performance management (pm) sept / dec 2020 examiner’s report€¦ · marginal costing takes into...

Examiner’s report – PM September/December 2020 1

Performance

Management (PM)

Sept / Dec 2020

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 ................................................................... 2

Example 1 .............................................................. 2

Example 2 .............................................................. 4

Example 3 .............................................................. 5

Example 4 .............................................................. 6

Section B ................................................................... 7

Question 1 .............................................................. 8

Question 2 .............................................................. 8

Question 3 .............................................................. 9

Question 4 .............................................................. 9

Question 5 ............................................................ 10

Section C ................................................................. 11

Question 1 - Health Nuts ...................................... 11

Requirement (a) – 5 marks ................................ 12

Requirement (b) – 3 marks ................................ 15

Requirement (c) – 6 marks ................................ 15

Requirement (d) – 6 marks ................................ 18

Question 2 - Tonford School ................................. 19

Requirement (a) – 4 marks ................................ 19

Requirement (b) – 12 marks .............................. 20

Requirement (c) – 4 marks ................................ 24


General comments

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

September/December 2020 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 20 and December 20 sittings of the exam.

• Section B objective test case questions – here we look at one case from section

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, including in the use of the CBE functionality

in answering these questions.

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

Example 1 Broad Co produces quarterly rolling budgets and had forecast the costs of material purchases for the next four quarters (quarters 1, 2, 3 and 4). Purchases for quarter 1 were budgeted to be $220,000 and it was anticipated that the cost of materials would rise at a rate of 2% per quarter.

At the end of quarter 1:

Actual material purchases were recorded as $210,000. This was due to a change of material supplier during the quarter.

• A revised estimate for the increase in material purchase costs was made. The rise was now predicted to be only 1% per quarter.

• The budget was updated.

https://cbept.accaglobal.com/sso/acca




What estimate for total annual material purchases should be recorded in the updated budget (to the nearest whole $)?

$ ____________

What does this test? ✓ The calculation of a rolling budget. What is the correct answer? ✓ The correct answer is $861,211

When using rolling budgets, two things happen at the end of an accounting period (month or quarter):

• the remaining budget for the year is updated based on the actual results and the up to date information available, and

• a further accounting period (month or quarter) is added. In this way there will always be a full year’s budget available.

In this question, the total annual material purchases will be the sum of the next four quarters i.e. the remaining quarters of the current year (Y1 quarters 2, 3 and 4) plus the first quarter of the following year (Y2 quarter 1). The budgets for these quarters will have been updated based on the actual material purchases from quarter 1 ($210,000) and the predicted cost increase of 1%.

Year 1 Year 1 Year 1 Year 1 Year 2

Quarter 1

Actual

Quarter 2

Budget

Quarter 3 Budget

Quarter 4

Budget

Quarter 1

Budget

Material purchases (increasing at 1% per quarter)

$210,000 $212,100 $214,221 $216,363 $218,527

The total annual material purchases figure in the updated rolling budget would therefore be $212,100 + $214,221 + $216,363 + $218,527 = $861,211

A common error in this question was to revise the budgets for quarters 2 – 4 as shown, but to state the annual budget as the sum of the actual for quarter 1 and the budgets for quarters 2 – 4. This showed a misunderstanding of the rolling budget technique.

Another common error was to state the answer as $212,100 which is the restated budget for quarter 2. This showed that the question requirements were not read carefully enough.


Example 2 Which TWO of the following activities are environmental INTERNAL failure costs?

Options: A. Quality control inspections to monitor pollution levels in water leaving a

production process

B. Water purification treatment to clean waste water before it leaves the factory

C. Fitting of carbon filters to machine processes to reduce carbon emissions D. Power usage measuring system to monitor energy consumption within the

factory

E. Payment of fines for breaching environmental regulations in the industry

F. Insulation of heating pipes in the factory to reduce heat loss

G. Public relations costs to remedy reputational damage caused by accidental river pollution

H. Capturing and recycling of waste exhaust gases to generate energy

What does this test? ✓ An understanding of environmental management accounting What is the correct answer? ✓ The correct answer is B and H Environmental costs can be categorised as prevention costs, detection cost, internal failure costs and external failure costs.

