Management Accounting

The nature, source and purpose of management information                                                                                          

Accounting for management- Purpose and role of cost and management accounting,  Comparison  between  financial accounting, cost accounting and management accounting. Managerial processes of planning, decision making and control,  Difference  between  strategic,  tactical  and operational planning. Distinction Between data and information. Identify and explain the attributes of good information. Limitations of management  information  in  providing  guidance  for managerial decision-making Sources of data- Three main sources of data: machine/ sensor, transactional and human/ social, sources of information from within and outside the organisation (including government statistics, financial press, professional or trade associations, quotations Uses and limitations of published information/data Impact of general economic environment on costs/revenue Sampling  techniques  (random,  systematic,  stratified, multistage,  cluster  and  quota),  identifying  appropriate sampling method in a specific situation. management information using charts, line graphs, pie charts and scatter graphs) Interpret information presented in management reports

Budgeting                                                                                                                 

• Nature and purpose of budgeting: Planning and control cycle in an organisation. Administrative procedures and stages used in the budgeting process
• Statistical techniques: Advantages and disadvantages of using high low method to estimate the fixed and variable element of costing Scatter diagrams and lines of best fit.
• Analysis of cost data: Concept, calculation and interpretation of correlation coefficient and coefficient of determination Establish a linear function using regression analysis and interpret the results Use linear regression coefficients to make forecasts of costs and revenues Advantages and disadvantages of linear regression analysis. Product life cycle – Concept and importance Principles of time series analysis (cyclical, trend, seasonal variation   and   random   elements), advantages   and disadvantages Moving averages, trend analysis using regression coefficients Trend and seasonal variation (additive and multiplicative) to make budget forecasts Purpose of index numbers, Calculate simple index numbers for one or more variables. Computer   spreadsheet   system-   role   and features, applications and its use in cost and management accounting
• Budget preparation: Concept and importance of budget Prepare sales budgets, functional budgets (production, raw materials usage and purchases, labour, variable and fixed overheads), Cash budgets, Master budgets Explain and illustrate ‘what if’ analysis and  scenario planning
• Flexible budgets: Importance, advantages and disadvantages of flexible budgets. Identify situations where fixed or flexible budgetary control would be appropriate. Flex a budget to a given level of volume

Capital budgeting and discounted Cash Flows:                                                    

Capital investment planning and control. Define and distinguish between capital and revenue. Expenditure preparation of a capital expenditure budget difference between simple and compound interest, and between nominal and effective interest rates Compounding and discounting distinction between cash flow and profit and the relevance of cash flow to capital investment appraisal cash flows for individual investment decisions net present value (NPV) and internal rate of return (IRR) methods of discounted cash flow. Calculate present value using annuity, and perpetuity formulae,  Calculate NPV, IRR and payback (discounted and non-discounted

• Calculate simple variances between flexed budget, fixed budget and actual sales, costs and profits Importance of variances, potential action to eliminate. Variances concept of responsibility accounting and its significance in Control Controllable and uncontrollable costs. Control reports to management. Behavioural aspects of budgeting, importance of motivation in performance management, factors in a budgetary planning that influence motivation Impact of targets upon motivation Managerial incentive schemes advantages and disadvantages of a participative approach to Budgeting top down, bottom up approaches to budgeting
• Standard Costing Systems- Purpose, principles and importance. Difference between standard, marginal and absorption costing standard cost per unit under absorption and marginal costing Calculation of Material, Labour and Overhead Variance and its analysis, sales price and volume variance Interpret the variances, Explain factors to consider before investigating variances, explain possible causes and recommend control action. Explain the interrelationships between the variances Calculation of actual and standard figures where the variances are given. Reconcile budgeted profit with actual profit under standard absorption costing. Reconcile budgeted profit or contribution with actual profit or contribution under standard marginal costing

Performance Measurement                                                                                   

Performance measurement overview, purpose of mission statements and their role in performance measurement, Purpose of strategic and operational and tactical objectives and their role in performance measurement. Impact of economic and market conditions on performance measurement, impact of government regulation on performance measurement. Measures of financial performance (profitability, liquidity, activity and gearing) and non-financial measures. Perspectives of the balanced scorecard. Advantages and limitations of the balanced scorecard. Performance  indicators  for  financial  success,  customer, internal business process and innovation and learning satisfaction, process efficiency and growth. Critical success factors and key performance indicators and their link to objectives and mission statements. Establish critical success factors and key performance indicators. Concepts of economy, efficiency and effectiveness and their performance indicators. Computation of Efficiency, capacity and activity, Building Block Method, Performance measures suitable in contract and process costing, Resource utilization- measures of performance utilisation in service and manufacturing environments, Profitability- calculate return on investment and residual income Advantages and limitations of return on investment and residual income, Service Quality- distinguish performance measurement issues in service and manufacturing industries. Cost reductions and value enhancement Value analysis. Monitoring performance and reporting, Importance of  non-financial  performance  measures, relationship between short-term and long-term performance Measurement of performance in service industry situations, non-profit seeking and public sector organizations Role of benchmarking in performance measurement. Reports highlighting key areas for management attention and recommendations for improvement