General Comments - CIMA - Chartered Institute of ...€¦ · General Comments The overall result...

Paper P1 – Management Accounting – Performance Evaluation Post Exam Guide

May 2009 Exam General Comments The overall result on this paper was quite good and well above that achieved in November 2008. In Section A, the marks gained on the ten multiple-choice questions and on the six short-form calculation questions were once again particularly good. For many candidates this provided a sound foundation to go on and achieve a pass on this paper. However, it is still the case that a number of candidates do not attempt all of the multiple-choice questions. Average performances in Sections B and C of the examination paper were not as good. The focus of the questions in these sections was more on a requirement for narrative answers, especially if question 4 was selected by candidates in Section C. Candidates often demonstrated some difficulty in focusing on the specific requirements of those questions. There was little evidence of time pressures or poor time management for reasonably prepared candidates despite workings too often being unnecessarily long and at times somewhat repetitive. Time spent planning answers is time well spent if it reduces the overall time taken. Presentation of some candidates’ work was poor with workings difficult to follow or insufficient. Lack of preparation once again seemed to be the primary reason for candidate failure. Candidates who failed Paper P1 at this diet must try to prepare themselves for future exams with a good knowledge of topic areas. In the exam they need to read questions carefully and then answer the specific requirements rather than write all they know on a broader topic. They must be prepared to apply their knowledge to particular practical scenarios.

The Chartered Institute of Management Accountants �


May 2009 Exam Section A – 40 marks

Question 1.1 The fixed overhead volume variance is defined as the difference between A the budgeted value of the fixed overheads and the standard fixed overheads absorbed by actual

production.

B the standard fixed overhead cost specified for the production achieved, and the actual fixed overhead cost incurred.

C budgeted and actual fixed overhead expenditure.

D the standard fixed overhead cost specified in the original budget and the same volume of fixed overheads, but at the actual prices incurred.

(2 marks)

The answer is A

The following data are given for sub-questions 1.2 and 1.3 below. The following data relate to a manufacturing company. At the beginning of April there was no inventory. During April, 2,000 units of Product X were produced, but only 1,750 units were sold. The financial data for Product X for April were as follows:

£ Materials 32,000Labour 12,600Variable production overheads 9,400Fixed production overheads 22,500Variable selling costs 6,000Fixed selling costs 19,300Total costs for Product X 101,800



May 2009 Exam

Question 1.2 The value of inventory of Product X at the end of April using a marginal costing approach was: A £5,575

B £6,750

C £7,500

D £9,563 (2 marks)

The answer is B

Workings

Marginal cost values inventory at the variable production cost of £54,000. 1/8th of production was in inventory. 1/8th of £54,000 = £6,750

Question 1.3 The value of inventory of Product X at the end of April using a throughput accounting approach was: A £1,575

B £4,000

C £5,175

D £5,575 (2 marks)

The answer is B

Workings Throughput approach values inventory at direct materials cost = 1/8th of £32,000 = £4,000



May 2009 Exam

Question 1.4 A retailer uses the formula shown below when forecasting standard operating costs for its delivery vehicles. Analysis has shown that the relationship between miles driven and total monthly vehicle operating costs is given by the following formula: y = £2,000 + £0·0003x2

where y is the total standard monthly vehicle operating cost x is the number of miles driven in the month The forecast then needs to be adjusted for inflation in vehicle operating costs, which for April was 2%. Records for April show that the delivery mileage was 3,900 miles, and that the total actual vehicle operating costs for April were £5,500. The total vehicle operating cost variance for April was closest to A £4,459 adverse

B £1,194 adverse

C £1,194 favourable

D £4,459 favourable

(2 marks)

The answer is C

Workings

Total cost = 2,000 + 0·0003 x (3,900)2

Total cost = 2,000 + (0·0003 x 15,210,000) Total cost = £6,563 Adjusted for inflation: Total cost = £6,563 x 102% = £6,694 Total cost variance = £6,694 - £5,500 = £1,194 favourable



May 2009 Exam

Question 1.5

The budgeted profit statement for a company, with all figures expressed as percentages of revenue, is as follows:

After the formulation of the above budget it has now been realised that the sales volume will be only 80% of that originally forecast. The revised profit, expressed as a percentage of the revised revenue, will be: A 5·0%

B 6·4%

C 8·0%

D 20·0% (2 marks)

The answer is A (4/80).

