ACCA MOCK B

Performance
Management

PM
September 2021

Time allowed: 3 hours 15 minutes

Section A – ALL 15 questions are compulsory and MUST be

attempted
Section B – ALL 15 questions are compulsory and MUST be
attempted
Section C – Both questions are compulsory and MUST be
attempted
Do not open this paper until instructed by the supervisor

This question paper must not be removed from the

examination hall
Please note that the real exam is a computer based exam.
Therefore, the questions in this paper version reflect the
question formats of a computer based exam.

Kaplan Publishing/Kaplan Financial

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© Kaplan Financial Limited, 2021

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FORMULAE
Learning curve

Y = axb

Where y = cumulative average time per unit to produce x units

a = Time taken for the first unit of output

x = The cumulative number of units produced

b = The index of learning (log LR/log 2)

LR = the learning rate as a decimal

Demand curve

P = a − bQ

Change in price
b=
Change in quantity

a = price when Q = 0

MR = a – 2bQ

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SECTION A

ALL 15 questions are compulsory and MUST be attempted

Each question is worth 2 marks

1 The following is relevant for a production process for the January 2016 period:
Direct material costs $12,000
Direct labour costs $5,000
Overheads $3,000
Total costs $20,000
The 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’ and
9,000 units of ‘B’.
What was the cost of sales for Product ‘B’ for the January 2016 period, assuming joint
costs are apportioned by market value?
A $4,000
B $5,000
C $15,000
D $16,000

2 Company B uses a throughput accounting system. The details of product X per unit are as
follows:
Selling price $50
Material cost $20
Conversion costs $20

Time on bottleneck resource 8 minutes

What is the return per hour for product X?

A $105
B $225
C $255
D $375

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3 The following are types of management accounting techniques:

(i) Flow cost accounting

(ii) Throughput accounting
(iii) Input/output analysis
(iv) Activity‐based costing
Which of the above techniques could be used by a company to account for its
environmental costs?
A (i) only
B (i) and (ii) only
C (i), (iii) and (iv) only
D (i), (ii) and (iii) only

4 A company knows that for every $10 they increase the price of their product by, demand
falls by 20 units. Currently, the company is selling 1,000 units at a price of $200 each. The
variable cost of production is $140 per unit.

What is the selling price that will maximise profit?

A $410
B $420
C $430
D $440

5 Artemis Ltd makes and sells a single product. Details for the month of April are that it
planned to sell 1,000 units at a unit price of $200 which would give a contribution to sales
ratio of 30%.

Actual sales were 1,100 units at a selling price of $190. The actual contribution to sales ratio
was 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)

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6 The 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 resource
input to products.
Which of the above statements is/are true?
A (1) only
B (2) only
C Neither (1) nor (2)
D Both (1) and (2)

7 The following statements have been made about the Building Block Model as proposed by
Fitzgerald 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?
A (1) only
B (2) only
C Neither (1) nor (2)
D Both (1) and (2)

8 Division C has the following financial performance:

Operating profit $40,000
Total assets $150,000
Cost of borrowing 10%
Which ONE of the following statements is true?
A The manager of Division C will accept a new possible investment costing $10,000
which would earn a profit of $2,000 if evaluation is on the basis of the Return On
Investment.
B The manager of Division C will accept a new possible investment costing $10,000
which would earn a profit of $2,000 if evaluation is on the basis of the Residual
income.
C The 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.
D The 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.

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9 The following statements have been made about target costing:

(1) It is a method not well suited for service businesses where most of the costs are
fixed.
(2) It is a costing method that ensures that new product R&D costs are recovered in the
target price for the product.
Which of the above statements is/are true?
A (1) only
B (2) only
C Neither (1) nor (2)
D Both (1) and (2)

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

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11 The following decision tree has correctly been drawn for Mr Angelo, who is contemplating
opening a new ice cream parlour in Central London, but has to decide on its size:

Payoffs

80 customers 0.4
per hour $10,000

100 customers 0.2

per hour $15,000

0.4
120 customers
Small per hour $14,000
parlour

80 customers 0.4 $8,000

per hour
Medium parlour
100 customers 0.2
$18,000
per hour

0.4
120 customers
per hour $12,000
Large
parlour 0.4
80 customers $6,000
per hour

100 customers 0.2

$16,000
per hour

0.4
120 customers
per hour $21,000

Which of the following restaurant sizes should be chosen, based on the expected values
of the payoffs?
A Small parlour
B Medium parlour
C Large parlour
D Cannot be determined without more information

12 The 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?
A (1) only
B (2) only
C Both (1) and (2)
D Neither (1) nor (2)

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13 A company has budgeted sales revenue of $500,000 for January 2015, with an associated
contribution of $275,000. Fixed production costs are $137,500, and fixed selling costs
amount to $27,500.

What is the breakeven sales revenue?

