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Management Accounting

Foundations in Accountancy FMA / ACCA Paper F2

Management Accounting
This Interactive Text for Foundations in Accountancy
FMA Management Accounting and ACCA Paper F2
Management Accounting has been comprehensively
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Management Accounting

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Foundations in

Accountancy
FMA
ACCA
Paper F2
Management Accounting
BPP Learning Media is an ACCA Approved Content Provider for the Foundations in
Accountancy qualification. This means we work closely with ACCA to ensure this
Interactive Text contains the information you need to pass your exam.
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Examine your understanding in our practice question bank

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Reference all the important topics in our full index

BPP's Practice & Revision Kit also supports this paper.

FOR EXAMS FROM 1 SEPTEMBER 2016
TO 31 AUGUST 2017
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F2/FMA MANAGEMENT ACCOUNTING

First edition March 2011
Fifth edition January 2016

A note about copyright
Dear Customer

ISBN 9781 4727 4591 0
(Previous ISBN 9781 4727 3526 3)
e-ISBN 9781 4727 4632 0

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CONTENTS

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
2
3
4
5

Accounting for management................................................................................................... 3
Sources of data................................................................................................................... 19
Cost classification ............................................................................................................... 37
Cost behaviour ................................................................................................................... 55
Presenting information......................................................................................................... 75

Part B Cost accounting techniques
6

7
8
9
10
11
12
13

Accounting for materials ...................................................................................................... 99
Accounting for labour ........................................................................................................ 133
Accounting for overheads................................................................................................... 155
Absorption and marginal costing......................................................................................... 185
Job, batch and service costing............................................................................................ 199
Process costing................................................................................................................. 221
Process costing, joint products and by-products ................................................................... 251
Alternative costing principles .............................................................................................. 265

Part C Budgeting
14
15
16
17
18
19

Forecasting ..................................................................................................................... 285
Budgeting ........................................................................................................................ 331
The budgetary process....................................................................................................... 359
Making budgets work ........................................................................................................ 393
Capital expenditure budgeting ............................................................................................ 409

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

Part D Standard costing
20
21
22

Standard costing............................................................................................................... 445
Cost variances .................................................................................................................. 455
Sales variances and operating statements ............................................................................ 481

Part E Performance measurement
23
24

Performance measurement ................................................................................................ 501
Applications of performance measurement........................................................................... 545

Practice question bank ......................................................................................................................... 573
Practice answer bank ........................................................................................................................... 599
Appendix: Mathematical tables ............................................................................................................ 625
Index ..................................................................................................................................................... 631
Review form

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F2/FMA MANAGEMENT ACCOUNTING

iv

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INTRODUCTION

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.

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F2/FMA MANAGEMENT ACCOUNTING

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.
Demonstrates how to apply key knowledge and techniques.

EXAMPLE
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 examstyle chapter questions. Cross referenced for easy
navigation.

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INTRODUCTION

Studying F2/FMA
How to use this Interactive Text
Aim of this Interactive Text
To provide the knowledge and practice to help you succeed in the examination for Paper F2/FMA
Management Accounting.


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.

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F2/FMA MANAGEMENT ACCOUNTING

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.
Section A
35 compulsory multiple choice questions of two marks each
Section B
3 compulsory multi-task questions of ten marks each, one from each of
syllabus areas C, D and E

Number of marks
70
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

viii
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INTRODUCTION

Syllabus and Study Guide

ix
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F2/FMA MANAGEMENT ACCOUNTING

x
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INTRODUCTION

xi
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F2/FMA MANAGEMENT ACCOUNTING

xii
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INTRODUCTION


xiii
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F2/FMA MANAGEMENT ACCOUNTING

xiv
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INTRODUCTION

xv
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F2/FMA MANAGEMENT ACCOUNTING

xvi
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INTRODUCTION

xvii
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F2/FMA MANAGEMENT ACCOUNTING

The Computer Based Examination
Computer based examinations (CBEs) are available for the first seven Foundations in Accountancy
papers (not papers FAU, FTX or FFM) and ACCA papers F1, F2 and F3, in addition to the conventional
paper based examination.