This question asks for the identification of the two environmental internal failure costs. These are costs relating to an environmental failure, for example pollution or wastage but where the failure has been identified and dealt with within the organisation before it manages to affect the external environment. Water purification treatment to clean waste water before it leaves the factory and capturing and recycling of waste exhaust gases to generate energy would be examples of environmental internal failure costs.

They key here is that waste water has been produced which is a failure cost, but it has been cleaned before leaving the factory, making it an internal failure cost. Likewise, waste exhaust gases have been produced, but these have been captured and recycled within the factory.

Environmental prevention costs relate to activities or measure which aim to avoid the pollution or wastage occurring. Insulation of heating pipes in the factory to reduce


heat loss and fitting of carbon filters to machine processes to reduce carbon emissions would come under this heading. Environmental detection costs relate to the costs incurred to test the levels of emissions and wastage to ensure that the organisation is being compliant with internal standards and external regulations. Quality control inspections to monitor pollution levels in water leaving a production process and power usage measuring system to monitor energy consumption within the factory would come under this heading. External failure costs relate to pollution which has affected the outside environment. Payment of fines for breaching environmental regulations in the industry and public relations costs to remedy reputational damage caused by accidental river pollution would be examples of environmental external failure costs.

A number of candidates did not answer the question which was asked and instead gave the answer for the two environmental prevention costs, or the two environmental detection costs or the two environmental external failure costs. Environmental management accounting is an important area and candidates should ensure that they are familiar with the different categories of environmental costs. They should also read the requirements of the question carefully.

Example 3

A company had budgeted sales of $30.9 million within a market worth $61.8 million. When the budget was drafted, it was assumed that inflation would be 3%. After the end of the budget period, it was discovered that inflation had been 2% and that the market had been worth $65 million.

What is the sales revenue figure which should be used when assessing company performance (to one decimal place)?

$ ____________ million

What does this test? ✓ Understanding of the impact of external considerations on performance. What is the correct answer? ✓ The correct answer is $32.5 million

Sales forecast adjusted for inflation only: 30.9 x 1.02/1.03 = 30.6

$61.8 million would have included inflation of 3%, so adjusting that for the actual 2% inflation, 61.6 x 1.02/1.03 = 61.2

Market growth = 65/61.2 = 1.0621

Therefore, a fair sales figure to aim for would be: 30.6 x 1.0621 = 32.5


Example 4

Which THREE of the following statements about activity-based costing (ABC) and traditional costing systems (absorption costing and marginal costing) are correct?

Options:

A. No over-absorption or under-absorption of overheads can occur under ABC

B. ABC is useful for businesses which have high overheads in their cost structure

C. ABC is not suitable for use in businesses that provide services

D. Marginal costing understates the true cost of a product when compared to ABC

E. ABC is better than absorption costing in understanding what causes costs to be incurred

F. Both ABC and marginal costing treat all fixed costs as product costs

What does this test? ✓ Understanding of the ABC technique What is the correct answer? ✓ The correct answer is B, D and E

If budgeted level of activity differs from actual level of activity, over-absorption or under-absorption of overheads may occur under ABC just as under absorption costing. This will have to be accounted for when reconciling the budgeted and actual profit under ABC. Hence, this answer option is incorrect. ABC leads to a rational absorption of overheads and therefore it is particularly useful when overheads are high in the overall cost structure of a business. Hence, this answer option is correct. ABC can be applied to both manufacturing and service industry. In fact, ABC is relevant in service industries where overheads account for a significant share of the total cost. Hence, this answer option is incorrect. Marginal costing takes into account only variable costs whereas ABC accounts for all costs when computing the cost of a product. This means that ABC gives a better reflection of the true cost of a product unlike marginal costing which computes a lower cost. Hence, this answer option is correct. ABC absorbs costs on the basis of cost driver units consumed in the making of a product or provision of a service. Cost drivers are specific actions that cause the costs to be incurred. As a result, ABC helps to understand what really drives costs. In contrast, absorption costing absorbs costs using rather generic or blanket factors for absorbing overheads. This does not help to ascertain what is driving costs. Hence, this answer option is correct.


