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PerformanceManagementDecember 2017Time allowed: 3 hours 15 minutesAnswer ALL questionsDo not open this paper until instructed by the supervisorThis question paper must not be removed from theexamination hallKaplan Publishing/Kaplan FinancialPaper F5ACCA REVISION MOCK B

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN T Kaplan Financial Limited, 2017The text in this material and any others made available by any Kaplan Group company does notamount to advice on a particular matter and should not be taken as such. No reliance should beplaced on the content as the basis for any investment or other decision or in connection with anyadvice given to third parties. Please consult your appropriate professional adviser as necessary.Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability toany person in respect of any losses or other claims, whether direct, indirect, incidental,consequential or otherwise arising in relation to the use of such materials.All rights reserved. No part of this examination may be reproduced or transmitted in any form orby any means, electronic or mechanical, including photocopying, recording, or by any informationstorage and retrieval system, without prior permission from Kaplan Publishing.2K A P LA N P UB L I S H I N G

REVISION MO CK QUESTIONSFORMULAELearning curveY axbWhere y cumulative average time per unit to produce x unitsa Time taken for the first unit of outputx The cumulative number of units producedb The index of learning (log LR/log 2)LR the learning rate as a decimalDemand curveP a bQb Change in priceChange in quantitya price when Q 0MR a – 2bQKAPLAN P UBLI S H I N G3

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN TSECTION AALL 15 questions are compulsory and MUST be attemptedEach question is worth 2 marks1The following is relevant for a production process for the January 2016 period:Direct material costsDirect labour costsOverheadsTotal costs 12,000 5,000 3,000 20,000The process produces joint products ‘A’ and ‘B’, which are then sold at 3.00 for an ‘A’ and 4.00 for a ‘B’. In January 2016, all units produced were sold, i.e. 3,000 units of ‘A’ and9,000 units of ‘B’.What was the cost of sales for Product ‘B’ for the January 2016 period, assuming jointcosts are apportioned by market value?2A 4,000B 5,000C 15,000D 16,000Company B uses a throughput accounting system. The details of product X per unit are asfollows:Selling priceMaterial costConversion costs 50 20 20Time on bottleneck resource8 minutesWhat is the return per hour for product X?4A 105B 225C 255D 375K A P LA N P UB L I S H I N G

REVISION MO CK QUESTIONS3The following are types of management accounting techniques:(i)Flow cost accounting(ii)Throughput accounting(iii)Input/output analysis(iv)Activity-based costingWhich of the above techniques could be used by a company to account for itsenvironmental costs?4A(i) onlyB(i) and (ii) onlyC(i), (iii) and (iv) onlyD(i), (ii) and (iii) onlyA company knows that for every 10 they increase the price of their product by, demandfalls by 20 units. Currently, the company is selling 1,000 units at a price of 200 each. Thevariable cost of production is 140 per unit.What is the selling price that will maximise profit?5A 410B 420C 430D 440Artemis Ltd makes and sells a single product. Details for the month of April are that itplanned to sell 1,000 units at a unit price of 200 which would give a contribution to salesratio of 30%.Actual sales were 1,100 units at a selling price of 190. The actual contribution to sales ratiowas 25%.What is the sales volume contribution variance (to the nearest 1)?A 11,000 (A)B 6,000 (A)C 6,000 (F)D 11,000 (F)KAPLAN P UBLI S H I N G5

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN T6The following statements have been made in relation to activity-based costing:(1)ABC is most useful where production overheads are high relative to direct costs.(2)ABC is especially useful where there is considerable diversity of overhead resourceinput to products.Which of the above statements is/are true?7A(1) onlyB(2) onlyCNeither (1) nor (2)DBoth (1) and (2)The following statements have been made about the Building Block Model as proposed byFitzgerald and Moon:(1)Its determinants include quality, innovation, flexibility and resource utilisation.(2)Its standards for performance measurement systems are ownership, achievability,and equity.Which of the above statements is/are true?8A(1) onlyB(2) onlyCNeither (1) nor (2)DBoth (1) and (2)Division C has the following financial performance:Operating profitTotal assetsCost of borrowing 40,000 150,00010%Which ONE of the following statements is true?6AThe manager of Division C will accept a new possible investment costing 10,000which would earn a profit of 2,000 if evaluation is on the basis of the Return OnInvestment.BThe manager of Division C will accept a new possible investment costing 10,000which would earn a profit of 2,000 if evaluation is on the basis of the Residualincome.CThe manager of Division C will always accept a new possible investment costing 10,000 which would earn a profit of 2,000, regardless of the evaluation basis.DThe manager of Division C will never accept a new possible investment costing 10,000 which would earn a profit of 2,000, regardless of the evaluation basis.K A P LA N P UB L I S H I N G

