BPP ACCA F22FFMA management accounting 2017

Foundations in Accountancy FMA /ACCA F2 k p s k ACCA approved content provider k k p p s s BPP Learning Media is dedicated to supporting aspiring business professionals k k o o o o with top-quality learning material b as they study for demanding professionaleeb e e r exams, often whilst F working full time BPP Learning Media’s commitment Fr 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 • Chapter activities to test your understanding of the topics covered • Key terms extracted from the text and highlighted in ‘key term’ boxes • Exam focus points highlighting ways in which topics might be examined • A question and answer bank prepared by BPP Learning Media authors • Icons to highlight activities, key terms, PER alerts and quick quizzes • Regular fast forward summaries emphasising the key points in each chapter k p s ook b e e r F Contact us o b e re F k p s ok o b e Fre k p s ok o b e e Fr Feburary 2016 £25.00 k p s k FI33ST16 (RICOH).indd 1-3 eb e r F k p s ook For exams from September 2016 to 31 August 2017 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 k p s ok Interactive Text k p s k In addition to ACCA examining team reviewed material you get: Management Accounting k p s k Foundations in Accountancy FMA / ACCA Paper F2 Management Accounting This Interactive Text for Foundations in Accountancy FMA Management Accounting and ACCA Paper F2 Management Accounting has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage bo e e Fr k p s ok ACCA APPROVED CONTENT PROVIDER k p s ok o b e re F k p s ook b e e r F ACCA Approved Interactive Text k p s Foundations in Accountancy FMA / k o o ACCA e Paper eb F2 r F Management Accounting k p s ook eb e r F k p s ok o b e Fre Free access to our Exam Success siteks.pk o o b e inside eLook Fr For exams from September 2016 to 31 August 2017 b e Fre k p s ook k p s ook b e Fre 02/02/2016 10:40 ACCA APPROVED CONTENT PROVIDER pk ks o o eb o b e re k p s ok re F F 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 k p s ok k p s ook 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: o b e re F b e Fre 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 k p s ok k p s k o o eb Select the paper you wish to access o eb e r F n Enter the code you received when prompted You will only have to this once for each paper you are studying eb e r F k p s ook Fre e e r F b k p s ook k p s k o o eb Foundations in Fre Accountancy FMA ACCA k p s ook o b e re k p s ok I N T E R A C T.pk s kI o o eb e r F V E F eb F2 Paper e r F Management Accounting T E X T BPP Learning Media is an ACCA Approved Content Provider for the Foundations in Accountancy qualification This means we work closely with ACCA to ensure this Interactive Text contains the information you need to pass your exam In this Interactive Text, which has been reviewed by the ACCA examination team we:    k p s ok k p s ok Highlight the most important elements in the syllabus and the key skills you will need F o b e re Signpost how each chapter links to the syllabus and the study guide o b e re F Provide lots of exam focus points demonstrating what the examination will want you to  Emphasise key points in regular fast forward summaries  Test your knowledge of what you've studied 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 k p s ok1 SEPTEMBER 2016 FOR EXAMS FROM o b e TO 31re F AUGUST 2017 k p s ok F o b e re F2/FMA MANAGEMENT ACCOUNTING Fre k p s k o o eb First edition March 2011 Fifth edition January 2016 ISBN 9781 4727 4591 (Previous ISBN 9781 4727 3526 3) e-ISBN 9781 4727 4632 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd BPP House, Aldine Place 142-144 Uxbridge Road London W12 8AA k p s ook b www.bpp.com/learningmedia e Fre Printed in the United Kingdom by Ricoh UK Limited Unit Wells Place Merstham RH1 3LG 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 o b e re k p s ok 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 F o b e re k p s ok F A note about copyright Dear Customer What does the little © mean and why does it matter? Your market-leading BPP books, course materials and elearning 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 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 k p s ook With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media: b e Fre  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? We update for a reason.) Please note the e-products are sold on a single user licence basis: we not supply 'unlock' codes to people who have bought them secondhand And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? k p s ok o b e re F © BPP Learning Media Ltd 2016 ii F o b e re k p s ok k p s ok F o b e re CONTENTS k p s k o o Contents eb e r F o b e re k p s ok F Page Introduction Helping you to pass v Chapter features vi Studying F2/FMA vii The Computer Based Examination xviii Tackling Multiple Choice Questions xix Part A The nature, source and purpose of management information Accounting for management Sources of data 19 Cost classification 37 Cost behaviour 55 Presenting information 75 k p s ook k p s ook Part B Cost accounting techniques 10 11 12 13 Accounting