Sample REVISION QUESTION BANK. ACCA Paper F5 PERFORMANCE MANAGEMENT

For Examinations to June 2017
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ACCA
REVISION QUESTION BANK pl
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Paper F5 | PERFORMANCE MANAGEMENT
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ACCA
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pl PAPER F5
PERFORMANCE MANAGEMENT
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REVISION QUESTION BANK
For Examinations to June 2017

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©2016 DeVry/Becker Educational Development Corp. All rights reserved. (i)
No responsibility for loss occasioned to any person acting or refraining from action as a result of any
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ISBN: 978-1-78566-297-3
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Acknowledgement
Past ACCA examination questions are the copyright of the Association of Chartered Certified
Accountants and have been reproduced by kind permission.
(ii) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
REVISION QUESTION BANK – PERFORMANCE MANAGEMENT (F5)
CONTENTS
Question Page Answer Marks Date worked
FORMULAE
Formulae Sheet (vii)
OBJECTIVE TEST QUESTIONS1

1 Cost Accounting 1 1001 20
2 Developments in Management Accounting 4 1002 44
3 Relevant Cost Analysis 10 1005 28
4 Cost Volume Profit Analysis 14 1007 24
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5 Limiting Factor Decisions 18 1009 24
6 Pricing 23 1011 20
7 Risk and Uncertainty 26 1013 18
8 Budgeting 29 1015 20
9 Quantitative Analysis in Budgeting 32 1016 28
10 Budgeting and Standard Costing 36 1019 8
11
12
13
14
15
16
17
18
Basic Variance Analysis
Advanced Variance Analysis
Behavioural Aspects of Standard Costing
Performance Measurement
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Further Aspects of Performance Measurement
Divisional Performance Evaluation
Transfer Pricing
Performance Measurement and
37
40
44
47
49
51
53
1019
1021
1023
1024
1025
1025
1027
26
24
14
16
16
22
18
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Information Systems 56 1028 18
As shown by the Specimen Examination Section B will include “objective test case” questions of 10
marks each and Section C will include 20 mark “long” questions. Additional useful question practice
on examinable topics that is not exam style is indicated (*).
COST ACCOUNTING
1 Abkaber Co (ACCA D02) 58 1029 20
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2 Gadget Co (ACCA D10) 59 1030 20

3 Duff Co (ACCA J14) 59 1033 20
4 Brick by Brick (ACCA D14 Specimen **) 60 1034 10
5 Beckley Hill (ACCA J15 **) 62 1035 10
DEVELOPMENTS IN MANAGEMENT ACCOUNTING

6 Little Chemical Co * 64 1036 10
7 Edward Co (ACCA D07 adapted) 64 1037 20
8 Wargrin (ACCA D08 adapted) 65 1040 20
9 Yam Co (ACCA J09 **) 66 1041 10
10 Thin Co (ACCA J11) 68 1042 20
11 Fit Co (ACCA D11) 70 1044 20
12 Universal Health System (ACCA J12) 70 1046 20
13 Solar Systems Co (ACCA D13) 71 1048 20
** Adapted to the style of “OT-case” questions that now feature in Section B of the examination.
1
All OT questions are 2 marks each.
©2016 DeVry/Becker Educational Development Corp. All rights reserved. (iii)
PERFORMANCE MANAGEMENT (F5) – REVISION QUESTION BANK
RELEVANT COST ANALYSIS
14 Sniff Co (ACCA D07 adapted) 73 1050 20

15 Bits and Pieces (ACCA J09 **) 74 1051 10
16 Stay Clean (ACCA D09) 75 1052 20
17 T Co (ACCA D11) 76 1054 20
18 Robber Co (ACCA J12) 78 1057 20
COST VOLUME PROFIT ANALYSIS
19 A to C Co * 79 1059 10
20 Pico ** 80 1062 10
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21 Nerville ** 81 1063 10
22 Hair Co (ACCA D12) 83 1064 20
LIMITING FACTOR DECISIONS
23 Kobrin Engineers Co 84 1066 20

24
25
26
27
PRICING
28
Albion Co (ACCA J03)
Tablet Co (ACCA J14)
Kadok Co *
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Cut and Stitch (ACCA J10 **)
Cosmetic Co (ACCA D10)
85
86
88
88
89
1068
1069
1070
1072
1074
20
10
20
20
15
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29 Kertesz Co * 90 1077 15
30 BIL Motor Components Co (ACCA) 91 1079 20
31 Heat Co (ACCA J11) 92 1081 20
32 ALG Co (ACCA J15 **) 93 1083 10
RISK AND UNCERTAINTY
33 Decision tree * 94 1084 10

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34 Stow Hotel (ACCA Pilot 2007 **) 95 1086 10

35 Shifters Haulage (ACCA D08) 96 1087 20
36 Cement Co (ACCA J11) 97 1089 20
37 Gym Bunnies (ACCA J13) 97 1091 20
38 GAM Co (ACCA J14) 98 1093 20
BUDGETING
39 Northland (ACCA J09 **) 99 1095 10

40 Zero-based budgeting (ACCA D10) 101 1096 20
41 PC Co (ACCA D11) 101 1098 20
42 Designit (ACCA D12) 101 1101 20
43 Newtown School (ACCA J13) 102 1102 20
44 Lesting Regional Authority * (ACCA J15) 104 1104 15
(iv) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
QUANTITATIVE TECHNIQUES IN BUDGETING
45 Alex Co * 105 1105 10

46 AVX Co * 105 1106 10
47 Bear Co ** 106 1107 10
48 Henry Co (ACCA D08) 107 1108 20
49 Big Cheese Chairs (ACCA D09) 108 1110 20
50 Cam Co* (ACCA J13 adapted) 108 1112 10
51 Mic Co (ACCA D13) 109 1113 20
STANDARD COSTING
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52 Chaff Co (ACCA J08) 110 1115 20
ADVANCED VARIANCE ANALYSIS
53 Milbao Co * 111 1117 10

54 Simply Soup (ACCA Pilot 2007) 112 1118 20
55
56
57
58
59
60
Crumbly Cakes (ACCA J09)
Choc Co * (ACCA D11 adapted)
Block Co (ACCA J13)
Bedco (ACCA D13)
Valet Co (ACCA J14)
Organic Bread Co (ACCA D15 adapted)
PLANNING AND OPERATIONAL VARIANCES

pl 113
115
115
116
117
118
1121
1123
1124
1126
1127
1129
20
12
20
20
20
10
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61 Spike Co (ACCA D07 adapted) 120 1130 20
62 Noble Restaurant (ACCA J11) 121 1132 20
63 Lock Co (ACCA J12 **) 123 1134 10
64 Truffle Co (ACCA D12) 124 1135 20
65 Safe Soap Co (ACCA D14 **) 125 1136 10
66 Bokco (ACCA J15 **) 127 1138 10
PERFORMANCE MEASUREMENT
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67 Oliver (ACCA J09) 129 1139 20

68 Web Co (ACCA D12) 130 1141 20
FURTHER ASPECTS OF PERFORMANCE ANALYSIS
69 Education Ministry 131 1143 20

70 Easyair ** 131 1145 10
71 Eatwell Restaurant (ACCA J02) 133 1146 20
72 Jump (ACCA J10) 134 1148 20
73 Accountancy Teaching Co (ACCA D10) 135 1150 20
74 Squarize (ACCA J13) 136 1152 20
©2016 DeVry/Becker Educational Development Corp. All rights reserved. (v)
DIVISIONAL PERFORMANCE EVALUATION

