Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
General Comments
The overall performance was perhaps a little disappointing, especially as the paper contained items
from the syllabus that are fundamental to the Performance pillar, and have appeared in several recent
papers. The paper included variance analysis, the learning curve, aspects of budgeting and quality
costs, just-in-time calculations, limiting factors and break-even analysis and transfer pricing with
minimum and maximum pricing issues.
Following a detailed review of the scripts it was apparent that many candidates had not prepared for
the exam, and were only competent in specific portions of the syllabus. It was also clear that many
candidates did not demonstrate a good exam technique which would indicate they were not
accustomed to the rigours and exactness of a CIMA exam. Most importantly it appeared that
candidates had not practiced using past CIMA (or equivalent) P2 questions.
Some of the papers submitted by candidates were good and high marks were attained. However a
significant number of scripts contained issues that have been highlighted in many previous PEGs.
These issues include poor handwriting, poor layout of numerical answers, incorrect interpretation of
verbs, workings not decipherable, not referred to, or not shown, poor time management and
disproportionate, lengthy answers to discursive questions.
Thorough preparation for this exam is of paramount importance and most candidates would gain a
better mark if they displayed a better exam technique. There was ample evidence to indicate that
candidates had not:
•
•
•
•
•
•
Studied the entire syllabus
Read articles that have recently appeared in Financial Management magazine (for example
Q6(a))
Addressed any ‘knowledge gaps’ relating to relevant material from the P1 syllabus
Digested the content of previous PEGs
Practised using CIMA style questions
Completed an intensive revision session
The following points should be noted by candidates when reflecting on the paper just taken,
and when preparing for future CIMA examinations:
1. Due to the progressive nature of the Performance Pillar, candidates sitting the P2
examination are advised to closely examine the syllabi of the Certificate Level subjects,
particularly C01, and the P1 paper to ensure they have a thorough understanding of all the
topics covered in those papers. Any identified knowledge gap must be addressed.
2. Candidates should always practise time management and relate the time they expend on
each question to the marks available. A simple approach is to allow 1.8 minutes for one
mark. This will avoid candidates failing to complete the paper.
3. Candidates are advised to read Financial Management magazine and Velocity e-newsletter,
especially articles that relate to technical issues associated with the P2 syllabus.
4. Candidates should study and revise the entire syllabus and ignore suggestions put forward in
accounting journals which suggest the topics ‘likely’ to be examined.
5. Candidates are advised to understand the rubric of the paper and plan their attempts
accordingly.
6. Candidates should make full use of the 20 minutes allowed for reading and planning.
7. Answers to discursive questions should relate to the scenario in the question. On many
occasions general answers are submitted that attract few marks.
©The Chartered Institute of Management Accountants 2013
Page 1
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
8. In preparing for the exam, candidates are advised to practise regularly using past CIMA
questions, comparing their answers to the examiner’s suggested answers. The effort exerted
undertaking this task will allow candidates to measure their own progress. Candidates will
also gain an understanding of the correct layout for quantitative answers and of the depth of
answers required to discursive questions.
9. Candidates are advised to present answers in a clear and logical fashion, for example clear
and legible handwriting and workings clearly referred to. Blue or black ink only should be
used and pencil should be used for diagrams only.
10. Do not write in red ink or pencil.
Items 9 and 10 need particular attention, especially from candidates who fail simply due to a poorly
presented paper and poorly expressed answers. Also attention must be drawn to candidates who
write in red ink, which causes difficulties for the marking team who use red ink for their marking. A
weakness in basic mathematical techniques was also a worrying feature of this exam.
There are also a number of common faults that need attention:
1. When answering a question the effort expended should be related to the marks available.
2. If a question asks for, say, three items to be put forward, do not expend valuable time in putting
forward more items. Only the marks for the first three items will be recognised (for example Q1(b),
Q2(b), Q3, Q5(b))
3. Clearly indicate to the marker if part of the answer to a question appears later in the answer booklet
4. Poor layout to quantitative answers
5. It was noticeable, especially in the answers to questions 6 and 7, that some candidates were
crossing out attempts, some of which were correct, but were not replacing these answers. The
message is simple “do not cross out an answer until you have replaced it”.
The content of previous PEGs has been unheeded by many candidates as the items described above
were more prominent than in previous papers.
