Management Accounting
Paper F2
Integrated Course Notes
ACF2CN07(D)
F2 Management Accounting
(Computer Based Exam)
Study Programme
Page
Introduction to the paper and the course............................................................................................................... (ii)
1
2
3
4
Information for management ....................................................................................................................... 1.1
Cost classification........................................................................................................................................ 2.1
Cost behaviour ............................................................................................................................................ 3.1
Expected values and correlation and regression......................................................................................... 4.1
End of Day 1 – refer to Course Companion for
5
6
7
8
Home Study
Home Study
Home Study
Answers to Lecture Examples ................................................................................................................... 20.1
Appendix A: Pilot Paper questions ............................................................................................................ 21.1
Appendix B: Formulae given in the exam.................................................................................................. 22.1
Don’t forget to plan your revision phase!
•
•
•
•
Relevant costs........................................................................................................................................... 18.1
Linear programming .................................................................................................................................. 19.1
End of Day 6 – refer to Course Companion for
20
21
22
Home Study
Basic variances ......................................................................................................................................... 15.1
Further variances ...................................................................................................................................... 16.1
CVP analysis ............................................................................................................................................. 17.1
End of Day 5 – refer to Course Companion for
18
19
Job and service costing............................................................................................................................. 12.1
Budgeting .................................................................................................................................................. 13.1
Standard costing ....................................................................................................................................... 14.1
End of Day 4 – refer to Course Companion for
15
16
17
Home Study
Absorption costing and marginal costing..................................................................................................... 9.1
Process costing ......................................................................................................................................... 10.1
Process costing, joint products and by-products ....................................................................................... 11.1
End of Day 3 – refer to Course Companion for
12
13
14
Spreadsheets .............................................................................................................................................. 5.1
Materials costs ............................................................................................................................................ 6.1
Labour costs................................................................................................................................................ 7.1
Overheads and absorption costing ............................................................................................................. 8.1
End of Day 2 – refer to Course Companion for
9
10
11
Home Study
Revision of syllabus
Testing of knowledge
Question practice
Exam technique practice
BPP provides revision courses, question days,
mock days and specific material to assist you in
this important phase of your studies.
(i)
INTRODUCTION
Introduction to Paper F2 Management Accounting
Overall aim of the syllabus
The overall aim of the paper is to develop knowledge and understanding of the application of management
accounting techniques to support the management process of planning, control and decision making.
The syllabus
The broad syllabus headings are:
A
B
C
D
E
F
The nature and purpose of cost and management accounting
Cost classification, behaviour and purpose
Business mathematics and computer spreadsheets
Cost accounting techniques
Budgeting and standard costing
Short-term decision making techniques
Main capabilities
On successful completion of this paper, candidates should be able to:
•
•
•
•
•
Explain the nature and purpose of Cost and Management Accounting
Describe costs by classification, behaviour and purpose
Apply essential business mathematics and use computer spreadsheets
Explain and co-ordinate budgets and standard costing for planning feedback and control
Use Management Accounting techniques to make and support decision-making
Links with other papers
APM (P5)
Advanced Performance Management
PM (F5)
Performance Management
AB (F1)
Accountants in Business
FM (F9)
Financial Management
MA (F2)
Management Accounting
This diagram shows where direct (solid line arrows) and indirect (dashed line arrows) links exist between this
paper and other papers that may follow it.
The Management Accounting syllabus assumes knowledge acquired in paper F1 Accountants in Business, and
develops and applies this further and in greater depth. Paper F5 Performance Management assumes knowledge
acquired at this level.
(ii)
INTRODUCTION
Assessment methods and format of the exam
Examiner: David Forster
Students have the option to take either a paper-based or a computer-based exam.
Both exams contain 100% compulsory questions worth either 1 or 2 marks, making up a total of 90 marks to be
completed in two hours as follows:
–
–
40 two-mark questions
10 one-mark questions
Questions will assess all parts of the syllabus and will include both computational and non-computational
elements.
