CIMAP2-Performance Management Area D Self Study Guide Session Component Learning Outcomes (duration)

1 (Wk 1, 2 hrs) Introduction to P2 Familiarising yourself with the syllabus and what the exam is all about. Area D of P2 is all about responsibility centres, organisational structure and management control over responsibility centres.

Study Guidance/Tips
Please note that the session duration time given for each area is a rough guide based on % of P2 paper syllabus weightings. Research has shown that students who study at minimum of 11 hours per week are more likely to pass. These timings must be taken into account with other personal commitments such as work, family time, recreation etc. Obviously the more hours students can dedicate to studying the higher their chance of success. Please use this as guidance rather than as an exact science of how to study, and please feel free to change it to suit your requirements Please email any feedback to studysupport@cimaglobal.com

CIMA Technical Articles

Review the P1 syllabus to ensure there are no knowledge gaps, especially if you have exemptions.

1
Email feedback to: studysupport@cimaglobal.com Updated: July 2013

CIMAP2-Performance Management Area D Self Study Guide SECTION D: CONTROL AND PERFORMANCE MEASUREMENT OF RESPONSIBILITY CENTRES (20%)Recommended study time- 32 hours over 2-3 weeks Session Component Learning Outcomes Study Guidance/Tips CIMA Technical (duration) Articles
2 (Wk 1, 4 hours) 1(a) Discuss the use of cost, revenue, profit and investment centres in devising organisation structure and in management control. CS.com Chapter 14 1(a) Exam questions from past papers: Nov-11-Q7a(i) & Q7a(ii) Mar-12-Q7 2 2 (a) Discuss cost information in (Wk 1, appropriate formats for cost centre 4 hours) managers, taking due account of controllable/uncontrollable costs and the importance of budget flexing. CS.com Chapter 14 1. Understand the difference between cost, revenue, profit and investment centres. 2. Understand why a company may operate different centres as a way of controlling and managing costs. 3. Know the advantages and limitations of each method. Treatment of different responsibility centres

1. Understand the difference between controllable/uncontrollable costs. 2. Know the definition of budgeting flexing and its importance in relation to cost centre formats. 3. Understand the role of a manager within cost centres and the responsibilities they have for that centre.

2
Email feedback to: studysupport@cimaglobal.com Updated: July 2013

CIMAP2-Performance Management Area D Self Study Guide Session Component Learning Outcomes (duration)
3 (Wk 1, 4 hours) 2 (b) Discuss revenue and cost information in appropriate formats for profit and investment centre managers, taking due account of cost variability, attributable costs, controllable costs and identification of appropriate measures of profit centre contribution. CS.com Chapter 14 TOP TIP: A good understanding of investment appraisal techniques will help you understand reporting on investment centres. Ratios such as ROI, ROCE and RI are essential learning for this topic also. 2 (b) Exam questions from past papers: May-10-Q7 May-11-Q7 Nov-12-Q7b Mar-13-Q7a 4 (Wk 2, 4 hours) 2 (c) Discuss alternative measures of performance for responsibility centres. CS.com Chapter 15 1. Understand the use and principle of Economic Value Added (EVA), its definition, advantages/disadvantages/limitations. 2. Know how to calculate EVA. 3. Understand the difficulties in measuring EVA.

Study Guidance/Tips
1. Understand what an investment centre is and how it is managed. 2. Understand how reports are generated for investment centres and the key matrix for this centre. 3. Have an understanding of residual income and the differences between this and return on investment calculations.

