2013 Paper P5 QandA Sample Download v1 PDF

Questions and Answers
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Tony Surridge Online Limited, 2013
www.tonysurridge.co.uk
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
ACCA Paper P5: ADVANCED PERFORMANCE MANAGEMENT Questions and Answers

Published by Tony Surridge Online Limited in 2013
Copyright Tony Surridge Online Limited Part of the Tony Surridge +AddVance study materials range
Tony Surridge Online Limited www.tonysurridge.co.uk
This E-book is sold subject to the condition that no part of it shall be reproduced, transmitted, or freely distributed, in any form by any means, electronic, photocopying, recording or otherwise, without the prior permission in writing of Tony Surridge Online Limited. This book is not to be used for commercial use. It is sold on the understanding that a private individual has bought it for individual personal use, and prohibits purchase by any company or organisation entity (limited or otherwise) or sole trader or partnership. Such entities must contact technical@tonysurridge.co.uk separately to purchase a multiuser license.
Tony Surridge Online Limited is grateful to the Association of Chartered Certified Accountants (ACCA) and the Chartered Institute of Management Accountants (CIMA) for permission to reproduce past examination questions. The suggested solutions in the exam answer bank have been prepared by Tony Surridge Online Company, unless otherwise stated.
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
I ask any lady reading these questions, answers and tutorial notes to be patient with my occasional use of the masculine pronoun in referring to the manager, the member of staff, the planner, and any other dramatis personae of the text, which I have used simply for grammatical convenience. I have a personal view that all general terms used in life, such as man in the street, manning the office, manpower, man-made and so on should be de-masculinised as much as possible. This is not always easy when one is writing free-flowing text. Thank you. Tony Surridge
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
DOWNLOAD SAMPLE
Welcome to our download sample of the Tony Surridge +AddVance E-book publication:
ACCA Paper P5 Advanced Performance Management Practice Questions and Answers

Thanks for taking time to review a download extract of this Study Text publication which we have developed specially for the ACCA Paper P5: Advanced Performance Management. We hope you like our electronic study material and recognise that at an extremely low price from just 10 the complete purchased and downloaded version represents true value for money. This is only a small sample, taken directly from the full version, and as such not all hyperlinks will be active. For illustrative purposes, the selection shown here is for parts of each type of Question and Answer, as highlighted in the table of contents. All hyperlinks are fully functional only in the full downloaded version when purchased. You may like to learn some details about the full version: (please note these details may vary slightly depending on which updated version you have purchased).
Exam Questions and Answers 94

Exam Questions and Answers including tutorial comments and examiners comments.
Questions and Answers are hyperlinked for the convenience of the user.
It is important for you to know that each Tony Surridge +AddVance E-book can only be used on the computer it is initially downloaded to. The data cannot be transferred to any portable memory or any other computer or electronic device. This condition is enforced to protect our digital rights. The data can, however, be transferred to a printer linked to the same computer and printed in colour or black, white and grey. If you wish to use this +AddVance Exam Study Text on two separate computers (such as a desktop and laptop), then you will need to purchase the product twice, and download it once to each computer. For further details on minimum computer requirements and our license restrictions please visit
our
webpage at www.tonysurridge.co.uk/exam-material/how-to-buy Good luck with your studies.
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Thank you for helping to save our environment. Studying ONLINE protects trees! LEARN ONLINE
No snowflake in an avalanche ever feels responsible. Voltaire
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
+AddVance Study Material
Main Page
Copyright statement For the ladies only Download sample
ACCA Paper P5 ADVANCED PERFORMANCE MANAGEMENT Questions & Answers
Syllabus
The structure of the syllabus Intellectual levels Learning hours and education recognition Guide to exam structure Aim Main capabilities Relational diagram of main capabilities performance Rationale Study guide Approach to examining the syllabus Examination structure
Study Guide
A B C D E F Strategic planning and control External influences on organisational performance Performance measurement systems and design Strategic performance measurement Performance evaluation and corporate failure Current developments and emerging issues in management
Contents
Message from TonySurridge Online Ltd Exam Status Questions and Answers June 2013 Pilot Paper: Questions and Answers Technical Articles for Paper P5
There are two ways to access the material: 1. Either scroll through the e-book sample - screen by screen (like in a manual book), or 2. Hyperlink directly to the screen you want using the links provided. Only those links coloured pink are hyperlinked for this sample.
Where shall I begin, please your majesty? he asked. Begin at the beginning, the king said gravely, and go on till you come to the end: then stop. Lewis Carroll Through the Looking-Glass
Questions and Answers Dear Friend,
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
In this e-publication we have included examination questions ranging across the period 2002 2011 and these will provide vital examination practice for you, at the level required. ACCA have changed the examination format from the June 2013 exam. The new format is as follows:
EXAMINATION STRUCTURE The examination will be a three hour paper in two sections: Section A Section A will contain one compulsory question comprising of 50 marks Section B In section B candidates will be asked to answer two from three questions comprising of 25 marks each Total 100 marks
The Paper P5 syllabus has not changed much at all, just the format of the questions. We have included the Pilot Paper (Questions and Answers) in this download publication (pages 495 515) but the quality of the question has not changed. It is worth noting that the Examiners Pilot Paper Questions have been taken from past examination questions anyway: Pilot Paper Question number Mackerel Contracting Albacore Chess Stores Pharmaceutical Technologies Co PLX Refinery Co 1 (page 495) 2 (page 503) 3 (page 508) 4 (page 512)
Adapted from Past Exam Question December 2011 (page 468) December 2011 (page 486) June 2011 (page 449) June 2011 (page 463)
This supports our view that the questions are similar in content. I recommend that you work through as many of theses questions as possible before your examination. Questions are a vital support for your learning stage. Kind regards TonySurridge Online Ltd
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages
Contents: Exam-status Questions 1 of 10

