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  1. ACCA Paper F2 – Management accounting Course slides For exams to June 2008

  2. Syllabus

  3. Examiner & Format of the Exam Examiner: David Forster

  4. The BPP Learning Media classroom slides What do these slides cover? • A selection of key areas of the syllabus Using the slides • Use the slides as a point of reference • Add detail by talking around the slides (eg using material from the corresponding Study Text chapter) • Consider adding slides yourself to suit your course • Recommend students attempt appropriate questions from the Practice & Revision Kit

  5. Chapter 1 Study Text Chapter 1 Information for management

  6. Purpose • Assist management in running their business to achieve an overall objective • What is the overall objective of a business?

  7. Data and information • Data is the RAW MATERIAL • Information is the PROCESSED DATA

  8. Planning, control and decision making • Planning – Long term strategies – Short term targets • Control –Performance of the organisation –Review corporate plan • Decision making –autonomy of managers

  9. Key roles of a management accountant • Costing • How to put a cost on our products and services • Decision-making • What to produce/how should we finance it etc • Planning • Assessment of business requirements/budgeting • Control • Assessing inefficiencies • Performance Evaluation • Comparison to targets

  10. Question practice – end of Chapter 1 You should now be able to attempt the following question sets from the BPP Learning Media Practice and Revision Kit. Set 1 Set 20 You should now be able to attempt the following questions from BPP Learning Media i-Pass. Test 1: Information for management

  11. Chapter 2 Study Text Chapter 2 Cost classification

  12. Introduction • Arrange costs into logical groups • By function e.g. production, admin, finance • By nature e.g. labour, materials, stationery • Grouping by function: Pool of costs Production costs Non production costs

  13. Introduction • Grouping by nature: Pool of costs materials Labour Expenses

  14. Cost classification DirectProd’n cost Admin costs Indirect Prod’n cost Selling & Distribution £ Production costs X Non-production costs X TOTAL COST/EXPENSES X

  15. Cost classification Direct Production costs Direct materials X Direct labour X Direct expenses X Indirect Production costs Indirect materials X Indirect labour X Indirect expenses X Total Production costs X Non-production costs Administration costs X Selling and distribution costs X TOTAL COSTS X

  16. A typical cost card for a cost unit Direct Production costs Direct materials (5kg @ $3/kg) 15.00 Direct labour (3hrs @ $6/hr) 18.00 PRIME COST 33.00 Indirect Production costs Variable overheads 2.00 Fixed overheads 3.00 FULL PRODUCT COST 38.00

  17. Terminology • Cost object • Cost unit • Divisional structures • Cost centre • Profit centre • Revenue centre • Investment centre

  18. Question practice – end of Chapter 2 You should now be able to attempt the following question sets from the BPP Learning Media Practice and Revision Kit. Set 2 Set 21

  19. Chapter 3 Study Text Chapter 3 Cost behaviour

  20. Accountant’s Linear Assumption • Economist’s version • Accountant’s version Total cost ($) Variable cost (VC) Fixed cost (FC) output Y = a + bX Total cost = Fixed cost + (VC/unit x Output)

  21. ‘Hi-Low’ Method Four step approach • Find the highest and the lowest output and the total costs at these levels of output. • Find the difference in output units and total cost. • Calculate the variable cost per unit (VC/unit). • Calculate the fixed cost by substitution.

  22. Question practice – end of Chapter 3 You should now be able to attempt the following question sets from the BPP Learning Media Practice and Revision Kit. Set 3 Set 22 You should now be able to attempt the following questions from BPP Learning Media i-Pass. Test 2: Cost classification and behaviour

  23. Chapter 4 Study Text Chapter 4 Correlation and regression; expected values

  24. Costs vs output - scattergraph $ y = a + bx (y) dependent variable output (x) independent variable

  25. Linear regression a = y - b x n n • Finds the mathematical line of best fit b = nxy - xy nx2 - (x)2 y = a + bx

  26. Correlation coefficient r = nxy - xy ([n(x2) - (x)2][n(y2) - (y)2]) -1 < r < +1 - perfect positive correlation r = +1 - perfect negative correlation r = -1 - no correlation r = 0

