ACCA PM
ACCA Performance Management (PM) Flashcards
What is meant by the term ‘cost driver’ in the context of activity based costing?
What are steps involved in calculating a ‘target cost’?
What is meant by a ‘cost gap’ in the context of target costing?
What steps might be taken in order to reduce the ‘cost gap’ in the context of target costing?
What is the basic idea of lifecycle costing?
What are the phases in a product’s life cycle?
What are the main steps that should be considered in order to maximise the return over the life cycle of a product?
What are the two main assumptions in throughput accounting?
What is meant by the term ‘bottleneck’ in the context of throughput accounting?
What is the definition of the throughput accounting ratio (TPAR) for a product?
In what ways can the throughput accounting ratio of a product be improved?
List four methods that may be used to account for environmental costs.
What is meant by the term breakeven sales volume?
What is meant by the term breakeven sales revenue?
What are the labels of the axes on a breakeven chart?
What are the labels of the axes on a profit volume graph?
What is meant by the term ‘margin of safety’?
What is the definition of the CS ratio?
What is meant by the term shadow cost (or shadow price)?
What is meant by the market skimming pricing strategy?
What is meant by the penetration pricing strategy?
What is meant by volume discounting pricing strategy?
What is meant by price discrimination?
What is meant by the term ‘sunk cost’?
What is the difference between risk and uncertainty?
What is meant by the term ‘expected value’ in the context of decision making under uncertainty?
What are the limitations of using expected values for decision making?
What is the maximin decision rule?
What is the maximax decision rule?
What is the attitude to risk of a decision maker who uses the maximin approach?
What is the attitude to risk of a decision maker who uses the maximax approach?
What is the attitude to risk of a decision maker who uses the minimax regret approach?
What is the difference between sensitivity analysis and simulation?
What are the principal aims / uses of budgeting?
What is the difference between top-down budgeting and bottom-up (or participative) budgeting?
What is meant by incremental budgeting?
What is meant by a ‘rolling budget’?
What is the difference between feedback and feedforward control?
Learning curve theory is useful when budgeting for which costs?
In relation to learning curves, what does Wrights Law (or the ‘doubling rule’) state?
What is a flexed budget?
What is the purpose of a flexed budget?
Suggest three possible reasons for the existence of a sales volume variance.
Suggest three possible reasons for the existence of a materials price variance.
Suggest three possible reasons for the existence of a materials usage variance.
Suggest three possible reasons for the existence of a labour efficiency variance.
If absorption costing is being used, what is the cause of a fixed overhead volume variance?
What is the purpose of an operating statement?
When considering planning and operational variances, what is meant by the revised standard cost?
What are planning variances measuring?
What are operational variances measuring?
What is meant by the JIT (just in time) inventory strategy?
What is meant by TQM (total quality management)?
Why is important that non-financial performance is measured rather than concentrating solely on financial performance?
What are characteristics of a service business that distinguish services from manufacturing?
What are the three categories of stakeholders in a business?
What is mean by the term ‘transfer price’?
In the context of divisionalisation,what is meant by a division?
In the context of divisionalisation, what is meant by an ‘investment centre’?
How is the ROI (return on investment) of a division calculated?
How is the RI (residual income) of a division calculated?
For theoretical transfer pricing, how is the minimum transfer price calculated?
For theoretical transfer pricing, how is the maximum transfer price calculated?
When measuring Value for Money for a not-for-profit organisation, what are the three E’s?
In the context of linear programming, what is meant by ‘slack’?
What is the difference between ‘mark-up’ and ‘margin’?
In pricing, how is the price elasticity of demand calculated?
What is meant by the term ‘critical success factor’?
What are ‘key performance indicators’?
What are the four perspectives that the Balanced Scorecard focuses on?
What are the six dimensions in Fitzgerald & Moons’ building block model?
What are the three levels of planning and control in an organisation?
When comparing service businesses with manufacturing businesses, what is the relevance of intangibility?
When comparing service businesses with manufacturing businesses, What is meant by simultaneity?
What is meant by total factory costs for throughput accounting?
What is meant by the return per factory hour in throughput accounting?
What are the main factors influencing the selling price decision?
What are decision trees?
What is Trend in time series analysis?
What are Cyclical Variations in time series analysis?
What are Seasonal variations in time series analysis?
What are the practical reasons for the learning effect to cease?
What is Standard costing?
What are the uses of standard costing?
What are the limitations of standard costing?
List four standards in Standard costing?
Set out the stages in calculating a product cost using activity based costing.
