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Lecturers’ Conference 2006 Questions and Answers for

P2 Management Accounting Decision Management Question 1: In the February 2006 issue of Financial Management magazine, there was an article on process costing, which was marked as relevant for P2. Since Process costing is not in the P2 syllabus, can such an area be tested to that extent in the examination? Answer: Process costing is in the Certificate level and is therefore assumed knowledge at Managerial level. This question therefore highlights the problems that we face at Managerial level that candidates do not possess the basic Certificate level knowledge to understand the questions and scenarios that are set. Whilst it is unlikely that the Management Accounting Decision Management exam will require candidates to prepare process accounts, they are expected to understand them sufficiently to be able to extract relevant data from them in the context of decision making. Question 2: In the March 2006 issue of Financial Management magazine, there was an article on Decision Analysis, which was marked as relevant for P2. I don’t see this in the syllabus for this subject. What is the relevance of this article? Answer: Whilst this article is of general relevance and interest to students studying for the Managerial level papers in the management accounting and business management pillars and provided deep background to the papers listed, the techniques mentioned in the article are not specifically covered within the CIMA syllabus and will not be the subject of examination questions. Question 3: To what extent will tax be tested? Answer: Only within the context of project evaluation and in terms of income based tax and tax depreciation (UK capital allowances). Questions will be based on a simplistic tax system which will be fully explained in terms of timings, split of payment etc. Question 4: Will you examine initial allowances? Answer: No, this would be disadvantageous to candidates from certain international areas. Question 5: Will you test ABC? Answer: Yes, in an applied way.

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Question 6: To what extent will gain sharing be examined? There is not much coverage in the Study System. Answer: An article on the subject will be published in the September 2006 issue of Financial Management and will also be included in the new edition of the CIMA Study System published in July 2006. Question 7: What formulae will students be provided with in the exam? Answer: There is a standard formula sheet that is provided as part of the examination paper. Question 8: Will the taxation rules to be used in long-term decision making be the same as those examined under the old syllabus Paper 9? Answer: Students are expected to understand the different tax treatments of revenue income and expenditure and capital income and expenditure. It will not be necessary to have an in depth knowledge of taxation, but candidates must be able to calculate tax depreciation in accordance with the rules specified in the question, calculate tax liabilities based on relevant cashflows and tax depreciation and the information provided, and determine the timings of tax payments using the information provided in the question. Question 9: What depth of knowledge are students expected to have of the use of computer software for what-if analysis? Answer: Students are not expected to have knowledge of any specific packages but a general knowledge of the working of spreadsheets is expected. Question 10: Will the maximax/minimax/maximin decision rules be examined? Answer: Yes Question 11: Benchmarking is not specifically mentioned in the syllabus. Could it be examined in the context of ABM? Answer: This is unlikely at present Question 12: Could ABC be examined in its own right? Answer: Yes Question 13: Please could the examiner recommend a book in which gain-sharing arrangements are covered to the appropriate level? Answer: An article will be published in FM soon.

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Question 14: Please could the examiner recommend a book in which the topic of 'tiered contribution levels' is covered in the appropriate context? Answer: This is no more than an application of ABC, for example Product contribution; Batch contribution; Unit contribution Question 15: What depth of knowledge are students expected to have of supply chain management? Answer: The Study System provides appropriate coverage Question 16: Project abandonment was specifically included in the old syllabus Paper 9 but is not mentioned in the Paper P2 syllabus. The material on the topic in the Paper 9 CIMA Study System has been carried over into the Study System for Paper P2. Please could the examiner confirm the examinability or otherwise of this topic. Answer: Yes it is examinable Question 17: The CIMA Study System for Paper P2 includes the article ‘The NPV profile – a creative way of looking at the NPV’ (end of Chapter 8). Could the examiner please confirm the examinability or otherwise of the NPV profile. Answer: This is unlikely as an examination topic, it is background reading. Question 18: The CIMA Study System for Paper P2 includes an article on tools for dealing with uncertainty (end of Chapter 8 pages 223 – 231). Please could the examiner confirm the examinability or otherwise of the topics contained within it. Answer: Yes they are all potentially examinable Question 19: DPP was specifically included in the old syllabus Paper 9 but is not mentioned in the Paper P2 syllabus. Material on the topic has been included in the Study System for Paper P2. Please could the examiner confirm the examinability or otherwise of this topic. Answer: DPP is an application of ABC and is therefore in the syllabus and potentially examinable Question 20: Backflush accounting was specifically included in the old syllabus Paper 9 but is not mentioned in the Paper P2 syllabus (and is now included in Paper P1 syllabus). Material on the topic has been included in the Study System for Paper P2. Please could the examiner confirm the examinability or otherwise of this topic. Answer: This is background reading

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Question 21: The CIMA Study System for Paper P2 includes the article ‘Manage your costs by managing your cycle times’ (end of Chapter 12). Could the examiner please confirm the examinability or otherwise of the topics contained within it. Answer: This is background reading Question 22: The CIMA Study System for Paper P2 does not appear to cover the following topics included in the learning outcomes/syllabus content:

• Allocation of joint costs • Use of standard deviations to measure risk and uncertainty • Value analysis • Functional analysis • Continuous improvement • Kaizen costing • Preparation of cost of quality reports • BPR • Distribution channel profitability • Life cycle costing and its impact on marketing strategies • Supply chain management • Outsourcing

Please could the examiner confirm the depth of knowledge required of these topics, and the way in which he intends to examine them, given their non-appearance in the CIMA Study System. Answer: Some of these topic areas are in the Certificate level and are therefore assumed knowledge for paper P2. Where these are new topics for paper P2 they are included in the latest edition of the Study System to the extent that they may be examined in P2.