CA2.2 – Management Accounting

CA2.2-Management Accounting

On completion of this module, candidates will reach a competency sufficient to be able to:

• Apply costing techniques
• Explain management information and reporting requirements for both public and private sector organisations
• Apply techniques to support decision making
• Apply managerial budgetary control systems
• Determine prices for products and services using cost and other information and advise on product pricing

Syllabus topics	Weighting (%)	LO
Management information and reporting	20	1 and 2
Costing techniques	20	3 and 4
Decision making	20	5, 6 and 7
Budgeting	20	8, 9 and 10
Product and service pricing and budgetary control	20	11–15

Learning outcomes

• LO1: Explain the scope of management accounting for private and public sector organisations
• LO2: Identify the general framework of information that management accounting will use to support decision making
• LO3: Explain cost classification and cost behaviour
• LO4: Select and apply appropriate costing methods
• LO5: Select, apply and evaluate measures to optimise decisions over a range of organisational problems
• LO6: Address how organisations can incorporate risk and uncertainty into decision making
• LO7: Identify the role of non-financial issues in decision making
• LO8: Explain how budgeting frameworks match performance objectives
• LO9: Describe the budget creation process and explain some of the difficulties that may be encountered in this task
• LO10: Evaluate the different types of budgets that may be employed in organisations
• LO11: Calculate product and service prices using a range of costing methods
• LO12: Prepare and present performance management reports
• LO13: Apply flexed budgeting techniques
• LO14: Demonstrate budgetary control using variance reports and advise management on the outcomes of variance analysis
• LO15: Advise management upon suitable pricing strategies Management

1. Management information and reporting: LO1, 2
   1. Explain the differences in approach to management accounting between profit, non-profit, government and government-related bodies
   2. Explain the role of management accounting to meet the needs of wider stakeholders, particularly in relation to sustainability
   3. Identify costs and their classification, explaining the differences between variable and fixed costs
   4. Outline the nature of budgeting and responsibility accounting
   5. Describe the problem of overheads and outline allocation methods
   6. Explain the problem of public service provision where costs are hard to measure, where cost behaviour is not always exact, and where operational or non-financial factors are often priorities
2. Costing: LO3, 4
   1. Explain cost classification, paying attention to cost objects, cost accumulation, and manufacturing cost elements
   2. Explain the different types of cost behaviour
   3. Explain and apply different costing methods including job and batch costing, contract costing, service costing, and process costing
   4. Apply costing methods to problems using materials and labour data, paying attention to inventory valuation methods, inventory control techniques, and remuneration and incentive schemes
3. Decision making: LO5, 6, 7
   1. Calculate cost volume profit analyses and break even analyses based on a given business and given data and information using both numerical and graphical techniques evaluating the results and advising on management action including single and multiple product decisions
   2. Select relevant cost bases based on given data and information, evaluating the results and advising on management action
   3. Explain how non-financial issues inform decision making
   4. Select relevant limiting factors for a scarce resource or resources in a given business scenario applying a relevant technique given business objectives including make or buy decisions
4. Budgeting: LO8, 9, 10
   1. Explain the appropriateness of the budgeting frameworks that might be employed in organisations to suit performance objectives
   2. Explain the budget creation process and the importance of forecasting,
   3. Explain the information needs to support budgets and the limitations of budgets in the face of difficult-to-measure and non-quantifiable factors
   4. Identify the behavioural implications of budgeting and budgetary control
   5. Specify the types of budgets that might be employed in organisations, including:
      1. Fixed and flexed
      2. Zero based
      3. Activity based
      4. Rolling budgets
      5. Functional
      6. Master
5. Product, service pricing and budgetary control: LO11, 12, 13, 14, 15
   1. Calculate the optimum selling price for a product or service using given data and information for a given business and advising management, using:
      1. Absorption costing
      2. Marginal costing
      3. Activity based costing
      4. Standard costing
   2. Apply flexed budgeting techniques to a given scenario
   3. Calculate, using given information, and advise management on the implications of and actions required based on variances, including:
      1. Sales, price and volume variances
      2. Materials use and price variances
      3. Variable overhead expenditure and efficiency variances
      4. Fixed overhead volume, capacity and efficiency variances
      5. Material mix and yield variances
      6. Sales mix and quantity variances
      7. Planning and operational variances
   4. Calculate performance management reports that reconcile actual and budgeted results
   5. Advise management upon suitable pricing strategies for a given business based on a given business scenario and given business objectives, including:
      1. Cost plus pricing
      2. Marginal cost pricing
      3. Target pricing
      4. Life cycle pricing
      5. Backflush accounting