Professional Documents
Culture Documents
Study Notes
Study Notes
ACCA
Performance Instructor
Management Rizwan Maniya
Email - [email protected] Instructor - Rizwan Maniya WhatsApp Number +923212436266
Performance Management
About My Self
1. Teaching ACCA from last 14 years
2. Subject's specialist if ACCA PM, FM & APM
3. Currently teaching physically at KnS School of Business Studies
4. Have produced various Global and Nationwide position holder in PM, FM, APM
Paper Introduction
Advance of Paper MA
Transition for F2
1. Expectation
2. Question types
3. Exam timing
Email - [email protected] Instructor - Rizwan Maniya Whatsapp -923212436266
Performance Management
The two 20-mark questions will come from decision making techniques, budgeting and control and/or
performance measurement and control areas of the syllabus. These questions may also include requirements
related to the information systems area of the syllabus.
Email - [email protected] Instructor - Rizwan Maniya WhatsApp Number +923212436266
Performance Management
• Please take care with Fill in the Blank questions which have rounding instructions as
you want to ensure that the answer you input meets those rules.
• Read the question carefully and if it is a narrative OT read all the distractors
carefully. Ensure you follow the instructions in the question on how to answer the
question as different question types will require different interactions.
• Please take care with Fill in the Blank questions which have rounding instructions as you
want to ensure that the answer you input meets those rules.
• Complete in 18 Minutes
• The verbs used in the requirements not only indicate what to do, but often how
much detail to go in to (State & Explain)
• Complete in 36 Minutes
• Perform calculations that are carefully structured and clearly set out, with all workings shown in
an easy-to-follow layout.
• Write accurately and coherently, using simple English rather than long, rambling sentences
which have no structure and no real content
Budgets types
Budgets types
Incremental
Budget
Budgets start from previous period budget or actual results
Budgets types
Zero based
budget
The budgeting process starts from scratch which requires justification relating to every activity
Useful - Discretionary cost & Public sector organization
Steps
Decision package states the purpose of the activity
Evaluate and rank each package
On the basis of ranking allocate the resources.
Advantages Disadvantages
1. Efficient allocation of resources as it remove wasteful 1. Time consuming and costly budget
spending and uneconomic activities 2. Ranking activities may be difficult when the activity
2. Staff involvement increases benefits are of qualitative nature
3. Managers consider alternatives 3. Decision packages requires skills which manager need
to have to prepare decision packages
Budgets types
Rolling Budgets
Budgets which is regularly updated by adding a further period once the previous period has expired
Useful – Dynamic
conditions
Advantages Disadvantages
1. Reduces uncertainty 1. Time consuming and costly activity
2. More realistic budgets are prepared 2. Provides less opportunity to control actual
3. Control will be based on recent plan results due to frequent budgeting
Budgets types
Activity based
Budgets
Budgeting approach in which budgets are made for each overhead activity
Advantages Disadvantages
1. The budgets focuses on activities 1. This budgeting approach is costly and time
2. Its provides opportunity to control consuming as budgets will be prepared for
overhead cost by controlling the activity each over head activity
level
Learning Curves
Define
• First time the production time will be highest
• Repetition of job will reduces the time
• Learning process will stop eventually
Calculations
Double approach Previous average x LR
Log approach y= ax^b
Limitations
• Labour intensive environment
• Stable conditions
• Work is repetitive and labour turnover is low
Budgets affected
Labour Budget Overhead Budget Production Budget
Material Usage Budget Material Purchase Budget Cash Budget
Email - [email protected] Instructor - Rizwan Maniya WhatsApp Number +923212436266
Performance Management
Spread sheets
Define
• Used to build models in which data is presented by rows and columns
• These spread sheets are used for analyzing and manipulating the data
Advantages Disadvantages
Simplify and saves time Error can be done
Corrupt a model
Email - [email protected] Instructor - Rizwan Maniya WhatsApp Number +923212436266
Performance Management
Formula
Material Mix Variance
Actual Input in Actual Input Quantity Std Rate Cost
Standard Mix in Actual Mix Variance per input Variances
material
Formula
Sales Mix Variance
Actual Sales in Actual Units Std Con/ Con/ Profit
Actual Mix Sales in Std Variance Profit per Variances
Mix unit
Quantity Variance
Actual Sales in Std Sales in Units Std Con/ Con/ Profit
Std Mix Std mix Variance Profit per Variances
unit
Additional contribution earned if one extra unit of scarce resource becomes available
Shadow price at its original cost.
Slack
16/08/2021
Amount by which the resources is under-utilized
Target profit
GRAPHS
Multi Product Break even
1. Sales revenue line
2. Fixed cost line
3. Total cost line
Price skimming: Charging high prices at initial Price penetration: Charging low prices at the
phase of the product life cycle. initial phase of the product life cycle.
Conditions Conditions
a. Product life cycle is short a. Target is of higher market share
b. Inelastic demand b. Elastic demand
c. Production is limited at early stage c. Discourage competition
d. When there are barriers for competitors d. Quickly want to move to growth & maturity
stages
Email - [email protected] Instructor - Rizwan Maniya WhatsApp Number +923212436266
Performance Management
Relevant IRRelevant
Incremental cost / Income Sunk Cost
Notional costs
Re-apportionment of
existing fixed costs
Decision makers Risk seeker, Risk Averse, Risk neutral, Sore loser
Techniques
Expected value Long term average
Decision Rule
Maxi max Maxi min Mini max regret rule
Maximum from maximum Maximum from minimum Minimum from maximum regrets
Critical Success Factors are strongly related to the mission and strategic goals of your business
or project. Critical Success Factors focus on the most important areas and get to the very heart
of both what is to be achieved and how you will achieve it.
Strike a balance
Performance measurement
Financial Ratios
Note
Critical Success Factors – Key areas of the business
Key Performance Indicators – Measure CSF achievement
Performance measurement
Profitability Ratios
Performance measurement
Liquidity Ratios
Performance measurement
Risk related
ratios
Operational gearing
Fixed cost
Total cost
Performance measurement
Non financial indicators
Performance measurement
Non financial indicators
It represents the revenue per unit from the supplying division and cost per unit for
receiving division.
Objectives of transfer pricing system
Goal Performance
Autonomy
congruence measurement
Types of transfer pricing
Return on Residual
investment Common problems income
Formula
Advantages Disadvantages
Relative measure Correlation
Easily understood Dysfunctional
behavior
No need for COC
Email - [email protected] Instructor - Rizwan Maniya WhatsApp Number +923212436266
Performance Management
Formula
Advantages Disadvantages
Correlation No comparing
Dysfunctional
Does not relate
behavior
Steps
Ways to close
Steps
Market price • Cheaper material
Desired profit
Maket Price - Desired Profit
• Reduce material losses
Target cost
Current cost
• Cheaper labour
Cost gap Current cost – Target cost • Labour training
• Reduce overhead by ABC
• Move to machine intensive
Difficult in services
Advantages • Economies of scale
industry
• Price • Value analysis
Characteristics Qualitative
• Working method Information
Simultaneity
• Customer Heterogeneity
requirement Intangible
• Cost reduction Perishability
Stages Advantages
Development
Introduction Pricing decision
Growth Eight to ninety
Maturity Right decision
Decline Target cost
Short life cycle