(iii)
INTRODUCTION
Course Aims
Achieving ACCA's Study Guide Outcomes
A
The nature and purpose of cost and management accounting
A1 Accounting for management
Chapter 1
A2 Cost and management accounting versus financial accounting
Chapter 1
B
Cost classification, behaviour and purpose
B1 Production and non-production costs
Chapter 2
B2 Direct and indirect costs
Chapter 2
B3 Fixed and variable costs
Chapter 3
C
Business mathematics and computer spreadsheets
C1 Dealing with uncertainty
Chapter 4
C2 Statistics for business
Chapter 4
C3 Use of computer spreadsheets
Chapter 5
D
Cost accounting techniques
D1 Accounting for materials
Chapter 6
D2 Accounting for labour
Chapter 7
D3 Accounting for overheads
Chapter 8
D4 Marginal and absorption costing
Chapter 9
D5 Job and batch costing
Chapter 12
D6 Process costing
Chapters 10, 11
D7 Service/operation costing
Chapter 12
E
Budgeting and standard costing
E1
Nature and purpose of budgeting
Chapter 13
E2
Functional budgets
Chapter 13
E3
Flexible budgets and standard costing
E4
Basic variance analysis under absorption and marginal costing
Chapter 15
E5
Reconciliation of budgeted profit to actual profit
Chapter 16
Chapters 13, 14
(iv)
INTRODUCTION
F
Short-term decision making techniques
F1
Cost-volume-profit analysis
Chapter 17
F2
Relevant costing
Chapter 18
F3
Limiting factors
Chapter 19
(v)
INTRODUCTION
Classroom tuition and Home study
Your studies for BPP consist of two elements, classroom tuition and home study.
Classroom tuition
In class we aim to cover the key areas of the syllabus. To ensure examination success you will need to spend
private study time reinforcing your classroom course with question practice and reviewing areas of the Course
Notes and Study Text.
Home study
To support you with your private study BPP provides you with a Course Companion which helps you to work at
home and aims to ensure your private study time is effectively used. The Course Companion includes a Home
Study section which breaks down your home study by days, one to be covered at the end of each day of the
course. You will find clear guidance as to the time to spend on various activities and their importance.
You are also provided with progress tests and two course exams which should be submitted for marking as they
become due.
These may include questions on topics covered in class and home study.
BPP Learn Online
Come and visit the BPP Learn Online free at www.bpp.com/acca/learnonline for exam tips, FAQs and syllabus
health check.
ACCA Forum
We have thriving ACCA bulletin boards at www.bpp.com/accaforum. Register and discuss your studies with
tutors and students.
Helpline
If you have any queries during your private study simply contact your class tutor on the telephone number or
e-mail address that they will supply. Alternatively, call +44 (0)20 8740 2222 (or your local training centre if
outside the London area) and ask for a tutor for this paper to speak to you or to call you back within 24 hours.
Feedback
The success of BPP’s courses has been built on what you, the students tell us. At the end of the course for each
subject, you will be given a feedback form to complete and return.
If you have any issues or ideas before you are given the form to complete, please raise them with the course
tutor or relevant head of centre.
If this is not possible, please email
[email protected].
(vi)
INTRODUCTION
Key to icons
Question practice from the Study Text
This is a question we recommend you attempt for home study.
Real world examples
These can be found in the Course Companion.
Section reference in the Study Text
Further reading is needed on this area to consolidate your knowledge.
Formula to learn
Formula given in exam
(vii)
INTRODUCTION
(viii)
Information for
management
Syllabus Guide Detailed Outcomes
Having studied this chapter you will be able to:
•
Distinguish between data and information.
•
Identify and explain the attributes of good information.
•
Outline the managerial processes of planning, decision making and control.
•
Explain the difference between strategic, tactical and operational planning.
•
Describe the purpose and role of cost and management accounting within an organisation's management
information system.
•
Compare and contrast financial accounting with cost and management accounting.
Exam Context
The contents of this chapter are mainly to serve as an introduction to the ACCA's Management Accounting paper.
Although this chapter is an introductory chapter it is still highly examinable. You should expect questions on every
chapter including this one.
Qualification Context
Chapter 1 provides an introduction to the management accounting environment and provides a context for the rest of
this syllabus. This is examined again at paper F9 (Financial Management) where the relationship between financial
management and management accounts is discussed.
1.1
1: INFORMATION FOR MANAGEMENT
Overview
Information for
management
Role of management
accounting function
Data and information
Information for planning
Information for control
Qualities
Comparison with financial
accounting
Information for decision
making
1.2
1: INFORMATION FOR MANAGEMENT
1
Management accounting
Purpose
1.1
The purpose of management accounting is to assist management in running their business
to achieve an overall objective.
