These are ACCA F5 (PM) Performance Management MCQs for Part-E of the Syllabus “Performance measurement and control “ .
These multiple-choice questions (MCQs) are designed to help ACCA F5 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams . By doing so, students can reduce exam stress and prepare more effectively.
Please note:
Students should not attempt these MCQs until they have finished the entire chapter.
All questions are compulsory, so please do not skip any.
We hope that these MCQs will be a valuable resource for students preparing for the ACCA F5 (PM) exam .
Course: ACCA – Association of Chartered Certified Accountants Fundamental Level: Applied Skills Subject: Performance Management Paper: F5 – PM Chapters and Topics Covered: Performance analysis in private sector, Public sector and not-for-profit organisations, Divisional performance and transfer pricing, Specific performance analysis issues in not-for-profit organisations and the public sector Questions: 01 – Cherry Co 02 – Jamair 03 – Stickleback Co 04 – Squarize 05 – Alder Co 06 – Apple Co 07 – Box Co 08 – Willow Co Syllabus Area: E – “Performance measurement and control “ Questions Type: CBE MCQs Exam Section: Section B
Syllabus Area
These Multiple Choice Questions (MCQs) cover the Syllabus Area Part E of the Syllabus; “Performance measurement and control “ of ACCA F5 (PM) Performance Management Module.
Time
These MCQs are not time-bound. Take your time and solve them without stress. Pay proper attention and focus. Do not rush or hesitate
Result
Students will get their F5 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.
Types of Questions
MCQs: Choose one from the given options. Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect) “. Drop-down: Select from the list provided. Type numbers: Type your answer in numbers as per the requirement of the question.
Question – Cherry Co – (01/08)
Question – Jamair – (02/08)
F5 (PM) - Part E - MCQs - Jamair
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Jamair
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Jamair is one of a growing number of low-cost airlines in the country of Shania.
Jamair's strategy is to operate as a low-cost, high-efficiency airline.
The airline was given an 'on time arrival' ranking of seventh best by the country's aviation authority, which ranks all 50 of the country's airlines based on the number of flights which arrive on time at their destinations.
The average 'ground turnaround time' for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again.
The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013.
The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes.
However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.
REQUIREMENT
The following performance measure has been suggested for Jamair:
Improve on the 'on time arrival' ranking of seventh best in the country's aviation authority ratings.
To which perspective of the balanced scorecard does this measure belong?
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Jamair is one of a growing number of low-cost airlines in the country of Shania.
Jamair's strategy is to operate as a low-cost, high-efficiency airline.
The airline was given an 'on time arrival' ranking of seventh best by the country's aviation authority, which ranks all 50 of the country's airlines based on the number of flights which arrive on time at their destinations.
The average 'ground turnaround time' for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again.
The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013.
The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes.
However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.
REQUIREMENT
The following performance objective has been suggested for Jamair:
Improve the turnaround time on the ground
To which perspective of the balanced scorecard does this objective belong?
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Jamair is one of a growing number of low-cost airlines in the country of Shania.
Jamair's strategy is to operate as a low-cost, high-efficiency airline.
The airline was given an 'on time arrival' ranking of seventh best by the country's aviation authority, which ranks all 50 of the country's airlines based on the number of flights which arrive on time at their destinations.
The average 'ground turnaround time' for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again.
The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013.
The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes.
However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.
REQUIREMENT
Are the following statements about Jamair's performance measurement system true or false?
When performance is not quantified, it is difficult to target and monitor.
Jamair is more likely to have a reliable and comprehensive system for collecting data about qualitative aspects of performance than a well-established system for measuring quantitative data.
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Jamair is one of a growing number of low-cost airlines in the country of Shania.
Jamair's strategy is to operate as a low-cost, high-efficiency airline.
The airline was given an 'on time arrival' ranking of seventh best by the country's aviation authority, which ranks all 50 of the country's airlines based on the number of flights which arrive on time at their destinations.
The average 'ground turnaround time' for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again.
The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013.
The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes.
However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.
REQUIREMENT
The ___________ perspective considers whether the management in Jamair meets the expectations of its shareholders and how it creates value for them.
Which of the following words is missing from the above statement?
Select an answer Internal business Customer Innovation and learning Financial
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Jamair is one of a growing number of low-cost airlines in the country of Shania.
Jamair's strategy is to operate as a low-cost, high-efficiency airline.
