Student Guidance Notes

Guide C01
September 2004

Guidance notes for students planning to sit

C01 Fundamentals of Management Accounting of
the new 2006 CIMA Certificate in Business
Accounting syllabus

This guide outlines the issues relating to transition from C01 Management Accounting
Fundamentals of the 2000 syllabus to CO1 Fundamentals of Management Accounting of
the new 2006 CIMA Certificate in Business Accounting syllabus.

The first section of this guide compares the two syllabuses, highlighting the differences
between them.

The second part of this guide focuses on the assessment strategy for the new C01
Fundamentals of Management Accounting exam.

The third part of this guide lists additional (or changed) learning outcomes in the new
syllabus.

If you have any further queries relating to this guide, please contact the CIMA Contact
Centre:

Telephone+ 44 (0)20 8849 2251

Email: [email protected]

1 February 2006
 Syllabus Comparison
New Syllabus Old Syllabus Comparison and Comments

C01 Fundamentals C01 Management

of Management Accounting
Accounting Fundamentals
A. Cost Determination 1(i) Cost Cost Determination is reduced from 30%
25% Determination 30% currently to 25%. Stock control no longer
appears (it is included in the Managerial level).

The accounting for material, labour and

overheads is now seen in the Costing and
Accounting Systems section.

Also a comparison of marginal with

absorption costing has been removed (this
appears at the Managerial level).
B. Cost behaviour and 1(iv) Marginal This section reduces from 15% to 10% with
Break Even Analysis Costing and Decision the exclusion of relevant costs/revenues (seen
10% Making 15% at the later level).
C. Standard Costing 1(ii) Standard Costing Standard Costing no longer requires fixed
15% 15% overhead variances to be dealt with. They are
included at the Managerial Level
D. Costing and 1(iii) Costing and Costing and Accounting Systems rises from
Accounting Systems Accounting Systems 20% to 30% and contains material on
30% 20% managerial reports for a range of
organisations (for example, charities and
public sector bodies).

It also identifies financial statements that

inform management and items that may be
highlighted in management reporting. These
include value-added, contribution, marketing
and administration expenses.
Interlocking ledger systems have been
removed.

E. Financial Planning 1(v) Budgeting 20% Financial Planning and Control no longer has
and Control 20% reference to the use of IT in the budget
process. There is also a greater emphasis on
the interpretation of both budget statements
and budget variances.

Aims
These are unchanged from the current syllabus.

2 February 2006
 Assessment
There will be a computer-based assessment (CBA) of 2 hours duration, comprising 50
compulsory questions, each with one or more parts.

The current paper requires a CBA of 90 minutes duration with 40 questions with one or more
parts.

A variety of objective test question types and styles will be used within the assessment. As well
as the conventional multiple choice format other possible styles include:

• filling in the blank in a sentence

• listing items in rank order
• stating a definition (in not more than __ words)
• identifying a key issue, for example advantage/ disadvantage (in not more than __
words)
• calculating one specific figure, for example profit for a period.
• completing a blank or partially completed prescribed format using terms and/or
numbers, for example an overhead cost table
• identifying points on a graph or diagram, for example a break even point
• identifying a specific term describing action/valuation seen in a scenario, for example
the conditions for a recession
• matching items together or with a description, for example “are the following cash or
non-cash items”
• interpreting numerical or graphical data.

For further information about computer based assessment please visit the website at
www.cimaglobal.com/cba

3 February 2006
 Learning Outcomes

The following learning outcomes were either not included in the corresponding “old” syllabus
or have experienced a change:

