F2 Midterm

PART A: THE NATURE, SOURCE AND PURPOSE OF MANAGEMENT INFORMATION
BBP ACCA
1 Accounting for Chapter 1 Chapter 1
management - Information - Cost and Management
- Planning, control and decision- accounting
making - Planning, Decision-making
- Financial accounting and cost and and Control
management accounting - Data and information
2 Sources of data Chapter 2 - Sources of data and
- Types of data information
- Sources of data - Attributes of good
- Secondary data information
- Sampling & sampling methods Chapter 11: Sampling
techniques (chưa học
Probability & Expected Value)
PART B: COST ACCOUNTING TECHNIQUES
BBP ACCA
1 Accounting for Chapter 6 Chapter 2
materials - Inventory control level - Overview
- EOQ, EBQ - Inventory valuation method
- Inventory valuation method Chapter 3: Reorder level, EOQ
2 Accounting for Chapter 7: Chapter 4
labour - Measuring labour activity: - Direct/Indirect labour
efficiency ratio, capaciy ratio, - Labour turnover rate
production volume ratio - Labour ratios: efficiency ratio,
- Remuneration methods: time capaciy utilisation ratio,
work, piecework scheme production volume ratio
- Recording labour costs: idle time
ratio
- Labour turnover
- Accounting for labour costs
3 Accounting for Chapter 8: Chapter 5:
overheads - Overheads - Direct & Indirect expenses
- Absorption costing - Absorption costing
- Overhead allocation
- Overhead apportionment: direct,
step-down, reciprocal: repeated
distribution & algebraic
- Overhead absorption
- Blanket absorption rates and
departmental absorption rate
- Over & under absorption
09.04.2024
CHAPTER 16: COMPOUNDING AND DISCOUNTING
Simple interest
CHAPTER 17: INVESTMENT APPRAISAL

CHAPTER 18: NATURE AND PURPOSE OF BUDGETING
Introduction to Budgeting
Budget: a financial plan
Type: Sales budgets, Functional budgets, Cash budgets, Master budget: Budgeted SOPL,
Budgeted SOFP, Cash budget
The principle budget factor – the primary factor that limits an organisation’s activities is SALES
Budgeting stage
- Budget committee
- Budget manual: sets out the procedures
- Limiting factor identified
- Functional budgets prepared (first draft)
- Review of first draft budgets
- Master budget: prepared once the budget committee has agreed to the final drafts of the
functional budgets (Budgeted SOPL – functional budget, Budgeted SOFP – cash budget)
- Budget review process
Sales and Production Budgets
Sales budgets: expected demand & selling price
Production budgets: Closing inventory = Opening inventory + Production – Sales
Standard cost: a predetermined cost of a unit of a product
Raw materials budget: usage & purchases
Labour budget
OH budget
Master Budgets
Cash budget: exclude non-cash items (Depreciation, Profit or loss on NCA, Credit sales)
Asset Expensiture Budget
CHAPTER 19: FIXED AND FLEXIBLE BUDGETS, BUDGETARY CONTROL
AND REPORTING
The Planning and Control cycle:
Set goal – Set objectives and action plans – Budget – Implement – Monitor – Review and
forecast
Responsibility accounting
Cost centre: cost
Revenue centre: revenue
Profit centre: cost + revenue
Investment centre: cost + revenue + asset expenditure
CHAPTER 20: BEHAVIORAL ASPECTS OF BUDGETING
Managerial incentive scheme
- Financial motivation
- Non-financial motivation
Quality of good incentive schemes: Fair – Motivate – Clear – Easily measured
CHAPTER 21: PRESENTING INFORMATION

CHAPTER 22: SUMMARISING AND ANALYSING DATA
26.03.2024
PART B: ACCOUNTING FOR OVERHEADS
DIRECT AND INDIRECT EXPENSES
Prime cost of a product = Direct materials + Direcr labour + Direct expenses
Total cost of a product = Prime cost of a product + Share of overheads
ABSORPTION COSTING PROCESS

Process: Allocation – Apportionment and Reapportionment – Absorption
Why calculate overhead absorption?
- inventory valuations
- pricing decisions
- establishing the profitability of different product
Cost Centres: production costs centre, service cost centre
Whole costs and Common costs
- Whole costs: are overheads attributable to a single cost centre
- Common costs: need to be shared among different cost centres
(1) Overhead allocation: whole cost items are charged direct to a cost unit or cost centre
(2) Overhead apportionment: indirect costs are spread fairly between cost centers
- Apportionment: common costs  production & production service cost center
- Reapportionment: service costs  production cost centers (direct, step-down,
reciprocal, algebraic)
(3) Overhead absorption
- Establish suitable absorption basis: number of labour hours/ machine hours
- Calculate OAR
Total overheads of production cost center
Overhead absorption rate=
Total absorption base
Under and over-absorption

Budgeted productionoverhead
Predetermined OAR=
Budgeted activity levels
$
Overheads absorbed X
Actual overheads (X)
Over/Under - absorption X / (X)
25.03.2024
PART A: MANAGEMENT INFORMATION
DATA: raw material
Primary and secondary data

- Primary data: Machine/Sensor data, Transactional data, Human/Social data
- Secondary data: collected by someone other than the primary user
SAMPLING METHODS
- Random sampling: each element has an equal chance of being chosen, free from bias
- Stratified sampling: dividing the population into strata/categories
- Systematic sampling: every nth member of the population is selected
- Multistage sampling: dividing the population into a number of sub-populations 
selecting a small sample at random
- Cluster sampling: dividing into small groups  selecting one cluster  interviewing
everyone
- Quota sampling: dividing into different groups with interviewers  questioning a
particular proportion of people in each group
INFORMATION: data that has been processed

