ACCA MA cheat sheet

Data are raw, unprocessed facts and figures; information is data processed and presented so it is meaningful to the person receiving it.

Qualities of good information: accurate, complete, cost-effective, relevant, authoritative, timely and easy to use (mnemonic ACCURATE).

Strategic information: long-term, summarised and largely external, used by senior management to set objectives and plan the direction of the organisation.

Tactical information: medium-term and summarised, used by middle management for management control and comparing performance against budget.

Operational information: short-term, highly detailed and mainly internal, used by supervisors to control day-to-day transactions and tasks.

Probability sampling methods: simple random, systematic (every nth item after a random start), stratified (random samples within homogeneous groups), multi-stage and cluster; quota sampling is non-random.

Big data is characterised by volume, velocity, variety and veracity; analysis requires high-volume processing tools rather than a standard spreadsheet.

Information is only worth producing where the value of the decisions it improves exceeds the cost of collecting and processing it.

Spreadsheet what-if analysis changes an input to show the effect on outputs; sensitivity analysis finds how far an input can move before the decision changes.

High-low method: variable cost per unit = (cost at highest activity − cost at lowest activity) ÷ (highest units − lowest units); fixed cost = total cost at a level − (variable cost per unit × units at that level).

Overhead absorption rate = budgeted overhead ÷ budgeted activity level, where activity may be units, direct labour hours or machine hours.

Over-absorption = overhead absorbed − actual overhead incurred; a negative figure is under-absorption, and it is written off or charged to cost of sales.

Difference between marginal and absorption profit = change in inventory units × fixed overhead absorption rate per unit.

Breakeven units = fixed costs ÷ contribution per unit; margin of safety % = (budgeted units − breakeven units) ÷ budgeted units × 100.

Activity based costing: cost driver rate = cost pool total ÷ total driver volume; overhead is charged by the activities each product consumes rather than by volume alone.

EOQ = √(2 × Co × D ÷ Ch), where Co = cost per order, D = annual demand in units and Ch = holding cost per unit per year.

Equivalent units (weighted average) = fully completed output + closing work in progress × degree of completion; normal loss is valued at scrap value, abnormal loss at full cost per equivalent unit.

Throughput return per bottleneck hour = (sales − material cost) ÷ bottleneck hours used; throughput accounting ratio = return per bottleneck hour ÷ cost per bottleneck hour.

Purposes of budgeting: planning, control, coordination, communication, motivation and performance evaluation.

Production budget in units = sales units + closing inventory required − opening inventory.

Material purchases budget = production usage + closing inventory of material − opening inventory of material.

Incremental budgeting adjusts last period's figures for expected changes; zero-based budgeting starts from a nil base and requires every activity to be justified and ranked in priority order.

A rolling budget is updated by adding a new period as the earliest period expires, so the planning horizon stays constant.

A flexible budget is prepared for the actual activity level achieved before comparison with actual results, so volume effects are removed from the control report.

With a single limiting factor, rank products by contribution per unit of the scarce resource, not by contribution or profit per unit of product.

Participative (bottom-up) budgeting improves commitment but can create budgetary slack; imposed (top-down) budgeting is quicker and more coordinated but less motivating.

Learning curve: y = ax^b where y is cumulative average time per unit, a is time for the first unit, x is cumulative output and b = log(learning rate) ÷ log 2.

A standard cost is a predetermined unit cost built from planned prices and quantities for materials, labour and overhead; it may be ideal (attainable only under perfect conditions) or attainable.

Material price variance = (standard price − actual price) × quantity purchased; material usage variance = (standard quantity for actual output − actual quantity used) × standard price.

Labour rate variance = (standard rate − actual rate) × actual hours paid; labour efficiency variance = (standard hours for actual output − actual hours worked) × standard rate.

Variable overhead expenditure variance = budgeted variable overhead for actual hours − actual variable overhead; the efficiency variance uses the same hours basis as labour efficiency.

Fixed overhead expenditure variance = budgeted fixed overhead − actual fixed overhead; fixed overhead volume variance = (actual production − budgeted production) × standard fixed overhead per unit.

In absorption costing the fixed overhead volume variance is analysed into capacity (budgeted hours − actual hours worked) and efficiency (standard hours for actual output − actual hours worked) at the standard rate.

Sales price variance = (actual price − standard price) × actual units sold; sales volume profit variance = (actual units − budgeted units) × standard profit per unit.

Operating statement: budgeted profit ± variances (favourable added, adverse deducted) = actual profit, with variable and fixed cost variances shown separately.

An adverse material price variance may arise from rush orders, lost bulk discounts, inflation or buying higher-quality material; responsibility usually rests with purchasing, not production.

ROCE = operating profit ÷ capital employed × 100%, where capital employed = total assets − current liabilities (equivalently equity + non-current liabilities).

Gross profit margin = gross profit ÷ revenue; net profit margin = operating profit ÷ revenue; asset turnover = revenue ÷ capital employed, and ROCE = net margin × asset turnover.

Current ratio = current assets ÷ current liabilities; quick ratio = (current assets − inventory) ÷ current liabilities.

Inventory days = inventory ÷ cost of sales × 365; receivable days = trade receivables ÷ revenue × 365; payable days = trade payables ÷ purchases (or cost of sales) × 365.

Working capital cycle = inventory days + receivable days − payable days; a longer cycle means more financing is required.

Residual income = divisional profit − (imputed interest rate × divisional capital employed); RI accepts any project earning above the cost of capital whereas ROI may reject profitable projects.

Balanced scorecard perspectives: financial, customer, internal business process, and learning and growth.

Value for money is assessed by the three Es: economy (cost of inputs), efficiency (output per unit of input) and effectiveness (achievement of stated objectives).

Fitzgerald and Moon: six dimensions (financial performance, competitiveness, resource utilisation, quality of service, flexibility, innovation), each split into determinants and results.