The study text, "MA1 Management Information," covers Research and Development Manager, Human Resources

fundamental concepts in financial and management Manager, Administrative Manager, and Computer
accounting, offering detailed insights across eleven Services Manager, each with specific responsibilities.
chapters. Here are the key points from each chapter:
• Double-Entry Bookkeeping: An accounting system
Chapter 1: Business Organisation where every transaction has two equal sides, ensuring the
accounting equation (assets – liabilities = capital +
• Main Functions of an Office: An office serves as a profits) remains in balance.
central hub for information and administration,
supporting core organizational tasks like production, • Books of Prime Entry: These are initial records of
banking, legal, and local government services. Key daily transactions (e.g., Purchases day book, Sales day
activities include gathering, acting on, and recording book, Cash book, Petty cash book, Wages/salaries book,
information; managing mail; processing payments; Journal) before being summarized and posted to ledger
handling bills; staffing; purchasing; and marketing. accounts.

• Organisational Information: This includes • Cost Bookkeeping (Interlocking vs. Integrated

organization charts, personnel files, internal telephone Accounts):
lists, staff planning charts, holiday rotas, notice boards,
◦ Interlocking accounts keep cost and financial
company magazines, handbooks, and manuals of best
accounts distinct but in agreement via control accounts,
practice/procedures.
focusing solely on costs and revenues for costing
• Manual of Policies, Procedures, and Best Practices: purposes.
These written guidelines define operations for
◦ Integrated accounts combine cost and financial
information processing, storage, and communication,
accounts into a single system using the same data for all
ensuring effective control over transactions and helping
accounting purposes, eliminating the need for separate
to achieve organizational objectives efficiently.
control accounts for financial items.
• Effective Control over Transactions: It is crucial to
• Computerised Accounting Systems: These systems
control transactions like placing orders with suppliers,
offer significant benefits, including faster and more
supplying goods on credit, receiving goods, and paying
accurate routine processing, reduced paper usage,
employees. This involves documented procedures,
improved information access for managers, enhanced
authorized personnel, and prenumbered forms to prevent
planning activities, better control, support for decision-
errors and fraud.
making, and improved communication and employee
• Centralised vs. Decentralised Office Functions: motivation.

◦ Centralisation involves performing all office • Data Processing (Batch vs. Real-time):
procedures at a single point, offering standardized
◦ Batch processing collects and stores data for
systems, specialist staff, economical use of equipment,
processing at regular intervals (e.g., weekly, monthly),
reduced work backlogs, and easier communication.
which is easier to control and can utilize off-peak
Disadvantages include inflexibility for different
computer times. Its disadvantage is that information may
departments, less job enrichment, and increased
be out of date.
paperwork.
◦ Real-time processing inputs and processes data
◦ Decentralisation means each department has its own
immediately, providing always up-to-date information,
office, potentially offering better understanding of
though it may raise security concerns.
implications, improved service to department
management, and promptness for local needs. However, ◦ Most computerised systems are integrated systems,
it can lead to increased operational costs due to where a single entry updates all relevant records,
duplication of services and extra information processing. improving efficiency, reducing human error, and
providing accurate, timely information.
• Organisation Chart: A diagram illustrating the formal
relationships, communication flow, levels of authority, Chapter 2: Introduction to Management Information
and supervisory structure within an organization.
• Purpose of Management Information: Managers need
• Key Personnel: In a large organization, typical roles useful information to make decisions, plan, and control
include Managing Director/General Manager, Marketing organizational activities effectively.
Manager, Finance Manager, Production Manager,
• Decision Making: Managers make both long-term externally (from outside the organization, e.g., consumer
(strategic) decisions (e.g., product lines, staffing levels, price index, legislation).
investments) and short-term (operational) decisions (e.g.,
production scheduling, overtime, inventory levels). • Financial Accounting, Cost Accounting, and
Management Accounting:
• Data vs. Information: Data are raw facts and statistics,
while information is data processed into a useful form ◦ Financial accounting classifies, records, presents,
for the user. and interprets monetary transactions to assess
performance and financial position for external reporting.
• Planning: Management uses current, detailed
information to make future plans, often expressed in ◦ Cost accounting applies principles to determine and
financial terms as budgets, requiring knowledge of costs analyze costs within business units, establishing budgets,
and productivity. standard costs, and actual costs, and analyzing variances.