Workings

Assuming the revenue was $100 will lead to the following revised figures:

Question 1.6 Overheads will always be over-absorbed when A actual overheads incurred are higher than the overheads absorbed.

B actual overheads incurred are lower than the overheads absorbed.

C budgeted output is lower than actual output.

D budgeted overheads are lower than the overheads absorbed. (2 marks)

The answer is B

% Revenue 100Variable costs 80Fixed costs 12Profit 8

Original Revised $ $ Revenue 100 80 Variable costs 80 64 Fixed costs 12 12 Profit 8 4



May 2009 Exam

Question 1.7

A basic standard is: A a standard set at an ideal level, which makes no allowance for normal losses, waste and machine

downtime. B a standard which assumes an efficient level of operation, but which includes allowances for factors

such as normal loss, waste and machine downtime.

C a standard which is kept unchanged over a period of time.

D a standard which is based on current price levels. (2 marks)

The answer is C

The following data are given for sub-questions 1.8, 1.9 and 1.10 below

A company uses a standard absorption costing system and adjusts for any under or over absorbed overheads at the end of each period. The company produces only one type of product. The unit standard costs were the same in both March and April. Data for April included:

Budget Actual Sales volume 90,000 units 85,000 units Production volume 80,000 units 78,000 units Total fixed production overheads $400,000 $395,000 Selling price per unit $11 $14 Variable production costs per unit $4 $4

Question 1.8

The sales price variance for April was

A $108,000 favourable

B $170,000 favourable

C $255,000 favourable

D $270,000 favourable (2 marks)

The answer is C

Workings 85,000 x ($14 - $11)



May 2009 Exam

Question 1.9

The sales volume profit variance for April was A $10,000 adverse

B $14,000 adverse

C $35,000 adverse

D $50,000 adverse (2 marks)

The answer is A

Workings (90,000 – 85,000) x standard profit per unit = 5,000 x $2

Question 1.10

If the company had used standard marginal costing to calculate the profit for April that profit, compared to what would have been calculated by standard absorption costing, would be: A $10,000 higher

B $35,000 higher

C $49,000 higher

D $50,000 higher (2 marks)

The answer is B

Workings Inventory has fallen by 7,000 units and therefore the marginal costing profit would be higher by 7,000 * $5 = $35,000.



May 2009 Exam

Question 1.11 Three products P, Q and R are produced together in a common process. Products P and Q are sold without further processing, but Product R must be modified in an additional process before it can be sold. No inventories are held. There are no process losses. The following data apply to March.

Calculate the value of the common process costs that would be allocated to product R using the proxy sales value method (notional sales value method).

(3 marks)

Workings Post separation costs are £12,250 / 2,450 = £5 per litre Notional price at separation point is £9 - £5 = £4 per litre

Allocation of common process costs to R is £36,000 x (£9,800 / £30,000) = £11,760

Product P 2,000 litres Output Product Q 3,800 litres Product R 2,450 litres Product P £2·50 per litre Selling prices

Product Q £4·00 per litre Product R £9·00 per litre Costs incurred in the common process £36,000 Costs incurred in the additional process for R £12,250

Total sales value is P 2,000 x £2·50 = £5,000 Q 3,800 x £4·00 = £15,200 R 2,450 x £4·00 = £9,800 £30,000



May 2009 Exam

Question 1.12

Division L has reported a net profit of £10m for the year ended 30 April 2009. Included in the costs used to calculate this profit are the following items:

• interest payable of £3m; • development costs of £12m for a new product that was launched in May 2008, and is

expected to have a life of four years; • advertising expenses of £1m that relate to the re-launch of a product in June 2009.

The reported net assets invested in Division L at 30 April 2009 were £30m. The cost of capital for Division L is 5% per year. Ignore taxation.

Calculate the Economic Value Added® for Division L for the year ended 30 April 2009.

