CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2

Published November 2009

P2 – Performance Management
Pillar P

P2 – Performance Management
Specimen Examination Paper

Instructions to candidates

You are allowed three hours to answer this question paper.

You are allowed 20 minutes reading time before the examination begins
during which you should read the question paper and, if you wish, make
annotations on the question paper. However, you will not be allowed, under
any circumstances, to open the answer book and start writing or use your
calculator during this reading time.

You are strongly advised to carefully read all the question requirements
before attempting the question concerned (that is, all parts and/or sub-
questions). The requirements for all questions are contained in a dotted box.

ALL answers must be written in the answer book. Answers or notes written
on the question paper will not be submitted for marking.

Answer the FIVE compulsory questions in Section A on pages 2 to 6.

Answer the TWO compulsory questions in Section B on pages 7 to 11.

Maths Tables and Formulae are provided on pages 12 to 14.

The list of verbs as published in the syllabus is given for reference on page
15.

Write your candidate number, the paper number and examination subject title
in the spaces provided on the front of the answer book. Also write your
contact ID and name in the space provided in the right hand margin and seal
to close.

Tick the appropriate boxes on the front of the answer book to indicate which
questions you have answered.

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 The Chartered Institute of Management Accountants 2009

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

SECTION A – 50 MARKS

[The indicative time for answering this section is 90 minutes.]

ANSWER ALL FIVE QUESTIONS IN THIS SECTION - 10 MARKS EACH.

Question One

You are engaged as a consultant to the DT group. At present the group source their raw
materials locally, manufacture their products in a single factory, and distribute them worldwide
via an international distribution company. However, their manufacturing facilities are
restricting them from expanding so they are considering outsourcing some of their
manufacturing operations to developing economies.

Required:

(a) Discuss the concept of the value chain and how the changes being
considered by the DT group may impact on the management of
contribution/profit generated throughout the chain.
(6 marks)
(b) Discuss how gain sharing arrangements might be used by the DT group in
the context of the changes being considered. Suggest one non-financial
target that may be used as part of these gain sharing arrangements.
(4 marks)
(Total for Question One =10 marks)

Performance Management 2 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Question Two

S uses a standard absorption costing system to control its production costs and monitors its
performance using monthly variance reports.
S has recently launched a new product which is being manufactured in batches of 100 units.
An extract from the standard cost details per unit for this new product is as follows:
5·3 hours of direct labour @ $10 per hour $53·00
It is now realised that the standard cost details were based on an average learning period
target of 5·3 hours per unit, and that a batch related period of learning was expected. The
time expected for the initial batch was 1,000 hours and 90% learning rate was anticipated.
During August production commenced on the product, and 400 units were produced in four
batches of 100 units using 2500 hours of direct labour at a cost of $26,000. The direct labour
variances that were reported in respect of this product were:
Direct labour rate variance $1,000 Adverse
Direct labour efficiency variance $3,800 Adverse

Required:

(a) Calculate the expected length of the learning period in batches (to the
nearest whole batch).
(4 marks)

(b) Calculate planning and operating variances for August.

(4 marks)

(c) Explain why the variances you have calculated in (b) above provide more
meaningful information to the managers of S.
(2 marks)

(Total for Question Two = 10 marks)

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Specimen Exam Paper 3 Performance Management

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Question Three

A firm of solicitors is preparing its budgets for 2010. The structure of the firm is that it has a
managing partner who is responsible for client and staff management, the firm’s accounts and
compliance matters and three other partners who each take responsibility for case matters
depending on the branch of law that is involved in each case.
For a number of years the managing partner has prepared the budgets for the firm. These
include budgets for fee income and costs analysed by each partner, and a cash budget for
the firm as a whole. The firm has overdraft facilities which are renewable in June each year
and sets cash balance targets for each month that reflect the seasonality of some of its work.
At the end of each month there is a partners’ meeting at which the managing partner presents
a statement that compares the actual results of the month and the year to date with the
corresponding budget. At this meeting all partners are asked to explain the reasons for the
variances that have arisen.
The managing partner recently attended a course on “Budget Planning & Cost Control” at
which the presenter argued that each of the partners in the firm should be involved in the
budget setting process. However, the managing partner is not convinced by this argument as
she believes that this could lead to budget manipulation.

