ACCA
F5 (PM)
Performance Management
QUESTIONS
Mock A
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grateful to them.
MOCK A QUES TIONS
SECTION A
ALL 15 QUESTIONS ARE COMPULSORY AND MUST BE ATTEMPTED
EACH QUESTION IS WORTH 2 MARKS
1
2
3
Which ONE of the following does NOT represent a control in a computer network?
A
A firewall
B
Data encryption
C
Passwords
D
A cookie
Which TWO of the following actions would increase a product’s throughput
accounting ratio (TPAR), from one year to the next?
A
Removing settlement discounts currently being offered to businesses that buy the
product
B
Agreeing a less than expected annual pay rise for the factory staff
C
Removing trade discounts being offered on the product
D
Increasing the capacity of the business by working a longer day
A business produces a monthly newsletter to explain the steps it is taking to further improve
its environmental management. This newsletter is sent out to all staff and customers of
the business.
This type of expenditure is best defined as:
4
A
A conventional environment cost
B
A contingent environmental cost
C
A reputational environmental cost
D
A relationship environmental cost
A business is considering changing its fixed cost to variable cost mix (its operational gearing),
by encouraging some staff to agree to be paid for the hours they actually work, rather than
being fully employed on salaries. If they make this change the C/S ratio will reduce from 0.6
to 0.45 but the fixed cost base will drop 20% to $720,000 in total.
What will be the effect on the breakeven point in revenue terms and the risk profile of
the business?
A
The BEP will increase by $100,000 and the risk profile will worsen
B
The BEP will increase by $100,000 and the risk profile will improve
C
The BEP will reduce by $100,000 and the risk profile will worsen
D
The BEP will reduce by $100,000 and the risk profile will improve
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P M: PE RFORMA NCE MANA GEME N T
5
Which of the following statements is/are true?
(i)
(ii)
(iii)
6
Data is information that has been processed in such a way that it has meaning to the
person who receives it.
Big data can be used to predict consumer preferences, but is only relevant for shortterm decisions.
In order for a business to analyse big data and gain insights from it, the source data
needs to be structured into a software package.
A
(i) only
B
(i) and (ii)
C
(ii) and (iii)
D
None of the statements are true
The optimal solution for a linear programming problem has been correctly calculated as
follows:
Product X: 2,200 units
Product Y: 3,100 units
One of the non-critical resources was found to be the material, where a unit of X used 1.25
kg and a unit of Y used 1.75 kg of this material.
If there was 8,520 kg of this non-critical material available, but it could only be delivered in
40 kg bags, how many bags could be cancelled without the material becoming critical?
Enter your answer here
7
bags
A business has an objective to maximise profit through its pricing strategy. It has carried out
some analysis of past sales and prices. It concluded that for every $5 it increases prices, the
sales of a particular product reduces by 500 units. Last year, the sales of the product in
question were 45,000 units at an average selling price of $2,000 per unit. The variable costs
of making and selling the product are $800 per unit.
What is the marginal revenue function that would be used in a profit maximisation
calculation?
8
4
A
MR = 2,450 – 0.01Q
B
MR = 1,550 – 0.01Q
C
MR = 2,450 – 0.02Q
D
MR = 1,550 – 0.02Q
Electronic Executive Information Systems (EIS) and Expert Systems (ES) are examples of
which ONE of the following?
A
Customer Relationship Management Software
B
Database Management
C
Computer networking
D
Decision based software
MOCK A QUES TIONS
9
A business sells an established single product to a base of similar customers. It competes
primarily on prices as there is little to distinguish their products from others in the market.
Which is the only pricing methodology appropriate from the options below?
10
A
Price discrimination
B
Product line pricing
C
Skimming
D
Volume based discounting
A business is considering expanding its product range to include a more upmarket version of
its tablet PC. It has decided to build this new tablet in spare space within an existing factory.
The lease has 10 years yet to run and there is no break clause within the lease
contract. Depreciation is calculated at the rate of 4% on the capitalised value of the leased
asset.
Which TWO of the following statements are true?
Given the tablet will be manufactured in spare space within the factory, there will be
A
no incremental factory costs at all.
11
B
The lease cost is a committed cost, and should be excluded from the decision variables
for that reason.
C
Incremental fixed costs are never included when they relate to a lease rather than an
outright purchase.
D
Depreciation is not a cash flow, and should be excluded from the decision variables for
that reason.
A business is considering expanding its product range to include a more upmarket version of
its tablet PC. The labour required to make the tablet will come from two types of people,
programmers and engineers.