©The Chartered Institute of Management Accountants 2013
Page 2
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Section A – 50 marks
ANSWER ALL FIVE QUESTIONS IN THIS SECTION. EACH QUESTION IS
WORTH 10 MARKS. YOU SHOULD SHOW YOUR WORKINGS AS MARKS ARE AVAILABLE FOR
THE METHOD YOU USE.
Question 1
Required:
(a)
(b)
Calculate the learning rate that the Management Accountant assumed when
recalculating the variances.
(6 marks)
Explain TWO reasons why it is important for production planning and control
purposes to identify the learning curve.
(4 marks)
(Total for Question One = 10 marks)
Rationale
The question examines candidates’ knowledge, understanding and application of variance analysis
linked to the learning curve. The learning outcome tested is B1 (e), apply learning curves to estimate
time and cost for new products and services.
Suggested Approach
Carefully read and absorb the data provided, and by use of either the labour efficiency planning variance,
or the labour efficiency operating variance, calculate the revised standard time to produce 32 units. The
next step is to calculate the average time per unit, and express this as a percentage of the time for the
first unit (25 hours). Then, by recognising that the number of ‘ doublings’ of output is five, take the fifth
root of the percentage earlier calculated to arrive at the expected learning rate.
Part (b) requested candidates to explain two reasons why it is important for production planning and
control purposes to identify the learning curve, such as scheduling, control and resourcing.
Marking Guide
(a)
Calculate the planning variance of 360 hours
Calculate revised standard for 32 units – 440 hours
Cumulative average time (CAT) per unit of 13.75 hours per unit
Marks
1
1
1
CAT for first 32 units as a percentage of the time for the first unit is 55%
1
Number of doublings of output (5)
Taking the fifth root
1
1
(b)
Reason – planning, plus explanation
Control, plus explanation
Maximum marks awarded
©The Chartered Institute of Management Accountants 2013
2
2
10 marks
Page 3
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Examiner’s Comments
This question required knowledge of variance analysis and the learning curve. There were some good,
well laid out answers, but many candidates did not understand that they needed to calculate the revised
time to produce 32 units by use of the variances given in the question. The use of the follow through/
own figure rule meant that candidates could still gain marks for the learning curve portion of the question,
but many candidates attempted a logarithmic approach and simply lost their way in their workings.
The answers to part (b) were a little weak with candidates failing to realise that ‘planning’ and ‘control’
needed separate attention.
Common Errors
Part (a)
1.
2.
3.
4.
5.
6.
Failing to take account of the variances
Not appreciating that 32 is 5 ‘doublings’ of output
Unable to calculate the fifth route of a number
Unable to apply a logarithmic approach to solving the learning curve
Submitting unrealistic percentages for the learning rate, for example, 136%, 1.04%
Making basic mathematical errors
Part (b)
7. Not appreciating that comments were required for both planning and control
8. Simply giving an explanation of the learning curve. This was not requested
9. Putting forward up to four items whereas only two were required
©The Chartered Institute of Management Accountants 2013
Page 4
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Question 2
Required:
(a) Produce an amended statement for the quarter ending 31 October 2012 that is based on
a flexed budget.
(6 marks)
(b) Explain ONE benefit and ONE limitation of the statement you have produced.
(4 marks)
(Total for Question Two = 10 marks)
Rationale
The question examines candidates’ knowledge and understanding of a flexed budget. The learning
outcome tested is C2 (c), evaluate performance using fixed and flexible budget reports.
Suggested Approach
Carefully read and digest the relevant information and produce an amended statement that includes a
flexed budget column. The variance column would now compare the flexed budget with the actual column.
Part (b) asked for an explanation of a benefit and a limitation of the statement produced in part (a).
Marking Guide
Correct headings
Sales
Direct materials
Direct labour
Variable overhead
Fixed overhead
Inventory Adjustment
Inventory
Cost of Sales
Gross Profit
Maximum Mark
(b)
Like for like : Volume
Lack of detail: areas of responsibility
Other sensible benefits and limitations could be rewarded
Maximum marks awarded
$’000
(Variance 5.0 ADV)
(Variance 1.5 ADV)
(Variance 3.0 FAV)
(Variance 2.5 ADV)
(Variance 1.0 ADV)
(12 ADV)
(Variance 0)
(Variance 2.0 ADV)
(Variance 7.0 ADV)
Marks
2
0.5
0.5
0.5
0.5
0.5
1
0.5
0.5
0.5
6
2
2
10 marks
Examiner’s Comments
Generally the standard of answers to both parts was a little disappointing. Part (a) specifically requested
an amended statement meaning the statement shown in the question, plus an extra column for the flexed
budget. Many candidates chose to simply present one column of figures showing the flexed budget. Many
candidates also did not show any variances.
