Join Your Exam WhatsApp group to get regular news, updates & study materials HOW TO JOIN

ACCA F5 performance management notes

ACCA F5 performance management notes

ACCA F5 performance management notes: EXAM AIM

To develop knowledge and skills in the application of management accounting techniques to quantitative and qualitative information for planning, decision-making, performance evaluation and control.

To find the right resources for you, please select from the menu.



The F5 examination has undergone significant changes, with a new format for the examination applicable from the September 2016 exam session. Although the knowledge that you need to pass F5 remains the same, the way it is being examined is changing.

Details of the new structure can be found in the Syllabus and Study Guide

A Specimen Exam has also been produced to help you prepare for these format changes and these can be found by accessing the Specimen Exams.


ACCA F5 performance management notes

1. Activity based costing

  • a) Identify appropriate cost drivers under ABC.
  • b) Calculate costs per driver and per unit using ABC. c) Compare ABC and traditional methods of overhead absorption based on production units, labour hours or machine hours.

2. Target costing

  • a) Derive a target cost in manufacturing and service industries.
  • b) Explain the difficulties of using target costing in service industries.
  • c) Suggest how a target cost gap might be closed.

3. Life-cycle costing

  • a) Identify the costs involved at different stages of the life-cycle.
  • b) Derive a life cycle cost in manufacturing and service industries.
  • c) Identify the benefits of life cycle costing.

4. Throughput accounting

  • a) Discuss and apply the theory of constraints.
  • b) Calculate and interpret a throughput accounting ratio (TPAR).
  • c) Suggest how a TPAR could be improved.
  • d) Apply throughput accounting to a multi-product decision-making problem.

5. Environmental accounting

  • a) Discuss the issues business face in the management of environmental costs.
  • b) Describe the different methods a business may use to account for its environmental costs.

ACCA F5 performance management notes:  DECISION-MAKING TECHNIQUES 1 Relevant cost analysis

  • a) Explain the concept of relevant costing.
  • b) Identify and calculate relevant costs for a specific decision situations from given data.
  • c) Explain and apply the concept of opportunity costs.

2. Cost volume profit analysis

  • a) Explain the nature of CVP analysis.
  • b) Calculate and interpret the break-even point and margin of safety.
  • c) Calculate the contribution to sales ratio, in single and multi-product situations, and demonstrate an understanding of its use.
  • d) Calculate target profit or revenue in single and multi-product situations, and demonstrate an understanding of its use.
  • e) Prepare break even charts and profit volume charts and interpret the information contained within each, including multi-product situations. f) Discuss the limitations of CVP analysis for planning and decision making.

3. Limiting factors

  • a) Identify limiting factors in a scarce resource situation and select an appropriate technique.
  • b) Determine the optimal production plan where an organisation is restricted by a single limiting factor, including within the context of “make” or “buy” decisions.
  • c) Formulate and solve multiple scarce resource problem both graphically and using simultaneous equations as appropriate.
  • d) Explain and calculate shadow prices (dual prices) and discuss their implications on decision-making and performance management.
  • e) Calculate slack and explain the implications of the existence of slack for decision-making and performance management.

4. Pricing decisions

  • a) Explain the factors that influence the pricing of a product or service.
  • b) Explain the price elasticity of demand.
  • c) Derive and manipulate a straight line demand equation. Derive an equation for the total cost function(including volume-based discounts).
  • d) Calculate the optimum selling price and quantity for an organisation, equating marginal cost and marginal revenue
  • e) Evaluate a decision to increase production and sales levels, considering incremental costs, incremental revenues and other factors.
  • f) Determine prices and output levels for profit maximisation using the demand based approach to pricing (both tabular and algebraic methods) . g) Explain different price strategies, including:
    • i) All forms of cost-plus
    • ii) Skimming
    • iii) Penetration
    • iv) Complementary product
    • v) Product-line
    • vi) Volume discounting
    • vii) Discrimination
    • viii) Relevant cost
  • h) Calculate a price from a given strategy using cost-plus and relevant cost.

5. Make-or-buy and other short-term decisions

  • a) Explain the issues surrounding make vs. buy and outsourcing decisions.
  • b) Calculate and compare “make” costs with “buy-in” costs.
  • c) Compare in-house costs and outsource costs of completing tasks and consider other issues surrounding this decision.
  • d) Apply relevant costing principles in situations involving shut down, one-off contracts and the further processing of joint products.

6. Dealing with risk and uncertainty in decisionmaking

  • a) Suggest research techniques to reduce uncertainty e.g. Focus groups, market research.
  • b) Explain the use of simulation, expected values and sensitivity.
  • c) Apply expected values and sensitivity to decision-making problems.
  • d) Apply the techniques of maximax, maximin, and minimax regret to decision-making problems including the production of profit tables.
  • e) Draw a decision tree and use it to solve a multi-stage decision problem
  • f) Calculate the value of perfect and imperfect information.

ACCA F5 performance management notes: BUDGETING AND CONTROL

1. Budgetary systems and types of budget

  • a) Explain how budgetary systems fit within the performance hierarchy.
  • b) Select and explain appropriate budgetary systems for an organisation, including topdown, bottom-up, rolling, zero-base, activitybase, incremental and feed-forward control.
  • c) Describe the information used in budget systems and the sources of the information needed.
  • d) Indicate the usefulness and problems with different budget types (including fixed, flexible, zero-based, activity- based, incremental, rolling, top-down, bottom up, master, functional).
  • e) Prepare flexed budgets, rolling budgets and activity based budgets.
  • f) Explain the beyond budgeting model, including the benefits and problems that may be faced if it is adopted in an organisation.
  • g) Discuss the issues surrounding setting the difficulty level for a budget.
  • h) Explain the benefits and difficulties of the participation of employees in the negotiation of targets. i) Explain the difficulties of changing a budgetary system or type of budget used.
  • j) Explain how budget systems can deal with uncertainty in the environment.