ABC considers all costs, including fixed costs, when computing the cost of a product or service. This means ABC treats fixed costs as product costs. On the other hand, marginal costing does not absorb any fixed costs when computing the cost of a product; in fact, it treats all fixed costs as period costs i.e. relating to a specific time period. Hence, this answer option is incorrect.

Section B

In this section we will look in detail at a case covering lifecycle costing from syllabus area B – Specialist cost and management techniques. Midhurst Co Midhurst Co manufactures air conditioning units and is considering an investment in a new unit that will be used in modern office buildings. Advances in technology mean that this unit is more sensitive to changes and variations in temperature and therefore it can regulate airflow and heating more efficiently. Midhurst Co's competitors currently do not have an equivalent product that can offer these features.

Midhurst Co expects to sell 10,000 units over the predicted five-year life cycle of the unit. The finance director has just prepared the initial costings for the unit as follows:

$'000

Research and development costs 6,200

Design costs 33,450

Marketing costs 177,685

Variable production cost per unit 42

Fixed production cost 98,470

Variable distribution cost per unit 9

Fixed distribution cost 10,300

Variable selling cost per unit 4

Fixed selling cost 7,790

Administration cost 23,450

The finance director plans to use life-cycle costing to measure the profitability of the new product. The chief executive has asked for more information about life-cycle costing, as she is not sure whether it is the right method to use.

The production director has reviewed the costings in detail and suggested a couple of changes. He is enthusiastic about the product and believes that modifications could be made to prolong the product's life but wonders when the best time would be to make changes to the product.


Question 1 According to the life-cycle costing method, which TWO of the following statements regarding the stages of the life-cycle are true?

Options: A. At the introduction stage, further capital expenditure will be needed as

production capacity will need to increase to meet demand

B. The maturity stage occurs when the market has reached 'saturation point' and bought enough of the product

C. The majority of a product's life-cycle costs are determined by decisions which

are made at the design and development stage

D. The growth stage, when sales will have reached their peak and become stable,

will be the most profitable stage

The correct answers are A and C

Statements A and C are correct as capital expenditure is likely to increase at the introduction stage and the majority of a product's costs are determined at the outset.

Statement B defines the decline stage of the product lifecycle and Statement D defines the maturity stage.

Question 2 What is the cost per unit for the new air conditioning unit using life-cycle costing (to the nearest $)?

Options:

A. $35,740

B. $51,847

C. $88,390

D. $90,735

The correct answer is D

To calculate a cost per unit using life-cycle costing, the first step is to calculate the total cost over the full life-cycle of the product.


The total cost of the new product (in $000s) is $6,200 + $33,450 + $177,685 + ($42 x 10,000) + $98,470 +($9 x 10,000) + $10,300 + ($4 x 10,000) + $7,790 + $23,450 = $907,345

To calculate the cost per unit, divide the total cost by the number of units to be produced over the life-cycle of the product. $907,345,000/10,000 = $90,735.

If A was selected, the variable costs per unit were omitted from the total cost.

If B was selected, the total production cost was used, and all non-production costs were excluded.

If C was selected, the administration costs were excluded.

Question 3 The production director has suggested the following change for the costing of the new unit:

Currently material costs are 20% of the variable production costs per unit. One of the materials used is stainless steel which is budgeted at $2,000 per unit but an alternative corrosion-resistant metal costing 25% less can be used. The production director believes a 15% discount can be negotiated for the remainder of the materials.

