Unit 5 Management Accounting - Level 4

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Unit 5 Management Accounting - Level 4 (Diploma in Business)

Part A

1. Principles of management accounting

a) Influence:

b) Relevance:

c) Analysis:

d) Trust:

2. Role of management accounting and management accounting systems

a) Planning:

b) Organizing:

c) Controlling:

d) Decision making:

3. Use of techniques and methods used in management accounting

4 Calculation of income statements

5. Integration of management accounting to the organization and its benefits.

Part B

Scenario 1

A) A budget is a forecast of what is expected to happen in a business during the next year.'

b) ‘Activity-based budgeting is an approach that takes account of the planned volume of activity to .deduce the figures to go into the budget.'

Scenario 2 (i)

A. Cash budget is a plan that shows the inflows and outflows during the period for which it is calculated. It helps in evaluating if the business has sufficient cash to operate its day to day activities or not. It includes revenues and expenses paid by the business and reflects the position as surplus or deficit.

Cash budget is significant for a business.

b. The cash budget is as follows:

C .Information required by the banker for granting overdraft for further expansion:-

Scenario 2 (ii)

Scenario 3

i) ‘Afavorable direct labor rate variance can only be caused by staff working more efficiently than budgeted.'

ii) ‘When calculating variances, we ignore differences of volume of output, between original budget and actual, by flexing the budget. If there were a volume difference, it is water under the bridge by the time that the variances come to be calculated.'

iii)‘ Most businesses do not have feedforward controls of any type, just feedback controls through budgets.'

Scenario 4


(I) Calculation of NPV, IRR and payback period

(ii) Selection of a project

Scenario 5

A. Cost plus pricing

B. It is important to hold inventories.

c. (i) Calculation of ratios to measure efficiency of working capital management for two years

(ii) Inventory management tools

(iii) Operating cycle

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