for materials 99 Accounting for labour 133 Accounting for overheads 155 Absorption and marginal costing 185 Job, batch and service costing 199 Process costing 221 Process costing, joint products and by-products 251 Alternative costing principles 265 b ree F b e Fre Part C Budgeting 14 15 16 17 18 19 Forecasting 285 Budgeting 331 The budgetary process 359 Making budgets work 393 Capital expenditure budgeting 409 Methods of project appraisal 417 Part D Standard costing 20 21 22 Standard costing 445 Cost variances 455 Sales variances and operating statements 481 o b e re k p s ok Part E Performance measurement F 23 24 k p s ok o b e re F Performance measurement 501 Applications of performance measurement 545 Practice question bank 573 Practice answer bank 599 Appendix: Mathematical tables 625 Index 631 Review form F o b e re k p s ok k p s ok F o b e re iii F2/FMA MANAGEMENT ACCOUNTING Fre k p s k o o eb k p s ook b e Fre o b e re iv F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re INTRODUCTION k p s k o o eb Helping you to pass o b e re re Learning Media – Approved Content Provider FBPP F k p s ok As ACCA's 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 Interactive Text provides excellent, ACCA-approved support for your studies The PER alert! To become a Certified Accounting Technician or qualify as an ACCA member, you not only have to pass all your exams but also fulfil a 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 Interactive Text to remind you that what you are learning in order to pass your Foundations in Accountancy and ACCA exams is equally useful to the fulfilment of the PER requirement k p s Tackling studying k o o eb e r F k p s ook b e Fre Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the Interactive Text, the purposes of which are explained fully on the Chapter features page, will help you while studying and improve your chances of exam success Developing exam awareness Our Interactive Texts are completely focused on helping you pass your exam Our advice on Studying F2/FMA outlines the content of the paper and the recommended approach to studying 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 might be examined Using the Syllabus and Study Guide You can find the Syllabus and Study Guide on pages ix – xvii of this Interactive Text k p s Testing whatkyou can oo b e Fre k p s ok o b e re Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt F 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 F o b e re k p s ok k p s ok F o b e re v F2/FMA MANAGEMENT ACCOUNTING k p s k o o eb Chapter features Fre o b e re k p s ok Each chapter contains a number of helpful features to guide you through each topic Topic list Tells you what you will be studying in this chapter and the relevant section numbers, together with the 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 Fast Forward k p s ook EXAMPLE b e Fre o b e re Summarises the content of main chapter headings, allowing you to preview and review each section easily k p s ook Demonstrates how to apply key knowledge and techniques b e Fre Key Term Definitions of important concepts that can often earn you easy marks in exams Exam Focus Point Tells you how specific topics may be examined Formula Formulae which have to be learnt PER Alert This feature gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) Question Gives you essential practice of techniques covered in the chapter k p s ok k p s ok o b e re 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 Interactive Text with more examstyle chapter questions Cross referenced for easy navigation F vi F F o b e re F k p s ok k p s ok F o b e re INTRODUCTION k p s k o o eb Studying F2/FMA re to use this Interactive Text FHow o b e re k p s ok F Aim of this Interactive Text To provide the knowledge and practice to help you succeed in the examination for Paper F2/FMA Management Accounting To pass the examination you need a thorough understanding in all areas covered by the syllabus and teaching guide Recommended approach (a) k p s ook b ree (b) F k p s ook To pass you need to be able to answer questions on everything specified by the syllabus and teaching guide Read the Text very carefully and not skip any of it b Learning is an active process Do all the questions as you work through the Text so you can be sure you really understand what you have read e Fre (c) After you have covered the material in the Interactive Text, work through the Practice Question Bank, checking your answers carefully against the Practice Answer Bank (d) Before you take the exam, check that you still remember the material using the following quick revision plan (i) Read through the chapter topic list at the beginning of each chapter Are there any gaps in your knowledge? If so, study the section again (ii) Read and learn the key terms (iii) Look at the exam focus points These show the ways in which topics might be examined (iv) Read the chapter roundups, which are a summary of the fast forwards in each chapter (v) Do the quick quizzes again If you know what you're doing, they shouldn't take long k p s ok k p s ok This approach is only a suggestion You or your