REVISION MO CK QUESTIONS9The following statements have been made about target costing:(1)It is a method not well suited for service businesses where most of the costs arefixed.(2)It is a costing method that ensures that new product R&D costs are recovered in thetarget price for the product.Which of the above statements is/are true?10A(1) onlyB(2) onlyCNeither (1) nor (2)DBoth (1) and (2)The following statements have been made about variances:(1)Favourable variances are always good for an organisation.(2)Variance reporting is the comparison of actual results with the original budget.Which of the above statements is/are true?A(1) onlyB(2) onlyCNeither (1) nor (2)DBoth (1) and (2)KAPLAN P UBLI S H I N G7

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN T11The following decision tree has correctly been drawn for Mr Angelo, who is contemplatingopening a new ice cream parlour in Central London, but has to decide on its size:Payoffs80 customersper 0 customersper hour0.4 10,000 15,000 14,000 8,000Medium 0 customersper hour0.4100customers120customers 18,000 12,0000.2 6,000 16,0000.4 21,000Which of the following restaurant sizes should be chosen, based on the expected valuesof the payoffs?12ASmall parlourBMedium parlourCLarge parlourDCannot be determined without more informationThe following statements have been made about management control reports:(1)Reports should not include information about uncontrollable items.(2)Only encryption can be used to ensure the security of highly confidential information.Which of the above statements is/are true?8A(1) onlyB(2) onlyCBoth (1) and (2)DNeither (1) nor (2)K A P LA N P UB L I S H I N G

REVISION MO CK QUESTIONS13A company has budgeted sales revenue of 500,000 for January 2015, with an associatedcontribution of 275,000. Fixed production costs are 137,500, and fixed selling costsamount to 27,500.What is the breakeven sales revenue?14A 165,000B 250,000C 300,000D 366,667The following statements have been made about the variances in JIT/TQM environments:(1)JIT and TQM environments limit the value of variance analysis, because pricevariations are only one component of total cost.(2)JIT and TQM environments limit the value of variance analysis, because variancesemphasise the benefits of following standard work instructions, rather thanencouraging employees to adopt an innovative approach.Which of the above statements is/are true?15A(1) onlyB(2) onlyCBoth (1) and (2)DNeither (1) nor (2)A government is looking at assessing state schools by reference to a range of both financialand non-financial factors, one of which is average class sizes.Which of the three E’s best describes the above ityKAPLAN P UBLI S H I N G9

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN TSECTION BAll 15 questions are compulsory and MUST be attempted.Each question is worth 2 marks.The following scenario relates to questions 16–20Anderson Ltd has a single production process for which the following costs have been estimatedfor the period ending 31 December 2015:Material receipt and inspection cost: 15,600Power cost: 19,500Material handling cost 13,650Three products X, Y and Z are produced by workers who perform a number of operations onmaterial blanks using hand held electrically powered drills. The workers have a wage rate of 9per hour.The following budgeted information has been obtained for the period ending 31 December 2015:Production quantity (units)Batches of materialDirect material per unit, in m2Direct material per unit, in Direct labour, in minutesNumber of power drill operations per unitProduct X2,000104 m2 5246Product Y1,50056 m2 3403Product Z800163m2 6602Overhead costs for material receipt and inspection, process power and material handling arepresently each absorbed by product units using rates per direct labour hour. An activity basedcosting investigation has revealed that the cost drivers for the overhead costs are as follows: Material receipt and inspection: number of batches of material.Process power: number of power drill operations.Material handling: quantity of material (sq. metres) handled.16Using the existing method for the absorption of overhead costs, what is the budgetedproduct cost per unit for product X?10A 7.50B 12.50C 16.10D 18.00K A P LA N P UB L I S H I N G