The airline was given an 'on time arrival' ranking of seventh best by the country's aviation authority, which ranks all 50 of the country's airlines based on the number of flights which arrive on time at their destinations.
The average 'ground turnaround time' for airlines in Shania is 50 minutes, meaning that, on average, planes are on the ground for cleaning, refuelling, etc for 50 minutes before departing again.
The number of passengers carried by the airline has grown from 300,000 passengers on a total of 3,428 flights in 2007 to 920,000 passengers on 7,650 flights in 2013.
The overall growth of the airline has been helped by the limited route licensing policy of the Shanian government, which has given Jamair almost monopoly status on some of its routes.
However, the government is now set to change this policy with almost immediate effect, and it has become more important than ever to monitor performance effectively.
REQUIREMENT
The following performance objective has been suggested for Jamair:
Increase seat revenue per plane
To which perspective of the balanced scorecard does this objective belong?
Question – Stickleback Co – (03/08)
F5 (PM) - Part E - MCQs - Stickleback Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Stickleback Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Kingfisher is an investment centre within Stickleback Co. Kingfisher has an operating profit of $30,000, and operating assets of $150,000. The cost of capital is 15%. There is a proposed investment of $15,000 which will increase the operating income by $1,900.
REQUIREMENT
The divisional manager for Kingfisher wants to increase the ROI for the next period.
Which TWO of the following options would increase the ROI?
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Kingfisher is an investment centre within Stickleback Co. Kingfisher has an operating profit of $30,000, and operating assets of $150,000. The cost of capital is 15%. There is a proposed investment of $15,000 which will increase the operating income by $1,900.
REQUIREMENT
What is the return on investment (ROI) for Kingfisher with and without the proposed investment?
Before investment
After investment
$
$
Divisional profit
30,000
31,900
Capital employed
150,000
165,000
ROI
20%
19.3%
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Kingfisher is an investment centre within Stickleback Co. Kingfisher has an operating profit of $30,000, and operating assets of $150,000. The cost of capital is 15%. There is a proposed investment of $15,000 which will increase the operating income by $1,900.
REQUIREMENT
The following statements have been made about Stickleback Co's divisionalised structure.
There is a danger that managers in the divisions may use their decision-making freedom to make decisions that are not in the best interests of the overall company.
Stickleback Co's top management must have involvement in the day-to-day operations of the divisions.
Which of the above statements is/are correct?
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Kingfisher is an investment centre within Stickleback Co. Kingfisher has an operating profit of $30,000, and operating assets of $150,000. The cost of capital is 15%. There is a proposed investment of $15,000 which will increase the operating income by $1,900.
REQUIREMENT
What is the residual income (RI) for Kingfisher with and without the proposed investment?
Before investment: $3,350, After investment $7,150
Before investment: $7,500, After investment $7,150
Before investment: $7,150, After investment $7,500
Before investment: $7,500, After investment $3,350
Before investment
After investment
$
$
Divisional profit
30,000
31,900
Imputed interest (15% of $150,000)
(22,500)
Imputed interest (15% of $165,000)
(24,750)
Residual income
7,500
7,150
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Kingfisher is an investment centre within Stickleback Co. Kingfisher has an operating profit of $30,000, and operating assets of $150,000. The cost of capital is 15%. There is a proposed investment of $15,000 which will increase the operating income by $1,900.
REQUIREMENT
The following statements have been made about the use of ROI as a performance measure in Stickleback Co.
If a manager's performance is being evaluated, a portion of head office assets should be included in the calculation of ROI in Stickleback Co's investment centres.
It may lead to short termism.
Which of the above statements is/are correct?
Question – Squarize – (04/08)
F5 (PM) - Part E - MCQs - Squarize
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Squarize
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Squarize is a large company which started as a pay-TV broadcaster and then started offering broadband and telephone services to its pay-TV customers. Customers could take advantage of discounts for 'bundle' packages of all three services.
All contracts to customers of Squarize are for a minimum three-month period. The pay-TV box is sold to the customer at the beginning of the contract; however, the broadband and telephone equipment is only rented to them.
In the first few years after product bundling was introduced, the company saw a steady increase in profits. Then, Squarize saw its revenues and operating profits fall. Several reasons were identified for the deterioration of results:
In a bid to save cash, many pay-TV customers were cancelling their contracts after the minimum three-month period as they were then able to keep the pay-TV box. The box comes with a number of free channels, which the customer can continue to receive free of charge, even after the cancellation of their contract.
