Performance

Management (PM)
September/
December 2024
Examiner’s report
The examining team share their observations from the
marking process to highlight strengths and
weaknesses in candidates’ performance, and to offer
constructive advice for those sitting the exam in the
future.

Contents
General comments .............................................................. 2
Section A.............................................................................. 3
Example one .................................................................... 3
Example two ..................................................................... 4
Example three .................................................................. 5
Example four .................................................................... 6
Section B.............................................................................. 7
Question one .................................................................... 8
Question two .................................................................... 9
Question three ................................................................ 10
Question four .................................................................. 11
Question five .................................................................. 12
Section C ........................................................................... 13
Global Scan Co .............................................................. 13
Requirement (a) – 14 marks ....................................... 13
Requirement (b) – 6 marks ......................................... 15
Yetgo Co ........................................................................ 16
Requirement (a) – 7 marks ......................................... 16
Requirement (b)(i) – 3 marks...................................... 17
Requirement (b)(ii) – 6 marks ..................................... 18
Examiner’s report – PM September/December 2024 1
Requirement (c) – 4 marks ......................................... 18
General comments

This examiner’s report should be used in conjunction with the published

September/December 2024 sample exam which can be found on the ACCA Practice
Platform.

In this report, the examining team provide constructive guidance on how to answer the
questions whilst sharing their observations from the marking process, highlighting the
strengths and weaknesses of candidates who attempted these questions. Future
candidates can use this examiner’s report as part of their exam preparation, attempting
question practice on the ACCA Practice Platform, reviewing the published answers
alongside this report.

The Performance Management (PM) exam is offered as a computer-based exam

(CBE). The model of delivery for the CBE exam means that candidates do not all
receive the same set of questions. In this report, the examining team offer detailed
debriefs of selected questions from each section of the exam.

• Section A objective test questions – we focus on four specific questions that

caused difficulty in the September/December 2024 sittings of the exam.
• Section B objective test case questions – here we look at one case from syllabus
area B in detail.
• Section C constructed response questions – here we provide commentary on two
questions, providing guidance on answering these questions and where exam
technique could be improved.

Examiner’s report – PM September/December 2024 2

Section A

In this section we will look at FOUR Section A questions which proved to be particularly
difficult for candidates.

Example one

Which of the following statements regarding the uses of big data analytics is
correct?

(1) Ensures that business decisions are based upon data free from bias
(2) Informs business leaders of what will happen in the future
(3) Supports decisions relating to the development of new products

A. 2 and 3 only
B. 3 only
C. 1, 2 and 3
D. 1 only

What does this test?

 The understanding of the uses of big data and data analytics

What is the correct answer?

 The correct answer is B.

A problem with big data is that it is not necessarily accurate and not necessarily
representative of the population. This can lead to bias within the data and the results,
so statement 1 is incorrect.

Big data analytics can be used to predict what might happen (with an acceptable level
of reliability) but analytics cannot be used to say what will happen. This is a common
misconception of the reliability of the analysis. Hence statement 2 is incorrect.

One of the benefits of big data analytics is better understanding of customers’ views,
especially via social media. This information can be used to inform decisions about
new products or services suited to customers’ needs, as described in statement 3.

Examiner’s report – PM September/December 2024 3

Example two

Cad Co wishes to use life-cycle costing to set the price for an innovative corporate
governance ‘health check’ software package that it has developed, at a cost of
$162,000. The company anticipates that the following costs will be incurred over the
life of the software:

The fixed costs that will be incurred from launch to decline are expected to total
$529,600. Cad Co wishes to earn a profit of $120 per software package purchase,
after all life-cycle costs have been met.

What price should Cad Co charge for the purchase of a software package (to the
nearest whole $)?

$ ____________

What does this test?

 The application of life-cycle costing as a means of deriving a selling price

What is the correct answer?

