A Breakdown of the CIMA P2 Syllabus

CIMA P2 Syllabus Overview

CIMA P2 builds on what you have learnt in CIMA P1 about costs and their drivers.

Here you’ll learn the skills needed to analyse, plan and manage costs to support the implementation of an organisation’s strategy.

CIMA P2 is therefore more focused on long term decision making than CIMA P1.

Under the CIMA P2 Syllabus you’ll cover:

  • How to manage and control the performance of various units within an organisation in line with their short term budgets and long term strategy
  • Investment decision making and the risks associated with these decisions

CIMA P2 gives you a good grounding on the various types of risk that affect the strategy and operations of organisations. You will then go on to develop your understanding of this in CIMA P3.

Summary of the CIMA P2 Syllabus:

The percentages show the relative weight range given to each section in the CIMA P2 exam.

Syllabus AreaDescriptionWeighting
ACost Planning and Analysis for Competitive Advantage25%
BControl and Performance Management of Responsibility Centres30%
CLong-term Decision Making30%
DManagement Control and Risk15%

Learning Outcomes and Syllabus Content

ALL component learning outcomes will be tested in this exam and so it is important you cover each one below for each section of the exam.

I recommend you look to truly understand a learning outcome through reading, note taking, regular question practice and review, before moving onto the next.

If you can master all the learning outcomes, you will pass!

CIMA P2 Syllabus  – Section A: COST PLANNING AND ANALYSIS FOR COMPETITIVE ADVANTAGE (25%)

Learning outcome A1 (a) Evaluate Activity-Based Management

Key topics/theories:

  • Activity-based costing to derive ‘long-run’ costs appropriate for use in decision making.
  • Activity-based management and its use in improving the efficiency of repetitive overhead activities
  • Direct and activity-based cost methods in tracing costs to ‘cost objects’, such as customers or distribution channels, and the comparison of such costs with appropriate revenues to establish ‘tiered’ contribution levels, as in the activity-based cost hierarchy.
  • Direct customer profitability and distribution channel profitability

Learning outcome A1 (b) Evaluate Total Quality Management (TQM) Techniques

Key topics/theories:

  • The impacts of just-in-time (JIT) production, the theory of constraints and total quality management on efficiency, inventory and cost.
  • The benefits of JIT production, total quality management and theory of constraints and the implications of these methods for decision making in the contemporary manufacturing environment.
  • Kaizen costing, continuous improvement and cost of quality reporting.
  • Process re-engineering and the elimination of non-value adding activities and reduction of activity costs

Learning outcome A1 (c) Discuss Techniques for Enhancing Long-Term Profits

Key topics/theories:

  • Target costing and the determination of target costs from target prices.
  • Value analysis and quality function deployment.
  • The Value Chain and the management of contribution/profit generated throughout the chain.
  • Life cycle costing and its implications for marketing strategies

Learning outcome A1 (d) Apply Learning Curves to Estimate Time and Cost for Activities, Products and Services.

Key topics/theories:

  • Learning curves and their use in predicting product/service costs, including derivation of the learning rate and the learning index

CIMA P2 Syllabus – Section B: CONTROL AND PERFORMANCE MANAGEMENT OF RESPONSIBILITY CENTRES (30%)

Learning outcome B1 (a) Discuss the Information Needed for Decision Making in Different Organisational Structures

Key topics/theories:

  • Relevant cost information for cost centre managers: controllable and uncontrollable costs and budget flexing.
  • Relevant revenue and cost information for profit and investment centre managers: cost variability, attributable costs, controllable costs and identification of appropriate measures of profit centre ‘contribution’.
  • Alternative measures of performance for responsibility centres

Learning outcome B1 (b) Prepare Reports to Inform Decisions

Key topics/theories:

  • Performance reports: recognising issues of controllable/uncontrollable costs, variable/fixed costs and tracing revenues and costs to particular cost objects

Learning outcome B2 (a) Prepare Performance Reports for the Evaluation of Projected and Actual Performance

Key topics/theories:

  • Key metrics for the assessment of financial consequences including profitability, liquidity and asset turnover ratios, return on investment, residual income and economic value.
  • Analysis of reporting by dimension (e.g. segment, product, channel