Programmers will be needed for 2,400 hours. There are 10 programmers working for the
business in contracts demanding 40 hours work per week for 48 weeks. The business feels
that 95% utilisation is acceptable and presently the programmers are operating at 93%.
Extra programmers are available from an agency at an hourly cost of $35/hr.
The engineers are fully utilised, and in short supply. The only way to source the 200 hours
needed to set up the production line is to divert existing engineers from another product.
Production of this other product will be delayed, meaning a penalty clause in a customer
contract will be triggered costing $4,000. Additionally, the engineers are paid $20/hr and
the contribution earned on the delayed products is $8,200.
What is the total relevant cash flow for the programmers and the engineers for this
project?
A
$88,000
B
$74,560
C
$96,200
D
$82,760
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P M: PE RFORMA NCE MANA GEME N T
12
Printing Limited is trying to understand its cost base and has gathered some data covering
recent periods.
January
February
Total jobs
62
75
Total cost ($)
13,160
15,800
The business, in response to the extra work in February employed another technician whose
monthly salary was $2,000, he was employed for only 80% of February starting late in the
first full week of that month.
What is the average variable cost per job and fixed cost per month of the business in
January?
13
A
VC = $49.23 and FC = $10,108
B
VC = $80 and FC = $8,200
C
VC = $80 and FC = $9,800
D
VC = 49.23 and FC = $12,108
Skilled Limited works on technically difficult jobs, and as such experiences substantial
“learning”. In the past, it has been very unscientific in estimating the effect of the learning,
but is now keen to understand how much learning is taking place. Consequently, it has
gathered some basic data: the time taken for the first 20 units of a new job was 80 hours but
the next 10 units took only 30 hours and the 10 after that took 25 hours.
Estimate the learning effect using all the data at your disposal.
Enter your answer here (to 3 decimal places)
14
A new system has been developed to provide a check to see whether a patent that already
exists would be breached by any new filing. The system will highlight similarities and will even
suggest which areas need to be changed to gain a successful filing. This quicker and more
accurate information should, it is thought, lead to better decisions on future filing
applications.
Which type of system is this best described as?
6
%
A
Enterprise Resource Planning System (ERPS)
B
Decision Support System (DSS)
C
Expert system (ES)
D
Management Information System (MIS)
MOCK A QUES TIONS
15
A private school has grouped together with other schools to be able to gain volume discounts
on books and other supplies, and also invest in floating staff who teach part time in a number
of different schools. Grouping together has led to well-equipped classrooms taught by good
quality staff. The results have been encouraging too, with good attendance and academic
achievement. The head master feels that the extra investment in floating staff members is
worth the cost and has contributed to the above results.
Which of the following area(s) best describes ‘value for money’ in the context of the
extra investment in floating staff members?
A
Economy
B
Efficiency
C
Effectiveness
D
Efficiency and effectiveness
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P M: PE RFORMA NCE MANA GEME N T
SECTION B
ALL 15 QUESTIONS ARE COMPULSORY AND MUST BE ATTEMPTED.
EACH QUESTION IS WORTH 2 MARKS.
The following scenario relates to questions 16–20
Next Day Delivery (NDD) is considering which type of delivery van to buy at its next fleet
replacement point. The finance team has correctly prepared a decision table to assist in this
decision, which considers two van sizes – small (S) and medium (M), and each of three different
levels of activity expected in the market (the uncertainty). Level 1 is the lowest activity level, and
level 3 the highest.
The “outcome” measured in the table is the contribution per van likely to be gained over each year
of use. The same number of vans would be bought, regardless of type.
Type of Van
Small
Medium
Probability
$
$
1
0.2
9,600
6,200
2
0.3
11,200
11,400
3
0.5
13,300
15,600
Activity Level
NDD’s board (and owners) consists of four people:
1
The Managing Director (MD), who has always been a very confident and optimistic individual.
2
The Financial Director (FD), who is often teased by the others as being a bit too cautious; he
worries about the impact of getting a decision wrong, and insists on using the minimax regret
technique to make decisions.
3
The Operations Director (OD) is of the view that delivering correctly first time with no
mistakes is the only way to be successful in the delivery business. He defines himself as ‘risk
neutral’ and bases his decisions on expected values of returns.
4
The fourth owner (a silent investor) is on the board but doesn’t really understand the details
of the business, preferring to focus on long average returns to fund a looming retirement.
16
Assuming the MD has the final say, which type of van is likely to be chosen?
Enter your answer here as ‘small’ or ‘medium’
17
Assuming the FD prevails, which type of van is likely to be chosen?
Enter your answer here as small or medium
18
8
Small / Medium
Small / Medium
Assuming the OD’s preferences are met, what will be the average return gained per van?
