B5: PERFORMANCE MANAGEMENT SYLLABUS

Part .1 Cost Accounting Techniques

Part.2 Decisions-Making Techniques
Part.3 Budgetary Planning and Control
Part.4 Standard Costing and Variances Analysis
Part.5 Performance Measurement and Control

1 Cost Accounting Techniques

1.1 Cost Classification and Estimation
Learners will be able to:
a) Classification of costs, including classification by nature, functions, traceability to
products, relevance to decision making, cost behaviour, and accounting treatment
b) Estimate costs by using both linear and non-linear methods, including: High-low
method, Regression analysis, Accounting analysis, and Learning Curve
1.2 Income effects of alternative cost accumulation systems
Learners will be able to:
a) Illustrate the overhead allocation and apportionment.
b) Describe the nature of marginal costing and absorption costing
c) Distinguish between marginal costing and absorption costing.
d) Prepare profits statements based on marginal (variable) costing and absorption costing
system.
e) Explain the difference and reconcile the profits between marginal and absorption
costing.
f) Explain the arguments for and against marginal and absorption costing
1.3 Activity based costing
Learners will be able to:
a) Identify appropriate cost drivers under ABC.
b) Calculate costs per driver and per ABC.
c) Compare ABC and traditional methods of overhead absorption based on production
units, labour hours or machine
1.4 Target costing
Learners will be able to:
a) Derive a target cost in manufacturing and service industries.
b) Explain the difficulties of using target costing in service industries.
c) Suggest how a target cost gap might be closed

1.5 Back flush costing

Learners will be able to:
a) Explain what back flush costing is.
b) Explain the features of back flush costing.
c) Explain the application of back flush costing.

1.6 Life-cycle costing

Learners will be able to:
a) Identify the costs involved at different stages of the life- cycle.
b) Derive a life cycle cost in manufacturing and service industries.
c) Identify the benefits of life cycle costing
2 Decisions-Making Techniques
2.1 Cost Volume Profit Analysis
Learners will be able to:
a) Evaluate the nature of cost-volume-profit (CVP) analysis.
b) Evaluate the assumptions of CVP analysis.
c) Calculate the contribution margin ratio (P/V) in single and multi-product situations and
demonstrate an understanding of its use.
d) Compute the breakeven point
e) Calculate the level of sales needed to achieve a desired target profit.
f) Compute the margin of safety and explain its significance.
g) Prepare and interpret cost-volume-profit (CVP) graphs.
h) Compute the degree of operating leverage at a particular level of sales and explain how
the degree of operating leverage can be used to predict changes in net operating income.

i) Compute the breakeven point for a multiple product company.

j) Describe the differences between the accountant’s and economist’s model of CVP
analysis.
k) Discuss the limitations of CVP analysis for planning and decision making
2.2 Relevant information for Decision making
Learners will be able to:
a) Explain the meaning of relevant costs and revenue.
b) Differentiate relevant costs and irrelevant costs.
c) Evaluate the importance of qualitative factors in decision making.
d) Identify the characteristics of relevant information.
e) Identify and calculate relevant costs for a specific situations from given data
2.3 Throughput Accounting
Learners will be able to:
a) Calculate and interpret a throughput accounting ratio (TPAR).
b) Suggest how a TPAR could be improved.
c) Apply throughput accounting to a multi-product decision- making problem.
2.4 Decisions making under environment of certainty
Learners will be able to:
a) Identify limiting factors in a scarce resource situation and select appropriate techniques.
b) Determine the optimal production plan where an organization is restricted by a single
limiting factor
c) Formulate, solve and interpret multiple scarce resource problem both graphically and
using simultaneous equation
d) Interpret the final simplex table.
e) Evaluate factors affecting the make vs. buy and outsourcing
f) Calculate and compare make costs with buy in costs and make appropriate decision
using comparative analysis.
g) Identify costs relevant for shut down and shut down point
h) Apply relevant costing principles in situations involving shut down and extra shifts.
i) Make financial analysis and decide whether to replace an old equipment
j) Calculate incremental costs of processing further a product and make an appropriate
decision to process further or sell at a split off point
k) Prepare an analysis showing whether a special order should be accepted.
l) Compute the financial impact of product/operation shut down, and make appropriate
decision
2.5 Pricing Decision
Learners will be able to:
a) Evaluate the factors that influence the pricing of a product or service.
b) Illustrate the pricing policy, pricing objectives, and pricing strategies
c) Evaluate the different cost-plus pricing methods for deriving selling prices
d) Calculate the selling price using cost-plus pricing methods.
e) Evaluate the limitations of cost-plus pricing.
f) Illustrate the role that target costing plays in the pricing decision.
g) Illustrate the price elasticity of demand
h) Formulate the demand function.
i) Evaluate how the optimum output and selling price is determined using economic
theory.
j) Calculate the optimum selling price and output for an organization using calculus.

