Acca F5 Notes

Although zero based is in principle a much better approach, it is time-consuming and requires expertise. Introduction In this chapter we will look at two numerical techniques that can be useful in the preparation of budgets.

Open systems provide lexibility and can provide better information, but are harder to control and maintain because of the changes made. The same system is used for processing transactions and providing management information. These only represent the position at one point in time, which could be misleading. We will work through an example to illustrate the various ratios that you should learn under each heading. The reason for having a transfer price is to be able to make each division proit accountable.

ACCA F5 PM Short Notes 2019

Zero based budgeting Ignore what currently happens. Financial constraints Public sector organisations have limited control over the level of funding that they receive and the objectives that they can achieve. During the frm was reorganised and a regional divisional structure was introduced with individual proft targets being set for each of the semi-autonomous proft centres.

ACCA F5 Performance Management Notes by AccountanSea - ACCA Study Material

Decision Trees A decision tree is a diagrammatical representation of the various alternatives and outcomes. It is worth writing down the actual level of production if you have misread, it is then obvious what you were trying to do. The original budget proft remains the overall target of the company.

What time per batch should be budgeted? Direct wages comprise the wages of two employees, particularly skilled in the labour process for this job, who could be transferred from another department to undertake work on the special order. For example, basic accounting system is a closed system in that it follows ixed rules. Instead of the accounting department having their own system, separate from for example the system used by the warehouse, there is a single system serving all the departments. More likely of course, it would be a combination of the two.

They will therefore simply adjust by any expected wage increases. For example, instead of sending an order on paper which then requires an operator to copy it into the system, the customer can access the system directly and enter it themselves. If we are using absorption costing we then decide on a suitable basis for absorption e. Life-cycle costing identiies the phases in the life-cycle and attempts to accumulate the costs over the entire life of the product.

Remember me on this computer. Water and energy consumption.

It would make more sense to compare actual results with a standard that relects any changed conditions and is therefore realistic. The total of the variable production costs is also called the marginal cost of production.

ACCA F5 PM Short Notes - ACCA Study MaterialKevin otieno

ACCA F5 Revision Notes

As a result, although there may be sub-systems that are closed, the overall information system needs to be an open system in that information requirements will change as the business itself changes. If we were to shut down a sector, then any contribution from that area would be lost, but any avoidable ixed costs of that area would be saved. In the case of production costs, the total will vary with the level of production, whereas in the case of selling costs the total will vary with the level of sales.

For this sort of organisation, it is not possible or desirable to use standard proit measures. Direct user input Here the input is made using a keyboard, but instead of an operator copying in the data, the supplier of the data inputs it directly. Uncertainty exists when the future is unknown and the decision maker has no past experience on which to base predictions.

As the company progresses through the year, the budget gives us something to which we can compare the actual results in order to help identify any problems. These are any extra costs which would be incurred as a result of the decision and will therefore be relevant to the decision. Here there is less emphasis on monetary budgets and more emphasis on taking action which helps the business to achieve its objectives.

Transaction processing systems Transaction processing is the recording of the daily routine transactions of the business. If no way can be found of meeting the target cost then the product should not be produced. Where resources are limited, the irm should concentrate on making those products which give the greatest saving over buying in per unit of the scarce resource. If you string points one after the other, there is the danger of the marker missing some of them. Types of standards Ideal standard Calculated assuming that perfect conditions apply.

Opportunity cost plus This is a marginal cost approach but also includes within the cost any opportunities foregone. The amount of raw materials used in production. It is therefore necessary to have a series of performance measures for each division manager.

The software is easy to use - questions may be entered using normal language as opposed to programming languages. The other is something known as learning curves. There is no spare time, and the contract would have to be done in overtime. It is too late to do anything about the period under review, but can use information to attempt to correct or control any problems for the future. Always marginal costing in exam unless told otherwise, but check carefully.

Division B requires product Y from Division A. However the budgets do need to be challenged well otherwise there is the danger of managers introducing slack into their budgets.

Sales Price Variance Actual sales at actual S. However, businesses do need to change in response to changes in external factors such as the actions of competitors and changes in the economic environment. This is not a topic for which you can really learn rules. In addition there is the efect on the image of the company of not being environmentally friendly, although this is much harder to quantify.

Its application to environmental costs is that those costs that are environment-related e. Other activities are budgeted using the incremental approach.

Related titles

For budgeting purposes it is important to identify the variable and the ixed elements. We will also consider the possible problems that can result from the use of certain standard performance measures.

There is no negative marking, and so even if you are wrong you will not lose marks. The approach would be exactly the same as for materials. As we will illustrate, you will normally be asked to state a range rather than one speciic price. Combi have already decided that if they do have market research, and if the research indicates a poor result, then they will only be prepared to consider the cheaper refurbishment. If the optimum solution results in using less that the maximum available of a particular resource, autodesk 3ds max learning book then we have spare capacity of that resource or slack.

Make sure you still get the marks even if you have misread something. However, this would be dangerous because as we were to produce more and more units it is likely that the time taken for each unit would reduce as the workers gained experience. For example, the supply of labour may be limited by the length of the normal working week, but we can get more hours if we are prepared to pay overtime. The shadow price also known as the dual price of a limited resource is the most extra that we would be prepared to pay for one extra unit of the limited resource. Since the materials are no longer used the replacement cost is irrelevant.

ACCA F5 PM Short Notes - ACCA Study Material