 The correct answer is 1300

To calculate the life-cycle cost per package it will be necessary to total all of the costs
incurred over the entire life of the software package, from development through to
decline:

Total number of packages purchased = 240 + 420 + 1,020 + 140 = 1,820

Total variable costs (at $800 per package) = 1,820 x $800 = $1,456,000

Total life-cycle costs will equal total variable costs along with development costs and
total fixed costs, which equal $1,456,000 + $529,600 + $162,000 = $2,147,600.

Examiner’s report – PM September/December 2024 4

Life-cycle cost per purchase = $2,147,600/1,820 = $1,180.
Recommended price = $1,180 + $120 = $1,300

Example three

Which of the following is true with respect to performance measurement in not-

for-profit organisations (NFPOs)?

A. Less importance is placed upon performance measurement than in profit-making

organisations
B. Cost units do not exist and so it is difficult to measure costs
C. It is usually difficult to define the multiple objectives of an organisation
D. Achievement of organisational objectives is straightforward to quantify

What does this test?

 The understanding of performance measurement issues in not-for-profit

organisations

What is the correct answer?

 The correct answer is C

Performance measurement is just as important in not-for-profit organisations (NFPOs)

as in any other sector.

Cost units can be established in NFPOs (as they can in any type of organisation) and
costs can be measured.

NFPOs usually face multiple objectives, many of which are qualitative, and find it
difficult to say which is the overriding objective.

Achievement of objectives is difficult to quantify as it is often subjective, and the

objectives may conflict.

Examiner’s report – PM September/December 2024 5

Example four

Cosy Co is utilising time series analysis to forecast sales volume. An additive model
has been developed:

- Trend is T = 1,800 + 4x where x is the quarter number (x = 1 for quarter 1 20X1)

- Average seasonal variations are:

Indicate, by clicking on the relevant boxes in the table below, the quarter 2
average seasonal variation and the seasonally adjusted forecast sales units for
quarter 2 20X2.

What does this test?

 The application of time series analysis techniques for forecasting purposes

What is the correct answer?

 The correct answers are seasonal variation = -1,250 and forecast sales units =
574

Firstly it is necessary to identify the missing average seasonal variation for quarter 2.
This can be found by ensuring that the average seasonal variations in the additive
model sum to zero.
The total of the provided average seasonal variations = 1,450 – 1,000 + 800 = +1,250.
Therefore the quarter 2 seasonal variation must be -1,250.

The sales volume forecast = trend + seasonal variation under the additive model.
Quarter 2 20X2 is where x = 6 in the trend expression. Therefore the trend = 1,800 +
(4 x 6) = 1,824.

Applying the quarter 2 seasonal variation will give the required sales forecast to be
1,824 – 1,250 = 574 units.

Examiner’s report – PM September/December 2024 6

Section B

In this section we will look in detail at a case covering throughput accounting from
syllabus area B – Specialist cost and management accounting techniques.

Goodtyme Co

Goodtyme Co produces clocks and watches. It manufactures a single model of clock

and three models of watches: the GL, the RT and the SM. The clock is manufactured
in a separate factory from the watches.

The main constraint Goodtyme Co faces for all its products is assembly machine hours
available. The time available is reduced by temporary breakdowns of the assembly
machinery and the need for maintenance.

The finance director of Goodtyme Co has decided to introduce throughput accounting

in order to provide better information.

The following information relates to the products which Goodtyme Co manufactures:

Clock Watches
GL RT SM
$/unit $/unit $/unit $/unit
Sales price 40.00 36.00 26.00 22.00
Materials 15.50 14.70 10.30 8.80
Labour 6.60 5.80 4.20 2.80
Variable overheads 3.00 2.60 2.20 1.70
Contribution 14.90 12.90 9.30 8.70
Fixed overheads 2.40 2.50 1.40 1.20
Profit 12.50 10.40 7.90 7.50

Assembly machine time (minutes) 20 24 18 15

Goodtyme Co is also developing a new stopwatch for competitive watersports and is

forecasting the product to have a throughput accounting ratio of 1.75. The company
has budgeted to spend $50,000 on advertising when the product is launched.

