Performance Management

Unit I: Specialist cost and management accounting techniques                                             

• Activity-based costing-Meaning, cost drivers, Calculation of costs per driver and per unit using ABC, ABC Vs traditional methods
• Target costing- Meaning, target costing in manufacturing and service industries, challenges of using target costing in service industries.
• Life-cycle costing-Meaning, Benefits, life cycle cost in manufacturing and service industries.
• Throughput accounting-Meaning, throughput accounting ratio (TPAR), Application of throughput accounting to a multi-product decision- making problem
• Environmental accounting-Meaning, challenges, methods of environmental accounting.

Decision-making techniques                                                                              18 hrs

• Relevant Cost Analysis- Concept, identification and calculation of relevant costs, concept of opportunity costs.
• Cost Volume Analysis- Meaning, nature, limitations, Break-even point, Margin of safety, Multiproduct situation, Break-even chart and profit volume charts.
• Limiting Factors- Meaning, multiple scarce resource problem (both graphically and using simultaneous equations as appropriate), calculation of shadow prices (dual prices) and slack- implications on decision-making and performance management.
• Pricing Decisions- Factor influencing the pricing of a product or service, price elasticity of demand, decision based on incremental costs, incremental revenues and other factors, optimum selling price and quantity for an organization, demand based approach to pricing (both tabular and algebraic methods, pricing strategies, including: i) All forms of cost-plus, ii) Skimming, iii) Penetration, iv) Complementary product, Product-line, v) Volume discounting, vi) Discrimination, vii) Relevant cost, Calculation of a price from a given strategy using cost-plus and relevant cost.
• Make-or-buy and other short-term decisions- Dealing with risk and uncertainty in decision making-research techniques to reduce uncertainty e.g. Focus groups, market research, use of simulation, expected values and sensitivity, techniques of maximax, maximin,and minimax regret in decision-making , decision tree, value of perfect and imperfect information.

Budgeting                                                                                                                      

• Budgetary systems- budgetary systems for an organization, including top-down, bottom-up, rolling, zero-base, activity base, incremental and feed-forward control, information used in budget systems and the sources of the information needed, difficulties of changing a budgetary system, budget systems and uncertainty in the environment.
• Types of budget-, Preparation of rolling budgets and activity based budgets, usefulness and problems with different budget types (fixed, flexible, zero-based, activity- based, incremental, rolling, top-down, bottom up, master, functional), challenges of changing the type of budget used.
• Quantitative analysis in budgeting- high/low method, learning rate and learning effect, learning curve, benefits and dangers inherent in using spreadsheets in budgeting.

Standard costing·      

Meaning, Material mix and yield variances- Causes, issues involved in changing material mix e.g. cost, quality and performance measurement issues, relationship of the material usage variance with the material mix and yield variances, methods of controlling production processes.

·       Sales mix and quantity variances- Causes, relationship of the Sales volume variances with the sales mix and quantity variances. Planning and operational variances- Calculation of a revised budget, factors to revise an original budget, planning and operational variances for: sales, including market size and market share; materials, labour, including the effect of the learning curve.

Performance analysis and Behavioral aspects- Variance analysis, factors influencing behavior, effect of variances on staff motivation and action, JIT and TQM, behavioural problems resulting from using standard costs in rapidly changing environments.

Performance measurement and control                                                                        

• Performance management information, sources of management information, Management reports
•  Performance analysis in private sector organizations
•  Divisional performance and transfer pricing
• Performance analysis in not-for-profit organizations and the public Sector, External considerations and behavioral aspects