75 Osborne Co 137 1154 10
76 Welco ** 138 1155 10
77 Pace Co (ACCA D08 adapted) 140 1156 20
78 Brace Co (ACCA J11) 141 1158 20
79 Biscuits and Cakes (ACCA J12) 142 1159 20
80 Cardale Industrial Metal Co (ACCA D15 **) 143 1161 10
TRANSFER PRICING
81 Business Solutions * (ACCA J02) 145 1162 10
82 Hammer (ACCA J10) 145 1163 20
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83 Bath Co * (ACCA D11 adapted) 146 1165 20
84 Wash Co * (ACCA D12 adapted) 147 1167 15
85 Process Co (ACCA D13 **) 148 1169 10
86 Rotech Group (ACCA J14) 150 1170 20
87 Mobe Co (ACCA J15 **) 151 1171 10
PERFORMANCE MANAGEMENT INFORMATION SYSTEMS
88
89
90
91
XYZ Stores **
St Peregrine’s *
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Motor Components * (ACCA D02)
Moffat (ACCA D05)
SPECIMEN EXAM (applicable from September 2016)

153
155
156
156
1173
1173
1175
1177
10
15
15
20
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Section A 15 Objective Test (OT) Questions 2 19 30
Section B “OT case” questions
16-20 Glam Co 8 21 10
21-25 Chair Co 10 22 10
26-30 Hi Life Co 12 23 10
Section C “Constructed response” questions
31 Carad Co 14 24 20
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32 Thatcher International Park 15 25 20
COMPUTER BASED EXAM SUPPLEMENT
This supplement includes OT question types that will appear only in a computer-based exam,
but provides valuable practice for all students whichever version of the exam they are sitting.
(vi) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
Formulae Sheet
Learning curve
Y = axb
Where Y = cumulative average time per unit to produce x units

a = the 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
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Demand curve
P = a – bQ
change in price
b=
change in quantity
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a = price when Q = 0
MR = a – 2bQ
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©2016 DeVry/Becker Educational Development Corp. All rights reserved. (vii)
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(viii) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
MCQs 1 COST ACCOUNTING
1.1 Curtis runs a printing business. He estimates that his printing machine will need to be set-up
200 times per month, at a monthly total cost of $80,000. Item 2145 has to be printed in
batches of 50 copies, where each batch requires the machine to be set-up twice. Curtis
expects the total demand for item 2145 to be 5,000 copies per annum.
What amount should be charged to each copy of item 2145 for set-up costs?
A $0·08
B $1·92
C $8·00
D $16·00
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1.2 Meadaw Co uses an activity based costing system. The budgeted costs for warehousing for
the next six months are $356,014, of which $215,414 is in respect of handling receipts of
materials. The balance is for the issue of goods to production. In the same period, it is
expected that 3,700 orders will be received and 2,500 issues will be made. The company has
received an order which will generate 14 receipts and 6 issues.
1.3
B
C
D
$337·44
$815·08
$1,148·43
$1,152·52 pl
What is the warehousing cost to be included in the total cost of the order?
RS has recently introduced an activity based costing system. RS manufactures two products,
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details of which are given below:
Product R Product S
Budgeted production per annum (units) 80,000 60,000
Batch size (units) 100 50
Machine set-ups per batch 3 3
Processing time per unit (minutes) 3 5
The budgeted annual costs for two activities are as follows:

$
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Machine set-up 180,000

Processing 108,000
What is the budgeted machine set-up cost per unit of Product S?
A $1.50
B $1.80
C $30
D $150
1.4 The following statements have been made about activity based costing:
(1) ABC recognises that some overhead costs do not depend directly on the volume of
output
(2) The cost of implementing activity based costing may exceed the benefits for some
businesses
©2016 DeVry/Becker Educational Development Corp. All rights reserved. 1
Which of the above statements is/are true?
A 1 only
B 2 only
C Neither 1 nor 2
D Both 1 and 2
1.5 Which of the following statements about activity-based costing is/are true?
(1) It is not particularly relevant for service industry businesses

(2) It is based on marginal costing principles
A 1 only
B 2 only
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C Neither 1 nor 2
D Both 1 and 2
1.6 The budgeted overheads of Nambro for the next year have been analysed as follows:
$000
Machine running costs
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Purchase order processing costs
Production run set up costs
In the next year, it is anticipated that machines will run for 32,000 hours, 6,000 purchase
orders will be processed and there will be 450 production runs.
One of the company’s products is produced in batches of 500. Each batch requires a separate
450
180
640
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production run, 30 purchase orders and 750 machine hours.
Using Activity Based Costing, what is the overhead cost per unit of the product?
A $0·99
B $1·59
C $35·30
D $495·00
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1.7 The following statements have been made about activity-based costing (ABC) in a
manufacturing environment:
(1) ABC eliminates the use of volume as a means of measuring costs.

(2) Judgement may be required in selecting the drivers for a particular activity.
Which statements are true/false?
Statement 1 Statement 2
A True True
B False False
C True False
D False True
2 ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
1.8 The following statements have been made about Activity Based Costing (ABC):
(1) Introducing ABC will always reduce costs in the short term
(2) If the cost of a product or service using both ABC and absorption costing is the
same, there will be no benefit to be gained from adopting ABC
Which of the statements is/are correct?
A 1 only
B 2 only
C Neither 1 nor 2
D Both 1 and 2
1.9 Themens Co uses activity based costing. The budgeted distribution costs for the next year
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are:
$
Transport costs 2,631,200
Order processing 1,573,000
––––––––
Total distribution costs 4,204,200
vehicles will travel 1,495,000 km.
pl ––––––––
It is estimated that in the next year, 325,000 orders will be processed and that the delivery
A customer has indicated that 138 orders, each of which will require a journey of 122 km will
be placed in the next year.
To the nearest $, what is the distribution cost for this customer?

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A $1,785
B $30,299
C $38,891
D $47,342
1.10 A company manufactures two products, C and D, for which the following information is
available:
Product C Product D Total
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Budgeted production (units) 1,000 4,000 5,000

Labour hours per unit/in total 8 10 48,000
Number of production runs required 13 15 28
Number of inspections during production 5 3 8
Total production set up costs $140,000

Total inspection costs $80,000
Other overhead costs $96,000
Other overhead costs are absorbed on the basis of labour hours per unit.
Using activity-based costing, what is the budgeted overhead cost per unit of product D?
A $43·84
B $46·25
C $131·00
D $140·64
(20 marks)
Question 1 ABKABER CO
Abkaber Co assembles three models of motorcycle at the same factory: the 50 cc Sunshine, the 250 cc
Roadster and the 1000 cc Fireball. It sells the motorcycles throughout the world. In response to market
pressures Abkaber has invested heavily in new manufacturing technology in recent years and, as a
result, has significantly reduced the size of its workforce.
Historically, the company has allocated all overhead costs using total direct labour hours, but is now
considering introducing Activity Based Costing (ABC). Abkaber’s accountant has produced the
following analysis:
Annual Annual direct Raw
output labour Selling material
(units) hours price cost
($ per unit) ($ per unit)
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Sunshine 2,000 200,000 4,000 400
Roadster 1,600 220,000 6,000 600
Fireball 400 80,000 8,000 900
The three cost drivers that generate overheads are:
Deliveries to retailers
Set-ups
Purchase orders pl
– the number of deliveries of motorcycles to retail showrooms;
– the number of times the assembly line process is re-set to

accommodate a production run of a different model of motorcycle;
– the number of purchase orders.
The annual cost driver volumes relating to each activity and for each model of motorcycle are as
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follows:
Number of Number of Number of
deliveries set-ups purchase
to retailers orders
Sunshine 100 35 400
Roadster 80 40 300
Fireball 70 25 100
The annual overhead costs relating to these activities are as follows:

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$000
Deliveries to retailers 2,400
Set-up costs 6,000
Purchase orders 3,600
All direct labour is paid at $5 per hour. The company holds no inventory.
Required:
(a) Calculate the total profit on each of Abkaber Co.’s three models using the existing
method of allocating overheads based on labour hours. (5 marks)
(b) Recalculate the total profit on each of Abkaber Co’s three models using activity based
costing. (10 marks)
(c) Evaluate the labour hours and the activity based costing methods in the circumstances
of Abkaber Co. (5 marks)
(20 marks)
Question 2 GADGET CO
Gadget Co produces three products, A, B and C, all made from the same material. Until now, it has
used traditional absorption costing using labour hours to allocate overheads to its products.
The company is now considering an activity based costing system in the hope that it will improve
profitability. Information for the three products for the last year is as follows:
A B C
Production and sales volumes (units) 15,000 12,000 18,000
Selling price per unit $7.50 $12 $13
Raw material usage (kg) per unit 2 3 4
Direct labour hours per unit 0·1 0·15 0·2
Machine hours per unit 0·5 0·7 0·9
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Number of production runs per annum 16 12 8
Number of purchase orders per annum 24 28 42
Number of deliveries to retailers per annum 48 30 62
The price for raw materials remained constant throughout the year at $1·20 per kg. Similarly, the direct
labour cost for the whole workforce was $14·80 per hour. The annual overhead costs have been
analysed by activity as follows:
Machine set up costs

Procurement costs
Delivery costs
pl $
26,550
66,400
48,000
54,320
m
Required:
(a) Calculate the full cost per unit for products A, B and C under traditional absorption
costing, using direct labour hours as the basis for apportionment. (5 marks)
(b) Calculate the full cost per unit of each product using activity based costing. (9 marks)
(c) Using the information given and your calculation from (a) and (b) above, explain how
activity based costing may help Gadget Co improve the profitability of each product.
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(6 marks)
(20 marks)
Question 3 DUFF CO
Duff Co manufactures three products, X, Y and Z. Demand for products X and Y is relatively elastic
whilst demand for product Z is relatively inelastic. Each product uses the same materials and the same
type of direct labour but in different quantities. For many years, the company has been using full
absorption costing and absorbing overheads on the basis of direct labour hours. Selling prices are then
determined using cost plus pricing. This is common within this industry, with most competitors
applying a standard mark-up.
Budgeted production and sales volumes for X, Y and Z for the next year are 20,000 units, 16,000 units
and 22,000 units respectively.
MCQs 1 COST ACCOUNTING
1.1 D Activity rate is $80,000 ÷ 200 = $400

cost per copy is ($400 × 2) ÷ 50 = $16·00
1.2 D
Activity Total cost Driver Units of Cost per unit
cost driver of driver
$ $
Issue of goods 140,600 (bal) no. of issues 2,500 56.24
Handling receipts 215,414 no. of receipts 3,700 58.22
–––––––
356,014
–––––––
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Cost of order: (6 issues × 56.24) 337.44
(14 receipts × 58.22) 815.08
––––––––
Total cost 1,152.52
––––––––
1.3
1.4
B
B pl
Cost driver rate = $180,000 ÷ 6,000 = $30 per set up
Total set-up costs = $30 × 3,600 = $108,000
Set up cost per unit =$108,000 ÷ 60,000 = $1.80
ABC recognises the drivers that cause overhead costs to vary. These drivers are not
always directly related to the volume of output (e.g. the number of machine set ups
depends on how often managers decide to perform different production runs).
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The costs of implementing ABC are high – for businesses with a limited product
range, the benefits may not be sufficient to justify these costs.
1.5 C ABC can be used in service industries as well as manufacturing, so (1) is true.
Marginal costing implies ignoring fixed overheads – this is not the case with ABC,
which apportions all production overheads whether fixed or variable. So (2) is not
true.
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1.6 C Cost pool $ Volume of Cost per unit

cost driver of cost driver
Purchase order 450,000 6,000 $75
Set up 180,000 450 $400
Machine running 640,000 32,000 $20
Therefore batch cost: $

Purchase order $75 × 30 2,250
Set up $400 × 1 400
Machine running $20 × 750 15,000
––––––
17,650
––––––
Therefore, cost per unit = $17,650 ÷ 500 = $35·30
1.7 B While not all activities are volume based, some are, so ABC does not eliminate the
use of volume therefore statement (1) is incorrect. Judgement will certainly be
required in selecting drivers for a particular activity, as there may be several
potential drivers, but only one can be selected for use in ABC.
1.8 C (1) is incorrect as some costs will be fixed in the short term. For such costs, it will
only be possible to achieve a reduction in the long term.
(2) is incorrect as ABC will provide a greater insight into the causes of costs. This
will allow managers to exercise greater control of costs by focusing attention on
managing the causes of costs.
1.9 B The total cost is analysed into two cost pools, as follows:
Cost pool Cost driver CPU of cost driver

Transport km travelled $1·76 ($2,631,200 ÷ 1,495,000)
Processing orders processed $4·84 ($1,573,000 ÷ 325,000)
The cost to be quoted is therefore:
e
Per order Transport 122 km at $1·76 per km = $214·72
Processing $4·84
Total 219·56
For 138 orders, the cost is $30,299·28.
1.10 B
pl
Set-up costs per production run = $140,000 ÷ 28 = $5,000
Cost per inspection = $80,000 ÷ 8 = $10,000
Other overhead costs per labour hour = $96,000 ÷ 48,000 = $2
Overheads costs of product D:
Set-up costs (15 × $5,000)

$
75,000
m
Inspection costs (3 × $10,000) 30,000
Other overheads (40,000 × $2) 80,000
––––––––
185,000
––––––––
Overhead cost per unit = 185,000 ÷ 4,000 = $46·25
MCQs 2 DEVELOPMENTS IN MANAGEMENT ACCOUNTING

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2.1 D Throughput contribution per unit = Selling price – material costs = $28.50 – $9.25
= $19.25
Return per hour = ($19.25 ÷ 7.8) × 60 = $148.08
2.2 D D E F
Throughput contribution per unit $22 $20 $16
Units of limiting factor (minutes) 20 25 15
Throughput contribution per unit
of limiting factor $1.10 $0.80 $1.07
Ranking 1st 3rd 2nd
2.3 A Lifecycle costing aims to obtain more accurate product costs by including all costs
incurred over the life of a product.
Tutorial note: You may have been unsure about whether distribution and customer
service costs should be included, as these are not production costs. However, item
4 is included in all options. Since distribution and customer service costs are
included therefore, it would seem reasonable if all the other costs are included as
they relate to the making of the product.
Answer 1 ABKABER CO
(a) Total profit using labour hours
Total overhead cost = $12,000,000

Total labour hours = 500,000 hours
Overhead per labour hour = $12,000,000 ÷ 500,000 = $24
Sunshine Roadster Fireball Total

$ $ $ $
Direct labour ($5 per hour) 1,000,000 1,100,000 400,000
Materials (at $400/600/900) 800,000 960,000 360,000
Overheads (at $24) 4,800,000 5,280,000 1,920,000
––––––––– ––––––––– –––––––––
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Total Costs 6,600,000 7,340,000 2,680,000
––––––––– ––––––––– –––––––––
Output (Units) 2,000 1,600 400

