ACCA Paper F5 Performance Management Mock Paper F5 Performance Management Mock Exam Question Paper Time…

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  • ACCA Paper F5 Performance Management

    Mock Exam

    Question Paper

    Time allowed 3 hours 15 minutes

    This paper is divided into three sections

    Section A ALL FIFTEEN questions are compulsory and MUST be attempted

    Section B ALL THREE questions are compulsory and MUST be attempted

    Section C BOTH questions are compulsory and MUST be attempted

    Instructions: Take a few moments to review the notes on the inside of this page titled, 'Get into good exam habits now!' before attempting this exam.

    DO NOT OPEN THIS PAPER UNTIL YOU ARE READY TO START UNDER EXAMINATION CONDITIONS

  • 2

    Get into good exam habits now! Take a moment to focus on the right approach for this exam.

    Effective time management Watch the clock, allow 1.95 minutes per mark. Work out how long you can spend on each

    question and do not exceed that time.

    Take a few moments to think what the requirements are asking for and how you are going to answer them.

    Effective planning This paper is in exactly the same format as the real exam. You should read through the paper and

    plan the order in which you will tackle the questions. Always start with the one you feel most confident about.

    Read the requirements carefully: focus on mark allocation, question words (see below) and potential overlap between requirements.

    Identify and make sure you pick up the easy marks available in each question.

    Effective layout Present your numerical solutions using the standard layouts you have seen. Show and reference

    your workings clearly.

    With written elements try and make a number of distinct points using headings and short paragraphs. You should aim to make a separate point for each mark.

    Ensure that you explain the points you are making ie. why is the point a strength, criticism or opportunity?

    Give yourself plenty of space to add extra lines as necessary, it will also make it easier for the examiner to mark.

    Common terminology Identify List relevant points Discuss Explain the opposing arguments Describe Present the characteristics of Summarise State briefly the essential points Recommend Present information to enable the recipient to take action Analyse Determine and explain the constituent parts of Explain Set out in detail the meaning of Illustrate Use an example to explain something Appraise/assess/ evaluate Judge the importance or value of

  • 3

    Section A

    ALL FIFTEEN questions are compulsory and MUST be attempted 1 The following statements have been made about ABC:

    (1) Activity based costing is not suitable for use in service businesses (2) Activity based costing is a form of absorption costing

    Which of the following statements is/are true?

    A (1) only B (2) only C Neither (1) or (2) D Both (1) and (2) (2 marks)

    2 The selling price of Product B is set at $120 for each unit and sales for the coming year are expected to be 500 units. A return of 25% on the investment of $200,000 in product B will be required in the coming year.

    What is the target cost for each unit of Product B?

    A $20 B $30 C $90 D $100 (2 marks)

    3 The following measures may be used for the purpose of setting targets in life cycle costing.

    (1) Time to market (2) Breakeven time (3) Return on investment (4) Commercial life of product

    Which of the above should management seek to maximise?

    A (1), (2), (3) and (4) B (1), (2) and (3) only C (2) and (3) only D (3) and (4) only (2 marks)

    4 The following statements have been made about environmental management accounting:

    (1) Effective management of environmental costs can be a source of competitive advantage. (2) Environmental costs should be treated as production overheads.

    Which of the following statements is/are true?

    A (1) only B (2) only C Neither (1) or (2) D Both (1) and (2) (2 marks)

  • 4

    5 A contract requires 300 kg of material D and 100 kg of material E.

    The following data is available:

    In inventory Historic cost Current purchase cost Scrap value D 200 kg $3 per kg $3.25 per kg $3.10 per kg E 500 kg $0.5 per kg $1 per kg $0.9 per kg D is in regularly used for other products and purposes within the business, whilst E is no longer used by the company.

    What is the relevant cost of materials D and E to be included in the contact cost?

    D $ E $ A 975 100 B 930 50 C 975 90 D 900 90 (2 marks)

    6 A company makes a single product which it sells for $20 per unit.

    Fixed costs are $100,000 per month.

    The sales contribution ratio is 25%.

    Sales revenue is $525,000.

    What is the margin of safety (in units)?

    A 6,250 units B 20,000 units C 400,000 units D 125,000 units (2 marks)

    7 A company manufactures two products, X and Y, using the same machines and the same work teams for both products. There is a restricted supply of both machine time and labour time in the budget period. The following budgeted data is available.

    Product X Product Y Maximum available Hours per unit Hours per unit Hours

    Machine hours 0.5 1.0 2,000 Labour hours 2.0 1.5 4,000 Contribution per unit $5 $6 It has been calculated using linear programming that contribution will be maximised at $13,600 by making and selling 800 units of Product X and 1,600 units of Product Y, using the available machine time and labour time fully

    What is the shadow price per machine hour?

