Examples of a Contribution Margin Income Statement

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					                                         Management Accounting Fundamentals [MA1] Examination Blueprint
                                                                  2009–2010

Purpose

The Management Accounting Fundamentals [MA1] examination has been constructed using an examination blueprint. The blueprint, also referred to as
the test specifications, outlines the content areas covered on the examination and the weighting allotted to each content area. This document also lists the
topics, the level of competence for each topic, and the related learning objectives. In addition, information is provided on the proportion of each question
type presented in the examination (that is, multiple choice, quantitative problems, and so on).

Use

Students should use the examination blueprint to prepare for the course examination. The blueprint may not include all the topics listed in the course
materials. However, students are still responsible for acquiring a broad-based knowledge of all topics not listed in the blueprint since these topics will be
tested in assignment and review questions. The topics not listed in the blueprint will also provide students with a greater depth of understanding of the
concepts.

Examination Objectives

The objectives of this 3-hour, comprehensive examination are to test CGA students on the prerequisite knowledge required for advancement into many
courses, and to ensure that students have the broad-based knowledge in management accounting concepts needed to function properly in upper-level
education and certification courses.

Examination Guidelines for Questions

      i)   Question Type
           The following are guidelines on the type of questions and their approximate weightings:

                            Question Item                    Percent Weighting
                   Multiple-choice questions                     20% to 30%
                   Short-answer questions                        10% to 20%
                   Quantitative problems                         50% to 60%
                   Qualitative/worksheet-related questions       10% to 20%

      ii) Question Content
          The following table is organized according to content area and provides information on topics, learning objectives, weighting, and levels of
          competence.




Examination sessions: March 2010; June 2010; December 2010                                                                                       Page 1 of 10
Management Accounting Fundamentals [MA1] Examination Blueprint

Content Area                                 Topics                                          Learning objectives                        Weighting      Levels of
                                                                                                                                          (%)         competence
Module 1. Basic concepts of management accounting                                                                                       2% to 5%

                      1.1   The manager’s need for information             •   Describe the role of management accountants in an                    Level 2
                                                                               organization.

                      1.2   Comparing financial and managerial             •   Identify the major differences and similarities                      Level 2
                            accounting                                         between financial and managerial accounting.

                      1.3   Organizational structure                       •   Identify job descriptions as either line or staff                    Level 2
                                                                               positions and explain the problems that can arise
                                                                               between the two.

                      1.4   The changing business environment              •   Explain the basic concepts underlying just-in-time                   Level 2
                                                                               (JIT), total quality management (TQM), process
                                                                               re-engineering, and the theory of constraints (TOC).

                      1.5   Ethical standards                              •   Explain the importance of upholding ethical                          Level 2
                                                                               standards.

                      1.6   General cost classifications                   •   Identify and give examples of each of the three basic                Level 2
                                                                               cost elements involved in the manufacture of a
                                                                               product.

                      1.7   Cost classifications on financial statements   •   Prepare and explain the cost classifications on a                    Level 2
                                                                               manufacturing income statement.

                      1.8   Costs for planning, costing, and decision      •   Compare, contrast, and give an example of each of                    Level 1
                            making                                             the following types of costs: product and period;
                                                                               variable and fixed; direct and indirect; differential,
                                                                               opportunity, and sunk.




Examination sessions: March 2010; June 2010; December 2010                                                                                             Page 2 of 10
Content Area                                  Topics                                     Learning objectives                        Weighting      Levels of
                                                                                                                                      (%)         competence
Module 2. Job-order costing                                                                                                         3% to 8%

                       2.1    Job-order costing — An overview          •   Compute predetermined overhead rates and explain                     Level 1
                                                                           why estimated overhead costs (rather than actual
                                                                           overhead costs) are used in the costing process.

                       2.2    Job-order costing — The flow of costs    •   Prepare journal entries to record the flow of direct                 Level 1
                                                                           materials cost, direct labour cost, and manufacturing
                                                                           overhead cost in a job-order costing system.

