ACCA APPROVED In addition to ACCA examining team reviewed material you get: • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book Study Text Paper F5 Performance Management This ACCA Study Text for Paper F5 Performance Management has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage Performance Management BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA F5 ACCA approved content provider A-PDF Text Replace DEMO: Purchase from www.A-PDF.com to remove the watermark CONTENT PROVIDER ACCA Approved Study Text BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia February 2016 £32.00 For exams in September 2016, December 2016, March 2017 and June 2017 Contact us Paper F5 Performance Management Valid for both paper and computer based exams For exams in September 2016, December 2016, March 2017 and June 2017 http://accountingpdf.com/ ACF5ST16 (RICOH).indd 1-3 05/02/2016 16:03 ACCA APPROVED CONTENT PROVIDER As the first accredited publisher of ACCA materials, BPP Learning Media has set the benchmark for producing exceptional study materials for students and tutors alike Our Study Texts, Practice & Revision Kits and i-Passes (for exams on demand) are reviewed by the ACCA examining team and are written by our in-house authors with industry and teaching experience who understand what is required for exam success EXAM SUCCESS SITE To help maximise your chances of succeeding in your exams, we’ve put together a suite of exclusive ACCA resources Our Exam Success site provides you with access to a free digital version of this publication, as well as extra resources designed to focus your efforts on exams and study methods To access the Exam Success site, please email learningmedia@bpp.com with the subject line “Access to Exam Success site - eBook”, including your order reference number and the name of the book you’ve bought (ie ACCA F5 Study Text) for your access code Once you have received your code, please follow the instructions below: To access the BPP ACCA Exam Success site for this material please go to: www.bpp.com/ExamSuccessSite n Create a user account if you don’t already have one Make sure you reply to the confirmation email n Log in using your registered username and password Select the paper you wish to access n Enter the code you received when prompted You will only have to this once for each paper you are studying http://accountingpdf.com/ S T U D Y PAPER F5 PERFORMANCE MANAGEMENT BPP Learning Media is an ACCA Approved Content Provider This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam In this Study Text which has been reviewed by the ACCA examination team we: Highlight the most important elements in the syllabus and the key skills you will need Signpost how each chapter links to the syllabus and the Study Guide Provide lots of exam focus points demonstrating what is expected of you in the exam Emphasise key points in regular fast forward summaries Test your knowledge in quick quizzes Examine your understanding in our practice question bank Reference all the important topics in our full index BPP's Practice & Revision Kit also supports this paper FOR EXAMS IN SEPTEMBER 2016, DECEMBER 2016, MARCH 2017 AND JUNE 2017 http://accountingpdf.com/ T E X T First edition 2007 Ninth edition February 2016 A note about copyright Dear Customer ISBN 9781 4727 4422 (Previous ISBN 9781 4727 2675 9) What does the little © mean and why does it matter? Your market-leading BPP books, course materials and e-learning materials not write and update themselves People write them on their own behalf or as employees of an organisation that invests in this activity Copyright law protects their livelihoods It does so by creating rights over the use of the content e-ISBN 9781 4727 4664 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Breach of copyright is a form of theft – as well as being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media: Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia Photocopying our materials is a breach of copyright Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to facebook or emailing them to your friends is a breach of copyright You can, of course, sell your books, in the form in which you have bought them – once you have finished with them (Is this fair to your fellow students? 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Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated © BPP Learning Media Ltd 2016 ii Introduction http://accountingpdf.com/ Contents Page Introduction Helping you to pass Studying F5 The exam paper and exam formulae Syllabus and Study Guide v vii viii ix Part A Specialist cost and management accounting techniques 2a 2b 2c 2d 2e Costing Activity based costing Target costing Life cycle costing Throughput accounting Environmental accounting 19 31 39 49 65 Part B Decision-making techniques Cost volume profit (CVP) analysis Limiting factor analysis Pricing decisions Short-term decisions Risk and uncertainty 77 101 127 163 183 Part C Budgeting and control 10 11 12 13 Budgetary systems Quantitative analysis in budgeting Budgeting and standard costing Variance analysis Planning and operational variances Performance analysis and behavioural aspects 217 247 267 287 311 327 Part D Performance measurement and control 14 15 16 17 18 Performance management information systems Sources of management information and management reports Performance measurement in private sector organisations Divisional performance and transfer pricing Further aspects of performance management Practice question bank Practice answer bank Index 345 363 381 411 433 449 479 533 Review form Contents http://accountingpdf.com/ iii iv Introduction http://accountingpdf.com/ Helping you to pass BPP Learning Media – ACCA Approved Content Provider As an ACCA Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team's comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the 'PER alert' feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your online My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the Study Text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success Developing exam awareness Our Study Texts are completely focused on helping you pass your exam Our advice on Studying F5 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future Using the Syllabus and Study Guide You can find the syllabus and Study Guide on pages ix - xvii of this Study Text Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions – lots of them – both within chapters and in the Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction http://accountingpdf.com/ v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points When and how specific topics were examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) vi Question Gives you essential practice of techniques covered in the chapter Case Study Real world examples of theories and techniques Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Practice Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Introduction http://accountingpdf.com/ Studying F5 The F5 exam requires candidates to be able to apply management accounting techniques in business environments The key question you need to be able to answer is 'what does it all actually mean?' Modern technology is capable of producing vast amounts of management accounting information but it has to be used to help managers make good decisions and manage effectively The emphasis in this paper is therefore on practical elements and application to the real world The exam does not set out to trick you: the paper will be fair What F5 is about The aim of this syllabus is to develop knowledge and skills in the application of management accounting techniques It covers a number of specialist techniques, decision-making, budgeting and standard costing, concluding with how business performance should be managed and controlled F5 is the middle paper in the management accounting section of the qualification structure F2 concerns just techniques and P5 thinks strategically and considers environmental factors F5 requires you to be able to apply techniques and think about their impact on the organisation What skills are required? You are expected to have a core of management accounting knowledge from Paper F2 To deal with the multiple choice questions, you will need to demonstrate understanding of the subject across the entire syllabus For the longer questions, you will be required to carry out calculations, with clear workings and a logical structure You will be required to interpret data You will be required to explain management accounting techniques and discuss whether they are appropriate for a particular organisation You must be able to apply your skills in a practical context How to improve your chances of passing There is no choice in this paper; all questions have to be answered You must therefore study the entire syllabus, there are no short-cuts You should then practise extensively on examination-style questions Practice will improve your ability to answer questions well, and should enable you to answer them more quickly BPP's Practice & Revision Kit contains questions on all areas of the syllabus Keep an eye out for articles, as the examination team will use Student Accountant to communicate with students Read journals etc to pick up on ways in which real organisations apply management accounting and think about your own organisation if that is relevant Brought forward knowledge You will need a good working knowledge of basic management accounting from Paper F2 Chapter of this Study Text revises elements of costing, and further revision material is provided in other chapters, such as those on CVP analysis and variance analysis If you struggle with the examples and questions used to revise this knowledge, you should go back and revisit your previous work The examination team will assume you know this material and it may form part of an exam question Introduction http://accountingpdf.com/ vii The exam paper and exam formulae Format of the paper From September 2016, the exam will be three hours and 15 minutes in duration The exam paper is divided into three sections Section A consists of 15 multiple choice questions of two marks each Section B consists of 15 mini scenario based multiple choice questions of two marks each Section C consists of two questions of 20 marks each All questions are compulsory The exam will cover as much of the syllabus as possible Syllabus area A will only be examined in Sections A and B of the exam Computer Based Examination ACCA have announced that they intend to commence the launch of computer based exams (CBEs) for F5– F9 towards the end of 2016 At the time of going to print the exact details had not been confirmed Paper based examinations will be run in parallel while the CBEs are phased in and BPP materials have been designed to support you, whichever exam option you choose Exam formulae Set out below are the formulae you will be given in the exam If you are not sure what the symbols mean, or how the formulae are used, you should refer to the appropriate chapter in this Study Text Chapter in Study Text Demand curve P = a – bQ b = a = price when Q = change in price change in quantity MR = a – 2bQ Learning curve Y = axb Where viii Y a x b LR = cumulative average time per unit to produce x units = the time taken for the first unit of output = the cumulative number of units = the index of learning (log LR/log 2) = the learning rate as a decimal Introduction http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Notes http://accountingpdf.com/ Review Form – Paper F5 Performance Management (02/16) Please help us to ensure that the ACCA learning materials we produce remain as accurate and user-friendly as possible We cannot promise to answer every submission we receive, but we promise that it will be read and taken into account when we update this Study Text Name: Address: How have you used this Text? 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Yes No On the reverse of this page is space for you to write your comments about our Study Text We welcome your feedback The author of this edition can be emailed at: accaqueries@bpp.com Please return this form to: Head of ACCA & FIA programmes, BPP Learning Media Ltd, FREEPOST, London, W12 8AA http://accountingpdf.com/ TELL US WHAT YOU THINK Please note any further comments and suggestions/errors below For example, was the text accurate, readable, concise, user-friendly and comprehensive? http://accountingpdf.com/ ... http://accountingpdf.com/ S T U D Y PAPER F5 PERFORMANCE MANAGEMENT BPP Learning Media is an ACCA Approved Content Provider This means we work closely with ACCA to ensure this Study Text contains... to pass BPP Learning Media – ACCA Approved Content Provider As an ACCA Approved Content Provider, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination... but, basically, without the express permission of BPP Learning Media: Published by BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www .bpp. com/learningmedia Photocopying our materials