1.2
What could a business have as its objective?
1.3
The assumption that will usually be made in your studies is that companies wish to
maximise the wealth of their shareholders.
Usually this will be achieved by maximising profit.
2
Data and information
2.1
Data is the raw material for data processing.
2.2
Information is data that has been processed in some way to make it meaningful to the
person who receives it.
Lecture example 1
Preparation question
What are the general qualities of good information?
Solution
3
Planning, control and decision making
3.1
Information for management accounting is likely to be used for planning, control and
decision making.
3.2
Planning →
→
establishing objectives
selecting appropriate strategies to achieve those objectives
1.3
1: INFORMATION FOR MANAGEMENT
Lecture example 2
Preparation question
The objectives of a firm may be:
Profit making firm
Non profit making firm
•
•
•
•
•
•
•
•
3.3
Long-term strategic planning (corporate plan) involves determining an organisation's longterm goals and then selecting appropriate strategies to attain those objectives.
3.4
Shorter term planning involves developing tactical and operational plans in order to
achieve the goals of the corporate plan.
3.5
3.6
Control
→
There are two key mechanisms within the control process.
(1)
Actual performance is compared with planned performance of the
organisation as set out in the detailed operational plan and
adjusted in response.
(2)
The corporate plan is reviewed to reflect significant new
information.
Decision Making → Managers at all levels within an organisation make
decisions.
It is the role of management accountants to provide information so
that management at whatever level can reach an informed
decision.
4
Role of management accountant
Main areas
Management accounting can be broken down into five main areas.
4.1
Costing
What is the cost of goods or services?
We need to know this to calculate the profit that a unit will generate, to help set prices and to
value inventory in the balance sheet.
1.4
1: INFORMATION FOR MANAGEMENT
4.2
Decision-making
There are many decisions managers may have to make such as:
–
–
–
4.3
What should we produce?
How should we finance the business?
Is a project worthwhile?
Planning
Define objectives; assessing future costs and revenues to set up a budget.
Planning is essential in assessing the purchasing/production requirements of the business.
4.4
Control
Once plans have been made, they must be reviewed to ensure the company is following
them and any identified inefficiencies must be addressed.
4.5
Performance evaluation
The performance of divisions and employees can be assessed by comparing their
performance against budgets or divisional or individual targets.
Lecture example 3
Preparation question
What information may the managers of a business need?
Solution
External Information
Internal Information
1.5
1: INFORMATION FOR MANAGEMENT
5
Management accounting and financial accounting
Lecture example 4
Preparation question
Complete the following table to compare financial and management accounting:
Financial accounting
Management accounting
Legal requirement
Users
Level of precision
Rules
Reporting
Scope
Frequency
Format
5.1
Thus it is useful to think of the two as
Financial Accounting:
recording and reporting historical data
Management Accounting: deciding where the company wants to go and ensuring it gets
there
5.2
It is important to remember that as management accounting is forward looking, it relies
heavily on guesses and approximations, to deal with future uncertainties. We therefore have
to use reasonable approximations in all our calculations.
6
Chapter summary 1
6.1
Data is raw material for data processing.
6.2
Information is data that has been processed in such a way as to be meaningful to the
person who receives it.
6.3
Good information should be relevant, complete, accurate, clear, timely, appropriately
communicated and the cost of it should be less than the benefit.
6.4
Information is used in a business for planning, control and decision making.
6.5
Financial accounting systems ensure that the assets and liabilities of a business are
properly accounted for. Management accounting systems provide information specifically for
managers.
1.6
Chapter 1: Questions
1.7
1: QUESTIONS
1.1
Information is data that has been manipulated into a report for a specific purpose.
True
False
1.2
1.3
(1 mark)
Management accountants may provide information for management on which of the following:
(i)
(ii)
(iii)
Cost of goods and services
Actual costs compared to expected costs
Expected profits and production plans
A
(i) only
B
(i) and (iii) only
C
All of the above
(1 marks)
Management accounts must be reported monthly.
True
False
1.4
(2 marks)
(1)
Management accounting will report information on the past period in order to compare it to the
original budget.
(2)
Financial accounting will plan for the future periods.
A
One true one false
B
Both true
C
Both false
(1 mark)
1.8
Chapter 1: Answers
1.9
1: ANSWERS
1.1
True
1.2
C
1.3
False
1.4
A
END OF CHAPTER
1.10
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