Define a 'cost pool' and give examples of activities that would each form one.
Under ABC, how is set-up cost absorbed into a unit of product?
Under traditional absorption costing using labour hours, which products tend to be under-costed and which over-costed compared with ABC?
In what circumstances does ABC give materially different product costs from traditional absorption costing?
Why does ABC give a different overhead cost per unit from traditional absorption, and which products are affected?
How are facility-sustaining costs (such as factory rent and heating) dealt with under ABC?
State three practical drawbacks of implementing activity based costing.
How can activity based costing improve decision-making rather than just inventory valuation?
How would you decide whether a proposed cost driver is appropriate?
How is a target cost and a cost gap calculated?
How does the target cost differ when the profit is expressed as a MARK-UP on cost rather than a margin on price?
How does target costing reverse the logic of traditional cost-plus pricing?
Why is target costing more difficult to apply in service industries?
At which point in the product life-cycle must target costing be applied, and why?
What is value engineering, and how does it help close a cost gap?
What is the danger in closing a target cost gap, and how should it be avoided?
What costs enter a life-cycle cost, and how is the life-cycle cost per unit found?
Distinguish between costs committed and costs incurred over a product's life-cycle.
State three benefits of life-cycle costing.
Which costs dominate at each phase of the life-cycle?
Why can conventional annual profit reporting be misleading for a product with a short life-cycle?
How does life-cycle costing apply to a service, and to a customer?
How does the life-cycle stage influence the pricing strategy chosen?
Explain input/output analysis for environmental costs.
Explain flow cost accounting and the three categories of cost it uses.
How is activity based costing applied to environmental costs?
How does life-cycle costing serve as an environmental management accounting technique?
Give the four categories used to classify environmental costs, with an example of each.
Why are environmental costs often invisible to management?
What difficulties do organisations face in managing environmental costs?
What is an externality, and why does it matter for performance management?
What role should the management accountant take in supporting sustainable practice?
State the TPAR calculation.
State the five steps in the theory of constraints.
What does a TPAR of less than 1 tell you, and what should be done?
On what basis are products ranked in a multi-product throughput decision, and why not on contribution per unit?
Why does throughput accounting treat labour as a fixed cost, and what is the consequence for inventory?
How is the optimal production plan determined where there is a SINGLE scarce resource?
Set out the steps in solving a two-product linear programming problem graphically.
What is the feasible region, and where does the optimal solution lie?
In linear programming, how is the optimal plan found and what does a shadow price mean?
What does the shadow price of a resource tell management, and what are its limits?
What is the relationship between slack and shadow price?
How is a make-or-buy decision made when a resource is scarce?
When are simultaneous equations used rather than a graph in limiting factor problems?
What is the significance of slack for performance management?
State four assumptions underlying linear programming.
How is the demand equation P = a - bQ derived from market data?
How is the profit-maximising price and quantity found from P = a - bQ?
How is price elasticity of demand calculated and interpreted?
State the advantages and disadvantages of cost-plus pricing.
Explain complementary product pricing, product-line pricing and relevant cost pricing.
In what circumstances is market skimming preferable to penetration pricing?
How are the breakeven point in units and in revenue calculated?
How is the volume needed for a TARGET PROFIT calculated?
How is multi-product breakeven revenue calculated, and what assumption does it depend on?
How is a multi-product profit-volume chart constructed, and what does it show?
How is the margin of safety calculated and what does it tell you?
State the limitations of CVP analysis.
What three tests must a cost pass to be a relevant cost?
State the rules for the relevant cost of material.
State the rules for the relevant cost of labour.
What is the relevant cost of MATERIAL, in each of the possible situations?
What is the relevant cost of LABOUR, in each of the possible situations?
Which costs are relevant to a make-or-buy decision where capacity is not scarce?
How is a further-processing decision made, and what is irrelevant to it?
On what basis is a shutdown decision taken?
What is the minimum price for a one-off contract, and what qualitative factors qualify it?
How is sensitivity calculated and interpreted?
How is the value of PERFECT information calculated?
Set out the stages in zero based budgeting.
State the benefits and problems of zero based budgeting.
What is activity based budgeting, and how does it differ from incremental budgeting?
Explain the beyond budgeting model, with its benefits and problems.
Explain the benefits and difficulties of participation in budget setting.
What difficulty level should a budget be set at, and what conflict does this create?
How can budgeting systems deal with uncertainty and volatility?
What ethical and sustainability considerations arise in setting budgets?
State the high-low method for splitting fixed and variable cost.