Cost per unit $3,300 $4,587.5 $6,700
Selling price $4,000 $6,000 $8,000
(b)
Profit/(loss) per unit
Total profit/(loss)
Activity-based costing
Deliveries to retailers
pl ––––––––
$700
––––––––
$1,400,000
$2,400,000 ÷ 250 = $9,600

––––––––
$1,412.5
––––––––
$2,260,000
–––––––
$1,300
–––––––
$520,000 $4,180,000
–––––––––
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Set-ups $6,000,000 ÷ 100 =$60,000
Deliveries inwards $3,600,000 ÷ 800 =$4,500
Sunshine Roadster Fireball Total

$ $ $
Direct labour ($5 per hour) 1,000,000 1,100,000 400,000
Materials (at $400/600/900) 800,000 960,000 360,000
Overheads:
Sa
Deliveries at $9,600 960,000 768,000 672,000

Set-ups at $60,000 2,100,000 2,400,000 1,500,000
Purchase orders at $4,500 1,800,000 1,350,000 450,000
––––––––– ––––––––– –––––––––
6,660,000 6,578,000 3,382,000
––––––––– ––––––––– –––––––––
Output (Units) 2,000 1,600 400
Cost per unit $3,330 $4,111.25 $8,455
Selling price $4,000 $6,000 $8,000
––––––––– ––––––––– –––––––––
Profit/(loss) per unit $670 $1,888.75 ($455)
––––––––– ––––––––– –––––––––
Total profit/(loss) $1,340,000 $3,022,000 ($182,000) $4,180,000
––––––––––
(c) Evaluation of labour hours and activity-based costing methods
Direct costs
The direct costs of labour and materials are unaffected by the use of ABC as they are directly
attributable to units of output.
Notwithstanding the fact that labour is a relatively minor cost, however, the use of labour
hours to allocate overheads magnifies its importance.
The labour hours allocation basis
As labour appears to be paid at a constant rate an allocation using labour cost or labour hours
gives the same result.
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The central concern is, however, whether there is a cause and effect relationship between
overheads and labour hours. Moreover for this allocation base to be correct overheads would
need to be linearly variable with labour hours. This seems unlikely on the basis of the
information available.
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ABC and labour hours cost allocation
ABC attempts to allocate overheads using a number of cost drivers rather than just one as
with labour hours. It thus attempts to identify a series of cause and effect relationships.
Moreover, those in favour of ABC argue that it is activities that generate costs, not labour
hours.
While costs are likely to be caused by multiple factors, the accuracy of any ABC system will
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depend on both the number of factors selected and the appropriateness of each of these
activities as a driver for costs. Each cost driver should be appropriate to the pool of overheads
to which it relates. As noted already there should ideally be a direct cause and effect
relationship between the cost driver and the relevant overhead cost pool, but this should also
be a linear relationship (i.e. costs increase proportionately with the number of activities
operated).
The contrast between the labour hours costing system and ABC can be seen in the different
values placed on the products in parts (a) and (b) above, particularly the Fireball, where the
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cost per unit using activity based costing was 26% higher when activity based costing was
used.
Answer 2 GADGET CO
(a) Traditional absorption costing
Total annual overhead costs: $

Machine set up costs 26,550
Machine running costs 66,400
Procurement costs 48,000
Delivery costs 54,320
–––––––
195,270
–––––––
Overhead absorption rate:

A B C Total
Production volumes 15,000 12,000 18,000
Labour hours per unit 0·1 0·15 0·2
Total labour hours 1,500 1,800 3,600 6,900
Therefore, overhead absorption rate = $195,270 ÷ 6,900 = $28·30 per hour.
Cost per unit

A B C
$ $ $
Raw materials ($1·20 × 2:3:4 kg) 2·4 3·6 4·8
Direct labour ($14·80 × 0·1:0·15:0·2 hours) 1·48 2·22 2·96
Overhead ($28·30 × 0·1:0·15:0·2 hours) 2·83 4·25 5·66
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––––– ––––– –––––
Full cost per unit 6·71 10·07 13·42
––––– ––––– –––––
(b) Activity based costing
Cost drivers
Cost pools
Machine set up costs
Procurement costs
Delivery costs
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$
26,550
66,400
48,000
54,320
–––––––
Cost driver
36 production runs (16 + 12 + 8)
32,100 machine hours (7,500 + 8,400 + 16,200)
94 purchase orders (24 + 28 + 42)
140 deliveries (48 + 30 + 62)
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195,270
–––––––
Cost per machine set up $26,550 ÷ 36 = $737·50

Cost per machine hour $66,400 ÷ 32,100 = $2·0685
Cost per order $48,000 ÷ 94 = $510·6383
Cost per delivery $54,320 ÷ 140 = $388
Allocation of overheads to each product:

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A B C Total
$ $ $ $
Machine set up costs 11,800 8,850 5,900 26,550
Machine running costs 15,514 17,375 33,510 66,400
Procurement costs 12,255 14,298 21,447 48,000
Delivery costs 18,624 11,640 24,056 54,320
–––––– –––––– –––––– ––––––
58,193 52,163 84,913 195,270
–––––– –––––– –––––– ––––––
Number of units produced 15,000 12,000 18,000

$ $ $
Overhead cost per unit 3·88 4·35 4·72
Total cost per unit A B C

$ $ $
Materials 2·4 3·6 4·8
Labour 1·48 2·22 2·96
Overheads 3·88 4·35 4·72
––––– ––––– –––––
7·76 10·17 12·48
––––– ––––– –––––
(c) How ABC may improve profitability
When comparing the full unit costs for each of the products under absorption costing as
compared to ABC, the following observations can be made:
Product A
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The unit cost for product A is 16% higher under ABC as opposed to traditional absorption
costing. Under ABC, it is $7·76 per unit compared to $6·71 under traditional costing. This is
particularly significant given that the selling price for product A is $7·50 per unit. This
means that when the activities that give rise to the overhead costs for product A are taken into
account, product A is actually making a loss. If the company wants to improve profitability it
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should look to either increase the selling price of product A or somehow reduce the costs.
Delivery costs are also high, with 48 deliveries a year being made for product A. Maybe the
company could seek further efficiencies here. Also, machine set up costs are higher for
product A than for any of the other products, due to the larger number of production runs.
The reason for this needs to be identified and, if possible, the number of production runs
needs to be reduced.
Product B
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The difference between the activity based cost for B as opposed to the traditional cost is quite
small, being only $0·10. Since the selling price for B is $12, product B is clearly profitable
whichever method of overhead allocation is used. ABC does not really identify any areas for
concern here.
Product C
The unit cost for C is 7% lower under ABC when compared to traditional costing. More
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importantly, while C looks like it is making a loss under traditional costing, ABS tells a
different story. The selling price for C is $13 per unit and, under ABC, it costs $12·48 per
unit. Under traditional absorption costing, C is making a loss of $0·42 per unit. Identifying
the reason for the differences in C, it is apparent that the number of production runs required
to produce C is relatively low compared to the volumes produced. This leads to a lower
apportionment of the machine set up costs to C than would be given under traditional
absorption costing. Similarly, the number of product tests carried out on C is low relative to
its volume.
ABC is therefore very useful in identifying that C is actually more profitable than A, because
of the reasons identified above. The company needs to look at the efficiency that seems to be
achieved with C (low number of production runs less testing) and see whether any changes
can be made to A, to bring it more in line with C. Of course, this may not be possible, in
which case the company may consider whether it wishes to continue to produce A and
whether it could sell higher volumes of C.
Paper F5
Fundamentals Level – Skills Module
Performance
Management
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Specimen Exam applicable from
September 2016
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Time allowed: 3 hours 15 minutes
This question paper is divided into three sections:

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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
Formulae Sheet is on page 16. [Not reproduced]

Do NOT open this question paper until instructed by the supervisor.
Do NOT record any of your answers on the question paper.
This question paper must not be removed from the examination hall.
The Association of Chartered Certified Accountants

Section A – ALL 15 questions are compulsory and MUST be attempted
Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple
choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.
1 A company manufactures two products, C and D, for which the following information is available:
Product C Product D Total
Budgeted production (units) 1,000 4,000 5,000
Labour hours per unit/in total 8 10 48,000
Number of production runs required 13 15 28
Number of inspections during production 5 3 8
Total production set up costs $140,000
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Total inspection costs $80,000
Other overhead costs $96,000
Other overhead costs are absorbed on a labour hour basis.
Using activity-based costing, what is the budgeted overhead cost per unit of Product D?
2
A
B
C
D
$43·84
$46·25
$131·00
$140·64
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The selling price of Product X is set at $550 for each unit and sales for the coming year are expected to be 800 units.
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A return of 30% on the investment of $500,000 in Product X will be required in the coming year.
What is the target cost for each unit of Product X?

A $385·00
B $165·00
C $187·50
D $362·50
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2
Section B – ALL 15 questions are compulsory and MUST be attempted
Please use the grid provided on page two of the Candidate Answer Booklet to record your answers to each multiple
choice question. Do not write out the answers to the MCQs on the lined pages of the answer booklet.
Each question is worth 2 marks.
The following scenario relates to questions 16–20.

Glam Co is a hairdressing salon which provides both ‘cuts’ and ‘treatments’ to clients. All cuts and treatments at the salon
are carried out by one of the salon’s three senior stylists. The salon also has two salon assistants and two junior stylists.
Every customer attending the salon is first seen by a salon assistant, who washes their hair; next, by a senior stylist, who
cuts or treats the hair depending on which service the customer wants; then finally, a junior stylist who dries their hair.
The average length of time spent with each member of staff is as follows:
Cut Treatment
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Hours Hours
Assistant 0·1 0·3
Senior stylist 1·0 1·5
Junior stylist 0·6 0·5
The salon is open for eight hours each day for six days per week. It is only closed for two weeks each year. Staff salaries
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are $40,000 each year for each senior stylist, $28,000 each year for each junior stylist and $12,000 each year for each
of the assistants. The cost of cleaning products applied when washing the hair is $1·50 per client. The cost of all additional
products applied during a ‘treatment’ is $7·40 per client. Other salon costs (excluding labour and raw materials) amount
to $106,400 each year.
Glam Co charges $60 for each cut and $110 for each treatment.
The senior stylists’ time has been correctly identified as the bottleneck activity.
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16 What is the annual capacity of the bottleneck activity?
Cuts Treatments
A 2,400 1,600
B 4,800 4,800
C 7,200 4,800
D 9,600 9,600
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17 The salon has calculated the cost per hour to be $42·56.
What is the throughput accounting ratio (TPAR) for both services?

Cuts Treatments
A 1·37 1·58
B 1·41 2·38
C 1·37 1·61
D 1·41 2·41
8
Fundamentals Level – Skills Module, Paper F5
Performance Management Specimen Exam Answers
Section A
1 B
Set-up costs per production run = $140,000/28 = $5,000
Cost per inspection = $80,000/8 = $10,000
Other overhead costs per labour hour = $96,000/48,000 = $2
Overhead costs of product D:
$
Set-up costs (15 x $5,000) 75,000
Inspection costs (3 x $10,000) 30,000
Other overheads (40,000 x $2) 80,000
––––––––
185,000
––––––––
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Overhead cost per unit = $185,000/4,000 units = $46·25
2 D
Return: $500,000 x 30% = $150,000
Total sales revenue = $550 x 800 = $440,000
3
Unit cost = $290,000/800 = $362·50
C
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Therefore total cost = $440,000 – $150,000 = $290,000
The number of units required to make a target profit = (fixed costs + target profit)/contribution per unit of P1.
Fixed costs = ($1·20 x 10,000) + ($1·00 x 12,500) – $2,500 = $22,000
Contribution per unit of P = $3·20 + $1·20 = $4·40
($22,000 + $60,000)/$4·40 = 18,636 units
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4 B
Most organisations do collect data about environmental costs but find it difficult to split them out and categorise them effectively.
Life-cycle costing does allow the organisation to collect information about a product’s environmental costs throughout its life cycle.
The technique which divides material flows into three categories is material flow cost accounting, not input/output analysis.
ABC does categorise some costs as environment-driven costs, however, these are costs which are normally hidden within total
overheads in a conventional costing system. It is environment-related costs which can be allocated directly to a cost centre.
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5 D
Mix variance:
Material AQSM AQAM Difference Standard cost Variance
(litres) ($/litre) ($)
A 800 900 100 A 20 2,000 A
B 1,200 1,100 100 F 25 2,500 F
–––––– –––––– –––––––
2,000 2,000 500 F
Yield variance:
Material SQSM AQSM Difference Standard cost Variance
(litres) ($/litre) ($)
A 779 800 21 A 20 420 A
B 1,168 1,200 32 A 25 800 A
–––––– –––––– –––––––
(W1) 1,947 2,000 1,220 A
(W1) 1,850 litres of output should use 1,947 litres of input (1,850/0·95)
19
6 A
An incremental budget builds from the previous year’s figures and so any inefficiencies will be carried forward and zero-based
budgeting starts from scratch with each item justified for its inclusion in the budget and so should encourage the identification of
waste and non-value adding activities, so Statement 1 is correct.
Beyond budgeting attempts to move away from conforming to a rigid annual budget and uses adaptive processes to encourage
management to be responsive to current situations which facilitates the use of rolling forecasts, so Statement 2 is correct.
Rolling budgeting are budgets which are continuously updated throughout the year and so forces managers to reassess plans more
regularly, whereas activity-based budgeting involves defining the activities which underpin the financial figures and using the
activity to allocate resources for the budget, so Statement 3 is incorrect.
Flexible budgets are designed to show the changes in financial figures based on different activity levels and so will recognise
different cost behaviour patterns, however, it is activity-based budgeting which ensures that the overall strategy is taken into
account because it attempts to manage the business as interrelated parts, not separate activities, so Statement 4 is incorrect.
7 C
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EV for major upgrade = (0·80 x $11m) + (0·2 x $7·5m) = $10·3m
EV for minor upgrade = (0·70 x $9m) + (0·3 x $6m) = $8·1m
Decision
Shutdown and sell $5·75m
Major upgrade (10·3m – 4·5m) $5·8m
Minor upgrade ($8·1m – $2m) $6·1m
8 A
Contribution per unit ($)