Some bundle customers found that the broadband service that they had subscribed to did not work. As a result, they were immediately cancelling their contracts for all services within the 14-day cancellation period permitted under the contracts.
In a response to the above problems and in an attempt to increase revenues and profits, Squarize made the following changes to the business:
It made a strategic decision to withdraw the bundle package from the market and, instead, offer each service as a standalone product.
It investigated and resolved the problem with customers' broadband service.
It is now one year since the changes were made and the finance director wants to use a balanced scorecard to assess the extent to which the changes have been successful in improving the performance of the business.
REQUIREMENT
Which of the following is most likely to be used as a measure of performance from the customer perspective in Squarize's balanced scorecard?
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Squarize is a large company which started as a pay-TV broadcaster and then started offering broadband and telephone services to its pay-TV customers. Customers could take advantage of discounts for 'bundle' packages of all three services.
All contracts to customers of Squarize are for a minimum three-month period. The pay-TV box is sold to the customer at the beginning of the contract; however, the broadband and telephone equipment is only rented to them.
In the first few years after product bundling was introduced, the company saw a steady increase in profits. Then, Squarize saw its revenues and operating profits fall. Several reasons were identified for the deterioration of results:
In a bid to save cash, many pay-TV customers were cancelling their contracts after the minimum three-month period as they were then able to keep the pay-TV box. The box comes with a number of free channels, which the customer can continue to receive free of charge, even after the cancellation of their contract.
Some bundle customers found that the broadband service that they had subscribed to did not work. As a result, they were immediately cancelling their contracts for all services within the 14-day cancellation period permitted under the contracts.
In a response to the above problems and in an attempt to increase revenues and profits, Squarize made the following changes to the business:
It made a strategic decision to withdraw the bundle package from the market and, instead, offer each service as a standalone product.
It investigated and resolved the problem with customers' broadband service.
It is now one year since the changes were made and the finance director wants to use a balanced scorecard to assess the extent to which the changes have been successful in improving the performance of the business.
REQUIREMENT
The following performance objective has been suggested for Squarize:
Reduce the number of contracts cancelled due to the broadband service not working
To which perspective of the balanced scorecard does this objective belong?
Select an answer Customer Innovation and learning Internal business Financial
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Squarize is a large company which started as a pay-TV broadcaster and then started offering broadband and telephone services to its pay-TV customers. Customers could take advantage of discounts for 'bundle' packages of all three services.
All contracts to customers of Squarize are for a minimum three-month period. The pay-TV box is sold to the customer at the beginning of the contract; however, the broadband and telephone equipment is only rented to them.
In the first few years after product bundling was introduced, the company saw a steady increase in profits. Then, Squarize saw its revenues and operating profits fall. Several reasons were identified for the deterioration of results:
In a bid to save cash, many pay-TV customers were cancelling their contracts after the minimum three-month period as they were then able to keep the pay-TV box. The box comes with a number of free channels, which the customer can continue to receive free of charge, even after the cancellation of their contract.
Some bundle customers found that the broadband service that they had subscribed to did not work. As a result, they were immediately cancelling their contracts for all services within the 14-day cancellation period permitted under the contracts.
In a response to the above problems and in an attempt to increase revenues and profits, Squarize made the following changes to the business:
It made a strategic decision to withdraw the bundle package from the market and, instead, offer each service as a standalone product.
It investigated and resolved the problem with customers' broadband service.
It is now one year since the changes were made and the finance director wants to use a balanced scorecard to assess the extent to which the changes have been successful in improving the performance of the business.
REQUIREMENT
Squarize has been advised that it could also use the Fitzgerald and Moon building block model to attempt to overcome the problems associated with performance measurement of service businesses.
Which of the following is not a building block included in this performance management system?
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Squarize is a large company which started as a pay-TV broadcaster and then started offering broadband and telephone services to its pay-TV customers. Customers could take advantage of discounts for 'bundle' packages of all three services.
All contracts to customers of Squarize are for a minimum three-month period. The pay-TV box is sold to the customer at the beginning of the contract; however, the broadband and telephone equipment is only rented to them.
In the first few years after product bundling was introduced, the company saw a steady increase in profits. Then, Squarize saw its revenues and operating profits fall. Several reasons were identified for the deterioration of results:
In a bid to save cash, many pay-TV customers were cancelling their contracts after the minimum three-month period as they were then able to keep the pay-TV box. The box comes with a number of free channels, which the customer can continue to receive free of charge, even after the cancellation of their contract.
