ACCA F5复习提纲.doc

Self-review F5Part A Std. costingLife cycle costing estimates the costs and revenues attributable to a product over its entire expected life cycle, from production concept and design to eventual withdrawal from the market. How to maximize the return? (profit)1.Extend the length of the life span.2. Minimize the time to market.3. Shorten the introduction.4.Control the R&D.5.Minimize the breakeven time.Profitability、Pricing、Cost control、Decision makingTarget costingPurpose: improve the competition to suit the environment with similar productsProcess: Step 1 Determine a product specification Step 2 Decide a target selling price at which the organisation will be able to sell the productsuccessfully and achieve a desired market share.Step 3 Estimate the required profit, based on required profit margin or return on investment.Step 4 Calculate: Target cost = Target selling price Target profit.Step 5 Prepare an estimated cost for the product, based on the initial design specification and current cost levels.Step 6 Calculate: Target cost gap = Estimated cost Target cost.Step 7 Make efforts to close the gap. How to close the cost gap?1.Using cheaper staff2.Acquiring more efficient technology3.Cutting out non-value-added activities4.Training staff in more efficient techniquesBenefits:1.cost reduction techniques2.focus on customer improve the level of satisfaction3.focus on product design and process4.improve the competitiveness of products and enhancing the profitability of successThroughput Accounting TOC(The theory of constraints): Its key financial concept is to turn materials into sales as quickly as possible, thereby maximizing the net cash generated from sales-production managementAssumptions:1.In the short run, the cost of purchase materials is the only variable cost, other costs in the factory are fixed costs.2.Producing for orders, the ideal inventory level should be fitability is determined by how quickly goods can be produced to satisfy customer orders.4.idle time at non-bottleneck exist and is acceptedTA per bottleneck resource(return per factory hr)-Throughput/bottleneck hrs per unit计算题：Optimum plan:(1).Limiting factor analysis(contribution per bottleneck resource)(2).TA accounting(Throughput per bottleneck resource)1.TA类process：1. The bottleneck resource is xxxx2. calculation TA/unit TA/bottleneck hours3.rank production4.allocate resource to arrive at optimum production plan TA ratio : total TA/ total factory cost TA per bottleneck resource/Factory cost per bottleneck resource TA per unit/ Factory per unit2.ABC类Cost pool O/H activity driver no. of drivers OH/driver Cost(O/H) per productEAEMA(environmental management accounting)-internalUS: 1. Conventional cost2. Potentially hidden cost3. Contingent costs4. Image and relationship costsUNDSD:1.Input/output analysis 2. Flow cost accounting-material system delivery&disposal3.ABC4.Lifecycle costingPart B Decision makingSingle limiting factor-optimum production planRankcontribution per limiting factor=CPU/limiting factor per unitMultiple limiting factor-linear programming画图可行域交点代入目标方程式Variables:Let x = number of XXXLet c represent the contribution Constraints:联立不等式组p.s: non negativityObjective: c=SlackSlack occurs when maximum availability of a resource or other constraining factor is not used.Constraint with slack-non-critical constraint, shadow price=0Constraint without slack-critical constraint (binding)This is a non-critical scarce resource and as such it has a shadow price of nil.Shadow price The shadow price （dual price）of a limiting factor is the increase in value which would be created by having one additional unit of the limiting factor at its original cost.（linear programming）extra contribution or profit that may be earned by relaxing a binding resource constraint by one unit.Process：联立两个bindingShadow price= total contribution（new optimal plan）-total contribution in original solutionRelevant costs are future cash flows arising as a direct consequence of a decision.Opportunity cost is the benefit sacrificed by choosing one opportunity rather than the next best alternative.Cash inflowsLess: Cash outflowsNet cash flowSpare capacityMake or buy decisionsNo spare capacityProcess;Variable cost of makingVariable cost of buyingExtra variable cost of buyingLimiting factor saved by buying(per unit)Extra variable cost of buying per hour savedRankingShut-down decisionsFactors to consider for shutting-down decisions:1.Loss of contribution from the segment2.Savings in specific fixed costs from closure3.Penalties resulting from the closure4.Alternative use for resources released5.Non-quantifiable effects6.Knock-on impactloss leader 局部故意亏损以求整体利益If shut down;Cash inflows; Saved costs Increased contribution of other products（substitute）Cash outflows; Loss contribution (complement&itself) PenaltiesNCFsJoint product further processing decisionsIncremental revenueLess: Incremental costIncremental profit/(loss)The xxx product is worth further processing in that the extra revenue exceeds the extra cost by $xxxPricing DecisionsPrice elasticity of demand- inelastic 0x1Demand equation;P=a-bQMR=a-2bQP=pricea=the price at which demand would be nil b= in price/in quantityQ=the quantity demandedProfits maximised: MR=MCRevenue maximised: MR=0CVP analysisCost volume profit (CVP)/breakeven analysis is the study of the interrelationships between costs, volume and profit at various levels of activity.CPU-contribution per unitBEP=contribution-FCTo make zero profit, sales volume should be atBEP=FC/CPU To make zero profit, sales revenue should be atBreakeven revenue=FC/ c/s ratio Sales volume for target profit= FC+ target profit/CPU利润率指标（不变）C/S ratio= contribution/ sales = CPU/ priceWeighted average sales price per unit=price*volume/volumeMargin of safetyMOS=budgeted sales- BEP -in sales MOS=budgeted units-breakeven units-in unitsMOS/budgeted sales （百分比形式）Limitations of CVP analysis1. It is assumed that fixed costs are the same in total and variable costs are the same per unit at all levels of output.2. It is assumed that sales prices will be constant at all levels of activity.3. Production and sales are assumed to be the same.4. Uncertainty in the estimates of fixed costs and unit variable costs is often ignored.Advantages1.Highlighting the breakeven point and the margin of safety gives managers some indication of the level of risk involved.2. Graphical representation of cost and revenue data (breakeven charts) can be more easily understood by non-financial managers.3. A breakeven model enables profit or loss at any level of activity within the range for which the model is valid to be determined, and the C/S ratio can indicate the relative profitability of different products.Risk&uncertaintyRisk involves events which may or may not occur, but whose probability of occurrence can be estimated statistically.Risk preferenceA risk seeker is a