CIMA Technical Articles

Ratio analysis Q & A

3
Email feedback to: studysupport@cimaglobal.com Updated: July 2013

CIMAP2-Performance Management Area D Self Study Guide Session Component Learning Outcomes (duration)
2 (c) Exam questions from past papers: Nov-10-Q7 Mar-11-Q7 May-11-Q7 Sept-11-Q7a & Q7b Nov-11-Q7a(iii) Mar-12-Q7 Sept-12-Q7a & Q7b 5 3 (a) Discuss the likely behavioural 1. Understand the delegation of control and the (Wk 2, consequences of the use of performance consequences of this for different centres. 4 hours) metrics in managing cost, profit and 2. Understand how employee motivation may investment centres. change and the significance of employee buy-in for the use of responsibility centres. CS.com Chapter 15 3. Understand the loss of control by senior management and the responsibility that will be placed on middle management in making crucial decisions for the company. 3 (a) Exam questions from past papers: Sept-10-Q4 Mar-12-Q7 Mar-13-Q7b

Study Guidance/Tips

CIMA Technical Articles

Responsibility accounting and the affects on employee empowerment

4
Email feedback to: studysupport@cimaglobal.com Updated: July 2013

CIMAP2-Performance Management Area D Self Study Guide Session Component Learning Outcomes (duration)
6 (Wk 2, 4 hours) 3 (b) Discuss the typical consequences of a divisional structure for performance measurement as divisions compete or trade with each other. CS.com Chapter 16

Study Guidance/Tips
1. Understand the impact for the company as a whole as a result of divisional structures. 2. Understand the potential problems or benefits a divisional structure could create. 3. Understand the difficulties in reporting on a divisional structure profile if there is trade between divisions.

CIMA Technical Articles

TOP TIP: Understand with divisional structures the company is creating competition within itself between departments. In the short-term this may create benefits, but it may not be sustainable for the long-term success of company.

3 (b) Exam questions from past papers: May-10-Q5 Sept-10-Q7 8 3 (c) Discuss the likely consequences of (Wk 3, different approaches to transfer pricing for 4 hours) divisional decision making, divisional and group profitability, the motivation of divisional management and the autonomy of individual divisions. CS.com Chapter 16

1. Understand the definition of transfer pricing and the different approaches used. 2. Understand the objectives of transfer pricing. 3. Understand the different bases for setting a transfer price. 4. Understand the impact of transfer pricing on group profitability. 5. Understand the changes that can occur given different market conditions.

Transfer prices Transfer pricing system

5
Email feedback to: studysupport@cimaglobal.com Updated: July 2013

CIMAP2-Performance Management Area D Self Study Guide Session Component Learning Outcomes (duration)
3 (c) Exam questions from past papers: May-10-Q7 Mar-11-Q7 May-11-Q7 Sept-11-Q7c Nov-11-Q6c 9 3 (d) Discuss in principle the potential tax 1. (Wk 3, and currency management 4 hours) consequences of internal transfer pricing 2. policy. CS.com Chapter 16 May-12-Q7 Nov-12-Q7a & Q7c May-13-Q7a, Q7b Understand how a company may manipulate its tax liability favourably if it is a multinational company. Understand how currency management may be affected if different subsidiaries are trading within different currency zones.

Study Guidance/Tips

CIMA Technical Articles

TOP TIP: Great examples of tax management and manipulation include Starbucks, Apple and Google. Research some past news stories to understand this topic further and give you some great examples. 3 (d) Exam questions from past papers: May-13-Q7c

6
Email feedback to: studysupport@cimaglobal.com Updated: July 2013

CIMAP2-Performance Management Area D Self Study Guide Revision Day:

1. Attempt at least two mock papers to timed conditions before the exam including reading time of 20 minutes (Total 3 hrs and 20 minutes to complete). Review the examiners answers and post exam guides after you have finished the mock exam. Nov-12 exam May-12 exam Examiners answers Post exam guide Examiners answers Post exam guide Using your 20 minute reading time effectively Detailed model answer for Nov-12- Q6 & Q7 ASAP approach to tackle Q7 from May 2011 exam

OTHER STUDY RESOURCES:

Find all examiners suggested answers here Post exam guides CIMA Publishing Velocity-Student e-magazine Financial Management magazine Chat to other students on CIMAsphere-discussion boards for management level

7
Email feedback to: studysupport@cimaglobal.com Updated: July 2013