Computer based examinations must be taken at an ACCA CBE Licensed Centre.

How does CBE work?


Questions are displayed on a monitor.



Candidates enter their answer directly onto the computer.



Candidates have two hours to complete the examination.



When the candidate has completed their examination, the final percentage score is calculated
and displayed on screen.



Candidates are provided with a Provisional Result Notification showing their results before leaving
the examination room.



The CBE Licensed Centre uploads the results to the ACCA (as proof of the candidate's
performance) within 72 hours.




Candidates can check their exam status on the ACCA website by logging into myACCA.

Benefits


Flexibility as a CBE can be sat at any time



Resits can also be taken at any time and there is no restriction on the number of times a
candidate can sit a CBE



Instant feedback as the computer displays the results at the end of the CBE



Results are notified to ACCA within 72 hours

CBE question types


Multiple choice – choose one answer from four options



Multiple response – select more than one response by clicking the appropriate tick boxes




Multiple response matching – select a response to a number of related statements by choosing
one option from a number of drop down menus



Number entry – key in a numerical response to a question



Multiple task questions – a series of short questions related to one scenario. Question formats
could include number entry, drop-down lists, multiple choice, multiple response and hotspot

For more information on computer-based exams, visit the ACCA website.
www.accaglobal.com/en/student/Exams/Computer-based-exams.html

xviii
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INTRODUCTION

Tackling Multiple Choice Questions
MCQs are part of all Foundations in Accountancy exams and ACCA papers F1, F2 and F3.
The MCQs in your exam contain four possible answers. You have to choose the option that best
answers the question. The three incorrect options are called distracters. There is a skill in answering
MCQs quickly and correctly. By practising MCQs you can develop this skill, giving you a better chance of
passing the exam.
You may wish to follow the approach outlined below, or you may prefer to adapt it.

Step 1

Skim read all the MCQs and identify what appear to be the easier questions.

Step 2

Attempt each question – starting with the easier questions identified in Step 1. Read
the question thoroughly. You may prefer to work out the answer before looking at the
options, or you may prefer to look at the options at the beginning. Adopt the method
that works best for you.

Step 3

Read the four options and see if one matches your own answer. Be careful with
numerical questions, as the distracters are designed to match answers that incorporate
common errors. Check that your calculation is correct. Have you followed the
requirement exactly? Have you included every stage of the calculation?

Step 4

You may find that none of the options matches your answer.


Re-read the question to ensure that you understand it and are answering the
requirement



Eliminate any obviously wrong answers




Consider which of the remaining answers is the most likely to be correct and
select the option

Step 5

If you are still unsure make a note and continue to the next question.

Step 6

Revisit unanswered questions. When you come back to a question after a break you
often find you are able to answer it correctly straight away. If you are still unsure have a
guess. You are not penalised for incorrect answers, so never leave a question
unanswered!

After extensive practice and revision of MCQs, you may find that you recognise a question when you sit
the exam. Be aware that the detail and/or requirement may be different. If the question seems familiar
read the requirement and options carefully – do not assume that it is identical.
Tempting though it might be, don’t try to predict where the correct answers might fall based on any kind
of pattern you think you might perceive in this section. The distribution of the correct answers do not
follow any predictable pattern in this exam!

xix
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F2/FMA MANAGEMENT ACCOUNTING

xx
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part

The nature, source and purpose of
management information

1
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PART A: THE NATURE, SOURCE AND PURPOSE OF MANAGEMENT INFORMATION

2
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C H A P T E R

This chapter provides an introduction to Management
Accounting. We look at data and information and
introduce you to cost accounting and the differences
between financial accounting and management
accounting. We also outline the managerial processes of
planning, control and decision making. The sources of
data are covered in the next chapter. Chapters 3 and 4
provide basic information on how costs are classified and
how they behave.

Accounting for
management

SYLLABUS

REFERENCE

TOPIC LIST

1

Information

A1 (e), (f)

2

Planning, control and decision making

A1 (c), (d)

3

Financial accounting and cost and management accounting

A1 (a), (b)

4

Cost accounting information and decision making

A1 (g)

3
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