- Internal sources: the accounting system and records, employees and managers,
production records, administration and other records
- External sources
Good information: ACCURATE
Accurate – Complete – Cost-effective – User-targeted – Relevant – Authoritative – Timely –
Easy-to-use
BIG DATA
- Volume
- Velocity (speed)
- Variety
- Veracity (đáng tin cậy): data quality relating to accuracy and truthfulness
- Value: benefit for the organization > cost of obtaining it
PLANNING, CONTROL AND DECISION-MAKING

Planning: objectives  strategies
Operational planning day-to-day planning, short-term “front-line”/junior managers
or supervisors
Tactical planning relates to business control and the middle managers
allocation of resources
Strategic planning long-term goals senior managers
WRONGDOINGS
PART B: ACCOUNTING FOR LABOUR
DIRECT AND INDIRECT LABOUR
Direct labour cost: overtime worked for customer request
Indirect labour cost:
- Holiday/sick pay
- Idle time
- General overtime premium
MEASURING LABOUR ACTIVITY

- Production: quantity of output produced
- Productivity: a measure of the efficiency with which output has been produced
 An increase in production WITHOUT an increase in productivity will NOT reduce unit costs
 An increase in productivity will reduce unit costs
Efficiency ratio x Capacity ratio=Production volume ratio
Expected hours Actual hours taken Expected hours

x =
Actual hours taken Budgeted hours Budgeted hours
REMUNERATION METHODS
Time work
Wages=Hours worked x Rate of pay per hour
- Overtime payment: hours of overtime are usually paid at a premium rate
- Example: if the basic day-rate is $4 per hour and overtime is paid at time-and-a-quarter,
eight hours of overtime would be paid?
Basic pay ($4 x 8) $32
Overtime premium (25% x $4 x 8) $8
Total $40
Piecework schemes
Wages=Unit produced x Rate of pay per unit
Bonus/Incentive schemes
LABOUR TURNOVER: is the rate at which employees leaves a company

Replacements
Labour turnover rate= x 100 %
Average number of employees∈ period
ACCOUNTING FOR LABOUR COST

Paying wages
Net pay to employees Employee deductions and contributions to external entities
Dr Wages control Dr Wages control
Cr Bank/Cash Cr tax PAYE/employee benefits
Labour costs in Wages control
Dr WIP/Production overheads/Employer contributions
Cr Wages control
Wages Control Account

$ $
Bank X WIP X
Payment of net wages Direct labour costs
Payables (tax, National X Production overheads X

insurance, etc.) Indirect labour costs
Mandatory deductions and
contributions Statement of profit and loss X
Other labour costs (like
employer contributions, etc.)
WRONGDOING
21.03.2024
ACCOUNTING FOR MATERIALS
Classifications of inventories: raw materials, WIP, spare parts/consumables, finished goods
Inventory control system: ordering – purchase – receipt – storage – issue
Inventory costs = Ordering costs + Purchase costs + Holding costs + Stockout costs
• Ordering cost = Number of orders x Cost per order
• Purchase cost = Unit purchased x Unit purchase price
• Holding cost = Average inventory x Holding cost per unit
(Buffer inventory + ½ Reorder quantity)
The ordering, receipt and issue of raw materials

• Purchase requisition: department requiring goods  purchasing department
• Purchase order: purchading department  supplier
• Quotation (báo giá)
• Delivery note: storekeeper signs for the carrier
• Goods received note: storekeeper prepares  a copy is sent to the account department
where it is matched with the copy of the purchase order, the supplier’s invoice is
checked against the purchase order and GRN
Accounting entries for materials

Absorption of production overheads into production: Dr WIP/ Cr Production overheads
Transfer to finished goods: Dr Finish goods/ Cr WIP
Sale of finished goods: Dr COGS/ Cr Finished goods
Inventory control levels: can be calculated in order to mainain inventories at the optimum level
Reorder level = Maximum usage x Maximum lead time
Minimum level = Reorder level – (average usage x average lead time)
(= Buffer inventory)
Maximum level = Reorder level + Reorder quantity – (minimum usage x minimum lead time)
Average inventory = Buffer/Safety inventory + ½ Reorder quantity
Economic Order Quantity (EOQ): is the order quantity which minimizes inventory costs
Economic Batch Quantity (EBQ): is a modification of the EOQ and is used when resupply is
gradual instead of instantaneous
Inventory valuation methods:

- FIFO
- LIFO
- Cumulative weighted average pricing (CWA)
- Periodic weighted average pricing (PWA)
WRONGDOINGS:

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

CHAPTER 17: INVESTMENT APPRAISAL

CHAPTER 21: PRESENTING INFORMATION

ABSORPTION COSTING PROCESS

Under and over-absorption

Primary and secondary data

INFORMATION: data that has been processed

PLANNING, CONTROL AND DECISION-MAKING

MEASURING LABOUR ACTIVITY

Expected hours Actual hours taken Expected hours

LABOUR TURNOVER: is the rate at which employees leaves a company

ACCOUNTING FOR LABOUR COST

Wages Control Account

Payables (tax, National X Production overheads X

The ordering, receipt and issue of raw materials

Accounting entries for materials

Inventory valuation methods:

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