Examiner’s report – PM September/December 2024 7

Question one

Which of the following statements about throughput accounting and the theory
of constraints is/are true?

(1) The theory of constraints suggests that when one bottleneck is overcome, another
bottleneck will arise
(2) Throughput accounting aims to maximise the amount of non-bottleneck resources
used
(3) In throughput accounting work in progress should be valued at the cost of
materials only

A. 1 only
B. 2 and 3 only
C. 1 and 3 only
D. 1, 2 and 3

 The correct answer is C.

Under the theory of constraints, a business should attempt to elevate a bottleneck

resource to a level where it ceases to be a bottleneck. At that point, there will be a new
bottleneck from another resource, hence statement 1 is correct.

Throughput accounting aims to make optimal use of the bottleneck resource, but limit
the usage of non-bottleneck resources to the level required to maximise throughput.
This avoids waste such as the creation of work in progress. Statement 2 is therefore
incorrect.

In throughput accounting, work in progress is valued at the cost of materials only, as

no value is considered to be added to it until it is completed and sold, so statement 3
is correct.

Examiner’s report – PM September/December 2024 8

Question two

What is the throughput accounting ratio for the clock (to two decimal places)?

A. 1.45
B. 2.04
C. 2.55
D. 3.31

 The correct answer is B.

Throughput accounting ratio (TPAR) is calculated by dividing the throughput per

assembly machine hour by the factory cost per assembly machine hour.

Throughput per clock is equal to sales price less materials = $40.00 – $15.50 = $24.50.
It takes 20 minutes of assembly machine time, the bottleneck resource, to make each
clock. So, throughput per assembly machine hour = $24.50 / (20/60) = $73.50 per
hour.

Total factory cost per clock is equal to the total of all factory costs apart from materials
= $6.60 + $3.00 + $2.40 = $12.00.
Factory cost per assembly machine hour = $12.00 / (20/60) = $36.00.

So, TPAR = $73.50 / $36.00 = 2.04 to two decimal places.

Examiner’s report – PM September/December 2024 9

Question three

For each of the following proposed actions, identify the impact on the
throughput accounting ratio (TPAR) of the clock.

 The correct answer is:

Increase Improving the effectiveness and efficiency of the maintenance

process to increase available machine hours
Decrease Payment of overtime at time and a third to increase the number of
labour hours available
Increase Negotiating a contract to buy materials at a lower price from a
new supplier
Increase Changing electricity suppliers to one charging a lower standing
charge per day for factory power

To approach this question it is necessray to refer to the calculation of the TPAR

= throughput per assembly machine hour / factory cost per assembly machine hour

Any action that increases the throughput per assembly machine hour or decreases the
factory cost per assembly machine hour will lead to an increase in the TPAR and vice
versa.

Making more machine hours available would not affect the throughput per assembly
machine hour. However, the total factory operating costs, which are treated as fixed
under throughput accounting, would be spread over an increased number of hours.
This would lead to a reduction in the factory cost per assembly machine hour and
hence an increase in the throughput accounting ratio.

Examiner’s report – PM September/December 2024 10

Paying labour at a higher rate per hour would increase the factory cost and hence
cause the throughput accounting ratio to fall.

Buying materials from a cheaper supplier would increase throughput and hence
increase the throughput accounting ratio.

Changing electricity suppliers would reduce the factory costs, therefore improving the
throughput accounting ratio.

Question four

What should be the production ranking for the watches in order to maximise
throughput?

A. First: GL, second: RT, third: SM

B. First: SM, second: RT, third: GL
C. First: SM, second: GL, third: RT
D. First: GL, second: SM, third: RT

 The correct answer is D.

Production would be ranked based upon throughput per assembly machine hour, so
it is necessary to calculate this for all three watches.

GL RT SM
Sales price per unit $36.00 $26.00 $22.00
Materials per unit $14.70 $10.30 $8.80
Throughput per unit $21.30 $15.70 $13.20
Assembly machine time (minutes) 24 18 15
Assembly machine time (hours) 0.4 0.3 0.25
Throughput per assembly machine hour $53.25 $52.33 $52.80
Ranking for production 1st 3rd 2nd

Examiner’s report – PM September/December 2024 11

Question five

Which of the following statements, if any, about the throughput accounting ratio
(TPAR) for the new stopwatch is/are true?

