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  • FIA MA1Management Information2012

  • FIA MA1The Syllabus:Cost and management accountingSource documents and codingCost classification and measurementRecording costsProviding informationSpreadsheets

  • FIA = MA1The exam:50 multiple choice questions worth 2 marks eachTime allowed: 2 hours2.4 minutes per questionCan be sat as a paper-based or computer-based exam

  • Business organisationFunctions of an office:PurchasingSalesControl of inventory, accurate record keepingInformation processingFilingCopying, typing, information

  • Business organisationCentralisation:Procedures are done centrally

    Decentralisation:Each department has their own, independent office

  • Business organisationOrganisation chart:Names of individualsLine structureLevels of authorityLines of communication

  • Business informationPersonnel:Managing DirectorSales ManagerMarketing ManagerFinance ManagerProduction ManagerR & D ManagerHR ManagerAdmin ManagerIT Manager

  • Business organisationLayout:Open planLandscapedCorridor

  • Business organisationOrganisational information:Manual of best practiceOrganisation chartStaff planning chartCompany handbook

  • Business organisationDouble-entry bookkeeping:Books of prime entry =PDBPRDBSDBSRDBCBPCBJournals

  • Business organisationComputerised accounting:Batch processingReal-time processingIntegrated computerised accounting systems

  • Management informationFunctions of management:PlanningControllingOrganisingCommunicatingMotivatingDecision-making

  • Management informationEffective management information:RelevantReliableUnderstandableCompleteAccurateTimelyClearConsistentCost effective

  • Management informationSources:Internal various department in the company .e.g. Sales, production, personnelExternal Internet, journals, HMRC, banks, competitors, suppliers, customers

  • Management informationManagement accounts Internal, futuristic, detailed, monthly, any formatFinancial accounts External, historic, summarised, yearly, prescribed format

  • Management informationResponsibility centres:Cost centreProfit centreInvestment centre

  • Cost classificationsProduct costPeriod costControllable and uncontrollable costsDirect costsIndirect costsVariable costsFixed costsSemi-variable costsStepped costs

  • CodingTypes:BlockHierarchicalFacetedMnemonic

  • Materials costTypes of inventory:Raw materialWork in progressFinished goods

  • Materials costDirect materials .e.g. Wood in the manufacture of furnitureIndirect materials .e.g. Oil for the lubrication of the wood cutting machine

  • Materials costMaterials paperwork:Purchase requisitionPurchase order (PO)Delivery noteGoods received note (GRN)Purchase invoiceMaterials requisition noteMaterials returned noteBin card

  • Materials costPricing material issues:First in first out (FIFO)Last in first out (LIFO)Weighted average cost (AVCO)Periodic weighted average cost

  • Materials costControlling inventory:Free inventory = Inventory in stores + Inventory on order from suppliers Inventory already requisitioned for use

  • Labour costsRecording labour costs:Clock cards / time sheetsHolidaySicknessIdle time

  • Labour costsGross pay time related:Time relatedSalaried employeesHourly rated employeesOvertimeOvertime premium

  • Labour costsGross pay output related:Piece ratePiece rate with guaranteeDifferential piecework

  • Labour costsBonus schemes:Flat ratePercentage bonusTime related

  • Labour costsProductivity:The amount of output produced per labour hour

  • OverheadsCapital expenditure non-current assets are purchased (not intended for resale) .e.g. A factoryRevenue expenditure expenditure on everyday items .e.g. Rent, rates, insurance

  • OverheadsApportionment bases:Overheads which are shared should be split in a fair way across the cost centres that use them .e.g. Rent might be split across four departments on the basis of floor area. The biggest department incurs the most rent.

  • OverheadsAbsorption:By unitBy labour hoursBy machine hours

    All based on BUDGETED information

  • OverheadsAbsorption:

    Actual overheadX

    Actual labour hours x Budgeted absorption rate(X)Under / over absorptionX

  • MC & TACMarginal cost = Variable cost

    Contribution = Sales Variable costs

    Absorption cost = Sales All costs

  • Job costingJob cost card:

    Job no. 1Mrs. Smith2nd Jan 2011CostsMaterials100 kg$2 / kg$200Labour4 hours$10 per hour$40Overheads4 hours$1 per hour$4$244

  • Batch costingBatch costing is:Job costing divided over the number of units in the batch.

  • Process costingT-account:

    kg$kg$Material2,5003,500Output2,4004,550Labour600Normal loss100-Overhead4502,5004,5502,5004,550

  • Process costingFormula:

    Cost per unit of output =

    Cost of inputs Normal loss receiptsExpected good output

  • Process costingEquivalent units:

    Number of physical units x % complete

  • BudgetingPrincipal budget factor:

    The factor that limits the level of activity for the organisation (usually sales).

  • BudgetingProduction budget:UnitsSalesX+ Closing inventoryXOpening inventory (X)ProductionX

  • BudgetingPurchases budget:kgProduction requirementX+ Closing inventoryXOpening inventory(X)PurchasesX

  • BudgetingFlexible budgets:

    Variable costs vary dependent on outputFixed costs remain at the same level as before

  • Performance indicatorsComparators:

    A performance indicator is useless on its ownNeed a different period, a budget, or a different company to establish whether activity is better or worse

  • Performance indicatorsProductivity measures:Production volume ratio =

    Actual output in standard hours X 100%Budgeted production hours

  • Performance indicatorsCapacity utilisation ratio =

    Actual hours worked x 100%Budgeted hours

  • Performance indicatorsEfficiency ratio =

    Actual output in standard hours x 100%Actual production hours

  • Performance indicatorsProfit centre performance:

    Profit margin = Profit x 100%Sales

    Cost to sales ratio = Direct cost x 100%Sales

  • Performance indicatorsInvestment centre performance:

    ROCE = Profit before interest and tax x 100%Capital employed

    Where capital employed = Non-current assets + current assets current liabilities

  • Performance indicatorsResidual income = Investment centre profit (% interest x Capital employed)

    Asset turnover = RevenueCapital employed

  • VariancesException reporting:

    Highlighting for management attention only those variances which exceed a certain limit (by $ or %)

  • VariancesMaterials:

    Total material cost variance =Original budgeted cost of materialsVActual cost of materials

  • VariancesMaterials activity (volume) variance =

    Original budgeted cost of materialsvFlexed budgeted cost of materials

  • VariancesMaterials price and usage variance =

    Flexed budgeted cost of materials vActual cost of materials

  • VariancesLabour:

    Total labour cost variance =

    Original budgeted cost of labourvActual cost of labour

  • VariancesLabour activity (volume) variance

    Original budgeted cost of labourvFlexed budgeted cost of labour

  • VariancesLabour rate and / or efficiency variance =

    Flexed budgeted cost of labour vActual cost of labour

  • VariancesSales:Total sales variance:

    Budgeted sales revenuevActual sales revenue

  • VariancesSales activity (volume) variance =Original budget for sales revenuevFlexed budgeted sales revenueSelling price variance =Actual quantity sold @ actual pricevActual quantity sold @ budgeted price

  • VariancesCauses:Bad budgetingBad measurement or recordingRandom factorsOperational factors

  • VariancesInvestigation:ControllabilityCostSizeInter-relationshipsTrend

  • Data presentationPresentation:TablesDiagramsBar chartsPie chartsGraphs

  • Data presentationPresentation:NoteLetterEmailMemorandumReport

  • SpreadsheetsBasic features:RowsColumnsCopy and pasteEditing and deletingFormattingBorders and shading

  • SpreadsheetsFormulae:+ * - /Sum( )

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