What would be the revised material cost per unit (to the nearest whole $)?

$ ____________

The correct answer is $6,940 Current variable material cost per unit = 20% x $42,000 = $8,400

Revised variable material cost per unit = (85% x ($8,400 - $2,000)) + (75% x $2,000) = $6,940

Question 4 The production director has also asked about the implications for production planning if the company wishes to extend the product's life-cycle.

At what stage of the life-cycle is the new unit most likely to undergo product development?

Options:

A. Introduction

B. Growth

C. Maturity

D. Decline


The correct answer is C Normally product development occurs at the maturity phase in order to extend the profitable stage of the life-cycle. This is usually done by adding enhancements or new features.

Question 5 The chief executive wants to be briefed on the advantages of using life-cycle costing.

Which of the following statements relating to the advantages of life-cycle costing are correct?

(1) It draws management's attention to all costs related to a product which other costing methods usually treat as period costs

(2) It focuses on measuring a product's costs from concept to withdrawal rather than reviewing costs on a period by period basis

(3) It focuses on what consumers are prepared to pay for a product and establishes cost budgets based on an expected selling price

(4) It aids understanding of the relationship between decisions at the design stage and the cost of other functions, such as marketing

Options:

A. 2, 3 and 4 only

B. 1, 2 and 4 only

C. 1 and 3 only

D. 1, 2, 3 and 4

The correct answer is B Statements 1, 2 and 4 are correct.

Statement 3 is an advantage of target costing and not life-cycle costing.


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 website.

Question 1 - Health Nuts The topic for this question is Cost/Volume/Profit (CVP) analysis, from the decision-making area of the syllabus (section C).

The scenario was based on a fitness centre (Health Nuts) which offered gym and café facilities. There was a proposal to close the café and use the space to offer creche facilities to the gym users. The requirements asked for some standard CVP calculations (breakeven, margin of safety and C/S ratio) for 11 marks with the remaining 9 marks for discussion elements regarding the performance of Health Nuts and whether it should accept the proposal to close the café and open the creche. On the whole, answers were disappointing – most candidates were aware of the basic breakeven and margin of safety calculations but were unable to score well on part (c), where a multi-product situation was introduced. There seemed to be several reasons for this – firstly a lack of knowledge of the calculation of weighted average C/S ratio; secondly poor presentation leading to confused calculations and thirdly, poor exam technique meaning that easier parts of the question were not fully attempted. Part (d) was a discussion-based requirement which could, for the most part, be completed without successfully calculating parts (a) or (c), but unfortunately many candidates performed poorly here too. Health Nuts consisted of a reasonably long scenario which contained a lot of data. There were five main requirements. This can make time management tricky – it is important not to spend too long on one part and run out of time for the later ones. Remember the rule of 1.8 minutes per mark. When tackling a question like this, it is a good approach to scan through the scenario to get an overall idea of what the question is about and then take time to read the


requirements. There is generally no benefit in reading the scenario in detail before you know what the question is asking. Remember to identify the verbs in each requirement – these are crucial pointers in terms of what type of answer is required.

Requirement (a) – 5 marks

Two calculations are required for each part, the formulae are: Breakeven point (BEP) in units = Fixed costs/contribution per unit Margin of safety (MOS) (%) = (Budgeted sales – BEP sales)/Budgeted sales * 100% It is good practice to write down any formulae being used to show the marker what is being calculated. Here, units are the number of customers. The information needed (for both the gym and the café) is:

• fixed costs

• contribution (sales price and variable costs)

• budgeted sales Make use of the spreadsheet in laying out these answers clearly, as some the figures may also be used in later parts of the question. As a minimum we know we’ll need the following:

