Part 1: PERFORMANCE ANALYSIS

Introduction Performance, role of management accountant, organization objectives and the function of management accounting in performance measurement and control, manufacturing, service, profit-making and not-for-profit.

Are also covered: the management of relationships within organisation and the implications for performance measurement and reward systems. It considers how organisations evaluate the achievement of key strategic objectives. How do organisations set targets and what rewards will managers gain by achieving these performance targets? How effective are the different models of performance measurement? What effect has the increasing level of uncertainty and unpredictability in the business environment on control system e.g. beyond budgeting.

Budgeting and Budgetary Control Objectives of budgeting, role of the management accountant, advantages of budgets, types of budgets, the budget period, budget administration, the master budget including cash budgets. The nature of control, objectives of a control system, feedback and feedforward controls, role of budgets in control, responsibility accounting, management by exception, zero-based budgeting, non-financial performance indicators (e.g. balanced scorecard). Standard Costing and Variance Analysis Effectiveness and efficiency, types of standards, revision of standards, benefits of standard costing, flexible budgets, variance analysis regarding revenue and cost items, mix and yield variances, accounting for variances, investigation of variances.

Behavioural Issues Theories of human behaviour, performance evaluation, motivation, aspiration levels and perception, inertia and slack, participation, communication and feedback, reward and effort, controllability.

Cost Behaviour and Cost Estimation

Cost behaviour and different cost objects, linear and non-linear cost behaviour patterns. Approaches to estimating cost functions including regression, linear and non-linear functions, learning curves. Routine Decision Making - CVP Analysis Profit volume ratios, breakeven analysis, assumptions of accountants CVP model, margin of safety, uncertainty and CVP analysis. Non-Routine Decision Making Incremental costs, relevant costs, opportunity costs, sunk costs, relevant cost analysis, limiting factors and the application of linear programming. Decision-making, Risk and Uncertainty Use of probabilities, expected values and standard deviation, limitations of expected values.Risk preferences and managing attitudes to risk (e.g. applying maxmiax, maximin and minimax). Pricing Decisions Economists approach: price elasticity of demand v Accountants approach: cost plus, target costing. Pricing strategies, Product lifecycle and pricing. Current Issues in Performance Analysis