2. Quantitative analysis in budgeting

  • a) Analyse fixed and variable cost elements from total cost data using high/low method.
  • b) Estimate the learning rate and learning effect
  • c) Apply the learning curve to a budgetary problem, including calculations on steady states
  • d) Discuss the reservations with the learning curve.
  • e) Apply expected values and explain the problems and benefits.
  • f) Explain the benefits and dangers inherent in using spreadsheets in budgeting.

3. Standard costing

  • a) Explain the use of standard costs.
  • b) Outline the methods used to derive standard costs and discuss the different types of cost possible.
  • c) Explain and illustrate the importance of flexing budgets in performance management.
  • d) Explain and apply the principle of controllability in the performance management system.

4. Material mix and yield variances

  • a) Calculate, identify the cause of, and explain material mix and yield variances.
  • b) Explain the wider issues involved in changing material mix e.g. cost, quality and performance measurement issues.
  • c) Identify and explain the relationship of the material usage variance with the material mix and yield variances.
  • d) Suggest and justify alternative methods of controlling production processes.

5. Sales mix and quantity variances

  • a) Calculate, identify the cause of, and explain sales mix and quantity variances.
  • b) Identify and explain the relationship of the sales volume variances with the sales mix and quantity variances.

6. Planning and operational variances

  • a) Calculate a revised budget.
  • b) Identify and explain those factors that could and could not be allowed to revise an original budget.
  • c) Calculate, identify the cause of and explain planning and operational variances for: i) sales, including market size and market share; ii) materials; iii) labour, including the effect of the learning curve.
  • d) Explain and discuss the manipulation issues involved in revising budgets.

7. Performance analysis

  • a) Analyse and evaluate past performance using the results of variance analysis.
  • b) Use variance analysis to assess how future performance of an organisation or business can be improved.
  • c) Identify the factors which influence behaviour.
  • d) Discuss the effect that variances have on staff motivation and action.
  • e) Describe the dysfunctional nature of some variances in the modern environment of JIT and TQM.
  • f) Discuss the behavioural problems resulting from using standard costs in rapidly changing environments.


1. Performance management information systems

  • a) Identify the accounting information requirements and describe the different types of information systems used for strategic planning, management control and operational control and decision-making.
  • b) Define and identify the main characteristics of transaction processing systems; management information systems; executive information systems; and enterprise resource planning systems.
  • c) Define and discuss the merits of, and potential problems with, open and closed systems with regard to the needs of performance management.

2. Sources of management information

  • a) Identify the principal internal and external sources of management accounting information.
  • b) Demonstrate how these principal sources of management information might be used for control purposes.
  • c) Identify and discuss the direct data capture and process costs of management accounting information.
  • d) Identify and discuss the indirect costs of producing information.
  • e) Discuss the limitations of using externally generated information.

3. Management reports

  • a) Discuss the principal controls required in generating and distributing internal information.
  • b) Discuss the procedures that may be necessary to ensure security of highly confidential information that is not for external consumption.

4. Performance analysis in private sector organisations

  • a) Describe, calculate and interpret financial performance indicators (FPIs) for profitability, liquidity and risk in both manufacturing and service businesses. Suggest methods to improve these measures.
  • b) Describe, calculate and interpret non-financial performance indicators (NFPIs) and suggest methods to improve the performance indicated.
  • c) Analyse past performance and suggest ways for improving financial and non-financial performance.
  • d) Explain the causes and problems created by short-termism and financial manipulation of results and suggest methods to encourage a long term view.
  • e) Explain and interpret the Balanced Scorecard, and the Building Block model proposed by Fitzgerald and Moon.
  • f) Discuss the difficulties of target setting in qualitative areas.

5. Divisional performance and transfer pricing

  • a) Explain and illustrate the basis for setting a transfer price using variable cost, full cost and the principles behind allowing for intermediate markets.
  • b) Explain how transfer prices can distort the performance assessment of divisions and decisions made.
  • c) Explain the meaning of, and calculate, Return on Investment (ROI) and Residual Income (RI), and discuss their shortcomings.
  • d) Compare divisional performance and recognise the problems of doing so.

6. Performance analysis in not for profit organisations and the public sector

  • a) Comment on the problems of having non-quantifiable objectives in performance management.
  • b) Comment on the problems of having multiple objectives in this sector.
  • c) Explain how performance could be measured in this sector
  • d) Outline Value for Money (VFM) as a public sector objective.
  • e) Describe, calculate and interpret non-financial performance indicators (NFPIs) and suggest methods to improve the performance indicated.
  • f) Discuss the difficulties of target setting in qualitative areas.
  • g) Analyse past performance and suggest ways for improving financial and non-financial performance.
  • h) Explain the causes and problems created by short-termism and financial manipulation of

ACCA F5 performance management notes

ACCA F5 performance management notes: For more information on ACCA please follow this Visit

ACCA F5 performance management notes: For other exam related information visit


Leave a comment

Your email address will not be published. Required fields are marked *