Learning outcome B2 (b) Discuss Traditional and Non-Traditional Approaches to Performance Measurement

Key topics/theories:

  • Non-financial performance indicators.
  • Balanced Scorecards (BSC)

Learning outcome B2 (c) Discuss the Criticisms and Behavioural Aspects of Budgeting in Responsibility Centres

Key topics/theories:

  • Behavioural issues in budgeting: participation in budgeting and its possible beneficial consequences for ownership and motivation; participation in budgeting and its possible adverse consequences for ‘budget padding’ and manipulation; setting budget targets for motivation; implications of setting standard costs etc.
  • Criticisms of budgeting and the arguments for and against ‘beyond budgeting’

Learning outcome B3 (a) Discuss the Likely Behavioural Consequences of Performance Measurement within an Organisation

Key topics/theories:

  • The behavioural consequences of performance management and control in responsibility centres.
  • The behavioural consequences arising from divisional structures: internal competition and internal trading.

Learning outcome B3 (b) Discuss Transfer Pricing Systems

Key topics/theories:

  • The theory of transfer pricing, including perfect, imperfect and no market for the intermediate good.
  • Negotiated, market, cost-plus and variable cost-based transfer prices. Dual transfer prices and lump sum payments as means of addressing some of the issues that arise.

Learning outcome B3 (c) Evaluate the Effects of Transfer Prices

Key topics/theories:

  • The motivation of divisional management.
  • Divisional and group profitability.
  • The autonomy of individual divisions

CIMA P2 Syllabus – Section C: LONG-TERM DECISION MAKING (30%)

Learning outcome C1 (a) Analyse Information for use in Long-Term Decision Making

(including consideration of tax, inflation and other factors)

Key topics/theories:

  • Relevant cash flows taking account of tax, inflation and other factors, and the use of perpetuities to derive ‘final’ project value where appropriate.
  • The identification and integration of non-financial factors in long-term decisions

Learning outcome C1 (b) Discuss the Financial Consequences of Dealing with Long-run Projects, in Particular the Importance of Accounting for the ‘Time Value of Money’

Key topics/theories:

  • The process of investment decision making, including origination of proposals, creation of capital budgets, go/no go decisions on individual projects (where judgements on qualitative issues interact with financial analysis).
  • Discounting, including the use of annuities in comparing projects with unequal lives and the profitability index in capital rationing situations.
  • Capital investment real options (i.e. to make follow-on investment, abandon or wait)

Learning outcome C1 (c) Evaluate Investment Appraisal Techniques and Explain their Results.

Key topics/theories:

  • The strengths and weaknesses of: payback, discounted payback, accounting rate of return (ARR), net present value (NPV), internal rate of return (IRR) and modified internal rate of return (based on a project’s terminal value).
  • Prioritisation of projects that are mutually exclusive, and/or are subject to single-period capital rationing, and/or have unequal lives

Learning outcome C2 (a) Discuss Pricing Strategies and their Consequences.

Key topics/theories:

  • Pricing decisions for profit maximising in imperfect markets (tabular methods of solution are acceptable.)
  • Pricing strategies and the financial consequences of market skimming, premium pricing, penetration pricing, loss leaders, product bundling/optional extras and product differentiation to appeal to different market segments

CIMA P2 Syllabus – Section D: MANAGEMENT CONTROL AND RISK (15%)

Learning outcome D1 (a) Apply Sensitivity Analysis

Key topics/theories:

  • Sensitivity analysis to identify the input variables that most affect the chosen measure of project worth (payback, ARR, NPV or IRR)

Learning outcome D1 (b) Analyse Risk and Uncertainty.

Key topics/theories:

  • Quantification of risk.
  • Probabilistic models and interpretation of distribution of project outcomes.
  • Decision trees.
  • Bayes Theorem.
  • Decision making in conditions of uncertainty

Learning outcome D2 (a) Discuss Risk Management

Key topics/theories:

  • Upside and downside risk.
  • The TARA framework – transfer, avoid, reduce, accept.
  • Business risks.
  • Ethical implications and the public interest

Learning outcome D2 (b) Discuss the Risks Associated with the Collection and Use of Information

Key topics/theories:

  • Costs and benefits associated with investing in information systems.
  • Big Data

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Categories: CIMA P2, Managerial