                       2.3    Using pre-determined overhead rates      •   Apply overhead cost to Work in process by use of a                   Level 1
                                                                           predetermined overhead rate.

                       2.4    Complications of overhead application    •   Compute any balance of under- or overapplied                         Level 1
                                                                           overhead cost for a period, and prepare the journal
                                                                           entry needed to close the balance into the appropriate
                                                                           accounts.

                       2.5    Job-order costing in service companies   •   Explain the role of job-order costing in service                     Level 1
                                                                           companies.

                       2.6    Scrap and rework                         •   Prepare journal entries to deal with scrap and rework                Level 1
                                                                           of unacceptable production.




Examination sessions: March 2010; June 2010; December 2010                                                                                         Page 3 of 10
Content Area                                  Topics                                         Learning objectives                       Weighting      Levels of
                                                                                                                                         (%)         competence
Module 3. Process costing                                                                                                              3% to 8%

                       3.1   Comparison of job-order and process costing   •   Identify the major similarities and differences                     Level 2
                                                                               between job-order and process costing.

                       3.2   A perspective of process cost flows           •   Prepare journal entries to record the flow of                       Level 1
                                                                               materials, labour, and overhead through a process
                                                                               costing system.

                       3.3   Equivalent units of production                •   Explain and compute the equivalent units of                         Level 1
                                                                               production for both the weighted-average method and
                                                                               the FIFO method.

                       3.4   Production report — Weighted-average          •   Prepare a production report using the                               Level 1
                             method                                            weighted-average method.

                       3.5   Production report — FIFO method               •   Prepare a production report using the FIFO method.                  Level 1

                       3.6   Shrinkage, spoilage, and lost units           •   Compute the cost of lost units or shrinkage.                        Level 1

                       3.7   Operation costing                             •   State the conditions under which operation costing is               Level 2
                                                                               useful to management, and explain the impact of a
                                                                               flexible manufacturing system on job-order and
                                                                               process costing.




Examination sessions: March 2010; June 2010; December 2010                                                                                            Page 4 of 10
Content Area                                 Topics                                          Learning objectives                           Weighting      Levels of
                                                                                                                                             (%)         competence
Module 4. Cost behaviour and cost-volume-profit analysis                                                                                  15% to 20%

                       4.1   Variable cost behaviour patterns              •   Identify examples of variable costs, and explain the                    Level 1
                                                                               effect of a change in activity on both total variable
                                                                               costs and per unit variable costs.

                       4.2   Fixed costs                                   •   Identify examples of fixed costs, and explain the                       Level 1
                                                                               effect of a change in activity on both total fixed costs
                                                                               and fixed costs expressed on a per unit basis.

                       4.3   Analysis of mixed costs                       •   Analyze a mixed cost using the high-low method and                      Level 1
                                                                               the regression method.

                       4.4   Contribution margin and contribution format   •   Prepare an income statement using the contribution                      Level 1
                             income statement                                  method.

                       4.6   Basics of cost-volume-profit analysis         •   Explain how changes in activity and changes in                          Level 1
                                                                               variable costs, fixed costs, selling price, and volume
                                                                               affect contribution margin and net income.

                       4.7   Break-even analysis                           •   Compute the break-even point by both the equation                       Level 1
                                                                               method and the contribution margin method.

                       4.8   CVP considerations in choosing a cost         •   Use cost-volume-profit formulas to determine the                        Level 1
                             structure                                         activity level needed to achieve a desired target net
                                                                               profit figure.

                       4.9   Structuring sales commissions                 •   Explain the importance of considering contribution                      Level 2
                                                                               margin when structuring sales commissions.

                       4.10 Sales mix                                      •   Compute the break-even point for a multiple product                     Level 1
                                                                               company, and explain the effects of shifts in the sales
                                                                               mix on contribution margin and the break-even point.

                       4.11 Assumptions of CVP analysis                    •   Explain cost–volume–profit with uncertainty.                            Level 2




Examination sessions: March 2010; June 2010; December 2010                                                                                                Page 5 of 10
Content Area                                  Topics                                         Learning objectives                        Weighting       Levels of
                                                                                                                                          (%)          competence
Module 5. Activity-based costing and service department costing                                                                         8% to 12%

                        5.1   Overhead costing in the new manufacturing    •   Explain activity-based costing and how it differs from                Level 1
                              environment                                      a traditional costing system.

