Professional Documents
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Paper F5
Performance Management
Revision Mock Examination
March 2016
Answer Guide
Health Warning!
How to pass
How to fail
Simply
read
or
audit
the
answers
congratulating yourself that you would have
answered the questions as per the suggested
answers.
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Section A
C
First calculate variable cost per unit as difference in costs divided by
difference in units
Then either using highest level or lowest level, substitute variable cost into
the equation (Fixed costs = Total cost (variable cost number of units)
D
C
Apply breakeven units formula = total fixed costs / contribution per unit,
substitute information provided and balancing figure will be fixed costs
C
For X = 40% 100 cents + 60% $150cents
For Y apply similar method
B
$120,000 is sunk cost as spent in the past.
Replacement cost is irrelevant as machine is already owned.
Therefore opportunity cost of $150,000 is relevant
A
$50,000 is sunk as spent in the past.
$10,000 is also sunk.
$8,000 being a greater option will be opportunity cost or relevant cost to use
on the project.
C
First calculate the break even sales volume, and then apply the formula
budgeted sales minus break even sales units
B
B
$55 per kg is sunk as spent in the past.
150 kg $40 as opportunity cost + 350 kg $53
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B
A
Apply the following proforma for both Q11 and Q12.
SQ(SM)
SP
SP
SP
SQ is the total input quantity which the company should have used to produce
actual output of 12,000 units
SM is the standard mix as 24:36 for A and B respectively
SP is the standard price per kg for each material.
B
A
Throughput return per hour = (Selling price less direct material cost) x 80
units
Factory costs per hour = $46,000 / 10 hours per day
Now apply TPAR = Throughput return per hour / factory costs per hour
D
B
First calculate cost driver rate = annual machine set up costs / total number
of set ups
Total set ups will be based on number of sets per batch times by total batches
for each product
Now multiply cost driver rate to number of set ups for product Z and divide
by batch size to get costs per unit
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D
First calculate b value as Log LR / Log 2
Now apply formula Y=ax2 twice (first x = 250 and then x=249)
Now calculate cumulative time for 250 units and then 249 units
Difference between cumulative hours of 250 units and 249 units will give you
time of the 250th unit
C
1,600 units x SQ x SP
1,600 units x SQ x RSP
Alternatively this can also be calculated by taking actual usage x (SP RSP)
Both answers are acceptable to ACCA.
A
Standard usage
Actual usage
RSP
A
A
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Section B
Answer 1
(5 marks)
(10 marks)
(15 marks)
Direct materials
Direct labour
Production overheads (W1)
Total cost per unit
Barugan
$
1.00
2.50
0.70
4.20
Jen-10
$
0.50
1.50
1.05
3.05
Fonic
$
0.75
1.75
1.40
3.90
= $3,500,000/10,000,000 hours
= $0.35 per hour
*Total budgeted machine hours:
Barugan
Jen-10
Fonic
Total hours
=
=
=
=
2,000,000 hours
6,000,000 hours
2,000,000 hours
10,000,000
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Direct materials
Direct labour
Production overheads
Machine running costs (W2)
Set up costs (W3)
Purchase order costs (W4)
Total overheads per unit
Total costs per unit
Barugan
$
1.00
2.50
Jen-10
$
0.50
1.50
Fonic
$
0.75
1.75
0.28
0.19
0.08
0.55
3.05
0.42
0.38
0.23
1.03
3.03
0.56
1.13
0.15
1.84
4.34
$0.14 2 hours
$0.14 3 hours
$0.14 4 hours
=
=
=
= $1,500,000/32,000 set-ups
$46.88 4 set-ups/1,000 units
$46.88 4 set-ups/500 units
$46.88 6 set-ups/250 units
=
=
=
=
=
=
=
=
$600,000/16,000 orders
$37.50 2 orders/1,000 units
$37.50 3 orders/500 units
$37.50 1 order/250 units
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=
=
=
=
Answer 2
(i)
$/unit
Sales price
30
Variable cost:
Material
Labour/Travel
12
7
11
Demand
Low
Medium
High
100
200
300
11
11
11
1,100
2,200
3,300
280
280
280
400
400
400
Profit
420
1,520
2,620
Probability
0.2
0.5
0.3
84
760
786
Sales units
Unit contribution
1,630
(3 marks)
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(ii)
$/unit
Sales price
40
Variable cost:
Material
Labour/Travel
12
7
21
Demand
Low
Medium
High
Sales units
50
150
250
Unit contribution
21
21
21
1,050
3,150
5,250
280
280
280
600
600
600
Profit
170
2,270
4,370
Probability
0.2
0.5
0.3
34
1,135
1,311
2,480
(3 marks)
Maximax refers to maximising the maximum returns. Risk seeking decision maker
chooses maximax criterion to go for the highest risk option in the hope of making
maximum returns.
1 mark
Maximin refers to maximising minimum returns, whereby risk averse decision maker
chooses the best option among the worst available.
1 mark
Expected value refers to the weighted average value of all outcomes. Risk neutral
decision maker chooses to use expected value criterion.
Expected value = px
Where; p refers to probability of an outcome, and
X refers to the value of an outcome (generally in terms of sales revenue, cost or
expenditure, or profit or loss)
2 marks
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Answer 3
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Answer 4
(a)
SH
900 x 2.5 x
$5 = $11,250
SR
RSH
900 x 2.5 x
SR
$5 = $11,250
Planning rate variance $2,250 A
RSH
900 x 2.5 x
$6 = $13,500
RSR
$6 = $10,875
RSR
AR
$9.968.75
(2 marks for each variance) total 6
Hence total labour cost variance comes to $1,281.25 by adding all planning and
operational variances.
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(b)
Planning variances reflect the difference between original budgeted and revised budgeted
results (flexed), and such variances are caused by external / uncontrollable factors.
Performance is not assessed on the basis of planning variances.
Operational variances reflect difference between revised budgeted and actual results and
such variances are caused by internal / controllable factors. Performance of various
managers is assessed on the basis of operational variances.
Basic rate variance in the question is $906.25 adverse showing that the manager has paid
above the standard rate and has caused overspending, whereas operational rate variance
has shown that rate variance is infect $906.25 favourable reflecting that manager has paid
less than average labour rate. This proves good performance. Without analysing it into
planning and operational components, original analysis could be demotivating and unfair
for the manager concerned.
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Answer 5
Calculation
Calculation
Calculation
Calculation
of
of
of
of
sales
costs
profit
ROI
(b)
Calculation of bonus
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Investment
Return on investment
South
$
378,000
North
$
242,000
Sales
$
130,000
1,500,000
25.2%
1,000,000
24.2%
250,000
52%
Workings
Cost calculation
Direct materials
Direct labour
Overheads
Full cost per unit
Profit mark-up (10%)
Selling price
South
$
1.20
1.00
0.50
2.70
0.27
2.97
North
$
0.80
1.00
0.40
2.20
0.22
2.42
Sales division
From South
From North
$
$
Transferred cost
2.97
2.42
Sales price
3.00
2.50
Profit per unit
0.03
0.08
Volume of units
1,400,000
1,100,000
Total profits
$42,000
$88,000
Profits by Sales Division: ($42,000 + $88,000) = $130,000
Bonus calculation
Criterion: $500 for every 1% in excess to 20% target ROI
South
North
Sales
ROI
ROI
ROI
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25.2%
24.2
52%
(5.2 x $500)
(4.2 x $500)
(32 x $500)
=
=
=
$2,600
$2,100
$16,000
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