Answers

Part 3 Examination – Paper 3.3

Performance Management June 2003 Answers

1 (a) 2004 2005 2006

Sales units 150,000 130,000 110,000
£m £m £m
Revenues 1,425 1,235 1,045
Less Variable Costs
– Materials and Labour 540 468 396
– Assembly (variable) 150 130 110
– Marketing 30 26 22
– Delivery 15 13 11
––––– ––––– –––––
Total 735 637 539
Contribution 690 598 506
Less Fixed Costs
Assembly 450 450 450
Marketing 30 30 30
Delivery 60 60 60
Administration 10 10 10
––––– ––––– –––––
550 550 550
Profit = 140 48 (44)
The drop in sales volume will result in a decrease in the total annual contribution. The profit performance will decline and a
loss will be sustained by 2006.

(b) Original Strategy 1 Strategy 2 Strategy 3

Forecast
Volume 150,000 160,000 150,000 150,000
Selling Price £9,500 £9,500 £10,000 £9,500
£m £m £m £m
Revenues 1,425 1,520 1,500 1,425
Less Variable Costs
– Materials and Labour 540 576 540 432
– Assembly 150 160 150 120
– Marketing 30 32 30 24
– Delivery 15 16 15 12
––––– ––––– ––––– –––––
Total 735 784 735 588
Contribution 690 736 765 837
Less Fixed Overheads
– Assembly 450
– Marketing 30 550 550 550
– Delivery 60
– Administration 10
– Strategy 1 30
– Strategy 2 10
– Strategy 3 70
––––– ––––– ––––– –––––
550 580 560 620
––––– ––––– ––––– –––––
Profit 140 156 205 217
––––– ––––– ––––– –––––

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(c) All three strategies together:
2004
Selling Price 10,000
Volume 160,000
£m
Revenue 1,600
Less Variable Costs:
– Materials and Labour 460·8
– Assembly 128·0
– Marketing 25·6
– Delivery 12·8
627·2
Contribution 972·8
Less Fixed Overheads
– Assembly 450
– Marketing 30
– Delivery 60
– Administration 10
– Strategy 1 30
– Strategy 2 10
– Strategy 3 70
––––––
660
––––––
Profit 312·8
––––––

(d) Increase in profit from separate strategies:

£m
Strategy 1 16
Strategy 2 65
Strategy 3 77
–––
Total increase in profit £158m
––––––
The increase in profit from the implementation of 3 strategies simultaneously –
312·8 – 140 = £172·8m
A net increase of £14·8m when they are combined together.
There is a synergy between the three strategies that provides a contribution greater than the sum of their parts.
£m
Strategies 1 and 2:
Additional units (10,000) x additional contribution (£500) = 5·0
Strategies 1 and 3:
Additional units (10,000) x saving in variable costs (£980) = 9·8
––––
14·8
––––
OR additional units (10,000) x additional contribution (1,480) = £14·8m
–––––––
–––––––

(e) Gap Analysis is concerned with the gap between the forecast position from continuing with current activities and the position
that the organisation desires. It is not the gap between the current position and the forecast position. The Managing Director
is unhappy with the current profit/(loss) forecast of £140m in 2004, £48m in 2005 and £(44)m in 2006. The strategies
outlined will enable a profit of £312·8m to be achieved in 2004.
Each strategy contributes towards filling the gap
£312·8m – £140m = £172·8m

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 The desired position for 2004 is to achieve more than double the current profit estimate of £140m i.e. in excess of £280m.
Gap analysis can be illustrated with the following diagram.

