Management Accounting Archives - Premium Online Hub

Management Accounting

Advanced Audit and AssuranceAudit and AssuranceBusiness Management and Information SystemsCorporate FinanceCorporate ReportingManagement AccountingPublic Sector Accounting and FinanceStrategic ManagementTaxation and Fiscal Policy


mock exam

Thank you for visiting our website today. Our team of Expert Professional Educators has put together the following  mock examination questions with suggested solutions for the May 2018 examination.

Check them out and share with other colleagues to increase their chances of passing as well.

To JOIN our class next semester, fill our Online Admission Form  or send us an Email .


If you have any question and want personalize assistance then email Nhyira Premium .



MA – 2018 MOCK






FM- MOCK 2018


Read on various subjects on our Website

Like our Facebook Page and Join the Discussion on our Facebook Forum


We wish you the very best as you write your Examination.



Nhyira Premium

Managing Partner


read more
Advanced Audit and AssuranceAudit and AssuranceBusiness Management and Information SystemsCorporate FinanceCorporate ReportingFinancial ManagementFinancial ReportingManagement AccountingPublic Sector Accounting and FinanceStrategic ManagementTaxation and Fiscal Policy



Join our revision session for ICAG May 2018 Examination.

Thank you for visiting our website today. Our team of Expert Professional Educators has put together the following documents, analysis and revision time table for the May 2018 examination.

Our revision session comes in three segment; Revision classes, Mock examination and Mock discussion.

Check them out and share with other colleagues to increase their chances of passing as well.

To sign up for the Revision Session, fill our Online Admission Form  or send us an Email .

If you have any question and want personalize assistance then email Nhyira Premium .

Read on various subjects on our Website

Like our Facebook Page and Join the Discussion on our Facebook Forum

Download all your notes here


MODULE 1 – Conceptual Framework






PSAF – Solution

PSAF – Questions


PEH – Level one (MAY 2018)

MODULE 7 – Public fund

MODULE 4 – Envirnmental Analysis

MODULE 3 – Regulatory Framework


We wish you the very best as you write your Examination.



Nhyira Premium

Managing Partner

read more
Business Management and Information SystemsManagement AccountingStrategic Management


Performance Evaluation Drawn on Brick Wall.


It is very important to assess the performance of an organization. Performance evaluation helps stakeholders to make decisions. But the question we ask ourselves is; “……how can we assess the performance of an organization?” The assessment of the organization can be done from two major angles or perspectives. These are: FINANCIAL PERFORMANCE AND NON-FINANCIAL PERFORMANCE.

In an attempt to answer the above question, we will use two models or frameworks to assess the performance of an entity. These are:


This is a strategic planning and management system that is extensively used by entities to align business activities to the vision and strategy of the organization, improve internal and external communication, monitor organization performance against strategic goals. It was originated by Dr. Robert Kaplan (Harvard Business School) and David Norton as PERFORMANCE MEASUREMENT framework that added strategic metrics to give managers and executives a more “balanced” view of organizational performance.

There are four indicators of measuring the performance of management from the view point of Kaplan & Norton. These are:

  1. THE FINANCIAL PERSPECTIVE: This measures the financial performance of the entity. It is the traditional evaluation of the entire business base on the financial statements. Examples include financial ratios such as return on assets, return on equity, liquidity ratios, and return on investment. This answers the question: “HOW DO WE LOOK TO SHAREHOLDERS”.
  2. THE CUSTOMER PERSPECTIVE: Customer measures of performance relate to customer attraction, satisfaction, and retention. These measures provide insight to the key question “How do customers see us” Examples might include the number of new customers and the percentage of repeat customers. Recent management philosophy has shown an increasing realization of the importance of customer focus & customer satisfaction in any business.
  3. INTERNAL BUSINESS PROCESS: Internal business process measures of performance relate to organizational efficiency. These measures help to answer the key question “What must we excel at”. Examples include the time it takes to manufacture the organization’s good or deliver a service. The time it takes to create a new produce and bring it to the market is another example of this type of measure. This allows management to know how well their business is running, and whether its products and services conform to customers’ requirement (the mission) in terms of cost, quality, reliability, etc.
  4. ORGANISATIONAL CAPACITY/ LEARNING & GROWTH: This relates to the future. Such measures provide insight to tell the organization, “Can we continue to improve and create value”. This includes:
  • Employee training and corporate cultural attitude related to both individual and corporate self-improvement
  • Ability to adapt and utilize advancements/changes in technological tools.


