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ACCAACCA PM Cheat Sheet: Variance Analysis, Transfer Pricing and Decision-Making
ExpertMinds Editorial·3 June 2026·9 min read
Practice ACCA questions while you read →Key fact:PM exam: 3-hour CBE · 100 marks · Section A (20 OT, 20 marks) · Section B (3 OT cases, 30 marks) · Section C (2 constructed response, 50 marks). Pass rate March 2026: 45% — second hardest Applied Skills paper.
Mix and Yield Variances (Material)
| Variance | Formula |
|---|---|
| Material mix variance | (Actual quantity in standard mix − Actual quantity used) × Standard cost per unit |
| Material yield variance | (Actual yield − Standard yield from actual input) × Standard cost per unit of output |
| Mix + Yield = Usage variance | Cross-check: mix + yield should equal the total usage variance |
Limiting Factor Analysis
| Step | Action |
|---|---|
| 1 | Identify the single binding constraint (e.g., machine hours, labour hours, materials) |
| 2 | Calculate contribution per unit for each product |
| 3 | Divide contribution per unit by units of scarce resource used per unit of product |
| 4 | Rank products by contribution per unit of scarce resource — highest first |
| 5 | Allocate all scarce resource to the highest-ranked product first, then next, until exhausted |
Throughput Accounting
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| Concept | Formula |
|---|---|
| Throughput | Sales revenue − Direct material cost |
| Total factory cost (TFC) | All costs other than direct materials (including labour, overheads) |
| Throughput Accounting Ratio (TAR) | Return per factory hour / Cost per factory hour |
| Return per factory hour | Throughput / Time on bottleneck resource |
| Cost per factory hour | Total factory cost / Total bottleneck resource hours available |
| Decision rule | TAR > 1: product makes a positive contribution; prioritise highest TAR when ranking |
Transfer Pricing
| Scenario | Transfer price rule |
|---|---|
| Supplying division has spare capacity | Minimum TP = Variable cost of supplying division |
| Supplying division at full capacity | Minimum TP = Variable cost + Opportunity cost (contribution foregone on external sales) |
| Buying division's perspective | Maximum TP = Lower of: external market price OR net marginal revenue (price − own variable costs) |
| Group optimal decision | Accept transfer if: Min TP ≤ Negotiated TP ≤ Max TP |
Watch out:Transfer pricing examiner trap: candidates frequently state the minimum TP without considering opportunity cost. If the supplying division is at full capacity and selling externally, every internal transfer foregoes an external sale. The minimum TP must include the contribution lost on that diverted unit.
Divisional Performance Measures
| Measure | Formula | Problem |
|---|---|---|
| ROI | Divisional profit / Net assets × 100% | Discourages positive-NPV investment if divisional ROI > project ROI |
| RI (Residual Income) | Divisional profit − (Required return % × Net assets) | Not comparable across divisions of different sizes |
| EVA | NOPAT − (WACC × Capital employed) | Complex to calculate; numerous accounting adjustments required |
Practise PM under Section C conditions
PM Section C requires laying out working clearly for partial marks. Build exam technique with full simulations.
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