Jay's ACCA P5 Advance Performance Management

P5 ACCA Re-sit for June 2012 examination

2012-02-12T22:47:00.000-08:00

Timetable for the re-sit is out
P5 Advance Performance Management Classes (8.30 - 5.30 pm)
25 Feb 2012
10 Mar 2012
18 Mar 2012
31 Mar 2012
7 Apr 2012
8 Apr 2012
21 Apr 2012
Revision
1 - 3 June 2012
CALL 0178786074

Spots for DEC 2011 P5 ACCA

2011-11-17T07:09:00.001-08:00

This is the areas that is spotted by Mr.Jay for the ACCA P5 DEC 2011 paper
This time around the paper will probably have the following elements
1. Uncertainty (articles)
2. Benchmarking (sample paper)
3. Budgeting - ABB or ZBB (public sector question)
4. Mission statement with a gap analysis - compute gap and critically evaluate the options suggested by management to close the gap (calculate the closing prospect and comment on the risk associated with it)
5. Prism or pyramid
6. Information system issues / sources
7. Quality, six sigma issues DMAIC and consideration for CMMI (stages)
8. Service quality management issues - RATER
9. Economic factors influencing performance
10. VFM and Public sector issues
11. Basic bread and butter stuff - TRANSFER PRICING / ROI / RI / EVA / EBITA / OVERHEAD SYSTEM

Most of the items will be either theories or possibly some computation.

BE CAREFUL IF YOU HAVE USED SHANE JOHNSON'S QUESTION - WHICH FOCUSED HEAVY ON PERFORMANCE MEASUREMENT, WHEREAS ALEX WATT SEEMS TO FOCUS HEAVY ON PERFORMANCE SYSTEM EVALUATION AND MANAGEMENT - NOT TOO MUCH ON MEASUREMENT. THIS DIFFERENCE IN EMPHASIS IN CRITICAL UNDERSTANDING IN PASSING THIS PAPER!

Best of luck in preparing for this paper.
Hope the DEC 2011 ACCA Paper P5 will be kind to you.

P5 IRC Slot for Dec 2011 ACCA Exams

2011-10-02T19:02:00.000-07:00

UPDATE REGARDING IRC SLOT

There has been significant interest in the IRC for P5 for the coming ACCA Dec 2011 Examination. The dates for the slot are as follows:

Registration is on 29/10/2011 at 5.30 pm - 7.30 pm (Limited seats, only 18 pax can be accommodated) OR you can sms 0178786074 and make the necessary arrangement.
Training slots for the P5 IRC on:
30/10/11 (8.30 - 5.30)
3/11/11 (8.30 - 5.30)
4/11/11 (8.30 - 5.30)
5/11/11 (8.30 - 5.30)

2011-03-06T09:24:00.000-08:00

ACCA P5 New Beginnings

The paper has been remade with new materials from P3 being added in and some elements being removed, while ACCA has also added in a new examiner.

Updated examiner's approach to Paper P5

As a relatively new examiner and having managed the marking (though not the writing) of the June 2010 paper and both the writing and marking of the December 2010 paper, I felt that it would be helpful to try to give candidates further clarification of the style of questions and skills that will be tested in Paper P5, Advanced Performance Management.

Key issues to consider

The paper will test a candidate’s ability to assess different approaches to performance management from a variety of perspectives. This will entail the candidate knowing what the approaches are and more importantly being able to compare one with another in the context of a scenario, for example, profit and value approaches, financial and non-financial perspectives, short-term and long-term issues.

The questions set in Paper P5 will be based around an organisation. The scenario will describe the organisation, its objectives and its business environment. A good candidate will show how they have taken in this information and then applied it to the performance management of that

organisation. For example, when assessing different performance management approaches, a useful question to ask is ‘Does this meet the objectives/needs of the organisation?’ so obviously, the candidate must have identified these from the scenario.

Candidates must make sure that they can:

1. Assess the current situation of the organisation (eg its existing performance management systems) and then

2. consider how to apply a new approach to performance management (eg value-based or based on one of the many models mentioned in the syllabus such as the performance prism or the building block model)

and

3. assess whether this new approach will be an improvement.

Lists of rote-learned advantages and disadvantages for different approaches will not produce a complete answer as a candidate will be expected to tailor this knowledge to the situation given in the question. So for example, Question 2 of December 2010 asked for an evaluation of two costing systems within a laptop manufacturer. A good answer considered the advantages and

disadvantages of the absorption costing and activity-based costing in a dynamic, competitive, bespoke-manufacturing environment.

Cover the whole syllabus

Remember that, broadly, the exam will test the capabilities listed in the syllabus that are required of a candidate. There are six capabilities and most will feature to some extent in every diet:

• use strategic planning and control models to plan and monitor organisational performance

• assess and identify relevant macro economic, fiscal and market factors and key external influences on organisational performance

• identify and evaluate the design features of effective performance management information and monitoring systems

• apply appropriate strategic performance measurement techniques in evaluating and improving organisational performance

• advise clients and senior management on strategic business performance evaluation and on recognising vulnerability to corporate failure

• identify and assess the impact of current developments in management accounting and performance management on measuring, evaluating and improving organisational performance

The paper will aim to address issues at both the strategic and operational levels and will often require a candidate to understand the connections between these levels. For example, the question of how strategic objectives flow through critical success factors to performance indicators as in Question 1 of the December 2010 paper.

Another example of the type of question that arises is how does the choice of operational performance measures impact on the strategic performance of the organisation? A phrase that rings true in many situations is Drucker’s dictum ‘What gets measured gets done.’ This phrase succinctly points to the impact that the choice of performance metrics have on the management activity of the firm.

Now these points should illustrate why it is a misapprehension that the paper is predominantly about performance measurement, it is a performance management paper. This error often manifests in a candidate’s over-concentration on detailed elements of Section D (strategic performance measurement) of the syllabus. As indicated above, it is important to remember

that the ideas contained in the various metrics need to be coherently applied to meet the strategic needs of an organisation and this is where other sections of the syllabus will connect to a question, for example, Section A on how strategic performance fits with the planning and control structures or Section B on external drivers of performance.

Create information

The candidate is expected to be able to calculate numbers using the various techniques of the paper, however, it is more important that the candidate can explain what their numbers mean and what importance to place on them.

