Study Notes management accounting acca f2

discretionary fixed costs
▪ In long term variable and fixed costs both can be either avoided or reduced 
 
METHODS OF COST REDUCTION 
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Improving efficiency
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Improving efficiency includes:
▪ Improving efficiency of material usage 
▪ Low level of wastage 
▪ Better quality checks 
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Improving labour productivity
▪ Pay incentives 
▪ Change working methods 
▪ Improving coordination between departments 
▪ Give challenging standards 
▪ Improving efficiency of equipment usage 
▪ Better use of equipment resources 
▪ Provide proper maintenance to avoid down time 
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Material costs
▪ Avail bulk purchase discounts 
▪ Introduce EOQ 
▪ Use Cheap substitute material 
▪ Improve store controls 
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Labour cost
Work study is a mean of raising the productivity of an operating unit by reorganization of work. 
There are two parts of work study: 
▪ 
Method study: 
It is the systematic recording and critical examination of existing and proposed 
ways of doing work in order to develop and apply easier and more effective methods and reduce 
costs. 
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Work measurement: 
It involves establishing the time for qualified workers to carry out a 
specified job at a specified level of performance.
 
Methods of work study:
♦ Direct observation methods: It involves observing jobs in practice 
♦ Synthetic methods: These are used to estimate work content of jobs without having to 
observe them. 

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F2 Management Accounting
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Organization and methods (O&M)
It is a term for techniques, including method study and work measurement that are used to examine 
clerical, administrative and management procedures for improvements. 
Critical examination of existing and proposed ways of doing work in order to improve it through 
alternative cost reduction methods and establishing the time for a skilled worker to carry out a 
specified job at specified level of performance 
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Finance Cost
▪ Avail cash discounts from suppliers 
▪ Reassessed cash discounts offered to credit customers 
▪ Borrow at low interest rates 
▪ Improve foreign exchange dealings 
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