ACCA MA flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Data versus information

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

Qualities of good information

Accurate, complete, cost-effective, relevant, authoritative, timely and easy to use; information failing these tests wastes resources and leads to poor decisions.

Strategic information

Long-term, summarised, largely external information used by senior management for setting objectives and planning the direction of the whole organisation.

Operational information

Short-term, highly detailed, mainly internal information used by junior management and staff to control day-to-day activities and transactions.

Stratified sampling

The population is divided into homogeneous groups (strata) and random samples are drawn from each stratum, ensuring every group is represented in the sample.

Systematic sampling

Every nth item in a population list is selected after a random start; simple to apply but biased if the list has a repeating pattern.

Big data characteristics

Volume, velocity, variety and veracity: large, fast-moving, varied and uncertain data that require specialist analytical tools rather than a standard spreadsheet.

High-low method

Splits a semi-variable cost by dividing the difference in total cost by the difference in activity between the highest and lowest activity levels, giving variable cost per unit.

Overhead absorption rate

Budgeted overhead divided by budgeted activity level (units, labour hours or machine hours), used to charge overhead into product costs under absorption costing.

Contribution

Sales revenue less variable costs; it first covers fixed costs and any surplus is profit, and it is the basis of marginal costing and CVP analysis.

Breakeven point

Activity level at which total contribution equals fixed costs, so profit is zero; in units it is fixed costs divided by contribution per unit.

Margin of safety

Excess of budgeted or actual sales over breakeven sales, expressed in units, revenue or as a percentage of budgeted sales; measures the fall in sales before a loss arises.

Equivalent units

Notional fully complete units used in process costing, calculated as completed output plus closing work in progress multiplied by its degree of completion.

Cost driver rate

Cost pool total divided by total driver volume, giving a cost per unit of activity used to charge overhead to products on the basis of the activities they consume.

Zero-based budgeting

Each cost centre's budget is built from zero and every activity must be justified and ranked in priority packs, so inefficiencies are challenged but preparation is time-consuming.

Rolling budget

A budget continuously updated by adding a further period as the earliest expires, so the planning horizon stays constant and estimates remain realistic.

Flexible budget

A budget prepared for a range of activity levels and flexed to the actual level achieved, allowing like-for-like comparison between budgeted and actual costs.

Budgetary slack

Deliberate understatement of budgeted revenue or overstatement of budgeted costs by managers to make targets easier to achieve; reduced by participation and review.

Limiting factor ranking

Scarce resource allocation: calculate contribution per unit of the limiting factor for each product, rank highest first, then allocate the available resource in that order.

Learning curve rate

The proportion of cumulative average time retained each time cumulative output doubles; with an 80% rate the average time per unit falls to 80% of its previous value.

Material price variance

(Standard price − actual price) × quantity purchased; favourable when the actual price is below standard, and usually the purchasing manager's responsibility.

Material usage variance

(Standard quantity for actual output − actual quantity used) × standard price; an adverse figure may reflect poor quality material or inefficient production.

Labour efficiency variance

(Standard hours for actual output − actual hours worked) × standard rate; adverse if more hours than standard were needed, often the production supervisor's responsibility.

Fixed overhead volume variance

(Actual production − budgeted production) × standard fixed overhead per unit; it measures the over- or under-absorption caused by producing at a different volume from budget.

Sales volume profit variance

(Actual units sold − budgeted units) × standard profit per unit; it measures the profit effect of selling a different volume from the budgeted volume.

Planning variance

Difference between a revised standard, reflecting factors not controllable when the budget was set, and the original standard, separated from operational variances caused by controllable factors.

ROCE

Operating profit divided by capital employed, expressed as a percentage; it measures the return generated by all the long-term funds invested in the business.

Residual income

Divisional profit less an imputed interest charge on divisional capital employed; unlike ROI it encourages managers to accept projects earning above the cost of capital.

Current ratio

Current assets divided by current liabilities; a short-term liquidity measure of whether current obligations can be settled from current assets as they fall due.

Working capital cycle

Inventory days plus receivable days minus payable days; the number of days between paying suppliers for goods and receiving cash from customers.

Balanced scorecard

Performance framework using four perspectives - financial, customer, internal business process, and learning and growth - to balance financial and non-financial measures of performance.

Value for money

Assessed using the three Es: economy (cost of inputs), efficiency (output achieved per unit of input) and effectiveness (the degree to which stated objectives are met).