£m Profit

312·8

298
} Synergy gain
£14·8m

} Str 3
extra £77m

} Str 2
extra £65m
Desired
} Str 1
extra £16m outcome
£280m

Current
forecast
£140m

Year
2003 2004

(f) (i) Sensitivity Analysis is a technique that permits options to be tested as to their sensitivity/responsiveness to changes in
specified key variables such as units sold, price and material costs. The strategies outlined above generate other
predicted outcomes from specified changes in particular variables. For example:
Strategy 3 Strategy 3 offers a 20% reduction in variable costs as a result of a £70m cost reduction programme. What
if the £70m cost reduction programme only reduced costs by 15% – is it still worthwhile? How sensitive is
the success of the strategy on the original estimates?
Strategy 1 What additional profits result from strategy 1 if the sales only rose to 155,000 or 156,000?
Strategy 2 What if a re-design permitted the price to rise to £9,700 or £10,200 and not 10,000?
Sensitivity Analysis can be used to assess the robustness of a strategy – will it continue to deliver its major benefits in
spite of some changes in key variables.
It provides management with more information than a single point estimate of an outcome. It provides a range of
predicted outcomes depending upon the behaviour of key variables. It considers risk and uncertainty by offering
alternative scenarios – increasing realism and complexity.
(ii) Percentage changes/sensitivity data:
Strategy 1 – % change in volume
Contribution required = £580m + £280m = £860m
Original forecast contribution = £690m
Therefore, units increase required = (£860m – £690m) /£690m = 24·6%
Strategy 2 – % increase in selling price from re- design
Extra profit required = £280m – £205m = £75m
Therefore the revenue required = £1,500m + £75m = £1,575m
This requires a selling price of £1,575m/150,000 = £10,500 per car
Therefore the % increase in selling price = (£10,500 – £9,500)/£9,500 = 10·5%
Strategy 3 – % reduction in variable cost from cost reduction programme
Additional profit required = £280m – £217m = £63m
The variable costs required = £588m – £63m = £525m
Therefore the % reduction in variable costs required = (£735m – £525m)/£735m = 28·6%
This indicates that a much greater percentage change from the current forecast is required in the key variable(s) for
strategies 1 and 3 if the desired outcome is to be achieved as compared to the percentage change required for
strategy 2.

(g) The financial performance of the company will be influenced by the economic, financial, legal and social environment within
which it operates. There is a range of non-controllable factors that will have a significant impact upon the performance that
the company achieves. Therefore an assessment of the success of the strategies will require these factors to be considered.
– The general level of economic activity – is it a period of growth or contraction?
– The presence of local economic factors that make the situation particularly favourable or difficult e.g. the availability of
skilled labour.
– Interest rate movements and the debt structure of the company. A heavily indebted company during times of rising
interest rates will be operating in a particularly difficult financial environment.

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 – Strategy 1 depends upon the success in entering a new overseas market. The condition of the overseas economy and
exchange rate movements will be particularly vital to the success of this strategy.
– Government policy towards car ownership can have a significant influence on the performance of the company –
taxation, safety and environmental legislation, policy towards traffic congestion – all these have the potential to impact
on car sales.
– Competitors – they are unlikely to be passive and will take counter measures to maintain their market share in response
to the strategies.
This list is illustrative and is obviously not exhaustive and alternative approaches are acceptable e.g. candidates may refer to
PEST analysis.

2 (a) (i) BEST OUTCOME

Year 1 2 3
£m £m £m
Revenues 84·0 94·5 105
Less direct costs 45·0 54·0 63
––––– –––––– ––––––
= net cash flow 39·0 40·5 42
Less depreciation 18·0 18·0 18
––––– –––––– ––––––
= Profit 21·0 22·5 24
Less imputed interest (8%) 4·32 2·88 1·44
––––– –––––– ––––––
= Residual Income 16·68 19·62 22·56
––––– –––––– ––––––
NBV 54 36 18
ROI 21 22·5 24
–– x 100 = 39% –––– x 100 = 62·5% –– x 100 = 133%
54 36 18
Year Cash flow Discount factor (8%) DCF
0 (54) 1 (54)
1 39·0 0·926 36·1
2 40·5 0·857 34·7
3 42·0 0·794 33·3
NPV = 50·1
(ii) WORST OUTCOME
Year 1 2 3
£m £m £m
Revenues 76·0 85·5 95
Less direct costs 55·0 66·0 77
––––– –––––– ––––––
= net cash flow 21·0 19·5 18
Less depreciation 18·0 18·0 18
––––– –––––– ––––––
= Profit 3·0 1·5 0
Less imputed interest (13%) 7·02 4·68 2·34
––––– –––––– ––––––
= Residual Income (4·02) (3·18) (2·34)
––––– –––––– ––––––
NBV 54 36 18
ROI 3 1·5 0
–– x 100 = 5·6% ––– x 100 = 4·2% –– x 100 = 0%
54 36 18
Year Cash flow Discount factor (13%) DCF
0 (54) 1 (54)
1 21·0 0·885 18·6
2 19·5 0·783 15·3
3 18·0 0·693 12·5
NPV = (7·6)

(b) Residual Income:

This measures net income after deducting an imputed interest charge on the capital employed. It is intended to ensure that
the decision making and performance assessment process incorporates the finance (interest) cost of securing funds for a
project. It prompts the question – is this project a good use for scarce and costly funds?
Strengths
– Signals to project sponsors that funding of projects involves finance costs.
– Can be used to discriminate between projects that generate returns above and below the cost of capital.
– Is a flexible tool as projects carrying differing risks can have separate rates of interest imputed.
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 Weaknesses
– It does not facilitate comparison between projects that vary in size because it is an absolute measure of surplus.
– Many difficulties can arise in deciding an appropriate and accurate measure of the capital employed on which to base
the imputed interest charge (see further comments on ROI).
Return on Investment:
It gauges the efficiency of the project to generate outputs (profits) from resources input (required investment). It can be used
to assess short and long term decisions.
Strengths
– It is directly related to the standard accounting process and is widely understood.
– It appeals to investors who are interested in assessing the percentage return on an investment.
– It permits comparison to be drawn between projects that differ in their absolute size.
– It permits the performance of semi-autonomous business units to be compared with each other and with an aggregated
figure.
Weaknesses
– It can be difficult to identify the appropriate value of the investment – there are problems associated with the valuation
of ‘assets’ in relation to their earning power. What are ‘assets’? Many ‘costs ‘are expensed, R&D for example, and do not
form part of the asset base of an organisation but nevertheless make a significant contribution to the earning power of
the entity. On the other hand, intangibles like brands and customer lists can be regarded as legitimate ‘assets’ in a
balance sheet but are notoriously difficult to value.
– Both recorded profit figures and asset values are subject to unscrupulous manipulation by senior managers in an attempt
to artificially enhance the ROI performance of their organisations – candidates should be given credit for referring to
recent (2002) scandals within large US companies.
– It is not easy to compare the performance of investment centres if they have calculated their depreciation in different
ways or have assets that vary in their age profile.
– The ROI is likely to increase as assets depreciate and therefore this may deter necessary asset replacement if managers
are assessed on short run ROI performance – short term ROI performance indicators may discourage long term optimal
decisions being taken.
– Where a conglomerate sets a common ROI target that has to be achieved for all new projects, it may present problems
in assessing performance fairly where:
– the target return makes no allowance for projects with varying risk.
– where the various parts of the business operate in differing business environments.
Net Present Value:
Unlike the other two indicators NPV considers the time value of money – it is concerned with not only how much, but also
when. Therefore it is particularly suitable for decisions whose consequences have a long time horizon, e.g. capital projects.
Strengths
– The emphasis on cash flows is particularly appealing to shareholders who are seeking short and long term cash returns.
– The use of cash flows is subject to less manipulation and fewer subjective decisions than the use of profits based on
accruals accounting (see above comments on ROI).
– It considers the opportunity cost of not holding money.
– Risk can be allowed for by adjusting the cost of capital.
Weaknesses
NPV estimates require a number of assumptions concerning decision critical variables such as:
– the duration of the cash flows.
– the timing of the cash flows within the life of the project – it is very difficult to profile cash flows accurately over long
time periods.
– determining the appropriate cost of capital to apply to the project and whether this should remain constant over the life
of the project. This is especially difficult when the organisation is not able or is unwilling to arrange long term fixed
interest funding.
– the heavy reliance on estimates and subjective decision making permits and encourages project sponsors and other
interested parties to submit optimistic projections that cannot be easily refuted.

(c) Issues to consider may include:

– The anticipated project risk – is it known and can it be measured?
– Does the project represent the commencement of a much larger and longer term plan? An apparently poor performing
project in the short term may proceed because of the long term prospects.
– The synergy and relationship between different projects may need to be considered – the role of the project within the
corporate plan.
– The potential for an individual project to alter the overall risk of a company’s business activities e.g. a single project has
the potential, if combined with certain other projects, to lower overall risk, and consequently the corporate cost of capital.
– When will the project commence – now or later? Is postponement feasible? Is this project an integral element of a broader
plan?

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3 (a) Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is
likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make
the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually
the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially
decline and then stabilise once efficient working is achieved.
The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles.
Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one
made.

