ACCA Paper P5 (INT) Advanced Performance management - Pocket notes - Kaplan

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Changes in business structure and management accounting

Changes in business structure and management accounting Chapter 4

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Activity-based management (ABM)

The use of activity based cost information •

for management purposes such as

customer profitability analysis and value

engineering.

Used to:•

re-price products and optimise new –

product design

reduce costs –

influence strategic and operational –

planning.

Implementing ABM

assigncoststoproductsand

customersbasedonactivityusage

Collectdataonactivitydemands

byproductandcustomer

groupindirectcostsby

activityusingcostdrivers

Determinecostdriversbyactivity

Determinekeyactivities

Changes in business structure and management accounting

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Key features of ABM

Cost visibility.•

The use of activity cost profiles.•

Example – activity cost profile

lastyear

Currentyear

purchasing

Quality

control

set-ups

Material

handling

Cost(£)

Exam focus

Recent exam questions

December 2008 - Question 5

June 2008 - Question 4

The impact of information

technology

In this chapter

The influence of IT on businesses.•

Immediate input and output of data.•

The need for continual systems development.•

chapter

The impact of information technology

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The impact of information technology Chapter 5

The emphasis in P5 is on the application of information systems for performance management and

the practical issues associated with their use.

Exam focus

THE

INFLUENCE

OF IT

information

iseasier&

cheapertoaccess

Vastquantitiesof

historical

information

canbe

held

Customers

requiring

afastand

fullresponse.

Management

accountinghas

developedin

conjunctionwith

iTsystems

‘E-commerce’

abCsystems

makemore

informationdemands

importanceofaccessing

internalandexternal

information

iTsystemshave

changedtheway

businessesarerun.

The impact of information technology

The impact of information technology Chapter 5

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Standard

Thebudget

Comparator

Theperformancereport

comparingactualwithbudget

Effector

Managerwhotakes

actiontoimprove

performance

Process

Sensor

Costingsystem

whichrecords

actualcosts

Feedback

actualresults

fortheperiod

Outputs

Inputs

Immediate input and

output of data

The budgetary control system

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The impact of information technology Chapter 5

Modern computerised systems using

immediate input and output attempt to

address problems with the traditional system.

Delays at the sensor, feedback, •

comparator stage and effector stages.

The impact of the environment on the •

system.

Feedback may be incomplete.•

Immediate input and output means:

comparisons are continually available•

quick and easy to make accurate •

changes

ABC procedures can be incorporated•

continuous access to internal •

and external data for trends and

benchmarking.

The need for continual

systems development

Information and accounting systems need to

be developed continually otherwise they will

become out of date.

The impact of information technology The impact of information technology Chapter 5

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Need for

continuous

improvement

of systems

business

growthand

diversication

new

manufacturing

processese.g.JiT

increased

competition

availability

ofnew

technologies

new

accounting

developments

greater

customisation

ofproducts

needfor

fasterinnovation

shiftfrom

manufacturingto

serviceindustries

increaseduse

oftheinternet

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The impact of information technology Chapter 5

MRP1 - ‘material requirements planning’. A system that allows planned production to be expressed

in the form of a full listing of the required materials and components.

MRP2 - ‘manufacturing resource planning’. MRP1 extended to include a listing of labour, machine,

facility, transport and finance utilisation.

ERP - ‘enterprise resource planning’. An advanced development of MRP2 extended to include sales

and customer details, and which may offer a degree of integration with the budgeting system.

SCM - ‘supply chain management’. The final development of MRP and ERP, which extends the

planning model both up and down the supply chain to include both suppliers and customers.

Recent exam questions

December 2008 Q2 C/D, December 2007 Q3 C.

 Material Materialand business planningthrough

 procurement plantutilisation operation allbusinesseson

 planning planning planning asupplychain

 MRp1 MRp2 ERp sCM

 1960s 1970s 1980s 1990s



Exam focus

The impact of information technology The impact of information technology Chapter 5

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Notes:

The impact of information technology

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ACCA Paper P5 (INT) Advanced Performance management - Pocket notes - Kaplan - 2010

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