Part (b) requested one benefit and one limitation, but many candidates ignored this request and simply
discussed the mechanics of a flexed budget.
©The Chartered Institute of Management Accountants 2013
Page 5
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Common Errors
Part (a)
1. Failing to present an acceptable statement
• Only the flexed budget shown
• No variance column
• The original budget was not shown
• Statement not including any totals
• Errors when arriving at totals
• Failing to balance the statement
• Incorrectly comparing the flexed budget to the original budget
Part (b)
2. Failing to answer the question and submitting non-relevant information, for example, ‘the flexed
budget does not contain non-financial information’.
3. Submitting an answer that gave a description of how a flexed budget is constructed
4. Submitting two benefits and no limitations and vice versa
©The Chartered Institute of Management Accountants 2013
Page 6
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Question 3
Required:
Produce a report, addressed to the new Director, that discusses participative budgeting.
Note: your report must
•
explain TWO potential benefits and TWO potential disadvantages of involving the new
and existing managers in the budget setting process.
•
provide a recommendation to the new Director.
(10 marks)
(Total for Question Three = 10 marks)
Rationale
The question examines candidates’ knowledge of participative budgeting. The learning outcome tested
is C3 (a), discuss the impact of budgetary control systems and setting of standard costs on human
behaviour.
Suggested Approach
Carefully read the scenario to identify the circumstances associated with the introduction of a
participative budget. A report addressed to the new Director was required that needed to contain specific
items such as potential benefits and disadvantages of involving new managers in this budget setting
process. Finally the question asked for a recommendation to the new Director relating to the introduction
of a participative budget.
Marking Guide
Report layout
Description of participative budgeting
Advantages: point/explanation
Disadvantages: point/explanation
Recommendation, plus reason
Maximum marks awarded
Marks
1
2
4
4
2
10 marks
Examiner’s Comments
Most candidates obtained the marks that were available. However some candidates chose to answer
their own question, for example giving a full description of a ‘top down’ approach to budgeting.
©The Chartered Institute of Management Accountants 2013
Page 7
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Common Errors
1. Submitting poorly presented reports. A business report should not start with such items as:
• “hello new director”
• “dear director”
• “hi director”
Neither does a business report finish with:
• “many thanks”
• “yours sincerely”
• “kind regards”
2.
3.
4.
5.
Incorrectly describing a ‘top-down’ budget
Failing to define or describe a participative budget
Failing to make any recommendations
Extremely poor handwriting, poor spelling and poor punctuation
©The Chartered Institute of Management Accountants 2013
Page 8
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Question 4
(a)
Explain each of the four quality cost classifications using examples from the above
data.
(4 marks)
(b)
Discuss, using the above data, the relationship between conformance costs and nonconformance costs and its importance for this company.
(6 marks)
(Total for Question Four = 10 marks)
Rationale
The question examines candidates’ knowledge and understanding of quality costs. The learning
outcome tested is B1 (d), prepare cost of quality reports.
Suggested Approach
Part (a) required an explanation of each of the four quality cost classifications using examples from the
scenario.
Part (b) required a discussion, using data from the scenario, to describe the relationship between
conformance costs and non-conformance costs and its importance to this company.
Marking Guide
(a)
Prevention + example
Appraisal + example
Internal failure + example
External failure + example
(b)
Definition
Relationships – ‘trade off’
Examples from scenario
Importance to company
Maximum marks awarded
Marks
1
1
1
1
1
1
2
2
10 marks
Examiner’s Comments
Most candidates were able to gain the marks available for part (a), although some were not able to select
an example of a cost for the four quality cost classifications from the question. In part (b) many
candidates were not able to describe the ‘trade-off’ between conformance and non-conformance costs,
and not able to discuss its importance for this company.
