October 15, 2012
Topic: Performance Management
Overview Welcome to Module 1. If you have not already done so, read the Program Manual located in the Reference Material section of the CMA Canada Professional Programs website. It provides you with important introductory information about the program. In Module 1 of the program, candidates are exposed to many functional competencies from the CMA Competency Map that involve decision making regarding performance management, performance measurement, risk management and governance, and financial reporting. For assistance when doing their assignments in these areas, candidates are expected to draw on many of their intermediate and advanced management and financial accounting concepts they learned in their university courses and/or in the Accelerated Program. For instance, in this assignment, one of the concepts involves Cost-Volume-Profit (CVP) analysis. In these types of analysis, candidates may be asked to look at how profits and costs change with a change in volume, or a change in such factors as variable costs, fixed costs, selling prices, and mix of products sold. By studying the relationships of costs, sales and net income, management is better able to cope with many planning decisions. Candidates who have difficulty doing this assignment or future assignments regarding CVP are encouraged to review Chapters 11 and 12 from the Horngren et al. required reading mentioned below. As candidates gain more work experience, they will be exposed to a number of organizational concerns in the topic areas outlined above. For instance, candidates may be asked to provide analysis on such items as: 1. Preparing reports on a product or geographic segment to determine where the organization generates cash and profits; 2. Evaluating strategic alternatives in one’s organization using cost-benefit and scenario/sensitivity analysis; 3. Determining the effectiveness of costing systems for their appropriateness for an organization; © 2012 The Society of Management Accountants of Canada. All rights reserved. ®/™ Registered Trade-Marks/Trade-Marks are owned by The Society of Management Accountants of Canada. No part of this document may be reproduced in any form without the permission of the copyright holder.
4. Introducing the main concepts of strategy to facilitate an understanding of the big picture; 5. Constructing and analyzing a cash flow statement to determine cash needs; 6. Looking at different short-term investment strategies as a means to effectively utilize excess cash; 7. Examining the effectiveness of internal control systems within an organization; 8. Reporting results using GAAP or a disclosed basis of accounting; and 9. Analyzing a company’s various product lines. Management accountants are often called upon to provide the analysis required for pricing decisions, such as cost-volume-profit, product costing, expected value, break even, contribution margin, and sensitivity analyses. Proper and accurate analysis is critical if management is to make well-informed decisions. Using the Right Financial Analysis Tool Candidates will oftentimes find themselves constrained by space (word/page limits) and/or time when doing their assignments. A critical outcome of analyzing cases is learning to use financial analysis tools under the appropriate circumstances. Selecting the right tool has the effect of demonstrating both good judgement (in terms of the candidate’s ability to select an appropriate tool) and conciseness (in presenting the information in a professional manner without burdening the reader with non-important information). Below are some examples that help to demonstrate how selecting the right tool for the right circumstance is critical to complete assignments in a quick and efficient manner. While the examples demonstrate the use of one tool, note that other tools may be just as effective. Given two scenarios and asked to provide an analysis between...