*** ACCA P5 December 2016 Exam was.. Instant Poll and comments ***

its seemed ok, lets hope it wasn’t tricky

thats what I thought too..

I did Q3,4

In my opinion, Q1(C) – Maximax was an overkill to calculate. Used expected values technique.

I have approached it from calculating expected demand.
This resulted in 1400, 1420, 1400.
Range was from 1200 to 1600 (median point 1400).

Therefore assumed that 1,400 seems quite right.

Then went to calculate net margin, net margin %, breakeven point and margin of safety.

A 11% B 11.1% C 10%

Margin of safety in units 95k, 96k, 81k.
Breakeven point for B was 1,150 units.

Minimum demand as per question was ca. 1,200 units, therefore highly unlikely to happen below.

Selected B based on highest net margin%, breakeven point below minimum demand, distribution weighting of 30% of 1,600 – which gives a chance of upside.

You are right that Maximax was an overkill. I think the same and I’m almost sure I miss the question.

However, in your calculations you do not take into account at any moment the appetite for risk of the board? Looks as a neutral risk approach to me.

It was unreasonable for me to select any other options based that Net margin % was lower and total return was within 20k difference across options. Didn’t believe that board would make a decision to potentially gain 20k, loosing 1% net margin with potentially unrealistic demand. Maybe I am just too risk averse, as I wouldn’t recommend such project at my work place. 🙂

Hello yinka, I followed the same approach.

However, not using these % of demand. I’m sure there is something missing. Michal approach look coherent to me, except for the fact of not getting the maximum outcome option, not matter of the probability.

Q1. Evaluate performance report n choice of metrics.
1 b what gets measured gets done. discuss in relation to scenario
1c. The risk n uncertainty using the criteria n select the appropriate measure
1d. brand n image.

q2. budgeting. rolling vs incremental. n computation of change in buffeted income

q3. bcg analysis

q4. predicting corporate failure. calculation of gscore n evaluation of the score
4b evaluate quantitative analysis
4c evaluate causes of corporate failure

From looking at the layout of previous exam papers, I believe the correct approach was to calculate the maximax, maximin, min regret and EV. The question asked for the methods for risk and uncertainty and these are the four methods as stated in the syllabus. I found the calculations to be straightforward and did not take particularly long. Once you have used the percentages to calculate variable costs then you can make up a standard cost and use this to multiple by the relevant demands. Using this approach project C was selected under maximax criteria as they were risk seeking and all methods showed positive returns regardless.

I feel this paper was fine, hoping for a good pass!

Also for c part. I concluded that bavus was risk seeking as it operates a franchise biz. only a risk seeking mind set who want to let out its brand for financial gains. so maxima works for me

Yes the question asked you to choose the most appropriate method. Takes the same time to calculate all three as calculating one as you use the same pay off table. There was an almost identical question in pilot paper and the same method was used. Calculate all using the one table and then comment on which is best for company.

Hey, Sarahp44. I used the same approach for Q1 c as per the pilot paper. Maximax, Maximin, Minimax regret and expected values. Although the calculations gave me a headache and ate up my time! the scenario did mention that the board had a strong risk apetite, hence the maximax option.

Q1 a appeared to need an evaluation of a suitable performance report for a franchisee, hence comments such as useful information required for a performance report (declutter, clarity, bechmarking, comparatives and balance sheet/cash flow statements were missing).

Question 3 was the BCG matrix, that was ok but needed a bit of time to find suitable metrics (shoot the dog, milk the cow) etc. then overall evaluation of the usefulness and limitations of BCG.

Question 4… time consuming but str8forward. The same evaluation of Altman’s Z model would have worked for the quantitative model they utilised. Then came evaluation of the importance of liquidity indicators, some of the metrics were easy to pick out from the balance sheet (NCL dropping from $25m to 40.1m in one year! Finally, I actually used Argenti model to identify the factors that cause corporate failure such as an autocratic CEO, passive board, weak FD, failed project (investment project), high gearing etc.

Overall, I found it ok, but just hope it gets marked fairly. I am always nervous about not getting to see your marked paper… Don’t want to be the unlucky one marked by some bitter lecturer looking to get through his scripts in record time 🙁

Good luck people!

I attempted Q2 also.

The part B looked quite straight forward. Recommend to change for luxury, stay the same for diary. Explains pros and cons of both budgeting methods applied to the case.

For part A, some calculations looked tricky, even if simple. Price and volume split. Delivery costs (6% and increased by taxation). COS to be levelled by level of activity as well the exchange rate increase?

I think I missed some important points (and marks) on this part. Hopefully the small recommendation of overoptimism on revenues and cost cuts will add some to both of us 😉