ACCA MA key terms

Financial and non-financial data that has been processed and structured so that managers can use it to plan, control and make decisions about the organisation.

Data that has been organised, summarised and interpreted so that it carries meaning and can support a decision; raw figures on their own are not information.

The characteristics that make information useful to managers, including accuracy, relevance, timeliness, completeness, clarity, comparability and cost-effectiveness relative to the benefit it brings.

A control approach in which managers focus attention only on results that deviate significantly from plan or budget, leaving routine activity that is within tolerance to run unreviewed.

Very large, fast-changing and varied data sets drawn from sources such as transaction records, sensors and social media, which need special tools to capture, store and analyse.

The total of the direct costs of production: direct materials, direct labour and any other direct expenses that can be traced specifically to a unit or job.

Indirect costs of running the production facility, such as supervision, rent, depreciation and power, which cannot be traced to individual units and so must be shared out.

A costing method that charges only variable production costs to units, treating fixed costs as a period cost written off against contribution in the period in which it arises.

A costing method that includes both variable and fixed production costs in the unit cost, with overheads allocated or apportioned to products and charged out using a predetermined rate.

A predetermined rate, usually budgeted overhead divided by budgeted activity such as labour hours, used to charge overhead to products as they are produced.

A method that assigns overhead to products according to the activities they consume, using a separate cost driver for each activity pool instead of one volume-based absorption rate.

Notional whole units representing the work done on partly completed items in a process, found by applying a percentage of completion to the physical units still in progress.

A technique for splitting a mixed cost into its fixed and variable elements by comparing the total cost at the highest activity level with the total cost at the lowest.

The value of the benefit given up when one course of action is chosen over the next best alternative; it matters for decision making but is never recorded in the accounts.

A method that begins with a competitive selling price and a required profit margin to derive an allowable cost, then designs and engineers the product so that cost can be met.

The level of activity at which total revenue equals total cost, so the business makes neither profit nor loss and contribution exactly covers the fixed costs.

A resource such as machine hours or skilled labour that is in short supply and restricts output, so products are ranked by the contribution earned per unit of that resource.

The idea that average labour time per unit falls by a constant percentage each time cumulative output doubles, as the workforce becomes more familiar with the task.

A quantified, usually financial, plan for a defined future period, setting out the resources required and the expected income and expenditure for a responsibility centre or the whole organisation.

The process of setting budgets, comparing actual results against them, analysing the differences and taking corrective action to bring performance back on target.

The limiting factor that restricts the organisation's activity, such as sales demand or machine capacity, and therefore determines the order in which the functional budgets are prepared.

A budget that is continually updated by adding a new period as each period passes, so that a constant planning horizon of, for example, twelve months is always maintained.

An approach in which each activity's budget starts from nothing and must be justified afresh in a decision package, rather than being built on the previous period's figures.

A budget prepared at the actual level of activity reached, used for control so that actual costs are compared with the costs that should have been incurred at that level.

The deliberate padding of a budget, for example by understating income or overstating costs, in order to make the resulting targets easier to achieve.

A planned unit cost for materials, labour and overhead, built from technical specifications and expected prices, against which actual costs are compared.

A system that records the planned cost of products and compares it with actual cost, producing variances that explain the difference and support control and pricing decisions.

A standard set at the level achievable only under perfect conditions, with no waste, idle time or breakdown; it can demotivate staff because it is almost never attainable.

The difference between a planned or standard figure and the actual figure, described as favourable when it improves profit and adverse when it reduces profit.

The difference between the standard price and the actual price paid for material, multiplied by the quantity of material purchased or used.

The part of a total variance caused by a change in the standard itself after it was set, such as a revised market price, and generally outside the operating manager's control.

A report that reconciles budgeted or standard profit to actual profit by listing each variance in turn and separating the favourable amounts from the adverse ones.

A performance measurement framework that looks beyond finance, setting objectives and measures in four perspectives: financial, customer, internal business process, and learning and growth.

A measure chosen because it signals progress towards a critical success factor, giving managers a short, clear guide to whether the organisation is performing as intended.

Divisional profit expressed as a percentage of the capital employed in that division, showing how much profit is generated by each unit of invested capital.

Divisional profit after deducting a notional interest charge on the capital employed, so that any investment earning more than the cost of capital increases the measure.

The price at which one division of a company supplies goods or services to another division; it decides how total group profit is shared between the two.

The extent to which an organisation obtains the best available combination of economy, efficiency and effectiveness from the resources it uses in delivering its services.

Comparing an organisation's processes, costs or performance measures with those of similar organisations or recognised best practice, in order to identify and close performance gaps.