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As the minor upgrade has the highest expected return that should be the option chosen.
In a single limiting factor situation products should be ranked based on their contribution per unit of limiting factor, which in this
case is labour hours.
Product A
46
B
52
C
21
D
60
m
Number of labour hours required per unit 6 8 3 2
Contribution per labour hour ($) 7·67 6·50 7·00 30·00
Ranking 2nd 4th 3rd 1st
9 D
Target 1 is a financial target and so assesses economy factors. Target 2 is measuring the rate of work handled by staff which is an
efficiency measure. Target 3 is assessing output, so is a measure of effectiveness.
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10 D
Management information systems do summarise data from TPS into periodic reports for management to use for decision-making.
Transaction processing systems do facilitate the immediate processing of data.
Executive information systems draw data from the MIS and support senior managers to make strategic decisions. They usually
have dashboard and interactive graphics so that the big picture can be seen.
Enterprise resource planning systems can have extranet links set up with customers and suppliers.
11 A
Direct data capture costs is a type of data input in which there is no data entry but instead it is captured for a specific purpose.
Therefore the use of bar coding and scanners and the completion of timesheets are examples of direct data capture costs.
Time spent by the payroll department processing personnel costs and the input of data into the production system are examples
of process costs.
20
12 C
Customer life-cycle costing can be used by organisations.
It has been reported that the majority of a product’s costs are determined early on, i.e. at the design phase.
Life-cycle costing does not include any opportunity costs associated with production.
The growth phase is characterised by a rapid increase in demand.
13 A
Return per factory hour = ($130 – $50)/4 hours = $20
Factory costs per hour = $20 + ($40/4) = $15
TPAR = $20/$15 = 1·33
14 B
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Increase in variable costs per unit from buying in ($140 – $100) =$40
Therefore total increase in variable costs (2,200 units x $40) = $88,000
Less the specific fixed costs saved if A is shut down = ($10,000)
Decrease in profit = $78,000
15 C
pl
The determinants of performance are quality, innovation, resource utilisation and flexibility. Competitiveness is a result of the
determinants.
Standards should be fair, achievable and staff should have ownership of them. Controllability is a feature of the rewards block.
Rewards should be clear, motivating and controllable, so this is correct.
It is a framework designed to attempt to overcome the problems associated with performance management in service companies.
Section B
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16 C
Total salon hours = 8 x 6 x 50 = 2,400 each year.
There are three senior stylists, therefore total hours available = 7,200.
Based on the time taken for each activity, they can perform 7,200 cuts (7,200 hours/1 hour per cut) or 4,800 treatments
(7,200 hours/1·5 hours per treatment).
17 A
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Cuts
Return per hour = (Selling price – materials)/time taken on the bottleneck = (60 – 1·50)/1 = 58·50
TPAR = Return per hour/cost per hour = 58·50/42·56 = 1·37 (to two decimal places)
Treatments
Return per hour = (Selling price – materials)/time taken on the bottleneck = (110 – 8·90)/1·5 = 67·40
TPAR = Return per hour/cost per hour = 67·40/42·56 = 1·58 (to two decimal places)
18 C
The factors which are included in the TPAR are selling price, material costs, operating expenses and bottleneck time. Increasing
the selling price and reducing costs will improve the TPAR.
Increasing the time which each service takes on the bottleneck (the senior stylists’ time) will only reduce the number of services
they can provide, so this will not improve throughput.
Throughput accounting does not advocate the building of inventory as it is often used in a just-in-time environment and there is
no point increasing the activity prior to the bottleneck as it will just create a build-up of work-in-progress. Neither of these will
improve the rate of throughput through the process.
21
19 B
The existing capacity for each activity is:
Cut Treatment
Assistants 48,000 16,000
Senior stylists 7,200 4,800
Junior stylists 8,000 9,600
If another senior stylist is employed, this will mean that their available hours will be (4 x 2,400) = 9,600.
This will give them capacity to now do 9,600 cuts (9,600 hours/1 hour per cut) and 6,400 treatments (9,600 hours/1·5 hours
per treatment).
As a result, the senior stylists will still be the bottleneck activity for treatments but for cuts the bottleneck will now be the junior
stylists as they can only do 8,000 cuts compared to the senior stylists of 9,600.
20 A
e
The theory of constraints is focused on identifying restrictions in a process and how to manage that restriction (commonly termed
a bottleneck).
It is based on the concept of managing throughput, operating expenses and inventory.
It does use a series of focusing steps but it is not complete once the bottleneck has been overcome. In fact it is an ongoing process
of improvement, as once the bottleneck has been elevated it is probable that another bottleneck will appear and the process will
continue.
control.
21 A
Learning curve formula = y = axb pl
It cannot be applied to all limiting factors as some, particularly those external to the organisation, may be out of the organisation’s
Cumulative average time per unit for 8 units: Y = 12 x 8–·415= 5·0628948 hours.
Therefore cumulative total time for 8 units = 40·503158 hours.
Cumulative average time per unit for 7 units: Y = 12 x 7–·415= 5·3513771 hours.
m
Therefore cumulative total time for 7 units = 37·45964 hours.
Therefore incremental time for 8th unit = 40·503158 hours – 37·45964 hours = 3·043518 hours.
Total labour cost for 8th unit =3·043518 x $15 = $45·65277
22 C
Actual learning rate
Cumulative number of Cumulative total Cumulative average
seats produced hours hours per unit
Sa
1 12·5 12·5
2 ? 12·5 x r
4 ? 12·5 x r2
8 34·3 12·5 x r3
Using algebra: 34·3 = 8 x (12·5 x r3)
4·2875 = (12·5 x r3)
0·343 = r3
r = 0·70
Therefore the learning rate was 70%.
23 B
An 80% learning rate means that the learning was faster than expected.
Factors which are present for a learning curve to take effect are a highly manual and repetitive process (so staff can become quicker
the more they perform the same series of tasks), no stoppages to production (so the learning rate will not be lost whilst staff are
idle) and a stable workforce (so the learning process does not have to keep restarting).
If there is high staff turnover, stoppages in production and continual design changes, then the learning rate will not be effective
and should be slower.
22
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ACCA
pl PAPER F5
PERFORMANCE MANAGEMENT
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REVISION QUESTION BANK SUPPLEMENT
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For Computer Based Examinations to June 2017
©2016 DeVry/Becker Educational Development Corp. All rights reserved. (i)
No responsibility for loss occasioned to any person acting or refraining from action as a result of any
material in this publication can be accepted by the author, editor or publisher.
This training material has been prepared and published by Becker Professional Development
International Limited:
Parkshot House
5 Kew Road
Richmond
Surrey
TW9 2PR
United Kingdom
Copyright ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
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The trademarks used herein are owned by DeVry/Becker Educational Development Corp. or their
respective owners and may not be used without permission from the owner.
No part of this training material may be translated, reprinted or reproduced or utilised in any form
either in whole or in part or by any electronic, mechanical or other means, now known or hereafter
invented, including photocopying and recording, or in any information storage and retrieval system
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without express written permission. Request for permission or further information should be
addressed to the Permissions Department, DeVry/Becker Educational Development Corp.
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Acknowledgement
Past ACCA examination questions are the copyright of the Association of Chartered Certified
Accountants and have been reproduced by kind permission.
(ii) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
COMPUTER BASED EXAM SUPPLEMENT – PERFORMANCE MANAGEMENT (F5)
CONTENTS
Question Page Page Answer Marks Date worked
COMPUTER BASED EXAMINATIONS
Introduction (iv)
OBJECTIVE TEST QUESTIONS
1 Multiple response 1 1001 16
2 Pull-down list 3 1002 12
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3 Number entry 5 1003 14
4 Hot area 7 1004 8
5 Hot spot 8 1005 8
OT CASES
6
1
2
3
4
Enhanced matching
Yam Co
Stow Hotel Co
Easyair
Mobe Co
pl 10
14
15
17
19
1007
1010
1012
1013
1014
14
10
10
10
10
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This supplement includes OT question types that will appear only in a computer-based exam, but
provides valuable practice for all students whichever version of the exam they are sitting.
ACCA’s CBE Specimen will be accessible from the exam resource finder
http://www.accaglobal.com/uk/en/student/exam-support-resources.html
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©2016 DeVry/Becker Educational Development Corp. All rights reserved. (iii)
PERFORMANCE MANAGEMENT (F5) – COMPUTER BASED EXAM SUPPLEMENT
Introduction
“Multiple choice – single answer” – is the standard OT type in paper-based examinations. In CBE this
type is presented with radio bullets instead of A B, C, D options.
Illustration
Cim Co has two divisions, A and B. Each division is currently considering the following separate
projects:
Division A Division B
Capital required for the project $32·6 million $22·2 million
Sales generated by project $14·4 million $8·8 million
Operating profit margin 30% 24%
Cost of capital 10% 10%
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Current return on investment of division 15% 9%
If residual income is used as the basis for the investment decision, which Division(s) would
choose to invest in the project?
o Division A only
o
o
o