A valuable management accountant will create information from the detailed data given in a question. It is often best to begin by considering the ‘big picture’ (what is the overall objective); next, break down the data into smaller but meaningful (and manageable) chunks; finally, discuss the individual lines of the data table and even then, a candidate should focus on the data that

explains the overall picture of emission changes.

A good example of this was Question 4 Part b) of the December 2010 paper.

1. Consider the ‘big picture’ – whether the overall target for emission reduction be met.

2. Break down the data into smaller but meaningful (and manageable) chunks – road, rail and air transport

3. Discuss the individual lines of the data table focusing on the data that explains the overall picture of emission changes – the switch from petrol to diesel powered motor vehicles is complete in commercial vehicles and has lead to large reductions in emissions but such a change may be more difficult in company cars as employees may resist such a change.

Note specifically, this will require answers that go beyond repeating, in sentence form, the data given in (say) a table in that question. There many candidates wasted their time by limiting their comments to only writing out statements such as ‘Commercial Fleet Diesel use has fallen from 105.4 to 70.1’ or even ‘Commercial Fleet Diesel use has gone down’. First, this is stating the obvious to anyone who read the table but also importantly, this is far too detailed for most reporting purposes.

Candidates will be expected to analyse not merely calculate numerical data given from a scenario.

Overall

A candidate would be advised to ask him/herself if the answer they have produced would help the organisation to answer the question requirement.

Remember… try to add value with your answers by way of comments relevant to the issue at hand.

Alex Watt is examiner for Paper P5

The above article was sourced from http://www.accaglobal.com/pubs/students/publications/student_accountant/archive/sa_feb11_P5_examap.pdf

(accessed on 7th March 2011,1.34am MST)

From the above, combined with the meeting that I attended in UK, it would seem that he is serious about the way he is changing the paper - performance management rather than performance measurement

Examples of types of organisations that might be sampled by the examiner can be reviewed by looking at http://www.linkedin.com/pub/alex-watt/b/5a9/469

Overall it would worth while to update yourself regarding this paper if you failed, since marks can be easily be obtained by the correct method

2010-08-26T04:45:00.001-07:00

J Pro update
The interest for P3 and F8 was sufficient for me to initiate a class for the 2 papers

The current schedule for p3 and f8 class is as follows:

P3 - Monday and Tuesday (10.00am - 1.00 pm)- RM1,000 (includes revision)

F8 - Wednesday (10.00 - 2.00 pm)- RM800 (includes revision)

The class will start on 6 th of September for P3 and F8 will start on 8th of September.

Both classes will cater for students that have some background in the paper, studied before but need some form of clarity in handling the exam questions. I will still do a re-cap of the theories and models for each paper, higher emphasis will be on exam techniques.

Please make your registration by sending an sms with your name and paper to 0178786074. The class size is limited to 18 only (maximum that I want to tutor), confirm early.

P7 classes will be starting this Saturday 28th, those that have confirmed your seats please take note, there is still some room for others to join in (8 more seats only)

2010-05-30T10:17:00.000-07:00

The following is the tips for the papers F5 and P5

F5 ACCA Performance Management by Kaplan for JUNE 2010

Financial and non-financial performance indicators
Mix and Yield variances
Transfer Pricing
Activity Based Costing

P5 ACCA Advanced Performance Management by Kaplan for JUNE 2010

Forecasting
Divisional assessment
Strategic alternatives
Corporate failure
Dealing with uncertainty

Paper F5 ACCA by BPP for JUNE 2010

Specialist Cost and Management Accounting Techniques. ABC, Throughput Accounting & Target Costing have featured recently. Backflush accounting has not yet been examined. Be prepared to discuss techniques such as ABC compared to traditional costing techniques such as Absorption Costing.
Decision making techniques. Relevant costing, linear programming and risk & uncertainty have been examined recently. Pricing is yet to be examined in much detail other than a brief discussion about discounting and a requirement to suggest two pricing strategies.
Budgeting. Learning curves have featured most regularly to date. Discussion marks may look at the appropriateness of budgeting types or the behavioural impacts of types of budgeting. Numerical elements in a budgeting question could include flexed budgets or time series analysis.
Standard costing & variance analysis. Mix & yield variances, planning & operating variances and operating statements have been examined. Be prepared to discuss performance and whether variances are an indicative measure of good / bad performance.
Performance Measurement and Control. Questions focusing on interpretation of performance and financial vs non financial measures have featured on all papers to date. Questions could focus on the public sector, divisional performance measures such as ROI / RI or a discussion of the impact on performance of various transfer prices.

Paper P5 ACCA Tips by BPP for JUNE 2010

Scope of strategic performance measures in the private sector. Analysis of financial and non-financial performance; this could include the use of activity-based approaches or learning curves, and strategies to improve performance.
Divisional performance and transfer pricing issues. ROI, RI , EVA or even ABC could feature here; transfer pricing could feature as an aspect of these questions.
Problems with budgeting. Budgeting has been a favourite essay question with your examiner, especially an awareness of the problems of budgeting but was largely unexamined in 2009.
Alternative views of performance measurement. The examiner often includes a question to evaluate an organisation against an established theoretical model. The balanced scorecard, performance pyramid and building blocks have all appeared in previous exams.
Performance hierarchy. Linking strategic decisions to mission statements or suggesting strategic options using models such as Ansoff’s matrix or the BCG matrix lend themselves to questions containing a mixture of financial and discursive elements that could easily include a simple NPV or profit analysis.

Tips for ACCA Paper F5 “Performance Management” for JUNE 2010 by Open Tuition

1. ABC

2. Linear Programming or Decision Theory

3. Budgeting written + flexed

4. Mix & Yield variances

5. Divisional + transfer pricing

2008-12-01T06:44:00.000-08:00

Good luck in the exams

Prepare yourself for the basic questions and the areas that was covered in the revision

2008-11-06T07:50:00.001-08:00

P5 ACCA Tips according to FTC for December 2008
Divisional performance and benchmarking.
Transfer pricing.
Activity based management.
Profit calculation.
Modern developments.
Corporate failure.
Environmental management accounting

2008-02-19T07:57:00.000-08:00

CAT T7 Exam results out

Well it seems that the results for T7 is finally out, and the prayers that were done have paid out. Most of the students did pass the papers, I suppose, since I only got feedback from those that passed. I was surprised that the T7 for the re-sit batch also managed to get thru the paper without too much damage. I will have to wait and see for the results from ACCA.