Some bundle customers found that the broadband service that they had subscribed to did not work. As a result, they were immediately cancelling their contracts for all services within the 14-day cancellation period permitted under the contracts.
In a response to the above problems and in an attempt to increase revenues and profits, Squarize made the following changes to the business:
It made a strategic decision to withdraw the bundle package from the market and, instead, offer each service as a standalone product.
It investigated and resolved the problem with customers' broadband service.
It is now one year since the changes were made and the finance director wants to use a balanced scorecard to assess the extent to which the changes have been successful in improving the performance of the business.
REQUIREMENT
Which of the following would be the most suitable measure of performance from the innovation and learning perspective in Squarize's balanced scorecard?
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Squarize is a large company which started as a pay-TV broadcaster and then started offering broadband and telephone services to its pay-TV customers. Customers could take advantage of discounts for 'bundle' packages of all three services.
All contracts to customers of Squarize are for a minimum three-month period. The pay-TV box is sold to the customer at the beginning of the contract; however, the broadband and telephone equipment is only rented to them.
In the first few years after product bundling was introduced, the company saw a steady increase in profits. Then, Squarize saw its revenues and operating profits fall. Several reasons were identified for the deterioration of results:
In a bid to save cash, many pay-TV customers were cancelling their contracts after the minimum three-month period as they were then able to keep the pay-TV box. The box comes with a number of free channels, which the customer can continue to receive free of charge, even after the cancellation of their contract.
Some bundle customers found that the broadband service that they had subscribed to did not work. As a result, they were immediately cancelling their contracts for all services within the 14-day cancellation period permitted under the contracts.
In a response to the above problems and in an attempt to increase revenues and profits, Squarize made the following changes to the business:
It made a strategic decision to withdraw the bundle package from the market and, instead, offer each service as a standalone product.
It investigated and resolved the problem with customers' broadband service.
It is now one year since the changes were made and the finance director wants to use a balanced scorecard to assess the extent to which the changes have been successful in improving the performance of the business.
REQUIREMENT
The following performance measure has been suggested for Squarize:
Volume of sales to new customers for each product/service
To which perspective of the balanced scorecard does this measure belong?
Select an answer Customer Innovation and learning Internal business Financial
Question – Alder Co – (05/08)
F5 (PM) - Part E - MCQs - Alder Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Alder Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $750,000 is budgeted to earn a profit of $200,000 next year. A proposed non-current asset investment of $125,000, not included in the budget at present, will earn a profit next year of $20,000. The company's cost of capital is 15%.
REQUIREMENT
Are the following statements about the divisionalised structure in Alder Co true or false?
The authority to act to improve performance motivates the divisional managers in Alder Co, more so than if the company was centralised.
Alder Co's top management must have involvement in the day-to-day operations of Alder Co.
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $750,000 is budgeted to earn a profit of $200,000 next year. A proposed non-current asset investment of $125,000, not included in the budget at present, will earn a profit next year of $20,000. The company's cost of capital is 15%.
REQUIREMENT
What is the residual income for next year, both before and after the investment is made?
Before investment: $87,500, After investment: $87,500
Before investment: $88,750, After investment: $87,500
Before investment: $88,750, After investment: $88,750
Before investment: $87,500, After investment: $88,750
Before investment
After investment
$
$
Divisional profit
200,000
220,000
Imputed interest (750,000 × 0.15)
(112,500)
Imputed interest (875,000 × 0.15)
(131,250)
Residual income
87,500
88,750
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $750,000 is budgeted to earn a profit of $200,000 next year. A proposed non-current asset investment of $125,000, not included in the budget at present, will earn a profit next year of $20,000. The company's cost of capital is 15%.
REQUIREMENT
Are the following statements about the use of ROI in Alder Co true or false?
The profit figure for ROI should always be the amount before any interest is charged.
The asset base of the ratio can be altered by increasing/decreasing payables and receivables (by speeding up or delaying payments and receipts).
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $750,000 is budgeted to earn a profit of $200,000 next year. A proposed non-current asset investment of $125,000, not included in the budget at present, will earn a profit next year of $20,000. The company's cost of capital is 15%.
REQUIREMENT
Are the following statements about the use of ROI in Alder Co true or false?
If a manager's performance is being evaluated, a portion of head office assets should be included in the calculation of ROI in Alder Co's investment centres.
If the performance of the investment centre is being appraised, head office assets or investment centre assets controlled by head office should not be included in the calculation of ROI.
