This is the 8th video in the series of 11 covering section C - Decision-making techniques of ACCA’s F5 – Performance Management including:
1. Relevant cost analysis
2. Cost volume profit analysis
3. Limiting factors
4. Pricing decisions
5. Make-or-buy and other short-term decisions
6. Dealing with risk and uncertainty in decision-making
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Download F5 2022 - 2023 Syllabus here: [ Ссылка ]#
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On successful completion of this video, you will be able to:
1. Relevant cost analysis - Covered in Video 1
a) Explain the concept of relevant costing.
b) Identify and calculate relevant costs for a specific decision situations from given data.
c) Explain and apply the concept of opportunity costs.
2. Cost volume profit analysis - Covered in Video 2
a) Explain the nature of CVP analysis.
b) Calculate and interpret the break-even point and margin of safety
c) Calculate the contribution to sales ratio, in single and multi-product situations, and demonstrate an understanding of its use.
d) Calculate target profit or revenue in single and multi-product situations, and demonstrate an understanding of its use.
e) Interpret break-even charts and profit volume charts and interpret the information contained within each, including multi-product situations.
f) Discuss the limitations of CVP analysis for planning and decision making.
3. Limiting factors - Covered in Video 3 - Limiting Factor, 4 - Linear programming, & 5 – Shadow Price
a) Identify limiting factors in a scarce resource situation and select an appropriate technique.
b) Determine the optimal production plan where an organization is restricted by a single limiting factor, including within the context of make-or-buy decisions.
c) Formulate and solve multiple scarce resource problems using both linear programming graphs and using simultaneous equations as appropriate.
d) Explain and calculate shadow prices (dual prices) and discuss their implications on decision-making and performance management.
e) Calculate slack and explain the implications of the existence of slack for decision-making and performance management.
4. Pricing decisions - Covered in Video 6
a) Explain the factors that influence the pricing of a product or service.
b) Calculate and explain the price elasticity of demand.
c) Derive and manipulate a straight line demand equation. Derive an equation for the total cost function (including volume based discounts).
d) Calculate the optimum selling price and quantity for an organization, equating marginal cost and marginal revenue.
e) Evaluate a decision to increase production and sales levels, considering incremental costs, incremental revenues and other factors.
f) Determine prices and output levels for profit maximisation using the demand based approach to pricing (both tabular and algebraic methods).
g) Explain different price strategies.
h) Calculate a price from a given strategy using cost-plus and relevant cost.
5. Make-or-buy and other short-term decisions - Covered in Video 7 - Decision Making Techniques
a) Explain the issues surrounding make vs. buy and outsourcing decisions.
b) Calculate and compare “make” costs with “buy-in” costs.
c) Compare in-house costs and outsource costs of completing tasks and consider other issues surrounding this decision.
d) Apply relevant costing principles in situations involving shut down, one-off contracts and the further processing of joint products.
6. Make-or-buy and other short-term decisions - Covered in Video 8 – Risk & Uncertainty, 9 - Payoff Tables, 10 - Decision Trees, & 11 - Sensitivity Analysis
a) Suggest research techniques to reduce uncertainty e.g. focus groups, market research.
b) Explain the use of simulation, expected values and sensitivity.
c) Apply expected values and sensitivity to decision-making problems.
d) Apply the techniques of maximax, maximin, and minimax regret to decision-making problems including the production of profit tables.
e) Interpret a decision tree and use it to solve a multi-stage decision problem.
f) Calculate the value of perfect and imperfect information.
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Transcript:
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