• Control: Managers use information to compare actual ◦ Management accounting is broader, involving
costs and income with budgeted figures, identifying professional knowledge to prepare and present
deviations and taking corrective action or revising information to all levels of management for strategy
budgets. formulation, planning, control, decision-making, and
resource optimization.
• Features of Effective Management Information: To
be useful, information should be: ◦ All three draw on the same basic data but classify and
present it differently for their specific purposes.
◦ Relevant: Pertaining to the user's needs, avoiding
information overload. • Role of a Trainee Accountant: Typically uses cost
accounting records to answer questions about
◦ Reliable: Dependable for decision-making. product/service/department cost and profitability, selling
price setting, inventory valuation, and deviations from
◦ Understandable: Avoiding jargon and appropriate to budgeted costs.
the user's skill level.
• Responsibility Centres: Parts of an organization whose
◦ Complete: Providing all necessary information for performance can be measured and is the direct
decisions. responsibility of a specific manager. Types include:
◦ Accurate: Ensuring correct actions based on precise ◦ Cost centre: A location, function, activity, or
data, though perfect accuracy may not always be equipment for which costs can be determined (e.g., a
necessary or cost-effective. mixing department). Managers are responsible only for
◦ Timely: Provided promptly to enable effective costs.
action. ◦ Profit centre: Similar to a cost centre but also has
◦ Clear: Communicated effectively, often using tables identifiable revenues and thus profit (e.g., a specific
or visuals. factory site). Managers are accountable for costs,
revenues, and profit.
◦ Consistent: Applying same principles in consecutive
reports for comparability. ◦ Investment centre: Similar to a profit centre but also
has identifiable assets and liabilities (e.g., a group of
◦ Cost effective: Benefits must outweigh the cost of sites). Managers are accountable for costs, revenues,
obtaining the information. profit, and the level of investment.

• Sources and Categories of Information: • Cost Units: A unit of product or service in relation to
which costs are ascertained (e.g., a litre of paint, an hour
◦ Primary data is gathered for a specific purpose (e.g.,
of client work). Composite cost units combine two parts,
customer interviews).
often used in service organizations (e.g., guest-night,
◦ Secondary data is not originally gathered for a tonne-km).
single purpose but can be used in various ways (e.g.,
Chapter 3: Classification of Costs and Cost Behaviour
government statistics).

◦ Information can also be sourced internally (from

within the organization, e.g., personnel records) or
• Cost Classification: Costs are analyzed into logical • Direct Costs: Expenditure directly identified with a
groups to provide meaningful information for specific cost unit (e.g., direct materials, direct labour,
management or external reporting. Classification criteria direct expenses). The total of direct costs is known as
include: prime cost.

◦ Nature: Materials, labour, or expenses. • Indirect Costs (or Overheads): Expenditure that cannot
be easily identified with a specific cost unit and must be
◦ Responsibility or Function: Administration, 'shared out' (e.g., factory oil, supervisor salary, electricity
manufacturing, selling, research, distribution. bill).
◦ Product Costs and Period Costs: Chapter 4: Coding of Costs and Income
▪ Product costs (or production costs) are the costs
• Cost Codes: A system of symbols used to classify and
of making or buying an inventory item (e.g., material and
categorize items, providing a brief, accurate reference for
labour).
record entry, collation, and analysis in a costing system.
▪ Period costs are charged to the income statement
◦ Generic or Functional Code: Identifies the cost
for the period, not directly related to production, and
centre and general type of expense (e.g., 07 for Machine
often fixed (e.g., selling, marketing, administration
Group 7, 23 for indirect materials).
costs).
◦ Specific Code: Provides further detail, uniquely
◦ Controllable Costs and Uncontrollable Costs:
identifying the item of cost within its generic
▪ Controllable costs can be influenced by a classification (e.g., 072304 for oil used by Machine
particular manager (e.g., labour cost for a factory Group 7).
manager).
• Purposes of Cost Codes: To assist precise information
▪ Uncontrollable costs cannot be influenced by a classification, facilitate electronic data processing, enable
particular manager (e.g., centrally allocated rent for a logical arrangement of costing records, simplify
factory manager). comparison of expenses, and incorporate check codes for
accuracy.
◦ Cost Behaviour Patterns: How a cost changes with
the level of activity. • Coding Systems: Various methods for assigning codes:

◦ Direct Costs and Indirect Costs. ◦ Sequential Code: Each code follows a numerical or
alphabetical sequence (e.g., 001, 002, 003).
• Cost Behaviour Patterns:
◦ Block Code: Groups sequential codes into blocks to
◦ Fixed costs: Costs that remain constant in total categorize similar items (e.g., 0000-0999 for Expenses,
regardless of the level of activity (e.g., factory rent). Per 1000-1999 for Revenue).
unit, fixed costs fall as activity increases.
◦ Hierarchical Code: Uses decimal numbers to create
◦ Variable costs: Costs that change in direct levels of sub-categories, allowing for infinite
proportion to the level of activity (e.g., direct materials). expandability (e.g., 1.1 for UK, 1.1.1 for UK laptop
Per unit, variable costs remain constant. sales).
◦ Semi-variable costs (or mixed costs): Have both a ◦ Faceted Code: Breaks down the code into multiple
fixed and a variable element (e.g., a telephone bill with "facets" or fields, each signifying a unit of information
line rental and call charges). Per unit, semi-variable costs (e.g., Region + Department + Expense type).
fall as activity increases.
◦ Mnemonic Code: Uses alphabetical abbreviations or
◦ Stepped-fixed costs (or stepped costs): Constant for symbols to aid memory and understanding, simplifying
a range of activity levels, then change to a new constant information but potentially limiting sub-categories (e.g.,
level for another range (e.g., supervisor salaries that NCA for Non-Current Assets).
increase with production tiers).
• Coding in Practice: Costs should be coded
• Relevant Range: The range of activity levels over immediately upon receipt of an invoice or payment
which observed cost behaviour patterns are valid. Cost documentation (e.g., cheque, petty cash voucher,
predictions outside this range may not be accurate. payroll). Proper coding ensures costs are charged to the
correct cost centre and analyzed as direct or indirect.
• Coding Income: For profit or investment centers, ◦ Delivery Note: Sent by the supplier with goods,
income (e.g., from sales invoices, cash sales) must also signed upon receipt.
be coded to specify the relevant center and
product/service sold. ◦ Goods Received Note (GRN): Produced by the
stores department upon receipt, confirming goods agree
• Problems with Coding and Correction: with order, and sent to accounts.

◦ Ambiguity in choosing the correct code. ◦ Purchase Invoice: Received from supplier, checked
against purchase order, delivery note, and GRN before
◦ Apportionment of shared indirect costs (e.g., heating authorization for payment.
bill) fairly among cost centres, often based on specific
criteria. ◦ Bin Card: Simple record kept by storekeepers
showing quantities of receipts, issues, and inventory
◦ Wrong codes used or invoices for incorrect balances; does not include monetary values.
organizations.
◦ Materials Requisition Note: Authorizes storekeeper
◦ Errors are detected via internal controls or audits to release materials to production departments.
(e.g., reconciliation, logic checks, sampling) and
corrected by reversing incorrect entries and reposting ◦ Materials Returned Note: Records unused materials
correctly. returned from user departments to stores.

Chapter 5: Materials Cost • Recording Materials Costs: The stores control

account (or materials inventory account) records quantity
• Materials Cost Classification: Primarily categorized as and value of receipts, issues, and balances of both direct
direct materials (economically attributed to a specific and indirect materials. Movements are carefully coded.
production unit, e.g., metal for spoons) and indirect
materials (other materials used in production but not • Pricing Issues of Materials: When materials are issued
directly attributed to a unit, e.g., machinery oil). Some from store, a cost/price is attached using a valuation
direct material items with low unit cost might be method:
classified as indirect for economic reasons.
◦ First In First Out (FIFO): Assumes materials are
• Types of Inventory for Manufacturers: issued in the order they were received, valuing closing
inventory at the cost of the most recently purchased units.
◦ Raw materials: Materials purchased from suppliers.
◦ Last In First Out (LIFO): Assumes materials issued
◦ Work in progress (WIP): Units started but are those acquired most recently, valuing closing
incomplete at period end. inventory at the cost of the oldest units.
◦ Finished goods: Completed products ready for sale. ◦ Cumulative Weighted Average Cost (AVCO): All
• Stores Department Functions: Responsible for the inventory quantities are valued at a weighted average
receipt (checking goods against purchase orders for cost, recalculated after each new delivery.
quantity, quality), storage (appropriate conditions, easy ◦ Periodic Weighted Average Cost Method: An
access), issue (providing correct quantity/quality average price is calculated at the end of the period to
materials to production), and recording of raw materials. price all issues.
• Materials Control Cycle: A rigorous process with • Bookkeeping Entries: Transactions are recorded in a
extensive paperwork and internal controls to ensure only stores control account, charging direct materials to the
necessary items are purchased, from appropriate work-in-progress account and indirect materials to the
suppliers, received correctly, and paid for accurately. production overheads or other relevant overhead
• Documentation in the Control Cycle: accounts.