Privmed Hospital: December 2002 A question covering ABC, contract pricing and non financial performance analysis Mack-King Company: December 2002 A question covering the assessment of financial performance, the need for additional information, problems when assessing comparative financial performance and identifying separate measures for four stated areas Motor Component Manufacturer: December 2002 A question covering aspects of the external environment, sources of such information and how an external environment information system could be introduced into a company Mission Statement: December 2002 A question covering the role and content of a Mission Statement, how a Mission Statement contributes towards planning and performance measurement and the potential problems from using a Mission Statement to manage performance Single Product Company: December 2002 A question covering costs, revenues and optimum output in an imperfect market A Motor Car Manufacturer: June 2003 A question covering the preparation of a financial analysis; estimation of profit for three strategies; reconciliation of profit figures; use of Gap Analysis; use of sensitivity analysis; environmental analysis Project X: June 2003 A question covering the calculations of net profit, RI, ROI, and NPV; the features of RI, ROI and NPV; and broader issues to be considered Velo Racers: June 2003 A question covering Learning Curve Theory (LCT); price quotations based on the LCT; uses and problems of using LCT Fire, Police, Education and Health: June 2003 A question covering overall performance in respect of public services; problems when monitoring a public service; and ways by which such problems may be managed or overcome Behavioural consequences: June 2003 A question covering the behavioural consequences of a management accounting system; the behavioural issues in the application of performance monitoring and transfer pricing, and overcoming associated problems
Question
Answer
30
33
38
40
44
45
47
48
50
51
53
55
61
62
66
67
69
70
72
73
Our past examination questions and answers are based on the ACCA Official solutions. Note: the ACCA Official solutions are available free of charge on www.accaglobal.com.
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

NW Entertainments Company: December 2003 A question requiring the preparation of a statement of budgeted net income; explanation of the use of a two-way data table; preparation of range of possible net income based on combined probability; use of expected values; and the identification of six performance measures which assess service quality BLA Company: December 2003 A question covering Fitzgerald & Moon performance indicators; and factors considered in the determination of expected standards in a performance measurement system Changing perceptions: December 2003 A question requiring discussion of the following statement: The continued use of management accounting techniques may be viewed in the context of changing perceptions of the most appropriate method by which to measure performance. INA Company: December 2003 A question covering benchmarking; the introduction of a system of benchmarking; the problems associated with implementing a system of benchmarking; and addressing such problems Bennett Company: December 2003 A question covering project evaluation and the use of target costing NAW Group: June 2004 A question requiring the preparation of a statement of budgeted income; calculation of RI and ROI; discussion of factors other profit maximisation which should drive product mix strategy; discussion on the uses of RI and ROI; the use of an adjusted market price; and calculation and discussion of issues concerning transfer pricing Division 0 of NAW Group: June 2004 A question requiring the preparation of a statement of budgeted customer profitability; discussion on the proposition that customer profitability is as critical as product profitability; and discussion on the initiatives that managers should consider in order to improve customer profitability The needs of modern industry: June 2004 A question requiring identification and discussion of the circumstances that have brought about the proposition that traditional management accounting control systems have lost their relevance; evaluation of strategic cost management initiatives which may be used in order to restore the relevance of management accounting control systems in todays industry
Question
Answer
76
79
84
86
90
91
95
96
99 104
100 107
113
115
119
120
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

NN Company: June 2004 A question covering zero based budgeting implementation in a company, behavioural problems and also implementation in a not for profit organisation AV Charity: June 2004 A question covering value for money: critical evaluation of its application, performance measures to be used, and the difficulties of comparing the financial performance of a private sector company with a charity Alocin Company: December 2004 A question concerning imperfect market conditions and covering: calculation of profit maximising output level, breakeven output and selling prices, pricing strategy generally and competitive strategy based on cost leadership product differentiation and niche marketing Ride Company: December 2004 A question covering marginal costing, throughput accounting and comparisons Contingency theory: December 2004 A question covering contingency theory of management accounting, business process re-engineering application and problems Woods Company: December 2004 A question covering replacement calculations using NPV, justification for the withdrawal of a product from the market, limitations of the analysis performed, and the benefits of withdrawing a product Responsibility Accounting: December 2004 A question covering the controllability principle and the difficulties in applying it, how the difficulties might be addressed, and setting financial targets using the engineered approach, the historical approach, and the negotiated approach Quicklink Company: June 2005 A question covering the preparation of budgeted statements of income, comment on the performance of two businesses, reasons for acquisition strategy, benefits of a TQM programme NCL Company: June 2005 A question covering possible conflicts between division and the board; merits of using IR based on annuity depreciation; and the evaluation of a proposed project Beyond Budgeting: June 2005 A question covering the inherent weaknesses of the annual budget model, the ways in which the traditional budgeting process may be seen as a barrier to the achievement of the aims of EACH of the following models for the implementation of strategic change: (i) benchmarking; (ii) balanced scorecard; and (iii) activity-based models.
Question
Answer
123
124
128
130
134
136
141 147
142 148
151
153
156
157
160
163
170
172
175
176
10
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

