ACCA Pakistan Management Accounting (MA) Syllabus

What are the two main remuneration methods, time-based and piecework?

Time-based pay = hours worked × rate per hour (plus any overtime). Piecework pay = units produced × rate per unit, rewarding output rather than time. Bonus/incentive schemes combine elements of both.

What is the difference between cost allocation and cost apportionment?

Allocation assigns a whole cost item directly to a single cost centre that caused it. Apportionment shares a cost that relates to several cost centres between them using a fair basis (e.g. floor area for rent).

What is overhead absorption (recovery) and how is the overhead absorption rate calculated?

Absorption charges overheads to cost units. OAR = Budgeted total overheads ÷ Budgeted level of activity (e.g. budgeted labour hours or machine hours).

How is under- or over-absorption of overhead calculated?

Absorbed overhead = actual activity × predetermined OAR. If absorbed > actual overhead incurred, it is over-absorbed (credit to P&L). If absorbed < actual, it is under-absorbed (extra charge to P&L).

What is reciprocal servicing and how can it be dealt with?

Reciprocal servicing occurs when two service cost centres do work for each other. It is resolved using the repeated distribution (continuous allotment) method or the simultaneous equations (algebraic) method.

What is the key difference between marginal costing and absorption costing?

Marginal costing charges only variable production costs to units and treats fixed production overhead as a period cost. Absorption costing includes fixed production overhead in unit cost and carries it in inventory.

Define contribution and give its formula.

Contribution = Sales revenue − Variable costs. It contributes first to covering fixed costs and then to profit. Per unit: Contribution = Selling price per unit − Variable cost per unit.

How does the difference in inventory levels reconcile marginal and absorption costing profit?

Difference in profit = change in inventory units × fixed overhead absorption rate per unit. If inventory increases, absorption profit is higher; if inventory decreases, absorption profit is lower.

State one advantage of marginal costing and one of absorption costing.

Marginal costing: avoids carrying fixed overhead in inventory and gives clearer contribution for decisions. Absorption costing: complies with IAS 2 for external reporting and ensures fixed overheads are recovered in product cost.

What is job costing and when is it used?

Job costing is used when work is done to specific customer orders, each job being unique and separately identifiable (e.g. a printing order). Costs are collected per job on a job cost card.

What is batch costing and how is the cost per unit found?

Batch costing applies where identical items are produced in distinct batches. Total batch cost is accumulated, then cost per unit = total batch cost ÷ number of units in the batch.

In process costing, what are normal loss and abnormal loss?

Normal loss is the expected, unavoidable loss inherent in the process (given no cost beyond any scrap value). Abnormal loss is loss exceeding the normal expected level; it is costed at the same rate as good output and charged to the P&L.

How is the cost per unit calculated in process costing with normal loss having scrap value?

Cost per expected unit = (Total process costs − Scrap value of normal loss) ÷ (Input units − Normal loss units).

What are equivalent units and why are they used in process costing?

Equivalent units convert partly-completed work-in-progress into an equivalent number of fully-completed units, so that process costs can be fairly spread over both finished output and closing WIP.

Distinguish abnormal loss from abnormal gain in process costing.

Abnormal loss is actual loss greater than normal loss (debited to abnormal loss account). Abnormal gain is actual loss less than expected (output higher than expected); it is a credit valued at the normal cost per unit.

How are joint products and by-products different, and how are joint costs apportioned?

Joint products have significant sales value; by-products have minor value. Joint costs are apportioned to joint products by physical units or by sales value at split-off. By-product income is usually deducted from process costs.

What is service (operation) costing and what feature makes it distinctive?

Service costing measures the cost of providing a service rather than a product. It is distinctive because it often uses composite cost units (two measures combined) and has a high proportion of indirect costs and intangible output.

Give two examples of composite cost units used in service costing.

Examples: cost per tonne-kilometre (freight transport), cost per patient-day (hospitals), cost per passenger-mile (passenger transport), cost per occupied bed-night (hotels).

What is the difference between a functional budget and the master budget?

A functional (subsidiary) budget covers one function or activity (e.g. sales, production, materials). The master budget is the summary that consolidates all functional budgets into a budgeted income statement, statement of financial position and cash budget.

What is the principal (key) budget factor and why is it identified first?

