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PL5: Management Decision Information
Learning Objectives

The objective of the syllabus is to build on the knowledge of fundamentals of accounting acquired at foundation level in application of IAS and IFRS in preparation and interpretation of financial statements

Key Competencies

On successful completion of this exam, the student shall be able to:

  • Prepare various types of budgets from the available data.
  • Calculation of variances and reconciliation of actual and budgeted profits.
  • Apply linear programming model to decision making.
  • Learn and apply data analysis and statistical techniques.
  • Present performance analysis using performance measurement methods.

GRID Weightage
Budgeting & Standard Costing 20-30
Variance analysis 15-20
Data analysis and statistical techniques 20-50
Capital budgeting 20-30
Performance measurement 20-30
Total 100
Components
Budgeting

  • Explain the purpose and usage of budgeting in monitoring performance.
  • Describe the planning and control mechanism of an entity.
  • Preparation of master budget.
  • Preparation of cost element wise cost budgets.
  • Preparation of cash budgets.
  • Preparation of flexible budgets.
  • Explain the advantages and disadvantages of budgeting.
Variance Analysis
  • Calculation of cost and sales variances.
  • Reconciliation of actual and budgeted profits using the calculated variances.
  • Finding out various cost components using the calculated variances.

Data Analysis and Statistical Techniques
  • Use of sampling methods and sampling techniques:
    • Random sampling, systematic sampling, multistage and stratified
  • Application of linear programming model.
  • High/low method application for separation of fixed and variable components of overheads.
  • Correlation coefficient and coefficient of determination
  • Calculation of moving averages
  • Calculation of mean, median and mode for grouped and ungrouped data
  • Calculation of expected values for decision making
  • Normal distribution and its properties.

Capital Budgeting
  • Application of Net Present Value (NPV) and Internal rate of return (IRR) for discounted cash flows.
  • Calculation of present value using perpetuity formula.
  • Calculate NPV, IRR and payback.
  • Interpretation of NPV, IRR and payback calculation for investment viability.
  • Identification of relevant cash flows for decision making.

Performance Measurement
  • Identification of financial and non-financial performance measures.
  • Calculation of financial measures of performance.
  • Explain and apply Balance scorecard technique.
  • Describe the performance measures related to efficiency, effectiveness and economy and calculation of efficiency, activity and capacity ratios.
  • Calculate and describe return on investment and residual income.
  • Performance measurement of services businesses and its comparison with manufacturing concern’s performance measurement.
  • Performance measurement in non-profit entities.
  • Short term and long term performance measures of businesses.