F5 (PM) – PART E – CBE MCQs – ACCA

These are ACCA F5 (PM) Performance Management MCQs for Part-E of the Syllabus “Performance measurement and control”.

These multiple-choice questions (MCQs) are designed to help ACCA F5 students to better understand the exam format. We aim to instill in students the habit of practicing online for their CBE exams. By doing so, students can reduce exam stress and prepare more effectively.

Please note:

  • Students should not attempt these MCQs until they have studied the entire chapter.
  • All questions are compulsory, so please do not skip any.

We hope that these MCQs will be a valuable resource for students preparing for the ACCA F5 (PM) exam.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course:ACCA – Association of Chartered Certified Accountants
Fundamental Level:Applied Skills
Subject:Performance Management
Paper:F5 – PM
Chapters and Topics Covered:
  • Performance analysis in private sector,
  • Public sector and not-for-profit organisations,
  • Divisional performance and transfer pricing,
  • Specific performance analysis issues in not-for-profit organisations and the public sector
Syllabus Area:E – “Performance measurement and control”
Questions Type:CBE MCQs
Exam Section:Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part E of the Syllabus; “Performance measurement and control” of ACCA F5 (PM) Performance Management Module.

Time

These MCQs are not time-bound. Take your time and solve them stress freely. Pay proper attention and focus. Do not rush or hesitate.

Result

Students will get their F5 CBE MCQs Test results after they finish the entire test. They will also be able to see the correct and incorrect answers, as well as explanations for the incorrect questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

 

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F5 (PM) - Part E - MCQs - Performance measurement and control

Course: ACCA - Association of Chartered Certified Accountants
Subject:
F5 (PM) - Performance Management
Syllabus Area: E - Performance measurement and control
Chapters covered: Performance analysis in private sector, public sector and not-for-profit organisations, Divisional performance and transfer pricing, Specific performance analysis issues in not-for-profit organisations and the public sector
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

  1. If you are using mobile, turn on the mobile rotation and solve the MCQs on wide screen for better experience.

REQUEST

  1. Please rate the quiz and give us feedback once you completed the quiz.
  2. Share with ACCA students on social media such as, Facebook Groups, Whatsapp, Telegram, etc.

1 / 32

Which of the followings are Qualitative aspects of non-financial performance?

2 / 32

The following statements have been made about divisionalisation and performance
measurement systems.

  1. Residual income as a measure of performance enables fair comparisons to be made between the performances of different divisions in the company.
  2. When a transfer price is based on cost because there is no external market for the transferred item, at least one of the divisional managers is likely to consider the transfer price as 'unfair'.

Which of the above statements is/are true?

3 / 32

An investment centre has prepared the following forecasts for the next financial year.

$
Operating profit before depreciation 85,000
Depreciation 20,000
Net current assets at beginning of year 30,000
Carrying value of non-current assets at beginning of year 180,000

The centre manager is now considering whether to sell a machine that is included in these forecasts. The machine would add $2,500 to divisional profit next year after depreciation of $500. It has a carrying value of $6,000 and could be sold for this amount. They would use the proceeds from the sale plus additional cash from Head Office to purchase a new machine for $15,000. This new machine would add $5,200 to divisional profit next year after depreciation of $2,000.

What will be the expected return on investment (ROI) for the division next year, assuming that the manager acquires the new machine and that non-current assets are valued at the start of year carrying amount for the purpose of the ROI calculation?

_______ % (to one decimal place i.e 100.0)

Note. Don't put % sign, write only numbers.

4 / 32

A typical balanced scorecard measures performance from four different perspectives.

Which perspective is concerned with measuring 'What must we excel at?'

5 / 32

In a company with a divisionalised structure, Division A transfers its output to Division B. Division A produces just one item, Component X. Division B makes and sells an end product that requires one unit of Component X.

$ per unit of X
Marginal cost of production in Division A 8
Fixed overhead cost of production 3
Cost of selling in the external market 1
Market price in the external market 16
Division B contribution from further processing Component X, before deducting the transfer cost 25

Division A is working at full capacity.

What should be the minimum transfer price per unit of Component X in this situation?

$ _____

6 / 32

If the performance of a local fire service is judged in terms of its inputs rather than its outputs, which one of the following would be a suitable measure of performance?

7 / 32

The 3Es are often used to assess performance in non-profit making organisations, especially in relation to value for money.

Which THREE of the following Es are used?

8 / 32

In a balanced scorecard system of performance measurement, which of the following is most likely to be used as a measure of performance from the customer perspective?

9 / 32

Which of the following is NOT usually a consequence of divisionalisation?

10 / 32

A company has a divisionalised structure in which Division A transfers its output to Division B. There is no external market for the transferred item and cost will be used as the basis for setting a transfer price.

Which of the following will be the most appropriate basis for negotiating and agreeing a transfer price?

11 / 32

Which of the following measures of performance for public sector services is a measure of efficiency?

12 / 32

A company has two Divisions, A and B. Division A manufactures a component which is transferred to Division Division B uses two units of the component from Division A in every item of finished product that it makes and sells. The transfer price is $43 per unit of the component.

$ per unit
Selling price of finished product made in Division B 154
Variable production costs in Division B, excluding the cost of transfers from Division A 32
Variable selling costs, chargeable to the division 1
33
Fixed costs $160,000
External sales in units 7000
Investment in the division $500,000

The company uses 16% as its cost of capital.

What is the residual income of Division B for the period?

13 / 32

In a company with a divisionalised structure, Division A transfers its output to Division B. Division A produces just one item, Component X. Division B makes and sells an end product that requires one unit of Component X.