Division B only
Both Division A and Division B
Neither Division A nor Division B
How to answer?
pl
Click on a radio button to select an answer from the choices provided.
m
You can select only one.
 If you want to change your answer, click on your new choice and the original choice will be
removed automatically.
Answer
 Division A only
Division A: Profit = $14·4m × 30% = $4·32m

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Imputed interest charge = $32·6m × 10% = $3·26m

Residual income = $1·06m
Division B: Profit = $8·8m × 24% = $2·112m

Imputed interest charge = $22·2m × 10% = $2·22m
Residual income = $(0·108)m
OTHER OT TYPES
The following OT types appear only in CBE:
(1) Multiple response

(2) Pull down list
(3) Number entry
(4) Hot area
(5) Hot spot
(6) Enhanced matching
These are illustrated below.
(iv) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
(1) Multiple response
Description – candidates are required to select more than one response from the options provided by
clicking the appropriate tick boxes.
Illustration 1
Which TWO of the following statements concerning the use of variable cost plus pricing are
true?
It is useful for short term pricing decisions
It is useful in a perfectly competitive market
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The price may not cover all the fixed costs
It ensures that profit is maximised
It is most useful when fixed costs are high
How to answer?



Two is the maximum you are permitted to select.
You can deselect a chosen answer to clear it.
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When you have chosen the required number, deselecting an answer will allow you to select
another answer.
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Answer
It is useful for short term pricing decisions
The price may not cover all the fixed costs
(2) Pull down list

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Description – candidates are required to select one answer from a list of choices within a drop down
list.
Illustration 2
What is the current price for a typical GC using the current method of absorbing overheads?
Select... 
$11,000
$14,700
$16,500
$22,000
©2016 DeVry/Becker Educational Development Corp. All rights reserved. (v)
Answer
Price per unit using absorption cost plus 50%:

$
Materials 3,500
Labour (300 × 15) 4,500
Overheads (300 ×10 (W)) 3,000
––––––
Total cost 11,000
Plus mark-up (50%) 5,500
––––––
Current price 16,500
––––––
WORKING
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Total overheads ÷ total labour hours = $400,000 ÷ 40,000 = $10 per labour hour.
(3) Number entry
Description – candidates are required to key in a numerical response.
Illustration 3
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XYZ Stores operates a chain of 10 convenience stores in Bigton. The current information systems in
each store are very basic. Each store has two or three cash registers that record the value of sales
transactions, but which are not linked to head office systems. The directors are considering investing
in a new system whereby the cash registers would be replaced with computerised Electronic Point of
Sale (EPOS) cash registers, which use bar code readers to record details of each sale.
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The costs of the new system have been forecast as follows:
$
Capital costs
25 new EPOS cash registers @ $300 7,000
1 new server at head office 2,000
Software licenses 3,000
Data file setup costs 2,000
Staff training 2,000
––––––
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16,000
Operating costs per year
Broadband internet connections 3,600
Software maintenance costs 500
––––––
4,100
––––––
As a result of the project, the cost of renting the existing cash registers, totalling $2,000 per year will
be saved. The purchasing manager has also estimated that due to better information about sales and
inventory levels, the stores will be able to increase the volume of sales. He has estimated that this will
increase annual contribution by $20,300 each year. The system will last for five years, after which it
will be replaced.
Ignoring inflation and the cost of capital, what would be the total net benefit of the new system
over its five year life?
(vi) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
How to answer?
 Enter a numerical value in the answer box. Pay attention to any instruction about how the answer
should be rounded (e.g. “to the nearest $”).
 The only permitted characters for numerical answer are:

 One full stop as a decimal point (if required);
 One minus symbol at the front of the figure if the answer is negative.
For example: -10234.35
 No other characters, including commas, are accepted.
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You can change your answer by adding permitted characters or deleting one or more highlighted
characters.
Answer
1 Annual benefits $
Increased annual contribution
Renting of existing cash registers
Annual operating costs
Broadband
Maintenance costs
Net annual benefits
× 5 years 91,000
pl 20,300
2,000
(3,600)
(500)
–––––––
18,200
–––––––
m
Less capital costs (16,000)
–––––––
Net benefit 75000
–––––––
(4) Hot area
Description – candidates are required to select one or more areas in an image as their answer(s).
Sa
Illustration 4
The following statements have been made about planning and control as described in the three tiers of
Robert Anthony’s decision-making hierarchy:
Strategic planning is concerned with making decisions about the efficient TRUE FALSE
and effective use of existing resources
Operational control is about ensuring that specific tasks are carried out TRUE FALSE
efficiently and effectively
How to answer?
 Click on a hotspot area to select an answer from the hotspot choices provided.
 You can select only one per line.
 The selected area will be highlighted.
 If you want to choose a different answer click on an alternative area.
©2016 DeVry/Becker Educational Development Corp. All rights reserved. (vii)
Answer
Strategic planning is concerned with making decisions about the efficient FALSE
and effective use of existing resources
Operational control is about ensuring that specific tasks are carried out TRUE
efficiently and effectively
(5) Hot spot
Description – candidates are required to select one or more points by clicking on an image.
Illustration 5
Click on the graph below to identify the value of Q at which profit will be maximised.
e
Price $
Marginal cost
pl
Demand
m
Q
0
Marginal revenue
Answer
$
Sa
Marginal cost
Demand
Q
0 Profit
maximising
output Marginal revenue
(viii) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
(6) Enhanced matching
Description – candidates are required to select and drag their chosen answers to other areas of the
screen.
Illustration 6
Different types of information systems provide the information which organisations need for strategic
planning, management and operational control.
Match the following characteristic to the relevant information systems.
Characteristic
e
Facilitates the immediate Management Transaction Processing
processing of data Information system System
Reduces the opportunity for non-

standard operations MIS TPS
Summarises internal data into

periodic reports
Enables data to be easily shared

between different departments
Usually includes data analysis

and modelling tools
pl MIS
Executive Information
System
TPS
Enterprise Resource
Planning System
m
Can be set up with extranet links
to customers and suppliers EIS ERPS
Utilises dashboard facilities and

interactive graphics EIS ERPS
Supports structured decisions at

the operational level
Sa
Answer
Management Information System Transaction Processing System