For the gym, the BEP formula is in cell B6 – taking the fixed costs in cell B5 and dividing by the contribution per unit in B4. For the MOS formula, budgeted customers


is in cell B7, and the formula is in B8. This is a much better approach than using a calculator and typing in the answer. Make sure to practise using the spreadsheet answer space before attempting to sit an exam. All of the above could be set up before reading the detail in the scenario, just by knowing the formulae. The difficulty in this question was reading through the detail in the scenario to pick out the figures needed in the calculations. Paragraph 1 – general information about capacity, car park and opening times. Paragraph 2 – Gym price ($8.40), Car park fees and usage, June attendance of the gym and café. We can add the information in to our workings:

The calculation for selling price is at the top of the screenshot – the $8.40 admission, plus 80% of users paying $1. Simple calculations like this should be done within the spreadsheet, so the marker can easily see where any mistakes have arisen. Similarly, the customer numbers are given daily, so the gym has 330 per day for 30 days, ie 9900. Paragraph 3 – Gym fixed and variable costs are given which can be added to the calculation. This completes the gym calculations.


Paragraph 4 – Information on café usage, customer spend (revenue), profit margins and fixed costs. Here, rather than just giving the selling price and variable cost, we are given the profit margins, so we have to work out the contribution. A more detailed calculation like this can be performed separately – either to the side or underneath the main working. Always do the easy bits first – we are told that half of gym users use the café, and fixed costs are $3,600 so:

As the formula in D7 shows, the number of café users is half of the number of gym customers. It is important to show this calculation. If the calculation for the number of gym customers was incorrect, the marks for the café customers can still be gained – as long as the workings show that the number of café customers is half of the number of gym customers. Overall café spend is split between food and drinks Both have different profit margins, so the individual contributions need to be calculated in order to get the overall contribution figure. Most candidates were able to complete this. This could be shown as follows:


The formula in the highlighted cell, =G5 just means ‘use whatever number is in cell G5’ – ie the contribution. This cuts out errors from typing numbers incorrectly. It is possible to do all the workings for the contribution in one cell, but if you mistype something, or use the wrong number somewhere, it’s very hard tor the marker to see what you’re trying to achieve and they cannot give you credit. The separate working is much clearer.

Requirement (b) – 3 marks

It is an important skill in the Performance Management syllabus to be able to show an understanding of what calculations mean. The breakeven point is the point at which we make zero profit or have enough customers to cover our fixed costs. The margin of safety is our ‘safety net’ – i.e. how far our sales can fall before we breakeven or start to make a loss. It is good to state this in general terms first, and then relate it to the scenario – both the type of business being discussed and the calculations from (a).

Requirement (c) – 6 marks

The formulae required are: Weighted average C/S ratio = Total Contribution/Total Revenue Profit = Revenue - Total Costs (or total contribution - fixed costs) The calculation of profit is one of the simpler formulae you could be asked for. The main problem with this part of the requirement was not that candidates could not perform the calculation; it’s was that they missed that part of the requirement. Always read the requirement carefully to ensure that all parts are fully answered. The information needed:

• the total contribution and total revenue for the gym and the crèche - not the café. We should have the gym details from (a), so we need information on the selling price, variable costs and customer volume for the crèche.

Set up the headings and the formula for the C/S ratio on the spreadsheet:


The C/S ratio formula is in cell E19 (total contribution/total revenue). The total contribution and total revenue figures will be the totals of the individual gym and crèche figures. Workings for these figures should be shown separately. Paragraph 5 gives details about the crèche option – the fact that the café would close, and how much would be charged for each child. Paragraph 6 gives more information about the crèche, including expected usage and costs. Put this information into the spreadsheet and calculate the contribution.

For the gym, the revenue and contribution per unit are unchanged, however customer numbers will change. The number of customers arriving between 9am and 5pm will increase by 300%. There is no information about any other time of day, so it can be assumed that it stays the same. So, new customer numbers are:

Read the question carefully – the new number of gym customers is 450. Now calculate the number of creche customers. The scenario states only those new customers will use the creche facilities, so 120 customers will use the creche per day. The gym revenue and contribution can be worked out relatively easily now – the selling price of $9.20 and the contribution/customer of $8 haven’t changed since part (a), so multiply each by the 13,500.