(3 marks)

Workings

Note: Capital = £40m = 30 + (12 – 3) + 1

£m £m Net profit 10 Add Interest 3 Development costs 12 Advertising 1 16 26 Less 1/4 development costs 3 23 Less capital charge: 40 x 5% 2 EVA 21



May 2009 Exam

Question 1.13

A company manufactures a product using two sequential processes. In Process 2 additional materials are added to the base units that have been transferred from Process 1 and they are then converted to the finished product. Details for the previous period for Process 2 are: Opening inventory: 700 base units. They were 75% complete in respect of added materials and 40% complete in respect of conversion costs. Closing inventory: 800 base units. They were 55% complete in respect of added materials and 30% complete in respect of conversion costs. Input: 2,000 base units were transferred from Process 1 during the period. Output: 1,900 finished products were transferred out of Process 2. Losses: there are no losses expected in Process 2. The company uses “first in, first out” (FIFO) costing. Calculate the total equivalent units for the previous period that would be used in the calculation of the cost per unit for the following cost elements:

(i) base units

(ii) added materials

(iii) conversion (3 marks)

Workings Base units = 1,200 + 800 = 2,000 equivalent units Added materials = (700 x 25%) + 1,200 + (800 x 55%) = 1,815 equivalent units Conversion = (700 x 60%) + 1,200 + (800 x 30%) = 1,860 equivalent units.



May 2009 Exam

Question 1.14 A company can produce a wide variety of products but its production plans are limited by the time available on Machine M. The budgeted time available for the next period for Machine M is 12,000 hours. The overheads for the next period are budgeted to be $216,000. The company is reviewing the production plans for Product X. The product sells for $8 per unit and incurs material costs of $2 per unit and labour costs of $4 per unit. Each unit of Product X is worked on by Machine M for 10 minutes.

(i) Calculate the throughput accounting ratio for Product X.

(ii) State the significance of the figure you have calculated. (3 marks)

Workings (i) Throughput accounting ratio = (selling price – materials)/(labour + overhead)

Overhead = $216,000/12,000 hours = $18 per hour

Overhead for Product X = $18 x 10/60 = $3 per unit

Throughput accounting ratio = (8 – 2)/(4 + 3) = 6/7 = 0·857

(ii) The ratio is less than 1·0 and therefore the product is not profitable.



May 2009 Exam

Question 1.15

A company makes many products, one of which is Product P. Extracts from the budget for the whole company for June are set out below:

Budgeted data for the manufacture of Product P in June are as follows:

Calculate, using an activity-based costing approach, the budgeted cost per unit of Product P for June.

(4 marks)

Workings

Budget category £ Cost driver details Direct labour cost 64,000 8,000 direct labour hours Set-up costs 22,000 44 set-ups Quality testing costs 6,800 160 tests General overheads 18,800 Absorbed using direct labour hours.

Budgeted output 200 units Direct materials £18.00 per unit Direct labour 0·4 hours per unit Batch size 100 units Set-ups 1 set-up per batch Quality tests 2 tests per batch

£ Calculation Direct materials 18·00 Direct labour 3·20 0·4 * 64,000/8,000 Set-up costs 5·00 (22,000/44) * (200/100) / 200 Quality testing 0·85 (6,800/160) * (200/100) * 2/200 General overheads 0·94 (18,800/8,000) * 0·4 Total cost per unit 27·99



May 2009 Exam

Question 1.16

A manufacturing company produces only one type of product. The company has two production departments, Assembly and Finishing, and two service departments, Maintenance and Stores. Maintenance provides the following service to the production and service departments: 40% to Assembly, 40% to Finishing and 20% to Stores. Stores provides the following service to the production departments: 55% to Assembly and 45% to Finishing. The budgeted information for the year was as follows:

At the end of the year after apportioning the service department overheads, the actual total fixed production overheads attributed to the Assembly department were £298,790. The actual output achieved was 10,800 units. Calculate the under/over absorption of fixed production overheads for the Assembly department.

(4 marks)

Workings

Budgeted fixed production overheads Assembly £200,000 Finishing £160,000 Maintenance £60,000 Stores £80,000

Budgeted output 10,000 units

Assembly Finishing Stores Maintenance £ £ £ £

Overheads 200,000 160,000 80,000 60,000 Reapportion Maintenance 24,000 24,000 12,000 -60,000 Stores 50,600 41,400 -92,000 274,600 225,400 Nil Nil OAR 274,600/10,000 £27·46 per unit Assembly Absorbed 10,800 x £27·46 £296,568 Incurred £298,790 Under absorbed £2,222



May 2009 Exam Section B – 30 marks ANSWER ALL SIX SUB-QUESTIONS. EACH SUB-QUESTION IS WORTH 5 MARKS

Question 2(a) Explain how a budget can cause conflict between “motivation” and “control”.