Congratulations for those that did get thru the paper. The highest in the class for G1 is Yee Mun scoring 97, but the highest in the Sunwaytes is 100.

I suppose the results was kinda of a surprise since most of thë "barred" students also managed to pass in the last stroke. I belief that the Mock and PT papers were too hard for CAT level, more of F5 level. That is why you get a much higher mark at the final exam.

But you guys proved my hunch right, there was always the G1 spirit in you all to fight hard and smart. Quote from the previous blog

"Well I decided against that advice because I belief that you are capable of making it, so for those that failed, all I can say is not to make me lose faith in you, and not to make the predictions of the others come true......that you were not worthy"

Looks like I didn't need to loose any faith at all.

2008-02-17T03:07:00.000-08:00

Now that the results have been released, hopefully it was good news. If there was bad news it was for T4 if I am not mistaken.

Those that have managed to sales across the deep ends of the T3456 water now come into the T789 waters. Looking at the following information you should now decide your study strategy, since all good auditors plan their work before embarking on the audit, you have to plan your work before facing the examiners test.

Now if you look at the analysis I have done, the red is danger zone whereas the green is safe zone, in audit terms High risk papers and Low risk papers.

This was confirmed by internal statistics for Sunway, which mirrors that results above by with higher rates.

Now you understand the waters that you are sailing into, so as to avoid the dangers in the waters of ACCA, else you end up like

2007-11-19T09:45:00.000-08:00

PAPER 7 HOW TO PREPARE FOR FINAL EXAMS

The paper has been completed and now it is up to you to finish up the job. I was quite disappointed with the performance in MOCK, and now considering if I should have followed the advice of another lecturer who recommended to bar all the students that under performed.

Well I decided against that advice because I belief that you are capable of making it, so for those that failed, all I can say is not to make me lose faith in you, and not to make the predictions of the others come true......that you were not worthy.

I hope you seriously look at the paper and tell me why you failed so miserably and give me the assurance that you will do your best to achieve the pass mark.

NOW for those that need to know how to study for the paper

1. Cover all the PT 1, PT2 and MOCK questions in detail.

2. Cover the areas from EDC and EFC

3. Try out all the past papers from t7 without looking at the answers and see what is going wrong

4. Read up the short notes

Cycle back to the top

You will need to do some memory work - advantages and disadvantages

2007-10-13T22:09:00.000-07:00

The marks for PT2 is listed above as a reminder for you to take action.

As you all know that the answers for PT 2 has already been discussed, you should be aware that most of you made a lot of careless mistakes that could have been avoided by proper preparation.

Now you should have completed the question pack practise question as fast a possible.

You should have also started planning for the final battle with Steve Jays Beast.

Even though things look bleak and time is against you, I would not have labelled this blog Fantastic Management Accountants if I did not believe that you could be called fantastic. Remember that I started this blog even before the results were out, and look at the P3, P4 and P5 results that were generated by your combined effort.

Its time for you as a group to show the rest what you guys are made up of. Its time for you all to start looking at your own self and decide that you are made for success and not some kind of failure.

If you look at the above results, remember that it was 10x harder and you still managed to survive a battle.

SYNERGY is what you should be looking for, speed up the learning process, you are not competing against each other, but against other groups and the WORLD itself. Look for a partner, 4 if can, and set a clear goal that each of you will not let the other fall behind.

You can do it if you put your mind - victory is for those who want it the most to it

2007-10-11T02:12:00.000-07:00

2007-09-24T09:58:00.000-07:00

Congratulations to the following students for outstanding performance in Paper 5

Chan Yin Kit obtained a score of 97 was rated No.1 in Malaysia and No. 3 in the world

Tan Lay Wan 93 was rated No.2 in Malaysia and No. 7 in the world

Thebandra Manogaran 91 was rated No.3 in Malaysia and No. 9 in the world.

Keep up the good work.

Below is a reminder for you on where you stand now and what is the target for PT 2

2007-09-22T06:42:00.001-07:00

Good luck on the progress test - I believe that you will do the best possible to score and aim for a high mark. Since there will be a posting for the results this time for sure...........to show your progress tracking and highlighting the high risk candidates.

Right check and tell me if any of the notes are missing

Answer for Progress test 2

13-09-07

11-09-07 class note

11-09-07 Class notes

The test answers that were sought - class date 06-09-07

2007-09-22T06:35:00.000-07:00

2007-09-22T05:45:00.000-07:00

Loaded posting

Sorry for the delay, had been overloaded with too much work. Well the current catch up class and being requested to do F8 in Johor had taken lots of time away from the activity that I liked doing - putting up post for you guys

Jeez the files takes forever to load.

Case study - Costing for your class CAT Group 1

How to do costing for your class, establish the cost per student that is incurred by SUNWAYTES for each CAT students

Hints

Your cost structure should be:

Lecturers -

Part-time (paid hourly basis)
Full-time (paid a monthly basis for 20 hours per week) exceeding that they
will be paid an hourly basis
Lecture Rooms are charged at a predetermined rate per hour (currently around RM 100 per hour)
Text books printing cost (say 0.06 cents per page)
Royalty rights for the text books are paid for 3 years for ACCA and CAT for all the papers to Kaplan comes up to (approximately RM200,000)

Standard lecture time is set at 28 sessions of 3 hours.

Part-timers not allowed to exceed this unless justified
Full-timers are allowed to exceed and claim but not to excessively

There is also the exam paper marking and review services that cost up to say RM 5.00 per papers

Then don't forget you need to include an overhead recovery rate for all the admin staff that cater for all the students and all the other staffs that are doing marketing and sales

Estimated admin staff now = ?
Cost per staff = ?
Estimated full time staff = ?
Estimated full time lecture staff cost = ?

Now establish the cost per student ( estimate with your friend, make some assumptions that you belief will make the computation easier to explain.

2007-09-03T10:00:00.000-07:00

Forecasting problems

Well it seems there is some confusion still on the area of forecasting.

