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BPP Learning Media is the sole ACCA Platinum Approved Learning Partner –
content for the FIA and ACCA qualifications. In this, the only FMA/F2 study text to
be reviewed by the examiner:
 We highlight the most important elements in the syllabus and the key skills
you will need
 We signpost how each chapter links to the syllabus and the study guide
 We provide lots of exam focus points demonstrating what the examiner will
want you to do

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organisations that do. If they act illegally and unethically in
one area, can you really trust them?
CONTENTS

iii
Contents
Page
Introduction
Helping you to pass – the ONLY FMA/F2 study text reviewed by the examiner! v
Chapter features vi
Studying FMA/F2 vii
The Computer Based Examination xvi
Tackling Multiple Choice Questions xvii
Part A
The nature, source and purpose of management information
1 Accounting for management 3
2 Sources of data 19
3 Cost classification 37
4 Cost behaviour 55
5 Presenting information 75
Part B
Cost accounting techniques
6 Accounting for materials 97
7 Accounting for labour 129
8 Accounting for overheads 151
9 Absorption and marginal costing 179
10 Job, batch and service costing 193
11 Process costing 215
12 Process costing, joint products and by-products 243
13 Alternative costing principles 255


FMA/F2 MANAGEMENT ACCOUNTING

iv
INTRODUCTION

v
Helping you to pass – the ONLY FMA/F2 study text reviewed by the
examiner!
BPP Learning Media – the sole Platinum Approved Learning Partner -
content
As ACCA’s sole Platinum Approved Learning Partner – content, BPP Learning Media gives you the
unique opportunity to use examiner-reviewed study materials for exams from February 2013 to January
2014. By incorporating the examiner’s comments and suggestions regarding the depth and breadth of
syllabus coverage, the BPP Learning Media Interactive Text provides excellent, ACCA-approved support
for your studies.
The PER alert!
To become a Certified Accounting Technician or qualify as an ACCA member, you not only have to pass
all your exams but also fulfil a practical experience requirement (PER). To help you to recognise areas
of the syllabus that you might be able to apply in the workplace to achieve different performance
objectives, we have introduced the ‘PER alert’ feature. You will find this feature throughout the
Interactive Text to remind you that what you are learning in order to pass your FIA and ACCA exams is
equally useful to the fulfilment of the PER requirement.
Your achievement of the PER should be recorded in your online My Experience record.
Tackling studying
Studying can be a daunting prospect, particularly when you have lots of other commitments. The
different features of the Text, the purposes of which are explained fully on the Chapter features page,

Study Guide

Links the chapter content with ACCA guidance.

Fast Forward

Summarises the content of main chapter headings,
allowing you to preview and review each section easily.

Key Term

Definitions of important concepts that can often earn you
easy marks in exams.

Exam Focus
Point

Tell you how specific topics may be examined.

Formula

Formulae which have to be learnt.

PER Alert

This feature gives you a useful indication of syllabus areas
that closely relate to performance objectives in your
Practical Experience Requirement (PER).

Question

Bank, checking your answers carefully against the Exam Answer Bank.
(d) Before you take the exam, check that you still remember the material using the following quick
revision plan.
(i) Read through the chapter topic list at the beginning of each chapter. Are there any gaps
in your knowledge? If so, study the section again.
(ii) Read and learn the key terms.
(iii) Look at the exam focus points. These show the ways in which topics might be examined.
(iv) Read the chapter roundups, which are a summary of the fast forwards in each chapter.
(v) Do the quick quizzes again. If you know what you're doing, they shouldn't take long.
This approach is only a suggestion. You or your college may well adapt it to suit your needs.
Remember this is a practical course.
(a) Try to relate the material to your experience in the workplace or any other work experience you
may have had.
(b) Try to make as many links as you can to other papers at the Introductory and Intermediate levels.

What FMA/F2 is about
The aim of this syllabus is to develop a knowledge and understanding of the principles and techniques
used in recording, analysing and reporting costs and revenues for internal management purposes. It
covers management information, cost recording, costing techniques, budgeting and performance
measurement.
For practice and revision use BPP Learning Media’s Practice and Revision Kit, iPass and Passcards.
To provide the knowledge and practice to help you succeed in the examination for Paper FMA/F2
Management Accounting.
FMA/F2 MANAGEMENT ACCOUNTING

viii

Approach to examining the syllabus
Paper FMA/F2 is a two-hour paper. It can be taken as a written paper or a computer based examination.
The questions in the computer based examination are objective test questions – multiple choice, number

INTRODUCTION

xi

FMA/F2 MANAGEMENT ACCOUNTING

xiiINTRODUCTION

xiii

FMA/F2 MANAGEMENT ACCOUNTING

xivINTRODUCTION

xv

FMA/F2 MANAGEMENT ACCOUNTING

xvi

The Computer Based Examination
Computer based examinations (CBEs) are available for the first seven FIA papers (not papers FAU, FTX
or FFM) and ACCA papers F1, F2, and F3, in addition to the conventional paper based examination.
Computer based examinations must be taken at an ACCA CBE Licensed Centre.