A
$11,930
B
$12,460
C
$9,600
D
$13,300
MOCK A QUES TIONS
19
What is the minimum return needed from the medium van at the activity level 1, to
make the silent partner indifferent between the types of van, assuming that the average
return for the small van is $11,930?
Enter your answer here to the nearest whole number
20
$
Which TWO of the following statements are true of an expected value?
A
It can never equal an actual result
B
It is a poor approach for a one-off decision
C
It is normally very difficult to calculate even when you have all of the data
D
Investors tend to feel that they understand it
The following scenario relates to questions 21–25
Hangers Limited manufactures two different styles of clothes hangers: a basic (B) and a luxury (L)
version. The finance department has correctly produced some costing information about the
products and the overheads of the business.
The basic hanger weighs 50g, with the luxury version 60% heavier. Each hanger suffers waste in
the manufacturing process with 10% of the input wasted for a basic and 20% wasted for a luxury.
Both styles of hanger are made from the same material, at a cost of $2 per kg.
Labour time to make the hangers varies dependent on type of hanger. A batch of 1,000 of the basic
hanger takes two hours to make and a batch of 1,000 of the luxury hanger takes three hours to
make. Labour costs $8 per hour.
Production levels expected next period are 10,000 batches of the basic hanger and 20,000 batches
of the luxury version.
Overheads total $40,000 per period, which are made up of $10,000 for deliveries and $30,000 for
set up costs. 25 deliveries in total are expected, 80% of which are for the luxury hanger. The
machines will be set up 150 times, including 100 times for the luxury hanger.
21
22
What is the combined cost of materials for one basic and one luxury hanger
combined?
A
$0.11
B
$0.20
C
$0.31
D
$0.26
What would be the total labour cost of production in the next period?
Enter your answer here to the nearest whole number
$
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P M: PE RFORMA NCE MANA GEME N T
23
24
25
10
If overheads are absorbed on a labour hours basis, how much overhead would be allocated
to each luxury hanger?
A
$0.50
B
$3.00
C
$1.50
D
$0.0015
If activity based costing is to be used, what will the overhead cost allocation be to the
luxury hanger?
A
$0.40
B
$0.004
C
$1.40
D
$0.0014
Which of the following statements concerning ABC are true?
(i)
ABC always makes a big difference to overhead allocations.
(ii)
Identifying the drivers of cost does not change the fact that fixed costs cannot be
controlled, so real savings cannot be made.
A
Both are true
B
Both are false
C
Only statement (i) is true
D
Only statement (ii) is true
MOCK A QUES TIONS
The following scenario relates to questions 26–30
Coffee Cup manufactures and then hand paints cups for sale to the wholesale traders. It sells two
types of cup, a small cup for espresso drinkers and a large cup for drinkers liking a longer coffee.
The process of making a cup can be broken down into three basic processes; forming the cup,
baking the cup in an oven and then finishing.
The management accountant has carried out some time and cost analysis and provides the
following data:
Small
$
Large
$
Selling price/cup
3.80
6.60
Materials/cup
0.84
1.75
Forming time/cup
4 mins
6 mins
Baking time/cup
2 mins
3 mins
Finishing time/cup
5 mins
7 mins
The processes maximum capacities have been measured as follows:
Forming
Baking
Finishing
Production Capacity in period
120,000 cups
120,000 cups
95,000 cups
Productive time available in period
12,000 hours
10,000 hours
10,000 hours
Labour costs are all fixed and these, along with other period costs, total $295,000.
26
27
What is the bottleneck process?
A
Forming
B
Baking
C
Finishing
D
They all have the same productive time, so the process has three bottlenecks
Assuming that finishing is the bottleneck, what is the throughput accounting ratio (TPAR)
for the large product?
Enter your answer here to 2 decimal places
28
$
Assuming Coffee Cup wanted to improve its TPAR ratios and that finishing remained
the bottleneck, which two of the following tactics would be most effective and cost
efficient?
Invest in more forming capacity
A
B
Double the number of shifts for all processes
C
Double the number of shifts for the finishing process
D
Negotiate a materials discount
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P M: PE RFORMA NCE MANA GEME N T
29
30
12
If a TPAR fell to a positive value below the value of ‘1’, which two of the following
statements could be made?
A
Production of the product in question will cease.
B
The product is loss making.
C
The product is still making a throughput contribution.
D
For a profitable company this is not possible.
An important feature of throughput accounting is the assumption of just in time
processing. Which of the following statements about JIT are true?
(i)
It is only workable if a business can predict demand patterns.
(ii)
It can often force suppliers to become surrogate stock holders.