    A $1.60 B $3.60 C $9.60 D $10.00 (2 marks)

    8 Sunny Co manufactures and sells suitcases. Currently sales are 1,000 units at a selling price $73.50. Market research has established that for every $15 increase in price, sales will fall by 200 units.

    What is the demand function for Sunny?

    A p= 73.50 0.075 Q B p= 148.50 0.075Q C p= 148.50 0.015Q D p= 73.50 0.015Q (2 marks)

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    9 Which of the following statements is correct about the use of spreadsheets for budgeting in a large company?

    A Spreadsheet budget models can take account of qualitative factors in the budget. B Errors in spreadsheet formulae are easy to trace and correct. C There may be audit problems when many different draft versions of a budget are produced. D Several individuals can work on a spreadsheet simultaneously, from different locations. (2 marks)

    10 The following statements have been made about budgeting and budgetary control.

    (1) Feed forward control is control based on comparisons between expected and targeted results. (2) Incremental budgeting is effective at eliminating slack and wasteful spending.

    Which of the above statements is/are true?

    A (1) only B (2) only C Neither (1) nor (2) D Both (1) and (2) (2 marks)

    11 Which of the following is a frequent consequence of using a participative style of budgeting rather than an authoritarian top-down management style?

    A Senior management lose control over budget decisions.

    B Participative budgeting encourages a blame culture when actual results turn out worse than the budget.

    C More time is needed to agree budgets than with top-down budgeting.

    D There is a loss of management responsibility for budgets. (2 marks)

    12 A manufacturer of multiple products has just introduced target costing for new product development. It is developing a new product, Product Z. There is currently a target cost gap for Product Z and the company wishes to close this gap. The product development team have discussed the following options.

    (1) Raising the selling price above the current target price (2) Reducing the time allowed for testing the new product (3) Using non-standard components where possible (4) Removing non-value-added features from the product specification

    Which of the above may be used to close the target cost gap for product Z?

    A (1) and (2) only B (1) and (3) only C (3) and (4) only D (4) only (2 marks)

    13 A company uses standard costing for its product. The budgeted standard cost per unit for direct materials was 4 kilograms at $3 per kilogram. Actual production in the period was 1,800 units of the product: this required 8,300 kg of direct material which cost $19,920.

    In was recognised in retrospect that the standard cost per unit for direct materials should have been 4.5 kg at $2.50 per kilogram. The direct materials usage planning variance has been calculated as $2,700 (A).

    What is the direct materials usage operational variance?

    A $600 Adverse B $500 Adverse C $480 Adverse D $1,350 Favourable (2 marks)

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    14 A company has a divisional structure; Division Y in the period just ended achieved Return on Investment (ROI) of 20%. Its capital employed was $4 million, of which 25% was working capital and the remainder consisted of non-current assets at net book value. The depreciation charge for the year was $300,000. The companys cost of capital is 9%.

    What was the residual income earned by Division Y in the period?

    A $140,000 B $230,000 C $440,000 D $530,000 (2 marks)

    15 The following statements have been made about use of the balanced scorecard for setting performance targets and measuring performance.

    (1) There should be more than one target for each of the four performance perspectives, but not too many.

    (2) Targets that are set for the four performance perspectives must not be inconsistent with each other.

    Which of the above statements is/are true?

    A (1) only B (2) only C Neither (1) nor (2) D Both (1) and (2) (2 marks)

    (Total = 30 marks)

  • 7

    Section B

    ALL THREE questions are compulsory and MUST be attempted The following scenario relates to questions 16 20.

    XYZ Co is a manufacturing company that uses throughput accounting. Financial data in the first period of 20X9 for XYZ, a manufacturing company was as follows:

    Division X Division Y Division Z Sales 85,000 63,000 77,000 Opening inventory of materials 5,000 2,000 5,000 Direct materials purchases 23,000 18,750 21,000 Closing inventory of materials 2,000 8,000 3,000 Direct labour 18,000 22,500 20,000 Fixed overheads 15,000 20,000 20,000 Capacity (hrs) 5,000 5,000 5,000 For the second period, the factory cost per hour was calculated as $9.50 for Division Y. Sales, materials and capacity remained the same as period 1. In the third period, Division Z's throughput accounting ratio (TPAR) is less than 1. XYZ Co is thinking of purchasing Zed Co. Zed Co makes two products, Z1 and Z2. Its machines can only work on one product at a time. The two products are worked on by two different grades of labour. The labour requirements for the two products are as follows:

    Minutes per unit of product Z1 Z2 Labour grade - skilled 12 16 Labour grade - unskilled 20 15

    Other information is as follows: Z1 Z2 $ per unit $ per unit Sales price 50.00 65.00 Direct materials 10.00 15.00 Direct labour 10.40 6.20 Variable costs 6.40 9.20 Fixed overheads 12.80 18.40 Profit per unit 10.40 16.20

    16 What is the factory cost per hour for Division X for period 1?

    A $3.17 B $6.60 C $9.50 D $14.10 (2 marks)

    17 What is the throughput accounting ratio (TPAR) for Division Y for period 2?

    A 0.53 B 0.93 C 1.08 D 1.88 (2 marks)

  • 8

    18 Which of the following statements are true for period 3?

    (1) Division Z's costs are greater than its return (2) Stricter cost control would help improve Division Z's TPAR (3) Decreasing Division Z's selling price would increase its TPAR (4) Increasing Division Z's inventory would improve its TPAR

    A (1), (2) and (4) B (1) and (2) only C (3) and (4) D (1) and (3) (2 marks)

    19 In period 4, there is a shortage of skilled labour at Zed Co and the maximum time available is 480 minutes for the limiting factor of skilled labour .

    What is the throughput maximising output in period 4?

    Units of Z1 Units of Z2

    A 40 0 B 0 34 C 0 50 D 23 0 (2 marks)

    20 Which of the following statements about throughput accounting is true?

    A Throughput assumes that all costs except direct materials are fixed in the short run. B Businesses using throughput accounting should avoid just-in-time production systems C Throughput accounting values inventory at total production cost D Efficiency in throughput accounting is based on labour and machines working to full capacity (2 marks)

    The following scenario relates to questions 21 25.

    Frozen Yoghurt Co (FY) produces and sells frozen yoghurt in small tubs. The company has found that demand for frozen yoghurt is weather dependent. Last summer the weather was poor and they ended up throwing lots of frozen yoghurt away at the end of the summer. Using estimates about the probable weather conditions and corresponding demand levels for weekends next summer, the following pay off table has been produced to show all the possible contribution outcomes.

    No of tubs of frozen yoghurt produced

    Weather

    Probability 10,000

    $

    8,000

    $

    4,000

    $

    Good 20% 3,000 2,400 1,200

    Average 50% 1,900 2,400 1,200

    Poor 30% (300) 200 1,200

    FY has decided to sign an advance contract at one of the three levels to match forecast demand. It now has to decide which level to select.

    The expected value of contribution if 10,000 tubs are produced is $1,460.

    The expected value of contribution if 8,000 tubs are produced is $1,740.

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    21 How many tubs should the company produce based on the maximin and maximax decision rules?

    Maximin Maximax

    A 10,000 4,000 B 8,000 10,000 C 4,000 8,000 D 4,000 10,000 (2 marks)

    22 If FY applies the minimax regret rule, what kind of decision making is this?

    A Risk averse B Risk seeking C Risk neutral D Risk spreading (2 marks)

    23 What is the expected contribution if 4,000 tubs are produced and how many tubs should the company produce based on the expected value decision rules?

    Expected contribution from 4,000 tubs Tubs to be produced using expected value rules

    A $1,460 10,000 B $1,200 8,000 C $1,460 8,000 D $1,200 4,000 (2 marks)

    24 What is the expected value of contribution with perfect information?

    A $7,200 B $1,740 C $2,160 D $1,200 (2 marks)

    25 The following statements have been made about perfect information by a trainee at FY.

    (1) Perfect information is guaranteed to predict the future with 100% accuracy.

    (2) Perfect information means that the correct decision would always been made, but as this is in hindsight it is not useful for calculations.

    Which of the above statements is/are true?

    A 1 only B 2 only C Neither 1 nor 2 D Both 1 and 2 (2 marks)

  • 10

    The following scenario relates to questions 26 30.

    Alpha Co uses rolling budgeting, updating its budgets on a quarterly basis. After carrying out the last quarter's update to the cash budget, it projected a large forecast cash deficit at the end of the year. Consequently, the planned purchase of new capital equipment for Project A has been postponed.

    Alpha Co has been working on a second project, Project B, and has developed a new product. The first batch of 20 units will take 600 labour hours to produce. There will be an 80% learning curve that will continue until 500 units have been produced. Batches after this level will each take the same amount of time as the 25th batch. The batch size will always be 20 units.

    Note: The learning index for an 80% learning curve is -0.3219

    26 Wh...

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