ACCA PAPER P5 ADVANCED PERFORMANCE MANAGEMENT December 2011 Exam Commentary

Transcription

1 ACCA PAPER P5 ADVANCED PERFORMANCE MANAGEMENT December 2011 Exam Commentary

2 GENERAL IMPRESSION Overall this was a paper which covered many P5 syllabus areas and confirmed the examiner s focus on qualitative not quantitative areas which is to be expected from a high level paper. Notable for its absence this diet was EVA and ROI an the Risk and Uncertainty compulsory question may have caught some candidates out, but the content was well within syllabus and a candidate who had used the BPP Practice and Revision Kit would have had ample opportunity to refine the skills needed to perform well in this paper. QUESTION REVIEW SECTION A 2 compulsory questions Question 1 35 marks compulsory This question focused on decision making in an uncertain environment; it reflected the current economic climate in that it dealt with a listed company (Mackerel) recently experienced volatile profits during turbulent economic times further complicated by their major customer being a government department facing the prospect of budget cuts. Probabilities were provided of potential demand levels following a tendering process for a new military vehicle APV. A report format covered all 35 marks available, which included 4 professional marks for content, structure and style. i) 9 marks - Asked for an analysis of risks which could have been broken down into financial and operational to provide some variety and 4 5 marks; and also asked for a risk response discussion which allowed an opportunity to introduce risk seeker/ averse and neutral attitudes, again providing 4+ marks. ii) 19 marks evaluate the APV project under risk & uncertainty methods and assess suitability of each method an initial appraisal should have led candidates to have reasonably conjectured potentially 6 marks for each attitude to risk, incorporating 2 3 marks each for calculations, 2-3 for discussion of the outcome and 1-2 for any suitability comments. Thus reducing an otherwise daunting 19 marks into realistic targets and helping with time management. iii) 3 marks for the report conclusion and recommendation they had to avoid stating in part (ii). Confident wording, following a précis of key findings and appropriateness would have attracted additional professional marks here. The time pressure came from consideration of presentation of the data not the calculations themselves and realisation that very little crunching of numbers was actually required. This examiner continues to show that elegant, uncomplicated and straightforward tabular presentation of figures with minimal manipulation is his style, in complete contrast to his predecessor. Interpretation remains the key to achieving marks. Although the solution includes 2.5 marks for minimax regret, which is notoriously disliked by many students, Maximin was a less complex option for those discussing the potential risk averse approach of Mackerel s management. Marks were available for both. As usual, there were plenty of marks available for preparing a basic profit data table and discussion of risk seeker

3 (maximax) and risk neutral (involving simple expected value calculations) positions to provide the well prepared candidate with a time pressured, but positive, experience. This Q1 is less daunting than the equivalent questions in this examiner s previous two exams. Question 2 25 marks compulsory Given the other performance models had featured heavily in the previous two diets the appearance of the pyramid should not have been a surprise to candidates. Performance Indicators are fundamental to this paper thus a critical appraisal of a company s existing system will only be unusual in P5 by its absence. In this case the company, Cod Electrical Motors ( COD ), was failing in linking its KPIs with its mission statement and it was flagged in the scenario that external, non-financial data whilst being collected was not being utilised at the strategic level and candidates were invited to demonstrate their understanding of how a multi-dimensional model, such as the pyramid, can bring coherence to an organisation, in line with its mission. a) Asked for an assessment of the current situation for 7 marks, but care had to be taken to avoid using the pyramid to do so, which was part (c) b) Asked for an explanation of the pyramid and how it could assist COD (6 marks), and; c) Following an evaluation of the current system using the pyramid (taking care not to just repeat (a)) then asked for some imagination in suggesting additional KPIs, essentially to plug the gaps in the pyramid for 12 marks. If anything there was more theory in the question (parts (a) & (b)) than candidates have come to expect as explanations of the basic model, its tiers and inter-relationships, were required in the context of COD and as such, many will have struggled to have made enough scenario specific points to satisfy their own expectations. With questions of this ilk it can be difficult to avoid repetition (in this case between (a) & (c)) and thus some careful planning would have facilitated a well constructed answer. Overall many candidates would have been more confident starting this question than they would have been when they finished it, but once again, there was certainly sufficient points regarding lack of quality, customer and product innovation PIs to have provided the well prepared candidate with the necessary marks. SECTION B - choice of two 20 mark questions from three The optional questions once again provided the examiner the opportunity to invite candidates to demonstrate their grasp of the point of performance indicators, their breadth and their maintenance, and how modern approaches are moving away from traditional management accounting techniques. All questions carried 20 marks. Question 3 This question was set in Bluefin School. We are presented with a fragmented information system spread across 11 departments and multiple software packages. In addition, the decentralisation

4 has allowed an inconsistent approach to data management across those departments by the individuals heading up each one. The main performance document is a 13 page pack which appears to do little more than collate the date on a single staple that being the only common element between the pages. The stage is set for a discussion on the introduction of a networked single data management system. Some tabulated data was provided in respect of class averages, this year and the last, split by Class. (a) 9 marks asked for a discussion on the current system s control procedures; (b) For 6 marks asked for an evaluation of the current 13 page pack, and; (c) For 5 marks asked for an evaluation of the improvements the new system may bring. Candidates may have preferred a little more balance between the mark allocation of (a) and (c) but a plan would have allowed the difficulties identified in (a) and (b) to furnish the necessary improvements to be discussed in (c). This question certainly had echoes of P3 systems and processes and should have been within the capabilities of most candidates. Question 4 This question involved Albacore Chess Store (in case you are wondering what the link to this year s theme is Albacore is a type of Tuna) a chain with 12 outlets. Three years ago Venture Capitalists became involved and installed a new management team. Standard costing and variance analysis and this traditional approach is creating tension and is de-motivating all staff but particularly the store managers. With elements of Reward Management now firmly in the P5 syllabus, removed from the P3 syllabus, such a question was due an airing. a) Assess the suitability of branch info for shop manager performance assessment and some calculations were expected 8 marks b) Analyse the PM style and evaluate the appraisal system. Suggest improvements to the reward system 12 marks. The one page scenario provided plenty of material to discuss and criticise. The calculations looked for were a flexed budget given the tough trading conditions and those candidates who would have identified a planning variance and operational variance would have rightly attracted credit even if they had not used these terms. In P5 flexing a presented budget should be second nature thus candidates should have been comfortable with this as well as discussing controllable and non-controllable elements. Whenever a question presents comments in quotes, as this one does, candidates should focus on the sentiments and as such many of the issues the examiner was looking for were well flagged. The part (b) style question relates to Hopwood which is in our notes and should have been familiar, although not necessarily at the forefront of candidates minds. Regardless, the question trod classic P5 ground and as such should have been attractive to many.

5 Question 5 Tench Cars was the shortest question, only a half page of scenario and focused on quality. This is another area now solidly in P5 after migration from the P3 syllabus. Broken down into three sections: a) discuss the impact of collection and use (my italics) of quality costs... for 6 marks was inviting comments on the focus they provide and non-conformance v conformance costs. b) Focused on Kaizen costing for 8 marks; and c) Evaluate the effect of moving to JIT for 6 marks. With the weighting given to part (b) to one specific type of costing, this may have put some off this question, but JIT could have provided some quick marks to those familiar with the technique itself or theory from F5 as well as P5. Many candidates would probably have preferred the marks for (b) and (c) being switched, but if time was short this question would have provided some quick marks in a last scramble as minutes ticked away.