Professional Documents
Culture Documents
Paper F5
Performance Management
Revision Mock Examination
December 2014
Answer Guide
Health Warning!
How to pass
How to fail
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Section A
1. A
2. C
3. C
4. D
5. A
6. B
7. C
8. B
9. D
10.
11.
12.
13.
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14.
15.
16.
17.
18.
19.
$683,761
20.
$4.30
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Section B
Question 1
Marking scheme
(a) One mark per reasonable point, 1 mark for a relevant correct ratio, 2 max
per heading, up to 9 marks.
(b)1 mark per sensible point, 2 max per heading, up to 6 marks.
(max 15 marks)
(a)
The financial performance of the office manager:
Sales revenue
Sales revenue has increased by 10.5% [(420 380)/380] over the previous year's
figure. Given that inflation was running at only 5% for the period, this represents a
real-terms increase in revenue. This indicates good marketing performance by the
office.
Net profit
The net profit has increased by 5.3% during 2010, which initially seems to be a
good performance. However, closer examination of the figures show that net profit
margin fell from 25% in 2009 to only 23.8% in 2010. This indicates a slight
worsening in control over operating costs by the office during 2010.
Cash balance
The average cash balance has increased by 20% during 2010, which indicates good
and improving liquidity for the office. Again, since this is higher than the inflation
rate of 5%, there has been a real-terms increase in liquidity.
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Trade receivables
Trade receivables days have remained below the industry average for the office,
which suggests good performance by the credit collection department of the office.
However, care should be taken to ensure that in reducing the amount of trade
credit offered by 12% over the year, the office does not damage its
competitiveness by alienating customers that prefer to take all trade credit offered
to them.
(b)
The non-financial performance of the office manager:
(i) Customer satisfaction
The number of customers has fallen alarmingly during the year, down by over
26%. This is particularly worrying as the consultancy market is expanding for
the office. In 2009 the total market size was 475 clients [190/40%]; in 2010
the total market size was 560 clients [140/25%]. The office manager needs to
quickly establish and address the reasons for this loss of competitiveness if the
office market share is to be restored.
(ii) Internal process efficiency
The client error rate may look low at only 4%, but this represents a 100%
increase (ie a doubling) of the error rate from 2009. Coupled with the fact that
the average time taken to complete client assignments has risen by 25%, this
seems to indicate a deterioration in the internal process efficiency of the office.
This could also account for some of the fall in competitiveness of the office
indicated above.
(iii) Learning and growth
The average level of experience of consultants in the office has declined during
2010, as indicated both by the average amount of training offered to office
employees which has fallen by 25% during the period and also by the rise of
25% in staff turnover at the office. These may help to account for the increase
in error rate mentioned above.
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Question 2
Marking scheme
(a)
(b)
(a)
Memo:
[1 mark for presentation]
To: Manager of OPD
From: Management Accountant
Date: aa/bb/cccc
Subject: Zero-based budgeting (ZBB)
Zero-based budgeting is an approach to modern budgeting in service organisations
where a budget is prepared from scratch. Every item of expenditure has to be
justified in its entirety before approval is granted in the budget.
ZBB ignores the assumption that next years activities will remain the same as the
last year with the same level or with same volume.
If we look at the last five years results of OPD it is obvious that activities were
widely fluctuating in the past.
Therefore every aspect of the budget is to be examined in terms of its costs and
benefits associated, and focus is always to select any alternative better than the
current one.
[1 mark for description]
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Patient numbers
72,000
48,000
24,000
Expenditure ($)
82,000
80,000
2,000
$76,000
$5,417
$81,417
[1 mark]
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Question 3
Marking scheme
Drawing of decision tree with complete possibilities
and proper labelling
6 marks
4 marks
(10 marks)
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Poor 70%
B
No more demand 40%
Good 30%
D
No more demand 75%
Dont advertise
Poor 70%
Good 30%
Analysis:
Point
A
B
C
D
EV of Advertise px =
E
F
EV of Dont Advertise px =
Tickets
7,000
5,000
13,000
10,000
Profit (x)
$000
20
(35)
135
75
p
0.42
0.28
0.075
0.225
5,000
10,000
(20)
90
0.7
0.3
px
$000
8.4
(9.8)
10.125
16.875
25.6
(14)
27
13
Therefore the company should advertise as it generates the highest expected value.
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Question 4
Marking scheme
Raw materials:
Part 1
mark
Part 2
mark
Delivery charge
mark
Other materials
mark
Labour
1 marks
Production overheads:
Variable
1 marks
Fixed
1 marks
1 mark
mark
1 mark
Target cost
1 mark
(10 marks)
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$
10.00
15.00
1.50
5.00
31.50
20.00
4.00
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Fixed($1.00 x 2 hours)
Total current expected cost
2.00
6.00
57.50
$50.00
($5.00)
$45.00
As we can see that our current expected cost per unit is greater than the target
cost, so cost gap of $12.50 exists and the business needs to investigate as to how
this cost gap maybe closed. Cost control is a continuous process, therefore
management should review the production process and apply various steps
involved in closing the cost gap so as to further reduce the cost if possible, without
any deterioration in quality.
W1
Highlow method:
Variable rate per hour:
$7,000 $6,200
2,300 hrs 1,900 hrs
12
$2,400
2,400 hours
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Question 5
Marking scheme
(a)
(i) 1 mark per point, 2 max per variance, up to 4
(ii) 1 mark per point, 1.5 max per variance, up to 3
max 7 marks
(b)
(i) Mix variance: 4 marks
(ii) Yield variance: 4 marks
8 marks
(15 marks)
(a)
(i) The performance of the kiosk operator in managing product cost:
The food material cost variances are getting more and more favourable each
month, which suggests the kiosk operator is improving control over food
product cost:
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The mix variance is favourable, and getting more so. A mix variance is
caused by substituting one material for another. This is controllable by
the kiosk operator as he assembles the product for the customer from
the three food ingredients used.
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The yield variance is also favourable, and getting more so. A favourable
yield variance suggests that more products are being produced from a
given level of food input than expected. This could be due to the operator
being more careful with the food he uses, wasting less of it than
expected, which would be a good thing.
(b)Material variances
SQ(SM) x SP
P:1420 x 0.32
B:1420 x 0.15
C: 1420 x 1.73
AQ(SM) x SP
P:836 x .4/.615 x 0.8
B:836 x .015/.615 x 10
C:836 x .2/.615 x 8.65
AQ(AM) x SP
P:578 x 0.8
B:18 x 10
C: 240 x 8.65
AQ(AM) x AP
Price variances
P
454.4
B
213
C
2456.6
Total
3124
203.9
2351.67
2990.57
180
2076
2718.4
175.5
4.5 F
2016
60 F
2682.8
35.6 F
Note: Material price variance is only calculated to fill in the whole proforma of
variances, it was not required in the question.
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