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CIMA BA2 Flashcards

VIVA

Learn or revise key terms and concepts for your CIMA BA2 Fundamentals of Management Accounting exam using OpenTuition interactive CIMA BA2 Flashcards.

There are over 50 CIMA BA2 Fundamentals of Management Accounting flashcards available

Why is important that non-financial performance is measured rather than concentrating solely on financial performance?

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Non-financial performance measures (such as quality) and important for achieving future growth. Financial measures concentrate on the past rather than the future.

What is the purpose of a flexed budget?

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The purpose of a flexed budget is control – the actual results can be compared with the flexed budget results.

What is a flexed budget?

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A flexed budget is where the original budget is re-written for the actual level of activity.

What is the difference between top-down budgeting and bottom-up (or participative) budgeting?

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Top-down budgeting is where the budget is imposed on the budget holder
Bottom-up budgeting is where the budget holder participates in preparing the budget

What are the principal aims / uses of budgeting?

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* Planning
* Control
* Communication
* Co-ordination
* Evaluation
* Motivation
* Authorisation and delegation

What is the definition of the CS ratio?

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The CS ratio = contribution / sales

What is meant by the term ‘margin of safety’?

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The margin of safety is the difference between the budgeted sales volume and the breakeven sales volume.
It can be expressed in units, or in $’s of revenue. or as a percentage of the budgeted sales volume.

What are the labels of the axes on a profit volume graph?

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The vertical axis shows the profit (or loss) in $’s.

The horizontal axis either shows the volume in units, or the sales revenue in $’s

What are the labels of the axes on a breakeven chart?

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The vertical axis shows the costs and revenues in $’s.

The horizontal axis shows the volume in units.

What is meant by the term breakeven sales revenue?

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The sales revenue at which the profit is zero
(i.e. no profit / no loss)

What is meant by the term breakeven sales volume?

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The number of units sold at which the profit is zero (i.e. no profit / no loss)

What are capital reserves?

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Capital reserves are the share premium account and the revaluation reserve. They represent amounts owing to shareholders, but this amount cannot be paid out as dividend.

 What are the four perspectives covered by the Balanced Scorecard?

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The four perspectives are:

  • Financial
  • Customer
  • Internal
  • Innovation and learning

Give possible reasons for an adverse material expenditure variance.

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Possible reasons for an adverse material expenditure variance include:
– paying more than the budgeted price per unit of materials due to errors in purchasing
– a price increase in materials
– purchasing better quality materials
– incorrect budgeting of the standard cost of materials

What is the purpose of an operating statement (as part of variance analysis)?

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The operating statement shows why the actual profit differs from the budgeted profit.

What does the sales volume variance measure?

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The sales volume variance measures the effect on the budgeted profit of the difference between the actual sales volume and the budgeted sales volume.

What is bottom-up budgeting?

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Bottom-up budgeting is where lower level managers are involved in the budget process – they prepare budgets for their departments which are then checked and co-ordinated by higher level management.

What is top-down budgeting?

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Top-down budgeting is where the budgets are prepared by high-level management and then communicated to lower levels.

Lower level management do not participate in the budget process.

What is the definition of the Internal Rate of Return (IRR)?

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The IRR is the rate of interest at which the Net Present Value of the project is zero.

What is meant by the ‘payback period’?

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The payback period is the number of years it takes to get back the original investment, in cash terms.

What is a ‘sunk cost’?

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A sunk cost is a cost already incurred (and is not relevant for investment decisions)

What is meant by the ‘principal budget factor’?

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The principal budget factor is the factor that limits the level of activity of the organisation (usually sales).

What is a flexed budget?

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A flexed budget is a budget re-written for the actual level of activity.

What are the purposes of budgeting?

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Planning
Control
Co-ordination
Authorisation
Communication
Motivation
Evaluation

Under what circumstances will the profit using marginal costing and the profit using absorption costing be the same?

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The profits will be the same if there is no change in the level of inventory over the period (i.e. when the closing inventory is the same level as the opening inventory).

What is the reason for a difference between the profit calculated under marginal costing principles and the profit calculated under absorption costing principles?

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The difference is because of the difference in the way opening and closing inventories are valued. Under marginal costing they are valued at the marginal (variable) cost of production; under absorption costing they are valued at the full cost of production (variable plus fixed).

What is meant by the ‘marginal cost of production’?

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The marginal cost of production is the total of all variable production costs.

What is meant by the word ‘contribution’?

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The contribution is the profit before fixed costs (or the revenue less all variable costs).

What is the difference between the allocation of overheads and the apportionment of overheads? 

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Allocation – whole cost items are charged to the relevant cost centre

Apportionment – cost items are shared/divided between several cost centres

What is meant by a ‘cost centre’?

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A cost centre is a production or service location, activity, function or item of equipment for which the total cost can be calculated.

What is meant by a ‘cost unit’?

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A cost unit is a unit of product or service for which the cost is calculated.

What is a ‘semi-variable cost’?

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A semi-variable cost is a combination of variable and fixed costs.

What is a ‘stepped fixed cost’?

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A stepped fixed cost is one that is fixed in total within a certain level of activity, but where once an upper limit of activity is reached then a new higher level of fixed cost occurs.

What is a ‘fixed cost’?

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A fixed cost is one which remains constant in total over certain levels of activity.

What is a ‘variable cost’?

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A variable cost is one which varies in total with the level of activity.

What is meant by ‘indirect costs (or overheads)’?

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Indirect costs are those costs which cannot be specifically identified with a specific cost unit or cost centre.

What is the ‘prime cost’ of a unit of production?

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The prime cost is the total of the direct costs of a unit.

What are ‘direct costs’?

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Direct costs are those that can be specifically measured in each unit of production.

What are the purposes of costing (i.e. calculating the cost of producing a product or service)?

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To enable a selling price to be set
To calculate a profit per unit
To value inventory

What is the difference between data and information?

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Data consists of facts that have been gathered.

Information is data that has been processed in a way that is meaningful to the person who receives it.

What are the attributes of good information?

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Good information should be:

  • Accurate
  • Complete
  • Cost-effective
  • Understandable
  • Relevant
  • Accessible
  • Timely
  • Easy to use

What is the purpose of management accounting?

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To help management run the business in a way that achieves the objectives of the business.


CIMA BA2 flashcards are interactive and only work on line, flashcards are NOT downloadable/printable

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