◦ Purchase Requisition: Completed and authorized by • Controlling Inventory Levels: Essential to maintain
storekeeper/manager to initiate a purchase order. optimum levels to avoid excessive storage costs,
insurance, capital tied up, or disruptions from stockouts.
◦ Purchase Order: Placed with suppliers by the
purchasing department, detailing goods, price, and ◦ Free Inventory: Inventory in stores or on order not
delivery, and sent to goods receiving and accounts. yet requisitioned (Inventory in stores + Inventory on
order - Inventory requisitioned).
 ◦ Raw Material Requirements: Calculated as ▪ Piece Rate with Guarantee: Provides security by
Budgeted usage + Budgeted closing inventory - Budgeted ensuring a minimum wage if output is low.
opening inventory.
▪ Differential Piecework: Piece rate increases as
Chapter 6: Labour Costs production targets are met/exceeded, further encouraging
high output.
• Recording Labour Costs:
• Bonus Schemes: Reward employees for additional
◦ Employee Personnel Records: Maintained by HR income or cost savings (e.g., time saved).
department, containing employee details, job, pay rate,
and history. ◦ Salaried Employees:

◦ Employee Record of Attendance: Tracks presence, ▪ Flat Rate Bonus: Same amount for all employees.
holidays, sickness, and other absences from sources like
▪ Percentage Bonus: Based on a percentage of
clock cards, time sheets, and job sheets.
annual salary, rewarding higher earners more.
◦ Clock Card: Records starting and finishing times,
◦ Time Rate Employees: Incentive to achieve
used for gross pay calculation.
additional output faster. The benefit of time saved is
◦ Time Sheet: Records how an employee's time at often split between employer and employee.
work has been spent, useful for charging labour cost to
◦ Group Bonus Schemes: Bonus based on the output
appropriate cost centres.
of a group/workforce, then shared among members.
◦ Job Sheet: Records the number of products an Advantages include increased group loyalty and simpler
employee has produced, used for calculating gross pay in administration.
output-related payment systems.
• Impact of Remuneration Methods on Unit Costs:
◦ Idle Time: Hours paid but with no output (e.g.,
◦ Fixed costs (e.g., fixed salary) result in falling labour
machine breakdown), classified as indirect labour costs
cost per unit as output increases.
and monitored for inefficiency.
◦ Variable costs (e.g., simple piece rate) result in
• Calculating Gross Pay:
constant labour cost per unit.
◦ Time Related Pay: Employees paid for hours spent
◦ Semi-variable costs (e.g., piece rate with guarantee)
at work.
result in falling labour cost per unit as output increases,
▪ Salaried Employee: Fixed pay for a period, but not linearly.
regardless of exact hours, though overtime may apply.
◦ Changing methods (e.g., simple piecework to
▪ Hourly Rate Employee: Paid a set rate per hour piecework with guarantee) changes cost behaviour.
worked.
• Payroll: Calculates gross pay, deductions (income tax,
▪ Overtime: Hours worked beyond the standard employee benefits), and net pay. Also calculates
week. employer's benefit contributions. Gross pay of employees
needs to be coded to correct production cost centers.
▪ Overtime Premium: Additional amount paid
above normal hourly rate for overtime. Classified as • Bookkeeping Entries for Labour Costs: Total wages
indirect cost unless worked at specific customer request are debited to a Wages and Salaries Control Account,
(then direct). then analyzed and transferred to WIP (for direct wages)
or relevant overhead accounts (for indirect wages).
◦ Output Related Pay (Payment by Results or
Piecework): Fixed amount paid per unit of output, • Non-Manufacturing Organisations (Service
irrespective of time spent. Industries): These organizations (e.g., accountancy
firms, transport companies) primarily incur labour costs.
▪ Advantages: Can encourage higher earnings and They still classify, collect, and ascertain costs for control
production. purposes, often using cost centers and appropriate cost
▪ Problems: Risk of inaccurate output recording and codes.
compromised quality. • Productivity: The amount of output produced per
labour hour.
 ◦ Production is quantity of goods/services produced; ◦ Proper coding ensures correct overhead charging.
Productivity measures efficiency of production.
• The Selling Function: Responsible for processing
◦ Increased productivity with time-related pay reduces orders, negotiations, notifying production, preparing
labour cost per unit. despatch/sales notes, coding invoices, and organizing
advertising. It can be a cost centre (incurring labour
◦ Increased productivity with output-related pay has costs like sales personnel gross pay and commission, and
no effect on unit labour cost, or may increase it if selling/distribution expenses like advertising, transport,
differential piecework is used. travel) or a profit centre (with sales income and costs,
◦ Standard Hour: The amount of work achievable in including value of goods sold).
an hour. • Absorption of Indirect or Overhead Costs: Process of
◦ Productivity Ratios: including a fair proportion of total overhead costs into the
cost of each cost unit.
▪ Production Volume Ratio: Assesses overall
production against planned levels (Actual output in ◦ Allocation and Apportionment to Cost Centres:
standard hours / Budgeted production hours x 100%). Production overheads are assigned to production cost
centers. Service cost centre overheads are re-apportioned
▪ Capacity Utilisation Ratio: Indicates hours of to production cost centers.
working time possible vs. actual (Actual hours worked /
Budgeted hours x 100%). ◦ Absorption Bases:

▪ Efficiency Ratio (Productivity Ratio): Indicator of ▪ Units Produced: Simplest, suitable for identical
productivity (Actual output in standard hours / Actual products.
hours worked x 100%). ▪ Time Basis: More appropriate when overheads
Chapter 7: Expenses and Absorption of Overheads depend on time (e.g., labour hours in labour-intensive
environments, machine hours in automated
• Expenses: All business costs not classified as materials environments).
or labour costs. Can be direct expenses (attributable to a
specific cost unit, e.g., royalty per unit) or, more • Methods of Overhead Absorption:
commonly, indirect expenses (overheads) not traceable ◦ Blanket Overhead Absorption: Total production
to a specific cost unit. overheads absorbed on a single basis for the entire
• Types of Expense: Manufacturing (e.g., power, organization, simplest but less accurate for diverse
depreciation), selling (e.g., advertising, delivery), activities.
administration (e.g., rent, telephone), and finance (e.g., ◦ Separate Cost Centre Overhead Absorption
loan interest). Rates: Overheads determined for each cost centre, then
• Capital Expenditure vs. Revenue Expenditure: absorbed into products using the most appropriate basis
for that specific centre, more accurate but requires more
◦ Capital expenditure: Purchasing non-current assets; calculations.
not an income statement expense directly but depreciated
over the asset's useful life. • Actual and Predetermined Overhead Absorption
Rates: Predetermined (budgeted) rates are commonly
◦ Revenue expenditure: Incurred on 'everyday' items used at the start of a period for planning, control, and
(e.g., running costs, general expenses); fully expensed in pricing, based on budgeted overheads and activity levels.
the period it relates to.
• Under- and Over-Absorption of Production
• Cost Centres and Expenses: Defining cost centers Overhead: Occurs when actual overheads or activity
(e.g., factory, production lines, sales department) levels differ from budgeted figures. Under-absorption
influences information generation and cost control. means less overhead was absorbed than incurred (debited
to income statement); over-absorption means more was
◦ Allocation: Allotting a whole item of overhead cost absorbed (credited to income statement).
directly to a specific cost centre.
• Non-Production Overheads: Selling and distribution,
◦ Apportionment: Sharing joint expenses fairly administration, and finance overheads. Usually expensed
between multiple cost centers using suitable bases (e.g., in the income statement, though can be absorbed into
floor area for rent, computer hours for IT costs). product costs if desired.
• Bookkeeping Entries: Input costs (materials, labour, ◦ Aligns with financial reporting requirements for
other expenses) are recorded. Materials in stores control, inventory valuation.
labour in wages/salaries control, other expenses in
overhead accounts. These feed into work-in-progress ◦ Practical for obtaining job costs in small jobbing
(WIP) account (collects direct materials, direct labour, businesses.
absorbed production overheads), finished goods ◦ Analysis of under-/over-absorbed overhead helps
account, and cost of sales account. identify inefficient resource utilization.
Chapter 8: Marginal Costing and Absorption Costing • Arguments Against Absorption Costing:
• Concept of Contribution: ◦ Profit per unit can be misleading as it changes with
activity levels due to fixed overhead absorption.
◦ Contribution is sales value less all variable costs.
◦ Changes in finished goods inventory levels can
◦ It can be calculated per unit or in total.
distort period operating statement comparisons.
◦ It represents the fund available to cover fixed costs
◦ Arbitrary apportionment of fixed costs can mislead
and then generate profit.
product comparisons.
• Absorption Costing: A cost accounting system that
• Profit vs. Contribution:
charges both fixed and variable production overheads
to cost units. ◦ Profit information is vital for long-run business
survival.
◦ Under this system, each unit of inventory (sold or
unsold) is valued at full production cost, including fixed ◦ Contribution information is often more useful for
and variable production overheads. management decision-making, especially regarding
activity levels, as it directly varies with output and avoids
◦ Can lead to under- or over-absorption of fixed
arbitrary fixed cost apportionment.
production overhead if actual production differs from
budgeted production used for absorption rates. Chapter 9: Job, Batch and Process Costing
• Marginal Costing: An accounting system where only • Job Costing:
variable production costs are charged to cost units,
and fixed production costs are treated as period costs ◦ Definition: Used for individual products or services
and written off directly to the income statement in the designed and produced as a single order for a specific
period they relate to. customer. Each job is a cost unit, unique in some
respects. Examples include building repairs or printing.
◦ Inventory is valued at variable production cost
only. ◦ Job Cost Card: A document used to record all actual
costs incurred for a specific job, including materials,
◦ There is no absorption of fixed production overheads, labour, direct expenses, and absorbed production/other
hence no under- or over-absorption. overheads.
• Differences in Profits: ◦ Direct Costs: Direct materials are recorded at their
◦ If inventory levels increase during a period, issue price, direct labour hours are logged and costed, and
absorption costing profit will be higher than marginal any direct expenses (e.g., special machinery hire) are
costing profit (because more fixed costs are capitalized in attributed directly to the job.
inventory). ◦ Overheads: Production overheads are absorbed into
◦ If inventory levels fall, marginal costing profit will jobs using a predetermined overhead absorption rate
be higher than absorption costing profit (because fixed (e.g., per labour hour or machine hour). Administration,
costs from opening inventory are released to cost of selling, and distribution overheads are also included to
sales). determine total job cost.