REVISION MO CK QUESTIONS1718Using an activity-based costing (ABC) method for the absorption of overhead costs, whatis the budgeted product cost per unit for product X?A 8.56B 16.10C 18.12D 20.40The following statements have been made regarding the use of ABC in Anderson Ltd:(1)With ABC, pricing in Anderson Ltd can be based on more realistic data.(2)With ABC, decision-making in Anderson Ltd will be improved.(3)With ABC, performance management in Anderson Ltd will be improved.Which of the above statements is/are true?1920A(1) onlyB(1) and (3) onlyCAll statements are correctDNo statements are correctWhich of the following statements about ABC are correct?(1)ABC can only be applied to production overheads.(2)ABC provides a more accurate cost per unit, and as a result pricing should beimproved.(3)ABC recognises that overhead costs are not all related to production and salesvolume.(4)ABC will be of limited benefit if the overhead costs are primarily volume related, or ifthe overheads represent a small proportion of the overall cost.A(1) and (2)B(1) and (4)C(2), (3) and (4)D(1), (2), (3) and (4)Which TWO of the following statements about ABC are correct?(1)ABC can only be used to analyse the past, not to make decisions about the future.(2)The benefits of ABC will always outweigh the costs of implementing the system.(3)ABC can be used within both service and manufacturing industries.(4)ABC is of less benefit if the majority of the costs suffered by an organisation arevariable costs.A(1) and (2)B(1) and (4)C(2) and (3)D(3) and (4)KAPLAN P UBLI S H I N G11

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN TThe following scenario relates to questions 21–25Product ‘Hale’ is a highly perishable commodity which can be sold on the retail market for 20 percase or for animal food at 1 per case. ‘Hale’ costs 10 per case from the wholesale market and isonly suitable for sale at the retail market for up to 24 hours after purchase. Orders for ‘Hale’ mustbe placed in advance each day.Rebecca, a market stall owner, has kept the following records of sales of the ‘Hale’ over the past50 days:Daily sales10 units20 units30 unitsDays sold152510The following summary payoff table has been correctly drawn:Supply of casesProbability10 cases20 cases30 cases10 cases0.3 100 10( 80)20 cases0.5 100 200 11030 cases0.2 100 200 300Daily demand21222312How many cases should Rebecca supply if she uses the expected value criteria as adecision rule?A10 casesB15 casesC20 casesD30 casesHow many cases should Rebecca supply if she uses the maximin decision rule?A10 casesB15 casesC20 casesD30 casesHow many cases should Rebecca supply if she uses the maximax decision rule?A10 casesB15 casesC20 casesD30 casesK A P LA N P UB L I S H I N G

REVISION MO CK QUESTIONS2425How many cases should Rebecca supply if she uses the minimax regret decision rule?A10 casesB15 casesC20 casesD30 casesThe following statements have been made regarding the use of expected values indecision making:(1) The expected value may not be a possible outcome.(2) The expected value is an average value that may not be useful for a one off project.(3) With expected values, the spread of possible outcomes (i.e. the risk) is not shown.Which of the above statements is/are true?A(1) onlyB(1) and (3) onlyCAll statements are correctDNo statements are correctThe following scenario relates to questions 26–30Company A has just completed the first three months of producing Product Z, and is consideringperforming some labour variance analysis. The standard cost per Z for labour (@ 5/ hour) is 200.26Which of the following sentences about labour variance analysis are true?(1)Costs are not a factor to consider when deciding whether a variance should beinvestigated.(2)All labour variances should be investigated.(3)Implementing a Just in Time system will affect the labour efficiency variance.(4)Reliability of figures is a factor to consider when deciding whether a variance shouldbe investigated.A(1), (2) and (3)B(1) and (4)C(2) and (4)D(3) and (4)KAPLAN P UBLI S H I N G13

P AP E R F 5 : PERFOR MAN CE MA NA GEMEN T27The following data is available for the first month of production:Actual hours worked: 400Number of units made: 20