Dental Health Partnership: June 2005 A question requiring the preparation of a summary Statement of Income (Profit and Loss Account) and calculation of percentage of maximum capacity required to break; discussion of factors that distinguish service from manufacturing organisations; identification and explanation of quantitative non-financial performance measures that could be used to assess the quality of service provided Taliesin Company: June 2005 A question covering the appraisal of the performance of the company and evaluation of the extent to which the objective of growth has been achieved; discussion on the major benefits of pursuing a policy of internal development; and explanation on how the use of activity-based techniques may benefit the company KCB Business Service Group: December 2005 A question covering a budgeted statement of income (Profit and Loss) which shows the profit/(loss) attributable to each of three services undertaken; by using the previous overhead allocation basis calculating the budgeted profit/(loss) attributable to each type of service; calculating size of seminar room that should be contracted using the criterion of expected value and using the Maximin and Minimax regret decision criteria; . advising the maximum amount that the management should pay for perfect information ; discussing six separate and distinct assessment criteria to assess the value for money ; explaining the term environmental management accounting and the benefits that may accrue to organisations which adopt it. CSix Company: December 2005 A question covering backflush accounting and just-in-time Moffat Company: December 2005 A question covering information required at different levels of management; qualitative benefits of a new IT system. Diverse Holdings Company: December 2005 A question covering advantages of a formal system of strategic planning; the use of SWOT analysis; assessing the competitive position of the company; and strategies that might be adopted Astrodome Sports Company: December 2005 A question covering performance measurement problems; remedying the performance measurement problems; improving the measurement of customer satisfaction and specific discussions on performance measures Great Western Cake Company: June 2006 A question covering learning curve calculations; improving estimated return; and target costing
Question
Answer
178
180
183
185
188
191
197 201
198 202
204
206
209
211
214
216
11
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

EAJ Business Services Group: June 2006 A question covering the performance pyramid; and performance appraisal financial performance, external effectiveness and internal efficiency Specialist Clothing Company: June 2006 A question covering the BCG matrix; strategy that should be considered; and limitations of the BCG model Stay Cool Company: June 2006 A question covering NPV, payback period and associated decision; advantages of using the payback period; the application of sensitivity analysis Better Gardens Company: June 2006 A question covering the design, implementation and discussion of a reward scheme and reward schemes generally Wonderland Company: December 2006 A question covering a statement of income; break-even calculation; calculations involving probabilities and expected values; a contract decision and related issues RJ Business Consulting Group: December 2006 A question covering transfer pricing calculations, and the limitations of negotiated transfer prices Vision Company: December 2006 A question covering the calculation of a profit gap; the use of Ansoffs productmarket matrix to reduce the profit gap; and discussion concerning the existing product range Our Timbers Company: December 2006 A question covering return on average capital employed and related discussion; evaluation of a proposed strategy; and comments on the use of in-sourcing raw materials Performance management in an organisation: December 2006 A question covering discussion of indicated terms to illustrate differences between both profit-seeking and not-for-profit organisations Geeland Bus Company: December 2007 A question covering operating and performance appraisal of two organisations; problems in undertaking a performance comparison of the two organisations; and a close or stay operating decision Alpha Company: December 2007 A question covering calculation and comments of RI; different bases of the evaluation of divisional management performances; estimation of EVATM and advantages of using EVA
Question
Answer
221
224
228
230
233
234
237
238
241
244
249
250
252
254
257
259
262
263
266
269
273
276
12
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

The Healthy Eating Group: December 2007 A question covering the calculation of average cost and expected sales margin; identification of critical success factors; and the impact of an enterprise resource planning system (ERPS) on the role of management accountants GMB Company: December 2007 A question covering ABC calculations; identifying and discussing appropriateness of cost drivers; and problems encountered in the implementation of an ABC system Blaina Packaging Company: December 2007 A question covering Porters five forces model; performance indicators which indicate that an organisation might fail as an entity Health and Fitness Group: June 2008 A question covering calculations of ROI, RI, EVATM; sensitivity analysis; the use of complaints as a measure of quality performance; and benchmarking performance Rubber Group: June 2008 A question covering the problems associated with the use of budgeting; and ways in which the problems may be overcome Global Hotel Group: June 2008 A question covering strategic and economic factors which should be considered before a decision is made; and ways in which the possibility of [international] cultural differences might impact on the performance of a local workforce Childrens Toy Company: June 2008 A question covering the production of statements of product profitability and associated comments; viability of a new product; calculation of minimum target contribution to sales ratio; and identification and discussion of an alternative strategy Telecoms At Work: June 2008 A question dealing with cost analysis concerning quality costs; and estimation of the financial consequences of described options with recommendation The Sentinel Company: December 2008 A question covering the evaluation of performance using stated measures; the evaluation of performance using Fitzgerald & Moon criteria; and benefits and problems of using league tables Superior Software House: December 2008 A question covering the assessment of financial performance; criteria concerning quality assessment; and performance measures to be used to assess quality of service provided to clients
Question
Answer
279
280
283
285
288
289
292
294
299
301
305
306
309
311
313
315
317
320
324
326
Tony Surridge Online Limited, 2013 www.tonysurridge.co.uk
13
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

