ACCAspace ACCA P5 习题详解. Provided by. Advanced Performance management (APM) 高级业绩管理第十二讲 ACCA Lecturer: Jerry Lin

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1 ACCAspace Provided by ACCA Research ACCA Institute Research ACCA 课程研究学院 Institute ACCA P5 习题详解 Advanced Performance management (APM) 高级业绩管理第十二讲 ACCA Lecturer: Jerry Lin

2 Syllabus Relational diagram of main capabilities Strategic planning and control (A) Economic fiscal, market and environmental factors (B) Performance measurement systems and design (C) Strategic performance measurement (D) Performance evaluation and corporate failure (E) Current developments and emerging issues in performance management (F) 2

3 Part C. Performance measurement systems a nd design Part C. Performance measurement systems and des ign 1. Performance management information systems 2. Lean information systems 3. Controls and security over information 3

4 23 Auto Parts P50 Auto Parts (AP) is a manufacturing company employing 1,300 people which makes components for the automotive industry. AP has had 'preferred supplier' status with a major car manufacturer, CDM, since September 20Y0. This means AP is guaranteed a minimum amount of business with CDM each week. The preferred supplier status is reviewed annually. CDM insists on a year-on-year reduction of 3% in the prices charged by AP. AP's current level of guaranteed business with CDM is $2 million per week, and this constitutes 90% of AP's revenue. 4

5 23 Auto Parts P50 CDM operates a just-in-time production and purchasing system and it has a policy of not inspecting the components supplied to it by AP. However, if there are two reports of any of AP's components failing in a year, either during production or later in a vehicle driven by one of CDM's customers, AP will lose its preferred supplier status. AP has a number of competitors which would like to replace it as CDM's preferred supplier. AP's Managing Director, K, has the following objectives, which have been imposed upon him by AP's Board of Directors: Maintain the preferred supplier status with CDM Keep AP's expenditure within the limits set each year in the budget which is approved by its Board of Directors 5

6 23 Auto Parts P50 Develop the management skills of AP's 32 operational managers K is held responsible for the successful achievement of the objectives and he may lose his job if any are not met. K believes that the best way to achieve his objectives is by the use of a performance management system (PMS) which he has designed. K's PMS is based exclusively on budgetary control. This PMS uses quarterly reports prepared by AP's budget accountant. These reports compare budgeted and actual expenditure for each of AP's 2,000 cost centers. 6

7 23 Auto Parts P50 The quarterly reports are reviewed by K and later discussed with AP's operational managers. The operational managers are shown the aggregate amount of under or overspending in the cost centres but are not allowed to know the detail underlying this. This is because K believes that the details of AP's finances should only be known to members of the Board of Directors. Recently, the Board of Directors have begun to express some concerns about the information they are provided from the PMS, and have suggested that AP needs to purchase a new performance management system. However, K has expressed his concerns about the cost of introducing a new system relative to the benefits it would offer AP. 7

8 Answer Required (a) Evaluate the effectiveness of AP's performance management system in assisting K achieve his objectives. (10 marks) (b) Recommend, with reasons, three improvements AP could make to its current performance management system. Note. Your answer to part (b), must not include introducing the balanced scorecard (or any other specific performance management model) as one of the recommendations. (6 marks) 1. 看题目分值, 确定答案分点数目和答案长短 2. 明确题目要求, 给定答案模板 3. 小标题作答 8

9 Answer Required (a) Evaluate the effectiveness of AP's performance management system in assisting K achieve his objectives. (10 marks) (a) Maintaining AP s preferred supplier status with CDM The business from CDM currently constitutes 90% of AP s revenue, which suggests that maintaining the preferred supplier position is the most important of K s objectives. AP needs to achieve three main things in order to keep the contact: 9

10 Answer Fulfil supply requirements The business guarantee means that AP will have to supply CDM with at least $2 million worth of components each week, and in some weeks this figure will increase depending on CDM s demand. Maintain product quality AP will lose its preferred supplier status if there are two reports of failures relating to its components in any one year, therefore quality control and quality assurance should be very important to it. Reduce prices CDM s insistence that AP reduces its prices by 3% per year, suggests that AP needs to be actively monitoring its prices over time. 10

11 Answer Keep expenditure within budget limits Budget control The PMS is based exclusively on budget control, which suggests that it should be effective in allowing K to keep expenditure within budget limits. Timeliness However, the effectiveness of the PMS as a control system is dramatically reduced by the fact that it is only based on quarterly reports. K needs to be able to identify any potential areas of over-spending more quickly than waiting for the next quarterly report. Lack of detail It is not clear what level of detail the PMS can produce, but K s discussions with operational managers only look at aggregate amounts. 11

12 Answer Develop management skills Exclusion from budgetary control K s belief that operational managers should not be allowed to know the detail of any under or overspends in their cost centres, suggests that they are not involved in budgetary control in an effective way. This exclusion suggests that rather than developing their management skills, K is suppressing them. Summary The PMS does not appear to help K achieve his objectives much at all, and therefore is ineffective in this respect. 12

13 Answer (b) Recommend, with reasons, three improvements AP could make to its current performance management system. Note. Your answer to part (b), must not include introducing the balanced scorecard (or any other specific performance management model) as one of the recommendations. (6 marks) 1. More timely reports The PMS currently uses quarterly reports as the basis for comparing actual performance to budget. However, in order to improve K s ability to monitor and control actual performance, these performance reports need to be available on a more timely basis. 13

14 Answer 2. Review cost centre structure/cost centre reports AP currently has 2,000 cost centres and it produces expenditure reports for all of these cost centres. 3. In addition, rather than simply producing reports which compare actual expenditure against budget, AP should consider whether it could produce exception reports instead. 4. Corrective action K s reluctance to discuss the detail of any expenditure with the operational managers appears to reduce his ability to understand the reasons for any variances, and perhaps more importantly, his ability to improve performance in the future. The operational managers are best placed to identify ways of improving performance going forward, 14

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