C:\Users\user\Pictures\Pictures\Screenshots\wp_ss_20151017_0001.png2. MEASURING PERFORMANCE USING THE TRIPLE BOTTOM LINE: Ralph Waldo Emerson once noted, “Doing well is the result of doing well. That’s what capitalism is all about.” While the balanced scorecard provides a popular framework to help executives understand an organization’s performance. Other frameworks highlight areas such as social responsibility. One such framework, the triple bottom line, emphasizes the THREE Ps of PEOPLE (making sure that the actions of the organization are socially responsible), the PLANET (making sure organizations act in a way that promotes environmental sustainability), and traditional organization PROFIT.

This notion was introduced in the early 1980s but did not attract much attention until the late 1990s.

Read also: This blog, Balance Scorecard Institute, Indiana Business Review

read more
Management Accounting


stock taking


Stocktaking refers to the physical verification of stocks in a store and checking the result against the book stocks. This may be done on a continuous (more frequent) or periodic basis.

Continuous Stocktaking is the counting and valuing of physical stocks more frequently. This involves a specialist team counting and checking a number of stock items on daily basis, so that each item is checked at least once a year. Valuable items with high turnover could be checked more frequently.

This system has the following advantages:

  1. It avoids the long disruption associated with the annual stock count.
  2. Stock discrepancies are revealed promptly.
  • Hold-ups in production are eliminated because stores staff will not be so busy as to be unable to deal with material issues.
  1. Improvement in control over stock levels is enhanced.
  2. Serves as a moral check on stores staff.
  3. More time is available for stock count and this reduces errors in stock count.
  • Regular skilled stock takers can be employed to reduce likely errors.




  1. Not suitable where less stocks are carried.
  2. May interfere with the core activities of the business.
  • Employment of regular stock takers may lead to additional cost.


Periodic Stocktaking

This is the counting and valuing of physical stocks at the end of an accounting period, usually annually. This system is suitable where low levels of stocks are carried.

Discrepancies after Stocktaking

The physical stocks counted in a store may be different from the book stocks in the stock records. This discrepancy must be investigated so as to prevent further occurrence. The following may be the causes of stock discrepancies:

  1. Poor record keeping such as omissions or over/under statement of receipts and issues of stocks.
  2. Theft or pilferage
  3. Damages, deterioration or evaporation
  4. Errors in stock count.

Perpetual and Periodic Inventory Systems

Stock recording may be done regularly or at the end of an accounting period. The recording of stocks such that the stock records are updated after each receipt and issue is called Perpetual Inventory System. Where the sock records are updated with total receipts and issues for a particular accounting period, the system is called Periodic Inventory System.



read more
Management Accounting

Process Costing


Process Costing

Process costing a continuous operation costing method that is applied where homogeneous or standard products are produced in a series of repetitive operations. Examples of industries that use process costing are pharmaceuticals.

Some Process Costing Terms

  1. Normal loss: It is the loss that is expected to occur in a production process. It is an expected loss because it cannot be prevented from occurring. Normal loss units are not given cost. Instead, cost of normal loss is borne by the good output produced. It is normally given as a percentage of input. Normal loss is also known as expected loss.


  1. Abnormal loss: It is any excess loss incurred in a production process over that which is expected. It is calculated as the difference between actual loss and expected loss. It can also be calculated as the difference between expected output and actual output.


  1. Abnormal gain: This refers to any savings in losses in a production process. It is a gain that occurs when actual loss is less than expected loss or when actual output is more than expected output.


  1. Joint products: These are two or more products produced simultaneously in a single process each having significantly high saleable value to merit recognition as a main product. That is, they are two or more products that are produced together in a single production process and each product has a high saleable value that is equal or almost equal to one another, each can be considered a main product. Examples include petrol and diesel fuel, etc.


  1. By product: It is any product produced incidentally to the production of a main product and has minor saleable value relative to the main product. Examples include off-cuts of wood in wood processing; bitumen, petroleum jelly, etc. in oil refining and so on. Revenue generated from the sale of by-product can be treated either,
  • as sundry income and thus credited directly to the income statement or
  • by using it to reduce the process cost before determining cost per unit.


  1. Joint cost: This is the cost incurred in single process that yields two or more products simultaneously. Example can be cost of crude oil used in producing various types of fuel.