◦ The difference in profits equals the change in • Batch Costing:

inventory multiplied by the fixed overhead absorption ◦ Definition: A batch is a group of identical but
rate per unit. separately identifiable products made together (e.g., 100
• Arguments for Absorption Costing: loaves of bread in a production run).
 ◦ Batch Costing System: Very similar to job costing; ◦ Cost per Unit: Absolute cost or cost per unit (e.g.,
costs for the entire batch (materials, labour, direct labour cost per unit).
expenses, overheads) are gathered on a batch cost card.
◦ Productivity Measures: Relate goods/services
◦ Cost of a Cost Unit: The total cost of the batch is produced to resources used, indicating efficiency.
divided by the number of identical products in that batch
to find the cost per unit. ▪ Production vs. Productivity: Production is
quantity; productivity is efficiency of production (output
• Process Costing: relative to resources).

◦ Definition: Applicable where goods or services result ▪ Standard Hour: Amount of work achievable in an
from a sequence of continuous or repetitive operations or hour.
processes (mass production of identical items). Examples
include chemical or textile industries. ▪ Productivity Ratios:

◦ Process Account: A T-account with extra columns to • Production Volume Ratio: (Actual output in
track units and monetary amounts for inputs (materials, standard hours / Budgeted production hours) × 100%.
labour, overheads/conversion costs) and outputs (finished Assesses overall production against plan.
goods, losses, work-in-progress). • Capacity Utilisation Ratio: (Actual hours
◦ Basic Process Cost Per Unit: Total costs for the worked / Budgeted hours) × 100%. Indicates worker
period are divided by the number of units produced in capacity utilization.
that period. • Efficiency Ratio (Productivity Ratio): (Actual
◦ Losses: output in standard hours / Actual hours worked) × 100%.
Indicator of labour force productivity.
▪ Normal loss: Expected loss during production
(e.g., evaporation, wastage). Its cost is absorbed by the ◦ Quality Measures: E.g., % of rejected raw
cost of good production (valued at zero if no scrap value). materials/components, % of rejected finished items.

▪ Abnormal losses or gains are unexpected and • Measuring Profit Centre Performance: Managers
valued at the same cost as good production (though not control costs and revenues. All cost centre measures
covered in MA1 for splitting). apply, plus:

◦ Equivalent Units (EU): Used when products are ◦ Extended Quality Measures: % of items
incomplete (work-in-progress, WIP) at period end. EU rejected/returned by customers, % requiring warranty
convert partially complete units into the equivalent work, customer satisfaction survey results.
number of fully complete units for cost assignment. ◦ Profit Measures:
▪ Calculated as: Number of physical units × ▪ Profit Margin: (Profit / Sales) × 100%. Indicates
percentage completion for each cost element (e.g., profit per $1 of sales.
materials, conversion costs).
▪ Cost to Sales Ratio: Direct cost % (Direct cost /
▪ Process costs are apportioned between finished Sales) × 100%; Overhead cost % (Overheads / Sales) ×
output and closing WIP based on equivalent units. 100%. Provides info for cost control.
Chapter 10: Performance Indicators ▪ Profit per Unit: If units are identical.
• Performance Measures: Provide information to • Measuring Investment Centre Performance:
management on business operations, combining financial Managers control costs, revenues, and investment levels.