(b) No of Cumulative Total Time Incremental Time

Bikes Average Time To Date for Additional Bikes
(hours) (hours) (hours)
1 50 50
2 (x 0·8) 40 (x 2) 80 (80 – 50) 30
4 (x 0·8) 32 (x 4) 128 (128 – 80) 48
8 (x 0·8) 25·6 (x 8) 204·8 (204·8 – 128) 76·8
Quotation 1 £ Quotation 2 £
Materials 1,000 Materials 2,000
Labour (30 x10) 300 Labour (48 x 10) 480
Overheads 600 Overheads 960
–––––– ––––––
Total cost 1,900 Total cost 3,440
Profit (20%) 380 Profit (20%) 688
–––––– ––––––
Selling Price 2,280 Selling Price 4,128
–––––– ––––––
4,128/2 = £2,064 Per Bike
Quotation 3 £
Materials 8,000
Labour (204·8 x 10) 2,048
Overheads 4,096
––––––––
Total cost 14,144
Profit (20%) 2,828·8
–––––––––
Selling Price 16,972·8
–––––––––
16,972·8/8 = £2,121·6 Per Bike

(c) Areas of consequence:

– A standard costing system would need to set standard labour times after the learning curve had reached a plateau.
– A budget will need to incorporate a learning cost factor until the plateau is reached.
– A budgetary control system incorporating labour variances will have to make allowances for the anticipated time
changes.
– Identification of the learning curve will permit the company to better plan its marketing, work scheduling, recruitment
and material acquisition activities.
– The decline in labour costs will have to be considered when estimating the overhead apportionment rate.
– As the employees gain experience they are more likely to reduce material wastage.
Limitations:
– The stable conditions necessary for the learning curve to take place may not be present – unplanned changes in
production techniques or labour turnover will cause problems and affect the learning rate.
– The employees need to be motivated, agree to the plan and keep to the learning schedule – these assumptions may not
hold.
– Accurate and appropriate learning curve data may be difficult to estimate.
– Inaccuracy in estimating the initial labour requirement for the first unit.
– Inaccuracy in estimating the output required before reaching a ‘steady state’ time rate.
– It assumes a constant rate learning factor.

4 (a) NB – A structured approach could take many alternative forms. This suggested answer represents one approach – candidates
are likely to offer many variations. The request for a ‘structured’ approach is to avoid candidates merely listing a series of
random indicators without consideration to the relationship between them and their contribution towards overall performance
assessment.
‘Overall performance’ refers to a comprehensive coverage of the major issues that are generally regarded as important in
assessing a public service. They could be broken down into three categories:
1. Financial indicators (assessing efficiency).
2. Non-financial quantitative indicators (assessing effectiveness).
3. Qualitative indicators that are difficult to quantify (assessing effectiveness).
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 Financial:
– Cost per unit of activity/unit cost measurement e.g. per hospital bed per annum, annual cost per pupil, per arrest, per
each call to attend a fire.
– A comparison between actual and budgeted or standard cost (variance analysis) – flexible budget approach may be
adopted to relate costs to activity levels.
– Benchmarking costs against other regions and/or ‘best practice’.
– An indicator that measures cost recovery against service delivered – e.g. fees received from dental patients who are
required to contribute towards the cost of a service – may be set at a ratio to total costs incurred.
– The ratio of one cost component to the total cost of the service e.g. staff costs as a percentage of the total costs. This
could be supplemented by benchmarking ratios.
Non-financial (quantitative):
– Units of activity delivered within a period e.g. operations undertaken, number of children attending school, criminals
arrested, fires attended.
– Flexibility and speed of response e.g. time taken for ambulances to arrive, hospital waiting lists and time elapsed
between diagnosis and treatment.
– Quality of Service/output measures – pupils’ test marks, crime rates, life expectancy, the number of hospital deaths
arising from infections, numbers of people rescued from fires.
– Utilisation of resources e.g. – bed occupancy ratios, average class size, ratio of police vehicles currently operational.
– Number of complaints received.
– Accessibility – e.g. distance to nearest hospital or school.
Qualitative:
– Public confidence in the service – the strength of the expectation that –
a criminal will be arrested.
a pupil will receive a ‘good’ education.
a patient will be ‘well looked after’ in hospital.
the fire service will respond rapidly when required.
– The morale of the workforce.
– The ‘attitude’ of the staff – do they appear concerned, helpful and confident when dealing with the public?
– How effective are they at meeting the information needs of their ‘customers’?
– Cleanliness, comfort, security – do people feel ‘comfortable’ within the premise owned by the public service (school and
hospital)? It is part of ‘quality’, but it is difficult to quantify.

