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ACCA F5 Performance Management
Sample Study Note
For exams in June2014
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Sample Note Content:
Main study note content [Total Pages: 106] ...................................................... 4
Product Summary .......................................................................................... 5
Live online note sample plan ........................................................................... 6
Live online course timetable: ........................................................................... 7
Introduction to management accounting ......................................................... 10
Throughput accounting method ..................................................................... 15
This is just the sample study note extracted from the main study note in your tuition study
[This tuition study note is consistent in basic/super/gold package]. There would be more
chapters in the main study note covering the whole ACCA syllabus.
You can also take a look at the content within the main study note below:
Main study note content [Total Pages: 106]
ACCA HD quality super tuition videos
ACCA HD quality super revision videos
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ACCA Live online tuition(4sessions)
ACCA Live online revision(14hours)
ACCA Mock exams(with tutor mark)
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Oxford Brookes BSc in Applied Accounting
Live online note sample plan
Live online tuition note plan for June2014 F5 Exam
[Only for super / gold package (there would be a unique plan for gold package)]
Live sessions: [2 hours/session---live online + recorded after class]:
Live session1: costing methods: ABC
Past exam question-pilot paper Q1 Triple Ltd
Live session2: budgeting
Past exam question-DEC2012 Q4
Live session3: standard costing system
Past exam question-DEC2011 Q5
Live session4:: performance measurement
Past exam question-June2012 Q5
Live revision note for June2014 F5 exam: [will be available since mid April 2014]:
Live revision1+2: [There would be a separate live revision note detailing all
past exam questions with answers to go through]
Live online course timetable:
Live session/revision for F4-P7
*Please Note: This Timetable may be subjected to future changes.
Kindly check regularly for any possible updates.
Introduction to management accounting
Management accounting① is to provide useful information② in assisting
management in the management activities③.
If you want to open up a high fashion clothes manufacturing company in India so
what you should do?
Information required: internal & external
-existing financial information?
-government report/industry report
Management activities: use the above information in:
Plan future activities, budget
-Decision making: Whether to set up company and what
further investment that company
may try to make
Variance-Compare results of operation with
expected(meet sales/ cost
①Difference between Management accounting & Financial Accounting
Idea: Management accounting is for the use of management to make decisions
Financial accounting is used for paying taxes, borrowing money from bank or
(reflect past and future)
1, Difference between information and data
-Data + meaning=information
-If I give you data profit is $5,000 and you may think it’s good but what if I
tell you that company has a sales revenue of $50m and you may think that
$5,000 is too small so you decide not to invest in this company.
-Without given context that $5,000 is just data(raw data) and you can’t make
your decision whether to invest in this company unless you are given
information, ie, incorporate the data with specific context(give some
meaning to it.)
2, How to assess whether this information is good?
They should be accurate not too vague and if you’re given information
that company has made profit this year but not told how much then
it’s useless to help you make decisions.
Cost efficient You should weigh the benefit you get after getting this information
and the cost you have to pay.
If you are told that there’s a competitor emerging then you should
need to obtain its price and skills they have mastered as well.
User-focused Eg, a shop manager may wish to have a summary of the shop’s daily
takings and a sales manager may want detailed customers details to
complete their sales target.
If you want to know the price that competitor is currently charging so
any information provided about the history about the competitor may
deem to be irrelevant.
Authoritative The information should be reliable so if you are told that inflation rate
this year is 5% so you need to check where is this information coming
from, eg, from government report?
Ease of use
Information must be produced in advance of the time when it’s
needed. Eg, budgets need to be set in advance of a period in order to
compare with actual performance as a benchmark.
We need to make sure Information produced can be used by users,
eg, easy language.
3, where does information come from?
Internal: wage rate; production rate; sales volumes.
External: government report; industry statistics.
Inflation rate; industry report.
4, How to sample information?
If you want to launch a new product then how to determine customers are
satisfied with your product you are going to launch? Well we need to select
samples from the populations and ask them whether they are satisfied with
the new products are hoping that they represent the whole population.
Approaches to sample:
Random sampling: Sample items at random and make sure that every item
would have an equal chance being sampled.
Systematic sampling: random sample first and sample at interval later.
Stratified sampling: stratified group first and then random sampling later.
Once we’ve looked at how to generate into information we now need to know where
do we use these information for and by.
The information should be used to management activities
Planning (budget); [regularly]
Decision making; (launch new products/enter into new market) [any time]
Control(variance analysis) [regularly]
The information should be used by different level of management within the
Strategic level (directors and senior management; more than 1year)
Tactical Level (divisional/departmental manager; somewhere between 1month1year)
Operational Level (team leader; factory supervisor; daily/weekly)
To achieve better control over the organization, companies would always divide
themselves up into different centers.
Cost Center: Break group costs into different areas like in products line; managers;
location; region; location; department;
Revenue Center: Break group revenue into different areas like in products line;
managers; location; region; location; department. Eg, Sales department.
Profit Center: senior management here will control both revenue and costs in
order to maximize profit. Usually this would be divisions within organization.
Investment Center: they are not only responsible for control over revenue and
costs but also for some capital. This would be done by quite senior persons within
Throughput accounting method
In the past most business only focuses on increasing the individual process
efficiency without considering if one process slows down then other processes will
slow down as well.
If one process slows down then the inventory will be piled up, workers are idled but
still gets paid and these will increase the overall costs to the organization.
Throughput accounting underpins the idea that inventory should be eliminated
during the process of the production. It is not just focusing on individual process
but rather focus on the factory as a whole.
As mentioned before one process slows down which will make other processes slow
down as well and this is called bottle neck.
So how to increase the overall output and profit for the organization given bottle
neck exist in the organization?
Well this introduces “throughput accounting” method.
‘throughput’ is the rate at which the system generates money through sales
So we can calculate “throughput accounting raio(TPAR)” and say:
If TPAR=1 then the business is not making or losing money(break even);
If TPAR>1 then the business is making money and
If TPAR<1 then the business is losing money.
But how can we calculate “TPAR” ?
TPAR= Return/factory hour (W1)
Cost /factory hour (W2)
W1: return/factory hour=sales price/unit-direct material cost/unit
Factory hours per unit(bottleneck hrs)
W2: cost/factory hour= Total factory costs
Total factory hours
Throughput accounting is very similar like marginal costing because you can see
the calculation of TPAR, return/factory hour is similar to contribution/hour. Before
we move on we would like to see the difference between marginal costing and
Direct material only
Costs don’t vary with
Called “total factory cists”.
Sales-direct material costs
Direct labour costs+all
Q Through ltd
Through ltd has 2 production departments: assembly and finishing department. It
makes 2 products: A&B. Through ltd operates a JIT manufacturing system.
Processing capabilities are shown below:
Processing time in
Factory overhead and direct labour expense for the period is $180,000.
Cost data is as follows:
Unit sales price
Direct material costs/unit
1, identify the bottleneck process.
2, calculate TPAR for each product.
3, interpret the TPAR and suggest how Through ltd can improve the TPAR.