                        5.2   Design of an activity-based costing system   •   Assign overhead costs using activity-based costing.                   Level 1

                        5.3   Comparison of traditional and ABC product    •   List the benefits and limitations of activity-based                   Level 2
                              costs                                            costing.

                        5.5   Guidelines for service department cost       •   Allocate both fixed and variable service department                   Level 1
                              allocation                                       costs to other departments using the direct method,
                                                                               the step method, and the reciprocal method.
Module 6. Absorption and variable costing and budgeting                                                                                 14% to 18%

                        6.1   Absorption and variable costing              •   Explain how absorption costing differs from variable                  Level 1
                                                                               costing, and compute the unit product cost under each
                                                                               method.

                        6.2   Absorption and variable costing income       •   Prepare income statements using both absorption and                   Level 1
                              statements                                       variable costing, and reconcile the two net income
                                                                               figures by observing the effect of deferred
                                                                               manufacturing overhead costs.

                        6.3   Advantages and disadvantages of absorption   •   Explain the advantages and limitations of both the                    Level 1
                              and variable costing                             absorption and variable costing methods.

                        6.4   Impact of JIT inventory methods              •   Explain how the use of JIT inventory methods                          Level 1
                                                                               decreases or eliminates the difference in net income
                                                                               reported under the absorption and variable costing
                                                                               methods.

                        6.5   Basic framework of budgeting                 •   Define budgeting and explain the difference between                   Level 2
                                                                               planning and control.

                        6.6   Advantages of budgets                        •   List the principal advantages of budgeting.                           Level 2

                        6.7   Preparing the master budget                  •   Prepare the following budgets: Sales budget,                          Level 1
                                                                               production budget, direct materials budget,
                                                                               manufacturing overhead budget, selling and
                                                                               administrative expense budget, cash budget, budgeted
                                                                               income statement and balance sheet.
Examination sessions: March 2010; June 2010; December 2010                                                                                              Page 6 of 10
Content Area                                   Topics                                          Learning objectives                       Weighting      Levels of
                                                                                                                                           (%)         competence
Module 7. Standard costs for materials, labour, and variable overhead                                                                    9% to 12%

                        7.1   Standard costs — Management by exception       •   Explain the term management by exception and how                    Level 2
                                                                                 it relates to standard costs.

                        7.2   Setting standard costs                         •   Explain how direct materials standards and direct                   Level 1
                                                                                 labour standards are set.

                        7.3   A general model for variance analysis          •   Compute the following variances and explain their                   Level 1
                                                                                 significance: direct material price and quantity
                                                                                 variance, mix and yield variances, direct labour rate
                                                                                 and efficiency variances, variable overhead spending
                                                                                 and efficiency variances.

                        7.4   Journal entries to record standard costs and   •   Prepare journal entries to record standard costs and                Level 2
                              variances                                          variances.


                        7.5   Variance analysis and management by            •   Explain how managers would determine whether a                      Level 2
                              exception                                          variance constituted an “exception” that would
                                                                                 require their attention.

                        7.6   Advantages and disadvantages of standard       •   List the advantages and disadvantages of using                      Level 1
                              costs                                              standard costs.

                        7.7   Balanced scorecard                             •   List some operating performance measures and                        Level 1
                                                                                 explain how they are used.

                        7.8   Other performance measures                     •   Compute the delivery cycle time, the throughput                     Level 1
                                                                                 time, and the manufacturing cycle efficiency.




Examination sessions: March 2010; June 2010; December 2010                                                                                              Page 7 of 10
Content Area                                     Topics                                      Learning objectives                          Weighting      Levels of
                                                                                                                                            (%)         competence
Module 8. Flexible budgets and decentralization                                                                                          12% to 16%

                        8.1   Flexible budgets                             •   Prepare a flexible budget, and explain the advantages                  Level 1
                                                                               of the flexible budget approach over the static budget
                                                                               approach.