• explain why organisations need to know how much products, processes and services
cost and why they need costing systems;
• explain the idea of a ‘cost object’;
• explain the concept of a direct cost and an indirect cost;
• explain why the concept of “cost” needs to be qualified as direct, full, marginal etc, in
order to be meaningful;
• distinguish between the historical cost of an asset and the economic value of an asset
to an organisation;
• apply first-in-first-out (FIFO), last-in-first-out (LIFO) and average cost (AVCO) methods of
accounting for stock, calculating stock values and related gross profit;
• explain why first-in-first-out (FIFO) is essentially a historical cost method, while last-in-
first-out (LIFO) approximates economic cost;
• calculate direct, variable and full costs of products, services and activities using
overhead absorption rates to trace indirect costs to cost units;
• explain the use of cost information in pricing decisions, including marginal cost pricing
and the calculation of “full cost” based prices to generate a specified return on sales or
investment.
• explain how costs behave as product, service or activity levels increase or decrease;
• distinguish between fixed, variable and semi-variable costs;
• explain step costs and the importance of time-scales in their treatment as either
variable or fixed;
• estimate the fixed and variable elements of a semi-variable cost using the high-low
method and “line of best fit” method;
• explain the contribution concept and its use in cost-volume-profit (CVP) analysis;
• calculate and interpret the breakeven point, profit target, margin of safety and
profit/volume ratio for a single product or service;
• calculate the profit maximising sales mix for a multi-product company that has limited
demand for each product and one other constraint or limiting factor.
• explain the difference between ascertaining costs after the event and planning by
establishing standard costs in advance;
• explain why planned standard costs, prices and volumes are useful in setting a
benchmark for comparison and so allowing managers’ attention to be directed to areas
of the business that are performing below or above expectation;
• prepare standard costs for the material, labour and variable overhead elements of cost
of a product or service;
• calculate variances for materials, labour, variable overhead, sales prices and sales
volumes;
• prepare a statement that reconciles budgeted contribution with actual contribution;
• interpret statements of variances for variable costs, sales prices and sales volumes
including possible inter-relations between cost variances, sales price and volume
variances, and cost and sales variances;

4 February 2006
 • describe the possible use of standard labour costs in designing incentive schemes for
factory and office workers.
• explain the principles of manufacturing accounts and the integration of the cost
accounts with the financial accounting system;
• prepare a set of integrated accounts, given opening balances and appropriate
transactional information, and show standard cost variances;
• compare and contrast job, batch, contract and process costing;
• prepare ledger accounts for job, batch and process costing systems;
• prepare ledger accounts for contract costs;
• explain the difference between subjective and objective classifications of expenditure
and the importance of tracing costs both to products/services and to responsibility
centres;
• design coding systems that facilitate both subjective and objective classification of
costs;
• prepare financial statements that inform management;
• explain why gross revenue, value-added, contribution, gross margin, marketing
expense, general and administration expense, etc. might be highlighted in
management reporting;
• compare and contrast managerial reports in a range of organisations including
commercial enterprises, charities and public sector undertakings.
• explain why organisations set out financial plans in the form of budgets, typically for a
financial year;
• prepare functional budgets for material usage and purchase, labour and overheads,
including budgets for capital expenditure and depreciation;
• prepare a master budget: income statement, balance sheet and cash flow statement,
based on the functional budgets;
• interpret budget statements and advise managers on financing projected cash shortfalls
and/or investing projected cash surpluses;
• prepare a flexible budget based on the actual levels of sales and production and
calculate appropriate variances;
• compare and contrast fixed and flexible budgets;
• explain the use of budgets in designing reward strategies for managers.

Transition Arrangements
Exams based on the CIMA Certificate in Business Accounting 2006 Syllabus, will be available
at CIMA approved CBA centres from 2 October 2006.

Exams based on the CIMA Certificate in Business Accounting 2000 Syllabus, will be available
at CIMA approved CBA centres until the 1 March 2007.

Exams based on the 2000 and 2006 Syllabus will be available concurrently between the 2
October 2006 and the 1 March 2007.

5 February 2006
 Conclusion

This syllabus has experienced some changes. Material excluded includes stock control, labour
control, marginal v absorption costing, fixed overhead variances, interlocking ledgers and IT in
budgeting. These are either dealt with elsewhere or are no longer considered necessary.

There is a rebalancing between sections with the biggest change in Costing and Accounting
Systems from 20% to 30%. It is worth noting that there is an emphasis in this section given to
management accounting reports for a range of organisations and the way they inform
management.

As with all the exams at Certificate level the computer based assessment is now two hours
(from 90 minutes).

6 February 2006