©The Chartered Institute of Management Accountants 2013
Page 9
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Common Errors
Part (a)
1. Selecting incorrect examples for the four quality cost classifications
2. Submitting examples that were not included in the question
3. Not knowing the four quality cost classifications
Part (b)
4. Failing to describe the ‘trade-off’ between conformance and non-conformance
5. Incorrectly reading the figures in the table, and believing that 2012 was 2011 and vice versa.
This error unfortunately led to a totally incorrect answer
6. Incorrectly believing that appraisal is a non-conformance cost.
©The Chartered Institute of Management Accountants 2013
Page 10
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Question 5
Required:
(a) Produce calculations using the above data to show which of the two plans would incur the
lowest total cost in 2013.
(6 marks)
(b) Explain TWO reasons why the decision about the production plan should not be based on
your answer to part (a) alone.
(4 marks)
(Total for Question Five = 10 marks)
Rationale
The question examines candidates’ knowledge of JIT and the impact of its application compared to a
traditional inventory control system. The learning outcome tested is B1(b), evaluate the impacts of just-intime production, the theory of constraints and total quality management on efficiency, inventory and cost.
Suggested Approach
Part(a) Carefully understand the details contained in the scenario and produce two plans which would
identify which method of inventory control/management would incur the lowest total cost.
A full costing approach could have been adopted, but the approach which made the most economical use of
time was an incremental approach. Careful presentation of the figures was essential for this part of the
question.
Part (b) asked candidates to explain two reasons why the decision reached in part (a) should not be based
on this answer alone. (The marking schemes accommodated the answer given in part (a) in that reasons
could be accepted for either eventuality.)
Marking Guide
(a)
Q1 incremental costs
Q2 incremental costs
Q3 overtime
Q4 overtime
Q3 incremental costs
Q4 incremental costs
Closing inventory (units)
Average inventory
Holding cost
(b)
Reason plus explanation x 2
Maximum marks awarded
Marks
$960,000
$60,000
1,000 units
14,000 units
$156,000
$1,442,000
0.5
0.5
0.5
0.5
0.5
0.5
1
1
1
4
10 marks
Examiner’s Comments
The attempts at part (a) were a little disappointing. The most economical way to answer this question was
on an incremental basis. Using a full costing approach was acceptable but it would take an average student
longer to arrive at the answer. In part (b) many candidates submitted comments that did not relate to part
(a).
©The Chartered Institute of Management Accountants 2013
Page 11
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Common Errors
Part (a)
1. Poorly presented statements
2. Figures shown with no headings or labels
3. Using quarter-end inventory figures to arrive at a holding cost, as opposed to using average
inventory figures
4. Mathematical errors in calculations
5. Calculating the overtime cost incorrectly
Part (b)
6. Failing to relate to the answers shown in part (a)
7. Submitting a general/generic answer that only loosely related to the question
8. Submitting an answer that described JIT, rather than selecting specific, relevant items that related to
the question.
©The Chartered Institute of Management Accountants 2013
Page 12
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
SECTION B – 50 MARKS
ANSWER BOTH QUESTIONS IN THIS SECTION. EACH QUESTION IS
WORTH 25 MARKS. YOU SHOULD SHOW YOUR WORKINGS AS MARKS ARE AVAILABLE FOR
THE METHOD YOU USE.
Question 6
(a) Produce calculations to determine the optimal production plan for P1, P2, P3, C1 and C2
during December.
Note: it is not possible to produce partly finished units or to hold inventory of any of these
products or components.
(10 marks)
(b) Explain the shadow prices of $200, $187.50 and $175 for the direct material. Your
answer should show the changes to the resource usage and the production plan
for each of the shadow prices.
(6 marks)
(c) Calculate the number of units of each product that must be sold for Company YZ
to break even in December given the current sales mix ratio.
(4 marks)
(d) The Sales Manager has now said that to be able to sell 6,300 units of product L in
December it will be necessary to reduce the selling price of product L.
Calculate the sensitivity of Company YZ’s total budgeted profit for December to a
change in the selling price per unit of product L.