In this respect let me see if I can explain some of the issues here.

Why do we need to do forecasting?

In management accounting the need stems from the preparation of budgets and plans for the future.

If we are to deal with the future we need to forecast what is going to happen in the future.

How are we going to forecast and what do we need to forecast in the future?

The "what" first -

We need to be able to forecast the sales demand for our product or service

We may need to forecast the selling price if this is determined by market forces like the case of petroleum, we do not need to do this in the case of Sunway College, set by management.

We may need to forecast the cost of materials and services, which may also be determined by market forces eg. Airasia needs to forecast the prices of fuel to time the purchases of futures contract for fuel.

So this means we have to forecast the sales volume, selling prices in some cases and material prices in other cases.

HOW DO WE FORECAST THIS?

The option available to management can be divided into

1. Qualitative forecast - use of experts and executive judgement or market research

2. Qualitative forecast - use of past data to predict the future

IN Paper 7 CAT we are concerned about the quantitative forecast rather then the qualitative forecast.

Here we consider 3 options to forecast

1. The easiest and the most unreliable one - High - Low Method of forecasting

2. The statistical way of forecasting - Regression analysis
(Need to calculate the formulae and then apply it for a forecast, used in conjuction with a scatter diagram). In this analysis, anything can become the independent variable (x), time, advertising, activity levels and so on, which is similar to High-Low analysis

3. The component way of forecasting - Time series analysis
(Need to calculate the moving averages and seasonal variations, used in conjuction with a time series diagram). In this analysis, the independent variable must be time, nothing else.

The dependent variable can be anything for all the above methods.

So given a set of data let say
Sales units
2004 Q1 100
Q2 150
Q3 180
Q4 120
2005 Q1 110
Q2 175
Q3 190
Q4 120
2006 Q1 130
Q2 180
Q3 210
Q4 145

We can now use the 3 methods to compute the forecast for 2007 Q1,2,3 and 4

We can use the high low method of forecasting to this

We can use the regression analysis (which I did not show you how to create the formula since it was not examinable but if you need to know ask, I shall reveal it)

We can use the time series analysis - ONE big question here, should I be using the multiplicative or additive model?

This should be highlighted in the question (which you mut obey at all cost) or if you have to decide, you look at the difference between the data Q1 - Q1 - Q1 for the 3 years. Is it stable growth or spiking growth

TRY IT OUT AND SEE IF YOU CAN ANSWER THE FORECAST USING 3 METHODS

2007-09-03T09:37:00.000-07:00

Class date 30-08-07

Class date 23-08-07

Class date 21-8-07

2007-08-19T10:41:00.000-07:00

Budgeting powerpoints now available direct from the text book supplier

It is good for you to

1. try out the self study questions and if you can't get something correct check it with me

2. Do the additional self-study questions

3. Download the powerpoint for the chapters discussed so that you understand it better

4. Check out the excel worksheet that have been prepared there for the question (since most management accoutants are experts with the excel, so should you)

The site is BUDGET NOTES ans MORE

2007-08-17T09:36:00.000-07:00

AUGUST 20 RESULTS are coming out.......

Good luck and god speed for the CAT students from Group 1,4, 10.

2007-08-07T11:26:00.000-07:00

Good website for reference purpose - if you have no cash to get a book

Management and Accounting Web (MAAW)

2007-08-07T09:18:00.000-07:00

The class today saw the introduction of operational budgets

Sales

Production

Raw materials

Labour

Overheads

Income Statements

The sample of the budget that was done on excel is given here for those that were just too lazy to get it.

Next class we will be moving into some complex computations that will involve the budgets.

FRIDAY is 5 hours of calculations practice.

Areas to be covered:

1. Cost behaviour

2. Overheads - ABC and Traditional

3. Time series

4. Regression Analysis

5. Index

6. ROI and RI

7. Budgets

So revise a head of time so that you don't look like a duck out of water!

The focus of the class is to

1. Clarify any misuderstanding about the area

2. Improve your ability to handle complex questions the like which will be appearing in the PT 1 and Final exam

3. Make you suffer a bit

ON the lighter side - I suffered today massively under the guise of Futsal - boy was my body aching like hell after playing a few short games. Talk about being out of the sports world - maybe its been to long (8 years plus). I need to increase my white-board pull down exercise more often. But it was fun - Thanks guys (G4 and G10)

2007-08-06T09:30:00.000-07:00

What we have done to date:

We have covered the following areas and now at a critical zone for the paper:

The last 2 areas are very critical for Paper 7 this time since Steve Jay has yet to hit a full course this time.

So far you have completed the following

Describe the management function within an organisation and how this may vary according to the nature of the business
(b) Describe the objectives of management accounting information in relation to short-term and long-term planning, control and performance measurement
(c) Describe the role of the management accountant in an organisation
(d) Describe the features of useful management information
(e) Explain the limitations of management information in providing guidance for managerial decision-making
(f) Explain how cost accounting systems can be maintained and improved

Absorption costing
(a) Demonstrate knowledge of the application of absorption costing in an organisation
(b) Apply absorption costing principles in a job, contract, batch, service, or process costing context
(c) Prepare management accounts and cost estimates using absorption costing principles
(d) Evaluate the usefulness of absorption costing in specific situations

Marginal costing
(a) Explain the use of marginal costing in an organisation
(b) Apply marginal costing principles in a job, contract,batch, service, or process costing context
(c) Explain cost behaviour
(d) Prepare management accounts and cost estimates using marginal costing principles
(e) Reconcile marginal costing and absorption costing profits
(f) Evaluate the use of marginal costing in specific situations
(g) Compare and contrast the use of absorption and marginal costing

Activity based costing
(a) Explain the reasons for the development of activity based costing
(b) Select appropriate cost pools and cost drivers
(c) Calculate product costs using activity based costing
(d) Apply activity based costing principles in a job, contract, batch, service, or process costing context
(e) Evaluate the use of activity based costing in specific situations
(f) Compare and contrast the use of absorption, marginal and activity based costing