A
Both are true
B
Both are false
C
(i) is true only
D
(ii) is true only
MOCK A QUES TIONS
SECTION C
BOTH QUESTIONS ARE COMPULSORY AND MUST BE ATTEMPTED
31
Yummy Doughnuts Limited is attempting to dominate the doughnut market in its home
market of Seatown. In 20X6, Yummy sold an average of 8,000 doughnuts every week, at a
unit price of 60 cents. Its 20X7 budget was aggressive, predicting sales of 8,000
doughnuts per week which it felt represented 20% of the doughnut market in the area. The
budget was in fact beaten, with actual sales of 8,500 doughnuts per week. The marketing
director, Mr Dumpling, a big fan of the doughnut himself, recently commented:
“This is an amazing result, particularly when one reflects on the fact that the overall market
for doughnuts is down by 5% since we did the budget, mainly due to the negative media
coverage that has hit this type of food. But I want everyone to know that our doughnuts are
‘Taste of the South Coast’ award winners and that in the marketing department, we are
doing everything we can to support the growth in sales”.
The 20X7 price charged on the doughnuts had to be reduced slightly, as there had been
negative media coverage about the fat content of most of the range. The price per doughnut
achieved was 5 cents less than the 60 cents budgeted, in order to gain a sufficiently large
share of the reduced market. This, somewhat inevitably, reduced the budget contribution
from its predicted level of 18 cents per doughnut.
Required:
(a)
Calculate the price elasticity of the Yummy doughnut and comment briefly on your
(3 marks)
results.
(b)
Calculate the budget weekly revenue and related contribution.
(c)
Calculate the weekly sales price and sales volume contribution variances. (4 marks)
(d)
Calculate the weekly sales market size and share variances and an estimate of the
actual market share achieved.
(6 marks)
(e)
Briefly discuss the sales performance of Yummy Doughnuts Limited.
(2 marks)
(5 marks)
(Total: 20 marks)
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P M: PE RFORMA NCE MANA GEME N T
32
Armadillo Limited assesses its divisions using return on investment (ROI), with managers
being rewarded with a bonus of $500 per full percentage point above their target for a given
year.
The North division’s manager has been reviewing her prospects for bonus for this year and
the following year and is a little concerned about her short-term prospects for earnings. She
has worked hard and feels she should be rewarded accordingly.
The financial projections before any last-minute change of strategy are as follows:
20X8
$m
20X9
$m
260
285
–185
–205
Controllable profit
75
80
Head Office costs
–42
–49
Taxation (allocation)
–5
–6
Net profit
28
25
550
625
Turnover
Locally controlled costs
Opening capital employed
Target ROI
12%
12%
Notes on the financial projections
1
Right at the end of 20X8, the North division is planning to invest in a new project
costing $80m. Predictions are strongly positive for the 10-year project, and the
expectation is for strong growth in revenue and profit margin as a result.
2
Taxation is calculated centrally and allocated to the divisions based on turnover.
The business’ year end is 31st December and it is now 30th November 20X8. The new
investment has not yet been made.
Armadillo’s CEO feels that both head office costs and taxation should be allocated to the
divisions on the basis of turnover and taken into account when calculating ROI. This is
unpopular with the local managers.
The head office currently deals with all recruitment, marketing, finance and accounting for
all the divisions. It also provides IT support and taxation planning, ensuring that best use of
divisional losses and reliefs are claimed for everyone. It is generally accepted that they do a
good job in these regards. The head office has no income.
14
MOCK A QUES TIONS
Required:
(a)
Discuss the arguments for the treatment of head office costs and taxation as
shown above. Your answer should include a discussion as to:
•
whether head office costs should be allocated
•
how the allocation should be made
•
whether allocated costs should be included in the ROI calculation
•
the fairness of the taxation costs (no detailed knowledge of taxation rules is
expected).
(10 marks)
(b)
Calculate the North division’s ROI based on controllable profit for both years,
and the related bonus that could be expected.
(4 marks)
(c)
Briefly discuss the suggestion and consider the impact of the new project
being delayed for 3 months. You should consider performance metrics, potential
(6 marks)
bonuses and any other relevant factor. Calculations are not required.
(Total: 20 marks)
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P M: PE RFORMA NCE MANA GEME N T
FORMULAE
Learning curve
Y = axb
Where
y
= cumulative average time per unit to produce × units
a
= the time taken for the first unit of output
x
= the cumulative number of units produced
b
= the index of learning (log LR/log 2)
LR
= the learning rate as a decimal
Demand curve
P = a − bQ
b=
Change in price
Change in quantity
a = price when Q = 0
MR = a –2bQ
16