Motherhelp Company: December 2008 A question covering the planning gap; problems associated with corporate acquisition; environmental considerations; and ways that government can aid business Better Agriculture Group: December 2008 A question covering the calculation of transfer prices; calculation of the effect of lowering a selling price to external customers; categorising quality costs and relating them to the division under review Ornamentall Company: December 2008 A question covering ABC calculations and discussion The Royal Laurel Hospital: June 2009 A question requiring the performance assessment of two hospitals; and evaluation of the use of the balanced scorecard Franchising For You Company: June 2009 A question covering NPV; issues and valuation of intellectual capital; how reliance solely on financial measures can detract from effectiveness; and setting a selling price using Maximax, Maximin and Minimax regret decision rules Universal University: June 2009 A question covering the application of : Agency Theory; Expectancy Theory; and Hard Accountability McIntyre Resort: June 2009 A question covering the calculation of a profit-maximising fee in an imperfect market and the resultant profit; evaluation of a proposed decision; and comments on initiatives that management might consider There 4 U Company: June 2009 A question covering Six-Sigma methodology description, problems and suggestions Benjamin Education College: December 2009 A question covering actual and budgeted statements; performance assessment; and issues that might restrict the extent to which a performance measurement system is accepted/supported by management and employees RRR Group: December 2009 A question covering beyond budgeting; the application of a KPI performance appraisal process and the benefits of using it SSA Group: December 2009 A question covering the use of an adjusted market price; calculations re the basis of transfer pricing; and a purchase decision
Question
Answer
329
330
333
335
338 343
340 345
352
354
357
358
360
362
366
368
371
373
377
380
382
384
14
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

Cundy Aquatic Pursuits: December 2009 A question covering the evaluation of financial performance; the principal financial, economic and social considerations pertaining to a decision Mission: December 2009 A question covering mission statements - purpose, potential benefits and potential problems; the use of critical success factors; identification and explanation of quantitative non-financial performance measures that could be used to assess the quality of service Superior Business Consultancy: June 2010 A question covering non-financial performance indicators and the balanced scorecard; calculation of an actual average cost; reasons for trends shown by the figures; potential benefits/problems of employing subcontract consultants Equine Management Academy: June 2010 A question requiring a statement showing the budgeted net profit or loss; possible net profit or loss statements based on probabilities; the use of expected values; reasons why a business venture had been decided Local Government Housing Department: June 2010 A question requiring explanation of the meaning and relevance of (i) Value for Money (VFM) audit, (ii) economy, efficiency and effectiveness as part of the VFM audit and (iii) the relevance of intangibility, heterogeneity, simultaneity and perishability Spare for Ships Company: June 2010 A question requiring a job to be costed using (i) traditional absorption and (ii) ABC and issues concerning the implementation of ABC; the application of ABM including the risks Better Electricals Group: June 2010 A question covering the use of cost targets; assessment of forecasted profit re (i) financial and marketing, (ii) external effectiveness and (iii) internal efficiency Film Productions Company: December 2010 A question covering critical success factors (CSFs) concerning monitoring and building, information required and PIs used to support CSFs. Robust Laptops Company: December 2010 A question requiring an evaluation of traditional absorption versus ABC; recommended management action; and an explanation of the potential for using beyond budgeting
Question
Answer
387
389
392
393
395
397
401
403
406
407
409
410
413
415
418
420
423
425
15
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

LOL Company: December 2010 A question covering value-based management and how it can be used to focus the company on shareholder interests; an assessment of the financial performance using EVA compared with those of earnings per share (EPS) growth and share price performance; and evaluation of VBM measures against traditional profit based measures of performance. FGH Telecom: December 2010 A question covering environmental analysis and related performance indicators; the evaluation of available data and commentary on the companys behaviour; suggestions on how the analysis could be improved RM Batteries Company: December 2010 A question covering the strengths and weaknesses of quantitative and qualitative models for predicting corporate failure; commentary on the results in a spreadsheet; the qualitative problems that are apparent in a companys structure and performance and an explanation as to their relevance to possible failure; critical assessment of the results of the analysis and additional data required JHK Coffee Machines Company: June 2011 A question requiring the evaluation of a divisions performance and discussion about proposed measures; the criteria for designing a transfer pricing system with demonstrations of their use; the impact of a new executive information system Pharmaceutical Technologies Company: June 2011 A question showing how the implementation of a balanced scorecard delivers a range of performance measures aligned with the corporate strategy; the evaluation of the performance measures proposed for PTs balanced scorecard; identification and analysis of the influence of different external stakeholders on the regulator; and the application of the balanced scorecard approach APX Accountancy: June 2011 A question covering Fitzgerald and Moons building block model of performance management; the evaluation of the existing performance management system at APX by applying the building block model; explanation of the main improvements the introduction of a building block approach to performance management could provide, and suggestions of specific improvements to the existing system of performance measures at APX in light of the introduction of the building block model.
Question
Answer
429
430
433
435
438
440
442
444
449
451
454
455
16
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages

ENT Entertainment Company: June 2011 A question covering BCG analysis of ENTs business and the use of this to evaluate the companys performance; a critical evaluation of this BCG analysis as a performance management system; evaluation of the divisional managers remuneration package in light of the divisional performance system and the BCG analysis. PLX Refinery Company: June 2011 A question covering the discussion of different cost categories that would aid transparency in environmental reporting both internally and externally; explanation and evaluation on how the three environmental accounting techniques mentioned [in the question] can assist in managing environmental and strategic performance ; evaluation of the costing approach used for a units performance compared to a lifecycle costing approach, with appropriate calculations. Mackerel Contracting Company: December 2011 A question covering risk analysis, evaluation of a project using metrics and methods for decision making under uncertainty, and recommendations of appropriate choice of method Cod Electrical Motors: December 2011 A question as to whether stated key performance indicators (KPIs) meet the expected features of a modern performance measurement system; explanation of how the performance pyramid (Lynch and Cross) can help a company reach its goal of a coherent set of performance measures; evaluation of a system using the performance pyramid and application of the performance pyramid to suggest additional KPIs and a set of operational performance measures for a company Bluefin School: December 2011 A question which discusses the controls and security procedures that are necessary for management information; the evaluation of data made available and the improvements suggested to the information system Albacore Chess Stores: December 2011 A question which assesses the suitability of branch information given as a means of assessing the shop managers performance for the store (involving calculations); the analysis of the performance management style and the evaluation of the companys performance appraisal system with suggestions of suitable improvements to its reward system for the shop managers Tench Cars: December 2011 A question covering the collection and use of quality costs ; discussion and evaluation of the impact of the Kaizen costing approach on the costing systems and employee management at the company; brief evaluation of the effect of moving to just-in-time purchasing and production, noting the impact on performance measures in the company
Question
Answer
458
460
463
465
468
470
476
478
481
483
486
488
491
492
17
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Pages
Contents: Pilot Paper June 2013

Mackerel Contracting: Pilot Paper A question covering risk analysis, project evaluation, impact of the introduction of a new executive information system, comparison of traditional measures (ROCE etc.) and newer measures (EVATM). Answer in report format Albacore Chess Stores: Pilot Paper A question covering the evaluation of a branch performance report, analysis of performance management style and the performance appraisal. Recommendations are required to support findings Pharmaceutical Technologies Co: Pilot Paper A question covering balanced scorecard analysis, stakeholder analysis and two different applications of the balanced scorecard PLX Refinery Co: Pilot Paper A question covering different cost categories, techniques used for managing environmental and strategic performance, impact of an input/output analysis on information systems, and comparison of costing approach used (in the case) with a lifecycle costing approach. The answer in report format.
Question
Answer
495
497
503
505
508
510
512
514
Our Answers for the 2013 Pilot Paper are based on the ACCA Official solutions. Note: the ACCA Official solutions are available free of charge on www.accaglobal.com.
The function of wisdom is to discriminate between good and evil. Cicero
18
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Privmed Hospital: Question

A question covering ABC, contract pricing and non financial performance analysis Privmed is a privately owned profit seeking hospital that specialises in operations to replace hip and knee joints. Privmed traditionally determines its prices by adding a 10% mark-up to the budgeted full cost of an operation. The fixed overheads are absorbed on the basis of operating hours using a predetermined rate. Privmed Operating and Financial Data for 2013 Hip Knee Total operating capacity (hours) Theatre utilisation ratio 70% Average duration of operation Number of operations taken Total Costs Fixed overheads * not given The variable costs per operation are as budgeted. Privmed Budgeted Data for 2013 Hip Knee Fixed overhead Annual operating hours Variable cost per operation * not given Required: (a) Calculate the number of hip operations undertaken during the year and the variable cost of performing a knee operation. (4 marks)
Total 10,800
30 hours *
36 hours 1270 $15,036,780 $12,000,000
Total $12,000,000 8,000
$1,450
(b)
Calculate the prices that Privmed would have charged in 2013 for: (i) (ii) A hip operation; A knee operation. (4 marks)
(c)
An activity based costing study recently discovered that the fixed overheads are determined by non operating time related activities. The study revealed the following data: Activity Consultations with potential patients X-rays Post-operative care Cost Driver Number of consultations Number of X-rays Days of care Hip 3,000 6,200 7,860 Knee 2,000 6,200 23,580 Fixed 0verheads $8,980,000 $1,800,000 $1,220,000
19
Questions and Answers (c) Required:
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Re-calculate the prices that would have been charged in 2013 for each knee and hip operation by using an activity based costing approach. (5 marks)
A A
(d)
Compare the results of your calculated prices in (b) and (c) and suggest with reasons what pricing decisions you would recommend to the hospital. (5 marks)
(e)
The Regional Public Health Authority is under pressure to reduce the length of its patients waiting lists for knee and hip operations. In an effort to improve the situation the area manager has approached Privmed and asked them to consider whether they would undertake some operations on a fee-paying basis. The approach is welcome, as the hospitals Theatre Manager would like to improve the utilisation of the facilities. Indeed, the hospital recently employed a consultant for a fee of $70,000 to assess the financial viability of undertaking public health authority operations at differing levels. The consultant concluded that contracting to undertake public health authority operations would also add to the administrative workload currently undertaken by the hospital e.g. billing and quality monitoring activities. It would be necessary to employ an additional clerk for $15,000 pa and additional variable administrative cost per operation would be $150 for a knee operation and $100 for a hip operation. If the hospital were to take on this work, it must also consider an additional requirement to keep 25% of its total operating capacity spare to meet the immediate needs of its special clients i.e. it cannot plan to use this proportion of its total capacity. The public health authority has approached the hospital and has proposed two alternative one-year contracts: Contract (1) The hospital would be required to perform an equal number of hip and knee operations during the next year that would utilise their remaining available spare capacity. The public health authority has agreed that the contract price should be composed of all the relevant incremental costs of the contract plus an 80% mark up. Contract (2) The hospital would be required to perform 1,500 knee operations. The public health authority will refund all the additional administrative costs resulting from the contract. The 1,500 additional knee operations would require the hospital to install a temporary operating theatre for a total cost of $500,000 with a two-year life. On completion of the contract, the hospital estimates that it could lease the temporary theatre during its second year with the following revenue estimates: 30% probability of earning $200,000 40% probability of earning $100,000 30% probability of earning $80,000 The public health authority is only prepared to pay $3,500,000 in addition to the refund of administrative costs for this one-year contract. Required: (i) Calculate the contract price and estimated financial benefit of Contract 1; (7 marks)
A A
(ii)
Calculate the estimated financial benefit of Contract 2.
(3 marks)
Note: The data/calculations in this section are at 2013 price levels.
The Question continues on the next screen
20
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
(f)
If either of the contracts were to be taken on, it would result in no capacity being available to meet an unexpected increase in demand from its private patients. Required: Explain the potential revenue consequences of such an event occurring and compile a list of information/data that you require to assess the financial consequences of the private patient demand unexpectedly rising to 80% of the total capacity during the contract year. (7 marks)
(g)
Suggest three broad areas of non-financial performance that the public health authority is likely to have to monitor as part of a contract involving knee and hip operations. Your answer should include specific variables that are to be monitored. (5 marks) (40 marks)
On the road to Mandalay Where the flying fishes play And the Dawn comes up like thunder out of China 'cross the bay On The Road To Mandalay Song sung by Lawrence Tibbett Lyrics by Rudyard Kipling, Music by Oley Speaks, 1907 On The Road To Mandalay Lawrence Tibbett From the Album The Song Is You
"Mandalay" is a famous poem by Rudyard Kipling that was first published in the collection Barrack-Room Ballads, and Other Verses, the first series, published in 1892. The Mandalay referred to in this poem was the sometime capital city of Burma.
21
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Privmed Hospital: Answer