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $750,000 is budgeted to earn a profit of $200,000 next year. A proposed non-current asset investment of $125,000, not included in the budget at present, will earn a profit next year of $20,000. The company's cost of capital is 15%.
REQUIREMENT
What is the budgeted ROI for next year, both before and after the investment is made (to the nearest %)? (e.g. 1000)
Before investment
After investment
$
$
Controllable divisional profit
200,000
220,000
Capital employed
750,000
875,000
ROI
27%
25%
Question – Apple Co – (06/08)
F5 (PM) - Part E - MCQs - Apple Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Apple Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre in Apple Co generates a profit of $24,000. You have been given the following additional information about the investment centre.
Working capital
20,000
Non-current assets at cost
230,000
Accumulated depreciation
170,000
Net book value
60,000
REQUIREMENT
What is the ROI for the investment centre? (to the nearest %) (e.g. 1000)
Investment
$
Divisional profit
24,000
Capital employed (20,000 + 60,000)
80,000
ROI
30%
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre in Apple Co generates a profit of $24,000. You have been given the following additional information about the investment centre.
Working capital
20,000
Non-current assets at cost
230,000
Accumulated depreciation
170,000
Net book value
60,000
REQUIREMENT
Apple Co has two divisions which are set to begin buying and selling a product between themselves. It has been suggested that a cost-based approach to transfer pricing be used.
Are the following statements about this suggestion true or false?
A cost-based approach is suitable for Apple Co in this scenario if there is no external market for the product that is being transferred.
A cost-based approach is suitable for Apple Co in this scenario if an imperfect market exists.
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre in Apple Co generates a profit of $24,000. You have been given the following additional information about the investment centre.
Working capital
20,000
Non-current assets at cost
230,000
Accumulated depreciation
170,000
Net book value
60,000
REQUIREMENT
Apple Co operates a transfer pricing system between two divisions based on market price.
Are the following statements about this true or false?
The market price acts as an incentive to use up any spare capacity in the selling division of Apple Co.
Using the market price as the transfer price encourages selling and buying decisions which appear to be in the best interests of the division's performance. This leads to the company as a whole achieving optimal results as each division optimises its performance.
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre in Apple Co generates a profit of $24,000. You have been given the following additional information about the investment centre.
Working capital
20,000
Non-current assets at cost
230,000
Accumulated depreciation
170,000
Net book value
60,000
REQUIREMENT
An investment in a non-current asset could be made which would result in a capital employed figure of $100,000. The investment would result in a new profit figure of $35,000 for the division.
If the investment is made, what would the residual income be for the investment centre if the cost of capital is 12%?
Note . You are not required to put $ sign nor any coma. (e.g. 1000)
Investment
$
Divisional profit
35,000
Imputed interest (100,000 × 12%)
(12,000)
Residual income
23,000
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre in Apple Co generates a profit of $24,000. You have been given the following additional information about the investment centre.
Working capital
20,000
Non-current assets at cost
230,000
Accumulated depreciation
170,000
Net book value
60,000
REQUIREMENT
Are the following statements about the use of different performance measures in Apple Co true or false?
Residual income is more flexible, since a different cost of capital can be applied to investments with different risk characteristics.
Residual income does not facilitate comparisons between investment centres.
Question – Box Co – (07/08)
F5 (PM) - Part E - MCQs - Box Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Box Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
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REQUEST
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1 / 5
The following scenario relates to questions 1 – 5.
Scenario
Box Co has an operating profit of $20,000, and operating assets of $95,000. The cost of capital is 12%. There is a proposed investment of $10,000 which will increase the operating profit by $1,400.
REQUIREMENT
What is the RI with and without the proposed investment?
Without investment: $8,600, With investment: $8,600
Without investment: $8,600, With investment: $8,800
Without investment: $8,800, With investment: $8,600
Without investment: $8,800, With investment: $8,800
Without investment
With investment
$
$
Divisional profit
20,000
21,400
Imputed interest (12% of $95,000)
(11,400)
Imputed interest (12% of $105,000)
(12,600)
Residual income
8,600
8,800
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
Box Co has an operating profit of $20,000, and operating assets of $95,000. The cost of capital is 12%. There is a proposed investment of $10,000 which will increase the operating profit by $1,400.
REQUIREMENT
What is the ROI with and without the proposed investment? (to one decimal point)
Without investment
With investment
$
$
Divisional profit
20,000
21,400
Capital employed
95,000
105,000
ROI
21.1%
20.4%
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
Box Co has an operating profit of $20,000, and operating assets of $95,000. The cost of capital is 12%. There is a proposed investment of $10,000 which will increase the operating profit by $1,400.
