June 10 Exams POLL Paper P5 was Post your comments here

@enigma1981 said:
I passed I think – but still not happy with the exam.
No Failure Prediction Models
No EVA, ROI, RI, NPV
No Pricing
No Learning Curve
Only TQM, Target Costing, E Values and Balanced Scorecard. The rest of the paper was the ability to waffle and pad an answer!
For Q 2 I said the government set up the Academy because;
1) To maybe provide a socially important service at a lower price than a private company. Important in a developing country
2) To show that they are philanthropic and this would help them in attaining investment from foreign companies and foreign governments in aid
3) Often governments in developing countries have an enormous sense of pride and nationalistic tendancies. They may not like a private company providing such an important service.

Would that get me the 6 marks I need to pass??

Also, for the budgeted income statement – anybody else get profit of around $5.4 million?

Yes I got about 5.4 million which I thought was unusually high considering the revenue but it may be a reflection of the lack of competition.

The tuition fee’s were extremely high.

Thought the exam was going to be worse, the discursive elements suited me better though.

I didnt apply profit changes to total revenue of college & horse however i changed fee per student & per horse category revenue of all three categories respectively and got six figures of net profits accordingly then i applied joint probability like that
first category profit of college x probibilty + first category of horse riding x probabilty
(XXXXXXX x 0.2 + XXXXXXXX x 0.1?)
So i ended up getting nine figures of expected profits
i hope i did right as i remeber doing it somewhere in question bank of IFP Book.
What do u say???

May Allah give me a pass!
Amen!

One guy next to me was still writing without being spotted at 1.23!!! just proves the time pressure i stopped at 1.15!!

Paper was ok but too lengthy I manged to answer 85 but not happy in all what i did

hi guys, what was the average cost for chargeable consultation, both for full time and contractors in question 1, was there a trick in that question?

@sifelani said:
hi guys, what was the average cost for chargeable consultation, both for full time and contractors in question 1, was there a trick in that question?

I just left this part out – only 7 marks and would take almost 20 mins I would estimate. I also left out the expected values calculation. Still hope to pass as I did good theory answers

@enigma1981 said:
I just left this part out – only 7 marks and would take almost 20 mins I would estimate. I also left out the expected values calculation. Still hope to pass as I did good theory answers

i just noticed that question 2 was exactly the same as question 1 in 2003 sitting question called NW Entertainment company. asked to do budgeted net profit, probablities and comment on the use of expected values.even some numbers in the question are same