decision-maker who is interested in the best outcomes, no matter how small the chance that they may occur. -optimistA risk averse is a decision-maker acts on the assumption that the worst outcome might occur and will make a decision to minimize the risk. -pessimistA risk neutral is a decision-maker who will make a decision that balance risk and return, and consider the most likely outcome.Expected value-support a risk neutral attitudeEV=possible outcome *probabilitiesLimitations of expected values;1. The expected value of a decision may be a value that will never occur.2. EV is an average value, it ignores the extreme outcomes.3.It ignores the aspect of probability distribution.Sensitivity analysisSensitivity analysis is used to testify the critical value to make the decision invalid. Sensitivity analysis can help to concentrate management attention on the most important factors.If xxx costs are more than x% above estimate, the project would make a loss.X%=profit/xx costMonte carlo simulationSimulation models can be used to deal with decision problems when there are a large number of uncertain variables in the situation. Random numbers are used to assign values to the variables.Part C Budgeting and controlA budget is a quantified plan of action for a forthcoming accounting period.Objectives of a budgetary planning and control system:1.Ensure the achievement of the organisations objectives2.Compel planning3.Communicate ideas and plans4.Co-ordinate activities5.Provide a framework of responsibility accounting.6.Establish a system of control7.Motivate employees to improve their performanceThe planning and control cycle has seven steps.Step 1. Identify objectivesStep 2. Identify potential strategiesStep 3. Evaluate strategiesStep 4. Choose alternative courses of actionStep 5. Implement the long-term planStep 6. Measure actual results and compare with the planStep 7. Respond to divergences from the planFeedbackFeedback is information produced as output from operations; it is used to compare actual results with planned results for control purposes.Budgeting and performance managementA fixed budget is a budget which remains unchanged throughout the budget period, regardless of differences between the actual and the original planned volume of output or sales. -planning purpose & prepared in advanceA flexible budget is a budget which, by recognising different cost behaviour patterns, is changed as the volume of output and sales changes. -control purpose & prepared retrospectivelyTop-down (Imposed budgeting)Budget prepared by senior manager and being posted to individual managers. No participation of junior manager.Bottom-up (Participative budgeting)Budget prepared by lower management and submit to high level for approvalRolling budgets (continuous budgets) are budgets which are continuously updated throughout a financial year, by adding a further period (say a month or a quarter) and removing the corresponding period that has just ended.Aim: Rolling budgets may be used when the pace of change in the business environment is fast and continual. They represent an attempt to prepare realistic plans and keep tight control.Incremental budgeting is a method of budgeting in which next years budget is prepared by using the current years actual results as a starting point, and making adjustments for known changes.Zero based budgeting involves preparing a budget for each cost centre or activity from a zero base. Every item of expenditure has then to be justified in its entirety in order to be included in the next years budget.- administrative expenses and departments,The aim of zero based budgeting is to remove unnecessary and wasteful spending from the budget.ZBB is particularly useful for budgeting for discretionary costs and for rationalisation purposes, in areas of operations where efficiency standards are not properly established, such as administration work.ZBB recognition: 1.The current years results may include wasteful spending and inefficiencies.2.Budgeted activities should be reviewed and assessed to establish whether they are still required or whether they should continue at the same level of activity as in the past.3 steps approach to ZBBl Define decision package(items or activities) for which costs should be budgeted, and spending decisions should be planned:l Evaluate and rank the packages in order of priority: eliminate packages whose costs exceed their value.l Allocate resources to the decision packages according to their ranking.Beyond Budgeting is a budgeting model which proposes that traditional budgeting should be abandoned. Adaptive management processes should be used rather than fixed annual budgets.Variance analysisA mix variance occurs when the materials are not mixed or blended in standard proportions and it is a measure of whether the actual mix is cheaper or more expensive than the standard mix.A yield variance arises because there is a difference between what the input should have been for the output achieved and the actual input.The sales mix variance occurs when the proportions of the various products sold are different from those in the budget.The sales quantity variance shows the difference in contribution/profit because of a change in sales volume from the budgeted volume of sales.The principle of controllability is that managers of responsibility centres should only be held accountable for costs over which they have some influence.Part D Performance managementPerformance measurement is a vital part of the planning and control process.Non-financial measures may relate to a number of different aspects of performance, such as:l Product or service qualityl Reliabilityl Speed of performancel Riskl Flexibilityl Customer satisfactionl Innovationl Capabilityl DeliveryFPIs analyse return on capital, profitability, liquidity and financial risk, often in relation to a plan or budget, or in relation to performance in preceding time periods.Balance scorecardThe balanced scorecard is a strategic management technique for communicating and evaluating the achievement of the strategy and mission of an organisation. It comprises an integrated framework of financial and non-financial performance measures that aim to clarify, communicate and manage strategy implementation. It translates an organisations strategy into objectives and performance measurements for the following four perspectives:Financial perspective: this perspective considers how the organisation appears to shareholders. How can it create value for its shareholders? Kaplan and Norton, who developed the balanced scorecard, identified three core financial themes that will drive the business strategy: revenue growth and mix, cost reduction and asset utilisation.Customer perspective: this considers how the organisation appears to customers. The customer perspective should identify the customer and market segments in which