Collection of information
(a) Describe sources of information from within and outside the organisation
(i) describe sources of information from suppliers and customers
(ii) describe sources of information from suppliers and customers
(iii) discuss sampling techniques (random, systematic, stratified, multistage, cluster and quota)
(iv) choose an appropriate sampling method in aspecific situation
(v) describe sources of information from government, trade associations and the financial press
(vi) describe benchmarking
(vii) discuss the advantages and disadvantages of benchmarking
(viii) select appropriate benchmarks at strategic, tactical and operational levels in a specific situation
(Note: Derivation of random samples will not be examined)

6 Presentation of information and use of Indices
(a) Presentation of information
(i) Prepare written reports representing management information in suitable formats according to purpose
(ii) Present information using tables, charts and graphs (bar charts, histograms, frequency
polygons)
(iii) Interpret information (including the above tables, charts and graphs) presented in management reports
(b) Indices
(i) Calculate price and quantity indices on Laspeyres' and Paasche bases
(ii) Discuss advantages and disadvantages of Laspeyres' and Paasche indices
(iii) Adjust raw data using appropriate indices

7 Forecasting
(a) Use the high-low method to estimate the fixed and variable elements of a cost
(b) Explain the advantages and disadvantages of the highlow method
(c) Construct scatter diagrams and lines of best fit
(d) Describe the use of linear regression analysis in the analysis of cost data
(e) Use linear regression coefficients to make forecasts of costs and revenues
(f) Adjust historical and forecast data for price movements
(g) Explain the advantages and disadvantages of linear regression analysis
(h) Describe the product life cycle and explain its importance in forecasting

8 Time series analysis
(a) Explain the principles of time series analysis (trend, seasonal variation and random elements)
(b) Calculate moving averages
(c) Determination of trend, including the use of regression analysis
(d) Use trend and seasonal variation (additive and multiplicative) to make budget forecasts
(e) Explain the advantages and disadvantages of time series analysis
(f) Describe the concept of the product lifecycle and its implications for sales forecasting
(Note: Derivation of regression coefficients will not be examined)

Note the Powerpoint note that is being used for the class is available HERE ! this should cover the notes aspect of it, so just take down the mechanics and pay more attention is undertanding the presentation tomorrow. Ask the relevant questions.
www.geocities.com/jay_sunway/ch09.ppt (you need to type this out in the address column and hit enter because the link is failing)

As for the above, all the red represents the theory area that is your homework for Thursday class. All that have yet to complete this will face the wrath of Doom.

You should use the text book to find the answers for the above. Or maybe the net

For support revision for budgeting this site is HELPFUL!

2007-07-24T10:35:00.000-07:00

FANTASTIC MANAGEMENT ACCOUNTANTS is currently students that are studying to be accountants for:

TO DO BATTLE WITH : VICTOR DOOM a.k.a STEVE JAY

2007-07-24T09:49:00.000-07:00

Presenting information for management

Today we covered 2 questions on Overhead costing - reciprocal services and now you should have the skills to handle

1. Step down method

2. Continuous method

3. Algebraic method

The class covered some basic graphical presentation techniques as well as report writing.

When covering a report you should have the following:

Title Section.

In a short report this may simply be the front cover. In a long one it could also include Terms of Reference, Table of Contents and so on.

Summary.

Give a clear and very concise account of the main points, main conclusions and main recommendations. Keep it very short, a few percent of the total length. Some people, especially senior managers, may not read anything else so write as if it were a stand-alone document. It isn’t but for some people it might as well be. Keep it brief and free from jargon so that anyone can understand it and get the main points. Write it last, but do not copy and paste from the report itself; that rarely works well.

Introduction.

This is the first part of the report proper. Use it to paint the background to ‘the problem’ and to show the reader why the report is important to them. Give your terms of reference (if not in the Title Section) and explain how the details that follow are arranged. Write it in plain English.

Main Body.

This is the heart of your report, the facts. It will probably have several sections or sub-sections each with its own subtitle. It is unique to your report and will describe what you discovered about ‘the problem’. These sections are most likely to be read by experts so you can use some appropriate jargon but explain it as you introduce it. Arrange the information logically, normally putting things in order of priority -- most important first. In fact, follow that advice in every section of your report.
You may choose to include a Discussion in which you explain the significance of your findings.

Conclusions.

Present the logical conclusions of your investigation of ‘the problem’. Bring it all together and maybe offer options for the way forward. Many people will read this section. Write it in plain English. If you have included a discussion then this section may be quite short.

Recommendations.

What do you suggest should be done? Don’t be shy; you did the work so state your recommendations in order of priority, and in plain English.

Appendices.

Put the heavy details here, the information that only specialists are likely to want to see. As a guide, if some detail is essential to your argument then include it in the main body, if it merely supports the argument then it could go in an appendix.

Sample for a financial performance report is as follows (ACCA DECEMBER 2004 PAPER 2.5 Question 4)

To get the full answer and question, head to the ACCA website and download the ACCA Professional Scheme (Old syllabus) Paper 2.5 exam paper and answer paper (HARD WORKING STUDENTS)

Other then that we covered an area that has yet to make an appearance for the exam paper - Graphs

- Bar chart - simple, component & % component

- Histogram - with equal class interval and unequal class interval

- Frequency polygon

The coming class we are heading into the area of index and forecasting where the graph papers are needed for drawing scatter diagrams and time series charts

Reading a head of the next class (HARD WORKING AND DEDICATED STUDENTS)

FORECASTING POWERPOINT

The following are excellent for understanding the finer points involved in forecasting

FORECASTING METHODOLOGY

2007-07-22T10:32:00.000-07:00

Time to slow down

Please read up the Kaplan text at home for the areas that we have already covered - backup reading.

Well I know that I have been fast in the last 2 weeks - covering up to 5 chapters including the introduction to the paper and going thru all the past stuffs with you.

1. Trust me when I say that I have done a detail analysis of the paper from many angles - examiner, lecturer, students and I know that certain areas are high on the examiner agenda and some are not.

2 This was stated in all the examiners report

The paper followed the structure outlined in previous reports. Candidates preparing for this paper should expect the exam to: focus on the key syllabus areas as specified in the Syllabus.

On this occasion, all four questions were based on key syllabus areas, and this focus will not fall below 80% of available marks on future papers test numeric and written skills.

On this occasion, 35% of the marks were for discussion and 65% were for calculation.

In the long term, marks will be split into (approximately) 40% for words and 60% for numbers test application more than knowledge.

