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Foundations in Accountancy FMA / ACCA Paper F2

Management Accounting

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FMA Management Accounting and ACCA Paper F2

Management Accounting has been comprehensively

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Management Accounting Interactive Text FMA / Foundations in Accountancy ACCA F2 2016 to 31 August 2017 For exams from 1 September

Foundations in Accountancy FMA /

ACCA Paper F2

Management Accounting

For exams from 1 September 2016

to 31 August 2017

ACCA Approved

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FI33ST16 (RICOH).indd 1-3 02/02/2016 10:40

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FOR EXAMS FROM 1 SEPTEMBER 2016

TO 31 AUGUST 2017

Management Accounting

Foundations in

Accountancy

FMA

ACCA

Paper F2

F2/FMA MANAGEMENT ACCOUNTING

ii

First edition March 2011

Fifth edition January 2016

ISBN 9781 4727 4591 0

(Previous ISBN 9781 4727 3526 3)

e-ISBN 9781 4727 4632 0

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CONTENTS

iii

Contents

Page

Introduction

Helping you to pass .......................................................................................................................v

Chapter features ........................................................................................................................... vi

Studying F2/FMA......................................................................................................................... vii

The Computer Based Examination ...............................................................................................xviii

Tackling Multiple Choice Questions................................................................................................xix

Part A The nature, source and purpose of management information

1 Accounting for management................................................................................................... 3

2 Sources of data................................................................................................................... 19

3 Cost classification ............................................................................................................... 37

4 Cost behaviour ................................................................................................................... 55

5 Presenting information......................................................................................................... 75

Part B Cost accounting techniques

6 Accounting for materials ...................................................................................................... 99

7 Accounting for labour ........................................................................................................ 133

8 Accounting for overheads................................................................................................... 155

9 Absorption and marginal costing......................................................................................... 185

10 Job, batch and service costing............................................................................................ 199

11 Process costing................................................................................................................. 221

12 Process costing, joint products and by-products ................................................................... 251

13 Alternative costing principles.............................................................................................. 265

Part C Budgeting

14 Forecasting ..................................................................................................................... 285

15 Budgeting ........................................................................................................................ 331

16 The budgetary process....................................................................................................... 359

17 Making budgets work ........................................................................................................ 393

18 Capital expenditure budgeting ............................................................................................ 409

19 Methods of project appraisal .............................................................................................. 417

Part D Standard costing

20 Standard costing............................................................................................................... 445

21 Cost variances .................................................................................................................. 455

22 Sales variances and operating statements............................................................................ 481

Part E Performance measurement

23 Performance measurement ................................................................................................ 501

24 Applications of performance measurement........................................................................... 545

Practice question bank ......................................................................................................................... 573

Practice answer bank ........................................................................................................................... 599

Appendix: Mathematical tables ............................................................................................................ 625

Index ..................................................................................................................................................... 631

Review form

F2/FMA MANAGEMENT ACCOUNTING

iv

INTRODUCTION

v

Helping you to pass

BPP Learning Media – Approved Content Provider

As ACCA's Approved Content Provider, BPP Learning Media gives you the opportunity to use study

materials reviewed by the ACCA examination team. By incorporating the examination team's comments

and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media

Interactive Text provides excellent, ACCA-approved support for your studies.

The PER alert!

To become a Certified Accounting Technician or qualify as an ACCA member, you not only have to pass

all your exams but also fulfil a practical experience requirement (PER). To help you to recognise areas

of the syllabus that you might be able to apply in the workplace to achieve different performance

objectives, we have introduced the 'PER alert' feature. You will find this feature throughout the

Interactive Text to remind you that what you are learning in order to pass your Foundations in

Accountancy and ACCA exams is equally useful to the fulfilment of the PER requirement.

Tackling studying

Studying can be a daunting prospect, particularly when you have lots of other commitments. The

different features of the Interactive Text, the purposes of which are explained fully on the Chapter

features page, will help you while studying and improve your chances of exam success.

Developing exam awareness

Our Interactive Texts are completely focused on helping you pass your exam.

Our advice on Studying F2/FMA outlines the content of the paper and the recommended approach to

studying and any brought forward knowledge you are expected to have.

Exam focus points are included within the chapters to highlight when and how specific topics might be

examined.

Using the Syllabus and Study Guide

You can find the Syllabus and Study Guide on pages ix – xvii of this Interactive Text.

Testing what you can do

Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can

recall what you have learnt.

