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BPP Kit Sep23 – Jun24: Mock exam 1 – Question 13

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › BPP Kit Sep23 – Jun24: Mock exam 1 – Question 13

  • This topic has 2 replies, 2 voices, and was last updated 1 year ago by Iniss.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • December 4, 2023 at 8:38 am #695960
    Iniss
    Participant
    • Topics: 53
    • Replies: 55
    • ☆☆

    A profit centre manager claims that the poor performance of her division is entirely due to
    factors outside her control. She has submitted the following table along with notes from a market expert, which she believes explains the cause of the poor performance:

    Sales volume
    Budget this year: 500
    Actual this year: 300
    Actual last year: 400
    The entire market has decreased by 25% compared to last year.

    Sales revenue
    Budget this year: $50,000
    Actual this year: $28,500
    Actual last year: $40,000
    Rivalry in the market saw selling prices fall by 10%.

    Total material cost
    Budget this year: $10,000
    Actual this year: $6,500
    Actual last year: $8,000
    As demand for the raw materials is decreasing, suppliers lowered their prices by 5%.

    After adjusting for the external factors outside the manager’s control, in which
    category/categories is there evidence of poor performance?
    A. Material cost only
    B. Sales volume and sales price
    C. Sales price and material cost
    D. Sales price only

    I chose the D, however, the correct answer is A.
    This my workings:
    Sales volume should be 300 units (400 x 0.75). This is the same as actual sales volume achieved so this was not poor performance.
    Sales price should be $45,000 ($50,000 x 0.9). Revenue for the year was only $28,500 so this is poor performance.
    Material cost should be $9,500 ($10,000 x 0.95). Actual material purchased was only $6,500 so this is good performance.

    Can you tell me where is my mistake?
    Looking forward to your response,
    Iniss.

    December 4, 2023 at 10:13 am #695979
    LMR1006
    Keymaster
    • Topics: 4
    • Replies: 1511
    • ☆☆☆☆☆

    Agree….

    Sales volume should be 300 units (400 x 0.75). This is the same as actual sales volume achieved so this was not poor performance.

    Sales price (pu) was 100 as budget, actual ly was 100 and this year its 95 above so good not poor performance

    Material cost (pu) was as 20 as budget, actual ly was 20 and this year its 21.7 above so that is bad

    December 4, 2023 at 12:51 pm #695988
    Iniss
    Participant
    • Topics: 53
    • Replies: 55
    • ☆☆

    Got it! Thank you! I forgot to take into account the difference in volume.

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