A question covering ABC, contract pricing and non financial performance analysis
(a)
Current utilisation = 07 x 10,800 = 7,560 Hours spent on knee operations = 1,270 x 36 = 4,572 Hours spent on hip operations = 7,560 4,572 = 2,988 No of hip operations = 2,988/3 = 996 Total variable costs = $15,036,780 $12,000,000 = Less variable costs of hip operation On private patients (996 x $1,450) $3,036,780
$1,444,200 = Variable cost of knee operations $1,592,580 Therefore the variable cost of one knee operation on a private patient: = $1,592,580/1,270 = $1,254
(b)
(i) and (ii) Hip $ 1,450 4,500 5,950 595 6,545 Knee $ 1,254 5,400 6,654 6654 7,3194
Variable costs Absorbed Fixed Overhead**
+10% mark-up Price
** workings $12,000,000/8,000 hours = $1,500 hourly overhead absorption rate Hip = 3 hours x 1,500 = $4,500 Knee = 36 hours x 1,500 = $5,400 (c) Consulting (3:2) X-ray (1:1) Post operative care (1:3) Hip 5,388,000 900,000 305,000 6,593,000 996 6,6195 1,450 6,6195 8,0695 807 8,8765 Knee 3,592,000 = 900,000 915,000 5,407,000 1,270 4,2575 1,254 4,2575 5,5115 551.1 6,0626 Total 8,980,000 1,800,000 1,220,000 12,000,000
no of operations = Overhead per operation Variable cost Fixed Overhead Total cost per operation +10% mark-up Price
22
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Q
(d) The traditional pricing method based on operating hours does not consider the activities that drive costs. The activity based information identifies the causes or drivers of costs. The costs arising from the performance of hip operations exceed the current prices being charged for them each hip operation makes a loss. On the other hand, the price charged for a knee operation is far in excess of the costs arising from the operation. Indeed, the hospital may be losing some knee patient business because their prices are far above their costs and may possibly be set at an uncompetitive level. The hospital would need to consider the general market environment before making a final decision, but on the information currently available, they should lower the price of their knee operations and increase the price of the hip operations. (i) Contract 1 Available capacity Total 70% used 25% (kept spare) Hours 10,800 (7,560) (270) Available for contract 2,970 The number of knee and hip operations possible can be solved by formulating `simultaneous equations and then solving them. 2,970 k = = 3h + 36k h h = hip k= knee
(e)
2,970 = 3h + 3k 0 = 3h 3k 2,970 = 6.6k 2,970/6.6 Check: = k = 450
Hours 450 x 36 = 1,620 450 x 30 = 1,350 Total hours 2,970
Therefore 450 knee and 450 hip operations are possible Hip 450 x (1,450 + 100) = Knee 450 x (1,254 + 150) = Total Variable Costs + Clerks salary Total attributable cost $ 697,500 631,800 = 1,329,300 15,000 = 1,344,300
The mark up is 80% of the net attributable cost = Contract Price = 1,344,300 x 18 = $2,419,740 Net benefit = 1,075,440 N.B. The $70,000 consultancy fee should be ignored in the calculation it is a sunk cost and is not attributable to this contract.
23
Questions and Answers (e) (ii)
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
$ Variable cost of 1,500 knee operations x $1,254 Property Revenue in year 2 0.3 x 200,000 = 60,000 04 x 100,000 = 40,000 03 x 80,000 = 24,000 500,000
$ 1,881,000
(124,000) 376,000
Net attributable cost Contract price Attributable costs Net financial benefit (f) Potential revenue consequences: 3,500,000 2,257,000 1,243,000
376,000 2,257,000
loss of alternative revenues from private patients who cannot be treated within the contract period turning away private patients during the contract period may have adverse long-term consequences loss of goodwill and they go elsewhere in future a satisfactory service to the public health authority may result in a contract extension, providing long-term guaranteed revenues the increase in demand that cannot be met may provide the opportunity to raise/renegotiate future prices and hence revenues with the public health authority
The financial consequences are essentially concerned with identifying the opportunity costs of not being able to meet the increase in private patient demand when it rises from 70% to 80% of capacity. Information/data is required to provide estimates : lost patient numbers type of operations not carried out lost revenues the associated costs that have been avoided the long-term consequences of lost goodwill arising from turning away patients will any switching take place between public health and private patients how significant? Revenue and cost consequences? what it is the probability of the 80% utilisation ratio being maintained permanent? what are the operational and financial consequences of expanding capacity in both the short and the long term?
24
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Q
(g) Non-financial Performance Indicators: they will be concerned with ensuring that the operations are being carried out according to an agreed schedule of activity. This may be undertaken by comparing the cumulative running totals of scheduled operations with actual numbers Surgical Quality the health authority will wish to monitor the quality of the surgery. This may involve monitoring post operative treatments, the health of the patients before and after the operation, and the number of fatalities Non-Medical Service Quality this could involve monitoring any non-medical areas of service provision, e.g. patients attitudes towards the quality of food supplied, the manner in which they were received at the reception or the information provided to concerned relatives.
English saying: A golden key can open any door Meaning: Money opens any door. Origin This notion must be as old as money itself. The first person who is known to have written it down is the English playwright John Lyly, in Euphues and his England, 1580: Who is so ignorant that knoweth not, gold be a key for euery locke, chieflye with his Ladye. The proverb was the basis of the 1969 British comedy The Magic Christian, in which characters played by Peter Sellars and Ringo Starr use large amounts of money to bribe people to humiliate themselves by doing things completely out of character.