The December 2006 paper contained 32 knowledge-based marks. In the long term, marks will be split into (approximately) 70% for application and 30% for knowledge

STEVE JAY (EXAMINER PAPER 7 CAT)

What are the key syllabus areas mentioned here for the paper?

The key topic areas for PAPER 7 are
• forecasting
• budget preparation
• flexible budgets
• variance computation and interpretation
• performance indicators
• short-term decision-making
• cost reduction and value enhancement.

As you can see - this means that we have yet to start the 80% zone of the examiner, and still at the 20% zone of the examiner

Now in the December 2005 examiner report Steve Jay Paper 7 examiner stated the following:
Question 2
This question covered the use of marginal, absorption and activity based costing and the key syllabus area of pricing. It is detailed under syllabus headings 1 and 9, and study guide areas 2, 3, 4 and 31. This question is set in the context of a process industry and, amongst other things, covers study guide areas 2b, 3b, and 4d.

There appears to be some misunderstanding of the position of process costing in the syllabus. The reference to process costing in the study guide is purely contextual. Costing principles have to be examined in the context of some costing method. I have no intention of examining any of the costing methods (job, batch, process or contract) in any detail. This question (and those covered in earlier papers) represent as far as I will go with process costing, or any of the other costing methods

HOW DID THE QUESTION LOOK LIKE?

Bennett plc is a manufacturer of soft drinks. Drinks are mixed and bottled in an automated process supervised by a small number of technicians. The majority of production costs are fixed and are common to all of Bennett’s products.
The market for soft drinks is very competitive and all of Bennett’s products face strong price competition. Bennett has recently developed a new sports energy drink, which will be sold in one-litre bottles under the brand name ‘Zoom’. The production of Zoom is more complicated than that of Bennett’s existing soft drinks, involving more ingredients, a large variety of more expensive materials and more mixing operations.
The variable production cost of 4,000 litres of Zoom is £0·20 per litre, including packaging. Variable production cost consists entirely of direct material cost.
Bennett’s management accountant is considering how to charge overhead costs to the new product and the price at which it should be sold. She is considering the following three approaches:

Approach 1. This would involve not charging overhead to the product and pricing the new product at variable production cost plus a 300% mark up.
Approach 2. This would involve using a general overhead absorption rate of 400% of direct material cost. The product would then be priced at full absorption cost plus a 20% margin on sales.
Approach 3. This would involve using an activity-based costing approach to arrive at the full cost. The product will be priced at this full cost plus a 20% margin on sales.

Activity based costing rates
Overhead item Driver rate
Stores administration cost £100 per ingredient used.
Technician salaries £300 per mixing operation.
Despatch cost £200 per customer delivery.

The 4,000 litres of Zoom used twelve different ingredients and required eight mixing operations. Ten separate deliveries were required to deliver it to customers.

Required:
(a) Calculate the selling price per one-litre bottle of Zoom that would result from each of the above three approaches. (8 marks)
(b) Explain why an activity based costing approach would be more useful in costing products than a traditional absorption costing approach, given the circumstances faced by Bennett. (6 marks)
(c) Explain two advantages and two disadvantages of cost plus pricing. (6 marks)
(20 marks)

Why don't you try out PART a) and b)

NOW ACCORDING TO THE EXAMINER - THIS IS THE MOST HE WILL ASK FOR PROCESS COSTING, JOB COSTING, BATCH COSTING AND I AM GOING TO TRUST WHAT HE SAYS.

Now you know why I have been going fast on those areas.........no marks to be obtained, just knowledge (like knowing that book-keeping was invented by Luca Pacioli in 1494), impressive but not effective

YES former Group 1/07, I know that you are used to a lot of questions practice for each area that you study from your old paper 4, well I am the same, I will practice a lot of question in an area, but only if it is within the 80% zone. So I understand you issue and will be addressing them by allocating 1 class to re-affirm those areas that I feel are important.

I strongly believe that spending time in Process costing is a waste of time even though you have been introduced to new items - if this is wrong, comment about it so that I can address your grievance.

So for the coming tuesday class -

Revision on cost behaviour
Revision on overhead costing
Revision on ABC
Revision on some theory areas

I have been teaching costing and management accounting to ACCA,ABE,CIMA,AIA,LCCI and even to the most hardest bunch of students (marketing students from CIM) for the past 11 years plus.

2007-07-19T05:53:00.000-07:00

ABC example

What happened today?

Well we covered chapter 5 of the syllabus, whic had the following areas:

PUCE - for Process Account then to Equivalent units, then to Equivelant cost and finally evalution.

1. Data and information
What is the difference?

2. Data collection methods

Includes Primary and secondary data and collection methods (questionnaire, focus group, interview)

EXTREMELY POSSIBLE FOR DECEMBER 2007 T7 Exam and my progess test or mock

3. Sampling methods (DECEMBER 2006)

Get some excellent notes on sampling here

Explain to the sales manager how the following sampling methods could be used in market research, and give one advantage of each method:
(i) stratified random sampling; and
(ii) cluster sampling.

ANSWER
Stratified random sampling and cluster sampling
(i) Stratified random sampling
This involves dividing the total population into strata or categories (for example age groups) and then taking random samples from each of the strata or categories.
Advantages.
– The selected sample will be representative of the population as a whole, as all strata will be represented.
– Inferences can be drawn about each stratum.
– Precision is increased, as variation between strata does not enter as a chance event. A random sample could miss an entire stratum.

(ii) Cluster sampling
This involves splitting the population into convenient groups and then selecting a number of groups at random. Every item in the sample is then investigated. For example people travelling on particular buses could be taken as representative of the travelling public in general. All the passengers on the selected buses would then be interviewed.
This is a non-random sampling method.
Advantages.
– It is cheap to operate as the members of each cluster are all in one place, this is particularly useful if face to face interviews are required.
– Useful if a sampling frame does not exist (for example if you can’t identify your potential population of customers to sample from).
NOTE - random, systematic, quota has yet to be asked.### (possible for the PT)

4. Benchmarking - JUNE 2007 CAT PAPER 7

You are an accounting technician in the administration department of a small manufacturing company. Your manager,who is not an accountant, is about to attend a meeting and is unsure of the meaning of several items that appear on the agenda.
Required:
Produce notes on any TWO of the following three items to help your manager understand their meaning:
(i) The balanced scorecard and its perspectives on performance;
(ii) Total quality management (TQM) and the costs of quality;
(iii) Benchmarking (including internal, competitive, functional and strategic benchmarking).

