Level 6 – Page 7 – Accountants Institute
Exam Unit: Decision Making Management (3.6)

Learning Outcome

To be able to separate costs into their fixed and variable components and use these in break-even analysis and in decision-making under multiple constraints; establish relevant cash flows for decision making and apply these principles in a variety of contexts including process/product viability and pricing including evaluation of the tension between short-term, ‘contribution based’ pricing and long-term, ‘return on investment’ pricing; develop relevant cash flows for long-term projects taking account of inflation and taxation where appropriate, evaluate projects using discounting and traditional methods, critically assess alternative methods of evaluation and place evaluation techniques in the context of the whole process of investment decision making; apply learning curves in forecasting future costs and the techniques of activity-based management, target costing and value analysis in managing future costs and evaluate the actual and potential impacts of contemporary techniques such as JIT, TOC and TQM on efficiency, inventory and cost; undertake sensitivity analysis and assess the impact of risk in decision models using probability analysis, expected value tables and decision trees as appropriate; discuss externally oriented management accounting techniques and apply these techniques to the value chain, ‘gain sharing’ arrangements and customer/channel profitability analysis.

Short-Term Decision Making:
1. Principles of Decision Making
2. Pricing Decisions
3. Profit Maximisation
4. Profit Reporting and Stock Valuation
5. Joint Costs
6. Variable and Fixed Costs
7. Optimal SolutionsLong-Term Decision Making:
1. Cash Flow Analysis
2. Project Cash Flows
3. Time Value of Money
4. Investment Appraisal
5. Project Ranking
6. Sensitivity Analysis
7. Decision Support Information
Uncertainty:
1. The Impact of Uncertainty
2. Decision Models
3. Expected Values
4. Decision TreesCompetitive Advantage:
1. Value, and Functional Cost Analysis
2. JIT
3. Kaizen Costing
4. Learning and Experience Curves
5. Activity Based Management
6. Target Costs
7. Life Cycle Costing
8. Value Chain
9. Gain Sharing
10. Pareto Analysis