$ per unit of X
Marginal cost of production in Division A 8
Fixed overhead cost of production 3
Market price in the external market 16
Division B contribution from further processing Component X, before deducting the transfer cost 25

Division A is not working at full capacity, and can meet in full the external market demand and the demand from Division B for internal transfers.

What should be the maximum transfer price per unit for Component X in this situation?

14 / 32

The following statements have been made about the measurement of ROI and residual income.

  1. ROI is usually measured as divisional operating profit before deducting depreciation as a percentage of the division's capital employed.
  2. Residual income is calculated after deducting both depreciation on non-current assets and notional interest on the division's capital employed.

Which of the above statements is/are true?

15 / 32

A hospital wishes to establish a performance measurement for its 'quality of care', and in particular its adherence to appointment times for patients receiving medical checks.

Which of the following performance measurements would be the most suitable for this purpose?

16 / 32

On which TWO of the following matters would the manager of an investment centre make decisions?

17 / 32

A company that uses a balanced scorecard approach to performance measurement has recorded the following data for the previous financial year.

Products made and sold for at least two years Products introduced to market within the previous two years = 'new products' Total
Number of products 16 4
Annual sales $3.0 million $0.50 million $3.50 million
Cost of sales $2.4 million $0.42 million $2.82 million
Hours worked 27,500 4,500
Research and development costs $150,000

Which of the following would be the most suitable measure of performance from the innovation and learning perspective in a balanced scorecard?

18 / 32

The following statements have been made about performance measurements in not-for-profit organisations.

  1. Not-for-profit organisations do not have financial objectives.
  2. The outputs produced by not-for-profit organisations are easier to measure than output of commercial companies.

Which of the above statements is/are true?

19 / 32

The following statements have been made about a transfer pricing system where Division A transfers output to Division B.

  1. Internal transfers should be preferred when there is an external market for the transferred item, because there will be more control over quality and delivery.
  2. The transfer price will determine how profits will be shared between the two divisions.

Which of the above statements is/are true?

20 / 32

Binny Co has annual sales of $960,000 and a current ratio of 3.2:1. All of its sales are for cash and are priced at a markup on cost of 50%. The average cash balance is $40,000 and the inventory turnover period is 90 days.

Assuming 360 days in a year, what is Binny Co's quick ratio (acid test ratio)?

21 / 32

Which of the following is a dimension of performance in a service business, as identified by Fitzgerald and Moon?

22 / 32

The following statements have been made about performance measurements in not-for-profit organisations.

  1. Providing value for money (VFM) means providing a service that is cheap, efficient and effective.
  2. For the refuse collection department of a local government authority, the efficiency of operations can be measured by the proportion of collected refuse that is recycled.

Which of the above statements is/are true?

23 / 32

When goods are transferred from one division in a company to another division, and there is an intermediate external market for the transferred item in which the goods could be sold, which of the following states the economic transfer pricing rule for what the maximum transfer price should be?

24 / 32

Which of the following could lead to an increase in management bonus, without benefiting the organisation?

  1. A manager holds on to heavily depreciated assets in order to avoid heavy investment in the period
  2. A manager in a manufacturing division uses absorption costing and builds up high levels of inventory
  3. A sales manager changes their fixed target to a relative target based on market share

25 / 32

Organisations may need to develop performance measures to ensure that the needs of stakeholders are met.

Which TWO of the following measures are geared towards customer needs?

26 / 32

A company has a call centre to handle queries and complaints from customers. The company is concerned about the average length of calls and the time that it takes to deal with customers. As part of its balanced scorecard, it has set a target for reducing the average time per customer call.

A target for reducing the average time per call would relate to which of the four balanced scorecard perspectives?

27 / 32

Which of the followings are Quantitative aspects of non-financial performance?

28 / 32

Which of the following figures would be the most suitable for divisional profit for the purpose of performance measurement?

29 / 32

In a company with a divisionalised structure, Division A transfers its output to Division B. Division A produces just one item, Component X. Division B makes and sells an end product that requires one unit of Component X.

$ per unit of X
Marginal cost of production in Division A 8
Fixed overhead cost of production 3
Market price in the external market 16
Division B contribution from further processing Component X, before deducting the transfer cost 25

Division A is not working at full capacity, and can meet in full the external market demand and the demand from Division B for internal transfers.

What should be the minimum transfer price per unit for Component X in this situation?

30 / 32

In the Fitzgerald and Moon model of performance measurement in service businesses, which of the following dimensions of performance reflects past results or achievements, rather than provides a guide or determinant for future performance?

31 / 32

The following statements have been made about transfer pricing.

  1. Transfer pricing is almost inevitably required when a business is structured as more than one division and some divisions provide goods or services to other divisions.
  2. Where a perfect external market price exists and unit variable costs and unit selling prices are constant, the opportunity cost of transfer will be external market price or external market price less savings in selling costs.

Which of the above statements is/are true?

32 / 32

At the beginning of 20X2, a division has capital employed, consisting of non-current assets of $2 million (at net book value) and working capital of $0.2 million. These are expected to earn a profit in 20X2 of $0.5 million, after depreciation of $0.4 million. A new machine will be installed at the beginning of 20X2. It will cost $0.8 million and will require an additional $0.1 million in working capital. It will add $0.35 million to divisional profits before deducting depreciation. This machine will have a four-year life and no residual value: depreciation is by the straight-line method. When calculating ROI, capital employed is taken at its mid-year value.

What is the expected ROI of the division in 20X2?

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