and non-financial data. They should be appropriate to the All cost and profit centre measures apply, plus:
type of responsibility centre, focusing on aspects the
manager can control. ◦ Return on Capital Employed (ROCE) or Return
on Investment (ROI): (Profit before interest and tax /
• Measuring Cost Centre Performance: Managers Capital employed) × 100%. Measures profit earned
control only costs. Measures include: relative to capital invested.
◦ Controllable vs. Non-Controllable Costs: Evaluate ◦ Residual Income (RI): Investment centre profit –
managers only on costs they can influence. (Notional interest on capital employed). Measures surplus
profit after a capital charge.
 ◦ Asset Turnover Ratio: Revenue / Capital employed. ◦ Activating features: Via toolbar or right-click
Measures how efficiently assets generate revenue. menus.

◦ Link between Ratios: ROCE = Profit margin × ◦ Entering Data: In active cells or multiple cells;
Asset turnover. Excel can guess sequences for automatic filling.

◦ Only controllable items (revenues, costs, assets) ◦ Copy, Paste, and Paste Special: Allows copying
should be attributed to an investment centre for content, formulas (with adjusted references), values,
performance measurement. formats, or comments.

Chapter 11: Spreadsheets ◦ Editing and Deleting Cell Content: Via formula
bar, double-clicking cell, or delete key.
• Spreadsheets Overview: A computer program
allowing numerical data entry and manipulation in a table ◦ Selecting a Range of Cells: Highlighting adjacent or
of rows (numbered) and columns (lettered), forming cells non-adjacent cells.
with unique references (e.g., D7). Cells can contain text,
◦ Capturing Data from Another Source: Importing
numbers, or formulas, which automatically calculate
data from text files or the web.
based on other cells, enabling "what if?" or sensitivity
analysis. • Formatting: Changing visual aspects for readability.
• Benefits of Spreadsheets: ◦ Rows and Columns: Adjust height and width, insert
or delete.
◦ Automatic recalculation: Changes in one cell
automatically update dependent cells. ◦ Borders and Shading: Add visual structure and
emphasis to cells/ranges.
◦ Process large quantities of data: Efficiently handle
and store vast amounts of information. ◦ Text Formatting: Change font, size, color, style,
alignment (horizontal/vertical), and text wrapping.
◦ Display data in various ways: Numeric, tabular,
graphical, pictorial. ◦ Number Formatting: Specify decimal places,
thousands separators, negative number display, currency
◦ Useful for: Financial forecasts, budgets, comparing
symbols, date/time formats, and custom formats.
actual vs. budget, cash flow forecasts, and financial
statements. • Formulae: Start with an equals sign (=).
• Limitations of Spreadsheets (Spreadsheet Risk): ◦ Operators and Order of Precedence: Excel follows
a specific order of calculation (^, *, /, +, -); parentheses
◦ Development and maintenance time/cost.
( ) override this order.
◦ Risk of accidental data changes or deletion.
◦ Simple Formulas: Combine cell references with
◦ Errors in design (especially formulas) can lead to operators.
invalid output, difficult to locate in complex models.
◦ Functions: Pre-set calculations (e.g., SUM for
◦ Flawed data can result in incorrect decisions. adding ranges, AVERAGE for calculating averages,
ROUND for rounding numbers, IF for conditional logic).
◦ Data often has a high degree of uncertainty, which
might be overlooked. • Errors in Formulae: Excel highlights common errors:

◦ Security issues (unauthorized access, data loss). ◦ Formula AutoCorrect: Attempts to fix syntax errors
(e.g., missing brackets).
• Spreadsheet Design: Should be easy to use, well-
structured, clearly labelled, concise, and user-friendly, ◦ #DIV/0!: Division by zero or blank cell.
considering the reader's needs. Can be broken into
◦ Circular References: A formula refers to its own
multiple worksheets within a workbook.
cell (e.g., =SUM(A1+A2+A3) in A3).
• Basic Features:
◦ Other common errors: #NAME?, #NUM!, #REF!,
◦ Opening and Saving: Standard file operations. #VALUE!.

◦ Structure: Rows, Columns, Cells, Active Cell, • Other Useful Functions:

Formula Bar.
 ◦ Sort: Arranges data into a particular order ◦ Password Protecting a Spreadsheet: Limits access
(alphabetical, numerical) based on chosen columns. to the entire file (password to open) or restricts
modification (password to modify).
◦ Filter: Temporarily hides data that does not meet
specified criteria, allowing users to view a subset of data. ◦ Protecting Individual Cells: Allows specific cells
Filters are additive. (e.g., formulas) to be locked while others can be edited,
requiring a two-stage process (unlocking cells, then
◦ Adding Comments to a Cell: Provides hidden notes protecting the sheet).
that appear when the cursor hovers over the cell.
• Printing: Users can select specific output, configure
◦ Find and Replace: Locates specific data and page setup (size, paper type, margins, headers/footers),
replaces it, useful for updating similar spreadsheets. and choose to print gridlines or repeat rows for large
• Presenting Information – Charts and Graphs: A spreadsheets.
major advantage of spreadsheets is creating visual • Further Aspects:
representations of data.
◦ Splitting the Screen: Divides the view horizontally
◦ Can be displayed as a Chart Sheet (entire or vertically to see different parts of a large document
worksheet) or Embedded (on the data sheet). simultaneously and work independently.
◦ Bar/Column Charts: Good for making comparisons ◦ Freeze Panes: Keeps specific rows (e.g., headings)
and identifying trends. and/or columns visible while scrolling through large
◦ Line Charts: Excellent for showing trends over time. spreadsheets, maintaining context.

◦ Pie Charts: Show the relationship of parts to a whole

(proportional significance).

◦ Scatter Diagrams: Useful for identifying

correlations between two sets of data.

◦ Area Chart: Displays a series as points connected by

a line with the area filled below, showing overall totals
and component elements over time.

◦ Multiple Graph Types (Combination Charts):

Combine different chart types on one chart, potentially
with multiple axes.

◦ Creating Charts: Involves selecting data, opening

the chart wizard, choosing the chart type, and setting
chart options (titles, legend, data labels, gridlines).

• Consolidating Information:

◦ Multiple Worksheets: Work with and link data

across different worksheets (e.g., summing totals from
various divisional worksheets into a 'Total' sheet).

◦ Consolidating Data: Combining data from different

worksheets into one master worksheet, suitable when
data layout is consistent.

• Spreadsheet Security: Important to protect against

accidental or malicious changes, copyright infringement,
or unauthorized access.

◦ Hiding Rows or Columns: Conceals data from view,

often for formulas or workings.