(b) Common problems are likely to include:

– The simultaneous pursuit of multiple and sometimes conflicting objectives – the private sector frequently has a single
prime objective e.g. maximisation of shareholder wealth.
– Political interference – this may result in policy U-turns or long term organisational objectives being sacrificed for short
term political gains.
– They are usually monopoly services therefore making it difficult to assess relative performance. Attempts to overcome
this via benchmarking with other regions can be problematical owing to geographical variations in operating
environments.
– It is very difficult to measure outputs that public services provide. What is the ‘output’ of the fire service? The private
sector has measurable units of output whether it be goods or services – they charge for them! They also have a measure
of net output – their profits.
– Financial constraints e.g. a private company could decide to borrow money if it thought it were in its interest, but a
public body may be forbidden to undertake such action – the service may not have the freedom to act in what it regards
as its own interest.
– The temptation to judge outputs on the value of inputs – employing more people, spending more money on a service
and building new premises is frequently taken to represent improved service provision but this is not necessarily true.

(c) – Change in the governance to restrict political interference.

– Facilitate regional benchmarking by introducing adjustment factors to compensate for known regional disparities e.g.
permit higher rates of pay in high wage locations and allowing for variations in the socio-economic composition of the
population.
– Undertake cost-benefit analysis of projects in an effort to place a monetary value on the service provision.
– Accept that it is difficult to monitor their performance in a quantifiable and objective way, and therefore appoint and trust
independent agencies staffed by experts who will make subjective decisions based upon their experience and the
information presented to them.

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5 (a) The role of a management accountant is to provide information which can be used to assist and guide management in the
pursuit and achievement of organisational objectives. The management information provided is read, interpreted and
responded to by people within the organisation, and their responses will determine the quality of the decisions made and the
extent to which corporate objectives are achieved. Management accountants should be aware of this relationship and
endeavour to ensure that the information that they supply is used in a way that benefits their organisation. The design and
operation of a management accounting system should anticipate the behavioural consequences that are likely to arise as a
result of its activities. A management accountant who fails to consider these repercussions or denies responsibility for them
is likely to operate a dysfunctional system. This is most likely to manifest itself in a failure to secure goal congruence between
the interested parties. The management accounting system will need to consider the particular culture of the organisation,
whether it has a hierarchical or democratic structure, its attitude towards employee empowerment and the extent of delegated
team decision making.

(b) Performance Monitoring:

There is a general acceptance of the idea that an organisation that monitors performance and rewards individuals for ‘good
performance’ is more likely to encourage behaviour that is consistent with the objectives of the organisation. This involves the
organisation ‘transmitting signals’ to its people as to what it deems desirable activities and outcomes in the workplace. This
approach has resulted in such terms and activities as performance monitoring, performance related pay, payment by results,
bonus systems. The reward for the achievement of desired outcomes could be money, promotion, job security, preferred work
activities, alternative work environments. Unfortunately this is a very complex task and problems are likely to arise in a
number of areas:
– It is very difficult in many work environments to measure individual performance – and if you resort to team
performance, it is difficult to gauge the contribution from individual members.
– It is difficult to ensure that individual targets are not inconsistent with other individuals or corporate objectives.
– Current measured performance may discourage consideration of longer term issues that may have adverse
repercussions.
– Can a performance monitoring system comprehensively measure the key variables? For example, the desire to achieve
greater volume/activity may be at the cost of quality that is more difficult to identify and appraise.
– Measure fixation – concentrating on the measurement process and not on what needs to be achieved.
– Misrepresentation – ‘creative’ responses that give a favourable view of activities.
– Myopia – short sighted viewpoint with limited consideration to long term issues.
Candidates should be given credit for illustrating these issues with specific references to a work environment.
The problems highlighted above can be managed if the following points are considered:
– Do not underestimate the scale of the task in designing a performance monitoring system.
– Consider the expectations and likely responses of all the parties concerned – take a broad view.
– Ensure that the people designing and operating the system have a comprehensive understanding of the organisation’s
activities and the interrelationship between all of the stakeholders.
– Ensure that all parties involved believe that they will be beneficiaries of the system.
– Be prepared to reappraise and modify – it is unrealistic to believe that it can be perfected at the first attempt.
Budgeting:
Adverse behavioural consequences of budgeting can arise from insufficient consideration being given to the task during the
planning stage. The targets set may be perceived as:
– Imposed
– Complicated
– Unfair
– Irrelevant
– Easy
– Unachievable.
This is likely to foster the ‘them and us’ syndrome and the consequential failure to achieve goal congruence. These undesirable
consequences may be avoided by consulting with all interested parties, setting challenging but achievable targets, considering
other people’s perception of the targets and anticipating their likely responses. On the other hand, if budget holders are given
complete autonomy or are permitted to have a significant influence on budgetary targets, they may be tempted to build in
‘slack’ to give themselves an easy life which is not in the interests of their organisation.
Having implemented the planning stage, we need to turn our attention towards control. Behavioural problems can arise from:
– A failure to distinguish between controllable and non-controllable factors for each particular budget holder – people will
feel aggrieved for being accountable for what they do not control.
– A failure to account for the changing circumstances that have arisen since the budget was determined – may require
budget adjustments and/or a flexible budget approach.
– Failure to reward favourable variances – budget under spending that automatically results in cuts in future budget
provision merely encourages spending of the entire budget, not something that should be encouraged.
– Budget constrained approach – a requirement to conform to budget may stifle attempts at improvement.
– Insufficient participation in budgetary control and poor communication of the reasons for change decisions may alienate
staff.