(5 marks)

Rationale (a) covers learning outcome C(v) Describe and explain the possible purposes of budgets, including planning, communication, co-ordination, motivation, authorisation, control and evaluation. Suggested Approach • Define each of the terms 'motivation' and 'control' in the context of budgeting • Identify situations where there may be conflict between motivation and control and explain why Marking Guide Marks Motivation and control 1 Conflict situations (up to 2 marks for each) 4 Examiner’s Comments Many candidates were able to identify how motivation and control should work in harmony but often failed to identify conflict situations Common Errors • Description of the general purpose(s) of budgeting • Discussion of motivational aspects but no reference to control • Focus on harmony rather than conflict • Repetition



May 2009 Exam

Question 2(b) Explain how “zero based budgeting” can overcome the problems that are associated with “incremental budgeting”.

(5 marks)

Rationale (b) covers learning outcome C(vi) Evaluate and apply alternative approaches to budgeting. Suggested Approach • Describe problems associated with incremental budgeting • Explain how zero based budgeting can overcome the problems Marking Guide Marks Description of incremental budgeting & zero based budgeting (1 mark for each) 2 Problems and how overcome (1 mark per comment) 3 Examiner’s Comments Generally well answered Common Errors • Vague descriptions of incremental budgeting • Failure to explain how zero based budgeting can overcome the limitations of incremental budgeting • Focus on the time consuming aspect of zero based budgeting



May 2009 Exam

Question 2(c) Explain, giving examples, how budgets can be used for

(i) feedback control (ii) feedforward control

(5 marks)

Rationale (c) covers learning outcome C(x) Explain the ideas of feedback and feedforward control and their application in the use of budgets for control. Suggested Approach • Explain feedback control • Explain feedforward control • Provide examples of how budgets can be used for both types of control Marking Guide Marks Descriptions (1 mark for each) 2 Examples (1 mark for each) 2 Actions (1 mark for each) 2

max 5 Examiner’s Comments Feedback control was often well answered but candidates lacked knowledge about feedforward control Common Errors • Belief that feedforward control is about:

- using information from variance analysis to prepare the next period’s budget - using forecasts to revise budgets

• Examples not provided



May 2009 Exam

Question 2(d)

A management consulting company had set the budget for the staff requirements for a particular job as follows:

The actual hours recorded were:

The junior consultant reported that for 10 hours of the 90 hours he recorded there was no work that he could do.

(i) Calculate the following variances:

• Idle time variance • Labour mix variance

(3 marks)

(ii) Explain the worth, or otherwise, of this company calculating the labour mix variance in this situation.

(2 marks)

(Total for sub-question (d) = 5 marks)

Rationale (d) covers learning outcome B(ii) Calculate and interpret material, labour, variable overhead, fixed

overhead and sales variances. Suggested Approach • Calculate the idle time variance • Calculate the cost of the total actual hours (excluding idle time) if in the standard mix at standard

wage rates • Calculate the labour mix variance as the difference between the cost of the actual hours at standard

wage rates and the standard cost of the actual hours at standard mix • Explain the worth of calculating the labour mix variance Marking Guide

Marks

Idle time variance Labour mix variance Worth of mix variance

1 2 2

Examiner’s Comments Some marks were frequently gained for variance calculations but few candidates could explain whether the mix variance calculation was worthwhile in the circumstances.

£ 50 hours of senior consultant at £120 per hour 6,00090 hours of junior consultant at £80 per hour 7,200Budgeted staff cost for job 13,200

£ 60 hours of senior consultant at £130 per hour 7,80090 hours of junior consultant at £75 per hour 6,750Actual staff cost for job 14,550



May 2009 Exam

Common Errors • Valuation of the idle time variance at the actual wage rate paid • Calculation of the labour mix variance including the idle time and/or using actual wage rates • Use of incorrect variance signs • Explanation of how the mix variance is calculated, or of what may have caused it, rather than whether

the calculation was worthwhile



May 2009 Exam

Question 2(e) Explain the importance to management, for planning and control purposes, of the differing definitions of “variable” costs offered by traditional costing methods and activity based costing.