Now complete the creche information – the revenue is $4 per child, and the contribution is $3.50 per child. Our figure of 3600 is gym customers, not children, so we need to multiply by 2 to allow for this. As each child is only in the creche for an hour we don’t need to factor the number of hours in.

The C/S ratio is calculated as 0.87 (87%). It is possible to calculate the weighted average C/S ratio in different ways – usually by weighting the individual C/S ratios. This is acceptable, however the majority of candidates who tried this method used the sales volumes as their weighting factor instead of sales revenue which was incorrect. Finally, calculate the budgeted profit. The formula is total contribution – total fixed costs. The total contribution was just worked out as part of the C/S ratio calculation. The gym fixed costs are the same as in (a), and the creche fixed costs of $8,000 should be added to this.

This was not an easy question – there was a lot of information to digest from the question, but if you have the basic knowledge of the formulae then you can make it


much easier with a bit of planning, and then effective use of the software to make the calculations easier. You will need to practise these skills before sitting the exam.

Requirement (d) – 6 marks

Advise is a higher level verb – we need to offer advice here. There will be arguments for and against whatever it is we are advising, but we should give our opinion. There are a number of points to address in this requirement:

• Financial and non-financial factors. With written questions like this it can be helpful to use headings, one for financial and another for non-financial This really stresses to your marker that you’re dealing with the whole requirement.

• The decision to replace the café with a crèche (or not)

• Does (c) give enough information to make such a decision? A number of candidates missed this part out.

You don’t have to answer these in any particular order. Some non-financial ideas might have come up while reading the scenario, such as numbers will increase if the creche opens but has Health Nuts considered customers going elsewhere because they can’t use the gym any more, or there is an increase in customers between 9am and 5pm, but what about other times? The suggested solution performs more calculations, but these were not necessarily required. The most obvious calculation would be to work out the profit of the gym and the café which could be compared to the profit of the gym and the crèche. Only the very best answers did this. Finally, as the requirement is to advise, give an overall opinion. This was a challenging question and remember, you are not expected to produce the model answer. The key messages are:

• Read the requirements carefully

• Use the software to your advantage

• Practise!


Question 2 - Tonford School This question is taken from the Performance measurement and control area of the

syllabus (section E).

The main focus of this question is an appraisal of the performance of a not-for-profit

organisation. There are many different subtopics within this performance

measurement area of the syllabus e.g. financial/non-financial performance, divisional

performance and not-for-profit business performance. Although each type is slightly

different, the general approach is the same – use the scenario information given to

assess the performance as required.

The question scenario was based upon a school within the country of Ducland. All

schools in Ducland are state-funded and accountable to the Department of

Education (DoE). All schools have the same four objectives as the DoE. These four

objectives were given in the scenario. Each school in Ducland is visited by the DoE

inspectors every five years.

Data on various performance factors were given for Tonford school for the current

year. For comparison purposes the national targets for these performance factors for

the current year and Tonford school’s performance results from five years ago were

also given.

Requirement (a) – 4 marks

The emphasis here was an organisation having many different objectives, and what

issues or difficulties could be caused by this. Those who understood and answered

the requirements in the question tended to score well, however many candidates did

not answer the requirement set.

This requirement could have been answered with a little thought and consideration for any not-for-profit organisations. Candidates however struggled to achieve high


scores here which seemed to be down to poor exam technique and not addressing the requirement.

Candidates should have contemplated the state funding of the school and the

expectations of the various stakeholders. As an approach, candidates should firstly

have considered the difficulties faced in any situation where multiple objective exist,

then relate this to the situation to a not-for-profit organisation.

For example:

Difficulty of multiple objectives:

When an organisation has many objectives, it is not unusual for some of those

objectives to be contradictory. The organisation’s management will face a dilemma

when trying to decide which objectives are most important.