  1. Equivalent units: It is a number of fully completed units that represents a given number of uncompleted units. For example, 1,000 units of a particular product that are 40% complete will be equivalent to 400 (1,000 × 40%) fully completed units.


  1. Process scrap: This refers to discarded materials, products or residue from a production process having relatively minor saleable value. Scrap may be sold or reintroduced into the production process. The proceeds from the sale of scrap are normally used to reduce the total process cost before calculating cost per unit. Example of scrap may be the off-cuts of wood in wood processing, etc.



  1. Process waste: This refers to discarded materials, products or residue from a production process without saleable value. Scrap may be sold or reintroduced into the production process. Example may be saw dust in wood processing, etc.


  1. Reworked units: These are substandard products that require further processing before sale.


  1. Split-off point or point of separation: This is a stage in a production process where all the individual products being produced together are separately indentified. For example, the stage in the oil refining process where petrol is separated from diesel fuel.


  1. Further processing cost: It is any cost incurred after the split-off point to make a product complete for sale. That is, the cost incurred in a production process from the split-off point to the point when the final product is ready for consumption. Some products may either be sold immediately after the split-off point or processed further before sale so that they can attract a high selling price.


Where process costing is applied a factory may be divided into different cost centres with each cost centre taking charge of a distinct process. A process account is opened to record the cost incurred in the production process and the value of output transferred. A simple process account may be as follows:


                                       Process Account



Cost Per Units Amount Output


Cost Per Unit Amount
$ $ $ $
Direct material x x x Normal loss x x x
Direct labour x Abnormal loss x x x
Production overhead x Transferred output x x x
Abnormal gain x x x _ _
x x x   x




  1. Abnormal gain and abnormal loss cannot occur together in the same process.
  2. Any scrap value realised from the sale of normal loss is credited to the process account to reduce the total cost of the process. The scrap revenue is matched with any normal loss units in the process account.
  3. Abnormal loss, abnormal gain and transferred output units are valued using the same cost per unit calculated as follows:


Input units less normal loss units are known as expected output.



read more
Management Accounting




Relevant costing refers to the process through which an organisation determine the actual costs which must be taken into consideration in the determination of the cost of a product or service.

Relevant cost can be defined as any cash expenditure arising directly as a result of a particular decision.

The following are some of the characteristics of relevant cost. Relevant cost

  • involves cash flows;
  • is future cost;
  • is controllable;
  • is avoidable;
  • is incremental;
  • is discretionary;
  • it includes opportunity cost, etc.

The following are not relevant costs:

  • past or sunk costs;
  • notional costs such as depreciation, provisions, etc;
  • committed costs;
  • uncontrollable costs, etc.

The above features are explained below.

  1. Relevant costs involve cash flows. Only information that involves cash flows are to be considered in decision making. Therefore costs that are notional such as depreciation, provisions, absorbed overhead, etc are not relevant for decision making.
  2. Relevant costs are future costs. Decisions are about the future, therefore only future costs are to be used. Sunk costs or past costs are not relevant to decision making.
  3. Costs that can be controlled are relevant to a decision.
  4. Avoidable costs are relevant costs because the occurrence depends on future activity or decision.
  5. Relevant costs are incremental in nature. That is, any cost that varies with the level of activity. Differential costs are also relevant costs.
  6. Opportunity cost is relevant cost because it represents the future benefits to be forgone if one alternative is chosen in preference to another.


Note that any future cost that will be incurred anyway regardless of the decision taken is not a relevant cost since it is not incremental in nature, although it is future cost and may involve cash flow. Such costs are called committed costs.


Variable and Fixed Costs

Generally variable costs are relevant costs. However, where a cost qualifying as variable cost has already been incurred, it becomes a sunk cost and therefore will be irrelevant for a decision.

Fixed costs are generally irrelevant costs. But some can be relevant especially when such fixed costs are attributable, avoidable or incremental fixed costs.

Relevant Costs of Material and Labour

  1. Material Costs: The relevant cost of material is its replacement cost (i.e. where the material is used regularly by the business and will be replaced after usage). If the material will not be replaced after usage, the relevant cost is the higher of
  • it resale value and
  • the value if put to alternative use.

Note that where the material has no resale value and other possible use, the relevant cost is zero. Its past cost is a sunk cost therefore irrelevant.


read more
Management Accounting




Incentive scheme refers the mechanisms used by an organisation to pay an extra amount to an employee for his efficiency. The basis for paying bonus is either time saved or extra units produced by the employee.