(THIS CAME OUT FOR CAT PAPER 7 JUNE 2007) - 10 marks Benchmarking Benchmarking involves the establishment, through data gathering, of targets and comparators, through whose use relative levels of performance (and particularly areas of underperformance) can be identified. By the adoption of identified best practices the performance of the organisation should be improved. Four types of benchmarking are commonly recognised.

Internal benchmarking. This involves the comparison of different departments or divisions within an organisation. Data for this is easy to obtain and conditions are often comparable. Learning may be limited as comparisons are only being made within the same company.

Competitive benchmarking. This involves comparing performance with that of direct competitors. The potential for learning is improved but data may be difficult to obtain. For commercial reasons firms are often unwilling to divulge information to direct competitors. The growth of benchmarking clubs and trade associations has reduced the problems of competitive benchmarking

Functional benchmarking. Various functions in the business are compared with those recognised as the best external practitioners of the function. A manufacturing company could compare its invoice preparation time with that of a credit card company, its delivery time with a firm of couriers etc. The potential for learning how to improve performance is very high, but comparability problems sometimes exist. (This is sometimes referred to as operational or generic benchmarking)

Strategic benchmarking: This involves comparison of performance with competitors at the strategic level. Areas such as market share and return on capital employed could be considered. Such comparisons are important in designing competitive strategy

Notes from wikipedia
Benchmarking (also "best practice benchmarking" or "process benchmarking") is a process used in management and particularly strategic management, in which organizations evaluate various aspects of their processes in relation to best practice, usually within their own sector.

This then allows organizations to develop plans on how to adopt such best practice, usually with the aim of increasing some aspect of performance. Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations continually seek to challenge their practices.

Advantages of benchmarking
Benchmarking is a powerful management tool because it overcomes "paradigm blindness." Paradigm Blindness can be summed up as the mode of thinking, "The way we do it is the best because this is the way we've always done it." Benchmarking opens organizations to new methods, ideas and tools to improve their effectiveness. It helps crack through resistance to change by demonstrating other methods of solving problems than the one currently employed, and demonstrating that they work, because they are being used by others.

Competitive benchmarking
ADVANTAGE OF THE BENCHMARKING FOR A COMPANY:
1.A better understanding of the wants (expectations) of the customer because it is: based on the reality of the market estimated in an objective way
2.A better economic planning of the purposes and the objectives of the company by centering on what takes place outside controlled and mastered.
3.A better increase of the productivity:resolution of the real problems Understanding of the processes and what they produce "
4.Better current practices Search for the change Many decisions practices of break
5.A better competitiveness thanks to: a solid knowledge of the competition a strong implication of the staff new ideas on practices and tried techniques
Benchmarking has consequences which are beyond the process itself: it reforms all the levels of the company.; modifies the process of manufacture of the product leads(drives) ; also reforms the hierarchical organization of the company, the product itself, and the state of mind of the employees.

Collaborative benchmarking
Benchmarking, originally invented as a formal process by Rank Xerox, is usually carried out by individual companies. Sometimes it may be carried out collaboratively by groups of companies (eg subsidiaries of a multinational in different countries). One example is that of the Dutch municipally-owned water supply companies, which have carried out a voluntary collaborative benchmarking process since 1997 through their industry association.

Procedure
Identify your problem areas - Because benchmarking can be applied to any business process or function, a range of research techniques may be required. They include: informal conversations with customers, employees, or suppliers; exploratory research techniques such as focus groups; or in-depth marketing research, quantitative research, surveys, questionnaires, reengineering analysis, process mapping, quality control variance reports, or financial ratio analysis.

Identify other industries that have similar processes - For instance if one were interested in improving handoffs in addiction treatment s/he would try to identify other fields that also have handoff challenges. These could include air traffic control, cell phone switching between towers, transfer of patients from surgery to recovery rooms.

Identify organizations that are leaders in these areas - Look for the very best in any industry and in any country. Consult customers, suppliers, financial analysts, trade associations, and magazines to determine which companies are worthy of study.

Survey companies for measures and practices - Companies target specific business processes using detailed surveys of measures and practices used to identify business process alternatives and leading companies. Surveys are typically masked to protect confidential data by neutral associations and consultants.

Visit the "best practice" companies to identify leading edge practices - Companies typically agree to mutually exchange information beneficial to all parties in a benchmarking group and share the results within the group.

Implement new and improved business practices - Take the leading edge practices and develop implementation plans which include identification of specific opportunities, funding the project and selling the ideas to the organization for the purpose of gaining demonstrated value from the process.

Cost of benchmarking
Benchmarking is a moderately expensive process, but most organizations find that it more than pays for itself. The three main types of costs are:
Visit costs - This includes hotel rooms, travel costs, meals, a token gift, and lost labour time.
Time costs - Members of the benchmarking team will be investing time in researching problems, finding exceptional companies to study, visits, and implementation. This will take them away from their regular tasks for part of each day so additional staff might be required.
Benchmarking database costs - Organizations that institutionalize benchmarking into their daily procedures find it is useful to create and maintain a database of best practices and the companies associated with each best practice now.

Notes from Wikipedia

2007-07-16T23:37:00.000-07:00

Part c & d answer for walk-takl

Part c - Differences between budgeted and actual profit on an absorption basis
i)
Budgeted profit 100

Difference in:
Sales volume
(Budgeted 50,000 - Actual 45,000) x margin
5000 x (30 - 26) (20) (This reduces the budgeted profit)

Production volume
(B 50,000 - A 52,000) x OAR (16) 32 (Overabsorption increases the profit)

Fixed overhead expenditure
(B 800,000 - A 830,000) (30) (Overspending reduces the profit)

Actual profit 18

ii)Part c - Differences between budgeted and actual profit on a marginal basis

Budgeted profit 100

Difference in:
Sales volume
(Budgeted 50,000 - Actual 45,000) x contribution
5000 x (30 - 20) (100) (This reduces the budgeted profit)

Fixed overhead expenditure
(B 800,000 - A 830,000) (30) (Overspending reduces the profit)

Actual loss (30)

d)
The problems associated with the valuation of the finished stock of telephones at the year end include:

Variation in versions
There is a difference in the version and operating systems of the phones that may cause some to be outdated. Different colours and operating system implies the need for more sophisticated coding and valuation system for stocks

Obsolescence
The market is rapidly evolving into on that seems to have short product lifecycle. This may lead to products that may not be in demand thus the company may need to continuously ensure that stocks are valued in accordance to IAS 2 - Lower of cost and NRV. In this case obsolete products will have a value of NRV.