Relate to scenario:

The multiple objectives require different courses of action and different objectives

make different demands on resources which, in this case, are state funded.

This can be a particular problem when the different objectives reflect the varying

interests of the organisation’s stakeholders and therefore complicating further the

prioritisation in the course of strategic planning and decision-making.

A number of candidates provided a general discussion of not-for-profit organisations

or suggested the use of a value for money framework (3 Es) to create the objectives

in the first place. These approaches did not answer the requirement. This gave the

impression that candidates are not giving themselves time to consider what is

expected from the requirement before attempting to write an answer.

Requirement (b) – 12 marks

In this part of the question candidates were asked to assess the performance of the

school. Candidates were given a template to structure their answer around the

school’s four objectives.

To be able to score well in this type of question, candidates need to utilise the

scenario and link this to any figures or calculations. Therefore, candidates need to

read the scenario to find out why Tonford School’s data may be as it is.


In these particular questions, it is important to understand what the organisation’s objectives are, and these are explained in the scenario. The performance data provided could then be used to appraise the organisation in terms of the objectives. It was difficult to award marks to points made that were not relevant to the specific objectives requested in the question. It is absolutely crucial not to rush through in answering the question as some points might be missed. Care needs to be taken to understand and explain using the scenario, why there could have been changes in data over the five years, or differences between the school’s results and the national targets. A wrong approach would be to just discuss the figures and almost guess what has happened without an attempt to read the scenario, or just stating that a result has gone up or down. Example: Objective 1 – Strive for continuous improvement in performance

standards.

The figures in the scenario show that exam results have moved from 64% (five years

ago) to 62% (this year) of pupils achieving grades A-C (the top three grades).

The wrong approach (linked to Objective 1):

Discussions stating that exam results have gone down would not receive any credit,

simply stating if a number has increased or decreased does not give the reader any

detail around the candidate’s analysis.

The correct approach with professional scepticism (linked to Objective 1):

The percentage of pupils achieving grades A-C is lower than Tonford School

achieved five years ago. As such, the school does not appear to be achieving


continuous improvement as the results have worsened. However, exam results

alone are not necessarily an accurate indicator of a school’s performance. For

example, exam results will reflect the underlying ability of the pupils, as well as the

quality of the teaching they receive.

With this approach there is clear assessment of whether the results have worsened

or improved, and extra value is added by suggesting alternative legitimate reasons to

explain the changes in the results.

Example: Objective 2 – Provide a supportive learning environment, which

encourages a high standard of pupil achievement.

The figures in the scenario show that pupil numbers have moved from 627 (five

years ago) to 662 (this year) and the number of teaching staff have moved from 33

(five years ago) to 35 (this year). The Department of Education in the question

recommends that the pupil/teacher ratio should be less than 22:1.

The wrong approach (linked to Objective 2):

Tonford School has more pupils and teachers than five years ago. The teacher/pupil

ratio is in line with the recommendations of the Department of Education.

Here there is little assessment taking place here and no further explanation as to what this would mean as far as achieving the objective. It is however, linked to the correct objective. This is a common problem where candidates do not often use the information

provided to do a useful analysis of the scenario given. Without this, candidates have

very little information to apply their answer to, so they have little to talk about for the

discussion marks.

Candidates should of course refer to the scenario but, when doing so, they must

always add value to whatever they are writing about, a useful tip would be to

consider if someone would pay for the assessment you have just delivered in your

answer, or would anyone have been able to clearly identify what you have written

about?

The correct approach (linked to Objective 2):

Tonford School’s teacher/pupil ratio has slightly improved but remained essentially the same over the last five years – at 19 pupils per teacher, which is favourable compared to the national target of 22 pupils per teacher.

20X7: 662 pupils/35 members of teaching staff =18.9 pupils per member of staff

20X2: 627 pupils/33 members of teaching staff = 19 pupils per member of staff

Having a low teacher pupil ratio is likely to be beneficial because it will allow teachers to give more time to each pupil, thereby achieving the objective of providing a supportive learning environment.