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Transfer Pricing:
Transfer pricing is primarily concerned with ensuring that semi-autonomous business units behave in a way that contributes
towards the achievement of corporate and not merely divisional objectives. An effective transfer pricing system encourages
divisional managers with autonomous decision making authority to pursue the interest of the corporation automatically whilst
endeavouring to maximise the performance of their own business unit. Their decisions are made with self (divisional) interest
as the driving factor, but coincidentally benefit the entire company. Effective transfer pricing systems consciously endeavour
to harness selfish divisional behaviour to induce decisions that foster goal congruence. Problems can arise when inappropriate
prices are set that result in ‘wrong signals’ being sent and non-optimal decisions being made:
– Too high a price may result in unused capacity, lost contribution, reduced incentive to find external markets and
unnecessary external sourcing from the buying division.
– Too low a price may result in ‘excessive’ internal trading and a loss of valuable external business.
To avoid these pitfalls the transfer pricing determination should consider:
– The cost behaviour (fixed and variable) of the different divisions.
– The adequacy of the information available to the divisions concerning both internal and external prices.
– Both the short and long run consequences of the prices set – internal and external markets and capacity levels.
– The degree of autonomy given to the divisions.

19
Part 3 Examination – Paper 3.3
Performance Management June 2003 Marking Scheme

1 (a) Calculation of:

Revenues 1
Costs 3
Profits 1
Comment 1 6
–––

(b) Strategy 1 profit 2

Strategy 2 profit 2
Strategy 3 profit 2 6
–––

(c) Contribution 2
Profit 2 4
–––

(d) Increase in profit 1

Comment 1
Reconciliation 3 5
–––

(e) Comment 2
Graph 5 7
–––

(f) (i) General comment 4

(ii) Calculation (3 x 1) 3
Summary comment 1 8
–––

(g) 4 x 1 (per point) 4

–––
40
–––

2 (a) (i) Residual income 2

ROI 1
NPV 2 5
–––
(ii) Residual income 1
ROI 1
NPV 1 3
––– –––
8

(b) Comments on residual income 3

Comments on ROI 3
Comments on NPV 3 max 8
–––

(c) Issues listed (2 x 2) 4

–––
20
–––

3 (a) General explanation 2

Explanation of cumulative Average time 2 4
–––

(b) Quotation estimates (3 x 2) 6 6

–––

(c) Areas of impact (5 x 1) 5

Potential problems (5 x 1) 5 10
––– –––
20
–––

21
4 (a) Explanation of overall performance 4
Financial issues 2
Non-financial issues 2
Qualitative issues 2 6
–––

(b) Problems (1 x 6) 6

(c) Suggestions to overcome (4 x 1) 4

–––
20
–––

5 (a) General role of management accountant 2

Behavioural responses 2
Consequences of ignoring issue 1 5
–––

(b) Performance Monitoring:

potential problems 3
methods of overcoming 2
Transfer pricing:
potential problems 3
methods of overcoming 2
Budgeting:
potential problems 3
methods of overcoming 2 15
––– –––
20
–––

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