The principal budget factor is the limiting factor that constrains the entire budget (usually sales demand). It is identified first because all other budgets must be built around it.

How is the production budget (in units) calculated from the sales budget?

Production (units) = Sales units + Closing finished goods inventory − Opening finished goods inventory.

How is the material purchases budget (in units) calculated?

Material purchases = Material needed for production + Closing material inventory − Opening material inventory. Material needed = production units × material per unit.

What is a cash budget and what are its main sections?

A cash budget forecasts cash receipts and payments period by period. Sections: opening balance, cash receipts, cash payments, net cash flow, and closing balance — highlighting surpluses or deficits to be managed.

What is a flexible budget and how does it differ from a fixed budget?

A fixed budget is set for one planned activity level and not changed. A flexible budget is restated (flexed) to reflect the actual activity level achieved, so that variable costs are adjusted for a meaningful comparison.

Why must a budget be flexed before calculating meaningful variances?

Flexing adjusts the budget to the actual output level so that comparison isolates true cost/efficiency differences rather than differences simply caused by producing more or fewer units than planned.

What is budgetary control and how is feedback used in it?

Budgetary control compares actual results against budget, calculates variances, and uses this feedback to investigate and take corrective action. It supports planning, coordination, motivation, control and performance evaluation.

Distinguish controllable from uncontrollable costs in responsibility accounting.

A controllable cost can be influenced by a particular manager within a given period. An uncontrollable cost cannot be influenced by that manager. Managers should be held responsible only for costs they control.

What are the main purposes (benefits) of budgeting?

Planning, Coordination, Communication, Control, Motivation, Authorisation of expenditure, and Performance evaluation — often remembered by the mnemonic 'PCs FACE' or similar.

What is standard costing and what is a standard cost?

Standard costing sets predetermined unit costs (standards) for materials, labour and overheads, then compares actual costs against them. A standard cost is the planned cost of one unit under efficient operating conditions.

Name the four main types of standard.

Ideal standard (perfect conditions, no waste), Attainable standard (efficient but realistic, allows some normal waste), Current standard (based on current conditions), and Basic standard (unchanged over a long period as a comparison base).

What is the total direct material cost variance and how does it split?

Total material variance = (standard cost of material for actual production) − (actual cost of material). It splits into the material price variance and the material usage variance.

How are the material price and material usage variances calculated?

Price variance = (Standard price − Actual price) × Actual quantity purchased/used. Usage variance = (Standard quantity for actual output − Actual quantity used) × Standard price.

How are the labour rate and labour efficiency variances calculated?

Rate variance = (Standard rate − Actual rate) × Actual hours paid. Efficiency variance = (Standard hours for actual output − Actual hours worked) × Standard rate.

What is the labour idle time variance and how is it found?

The idle time variance arises when hours are paid but not worked. Idle time variance = Idle hours × Standard rate per hour, and it is always adverse.

How is the variable overhead total variance split, and how is each part calculated?

It splits into expenditure and efficiency. Expenditure = (Actual hours × Standard rate) − Actual variable overhead. Efficiency = (Standard hours for actual output − Actual hours) × Standard variable overhead rate.

How is the fixed overhead expenditure variance calculated?

Fixed overhead expenditure variance = Budgeted fixed overhead − Actual fixed overhead. It compares planned spending against actual spending on fixed overheads.

Under absorption costing, how does the fixed overhead volume variance split?

The fixed overhead volume variance = (actual output − budgeted output) × standard fixed OAR per unit. It splits into the fixed overhead capacity variance and the fixed overhead efficiency variance.

How are the sales price and sales volume variances calculated?

Sales price variance = (Actual price − Standard price) × Actual units sold. Sales volume variance = (Actual units sold − Budgeted units sold) × Standard contribution per unit (marginal costing) or standard profit per unit (absorption costing).

In an operating statement, how do you reconcile budgeted profit to actual profit under marginal costing?

Start with budgeted profit, add the sales volume contribution variance to get budgeted profit at actual volume, then add favourable and deduct adverse cost and sales price variances to arrive at actual profit.

What distinguishes the profit reconciliation under absorption costing from marginal costing?

Absorption reconciliation uses the sales volume profit variance and includes both fixed overhead expenditure and volume variances. Marginal reconciliation uses the sales volume contribution variance and includes only the fixed overhead expenditure variance (no volume variance).