Overhead absorption inappropriate
It seems that during the period the overhead cost is 30,000 more than estimated. This could lead to the stocks being undervalued due to poor estimation of cost.

Considering the volatility of the product and the uncertainty involved, it would be wiser for the company to value the stock using marginal costing which may ne closer to NRV.

Mr. Jay FCCA

2007-07-16T01:21:00.000-07:00

ANSWER FOR WALK-TALK

2007-07-10T09:52:00.000-07:00

Class on 10.7.07 covered the following:

A note for those that are coming in late - try not to be late since the class is such that when you enter, you are going to distract the others. LT2 design highlights the late comers to everybody and can be very distracting.

On the lighter side it seems that some of you may actually have a weak paper 4 foundation - is this so? If it is you better highlight it quickly since I am working on the assumption that P4 is no problem, hence the speed at which the class moves follows some assumptions. Is it a problem?

We took a close look at the development of Activity Based Costing and the mechanics behind the
calculations.

Why did ABC really develop?

The power of computing

The development of production complexity

The questions that we practised - review it now as you read this (to refresh how the computations are done)

The problems of ABC and the effectiveness was discussed in a short manner.

HOMEWORK that is required: June 1999 Paper Question 4

Overhead Apportionment - Continuous method at the end of the day you should get the following information:

a) Cutting = 193,752 & Assembly = 157,248

b) Cutting OAR = 25.00 & Assembly OAR = 3.25

c) Overheads absorbed C = 175,750 and A = 170,885

The Accounts

d) Benefits gained from using absorption costing

- it is recommended for external reporting purpose according to IAS 2 / SSAP 9 (inventory valuation)

- it aids in obtaining the full cost that can be used in cost based pricing

- Full cost comparison can be made between different products ( allows the assessment of resources usage)

- No need to be concerned about analysing the cost behaviour since all the cost are treated as either direct or indirect

2007-07-04T10:48:00.000-07:00

Absorption costing and Activity Based Costing

Absorption costing has a few stages of awareness for the students.

1. Overhead Analysis Sheet which includes the apportionment, re-apportionment and allocation of overhead cost

2. Computation of overhead recovery rates

3. Why use predetermined OAR rather then actual OAR

4. Explain the components of the under/over absorb

5. Difference between departmental rates and blanket rates

6. Why use absorption costing

7. Development of ABC

8. Computation of cost/driver and charging the product using ABC

9. Difference between ABC and Absorption costing

Mr. Jay FCCA

2007-07-04T10:45:00.000-07:00

Paper 7 CAT SunwayTES

Class 1 - What did we do?

Introduction to the subject matter

Difference between paper 4 and paper 7

Exam format

Starting up the paper by

Understanding the type of information that is needed for managing performance
(Context - Sales manager for KFC)
Internal
External

Primary
Secondary

Qualitative
Quantitative

Adhoc
Continuous

Understanding the difference between management accounting and financial accounting

Format
Standards
Requirement
Audience
Timing of report
Orientation – time
Type of information – QQ v M
Legal requirement

Understanding cost behaviour

Variable cost
Fixed cost
Semi-variable cost
Stepped fixed cost (homework)

You should be able to draw the total cost graph and the cost per unit graph

You should be able to give an example for each type of cost

Define it in simple terms

Be able to analyze the cost into different behaviour and use high-low method to figure out the semi-variable cost

High-low method
Assume that total cost = variable cost plus fixed cost
Variable cost is the difference between the high cost and the low cost, since fixed cost will not change, the balance of the change must be caused by variable cost.

The variable cost changes can be attributed to the activity changes, thus we can identify the variable cost per unit

Now for a selected activity level, we can calculate the total variable cost = variable cost per unit x activity level.

Since the total cost = variable cost + fixed cost, we can now deduce that for the selected level of activity, the fixed cost = total cost – variable cost.

We can now calculate the cost function for the semi-variable cost = variable cost per unit + total fixed cost

Mr. Jay FCCA

2007-05-07T19:07:00.000-07:00

Paper 7 in the CAT world is one that has the following mix

Theory - 50%
Computation - 50%

Total possible marks - 100%

2006-08-15T01:16:00.000-07:00

This is one of the hot topic that appears in Paper 10 - Managing Finance of the CAT paper.

The examiner tends to always ask a question in this section - either 40 marks or 20 marks. In the coming December 2006 I am pretty sure that CASH MANAGEMENT will be a 40 mark question.

In this case what will the examiner ask?

So far the questions in calculations have been
1. Cash budget, Profit & Loss Statement, Balance Sheet
2. Short-term cash management - free floats
3. Cash flow Statements

So far the examiner has already not asked a cash budget for some time, this would mean that CASH BUDGET is very very likely to be the COMPULSORY QUESTION.

If it comes for 40 marks, the calculation part can be up to 25-30 marks, which leaves another 10-15 marks in the theory section. Here the examiner has 2 options

1. Ask issues related to cash management
2. Ask issues related to other parts of the syllabus

In this case the it would be difficult to predict what will be coming out exactly.

What is a typical cash related question?

Briefly describe the drawbacks of the Baumol (EOQ) cash management model. 4 marks

Briefly explain three motives for holding cash, as identified by Keynes. 6 marks

Define and explain the characteristics of THREE out of the four types of investment below. In light of the characteristics you have identified, conclude as to whether you consider each of the investments you have explained to be an appropriate use of Tots Ltd’s cash surplus.
(i) Certificates of deposit;
(ii) Gilt-edged securities (gilts);
(iii) Shares;
(iv) Bills of exchange. (Total 18 marks)