A $165,000
B $250,000
C $300,000
D $366,667

14 The following statements have been made about the variances in JIT/TQM environments:

(1) JIT and TQM environments limit the value of variance analysis, because price
variations are only one component of total cost.
(2) JIT and TQM environments limit the value of variance analysis, because variances
emphasise the benefits of following standard work instructions, rather than
encouraging employees to adopt an innovative approach.
Which of the above statements is/are true?
A (1) only
B (2) only
C Both (1) and (2)
D Neither (1) nor (2)

15 A government is looking at assessing state schools by reference to a range of both financial

and non‐financial factors, one of which is average class sizes.

Which of the three E’s best describes the above measure?

A Economy
B Effectiveness
C Efficiency
D Externality

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SECTION B

All 15 questions are compulsory and MUST be attempted.

Each question is worth 2 marks.

The following scenario relates to questions 16–20

Anderson Ltd has a single production process for which the following costs have been estimated
for the period ending 31 December 2015:
Material receipt and inspection cost: $15,600
Power cost: $19,500
Material handling cost $13,650
Three products X, Y and Z are produced by workers who perform a number of operations on
material blanks using hand held electrically powered drills. The workers have a wage rate of $9
per hour.
The following budgeted information has been obtained for the period ending 31 December 2015:
Product X Product Y Product Z
Production quantity (units) 2,000 1,500 800
Batches of material 10 5 16
Direct material per unit, in m2 4m2 6m2 3m2
Direct material per unit, in $ $5 $3 $6
Direct labour, in minutes 24 40 60
Number of power drill operations per unit 6 3 2
Overhead costs for material receipt and inspection, process power and material handling are
presently each absorbed by product units using rates per direct labour hour. An activity based
costing 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.

16 Using the existing method for the absorption of overhead costs, what is the budgeted
product cost per unit for product X?

A $7.50
B $12.50
C $16.10
D $18.00

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17 Using an activity‐based costing (ABC) method for the absorption of overhead costs, what
is the budgeted product cost per unit for product X?
A $8.56
B $16.10
C $18.12
D $20.40

18 The 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?
A (1) only
B (1) and (3) only
C All statements are correct
D No statements are correct

19 Which 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 be
improved.
(3) ABC recognises that overhead costs are not all related to production and sales
volume.
(4) ABC will be of limited benefit if the overhead costs are primarily volume related, or if
the 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)

20 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 are
variable costs.

A (1) and (2)

B (1) and (4)
C (2) and (3)
D (3) and (4)

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The following scenario relates to questions 21–25

Product ‘Hale’ is a highly perishable commodity which can be sold on the retail market for $20 per
case or for animal food at $1 per case. ‘Hale’ costs $10 per case from the wholesale market and is
only suitable for sale at the retail market for up to 24 hours after purchase. Orders for ‘Hale’ must
be placed in advance each day.
Rebecca, a market stall owner, has kept the following records of sales of the ‘Hale’ over the past
50 days:
Daily sales Days sold
10 units 15
20 units 25
30 units 10
The following summary payoff table has been correctly drawn:

Supply of cases
Probability 10 cases 20 cases 30 cases
Daily demand
10 cases 0.3 $100 $10 ($80)
20 cases 0.5 $100 $200 $110
30 cases 0.2 $100 $200 $300

21 How many cases should Rebecca supply if she uses the expected value criteria as a
decision rule?

A 10 cases
B 15 cases
C 20 cases
D 30 cases

22 How many cases should Rebecca supply if she uses the maximin decision rule?

A 10 cases
B 15 cases
C 20 cases
D 30 cases

23 How many cases should Rebecca supply if she uses the maximax decision rule?

A 10 cases
B 15 cases
C 20 cases
D 30 cases

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24 How many cases should Rebecca supply if she uses the minimax regret decision rule?

A 10 cases
B 15 cases
C 20 cases
D 30 cases

25 The following statements have been made regarding the use of expected values in
decision 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) only
B (1) and (3) only
C All statements are correct
D No statements are correct

The following scenario relates to questions 26–30

Company A has just completed the first three months of producing Product Z, and is considering
performing some labour variance analysis. The standard cost per Z for labour (@$5/hour) is $200.

26 Which of the following sentences about labour variance analysis are true?

(1) Costs are not a factor to consider when deciding whether a variance should be
investigated.
(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 should
be investigated.

A (1), (2) and (3)

B (1) and (4)
C (2) and (4)
D (3) and (4)

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27 The following data is available for the first month of production:

Actual hours worked: 400 Number of units made: 200

The standard cost per hour was set without considering the 90% learning curve rate.
What is the planning variance to the nearest $?
A $4,425 F
B $4,425 A
C $22,125 F
D $22,125 A

28 The company is analysing the data for month 3. The 90% learning curve arose only for the
first 400 units and in month 3, when a steady state is then achieved. When units 401–650
were produced, each unit took the same amount of time as the 400th unit.

