Chartered Institute of Public Finance and Accountancy (CIPFA) Management Accounting Syllabus

Management Accounting syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Management Accounting in Chartered Institute of Public Finance and Accountancy (CIPFA), not a summary of it.

1. 1

   Cost Behaviour and Classification

   3 topics

   • Cost Classification by Nature and Function
     • Direct and indirect costs
     • Product versus period costs
     • Cost objects and cost units in public services
   • Fixed, Variable and Semi-Variable Costs
     • High-low method of cost estimation
     • Stepped fixed costs
   • Cost-Volume-Profit Analysis
     • Break-even point and margin of safety
     • Contribution and target profit
     • Multi-product break-even analysis
2. 2

   Costing Methods and Systems

   4 topics

   • Absorption Costing and Overhead Apportionment
     • Allocation, apportionment and reapportionment
     • Overhead absorption rates
     • Under- and over-absorption of overheads
   • Marginal Costing and Profit Reconciliation
   • Activity-Based Costing
     • Cost pools and cost drivers
     • Applying ABC in public sector services
   • Job, Batch and Service Costing
3. 3

   Budgeting and Budgetary Control

   4 topics

   • The Budget Cycle and Functional Budgets
   • Approaches to Budgeting
     • Incremental budgeting
     • Zero-based budgeting
     • Rolling and flexible budgets
   • Variance Analysis
     • Material and labour variances
     • Overhead and sales variances
     • Operating statements and reconciliation
   • Behavioural Aspects of Budgeting
4. 4

   Decision-Making Techniques

   3 topics

   • Relevant Costing for Short-Term Decisions
     • Make or buy decisions
     • Limiting factor analysis
     • Shutdown and outsourcing decisions
   • Pricing Decisions in Public Services
   • Performance Measurement and Value for Money

Management Accounting flashcards for Chartered Institute of Public Finance and Accountancy (CIPFA)

18 of 73 cards from the Management Accounting deck — real questions with worked answers.

1. In cost classification by nature, what are the three main elements of total cost?

   Materials, labour and expenses (overheads). Each can be further split into direct and indirect components.

2. How does classification by function divide costs in an organisation?

   Into functional groups such as production (manufacturing) costs, administration costs, selling and distribution costs, and finance costs.

3. Distinguish between direct costs and indirect costs.

   Direct costs can be traced specifically and economically to a single cost object (e.g. direct materials, direct labour). Indirect costs (overheads) cannot be traced directly and must be shared/apportioned across cost objects.

4. What is prime cost?

   Prime cost is the total of all direct costs: $$\text{Prime cost} = \text{Direct materials} + \text{Direct labour} + \text{Direct expenses}$$

5. Define a fixed cost and give its behaviour per unit as output rises.

   A fixed cost stays constant in total within the relevant range regardless of activity (e.g. rent, salaries). Per unit it falls as output rises, since the fixed total is spread over more units.

6. Define a variable cost and describe its total and per-unit behaviour.

   A variable cost changes in direct proportion to activity. Total variable cost rises with output, while the variable cost per unit stays constant within the relevant range.

7. What is a semi-variable (mixed) cost, and how is it expressed algebraically?

   A cost with both a fixed and a variable element (e.g. a phone bill with line rental plus call charges). It is modelled as $y = a + bx$, where $a$ is the fixed element, $b$ the variable cost per unit and $x$ the activity level.

8. Using the high-low method, how do you calculate the variable cost per unit of a semi-variable cost?

   $$b = \frac{\text{Cost at highest activity} - \text{Cost at lowest activity}}{\text{Highest activity} - \text{Lowest activity}}$$ The fixed element is then found by substituting back into total cost at either activity level.

9. What is a stepped fixed cost?

   A cost that is fixed over a range of activity but jumps to a new fixed level once a threshold is crossed (e.g. needing an extra supervisor or warehouse beyond a capacity limit).

10. State the contribution per unit formula.

    $$\text{Contribution per unit} = \text{Selling price per unit} - \text{Variable cost per unit}$$

11. In CVP analysis, what does contribution contribute towards?

    Contribution first covers total fixed costs; any contribution beyond the break-even point becomes profit.

12. Give the break-even point in units formula.

    $$\text{BEP (units)} = \frac{\text{Fixed costs}}{\text{Contribution per unit}}$$

13. Give the break-even point in sales revenue (£) formula.

    $$\text{BEP (£)} = \frac{\text{Fixed costs}}{\text{C/S ratio}}$$ where the contribution-to-sales (C/S) ratio = contribution ÷ sales.

14. What is the contribution-to-sales (C/S) ratio, also called the profit-volume ratio?

    $$\text{C/S ratio} = \frac{\text{Contribution}}{\text{Sales}}$$ It shows the proportion of each £1 of sales that becomes contribution.

15. How do you calculate the sales volume (units) needed to achieve a target profit?

    $$\text{Units} = \frac{\text{Fixed costs} + \text{Target profit}}{\text{Contribution per unit}}$$

16. Define the margin of safety and give its formula in units.

    The margin of safety is how far sales can fall before reaching break-even. $$\text{Margin of safety} = \text{Budgeted (or actual) sales} - \text{Break-even sales}$$ Often expressed as a percentage of budgeted sales.

17. What key assumptions underlie CVP/break-even analysis?

    Selling price, variable cost per unit and fixed costs are constant; costs split cleanly into fixed and variable; activity is the only cost driver; production equals sales (no inventory change); analysis holds only within the relevant range.

18. What is absorption costing?

    A costing method in which product cost includes a share of production overheads as well as direct costs, so fixed production overheads are 'absorbed' into units of output.

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