25
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Examiners Report
You might find it useful to know what the Examiner reported about the quality of answers for this scenario. Many candidates provided good overall solutions to this question and obtained more than 20 marks. Parts (a), (b) and (c) resulted in high marks for most candidates and many candidates obtained the maximum of 13 marks available for these sections. In Part (d) most candidates made reasonable comparisons between the results obtained in Parts (b) and (c). Part (e) was generally well answered although many candidates failed to recognise that the consultant fee paid by the hospital was a sunk cost and therefore not attributable to the contract. Other common errors in Part (e)(i) included incorrect calculation of the total number of operations that could be performed and the non-inclusion of attributable cost of employing an additional clerk. In Part (e)(ii) many candidates did not include the variable cost of performing knee operations that they had calculated in Part (a) of the question. The answers to Part (f) were disappointing. Many candidates did not provide any answer whatsoever to Part (f), and those answers provided were generally disappointing, being much too superficial, given that 7 marks were available. The majority of candidates provided reasonable comments on non-financial performance indicators which were the subject of Part (g).
Mr. Right's coming, but he's in Africa, and he's walking Oprah Winfrey Oprah Winfrey (born Orpah Gail Winfrey; January 29, 1954) is an American media proprietor, talk show host, actress, producer, and philanthropist. Winfrey is best known for her self-titled, multi-award-winning talk show, which has become the highest-rated program of its kind in history and was nationally syndicated from 1986 to 2011. She has been ranked the richest African-American of the 20th century, the greatest black philanthropist in American history,and was for a time the world's only black billionaire.She is also, according to some assessments, the most influential woman in the world.
Oprah Winfrey: A Biography (Greenwood Biographies) Helen S. Garson
26
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Technical Articles ACCA Paper P5
The following TWO screens provide links to the technical articles which are appropriate for ACCA Paper P5. The articles are hyperlinked simply click and go!
27
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Reward schemes for employees and management 03 Jan 2013 A major part of performance management involves managing employees and managers, as their performance will have a major effect on the performance of the organisation as a whole. This article looks at how reward schemes can be used to influence the behaviour of employees Benchmarking 01 Sep 2012 Many governments around the world have undertaken reforms aimed at making public sector organisations more accountable. One of the key features of these reform programmes has been the increasing use of performance measures like benchmarking, where one organisation compares its performance in a specific area with another - the benchmark - to identify areas for improvement The Performance Prism 02 Feb 2012 The Performance Prism has been described as a second generation performance management framework. In this article, we find out why its authors consider it a necessary replacement for established performance models like the balanced scorecard and performance pyramid Economic value added versus profit-based measures of performance - pt 2 26 Jul 2011 In the second part of his article on Economic Value Added (EVA), Nick Ryan focuses on how to interpret the calculated EVA and its use as both an organisational and divisional performance measure Economic value added versus profit-based measures of performance 12 Jul 2011 In the first part of two articles, Nick Ryan looks at an alternative performance measurement system, Economic Value Added - or EVA - which has gained widespread use among companies such as Siemens, Coca Cola and Herman Miller The risks of uncertainty - part 2 01 Oct 2009 In this article on the risks of uncertainty, we build upon the basics of risk and uncertainty addressed in the first article published in the first part to examine more advanced aspects of incorporating risk into decision making Transfer pricing 01 Oct 2009 Transfer prices are almost inevitably needed whenever a business is divided into more than one department or division Not-for-profit organisations - part 2 01 Oct 2009 The second part of the article takes a specific and deeper look at charities, which are one of the more important types of not-for-profit organisations Not-for-profit organisations - part 1 01 Sep 2009 The first part of the article broadly describes the generic characteristics of not-for-profit organisations The risks of uncertainty - part 1 01 Apr 2009 This article considers the concepts of risk and uncertainty will be introduced together with the use of probabilities in calculating both expected values and measures of dispersion
28
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Accounting and organisational cultures 18 Nov 2008 Graham Morgan describes the Financial Control Culture and the Excellence/Service Culture and the type of performance contracts associated with both Business failure 07 Jul 2008 Michael Pogue, assessor for Paper P5, discusses the various failure prediction models Defining managers' information requirements 01 Aug 2006 Jim Stone describes how critical success factors are used Business strategy and performance models 01 Apr 2006 This article provides a brief overview of three models to assist accountants in the determination of business strategy and in the appraisal of business performance
29
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
GOOD LUCK IN YOUR STUDIES
Thank you for using our e-book