(1) The operating costs of the stopwatch are expected to exceed the total throughput
contribution to be earned
(2) The cost per hour used in the TPAR calculation included the advertising costs for
the stopwatch

A. 1 only
B. 2 only
C. Both 1 and 2
D. Neither 1 nor 2

 The correct answer is D.

The new stopwatch has a TPAR of 1.75. This indicates that the throughput per hour
(throughput contribution) is greater than the factory cost per hour (operating costs) so
statement 1 is incorrect.

The TPAR calculation uses total factory cost per hour, and so would exclude any non-
production costs such as advertising costs. Statement 2 is therefore incorrect.

Examiner’s report – PM September/December 2024 12

Section C

In this section we will look in detail at TWO constructed response questions from
different syllabus areas. The full questions and solutions have been published and are
available on the ACCA Practice Platform.

Global Scan Co

This question is from the Decision-Making Techniques area of the syllabus, specifically
focussing on using relevant cost analysis.

Global Scan Co (GSC) is a company providing private ultrasound scans and has 20
clinics in Deeland. Consideration is being given to three clinics based in the central
region to decide if one should be shut down.

Requirement (a) – 14 marks

A proforma is provided for part (a).

(a) Complete the statement provided for GSC for the year ending 31 December
20X2, showing the revenue and costs for each clinic in as much detail as
possible. Recommend which clinic(s), if any, should be shut down at the end of
20X2.
(14 marks)

Shutdown decisions are based on relevant costing principles. It may be useful to refer
to this article written by a member of the PM examining team that provides a detailed
explanation of the technique.

The full solution can be found on the ACCA Practice Platform, and it shows the
correct approach to the calculations which should be studied. Rather than repeat these
workings, here are a few points worth noting about this specific situation:

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• The question requirement specifically states that the revenue should be shown in
as much detail as possible. There are three sources of revenue for each of the
clinics and these should be separately displayed.
• The question requirement also specifically states that the costs should be shown
in as much detail as possible. There are a number of costs, which include salaries
relating to the three different services provided, which should be displayed
separately.
• The proforma suggested in the requirement specifically states contribution before
head office overheads.
• Recommend which clinic, if any, should be shut down: It is important to note that
the correct approach to the decision-making using a relevant cost basis needs to
be used here and the recommendation should be justified. As long as the
recommendation is correct (and justified) for the figures that have been calculated
marks will be awarded.

Utilising the spreadsheet response area

It is essential that use of the spreadsheet software is practised as part of exam

preparation to ensure that complex formulae such as those required in part (a) can be
worked with smoothly. Where workings are clearly shown in the spreadsheet (either
within a formula or a written explanation) marks can be awarded when minor errors
(such as not increasing price by 10%) are made.

Where lengthy formulae would be required such as those required for salary cost
calculations a working can be used and referenced to the totals included in the
statement. It may be easier to calculate the salary for all employees in each job role
and then calculate the 5% increase and 13% government contribution in separate cells
of the spreadsheet before adding them together to reach the total salary cost.

Some calculations were fairly straightforward, and most candidates correctly

calculated the total revenue for the year. Machine costs needed to be multiplied by the
number of machines in each location, and by 12, to give a full year’s cost.

Salary costs were a more challenging calculation and needed to be multiplied by the
number of employees and increased by 5% for the pay rise before being increased by
13% for the government contribution. Darby, for example, has 2 junior sonographers:
2 x $32,000 = $64,000, increased by 5% $64,000 x 1.05 = $67,200, increased by 13%
to include the contribution $67,200 x 1.13 = $75,936. No adjustment for tax should be
made as this is still a cost suffered by GSC.