State the learning curve formula and calculate the learning index for an 80% curve.
How is a learning curve applied when the output is a DOUBLING of units?
State the learning curve formula and how it is used where output is not a doubling.
What is meant by the steady state, and how is a budget prepared once it is reached?
Distinguish the additive and multiplicative time series models, and explain how a forecast is made.
What do the correlation coefficient and the coefficient of determination measure, and what are the reservations about regression?
State the material price and usage variance calculations.
State the labour rate and efficiency variance calculations.
How is the material MIX variance calculated?
How is the material YIELD variance calculated?
What is the relationship between the material usage, mix and yield variances?
What wider issues should be considered before accepting a favourable material mix variance?
How are the sales MIX and sales QUANTITY variances calculated?
How are PLANNING and OPERATIONAL variances separated?
Which factors justify revising a budget to create a planning variance, and which do not?
What manipulation issues arise from revising budgets, and how can they be controlled?
How is ROCE calculated and what does it measure?
Distinguish gross profit margin from operating profit margin, and state what a divergence between them indicates.
Show how ROCE decomposes into margin and asset turnover, and use it to explain a ROCE of 20%.
How are the current and quick ratios calculated, and how should they be interpreted?
How are gearing and interest cover calculated, and what do they show?
How is the working capital cycle calculated and what does it drive?
Explain short-termism and financial manipulation, and how they can be reduced.
What are the risks of favouring short-term financial gain over long-term sustainability?
What difficulties arise in setting targets for qualitative areas, and how can they be overcome?
Why must external considerations be allowed for when assessing performance?
How is a project evaluated under ROI, and what is the behavioural problem?
How is a project evaluated under residual income, and why is it more goal-congruent than ROI?
State the shortcomings of ROI as a divisional performance measure.
State the shortcomings of residual income.
How does the basis of asset valuation distort divisional comparison?
Distinguish cost, profit and investment centres, and relate this to the controllability principle.
What are the objectives of a transfer pricing system?
When is market price the appropriate transfer price, and what adjustment is usually made?
What is the effect of transferring at marginal (variable) cost?
Why can transferring at full cost, or full cost plus, lead to poor decisions?
How do a two-part tariff and dual pricing resolve the marginal cost problem?
How is the range of acceptable transfer prices determined?
What additional issues arise in setting transfer prices in a multinational group?
Why can profit-based measures not be used to assess a not-for-profit organisation?
Define economy, efficiency and effectiveness, giving an example measure of each for a hospital.
What problems arise from non-quantifiable objectives?
What is value for money, and how is it achieved?
Distinguish inputs, outputs and outcomes, using a school as an example.
How can effectiveness be assessed when there is no market price for the output?
What problems do multiple objectives create in the public sector and not-for-profit organisations?
What are the dangers of published targets and league tables in the public sector?
Contrast the characteristics of information needed for strategic, tactical and operational decisions.
What is a transaction processing system, and what does it produce?
What is a management information system?
What is an executive information system, and how does it differ from an MIS?
What is an enterprise resource planning system, and what are its benefits and drawbacks?
What is a customer relationship management system, and how does it support performance management?
What controls are required over the generation and distribution of internal information?
What controls protect highly confidential information not intended for external consumption?
Why is data visualisation important in presenting management information?
What is the role of information systems in an organisation?
What are the costs of an information system?
What are the benefits of an information system, and why are they hard to quantify?
What are the main business uses of the internet?
Distinguish an intranet from an extranet.
What are the benefits and risks of wireless technology in business?
What are the qualities of good information?
Distinguish internal and external sources of management information, with examples.
How are principal sources of management information used for control purposes?
State and explain the five characteristics of big data.
What is the purpose of the big data pyramid?
What is data mining?
What is data analytics, and what benefits does it bring to performance management?
What is descriptive analytics?
What is diagnostic analytics?
What is predictive analytics?
What is prescriptive analytics?
What are the challenges and risks of implementing big data and data analytics?
Give practical examples of big data being used in performance management.
What does the employability and technology skills area of the syllabus require?
Which spreadsheet functions should you be able to use in the PM exam?
How should numerical answers be presented in the spreadsheet response area?
How should the word processing response area be used for discussion requirements?
How should you navigate the exam screen efficiently?
How should data and information be presented effectively in an answer?
How should the exhibits and given data be handled in a computer-based PM exam?
How should you decide between the spreadsheet and word processing response areas?
What attitude to risk is implied by choosing on the basis of expected values?
Card 1 of 250. Question side.