Reduces the opportunity for non- Facilitates the immediate processing of
standard operations data
Summarises internal data into Supports structured decisions at the

periodic reports operational level
Executive Information System Enterprise Resource Planning System
Usually includes data analysis and Enables data to be easily shared between
modelling tools different departments
Uses dashboard facilities and Can be set up with extranet links to

interactive graphics customers and suppliers
©2016 DeVry/Becker Educational Development Corp. All rights reserved. (ix)
e
pl
m
Sa
(x) ©2016 DeVry/Becker Educational Development Corp. All rights reserved.
OBJECTIVE TEST QUESTIONS
1 MULTIPLE RESPONSE
1.1 Which THREE of the following management accounting techniques might be used in
environmental management accounting?
Activity based costing
Life-cycle costing
Throughput accounting
Input output analysis
e
1.2 A manufacturing company produces multiple products.
Which THREE of the following are required in order to calculate the break-even sales
revenue for the company?
The product mix ratio
General fixed costs

pl
Contribution to sales ratio for each product
Method of apportioning general fixed costs
Budgeted sales of each product

m
1.3 Which TWO of the following measures could most suitably be used to assess the
customer perspective of the balanced scorecard approach for an insurance company?
New insurance products introduced in the period
Training expenditure on sales representatives

Sa
Average time to settle insurance claims
Percentage of policy renewals
1.4 Tom Hopkin is responsible for managing the volume, quality and cost of production within
his responsibility centre.
Which TWO of the following performance measures would be appropriate for
measuring Tom’s performance?
Return on investment
Materials usage variances
Percentage of products that are defective after inspection
Residual income
1.5 Which THREE of the following statements about the return on investment method of
performance measurement are true?
It enables comparison of performance of divisions which are not of common size
Managers’ decisions will be congruent with the goals of the organisation
It does not take account of the risk of project investments being undertaken
Managers will be encouraged to invest in projects with higher returns
It is appropriate for a profit centre
1.6 Two divisions in an organisation have autonomy to decide whether to trade with each other or
e
not, and to negotiate transfer prices. The selling division sells its output externally at the
external market price.
In which of the following situations would the selling division be prepared to sell
internally for a transfer price that is below the external market price?
pl
Head office has imposed the transfer price
The management of the selling division are seeking to restrict the quantity produced
Some additional costs are incurred on external sales
The selling division has some spare capacity after satisfying external demand for its
output
m
1.7 Which TWO of the following statements about expected values are true?
Expected value is of limited use for decisions regarding outcomes which will be
repeated often
Using expected value in decision-making can lead to the worst possible outcome being
ignored
The reliability of expected value calculations is heavily influenced by the accuracy of
Sa
the probabilities assigned to outcomes

Expected values take account of the risk associated with a decision
1.8 Which TWO of the following does the manager have control over in a profit centre?
Generation of revenues
Investment in non-current assets
Investment in working capital
Apportioned head office costs
Depreciation
(16 marks)
2 PULL-DOWN LIST
2.1 Which costing approach identifies ways of making an acceptable profit margin on the
market price of a product or service?
Select... 
Activity-based costing
Benchmarking
Life-cycle costing
Target costing
2.2 Ardvec makes four products which sell in roughly equal volume. Data in respect of each
product is shown below:
e
Per unit Economy Standard Premium Deluxe
Selling price $28 $32 $37 $40
Variable cost $13 $16 $20 $22
Direct labour hours 0·17 0·22 0·28 0·31
pl
In the coming period, a shortage of direct labour means that Ardvec can only manufacture
three products.
In order to maximise short-term profit which product should NOT be produced?
Select...
Economy

m
Standard
Premium
Deluxe
2.3 NG is deciding which of four potential venues should be used to stage an entertainment event.
Demand for the event may be low, medium or high depending on weather conditions on the
day. The management accountant has estimated the contribution that would be earned for
each of the possible outcomes and has produced the following regret matrix:
Sa
Regret Matrix
Venue Ayefield Beefield Ceefield Deefield
Demand
Low $0 $200,000 $300,000 $450,000
Medium $330,000 $110,000 $0 $150,000
High $810,000 $590,000 $480,000 $0
If the company applies the minimax regret criterion, which venue would be chosen?
Select... 
Ayefield
Beefield
Ceefield
Deefield
e
pl
ABOUT BECKER PROFESSIONAL EDUCATION
Becker Professional Education provides a single destination
for candidates and professionals looking to advance their
careers and achieve success in:
m
• Accounting
• International Financial Reporting
• Project Management
• Continuing Professional Education
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Sa
For more information on how Becker Professional Education can

support you in your career, visit www.becker.com.
®
This ACCA Revision Question Bank has been reviewed
e
by ACCA's examining team and includes:
• The most recent ACCA examinations with suggested answers
• Past examination questions, updated where relevant
•
Model answers and suggested solutions
Tutorial notes
pl
m
Sa
www.becker.com/ACCA | acca@becker.com
©2016 DeVry/Becker Educational Development Corp. All rights reserved.

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For Examinations to June 2017

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Becker Professional Education's ACCA Study Materials

For Examinations to June 2017

Question Page Answer Marks Date worked

OBJECTIVE TEST QUESTIONS1

2 Gadget Co (ACCA D10) 59 1030 20

DEVELOPMENTS IN MANAGEMENT ACCOUNTING

Question Page Answer Marks Date worked

RELEVANT COST ANALYSIS

14 Sniff Co (ACCA D07 adapted) 73 1050 20

COST VOLUME PROFIT ANALYSIS

LIMITING FACTOR DECISIONS

23 Kobrin Engineers Co 84 1066 20

Tablet Co (ACCA J14)

RISK AND UNCERTAINTY

33 Decision tree * 94 1084 10

34 Stow Hotel (ACCA Pilot 2007 **) 95 1086 10

39 Northland (ACCA J09 **) 99 1095 10

Question Page Answer Marks Date worked

QUANTITATIVE TECHNIQUES IN BUDGETING

45 Alex Co * 105 1105 10

ADVANCED VARIANCE ANALYSIS

53 Milbao Co * 111 1117 10

PLANNING AND OPERATIONAL VARIANCES

67 Oliver (ACCA J09) 129 1139 20

FURTHER ASPECTS OF PERFORMANCE ANALYSIS

69 Education Ministry 131 1143 20

Question Page Answer Marks Date worked

DIVISIONAL PERFORMANCE EVALUATION

PERFORMANCE MANAGEMENT INFORMATION SYSTEMS

SPECIMEN EXAM (applicable from September 2016)

32 Thatcher International Park 15 25 20

COMPUTER BASED EXAM SUPPLEMENT

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

MCQs 1 COST ACCOUNTING

The budgeted annual costs for two activities are as follows:

Machine set-up 180,000

What is the budgeted machine set-up cost per unit of Product S?

Which of the above statements is/are true?

(1) It is not particularly relevant for service industry businesses

Machine running costs

(1) ABC eliminates the use of volume as a means of measuring costs.

Which statements are true/false?

Which of the statements is/are correct?

vehicles will travel 1,495,000 km.

To the nearest $, what is the distribution cost for this customer?

Budgeted production (units) 1,000 4,000 5,000

Total production set up costs $140,000

The three cost drivers that generate overheads are:

– the number of times the assembly line process is re-set to

– the number of purchase orders.

The annual overhead costs relating to these activities are as follows:

Machine set up costs

MCQs 1 COST ACCOUNTING

1.1 D Activity rate is $80,000 ÷ 200 = $400

1.6 C Cost pool $ Volume of Cost per unit

Therefore batch cost: $

Cost pool Cost driver CPU of cost driver

The cost to be quoted is therefore:

For 138 orders, the cost is $30,299·28.

Overheads costs of product D:

Set-up costs (15 × $5,000)

MCQs 2 DEVELOPMENTS IN MANAGEMENT ACCOUNTING