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ACCA F5 performance management study guide

ACCA F5 performance management study guide

ACCA F5 performance management study guide: A SPECIALIST COST AND MANAGEMENT ACCOUNTING TECHNIQUES

ACCA F5 performance management study guide

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 study guide:  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 study guide: 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.

ACCA F5 performance management study guide: PERFORMANCE MEASUREMENT AND CONTROL

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 study guide

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