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Management Accounting

6 dot points across 6 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

How does a business plan its future cash and costs, and use those plans to control performance?

Prepare a cash budget and supporting functional budgets, explain the purpose and benefits of budgeting and budgetary control, and use a flexible budget to compare actual results with a budget adjusted to the activity level achieved.
A focused answer to the SQA Advanced Higher Accounting budgeting content, covering the preparation of a cash budget and functional budgets, the purpose and benefits of budgetary control, and the use of flexible budgets to compare actual performance against a budget flexed to the actual activity level.
12 min answer →

Which costs actually matter when a business chooses between options such as accepting a special order, making or buying, or allocating a scarce resource?

Apply relevant costing to short-term decisions - special order pricing, make-or-buy, the use of a limiting factor, and discontinuing a product - identifying relevant and irrelevant costs and ranking options by contribution.
A focused answer to the SQA Advanced Higher Accounting decision-making content, covering relevant and irrelevant costs, special order pricing, make-or-buy decisions, allocating a limiting factor by contribution per unit of the scarce resource, and the decision to discontinue a product.
13 min answer →

How does a business decide whether a long-term investment is worthwhile when the returns are spread over many years?

Appraise a capital investment using the payback period, the accounting rate of return, net present value and the internal rate of return, recognising the role of the time value of money and the strengths and limitations of each method.
A focused answer to the SQA Advanced Higher Accounting investment appraisal content, covering the payback period, the accounting rate of return, net present value and the internal rate of return, the time value of money behind discounting, and the strengths and limitations of each technique.
13 min answer →

How do you work out the cost of a one-off job or of a unit flowing through a continuous production process?

Calculate the cost of output using job costing for one-off or batch work and process costing for continuous production, including the treatment of equivalent units, normal loss, abnormal loss and abnormal gain.
A focused answer to the SQA Advanced Higher Accounting costing methods, covering job and batch costing for one-off work, process costing for continuous production, equivalent units for closing work in progress, and the treatment of normal loss, abnormal loss and abnormal gain.
13 min answer →

Should a product's cost include a share of fixed overhead, and how does that choice change reported profit and decisions?

Distinguish marginal and absorption costing, calculate profit under each method and reconcile the difference, and apply cost-volume-profit analysis - contribution, break-even point, margin of safety and target profit.
A focused answer to the SQA Advanced Higher Accounting requirement on marginal and absorption costing, covering the difference between the two methods, why reported profit differs and how to reconcile it, and cost-volume-profit analysis including contribution, break-even, margin of safety and target profit.
13 min answer →

How does a business set cost targets and then explain why actual costs differed from them?

Calculate and interpret cost variances - direct material price and usage, direct labour rate and efficiency, variable and fixed overhead variances, and sales variances - and reconcile budgeted profit or cost to actual through a statement of variances.
A focused answer to the SQA Advanced Higher Accounting standard costing and variance analysis, covering the material price and usage variances, labour rate and efficiency variances, variable and fixed overhead variances, sales variances, and how variances reconcile budget to actual and are interpreted for control.
14 min answer →