(5 marks)
(Total for Question Six = 25 marks)
Rationale
The question examines candidates’ knowledge and understanding of limiting factors, aspects
associated with limiting factors, such as make or buy, and break even analysis. The learning
outcomes tested are: part (a) A2 (b), interpret variable/fixed cost analysis in multiple product
contexts to break-even analysis and product mix decisions, including circumstances where there
are multiple constraints and linear programming methods needed to identify ‘optimal’ solutions; part
(b) A2(c), discuss the meaning of ‘optimal’ solutions and demonstrate how linear programming
methods can be employed for profit maximising, revenue maximising and satisfying objectives;
parts (c) and (d), A2(d), analyse the impact of uncertainty and risk on decision models based on
CVP analysis.
Suggested Approach
Part (a) carefully read the question to fully understand the details provided and what was required.
The first step was to establish the limiting factor and then construct a table to allow the company to
arrive at a production plan that would maximise the company’s profit. It was important that
components C1 and C2 were treated in exactly the same way as products P1, P2 and P3.
Part (b) required a sound understanding of shadow pricing, before addressing the figures given in
the question.
©The Chartered Institute of Management Accountants 2013
Page 13
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Part (c) required an understanding of breakeven analysis when faced with products which are sold
in a specific ratio.
Part (d) used the same scenario as part (c) but required the ability to calculate the sensitivity of the
selling price of one of the products. Part (d) was not reliant on the completion of part (c).
Marking Guide
(a)
Identify limiting factor
Calculate contribution for products
Calculate contribution for components
Limiting factor (amount per unit)
Contribution per limiting factor
Ranking
Production plan
(b)
Explain $200 – changed plan
Net impact on contribution
Explain shadow price
Explain $187.50 – allocation
Explain shadow price
Explain $175 – allocation
Explain shadow price
(c)
Bundle contribution or weighted contribution ($4,500 or $225)
Correct unit values (5,400,3,600 and 3,000)
(d)
Current profit - $450,000
Drop in unit contribution $71.43
Sensitivity
23.8%
Maximum marks awarded
Marks
2
1
2
1
1
1
2
Max 6 marks
1
1
1
1
1
1
1
Max 6 marks
2
2
1
2
2
25 marks
Examiner’s Comments
The attempts at part (a) were good but the attempts for parts (b),(c) and (d) were extremely poor.
Limiting factors and breakeven analysis are important and fundamental items within the Performance
pillar and should not have presented any problems for a well prepared candidate.
Common Errors
Part (a)
1.
2.
3.
4.
Not selecting material as the limiting factor
Showing the costs for C1 and C2 as negative contributions
Completely ignoring C1 and C2
Not answering the question when generating a production plan. The question clearly stated
that it was not possible to produce partly finished units but many answers showed either
137.5 units, or 138 units of product P2
5. Showing the correct ranking of the products but failing to correctly distribute the scarce
resource
6. Attempting to solve the question by use of linear programming but getting lost in the
calculations
©The Chartered Institute of Management Accountants 2013
Page 14
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Part (b)
7. Completely misunderstanding the requirement
8. Demonstrating no knowledge of shadow pricing
9. Simply describing shadow pricing and not relating the answer to the question
Part (c)
10. Submitting an answer that simply gave a total number of units with no attempt to give a
figure for each product
11. Incorrectly attempting to allocate the fixed costs to the three products
12. Assuming that each product had an equal weighting
13. Submitting unrealistic numbers
Example 1 – Product numbers L 2,025,000 units; M 1,620,000 units;
N 865,385 units
Example 2 –Total number of units to break even equals 12
Example 3 – BEP = 4,470,198 units (with no figure for each product)
Part (d)
14. Not understanding what was required
15. Unable to calculate a sensitivity percentage.
©The Chartered Institute of Management Accountants 2013
Page 15
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Question 7
Required:
(a)
Calculate the total revenue that would be generated by the complete cameras if:
(i)
the Manager of the Optics Division set the transfer price of a lens equal
to the selling price which would be set to maximise profits from the sale
of lenses to external customers;
(ii)
the transfer price of a lens was set to maximise the profits of the OB
group from the sale of complete cameras.
(10 marks)
(b)
Calculate, following the change to the company policy:
(i)
the minimum price per box that PD would be willing to charge;
(3 marks)
(ii)
the maximum price per box that SD would be willing to pay.
(4 marks)
(Total for part (b) = 7 marks)
(c)
The Manager of SD is unhappy about paying the same price per box as an
external customer and thinks that transfer prices should be set using an
opportunity cost-based approach.