  27. Coefficient of determination The amount of variation in y which appears to be explained by variation in x Does NOT prove “cause and effect” Coefficient of determination = r2

  28. Expected Values • Long term weighted average of possible outcomes: • Expected Value (EV) = np • If +ve EV = accept • If -ve EV = reject

  29. Question practice – end of Chapter 4 You should now be able to attempt the following question sets from the BPP Learning Media Practice and Revision Kit. Set 4 Set 23

  30. Chapter 5 Study Text Chapter 5 Spreadsheets

  31. Definition • Electronic piece of paper • Divided into rows and columns • Data is input into ‘cells’ i.e. A5, D8 • Data can either be numbers, text or symbols • Output is derived by applying a formula to data cells e.g. addition A5 + D8

  32. Uses of spreadsheets • Preparation of management accounts • Cash flow analysis, budgeting and forecasting • Account reconciliation • Revenue and cost analysis • Comparisons and variance analysis • Sorting and categorisation of data

  33. Formulae with conditions • We can build a range of options into our data • = IF (logical_test, value_if_true, value_if_false) Example • = IF (A5>500,”Hurray!”,”More Sales Please!”)

  34. Presentation of spreadsheets • Split into sections; Inputs, Calculations and Results • Use titles and column and row headings • State data source and purpose of spreadsheet • Apply consistent format i.e. 2 decimal places • Use colours, borders and shadings to highlight and differentiate

  35. Question practice – end of Chapter 5 You should now be able to attempt the following question sets from the BPP Learning Media Practice and Revision Kit. Set 5 Set 24 You should now be able to attempt the following questions from BPP Learning Media i-Pass. Test 3: Business maths and spreadsheets

  36. Chapter 6 Study Text Chapter 6 Material costs

  37. Order, receipt and issue of raw materials Purchase requisition Purchase order Goods received note

  38. Accounting for materials Materials inventory account (1) Material purchased (2) Issues to production __ __ c/d closing inventory balance X X X X X

  39. Monitoring inventory levels • To maintain accurate records of inventory • Visual methods of inventory control • Theoretical methods of inventory control • Re-order level • Minimum level • Maximum level Learn for the exam

  40. Costs associated with stock P x D + C x D/Q Order costs + H x Q/2 Holding costs = TOTAL COSTS WANT TO MINIMISE THESE Purchase costs

  41. Economic order quantity • Number of units to order to minimise costs Given in Exam

  42. Discounts • Available above a certain order quantity • Is it worth ordering above the EOQ to get the discount? • Steps: • Calculate EOQ • Recalculate EOQ if it falls within a discount band • Calculate total costs at EOQ • Calculate total costs at the lower boundary of each discount band

  43. Economic batch quantity • Used when stock replenished gradually • internally or; • from supplier • Similar to EOQ but factors in replenishment rate • Total EBQ never held in stock – as stock is being replenished during the period

  44. Economic batch quantity Given in Exam

  45. Question practice – end of Chapter 6 You should now be able to attempt the following question sets from the BPP Learning Media Practice and Revision Kit. Set 6 Set 25

  46. Chapter 7 Study Text Chapter 7 Labour costs

  47. Method of remuneration • Piecework systems • Bonus/incentive schemes • Time-based systems

  48. Measuring labour activity • Productivity • Standard hours of production • Efficiency x capacity = production volume

  49. Accounting for labour costs • Direct or Indirect labour – learn the rules • Ledger accounting • Dr Wages account Gross wages • Cr Bank / PAYE / NIC accounts • Dr WIP account Direct wages • Cr Wages account Direct wages • Dr Production o/h Indirect wages • Cr Wages account Indirect wages

  50. Labour turnover • The rate at which employees leave the company • Reasons may be controllable or uncontrollable by the company