and solution
Part 3 Examination – Paper 3.3
Performance Management December 2003 Answers
1 (a) NWEC Ltd
Budgeted Profit and Loss Statement for year to 30 November 2004
Amusement Park – admission receipts:
One-day pass £ £
Adults: 8,696,064
14–18 years, senior citizens 3,261,024
Under 14 years 4,348,032
Two-day pass
Adults: 19,566,144
14–18 years, senior citizens 7,337,304
Under 14 years 9,783,072
––––––––––
52,991,640
Other revenue Income from traders 1,044,000
–––––––––––
Total revenue – park 54,035,640
Operating costs 39,104,000
–––––––––––
Budgeted profit of park 14,931,640
Hotel income 9,110,400
Hotel operating costs 8,268,000
––––––––––
Budgeted profit of hotel 842,400
–––––––––––
Total budgeted profit 15,774,040
–––––––––––
Workings:
No. of Visitor days for year to 30 November 2004 = 2,090,400
One-day passes = 2,090,400 x 25% = 522,600
Two-day passes (2,090,400 x 75%)/2 = 783,900
Admission fees applicable from 1 December 2003.
(increased by 4% per annum).
Category of visitor:
One-day pass (£) Two-day pass (£)
Adults 41·60 62·40
14–18 years; senior citizens 31·20 46·80
Under 14’s 20·80 31·20
(b) A two-way data table shows the results of combinations of different values of two key variables. In this case, the table enables
the management of NWEC to view the net profit or loss for each of a range of combinations of levels of admission to the park
and hotel occupancy. A spreadsheet data table tabulates the results of sensitivity analysis – i.e. the outcome values when one
or two values are changed. The use of a data table enables the management of NWEC to quickly assess the impact on
profitability of changes in the number of visitor days to its amusement park and/or in the level of hotel occupancy. This table
indicates to management that for a net loss of £510,670 to occur within the year to 30 November 2004, not only would the
number of visitor days sold have to decrease by 25% but also hotel occupancy would have to fall to 40% (by 331/3% of the
previous year’s level). The best possible outcome is a profit of £28,649,968 which would arise if visitor days to the park
increased by 20% and the hotel occupancy rate also increased to 75% from 60%. Most decisions are quite complex,
involving a range of different input values. The management of NWEC can perform ‘what-if’ analysis, which will improve the
quality of decision-making within the organisation.
16
(c) (i) The range of possible outcomes using the probability estimates given in the question and the values contained within
Appendix 1 are shown in the following table together with the expected value of net profit.
% Change in Probability Hotel Probability Combined Net Profit Expected Value
Visitor days Occupancy Probability of net profit
£ £
+10% 0·20 75% 0·10 0·020 23,350,804 467,016
60% 0·60 0·120 21,073,204 2,528,784
45% 0·30 0·060 18,795,604 1,127,736
0% 0·60 75% 0·10 0·060 18,051,640 1,083,098
60% 0·60 0·360 15,774,040 5,678,654
45% 0·30 0·180 13,496,440 2,429,359
–15% 0·20 75% 0·10 0·020 10,102,894 202,058
60% 0·60 0·120 7,825,294 939,035
45% 0·30 0·060 5,547,694 332,862
–––––– –––––––––––
1·000 14,788,602
–––––– –––––––––––
(ii) The use of expected values takes into account the relative likelihood of each of the possible outcomes occurring. The
expected value of £14,788,602 is not one of the potential outcomes in the table, but is the weighted average of those
outcomes. The use of expected values by the management of NWEC implies that they have a risk-neutral attitude. A risk
neutral decision-maker will ignore the variability in the range of potential outcomes and will be concerned only with the
expected value of outcomes.
(d) The management of NWEC could choose from the following list of criteria relating to service quality. As required by the
question, a measure and mechanism for measurement is also provided.
– Appearance – the appearance of staff reflects the image of the hotel.
– Responsiveness – staff responsiveness assumes critical significance in the hotel industry. The time taken to deal with
queries by reception staff.
– Comfort – room facilities such as air-conditioning, tea/coffee-making and cold drinks facilities.
– Availability – the in-room availability of office facilities such as e-mail, facsimile and access to photocopying.
– Cleanliness – the cleanliness of all facilities within the hotel.
– Safety measures – the frequency of inspections made regarding safety equipment within the hotel and compliance with
legislation.
Customer surveys would be an appropriate mechanism for measurement of each of the foregoing measures with the exception
of safety which management should measure by inspection of internal records.
(e) Management could consider taking some of the following actions in order to maintain and improve the profitability of the
amusement park:
– The current structure regarding admissions is limited to the sale of either one-day or two-day passes. Perhaps, a wider
choice of tickets available for purchase by visitors might encourage more frequent visits by individual visitors. For
example, many visitors might welcome the opportunity to purchase season tickets which would allow them to visit the
park at any time during the year. Consideration could also be given to discounted family tickets and ‘twilight’ tickets for
afternoon/evening visitors. The latter would also help maintain the number of visitors throughout any given day since
the late arrival of such visitors would offset those who left after spending the morning and afternoon at the park.
– The amusement park is situated in a rural area which may deter potential visitors to the park who are either unable to
drive or do not have their own means of transport. Management should consider the provision of a transport service
from the nearest towns/cities to the amusement park. This might also lead to a reduction in the number of vehicles at
the amusement park leading to improved access and improved levels of safety.
– The company is expected to incur total operating costs amounting to £47,372,000 during the year to 30 November
2004. Management should give consideration to instituting a formal programme of cost reduction. The focus of such a
programme is upon the need to reduce costs below the previously accepted norm whilst simultaneously avoiding a
reduction in either quality or effectiveness. If NWEC has a ‘loose culture’ regarding cost-consciousness, there may well
be scope for significant savings to be achieved.
– It is noticeable that the company does not have any revenues from advertising. By the very nature of its business, NWEC
is well positioned to raise such revenues from those organisations wishing to advertise their goods and services to the
customers that visit the amusement park.
17
(f) The distinguishing feature of Strategic Management Accounting (SMA) is that it considers the relationship of the organisation
with its external business environment. It focuses attention on suppliers, customers and competitive rivals. Information may
be quantitative or qualitative in nature, and some information will be of a non-financial nature. For a long time there have
been criticisms of the information provided by management accountants as having an inward-looking perspective.
The development of a strategic management accounting system could provide extremely valuable additional information for
use by the management of NWEC. This value lies in the fact that the information is forward-looking and should focus on the
organisation and its external business environment. Such information will therefore focus on potential issues of importance
to the stakeholders of the organisation, in particular, its suppliers, customers and competitive rivals.
When management implement a chosen strategy they are seeking to derive a sustainable competitive advantage, and this
process will be aided by the information gathered within a strategic management accounting system. Virtually all organisations
are subject to environmental change and in this respect NWEC is no exception. Thus it is critical that all aspects of a business
are monitored so that a holistic approach is taken when strategic plans are being developed. The strategic management
accounting system should be capable of coping with changes that can and will inevitably occur in a dynamic business
environment. Hence it is crucial that changes such as the emergence of a new competitor, are detected and reflected within
strategic plans at the earliest opportunity.
If implemented, it is vital that a strategic management accounting system provides information that is relevant and reliable
therefore enabling the management of NWEC to make correct decisions. This is critical to any business given that decisions
of a strategic nature affect the entire organisation and are generally irreversible in the short-term, and quite often long term.
Thus managers throughout NWEC should receive information that will enable them to take the right options thereby improving
the overall position of the organisation. In this regard it is essential the managers be provided with information, which relates
to every aspect of NWEC and looks at its position relative to the entire industry in which it operates. This will enable due
consideration to be given not only to the strengths and weaknesses of the NWEC but also to the opportunities and threats
facing it.
There is no doubt that a strategic management accounting system, by providing information that facilitates beter planning,
control and decision making would make a major contribution to the longer term development of NWEC.

but it was fees from college and utilization of riding school. what were all the possible options? Did you have every college fee combined with every riding school fee and also as a third dimension the 3 possible utilizations?

@kamcreation said:
the way you are supposed to by multiplying the values with joint probability 😉

did not expect so much from F5, when P5 already has such a vast area off syllabus.