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Revision Part 2

Lecture 24

Semester 2 TopicsKey topics we covered:• Control• Budgeting• Variance analysis• Performance Measurement Techniques• Transfer Pricing• Balanced Scorecard• Quality Control• Managing Change

ControlPart of the planning and control cycleNeed for controls

Designing control systemsAction/Results/Personnel

Costs of controlDysfunctional effects

Budgeting

What is a budget? How does it change

What are the advantages for budgeting?

Who is responsible for budgeting?

The different types of budgets – in particular pay attention to preparing the budgeted income statement, cash budget and statement of financial position.

Master budgets

Variances• Flex the budget• Compare actual to flex• Calculate variances:

– Price variance= (AP x AQ) – (SP x AQ)– Efficiency variance= (SP x AQ) – (SQ x SP)– Sales variances– OH variance – variable and fixed

• Reconcile budgeted to actual profit• See tutorial 8

Performance Measurement and TF Pricing

• Financial Performance Measurement– ROI– RI– EVA

• Transfer Pricing– Describe the purpose and mechanisms of transfer prices

1. To motivate the decision maker (divisional manager) to act in the best interests of the organization as a whole.

2. Provide proper economic signals so that division managers affected will make good economic decisions from a corporate standpoint.

3. Transfer pricing enables top management to coordinate actions and to evaluate performance of divisions.

SMA and the Balanced Scorecard

Describe the balanced scorecard and its four perspectives Financial Customer Internal Innovation and Learning

Identify some of the benefits of the balanced scorecard relative to performance measurement systems relying on financial measures

The Balanced Scorecard (BSC) provides a system for measuring and managing all aspects of a company’s performance.

• The BSC includes financial measures that tell theresults of actions already taken;

• It complements the financial measures with operational measures on customer satisfaction, internal processes, and the firm’s innovation and improvement activities.

QualityTo define qualityTo distinguish between the two types of

quality conformanceTo identify the four categories of quality costs

and understand their relationship To outline the implications of quality

management to management accounting

What is expected in the exam?

• A 3 hour closed book exam• Part A, worth 50 marks.

– The 50 marks will be made up of both calculation and discursive sections. • Part B of the exam consists of FOUR 25 mark questions, from which

the student will choose any TWO. – These questions will consist of both calculations and discursive elements.

• Every tutorial question was structured in the same way as a standard exam question or a case study question. The answer for each question is available on Blackboard

• Old format• New format

How to score high marks in the exam?

• Spend a few minutes planning your answer, then cross through any work you do not want marked.

• Make sure you show ALL your calculations as marks will be awarded for the working out;

• Ensure you actually provide an answer;• Provide sufficient strength, depth, and good quality

in your arguments.• Write legibly

How much time to devote to each section?

• Do some calculations:– 3 questions to answer in 3 hours

• Look at the allocated marks for each sub-question:– Part (a) = 50 marks => 1.5 hours – Part (b) = 2 questions 25 marks each => 45 minutes each

question– Remember to include reading and planning time within

this.

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A final word…

• Practice, practice, and practice• Your tutorial questions and the questions at the

back of each chapter in the Drury/Burns book.• Read the additional links to ACCA website on BB• ACCA past exam papers – F5

• GOOD LUCK!

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