Multiple response – select more than one response by clicking the appropriate tick boxes

Multiple response matching – select a response to a number of related statements by choosing
one option from a number of drop down menus

Number entry – key in a numerical response to a question

The January 2012 issue of ACCA Student Accountant magazine contains an article on CBEs. Ensure
that you are familiar with this article.
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For more information on computer-based exams, visit the ACCA website.
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INTRODUCTION

xvii
Tackling Multiple Choice Questions
MCQ's are part of all FIA exams and ACCA papers F1, F2 and F3. They form the paper-based exams
and may appear in the CBE.
The MCQs in your exam contain four possible answers. You have to choose the option that best
answers the question. The three incorrect options are called distracters. There is a skill in answering
MCQs quickly and correctly. By practising MCQs you can develop this skill, giving you a better chance of
passing the exam.
You may wish to follow the approach outlined below, or you may prefer to adapt it.
Step 1
Skim read all the MCQs and identify what appear to be the easier questions.
Step 2
Attempt each question – starting with the easier questions identified in Step 1. Read
the question thoroughly. You may prefer to work out the answer before looking at the
options, or you may prefer to look at the options at the beginning. Adopt the method

FMA/F2 MANAGEMENT ACCOUNTING

xviii

1 The nature, source and purpose of
management information
part
PART A: THE NATURE, SOURCE AND PURPOSE OF MANAGEMENT INFORMATION

2 3
C H A P T E R TOPIC LIST
SYLLABUS
REFERENCE
1 Information A1 (e), (f)
2 Planning, control and decision-making A1 (c), (d)

K

(b) Compare and contrast financial accounting with cost and
management accounting
K

(c) Outline the managerial processes of planning, decision making
and control
K

(d) Explain the difference between strategic, tactical and
operational planning
K

(e) Distinguish between 'data' and 'information'
K

(f) Identify and explain the attributes of good information
K

(g) Explain the limitations of management information in providing
guidance for managerial decision-making
K 1 Information
1.1 Data and information
Data is the raw material for data processing. Data relate to facts, events and transactions and so forth.
Information is data that has been processed in such a way as to be meaningful to the person who
receives it. Information is anything that is communicated.

therefore important to choose the most appropriate presentation medium or channel of
communication.
(e) Confidence. Information must be trusted by the managers who are expected to use it. However
not all information is certain. Some information has to be certain, especially operating
information, for example, related to a production process. Strategic information, especially
relating to the environment, is uncertain. However, if the assumptions underlying it are clearly
stated, this might enhance the confidence with which the information is perceived.
(f) Communication. Within any organisation, individuals are given the authority to do certain tasks,
and they must be given the information they need to do them. An office manager might be made
responsible for controlling expenditures in the office, and given a budget expenditure limit for the
year. As the year progresses, the manager might try to keep expenditure in check but unless they
are told throughout the year what is the current total expenditure to date, they will find it difficult
to judge whether they are keeping within budget or not.
(g) Volume. There are physical and mental limitations to what a person can read, absorb and
understand properly before taking action. An enormous mountain of information, even if it is all
relevant, cannot be handled. Reports to management must therefore be clear and concise and in
many systems, control action works basically on the 'exception' principle.
(h) Timing. Information which is not available until after a decision is made will be useful only for
comparisons and longer-term control, and may serve no purpose even then. Information prepared
too frequently can be a serious disadvantage. If, for example, a decision is taken at a monthly
meeting about a certain aspect of a company's operations, information to make the decision is
only required once a month, and weekly reports would be a time-consuming waste of effort.
(i) Channel of communication. There are occasions when using one particular method of
communication will be better than others. For example, job vacancies should be announced in a
medium where they will be brought to the attention of the people most likely to be interested.
The channel of communication might be the company's in-house journal, a national or local
newspaper, a professional magazine, a job centre or school careers office. Some internal
memoranda may be better sent by 'electronic mail'. Some information is best communicated
informally by telephone or word-of-mouth, whereas other information ought to be formally
communicated in writing or figures.

(g) What other relevant information is available which could be used instead?
An assessment of the value of information can be derived in this way, and the cost of obtaining it should
then be compared against this value. On the basis of this comparison, it can be decided whether certain
items of information are worth having. It should be remembered that there may also be intangible
benefits which may be harder to quantify.

1.3 Why is information important?
Consider the following problems and what management needs to solve these problems.
(a) A company wishes to launch a new product. The company's pricing policy is to charge cost plus
20%. What should the price of the product be?
(b) An organisation's widget-making machine has a fault. The organisation has to decide whether to
repair the machine, buy a new machine or hire a machine. What does the organisation do if its
aim is to control costs?
(c) A firm is considering offering a discount of 2% to those customers who pay an invoice within
seven days of the invoice date and a discount of 1% to those customers who pay an invoice
within eight to fourteen days of the invoice date. How much will this discount offer cost the firm?
In solving these and a wide variety of other problems, management need information.
(a) In problem (a) above, management would need information about the cost of the new product.
(b) Faced with problem (b), management would need information on the cost of repairing, buying
and hiring the machine.