Head office costs were the most challenging with few candidates correctly calculating
these and allocating them to the correct place in the statement. The head office costs
provided are for one month. The first step is to calculate the costs for a full year, for

Examiner’s report – PM September/December 2024 14

example Darby $56,000 x 12 = $672,000. These then need to be split between those
specific to the clinic - these will be deducted in order to calculate the contribution to
head office costs - and the reapportioned overheads to be deducted from this
contribution to calculate profit or loss for the clinic.

Darby reapportioned head office costs are calculated by firstly calculating the
overhead recovery/absorption rate: $3,000,000/150 = $20,000 per employee. The
reapportionment to Darby will be 12 employees (2 junior, 2 senior and 8 other) x
$20,000 = $240,000. The remainder of the total overheads will be the clinic specific
overheads: $672,000 – $240,000 = $432,000. Therefore, $432,000 will be deducted
to arrive at the contribution to head office costs and then $240,000 will be deducted
from the contribution line to give the loss for Darby clinic.

Recommendation

This should have been a fairly straightforward part of the requirement based on the
calculations made but a disappointing number of candidates failed to provide a
recommendation or used an incorrect approach.

If a clinic makes a positive contribution towards the reapportioned head office costs,
it’s closure would result in GSC being worse off. The correct approach would be to
only shutdown a clinic if the contribution towards head office costs was negative.

Requirement (b) – 6 marks

(b) Discuss any other factors which GSC should consider before deciding to
shut down any of the three clinics at the end of 20X2.
(6 marks)

There were a number of factors which should be considered for this part. The
requirement is asking for a discussion of the factors and therefore a full response
should be given rather than bullet points. Factors which should have been accounted
for within the calculations in part (a) did not score marks, such as reduction in revenue
for the clinic closed, costs saved through the closure or head office costs still being
incurred.

Wider consideration of the impact on the performance of GSC was needed. The
shutdown of a clinic could have a positive or a negative impact on revenue in other
clinics. Negative if the reputation of GSC was damaged or positive if clients transferred
their custom to one of the other clinics. Further impact might be damage to employee
morale in other clinics resulting in reduced performance or loss of staff.

Examiner’s report – PM September/December 2024 15

Additional costs which could be incurred which were not already included in the
calculations in part (a) should be considered, for example, the penalty for the machine
lease contract, redundancy payments to those employees who would lose their jobs
at the clinic or other costs associated with the disposal of the clinic. If any of the specific
overhead costs are unavoidable these are another factor to be considered when
making the decision about shutting down the clinic.

Yetgo Co

This question is from section E of the syllabus, Performance Measurement and

Control, specifically covering divisional performance. It is important to remember all
syllabus areas can be tested and therefore a broad knowledge of the syllabus is
required.

Yetgo operates a chain of vacation resorts, each of which is run as an investment

centre. The question focuses on two of these investment centres, called Yuri and Lux,
which are identical in terms of the design, construction and number of buildings, but
are in different locations with different popularity with holidaymakers. The manager of
Lux has also recently invested in high quality spa and gym equipment in an attempt to
maintain custom in a less popular area.

The scenario provides information on the divisions’ recent performance, and on an

investment opportunity offered to the manager of Yuri.

Requirement (a) – 7 marks

(a) Calculate the receivables collection period, operating profit margin and
current ratio for both the Yuri and Lux resorts and comment on their relative
performance.
(7 marks)

Often, as is the case here, a requirement asks for more than one task. It is important
to identify the verbs used in order to fully meet the requirement. These are ‘calculate’
and ‘comment’. Additionally in this requirement there are three performance measures
(for each of the two divisions) to calculate and two divisions’ relative performance to
comment upon, so many elements to this requirement.

The full solution can be found on the ACCA Practice Platform, and it shows the correct
approach to the calculations which should be studied. These and other commonly
used performance measures, are essential learning for the Performance Management
examination.

Examiner’s report – PM September/December 2024 16

Responses to the calculation requirement were generally good as most candidates
knew the formulae and could apply them. A common mistake was to use the profit
after tax figure to calculate the operating profit margin; it should be remembered that
operating profit is profit before interest and tax, so the tax needed adding back to the
profit figure given.

