Cima - P3 - Control System And Budgeting

Front 1

What is Standard Costing?

Back 1

Standard costing is a control technique which compares standard costs and revenues with actual results to obtain variances which are used to stimulate improved performance.

Front 2

What is Capital investment appraisal

Back 2

Capital investment appraisal is a technique that considers decisions such as whether or not to invest, whether to invest in one project or one piece of equipment rather than another and whether to invest now or at a later time. There are three main methods of evaluating investments—accounting rate of return, payback and discounted cash flow (DCF).

Front 3

What is Overhead allocation?

Back 3

Overhead allocation is the process of spreading production overheads (i.e. those that cannot be traced directly to product/services) equitably over the volume of production.

Front 4

Strategic thinking has created the idea of developing a strategic competitive advantage for an organisation

How is Strategic management accounting different from traditional accounting practices?

Back 4

Various attributes and the characteristics of the information used. Strategic cost management uses the value chain framework in order to understand the behaviour of costs and sources of differentiation.

moving towards a preferred future state.

reacting to environmental changes.

dynamic approach, based on forecasting.

wide frame of reference.

Front 5

What is Lean Management accounting

Back 5

Lean management accounting is about relevant accounting, performance measurement and control techniques to support lean manufacturing and sustain a lean enterprise.

Lean thinking savagely eliminates waste within value streams. Methods used in lean management accounting include kanban and backflushing

Front 6

What is a common conflict between traditional accounting and lean accounting?

Back 6

The build up of stock in traditional account would be seen as assets accumulation in traditional accounting but is seen as waste in lean accounting

Front 7

what are the 5 principle of lean accounting?

Back 7

1 Value to customer reflected by target costing

2. Manage business through value streams rather than departments

3. Flow of product/services through value stream while reducing waste

4 Pull of product and service by demand rather than push of production

5. Continuous and breakthrough improvement

Front 8

A transfer price refers to the price used for intra-company transfers, i.e., transfers between segments of a company

what are three thing to consider in transfer pricing?

Back 8

1. should transfer take place

2. what should the price be

3. should central office get involved to set price

Front 9

What are the objectives of transfer pricing

Back 9

1. Aid evaluation of segment performance

2. Maintain divisional autonomy

3. Buying segment information (make or buy)

Front 10

What are the benefits of good budgeting?

Back 10

Compel planning

Allow plans to be implemented

Provide performance measure information

Promote communication and co-ordination

Front 11

What are some criticisms of traditional budgets?

Back 11

excessive reliance on past data, and extrapolating past trends.

the use of fixed 'across the board' percentage increases/reductions of budgets.

budgeting as if functional areas are independent of the rest of the organisation.

over-emphasising a fixed time horizon, such as a year. Meeting annual targets becomes a key task to be accomplished above all else.

a preoccupation with financial events in the budget period.

budget are only used at the end of the budget period to evaluate performance.

budgets are too often used to attribute blame for 'bad' performance.

budgets are too often imposed on staff from top management.

Front 12

How can the budget process be improved

Back 12

link budgeting explicitly to strategy.

Use activity-based budgeting.

Explicitly adopt a cross-functional approach to budgeting where interdependencies across functional areas of the value chain are recognised.

tailor the budget cycle to the purpose of budgeting.

focus on value creation.

balance financial and non-financial (e.g. time and quality) aspects.

signal to all employees the need for continual improvement.

remember budgeting is a human process

Front 13

What is Activity-based budgeting models

Back 13

Activity-based budgeting models the costs of different projects, products and activity levels, allowing managers to evaluate different outcomes, and where appropriate attempts to reduce the consumption of cost drivers before costs are committed or locked in.

Front 14

what does a total life cycle budgeting system provide?

Back 14

A total life cycle budgeting system provides managers with information to understand and manage costs across the whole of the organisation's activities, from research and development to customer service.

Front 15

Just-in-time has been defined as the constant and relentless pursuit of the elimination of waste, with waste being widely defined to include anything that does not add value to the product. The main management principles of JIT are?

Back 15

Cut order sizes and increase the frequency of raw material orders

Cut buffer/safety stock levels

Reduce purchasing costs

Improve material handling

Seek reliable suppliers

Reduce the product cycle time, i.e. the time from customer order to delivery

Improve continually

Front 16

Total quality management is a management philosophy that requires the management to look at all aspects of their operations and consider the quality aspects of all activities.

How does it affect cost

Back 16

Cost of quality move to prevention in aim to reduce failure cost whether internal or external

Front 17

Cost of quality is not recognised in the traditional budgeting systems. To operate a TQM system a new form of budgeting, which makes the cost of quality visible, is required. TQM requires costs to be categorised into four headings?

Back 17

Prevention costs

Appraisal costs

Internal failure costs

External failure costs

Front 18

There are 12 principles enshrined in the BBRT model what are they?

Back 18

1. Governance—clear purpose, principles and values
2. Empowerment—freedom and capability to act
3. Accountability—for meeting competitive outcomes
4. Organisation—interdependent, customer-oriented units
5. Coordination—of cross company interactions
6. Leadership—challenge and coach people, not command and control
7. Goal setting—beat the competition, not the budget
8. Strategy process—continuous and inclusive process
9. Anticipatory systems—inform strategy, not adjust
10. Resource allocation—make resources available as and when required
11. Measurement and control—fast, open information
12. Motivation and rewards—based on company and unit level competitive performance

Front 19

BBRT model recognises six critical success factors arising from the changing environment:

Back 19

Fast response

Best people

Continuous innovation

Operational excellence

Customer intimacy

Shareholder value

Front 20

What are some of the dysfunctiona behaviour that budget can produce

Back 20

Tunnel vision - only looking a metric not outcomes

Sub-optimisation - achieve budget not best performance

Short term focus

Gaming system

inhibit innovation

Front 21

what are two main type of benefit from BBRT?

Back 21

the first beyond budgeting opportunity—enabling a more adaptive performance management process.

the second beyond budgeting opportunity—enabling radical decentralisation.

Front 22

what is a flexible budget?

Back 22

A flexible budget is a budget that is flexed, that is standard costs per unit are applied to the actual level of business activity.