*** ACCA P5 June 2018 Exam was.. Instant Poll and comments ***

q1 was on performance report evaluation 20mrks was smilar and assessed in june 14 and in dec 2016 i think
(¡¡) write 3 performance measures not in the report with calculation ans justification (8)
(iii) value chain analysis measurement connected with the scenario (7)
(iv) big data analysis (risks and drawbacks) 11marks

q2 was on manager and divisional assessment (5)
(ii) assess if managers shall obtain annual bonus using R0I drawback and recommendation (14)
(iii) residual income – usefulness

q3 corporate failure

q4 was on suitability of incremental budgeting (13marks)
(ii) variance analysis and recommendation (12marks)

Hi guys,

For Q1 i I put around 10 points. They were small points like, it does not look cluttered and the rounding is good.

It was very time pressured and I was not sure what to put to complete the table in question 4B.

I also made a big error in 2ii with ROI. I put it as Profit after Tax / Capital Employed. So my drawbacks were wrong also.

What did you guys put for 4B and 2ii?

Thanks,

Paddy

Q2.
A. Divisional manager performance:
– Green division manager that it is investment center, so control over capital investment and depreciation,
– Blue manager has a lot of uncontrollable factors like, no control over investment, political instability, factory closures, no these should not be included when measure his performance.
– in short, it’s about controllability.

B.
Bases in current bonus system:
– Green manager should receive bonus, ROI Around 15.3%.
– Blue manager, not received because ROI is 14% due to different accounting policy on R&D capitalisation.

ROI bad due to:
– short term measure so discourage capital investment
– not maximize sh/h wealth
– distorted due to accounting policies

C. RI
– positive RI increase sh/h weather
– short term measure, discourage capital investment.
– absolute measure good for decision making.

@sokty said:
Q2.

B.
Bases in current bonus system:
– Green manager should receive bonus, ROI Around 15.3%.
– Blue manager, not received because ROI is 14% due to different accounting policy on R&D capitalisation.

how did you calculate this 14% for Blue. As I remember they have 4m profit and 86m capital employed. There was no data nor hint to adjust these numbers for capitalised R&D at least as far as i remember.

@sokty said:
Q3. Corporate failiure

A. Argenti A score
It is qualitative measure. Score of 47 indicated at risk of failure.
The model cover 3 areas:
– Defect:
+ Management defect:
– Autocratic CEO
– Override control by bidding during FD I’ll and everyone in leave
+ Accounting defect: No

– Mistakes:
+ High operational gearing 50%
+ Over trading: over use staff, long hours work
+ Failure of 1 big project: being sued by client and will result in big financial loss.

– Symptoms:
+ Decreasing ratio: not known, only high gearing
+ Frozen salary: no
+ Decreasing morales: yes, as staff work long hours and some leave.

B. How to improve:
– Change fixed salary to variable salary to avoid dismissal, so low gearing
– Convince staff to staff and go through tough situations together.

C. Problem of Argenti model:
– not suitable for service provider like LP.

* I don’t have much time for Q3 at all. So this is what I could answer.

Wish I pass!

Billy do you remember the mark break down for q-3

I think it is 12, 7, 6 for Q3.

how did u get 15.3% for green and blue??

How was it even possible to score 20 marks on the performance report?! It was a hard paper!

I don’t deduct head office cost as it is uncontrollable for both division.

@samie said:
Thank you Billy

U r welcome. Any idea to share about the answer?

@sokty said:
I choose Q1 Q2 Q3.
Q1.1.
I write sth like:
– it presents with revenue to show company sizes, but no growth
– use $m to present so not messy
– have EVA, in line with aim
– ROCE is not good for service provider
– have DPS, but no share price growth
– no KPI on largest retailer
– Lack long term trend for listed company
– short term control, lack variance analysis
– no cash flow forecast for investment in new tech
– no measure on new tech and currentky small web presence
– too many measures, but not really important
– Nonsense to compare between region A,B,C without any ratio
– lack external benchmarking

Q1.2. I suggest the following measures
– dividend growth: 0%
– maker position ranking: 2018 5th and 2017 4th
– share price growth, but no info to calculate

Q1.3. Value chain analysis, I suggest
– HRM provide training to IT staff to make well use of small web presence
– Procurement to conduct research on cost of new tech
– Marketing and sales makes use of web presence with new creative idea after training to advertise to increase sales

Q1.4. Big Data
I define what each V is.
– Volume: collect info about customers, and provide promotion and discount to target customer
– Verocity: collect info from customer fast so can delight customers. In rea industry, 1 min late can dissatisfy customers.
– Variety: info in different form like graph and table, processed and unprocessed data.

Risk and challenge:
– information security on customers
– no familiarity to new tech for all businesses
– cost of obtaining new tech, but benefits should outweigh, so Chiveb should not be duscoraged from investment.

For Q2 b) was ask to assess if Green / Blue Manager get the annual bonus.

Anyone use RI to calculate?
RI = Profit – (CE x WACC)
Green : +$2mil added value
Blue: -$9mil destroying value

I must say the question is vague, though ROI is the current measurement, but it did not ask the students to assess with ROI, given that one board member suggested the use of RI and capital structure 50:50 with 8% and 16% on cost (I think equity and debt respectively)

Maybe i’m wrong also since the 15% KPI was set for ROI