This could be expanded further to consider how this could have occurred.

Given that the school is state-funded, it seems likely that the Department of Education (DoE) would have had to authorise the budget needed to recruit the additional


teachers. On this basis, the fact that Tonford School has been able to increase the number of teachers it employs suggests that the DoE is pleased with the way it is performing, and therefore authorised the additional budget.

In this example, all the calculations have been shown so that there is the potential to award marks even if the final figure was incorrect. In a performance measurement question where more calculations are required (there were very few in this question) candidates should use comparable or relative figures to assist in their assessment. To improve scores, candidates must recognise whether this is an improvement or a

deterioration in performance. This can be seen in the correct approach with the

improvement in the teacher/pupil ratio. Also, candidates should identify if there is an

industry average, a competitor or perhaps a national average to use as a comparator

to discuss further and add to the justification of the performance. Then consider if

there are any reasons for this from the scenario to help explain the change.

If there is nothing in the scenario to suggest why there has been a change of

performance, candidates can use their judgement with regards to the measurement

used in the scenario, and its ability to measure the performance of the objective. It is

important to ensure that the measurement relates to the objective being discussed.

These are just a few examples and the other two objectives should be tackled in a

similar way.

For 12 marks, a lot of thought is required, but there is time to think and prepare a

suitable structure for the answer. In a three-hour exam, the ‘golden rule’ is 1.8

minutes per mark (180 minutes/100 marks), however in this type of question it might

be better to allow only 1.5 minutes initially, so as not to overrun, and allow some time

at the end for checking and dealing with any loose ends.

As mentioned earlier, pausing and spending a couple of minutes at the start to truly

absorb the question and requirements can focus attention and improve marks

significantly. Take the time to break the requirement down, as there is often more

than one part within an overall requirement. In addition, the question scenario

contains other information which can help to answer the question.

The extra time spent reading the scenario will pay dividends, as it will help explain

the key factors/activities/decisions which have underpinned the performance of the

organisation. It should always be preferable to have a few correct points than many

incorrect points written down.

Candidates should always take care over what the requirement is asking them to do.

Many spend valuable time telling the business what they should or should not do in

future periods to improve a situation. If a requirement is to ‘assess the performance

against the objectives,’ advice for future performance is not required.


Requirement (c) – 4 marks

To earn marks a good script should refer to problems that could happen when using

qualitative factors to assess performance. To make an answer more complete, the

emphasis here should be based on a school.

For example:

Difficulty using qualitative factors to assess performance:

The subjective nature of the scoring and the difficulties in measurement cause

problems when assessing performance.

Relate to the scenario to ensure that the answer is relevant:

The subjective nature of the scoring is a problem, for example, objective 4 states that

all children should be provided with high- quality education, regardless of their

location or background. The various stakeholders are likely to have differing views

and expectations on what constitutes a high-quality education.

There were several approaches that did not score any credit here and highlighted

that candidates did not take time to appreciate what the requirement was asking for:

- A detailed explanation of why it may be difficult for the school to meet its

objectives, rather than the qualitative measurement itself.

- Simply suggesting that quantitative measures would be better, and, suggesting

using frameworks such as the 3 Es or Balanced Scorecard to help identify

them.

- Using a quantitative measure (e.g. exam results) as the basis of the comments.

Without taking time to clearly distinguish what each requirement is asking for, there

is a tendency for some candidates to think they have been asked the same thing

more than once, and therefore repeat their written answer for different requirements.

A further common problem throughout was that some candidates answered the

question that they thought they were being asked, rather than what they were

actually being asked.

As with any written answer the suggested solution is not the only possible response, and it is not expected that any candidate would reproduce this exactly, but as long as the requirement is addressed and sensible points are made, credit would be given.

performance management (pm) sept / dec 2020 examiner’s report€¦ · marginal costing takes into...

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