The comments on the relative performance of the divisions scored fewer marks than
the calculations. The main reason for this is lack of depth in the answers given. The
requirement asks for comment on relative performance, so it is essential to say which
division is performing better. Whole company averages are also given which must be
used to assess the performance of both divisions. Finally, any information in the
scenario should also be used to give a fuller explanation of the performance.

An example of this can be seen in the operating profit margins: Yuri measures 35%,
Lux 38%, and the whole company average is 36%. As a bare minimum, it could be
said that Lux is outperforming Yuri, as well as the company average, which is likely to
be due to efficient cost control. However, a really strong answer would also identify
that the scenario tells us that the Lux manager has invested in new spa and gym
equipment, as well as making an effort to control the costs; this means that they may
be able to charge higher prices due to the better equipment as well as controlling costs
in a further attempt to increase margins.

Linking the detail in the scenario to calculations is a vital skill, and will be given much
more credit than a generic response.

Requirement (b)(i) – 3 marks

(b)(i) Calculate the return on investment (ROI) of both the Yuri and Lux resorts
and state which manager, if any, will receive a bonus this year.
(3 marks)

Requirement (b)(i) was relatively straightforward, with many responses scoring full
marks. ROI is a commonly used measure and a key calculation. Following on to state
which manager would receive a bonus was also fairly simple – the scenario is clear
that bonuses are paid for every whole percentage point above 22%, so only divisions
with an ROI of 23% or better would qualify.

Note that if a mistake was made here, for example if a candidate incorrectly calculated
ROIs of 15% for both divisions and went on to say that neither would receive a bonus,
the ‘bonus’ mark would still be given as it was correct for the calculations completed.

Examiner’s report – PM September/December 2024 17

Requirement (b)(ii) – 6 marks

(b)(ii) Explain the problems with the current bonus system at Yetgo Co.
(6 marks)

The requirement here needs detail to be provided to make it clear why something is a
problem. Although the correct points were often touched upon the answers provided
did not include sufficient detail to meet the ‘explain’ requirement.

Again the scenario can assist here. For example it has been highlighted that the
manager of Yuri has not invested recently, whereas Lux’s manager has. But, the
manager of Yuri is the one who is receiving regular bonuses, which demonstrates a
problem with the current system, and a reason for Lux’s manager’s demotivation.

Requirement (c) – 4 marks

(c) Calculate the Yuri resort’s divisional ROI if the new investment opportunity
goes ahead and explain whether Yuri’s manager will make a decision on the
investment opportunity which is in the best interest of Yetgo Co.
(4 marks)

This is another requirement with two parts to it; a calculation and then an explanation.

The calculation is another ROI. If the investment goes ahead, Yuri’s figures will
increase accordingly. The most common mistake in this part of the question was to
increase Yuri’s profit by the $8,000 cash inflow. ROI is based on operating profit, not
cash inflow, so the depreciation on the assets must also be considered.

For the second part of the requirement a methodical approach was required. In order
to explain whether the manager is going to make a decision in the best interest of
Yetgo it is necessary to consider the following:

• What would the divisional manager do?

• What would the company, Yetgo, do?
• Do they agree?

The bonus for the manager of Yuri is based entirely on ROI, so that will become the
only basis for this manager’s decision-making. If the ROI goes up from that calculated
in (b), they would proceed with the investment and if it goes down they would reject.
This fundamental point was explained well in the majority of responses.

Examiner’s report – PM September/December 2024 18

Yetgo, as the whole company, could use a variety of investment appraisal methods:

• ROI; the company would want managers to accept anything with an ROI that is
greater than the cost of capital, 10%.
• Residual income; anything positive should be accepted.
• NPV; a positive result would lead to an investment proceeding.

This part of the requirement was poorly answered, with many responses assuming
that Yetgo would always want to accept new investments, or not providing an
explanation for Yetgo’s preference.

The full suggested solutions can be found on the practice platform here.

Examiner’s report – PM September/December 2024 19