P2 Performance Management Syllabus

Paper P2 continues the analytic theme of Paper P1 Performance Operations (for example in terms of identifying relevant costs). However, its main focus is on the application of information in the management processes of decision-making and control, from a performance optimising perspective. The first section covers the key contributors to operational performance – revenue; decisions of what to produce, at what price. The second section covers costs; how to manage them to maximise profitability. The role of control in monitoring and improving performance then comes to the fore in the final two sections, dealing with principles and practices in the use of responsibility centres and budgeting.


Syllabus structure
The syllabus comprises the following topics and study weightings:
30% - Pricing and Product Decision

• Relevant Costing and Short-Term Decisions
• Marginal and Absorption Costing
• Pricing
• Linear Programming
• Cost-Volume-Profit

30% - Cost Planning and Analysis for Competitive Advantage
20% - Budgeting and Management Control
20% - Control and Performance Measurement of Responsibility Centres

Assessment strategy
There will be a written examination paper of three hours, plus 20 minutes of pre-examination question paper reading time.

The examination paper will have the following sections:

Section A – 50 marks
Five compulsory medium answer questions, each worth ten marks. Short scenarios may be given, to which some or all questions relate.

Section B – 50 marks
One or two compulsory questions. Short scenarios may be given, to which questions relate.

Full syllabus here

Read More

How To Pass P2 Performance Management?

CIMA P2 Performance Management is a continuation of the analytic theme of P1 (Performance Operations). However, P2 will focus more on the application of information in the management processes of decision-making and control.

The first section of P2 covers mainly the key contributors to operation performance (i.e., revenue; decisions of what to produce, at what price). The second section covers costs (i.e., how to manage them to maximise profitability).

So, what should be our strategy to pass this exam? Perhaps, we should start on how we're going to prepare for this exam paper - by studying of course!

I've listed down my personal strategy on how I will nail this exam once I enter the exam room! I don't have plans to topnotch this paper - I just want to pass.

1) Familiarise and understand the syllabus

There is no point of studying the entire textbook from cover to cover if some parts of it won't be included in the exam. Unless you have plenty of time, you can really devote most of it in getting used to the questions that will mostly appear.

The syllabus structure for P2 has been communicated to the students. As you can see, Pricing and Product Decisions and Cost Planning and Analysis for Competitive Advantage has 30% each weight. If you can get all the questions related to these two topics correctly, you've already passed at 60% mark!

2) Read the study text and answer the example questions

There is no way you'll be able to pass P2 if you immediately jump into answering the questions from Past Papers. You should at least know the basic theories - like what is relevant cost or ABC costing or Cost-Volume Profit, etc.

3) Practice, practice, practice

The key really in passing P2 is by constant practicing in answering the questions. The exam is actually more or less 90% computation - so, it means you need to compute!

In practicing, don't simply copy the model answers. At least, try to come up with your own solution. Once you have your own proforma answers, live everyday with those answers!

4) Read the Post Exam Guides

The Post Exam Guides are comments from the examiners about the common mistakes of the students who took the past exams. These aim to guide you on how marks are allocated on the questions, expected outline of the answers and the usual mistakes committed.

5) On the Exam itself, Write Legibly!

Put yourself on the examiners' shoes, would you be encouraged to understand and put marks on a very chaotic and disorganised answers? Most likely you want to mark all of them wrong. 

Answer the questions! Plan your Answers! Write Clearly!

Read More

Relevant Cost and Short Term Decisions

In Relevant Cost and Short Term Decisions, there are three learning outcomes we can get from this discussion:

• Discuss the principles of decision making including the identification of relevant cash flows and their use alongside non-quantifiable factors in making rounded judgement.
• Explain why joint costs must be allocated to final products for financial reporting purposes, but why this is unhelpful when decisions concerning process and product viability have to be taken.
• Explain the usefulness of dividing costs into variable and fixed components in the context of short-term decision-making. 

1) Relevant Cost and Non Relevant Cost

Relevant Cost - affected by decisions being taken
Non-relevant cost - cost is the SAME regardless of the decisions being taken

• Sunk/Past cost - spent and cannot be recovered (i.e., NPI Cost)
• Fixed Overhead - do not increase/decrease as a result of decision being taken (i.e., Space, Building)
• Committed cost - expenditure that will be incurred in the future, but as a result of decisions taken in the past that cannot be changed (i.e., Special packaging for new product)
• Historical cost depreciation - do not result in any future cash flows/ book entries only
• Notional cost - only relevant if they represent an identified cost opportunity to use the premise (i.e., notional rent/notional interest)

2) Opportunity Cost

Opportunity cost - value of the benefit sacrificed when one course of action is CHOSEN, in preference to an alternative. This is the forgone potential benefit from the best rejected course of action.




3) Avoidable and Differential/Incremental Cost

Avoidable Cost - specific cost of an activity or sector of a business which would be avoided if the activity or sector did not exist (i.e., shutting down a department - cost of labour/rental cost)

Differential/Incremental Cost - difference in total cost between alternative; calculated to assist in decision making. This is Incremental revenue less incremental cost equals Incremental gain/loss. Ultimately, we'll choose an activity that will give us incremental gain.

 

4) Limiting Factor Decision-Making

Limiting Factor - any factor that is in SCARCE supply and that stops the organisation from expanding its activities further, that is, it limits the organisation's activities.