and from us all at tonysurridge.co.uk
Good luck in your exams!

Wherever you are .
There is still another screen
30
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
THE END SCREEN

Congratulations on completing this +AddVance Study Guide Paper P5 Advanced Performance Management Questions and Answers
Remember where available we also provide Study Text, Question and Answer practice papers, Revision Mnemonics and Charts, and Case Studies. From all of us here at Tony Surridge we hope that you have found our +AddVance study materials useful, informative, and above all easier and more enjoyable to learn. We value your opinion and welcome any constructive feedback or reviews you may wish to give, so we can best improve our quality of service and product range. Please feel free to email us at technical@tonysurridge.co.uk Please also remember that the www.tonysurridge.co.uk website offers numerous other facilities in addition to these affordable and high quality ACCA study materials. We provide: a specialist Accounting and Finance only Job Board offering the latest available positions throughout the UK, eight financial news channels keeping you abreast of industry related topics, a lively Facebook page to place your questions and discuss a variety of business topics, and global business seminars for finance managers and business professionals looking to increase their industry knowledge. We aim to progressively improve and increase our range of service, and we already have some juicy new additions in the pipeline so keep an eye out for new changes to the website as and when they are launched! As a final word, from all of us at Tony Surridge, we just want to wish you Best of Luck in your exams, and hopefully well see you back for your next paper.
Chris Surridge
Managing Director www.tonysurridge.co.uk
31
MAIN PAGE
CONTENTS
PV TABLE
ANNUITY TABLE
ACCA Paper P5
Sorry... But that link will not work in this free sample copy. To buy the full Questions and Answers version, complete with all links, for your ACCA P5 studies, please go to www.TonySurridge.co.uk
Dedicated to the Accountancy and Finance Profession
32

2013 Paper P5 QandA Sample Download v1 PDF

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

2013 Paper P5 QandA Sample Download v1 PDF

Enviado por

Direitos autorais:

Formatos disponíveis

Questions and Answers

Tony Surridge Online Limited, 2013

Questions and Answers

ACCA Paper P5: ADVANCED PERFORMANCE MANAGEMENT Questions and Answers

Tony Surridge Online Limited www.tonysurridge.co.uk

Tony Surridge Online Limited, 2013

Questions and Answers

Tony Surridge Online Limited, 2013

Questions and Answers

ACCA Paper P5 Advanced Performance Management Practice Questions and Answers

Exam Questions and Answers 94

webpage at www.tonysurridge.co.uk/exam-material/how-to-buy Good luck with your studies.

Tony Surridge Online Limited, 2013

Questions and Answers

No snowflake in an avalanche ever feels responsible. Voltaire

Tony Surridge Online Limited, 2013

Questions and Answers

+AddVance Study Material

ACCA Paper P5 ADVANCED PERFORMANCE MANAGEMENT Questions & Answers

Tony Surridge Online Limited, 2013

Questions and Answers Dear Friend,

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 1 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 2 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 3 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 4 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 5 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 6 of 10

Questions and Answers

Contents: Exam-status Questions 7 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 8 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 9 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Exam-status Questions 10 of 10

Tony Surridge Online Limited, 2013

Questions and Answers

Contents: Pilot Paper June 2013

The function of wisdom is to discriminate between good and evil. Cicero

Tony Surridge Online Limited, 2013

Questions and Answers

Privmed Hospital: Question

36 hours 1270 $15,036,780 $12,000,000

Total $12,000,000 8,000

Tony Surridge Online Limited, 2013

Questions and Answers (c) Required:

Calculate the estimated financial benefit of Contract 2.

Note: The data/calculations in this section are at 2013 price levels.