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CIMA_P2_Performance Management_Specimen Papers__Ans_Nov_2009

CIMA_P2_Performance Management_Specimen Papers__Ans_Nov_2009

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Title:CIMA_P2_Performance Management_Specimen Papers_Ans_Nov_2009
Ref: www.cimaglobal.com
Purpose: With change in Sallaybus, material available on site is replaced. It would help to keep record of historical data regarding specimen papers.
Title:CIMA_P2_Performance Management_Specimen Papers_Ans_Nov_2009
Ref: www.cimaglobal.com
Purpose: With change in Sallaybus, material available on site is replaced. It would help to keep record of historical data regarding specimen papers.

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12/03/2010

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CIMA 2010 Chartered Management Accounting Qualification – Answers for Specimen Examination Paper P2Published November 2009
Performance Management Specimen Exam Paper1
 
The Examiner's Answers – Specimen PaperP2 - Performance Management
SECTION A
Answer to Question One
Requirement (a)
The Value Chain is the concept that there is a sequence of business factors by which value isadded to an organisation’s products and services. Modern businesses cannot survive merelyby having efficient production facilities, they must also have a thorough understanding of theimportance of the relationship between all of the elements in the value chain. These include:research & development, design, manufacturing, marketing, distribution and customerservice.The DT group currently has an internal manufacturing facility, this makes communicationsbetween different parts of that manufacturing process relatively straight-forward, however, ifpart of this process is to be outsourced this will place as added burden on the productionmanagement to ensure that all parts of the production process operate smoothly. Aside fromcommunication difficulties, there may be different work ethics to contend with, and delays inreceiving items and quality issues may disrupt the flow of goods to customers. This will leadto difficulties in identifying where profits / contributions are being earned (and lost) within thevalue chain.
Requirement (b)
Gain sharing arrangements are based on the concept of sharing profits, however, if they areto be successful both parties must be willing to share the information necessary to determinethe extent of any gain (or loss) that has arisen.The DT group may seek to enter a gain sharing arrangement with the suppliers of thecomponents that they have outsourced. This would require both organisations to establishsome clear targets which could include quality specifications and delivery schedules. The gainfrom lower levels of rejects and earlier delivery of components can then be determined andshared between DT and the external supplier.
 
CIMA 2010 Chartered Management Accounting Qualification – Answers for Specimen Examination Paper P2Published November 2009
Specimen Exam Paper Performance Management2
Answer to Question Two
Requirement (a)
Number of batches completed Average time per batch 
1 1,000 hours2 900 hours4 810 hours8 729 hours16 656 hours32 590 hours64 531 hoursIt seems that the average time equals 5·3 hours per unit (i.e. 530 hours per batch after 64batches had been completed.
Requirement (b)
4 batches were produced so the average time per batch should have been 810 hours (asshown in the answer to (a) above.Therefore the total time should have been 4 x 810 hours =3,240 hours.Actual hours taken were 2,500 hoursOperating efficiency difference 740 hours FavourableBy comparing the standard with the revised target time, the planning variance can beidentified:Original standard (5·3 hours x 400 units) 2,120 hoursTime allowed per learning curve 3,240 hoursPlanning efficiency difference 1,120 hours Adverse Each of these differences in hours is valued using the standard hourly rate of $10 per hour, sothe revised efficiency variances are:Planning variance $11,200 AdverseOperating variance $7,400 FavourableThe rate variance remains unchanged at $ 1,000 Adverse
Requirement (c)
 The analysis of the efficiency variance into planning and operational effects provides moremeaningful information because it shows the true efficiency of the operations as opposed toan invalid application of the original target. As production has only reached four batches bythe end of August and the learning period seems to continue to around 64 batches it is clearthat the learning has not yet been completed and therefore it is unfair to measureperformance against the post learning standard. These revised calculations show that theactual learning is better than was expected whereas the original variance calculation showedthat the time taken was more than it should have been. Rather than acusing the workforce ofbeing inefficient they should be congratulated on their efficiency.
 
CIMA 2010 Chartered Management Accounting Qualification – Answers for Specimen Examination Paper P2Published November 2009
Performance Management Specimen Exam Paper3
Answer to Question Three
Requirement (a)
Feedback control is the comparison of actual performance with an agreed target such as thebudget set by the Managing partner. An example would be a comparison of the fees earnedby each partner compared to those budgeted to be earned.Feed-forward control is the comparison of a draft version of a target with a rule or objective.An example would be the comparison of the draft cash budget with the target cash balancesand the overdraft facility. As a result of this comparison it may be necessary to defer someexpenditure until a later period or reduce it so as to stay within the firm’s existing cashbalances / overdraft facility. This will lead to a second draft of the cash budget beingprepared.
Requirement (b)
 One beneficial consequence of involving the other partners in the preparation of the firm’sbudgets is that they will accept ownership of their budget and accept responsibility forachieving their target. However, one adverse consequence is that since they will effectivelybe setting their own targets they may be tempted to set a target that is more easily achievedthan that which would have been set by the Managing partner. This is known as the inclusionof budgetary slack.
Answer to Question Four
Requirement (a)
Calculation of cost driver rates:Machine maintenance$100,000 / ((1,500 x 3) + (2,500 x 2) + (4,000 x 3)) = $4·65 per machine hourMachine setups$70,000 / [{(1,500/50) x 2} + {(2,500/100) x 3} + {(4,000/500) x 1}] = $489·51 per setupPurchasing$90,000 / [{(1,500/50) x 4} + {(2,500/100) x 4} + {(4,000/500) x 6}] = $335·82 per orderMaterial Handling$60,000 / [{(1,500/50) x 10} + {(2,500/100) x 5} + {(4,000/500) x 4}] = $131·29 per movementOther Costs$80,000 / ((1,500 x 2) + (2,500 x 4) + (4,000 x 3)) = $3·20 per labour hour
Product X Y
Batch costs:Machine setup 9791,468·5489·5Purchasing 1,3431,3432,015Material handling 1,313656·55253,6353,4683,029·5 Batch size 50 100 500Unitised batch costs 72·7034·686·06 Machine maintenance 13·959·306·06Other costsProduct overhead costs 93·0556·7829·61 

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