We include Questions – lots of them – both within chapters and in the Practice Question Bank, as well

as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content.

F2/FMA MANAGEMENT ACCOUNTING

vi

Chapter features

Each chapter contains a number of helpful features to guide you through each topic.

Topic list Tells you what you will be studying in this chapter and the

relevant section numbers, together with the ACCA syllabus

references.

Introduction Puts the chapter content in the context of the syllabus as a

whole.

Study Guide Links the chapter content with ACCA guidance.

Fast Forward Summarises the content of main chapter headings,

allowing you to preview and review each section easily.

EXAMPLE Demonstrates how to apply key knowledge and techniques.

Key Term Definitions of important concepts that can often earn you

easy marks in exams.

Exam Focus

Point

Tells you how specific topics may be examined.

Formula Formulae which have to be learnt.

PER Alert This feature gives you a useful indication of syllabus areas

that closely relate to performance objectives in your

Practical Experience Requirement (PER).

Question Gives you essential practice of techniques covered in the

chapter.

Chapter Roundup A full list of the Fast Forwards included in the chapter,

providing an easy source of review.

Quick Quiz A quick test of your knowledge of the main topics in the

chapter.

Practice Question Bank Found at the back of the Interactive Text with more exam￾style chapter questions. Cross referenced for easy

navigation.

INTRODUCTION

vii

Studying F2/FMA

How to use this Interactive Text

Aim of this Interactive Text

To pass the examination you need a thorough understanding in all areas covered by the syllabus and

teaching guide.

Recommended approach

(a) To pass you need to be able to answer questions on everything specified by the syllabus and

teaching guide. Read the Text very carefully and do not skip any of it.

(b) Learning is an active process. Do all the questions as you work through the Text so you can be

sure you really understand what you have read.

(c) After you have covered the material in the Interactive Text, work through the Practice Question

Bank, checking your answers carefully against the Practice Answer Bank.

(d) Before you take the exam, check that you still remember the material using the following quick

revision plan.

(i) Read through the chapter topic list at the beginning of each chapter. Are there any gaps

in your knowledge? If so, study the section again.

(ii) Read and learn the key terms.

(iii) Look at the exam focus points. These show the ways in which topics might be examined.

(iv) Read the chapter roundups, which are a summary of the fast forwards in each chapter.

(v) Do the quick quizzes again. If you know what you're doing, they shouldn't take long.

This approach is only a suggestion. You or your college may well adapt it to suit your needs.

Remember this is a practical course.

(a) Try to relate the material to your experience in the workplace or any other work experience you

may have had.

(b) Try to make as many links as you can to other papers at the Introductory and Intermediate levels.

For practice and revision use BPP Learning Media's Practice & Revision Kit, iPass and Passcards.

To provide the knowledge and practice to help you succeed in the examination for Paper F2/FMA

Management Accounting.

F2/FMA MANAGEMENT ACCOUNTING

viii

What F2/FMA is about

The aim of this syllabus is to develop a knowledge and understanding of the principles and techniques

used in recording, analysing and reporting costs and revenues for internal management purposes. It

covers management information, cost recording, costing techniques, budgeting and performance

measurement.

Approach to examining the syllabus

Paper F2/FMA is a two-hour paper. It can be taken as a written paper or a computer based examination.

The computer based examination contains 35 objective test questions – multiple choice, number entry

and multiple response and 3 longer style multi-task questions. (See page xvi for frequently asked

questions about computer based examinations.)

The written examination is structured as follows.

Number of marks

Section A

35 compulsory multiple choice questions of two marks each 70

Section B

3 compulsory multi-task questions of ten marks each, one from each of syllabus areas C, D and E 30

100

The balance of questions in Section A reflects the weightings in Section B, so as to preserve the overall

balance of the paper.

The June 2015 examiner's report (found on the ACCA website) advised students to:

 Study the whole syllabus, because the paper will cover the full syllabus

 Practise as many questions as possible

 Read questions very carefully in the examination

 Try to attempt the 'easy' examination questions first

 Not to spend too much time on apparently 'difficult' questions

 Attempt all questions in the examination (there are no negative marks for incorrect answers)

 Read previous Examiner's Reports

 For paper exams, present Section B answers as tidily as possible

 Read Student Accountant

INTRODUCTION

ix

Syllabus and Study Guide

F2/FMA MANAGEMENT ACCOUNTING

x

INTRODUCTION

xi

F2/FMA MANAGEMENT ACCOUNTING

xii

INTRODUCTION

xiii