Bonus may be paid either to individual employees separately or to a group of employees.

Individual bonus schemes are used where the efficiency of employees can be measured individually. Where efficiency of workers can be determined only on group basis, then a group bonus scheme will be applied.

An effective bonus scheme should have the following characteristics:

  1. It should be closely related to the extra effort spent by employees.
  2. It should be agreed by the employer and employees before implementation.
  3. It should be easy to understand and simple to operate.
  4. It must be beneficial to all employees involved in the scheme.

The following are some of the bonus schemes to be discussed:

  1. Rowan Scheme.
  2. Halsey Scheme.
  • Halsey Weir Scheme.
  1. High Day Rate System or Measured Day Work.
  2. Profit Sharing Scheme or Share of Production Plan.


  1. The Rowan scheme calculates premium bonus as follows:

Premium Bonus =   Time Saved  Time Rate


  1. The Halsey Scheme calculates premium bonus as;

Premium Bonus =   Time Saved  Time Rate


  • The Halsey Weir Scheme calculates premium bonus as;

Premium Bonus =   Time Saved  Time Rate



read more
Business Management and Information SystemsCorporate ReportingManagement Accounting




Good Information refers to data that has been processed in such a way as to be meaningful to the person using it.


The accountant’s work is involved with collection of data and processing it into information to be used by various stakeholders.

Data refers to the raw material for data processing. That is, the raw facts, events or transactions that are processed into information.


Information refers to data that has been processed in such a way as to be meaningful to the person using it.

Information may be classified as financial or non-financial. It can also be classified as quantitative or qualitative.


Qualities of Good Information


Good management information must have the following qualities so as to make it useful:

  1. Relevance: Information that is relevant meets the needs and aspirations of management. Irrelevant information does not serve management needs.
  2. Accuracy: Good information should be free of material errors. However there is no need to go into unnecessary detail for pointless accuracy.
  3. Clarity (Understandability): Information must be clear to understand by the user.
  4. Completeness: Information users should have all the facts needed to make a particular decision.
  5. Confidence: Good information must inspire confidence so as to be trusted by users. Where there is uncertainty, the assumptions underlying the information should be stated.
  6. Volume: Good information must be brief and concise. Where possible, the exception principle must be used.
  7. Timeliness (Speed): Information must be prompt for any decision. That is, information which is too late is as bad as too early.
  8. Communication: Information is classified as good when communicated to the right person.
  9. Cost (Economy): The benefit derived from any good information should be greater than the cost of acquiring it.
  10. Channel of communication: Good information must be communicated using the right channel or medium. For example using memos, professional magazines, journals, electronic mail, word-of-mouth, etc

Planning, Controlling and Decision Making

The three main functions of management are planning, decision making and control.

  1. Planning refers to the establishment of business objectives and devising strategies or means to achieve those objectives. The three levels of planning are


Strategic planning (long term planning)

Tactical planning (management control)

Operational planning (operational control or short term planning)

2. Decision making refers to making a choice between alternative courses of action. The three levels of decision making are

  1. Strategic decision
  2. Tactical decision (management decision)
  • Operational decision


  1. Control refers to the setting of standards, measurement of actual results and comparison with the standard set so as to take corrective action where there are deviations or variances.


It must be noted that the three management activities above are interdependent. That is, all three are inseparable in practice. For example, there cannot be effective control without planning and planning without control is practically impossible.


read more
Management Accounting




Cost classification refers to the grouping and sorting out of cost into specific or identifiable items for easy allocation, apportionment and absorption.


Cost classification by element


The elements of cost are

  • material cost,
  • labour cost and
  • Expenses.


  1. Material cost refers to the cost of the basic inputs, ingredients or component that undergo significant changes in a production process.

Give examples of material cost in various industries.


  1. Labour cost refers to the amount paid to employees for the services the render.


  1. Expenses refer to all other cost of a business apart from material and labour costs. They are the costs of the services enjoyed by a business and the costs of using the business own assets.



Cost Classification by Nature or Incidence


Nature of cost addresses whether a particular element of cost is direct or indirect to a particular product, service or activity.


Direct costs are incurred solely and beneficially for a particular product, activity or service. They can be traced easily or in total to a particular product, service or activity.


Indirect costs cannot be traced easily or in total to a particular product, service or activity. There are therefore not incurred solely and beneficially for a particular product, service or activity.