How long did it take to produce units 401 to 650?

A 3,412.50 hours.
B 6,422.65 hours
C 6,435.50 hours
D 7,218.22 hours

29 When units 401–650 were produced in month 3, the company paid for 5,250 hours and the
work force worked 4,500 hours. The company had expected 1,050 hours of idle time for
Month 3.

What was the idle time variance to the nearest $?

A $0
B $1,500 A
C $1,500 F
D $4,500 A
The management of Company A are uncertain as to the benefit of calculating planning and
operational variances.

30 Which TWO of the following statements are correct?

(1) Planning variances are of more use in a changing industry.

(2) Planning variances will not result in managers changing the assumptions in future
budgets.
(3) Standard costing is less suited to organisations that produce non‐homogenous
products or where the level of human intervention is high.
(4) Planning variances do not need to be investigated.

A (1) and (3)

B (1) and (2)
C (2) and (4)
D (3) and (4)

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SECTION C
Both questions are compulsory and MUST be attempted
31 Paint Mixers Inc manufactures and sells a range of paints, including a high performance
green paint that will attach to any surface without flaking or peeling.
The purchasing manager is responsible for buying the three ingredients (blue paint, yellow
paint and a specialist bonding agent) that are used to make green paint whilst the
production manager is responsible for mixing the paints and the volume and quality of
green paint that is produced. Both the purchasing manager and the production manager
joined the company on January 1st in the current year.
The standard ingredients of the green paint mix are as follows:
2 litres blue paint @ $2.5 per litre = $5.00
7 litres yellow paint @ $3.0 per litre = $21.00
1 litre bonding agent @ $10.0 per litre = $10.00
Total cost to produce 9 litres of green paint = $36.00
Standard cost of one litre of green paint = $4.00
The Managing Director wishes to compare the performance of the purchasing manager and
the production manager during their first three months at the company. The Sales Director
has commented that sales are significantly up and appear to be on a rising trend, customers
being very happy with the quality of the paint they have purchased in the first quarter of
the year.
The Finance Director has produced the table below showing the variance results for the
first three months of the year.
January February March
Material Price variance $3,000 (A) $2,000 (A) $1,000 (A)
Material Mix variance $2,000 (A) $750 (A) $100 (F)
Material Yield variance $4,000 (A) $2,000 (A) $50 (F)
Total variance $9,000 (A) $4,750 (A) $850 (A)
Production activity levels throughout the period varied little and the standard monthly
material total cost was approximately $20,000.

Required:
(a) Compare the performance of the purchasing manager and the production manager
taking into account the cost variance results and the comments of the Sales
Director. (11 marks)
(b) The Finance Director has provided the following data in relation to
April’s production of 5,000 litres of green paint.
1000 litres blue paint @ $2.6 per litre = $2,600
4000 litres yellow paint @ $3.1 per litre = $12,400
500 litres bonding agent @ $9.9 per litre = $4,950
5500 litres = $19,950
Calculate the material price, mix and yield variances for the month of April.
(9 marks)
(Total: 20 marks)

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32 The following information relates to Success Services Co, a provider of productivity‐

improving software to small and medium sized businesses.
The company was founded by and is wholly owned by David Speed. David Speed was MD
of the business until the end of last year, when he handed over control to his son, Michael
Speed. Michael has an MBA and at the start of the current year introduced a number of
initiatives aimed at giving greater authority and incentives to middle management.
You have been provided with financial information relating to the company in Appendix 1.
In Appendix 2 you have been provided with non‐financial information which is based on the
balanced scorecard format.
Appendix 1: Financial information
Current year Previous year
Turnover ($000) 4,900 3,400
Net profit 987 850
Interest cover 3 times 5 times
Average trade receivables days (industry average 40 days) 42 30
Appendix 2: Balanced Scorecard (extract)
Customer perspective Current year Previous year
Number of customers 910 620
% of sales from new software products 24% 15%
% on time installation of software products 47% 65%
Average value of software sales 4,180 5,300
% customers who complained 4.5% 1.5%

Internal perspective Current year Previous year

% of tenders for new business won 38% 24%
Average number of bugs per 1,000 lines of code 64 48
Average annual number of lines of code written 4,800 4,200
by each programmer

Learning and growth perspective Current year Previous year

%age of staff who have completed a software 10% 18%
development course
Employee retention rate 75% 90%
Number of new software products launched 2 0

Required:
(a) Using the information in Appendix 1 only, assess the financial performance of the
company (briefly consider growth, profitability, gearing and credit management)
and provide a concluding comment on the overall performance of the business.
(10 marks)
(b) Using the data from Appendix 2 assess the performance of the business. Include
separate comments on the three perspectives, customer, internal and learning and
growth, and provide a concluding comment on the overall performance of the
business. (10 marks)
(Total: 20 marks)

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