(5 marks)

Rationale (e) covers learning outcome A(vi) Compare activity-based costing with traditional marginal and

absorption costing methods and evaluate its potential as a system of cost accounting. Suggested Approach • Define 'variable' costs in traditional costing methods • Define 'variable' costs in activity based costing • Explain the importance for planning and control Marking Guide Marks 1 mark per definition/comment 5 Examiner’s Comments This part was generally not well answered. Common Errors • Focusing solely on accounting for overheads • Contrasting absorption and marginal costing • Not considering the importance for planning and control



May 2009 Exam

Question 2(f)

A company budgeted to produce 400 units of a product in a period. The standard cost card of the product showed that the standard cost of the material used to manufacture each unit of the product was 6 kg costing £12 per kg. The actual results for the period were that 380 units were produced from 2,500 kg of material which had cost £29,000. It has now been realised that the standard material content per unit should have been 6·75 kg. Calculate

(i) the materials usage planning variance

(ii) the operational materials price variance

(iii) the operational materials usage variance.

(5 marks)

Rationale (f) covers learning outcome B(iv) Calculate and explain planning and operational variances. Suggested Approach • Calculate each of the variances in turn Marking Guide Marks Materials usage planning variance 2 Operational materials price variance 1 Operational materials usage variance 2

Examiner’s Comments Most candidates were able to gain some marks on this part. Common Errors • In (i), calculation of the materials usage planning variance using the budgeted, rather than the actual,

output • In (i), calculation of the total materials usage variance rather than just the planning variance • In (ii), calculation of the total materials operational variance rather than just the price variance • In (iii), calculation of the total materials usage variance rather than just the operational variance • Incorrect variance signs



May 2009 Exam

Section C – 30 marks ANSWER ONE OF THE TWO QUESTIONS

Question 3(a) Calculate, in units, the budgeted break even point and margin of safety for the next year.

(6 marks) Rationale (a) covers learning outcome C(iii) Calculate projected revenues and costs based on product/service volumes, pricing strategies and cost structures Suggested Approach • Calculate the contribution per unit and the total fixed costs from the information provided • Use the total fixed costs and the contribution per unit to calculate the break even point in units • Calculate the margin of safety in units Marking Guide Marks Contribution per unit (½ for each variable cost element deducted from the selling price) 2½ Total fixed costs (½ for each element) 1½ Break even point in units (based on 'own figures') 1 Margin of safety in units (based on 'own figures') 1

Examiner’s Comments Answers to this question were often disappointing with many candidates seemingly unaware of how to calculate a break even point. Common Errors • Not including bad debts and/or variable selling costs in the calculation of contribution per unit • Including fixed production costs in the calculation of contribution per unit • Not including loan interest and/or depreciation in the calculation of fixed costs • Using incorrect formulae for the calculation of break even point and/or margin of safety



May 2009 Exam

Question 3(b) It is now thought that the price of raw materials could range from £7·50 to £11·50 for each unit produced. Produce a diagram that shows the sensitivity of the budgeted profit to changes in the price of the raw materials.

(4 marks) Rationale (b) covers learning outcome C(vii) Calculate the consequences of “what if” scenarios and evaluate their impact on master profit and loss account and balance sheet. Suggested Approach • Re-calculate the budgeted profit at each alternative material price (£7·50 & £11·50) • Plot the budgeted profit figures against material price on a graph Marking Guide Marks Revised profit calculations 1 Plotting 1 Labelling 2

Examiner’s Comments This part was not generally answered very well with many candidates making no attempt at charting the profit sensitivity Common Errors • Incorrect profit calculations • Not appreciating that profit needed to be plotted against material price



May 2009 Exam

Question 3(c) Prepare, showing all cash flows, a cash budget for period 1 and a cash budget for period 2 (assume the price of raw materials is £9·50 for each unit produced).

(14 marks) Rationale (c) covers learning outcome C(iii) Calculate projected revenues and costs based on product/service volumes, pricing strategies and cost structures. Suggested Approach • Calculate the cash inflows arising from sales in each of periods 1 & 2 (net of bad debts) • Calculate the cash outflows in each of periods 1 & 2 arising from each separate element of cost • Using the cash inflows and outflows calculated, prepare the cash budget including period net cash

flows and period end balances Marking Guide Marks Bad debt adjustment 2 Phasing of sales receipts (based on 'own figure' sales) 2 Materials inventory adjustment 2 Phasing of materials payments (based on 'own figure' purchases) 2 Outflows for other production costs (wages & expenses) 3 Variable selling expenses 1 Loan interest 1 Net cash flow & balances 1 Examiner’s Comments Reasonable marks were gained by many candidates but few did really well on this part Common Errors • Not adjusting sales revenues for the bad debts • Incorrect phasing of sales receipts • Not adjusting materials purchases for the inventory change • Incorrect phasing of materials payments • Incorrect treatment of opening receivables, payables & inventory balances • Including depreciation as a cash outflow • Including the loan as a cash inflow



May 2009 Exam

Question 3(d) Explain three areas from your cash budget which could cause problems for the company’s management team.