The various element of cost can be classified into direct and indirect.

  1. Direct material cost: This refers to the cost of materials which enter into and become a constituent part of a product. Examples are cost of clinker for cement; crude oil for petrol or diesel; flour for bread; wood for furniture, etc


  1. Direct Labour Cost: This is the cost of remuneration of employees whose effort is applied directly in producing a product or service. Example is wages of shop floor workers


  1. Direct Expenses: These are the expenses incurred solely as a consequence of producing a product, providing a service or running a department. Examples include hire of a special tool for a job; payments of royalty, etc. These are also known as chargeable expenses.


  1. Indirect Material Cost: Cost of material which cannot be traced and in total to a particular product or service.


  1. Indirect labour Cost: This refers to the remuneration of employees whose effort is not applied directly to the product produced or service rendered. Examples include salary of foremen and other non-production personnel.


  1. Indirect Expenses: All expenses that cannot be traced easily or in total to a particular product, service or activity. Examples include electricity, rent, rates, depreciation, fuels, cost of repairs and maintenance, etc.

The sum of direct material cost, direct labour cost and direct expenses is called prime cost. The sum of indirect material cost, indirect labour cost and indirect expenses is called overhead cost.

Analysis of Total Cost

Material  = Direct labour  + Indirect Material
+ +                +
Labour    = Direct Labour  + Indirect Labour
+ +                +
Expenses = direct Expenses + indirect Expenses
= =               =
Total cost = Prime Cost   +     Overhead


read more
Management Accounting




Cost classification by behaviour addresses the effect on cost of changes in the volume of output (output here means production or sales). This classifies costs into

  1. Fixed Cost
  2. Variable cost
  3. Semi fixed/semi-variable cost


  1. Fixed Cost is any cost which remains the same in total irrespective of the level of output. It has the following characteristics;
  • Fixed in total
  • Variable per unit
  • Normally uncontrollable
  • Normally irrelevant for decision
  • Normally non-traceable or indirect in nature
  • It is normally affected by passage of time


Examples of fixed costs include factory rent, straight line depreciation, basic salary per annum of an office clerk etc.



  1. Variable Cost is any cost which changes in total with the level of output. It has the following characteristics;
  • variable in total
  • fixed per unit
  • normally controllable
  • normally  relevant for decision making
  •  normally traceable or direct in nature


Examples of variable cost include raw material cost, wages of direct production personnel, etc.



  1. Mixed cost is any cost which is partly fixed and partly variable. It remains constant within a certain range of activity but varies when that activity level changes. It is also known semi-variable cost or semi-fixed cost. Most cost in practise behaves in this manner. Examples of this type of cost include electricity bill, telephone bills, salesmen salary, car running cost, etc.

Another form of the mixed cost is Stepped Fixed Cost. This remains fixed over a range of activity and changes if that activity level is exceed but becomes fixed again immediately after that change.


Semi-fixed cost may be segregated into its fixed and variable components using any of the following techniques:

  1. High-low method
  2. Regression Analysis

This two may not lead to the same results. The two techniques above assume that mixed costs are linear.



Cost Classification by Function


This is the classification of cost into the major activities undertaken by a business, such as production administration, etc.

  1. Production cost; the cost incurred directly from the production of goods. That is, the cost incurred by a factory up to the point that the products are ready for warehousing. This is made up of cost of raw materials, factory wages and salaries and other production overhead. It is known as a manufacturing cost.


  1. Administration cost: The cost incurred in the formulation of policies, decision making and control of the activities of an organisation. Examples include salaries of office staff, cost of office stationery, cost of office machines, etc.


  1. Selling and marketing cost: The cost incurred in securing orders, creating demand, providing customer service and increasing sales. Examples include salaries of sales reps or sales dept, cost of marketing research, bad debts, showroom expenses, etc


  1. Distribution Cost: The cost incurred in making the finished product ready for despatch and delivering it to the customer. Examples are cost of packaging, salaries of despatch drivers, salaries of packers, cost of packing cases, warehouse costs, etc.


  1. Finance Cost: The cost incurred in securing and servicing finance .Examples are loan interest, share issue expenses, dividends, cash discount, etc.


  1. Research and Development Cost: the cost incurred for the acquisition of new or improved knowledge in the production of goods and services. Examples are salaries of research personnel, cost of research equipment, etc.


read more
1 2
Page 1 of 2