CIMA P1: Management Accounting

It may seem odd but the CIMA P1 Management Accounting paper is the toughest exam students will face if we look at the historic pass rates.

The overall pass rate for P1 is just 45% with only 50% passing it first time, to give you some context, this is much lower than the strategic level P3 exam which is 54% overall pass rate and 62% of students pass first time!

With this in mind, this blog post is designed to help students pass the CIMA P1 exam under the new 2019 syllabus first time.

What’s new in 2019 P1 syllabus?

A newly added P1 syllabus area is ‘rationales for costing’.

This is a new addition but it should be familiar knowledge from your previous studies such as AAT or the CIMA cert paper BA2.

It contains basic costing knowledge – being able to identify cost classifications such as material, labour and overheads while also being able to identify costs by behaviour such as fixed, variable and so on.

While this is not too difficult it’s important not too gloss over the basics as its fundamental knowledge and new exam questions have been written specifically to test this aspect.

Cost Accountant Vs Management Accountant

One interesting addition is that CIMA want you to know the difference between being a ‘cost-accountant’ and a ‘management accountant’.

These terms may be used interchangeably in job roles, however, the new syllabus content is keen to portray a management accountant as a much higher-level strategic decision maker and is surely indicative of CIMA trying to raise the profile of the profession. And rightly so.

Similarly, we have inclusion of the CGMA cost transformation model, which CIMA have published themselves, to explain how effective costing can actually become part of a company’s competitive advantage.

As anticipated, with a nod to the new future of finance 2019 syllabus, CIMA have included the shiny new subject of digital product costing. A new topic which will hopefully be as interesting as it is relevant for students.

Here you will need to know the difficulties of ascertaining a product cost for, let’s say, E-books and software downloads. Also you should understand the benefits of using a digital costing system in this new part of the P1 syllabus.

The P1 Basic’s Remain

Nevertheless, the majority of the P1 syllabus remains the same as CIMA expects students to have a firm grasp of the core costing knowledge.

Students are still required to perform the reconciliation of marginal and absorption costing profits and know the usefulness of each method.

In terms of other costing techniques – there is still throughput accounting, ABC and standard costing too.

We are still expected to tackle topics such as linear programming, time series analysis, break even calculations and risk techniques.

Budgeting for Success

Budgeting, of course, is still big in this management accountancy P1 syllabus.

We are still expected to perform budget calculations in regards to fixed, flex and cash budgets and to know the differences between a functional, master, and principal budget.

Types of budget like zero-based budgeting, activity based budgets and rolling budgets are considered core knowledge in P1, meanwhile, the subject of Beyond Budgeting has dropped down from P2 into the P1 paper.

We also have a extra learning outcome relating to ‘stress testing budgets’ which is basically the ability to assess how vulnerable a budget is to a stressful event(s) such as loss of a major customer or supplier.

Could the numbers cope if supplier prices were to rise 20% for example or rental prices were increased on company premises?

POINT TO NOTE

Joint product costing has been raised in prominence but interestingly enough CIMA have removed environmental costing and quality costing from the syllabus.

Both are frequently examined areas for operational case-study so a decision to remove them at P1 will have impact on the OCS exam going forward.

In addition to this, CIMA P1 students are no longer required to learn about the modern-manufacturing environment (TQM or Just-in-time production and McDonaldisation have been removed) – these topics may appear elsewhere on other papers – but not P1 any longer!

Variances are still an important part of the syllabus – we need all of these – including the ‘much disliked’ fixed overhead variances splitting into capacity and efficiency.

In terms of advanced variances, planning & operational are staying with us, so are sales mix and quantity variances. However, you may be pleased to see that material mix and yield variances are being removed for new exams.

The CIMA Student:  P1 Exam Tip

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As a final note here – remember CIMA can ask you for backward variances – where you are told the solution and you need to work backwards to find what ‘actual hours’ or the standard rate must be.

These involve a good knowledge of variance formula’s – so work hard on this area!

On the whole, the new P1 exam seems more straightforward, modern and aligned with later papers such as OCS and the P2 paper. Pass rates are yet to be announced under the 2019 syllabus but I have a feeling they will be better than the 2015 syllabus P1 results.

So good luck with your CIMA P1 exam/resit – try to get through this transition from 2015 to 2019 as soon as you can!

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