REQUIREMENT
Are the following statements about Box Co's divisionalised structure true or false?
There is a danger that managers in Box Co may use their decision-making freedom to make decisions that are not in the best interests of the overall company.
A good performance measure for the divisional managers in Box Co should include a portion of head office costs in the calculations.
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
Box Co has an operating profit of $20,000, and operating assets of $95,000. The cost of capital is 12%. There is a proposed investment of $10,000 which will increase the operating profit by $1,400.
REQUIREMENT
Which of the following methods would encourage the managers of Box Co to take a short-term view?
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
Box Co has an operating profit of $20,000, and operating assets of $95,000. The cost of capital is 12%. There is a proposed investment of $10,000 which will increase the operating profit by $1,400.
REQUIREMENT
One of the managers in Box Co is critical of the performance measures used. She has said that they are too focused on financial performance and do not take into account any non-financial performance measures.
Are the following statements she has made true or false?
Financial performance measures do not necessarily provide sufficient information about ongoing problems with product quality. As a result, there is little attention paid to the generation of information on quality in Box Co.
Non-financial performance indicators can give a better indication of future prospects.
Question – Willow Co – (08/08)
F5 (PM) - Part E - MCQs - Willow Co
Course: ACCA - Association of Chartered Certified Accountants
Subject: F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Question Name: Willow Co
Exam Section: Section B
Questions type: MCQs
Time: No Time Limit
INSTRUCTIONS
If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.
REQUEST
Please rate the quiz and give us feedback once you completed the quiz.
Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.
1 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $600,000 is budgeted to earn a profit of $100,000 next year. A proposed fixed asset investment of $150,000, not included in the budget at present, will earn a profit next year of $23,000 after depreciation. The company's cost of capital is 13%.
REQUIREMENT
Two of the divisional managers in Willow Co disagree on the performance measure which should be used to determine their bonus for the year. Manager 1 is the manager of a large division, while manager 2 is manager of a small division. Manager 1 prefers to use residual income and has given the following examples of limitations of ROI to support this decision.
Which of the following is a valid reason for Willow Co choosing to use RI and not ROI?
2 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $600,000 is budgeted to earn a profit of $100,000 next year. A proposed fixed asset investment of $150,000, not included in the budget at present, will earn a profit next year of $23,000 after depreciation. The company's cost of capital is 13%.
REQUIREMENT
What is the budgeted return on investment (ROI) for next year, both before and after the investment is made (to the nearest %)? (e.g. 1000)
Before investment
After investment
$
$
Divisional profit
100,000
123,000
Capital employed
600,000
750,000
ROI
17%
16%
3 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $600,000 is budgeted to earn a profit of $100,000 next year. A proposed fixed asset investment of $150,000, not included in the budget at present, will earn a profit next year of $23,000 after depreciation. The company's cost of capital is 13%.
REQUIREMENT
Due to its size, Willow Co operates a divisionalised structure. One of the manager's area of responsibility is 'decisions over costs, revenues, and assets'. The typical financial performance measures used by this manager is return on investment and residual income.
Which of the following centres best describes the manager's responsibility area?
4 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $600,000 is budgeted to earn a profit of $100,000 next year. A proposed fixed asset investment of $150,000, not included in the budget at present, will earn a profit next year of $23,000 after depreciation. The company's cost of capital is 13%.
REQUIREMENT
What is the residual income (RI) for next year, both before and after the investment is made?
Before investment: $22,000, After investment: $25,500
Before investment: $25,500, After investment: $25,500
Before investment: $25,500, After investment: $22,000
Before investment: $22,000, After investment: $22,000
Before investment
After investment
$
$
Divisional profit
100,000
123,000
Imputed interest (600,000 x 0.13)
78,000
Imputed interest (600,000 x 0.13)
97,500
Residual income
22,000
25,500
5 / 5
The following scenario relates to questions 1 – 5.
Scenario
An investment centre with capital employed of $600,000 is budgeted to earn a profit of $100,000 next year. A proposed fixed asset investment of $150,000, not included in the budget at present, will earn a profit next year of $23,000 after depreciation. The company's cost of capital is 13%.
REQUIREMENT
Manager 2 wishes to use ROI as a performance measure.
Which of the following reasons is a valid reason for Willow Co choosing to use ROI and not RI?