                        8.2   Variable overhead variances                  •   Prepare a variable overhead performance report using                   Level 1
                                                                               the flexible budget to show only a spending variance
                                                                               and to show both spending and efficiency variances.

                        8.3   Overhead rates and standard costing          •   Explain the significance of the denominator activity                   Level 1
                                                                               figure in determining the standard cost of a unit of
                                                                               product.

                        8.4   Fixed overhead budget and volume variances   •   Compute and properly interpret the fixed overhead                      Level 1
                                                                               budget and volume variances.

                        8.6   Full income statement variance analysis      •   Prepare an income statement incorporating variance                     Level 2
                                                                               analysis.

                        8.7   Decentralization in organizations            •   Differentiate between cost centres, profit centres, and                Level 2
                                                                               investment centres, and explain how performance is
                                                                               measured in each.

                        8.8   Segment reporting                            •   Prepare a segmented income statement using the                         Level 1
                                                                               contribution format, and explain the difference
                                                                               between traceable fixed costs and common fixed
                                                                               costs.

                        8.9   Revenue variance and market expense          •   Analyze variances from revenue targets.                                Level 1
                              analysis

                        8.10 Rate of return and residual income            •   Compute and interpret the return on investment and                     Level 1
                                                                               residual income and list the strengths and weaknesses
                                                                               of each method.




Examination sessions: March 2010; June 2010; December 2010                                                                                               Page 8 of 10
Content Area                                  Topics                                     Learning objectives                         Weighting      Levels of
                                                                                                                                       (%)         competence
Module 9. Relevant costs for decision making and inventory management                                                               12% to 16%

                       9.1   Cost concepts for decision making          •   Identify sunk costs and explain why they are not                     Level 1
                                                                            relevant in decision making based on a general rule
                                                                            for distinguishing between relevant and irrelevant
                                                                            costs, including decisions about whether to keep or
                                                                            replace old equipment.

                       9.2   Adding and dropping product lines          •   Prepare an analysis showing whether a product line or                Level 1
                                                                            other organizational segment should be dropped or
                                                                            retained.

                       9.3   The make or buy decision                   •   Explain what is meant by a make or buy decision and                  Level 1
                                                                            prepare a well-organized make or buy analysis.

                       9.5   Special orders                             •   Prepare an analysis showing whether a special order                  Level 1
                                                                            should be accepted.

                       9.6   Utilization of a constrained resource      •   Make appropriate computations to determine the most                  Level 2
                                                                            profitable utilization of scarce resources.

                       9.7   Joint product costs and the contribution   •   Prepare an analysis showing whether joint products                   Level 1
                             approach                                       should be sold at the split-off point or processed
                                                                            further.

                       9.8   Economic order quantity (EOQ) and the      •   Compute the optimum inventory level and order size.                  Level 1
                             reorder point




Examination sessions: March 2010; June 2010; December 2010                                                                                          Page 9 of 10
Content Area                                  Topics                           Learning objectives                       Weighting      Levels of
                                                                                                                           (%)         competence
Module 10. Pricing and trends in management accounting                                                                   2% to 5%

                       10.1 Cost-plus pricing                •   Compute the target selling price of a product by use                Level 1
                                                                 of cost-plus pricing under the absorption approach.

                       10.3 Target costing                   •   Derive the markup percentage needed to achieve a                    Level 1
                                                                 target return on investment (ROI) for a product under
                                                                 either the absorption or the contribution approach.

                       10.4 Time and material pricing        •   Compute and use billing rates and the material                      Level 1
                                                                 loading charge used in time and material pricing in
                                                                 service organizations.

                       10.5 Cost of quality                  •   Prepare and interpret a quality cost report.                        Level 2

                       10.6 Ethical considerations           •   List some of the benefits of implementing a corporate               Level 2
                                                                 code of ethics.




Examination sessions: March 2010; June 2010; December 2010                                                                            Page 10 of 10

				
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Description: Examples of a Contribution Margin Income Statement document sample