2.6 Decision making under environment of uncertainty and risk

Learners will be able to:
a) Evaluate risk with probability distributions.
b) Evaluate the impact of uncertainty and risk on decision models.
c) Apply the techniques of maximax, maximin, and minimax regret to decision-making
problems including the production of profit tables.
d) Analyse risk and uncertainty by calculating expected values and standard deviations
together with probability tables.
e) Calculate the expected values and ascertain the value of information.
 f) Prepare decision trees and use it to solve a multi-stage decision problem.

3 Budgetary Planning and Control

3.1 Objectives of budget
Learners will be able to:
a) Illustrate how corporate and divisional objectives may differ and can be reconciled.
b) Identify and resolve conflicting objectives and explain its implications.
3.2 Budgetary Control System
Learners will be able to:
a) Evaluate the nature of budgetary control system.
b) Illustrate the functions of budgetary control system.
c) Evaluate the objectives of a budgetary control system.
d) Illustrate how budgetary control systems fit within the performance hierarchy.
e) Select and explain appropriate budgetary systems for an organization, including top-
down, bottom-up, rolling, zero- base, activity-base, incremental and feed-forward
control.
f) Evaluate the information used in budget systems and the sources of the information
needed.
g) Illustrate how budget systems can deal with uncertainty environment.
3.3 Types of Budget
Learners will be able to:
a) Identify the usefulness and problems with different types (functional, master, flexible,
zero-base, activity-based and incremental)
b) Prepare functional budgets, master budgets.
c) Evaluate the difficulties of changing the type of budget used.
3.4 Behavioral Aspects of budgeting
Learners will be able to:
a) Identify the factors which influence behaviour.
b) Evaluate the issues surrounding setting the difficulty level for a budget.
c) Evaluate the benefits and difficulties of participation of employees in the negotiation of
budgets.
4 Standard Costing and Variances Analysis
4.1 Introduction to standard costing, basic variances and operating statements
Learners will be able to:
a) Evaluate different types standards (ideal, basic, attainable, current)
b) Prepare Standard cost card
c) Calculate and identify the cause of basic variances including:
• Sales price and volume.
• Materials total, price and usage.
• Labour total, rate and efficiency.
 • Variable overhead total, expenditure and efficiency.
• Fixed overhead total, expenditure and, where appropriate, volume, capacity and
efficiency.
d) Produce full operating statements in both a marginal cost and full absorption costing
environment, reconciling actual profit to budgeted profit.
e) Calculate the effect of idle time and waste on variances including where idle time has
been budgeted for.
f) Calculate, using a simple situation, ABC-based variances.
g) Illustrate the different methods available for deciding whether or not to investigate a
variance cause.
4.2 Material mix and yield variances
Learners will be able to:
a) Calculate, identify the cause of, and explain material mix and yield variances.
b) Explain the wider issues involved in changing material mix such as cost, quality and
performance measurement issues.
c) Identify and explain the relationship of the material price variance with the material
mix and yield variances.
4.3. Sales mix and Quantity variances
Learners will be able to:
a) Calculate, identify the cause of, and explain sales mix and quantity variances.
b) Identify and explain the relationship of the sales volume variances with the sales mix
and quantity variances.
4.4 Planning and operational variances
Learners will be able to:
a) Calculate a revised budget.
b) Identify and explain those factors that could and could not be allowed to revise an
original budget.
c) Calculate planning and operational variances for sales, materials Labor, and overheads
d) Evaluate the dysfunctional nature of some variances in the modern environment of JIT
and TQM.
e) Assess the effect that variances have on staff motivation and action.

5 Performance Measurement and Control

5.1 The scope of performance measurement
Learners will be able to:
a) Select and calculate suitable financial performance measures for a given business from
given data and information provided.
b) Evaluate the results based on business objectives and advise on management action.
c) Explain and assess the use of balanced scorecard methods including evaluation of
performance from given data and information
 d) Explain and evaluate the use of value for money (VFM) techniques in performance
management
e) Select and explain stakeholder based measures of performance that may be used to
evaluate social or environmental performance of a business.
5.2 Divisional Performance measurement and transfer pricing
Learners will be able to:
a) Describe and illustrate the basis for setting a transfer price variable cost, full cost,
market based approach, negotiated approach and the principles behind allowing for
intermediate markets.
b) Illustrate how transfer prices can distort the performance assessment of divisions and
decisions made.
c) Describe the meaning of, and calculate, Return on Investment (ROI), Residual Income
(RI), Economic Value Added (EVA) and Shareholder Value Added (SVA) and assess
their benefits and shortcomings.
d) Describe the nature of, and calculate the productivity measures.

5.3 Performance management systems

Learners will be able to:
a) Evaluate and advise management on suitable information technology and information
systems support that may enable them to operate effective operational and strategic
performance management systems
b) Evaluate and advise management on suitable approaches that may be used to
management people issues and change when implementing performance management
systems.