MODULE: 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. External Examiner: Timothy Rutt Faculty: Brighton Business School; MIS. Module Writer(s): Brian Frost Date of First Approval: Version Number Site where delivered: Date of Last Revision: Moulsecoomb