Discuss the view that transfer prices should be set using opportunity cost. You
should use the data from the FF group to illustrate your answer.
(8 marks)
(Total for Question Seven = 25 marks)
Rationale
The question examines candidates’ understanding of transfer pricing, the calculation of the
maximum profit for a division and the company as a whole, and a discussion on transfer pricing
using opportunity cost. The learning outcomes tested are: part (a) and part(c), D3(c), discuss the
likely consequences of different approaches to transfer pricing for divisional decision making,
divisional and group profitability, the motivation of divisional management and the autonomy of
individual divisions and part (b), D2(b), discuss revenue and cost information in appropriate formats
for profit and investment centre managers, taking due account of cost variability, attributable costs,
controllable cost, and identification of appropriate measures of profit centre ‘contribution’.
Suggested Approach
Part (a)(i) Carefully digest the details in the question and calculate the revenue generated by the
complete cameras from the point of view of the Optics divisional manager.
The main aim was to calculate the selling price at which the Optics division would transfer the lens
to the Body division.
Part (a)(ii) required similar calculations but the transfer price needed to generate the maximum profit
for the OB group.
©The Chartered Institute of Management Accountants 2013
Page 16
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Part (b) considered the transfer of items between two divisions of the same company and required
calculations to address the two situations described in the questions.
Part (c) required a discussion relating to the use of opportunity costs as a basis for transfer pricing.
All parts of this question required answers to relate to the scenarios in the question.
Marking Guide
(a) (i)
Optics price equation
Marginal revenue
Solve for x
Solve for P
Body division price equation
Marginal cost
Follow through to x
Follow through to P
Revenue
(ii)
True marginal cost
Solving for x
Solving for P
Revenue
(b) (i)
Return required by PD
Total contribution needed
Contribution per box
Equating total contribution
Solving for x
(ii)
Total contribution needed
Equating (6.72m = 13.5m – (x x
500000))
Solving for x
Price per box
Marks
(6000 – 0.5x)
(6000 – x)
(4800)
($3600)
(8000 - ⅓ x)
$(1750 +3600)
(3975)
($6675)
(6675 x 3975)
1
0.5
0.5
1
1
1
0.5
1
0.5
Max 6 marks
$ (1750 + 1200)
(7575)
($5475)
(7575 x $5475)
2
1
1
0.5
Max 4 marks
($ 288000)
($2688000)
( x – 1.40)
((x – 1.40) x 4480)
($2.00)
($6720000)
1
0.5
0.5
0.5
0.5
No
Marks
given
($13.56)
($13.56 - $12)
(c)
There were many ways that an answer could be structured. The answer should recognise the
‘extreme’ transfer prices and then use those as the argument for opportunity cost.
Marginal cost
Marginal price
Argument for opportunity cost
Maximum marks awarded
Up to 3
Up to 3
Up to 4
Max 8 marks
25 marks
Examiner’s Comments
The attempts at this question were generally poor. The answers submitted to parts (a) and (b)
suggest that many candidates did not fully understand what was required. Many answers were
poorly presented with figures not being described or labelled. On many occasions the answers to
part (c) did not relate to part (b) and were simply discussions of a general nature relating to transfer
pricing.
©The Chartered Institute of Management Accountants 2013
Page 17
Paper P2 – Performance Management
Post Exam Guide
November 2012 Exam
Common Errors
Part (a)
1. Submitting an answer that gave revenues, costs and profits, whereas only revenues were
required
2. Extremely poor layout of answers
3. Confusing the requirement of parts (i) and (ii)
4. Showing the Body Division figures from part (i) as the answer for part (ii), and not answering
part (ii)
5. Incorrect use of formulae
6. Submitting unrealistic answers
Part (b)
7. Not understanding what was required
8. Mathematical errors
9. Not answering the question; for example, giving an answer of $13.56 for b(ii) and not
subtracting the variable cost of $12
Part (c)
10. Submitting detailed descriptions of other forms of transfer pricing, for example dual pricing.
This was not required
11. Not reading the question carefully and believing that the order for 500,000 was not included
in the figure of 4.48 million
12. Presuming that marginal cost is simply another name for opportunity cost
13. Unable to describe an opportunity cost approach to transfer pricing
©The Chartered Institute of Management Accountants 2013
Page 18