college may well adapt it to suit your needs Remember this is a practical course o b e re (a) F (b) o b e re Try to relate the material to your experience in the workplace or any other work experience you may have had F Try to make as many links as you can to other papers at the Introductory and Intermediate levels For practice and revision use BPP Learning Media's Practice & Revision Kit, iPass and Passcards F o b e re k p s ok k p s ok F o b e re vii F2/FMA MANAGEMENT ACCOUNTING k p s k is about o What F2/FMA o eb e r F o b e re k p s ok F The aim of this syllabus is to develop a knowledge and understanding of the principles and techniques used in recording, analysing and reporting costs and revenues for internal management purposes It covers management information, cost recording, costing techniques, budgeting and performance measurement Approach to examining the syllabus Paper F2/FMA is a two-hour paper It can be taken as a written paper or a computer based examination The computer based examination contains 35 objective test questions – multiple choice, number entry and multiple response and longer style multi-task questions (See page xvi for frequently asked questions about computer based examinations.) The written examination is structured as follows Number of marks Section A 35 compulsory multiple choice questions of two marks each Section B compulsory multi-task questions of ten marks each, one from each of syllabus areas C, D and E o o b ee k p s k Fr k p s ook 70 b ree 30 100 F The balance of questions in Section A reflects the weightings in Section B, so as to preserve the overall balance of the paper The June 2015 examiner's report (found on the ACCA website) advised students to:  Study the whole syllabus, because the paper will cover the full syllabus  Practise as many questions as possible  Read questions very carefully in the examination  Try to attempt the 'easy' examination questions first  Not to spend too much time on apparently 'difficult' questions  Attempt all questions in the examination (there are no negative marks for incorrect answers)  Read previous Examiner's Reports  For paper exams, present Section B answers as tidily as possible  Read Student Accountant o b e re k p s ok F viii F o b e re k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re NOTES Fre k p s k o o eb k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re F2/FMA MANAGEMENT ACCOUNTING (01/16) pk Review form ks o o b ree Name: F F During the past six months you recall seeing/receiving any of the following? (Tick as many boxes as are relevant) How have you used this Interactive Text? (Tick one box only) Distance learning (book only) Our advertisement in ACCA Student Accountant On a course: college As a tutor Our advertisement in Teach Accounting With 'correspondence' package Other advertisement Other Why did you decide to purchase this Interactive Text? (Tick one box only) k p s ook Have used BPP Texts in the past Our brochure ACCA email Recommendation by a lecturer at college Saw advertising Other k p s ook BPP email Our website www.bpp.com eeb Recommendation by friend/colleague Fr o b e re Address: k p s ok b e Fre Which (if any) aspects of our advertising you find useful? (Tick as many boxes as are relevant) Prices and publication dates of new editions Which BPP products have you used? Text Kit i-Pass Information on Interactive Text content Passcards Facility to order books off-the-page None of the above Your ratings, comments and suggestions would be appreciated on the following areas Very useful Useful Not useful Introductory section (How to use this Interactive Text) Key terms Examples k p s ok k p s ok Questions and answers Fast forwards o b e re Quick quizzes o b e re F F Exam alerts Practice Question Bank Practice Answer Bank Index Structure and presentation Icons Excellent Good Adequate Poor Overall opinion of this Interactive Text Do you intend to continue using BPP products? Yes No Please note any further comments and suggestions/errors on the reverse of this page The author of this edition can be emailed at accaqueries@bpp.com Please return this form to: Head of ACCA & Foundations in Accountancy Programmes, BPP Learning Media, FREEPOST, London, W12 8AA F o b e re k p s ok k p s ok F o b e re F2/FMA MANAGEMENT ACCOUNTING pk Review form ks(continued) o o b ree Please note any further comments and suggestions/errors below F k p s ook b e Fre o b e re F F k p s ook b e Fre k p s ok F o b e re o b e re k p s ok k p s ok o b e re F k p s ok k p s ok F o b e re ... accounts b e Fre Cost accounting and management accounting are terms which are often used interchangeably It is not correct to so Cost accounting is part of management accounting Cost accounting provides... an introduction to Management Accounting We look at data and information and introduce you to cost accounting and the differences between financial accounting and management accounting We also... interchangeably It is not correct to so Cost accounting is part of management accounting Cost accounting provides a bank of data for the management accountant to use  Cost accounting information is, in general,