(6 marks) Rationale (d) covers learning outcome C(xi) Evaluate performance using fixed and flexible budget reports. Suggested Approach • Using the cash budget in answer to part (c), and the question scenario, identify areas which could

cause cash problems Marking Guide Marks Up to 2 marks for each area fully explained 6 Examiner’s Comments This part was quite well answered with many candidates identifying the short term shortage of cash as a problem, along with a suggested solution, caused by the up-front payments for fixed production expenses and loan interest and the increase in working capital. Common Errors • Discussion of items that were not relevant or problematic



May 2009 Exam

Question 4(a)

Assume that the 15,000 wheel sets are supplied by the Wheels Division at a transfer price of $900 per set. Calculate the impact on the profits of each of the divisions and the group.

(5 marks)

Rationale (a) covers learning outcome D(i) Discuss the use of cost, revenue, profit and investment centres in devising organisation structure and in management control Suggested Approach • Calculate the incremental impact on the profit of Wheels Division or calculate revised total sales, costs

and profit to compare with the current profit • Calculate the extra costs, and thus reduced profit, in Frames Division • Calculate the impact on Group profit Marking Guide Marks Wheels Division profit increase: - increased contribution 1 - increased fixed costs 1 - net gain 1 Frames Division profit decrease 1 Group profit change ('own figure') 1 Examiner’s Comments This part was generally answered reasonably well. Common Errors • Failure to realise that the variable costs on internal transfers would be reduced by $50 per set • Keeping total output at 30,000 sets • Not including the increased fixed costs for Wheels Division • Not appreciating that the effect on the Group would be the sum of the effects on the two divisions, or

not calculating the effect on Group profit at all



May 2009 Exam

Question 4(b) Calculate the minimum price at which the Manager of the Wheels Division would be willing to transfer the 15,000 sets to the Frames Division if his performance is to be measured against maintaining:

(i) the profit of the division (currently $1m) (ii) the return on assets consumed by the division (currently 12·5%).

(9 marks)

Rationale (b) covers learning outcome D(vii) Identify the likely consequences of different approaches to transfer pricing for divisional decision making, divisional and group profitability, the motivation of divisional management and the autonomy of individual divisions. Suggested Approach • Calculate the change in the $900 per set transfer price, or the required contribution plus fixed costs

per set, that would result in profitability remaining unchanged under each of the two scenarios • (Various approaches were possible) Marking Guide Marks (i) Required total contribution 2 Required contribution per set 1 Minimum transfer price 2 (ii) Required total contribution 2 Required contribution per set 1 Minimum transfer price 1 NB Alternative approaches gained marks as appropriate (based on 'own figures' from (a)) Examiner’s Comments There were some very good answers, using 'own figures' from answers to part (a), but many other candidates did not know how to approach the calculations required. Common Errors • Assuming that capacity would be 45,000 sets within the Group • Calculating an average price for the whole of the 35,000 sets manufactured • Applying incorrect methods to the problem • Providing solutions that were not sensible given the answers to part (a)



May 2009 Exam

Question 4(c) Produce a report to the Managing Director of the group that:

(i) explains the problems that may arise from the directive and the introduction of performance

measures; (10 marks)

(ii) explains how the problems could be resolved.

(6 marks)

Rationale (c) covers learning outcome D(vi) Explain the typical consequences of a divisional structure for performance measurement as divisions compete or trade with each other Suggested Approach • Identify the problems that may arise from the directive that Wheels Division are to supply sets to

Frames Division, at $900 per set • Identify the problems that may arise from the performance measures under consideration • Explain how the problems could be resolved Marking Guide Marks (i) 1 mark per relevant point 10 (ii) 1 mark per relevant point 6

Examiner’s Comments Many candidates failed to grasp the real issues about autonomy, goal congruence and performance measurement and the possible effect on motivation in general. Common Errors • Focussing on ROCE and RI as other performance measures without considering whether they would

solve any problems • Not relating the answer to the situation revealed by the question scenario and the answers to parts (a)

and (b) • Failing to suggest reasonable solutions to the problems


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