Examples: (All the factors of production)
1) Materials
2) Labour Hours (Supply of Skilled Labour)
3) Machine Hours (Machine capacity)

Aim: Maximise Contribution

Steps in Making Decision when there is a limiting factor:

1. Check if limiting factor exist (i.e., materials required to produce the maximum demand vs available materials.
2. Calculate the contribution per unit of limiting factor (Note: Do not take the contribution per unit alone. It should relate to the limiting factor)
3. Rank the products from highest to lowest contribution per unit of limiting factor
4. Allocate the available materials according to the rank 

           - Product at Maximum production
           - Product at balancing/residual for production



5) Further Decision Making

Make or Buy

Discontinue a product

Deciding when to close a department

Further processing

Read More

Free P2 Performance Management Resources

If you are really into studying CIMA, of course, you are much willing to buy all the study materials available that will aid in passing the exam. But, it is no joke to purchase those big textbooks and carry them whenever you want to read them. Just imagine - one Kaplan textbook costs around £35, excluding delivery.

So what I did -- I did a widely search online of any free study materials that I can use in preparation for the P2 Performance Management Exam. And I'm so much willing to share them to you!

The good thing about these free study materials - you can sync this to your iPad, iPhone or any Tablet or Smartphone that will be accessible to you anytime. Also, it ranges from the full-length study materials to summarised versions from expert tutors online.

CIMA P2 Performance Management Study Text by Jo Avis

CIMA P2 Notes by LSBF

CIMA P2 Revision Summaries by Acorn

CIMA P2 Express Notes by ExpGroup

Read More

5 Reason Why I Study CIMA

The good thing about being an accountant - we have choices on what we want to specialize in. We can choose to be an external/internal auditor, an investment professional, an insurance agent, an accounting professor, or simply as a simple accountant. In my case, I never thought I will be specializing in Management Accountant.

Before I decided to take CIMA, I already had CPA under my belt but my experience comprises mainly of 5 solid years of being a Management Accountant. I was contemplating if I will take CIMA or other Chartered Accountants. But then, I found five good reasons why I should choose CIMA among all others.

1) Global Recognition

By becoming a CIMA member you will join the world’s largest professional body of management accountants. You will be able to use the Chartered Global Management Accountant (CGMA) designation and be part of a truly global network.

2) Combine finance and business
CIMA focuses on business, giving you more than just accounting knowledge. You will not only be financially qualified but also professionally trained in business management, capable of advising on business strategy and risk management.

3) Employability
As a CIMA student or member, you show employers that you have a commitment to uphold the highest ethical and professional standards. The ongoing professional development also keeps your qualification relevant.

The updated syllabus, which will take effect in January 2015, is built around addressing the ‘employability’ needs of businesses and people by helping them develop the skills and knowledge needed to create and execute successful strategies.

4) Post-graduate study
It is like taking an MBA - but a lot more convenient, cheaper and easier!

5) Boost Earning potential
A CIMA qualification can increase your earning potential, even while you are still studying. The global salary surveys show what you can expect to earn as a fully qualified or part-qualified professional.

See 2013 salary surveys

Read More

CIMA Certificate | The CIMA Examiner’s Guides to the Certificate Exams

The following guides will help you gain an understanding of what is required to succeed in the certificate level exams. Each paper assesses a different fundamental area of management accounting and as such requires a slightly different approach. Check them out below…

C01 fundamentals of management accounting

C02 fundamentals of financial accounting

C03 fundamentals of business mathematics

C04 fundamentals of business economics

C05 fundamentals of ethics, corporate governance and business law

Read More

E2: Chapter 2 - The Nature of the Competitive Environment

2.1 Introduction
2.2 Environmental impact assessment
2.3 Different stages in environmental analysis

• 2.3.1 Analysing the macro-environment
• 2.3.2 Analysing the micro-environment/industry environment
• 2.3.3 Industry life cycle analysis
• 2.3.4 Illustration of external environmental analysis – Example of a car manufacturer
• 2.3.5 Evaluation of environmental models
• 2.3.6 Survival and success factors

2.4 Causes of environmental uncertainty

• 2.4.1 Impact of uncertainty
• 2.4.2 Has uncertainty really increased?

2.5 Competitor analysis

• 2.5.1 The importance of competitor analysis
• 2.5.2 Competitor analysis – key concepts
• 2.5.3 Levels of competitors
• 2.5.4 Gathering competitor intelligence
• 2.5.5 Forecasting competitors’ response profiles

2.6 Competitor accounting

• 2.6.1 Evaluation of barriers to entry
• 2.6.2 Estimate competitors’ costs

2.7 The global economic environment

• 2.7.1 The new global economy

2.8 National competitive advantages

• 2.8.1 Porter’s Diamond
• 2.8.2 Demand conditions
• 2.8.3 Related and supporting industries
• 2.8.4 Factor conditions
• 2.8.5 Firm structure, strategy and rivalry
• 2.8.6 Other events
• 2.8.7 National competitive advantage
• 2.8.8 Losing competitive advantage
• 2.8.9 Porter’s strategic prescriptions
• 2.8.10 Comment on Porter’s Diamond 95

2.9 Country analysis and political risk 96

• 2.9.1 Political risk 96

2.10 Sources of information for environmental analysis 97

• 2.10.1 Environmental scanning 97
• 2.10.2 Accessing environmental information 98
• 2.10.3 Detailed environmental analysis 98
• 2.10.4 Categorisation of information sources 99

Read More