Required

(a) Explain feedback and feed-forward control systems and give an example
of each in the context of the firm of solicitors.
(5 marks)

(b) Discuss ONE potentially beneficial consequence and ONE potentially

adverse consequence of involving the firm’s other partners in the budget
setting process of the firm.
(5 marks)

(Total for Question Three = 10 marks)

Performance Management 4 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Question Four

W is a manufacturing company that produces three products: X, Y and Z. Each uses the
same resources, but in different quantities as shown in the table of budgeted data for 2010
below:
Product X Y Z
Budgeted production 1500 2500 4000
Direct labour hours per unit 2 4 3
Machine hours per unit 3 2 3
Batch size 50 100 500
Machine setups per batch 2 3 1
Purchase orders per batch 4 4 6
Material movements per batch 10 5 4

W’s budgeted production overhead costs for 2010 are $400,000 and current practice is to
absorb these costs into product costs using an absorption rate based on direct labour hours.
As a result the production overhead cost attributed to each product unit is:
Product X $32 Product Y $64 Product Z $48
The management of S are considering changing to an activity based method of attributing
overhead costs to products and as a result have identified the following cost drivers and
related cost pools:
Cost pool $ Cost driver
Machine maintenance 100,000 machine hours

Machine setups 70,000 machine setups

Purchasing 90,000 purchase orders

Material handling 60,000 material movements

The remaining $80,000 of overhead costs are caused by a number of different factors and
activities that are mainly labour related and are to be attributed to products on the basis of
labour hours.

Required:
(a) Calculate the production overhead cost attributed to each product unit
using an activity based approach.
(7 marks)

(b) Explain how W has applied Pareto Analysis when determining its cost
drivers and how it may continue to use Pareto Analysis to control its
production costs.
(3 marks)

(Total for Question Four = 10 marks)

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Specimen Exam Paper 5 Performance Management
CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Question Five

HJ is a printing company that specialises in producing high quality cards and calendars for
sale as promotional gifts. Much of the work produced by HJ uses similar techniques and for a
number of years HJ has successfully used a standard costing system to control its costs.
HJ is now planning to diversify into other promotional gifts such as plastic moulded items
including key fobs, card holders and similar items. There is already a well established market
place for these items but HJ is confident that with its existing business contacts it can be
successful if it controls its costs. Initially HJ will need to invest in machinery to mould the
plastic, and it is likely that this machinery will have a life of five years. An initial appraisal of
the proposed diversification based on low initial sales volumes and marginal cost based
product pricing for year 1, followed by increases in both volumes and selling prices in
subsequent years, shows that the investment has a payback period of four years.

Required

(a) Explain the relationship between target costs and standard costs and how
HJ can derive target costs from target prices
(5 marks)

(b) Discuss the conflict that will be faced by HJ when making pricing decisions
based on marginal cost in the short term and the need for full recovery of
all costs in the long term.
(5 marks)

(Total for Question Five = 10 marks)

(Total for Section A = 50 marks)

Performance Management 6 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

SECTION B – 50 MARKS

[The indicative time for answering this section is 90 minutes.]

ANSWER BOTH QUESTIONS IN THIS SECTION - 25 MARKS EACH.

Question Six

M is the holding company of a number of companies within the engineering sector. One of
these subsidiaries is PQR which specialises in building machines for manufacturing
companies. PQR uses absorption costing as the basis of its routine accounting system for
profit reporting.
PQR is currently operating at 90% of its available capacity, and has been invited by an
external manufacturing company, to tender for the manufacture of a bespoke machine. If
PQR’s tender is accepted by the manufacturing company then it is likely that another
company within the M group will be able to obtain work in the future servicing the machine. As
a result, the Board of Directors of M are keen to win the tender for the machine and are
prepared to accept a price from the manufacturing company that is based on the relevant
costs of building the machine.
An engineer from PQR has already met with the manufacturing company to determine the
specification of the machine and he has worked with a non-qualified accountant from PQR to
determine the following cost estimate for the machine.
Note $
Engineering specification 1 1,500
Direct material A 2 61,000
Direct Material B 3 2,500
Components 4 6,000
Direct Labour 5 12,500
Supervision 6 350
Machine hire 7 2,500
Overhead costs 8 5,500

Total 91,850

NOTES
1. The engineer that would be in charge of the project to build the machine has already
met with the manufacturing company, and subsequently prepared the specification for
the machine. This has taken three days of his time and his salary and related costs are
$500 per day. The meeting with the manufacturing company only took place because
of this potential work; no other matters were discussed at the meeting.
2. The machine would require 10,000 square metres of Material A. This material is
regularly used by PQR. There is currently 15,000 square metres in inventory, 10,000
square metres were bought for $6 per square metre and the remainder were bought for
$6·30 per square metre. PQR uses the weighted average basis to value its inventory.
The current market price of Material A is $7 per square metre, and the inventory could
be sold for $6·50 per square metre.
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Specimen Exam Paper 7 Performance Management

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

3. The machine would also require 250 metre lengths of Material B. This is not a material
that is regularly used by PQR and it would have to be purchased specifically for this
work. The current market price is $10 per metre length, but the sole supplier of this
material has a minimum order size of 300 metre lengths. PQR does not foresee any
future use of any unused lengths of Material B, and expects that the net revenue from
its sale would be negligible.
4. The machine would require 500 components. The components could be produced by
HK, another company within the M group. The direct costs to HK of producing each
component is $8, and normal transfer pricing policy within the M group is to add a 50%
mark up to the direct cost to determine the transfer price. HK has unused capacity
which would allow them to produce 350 components, but thereafter any more
components could only be produced by reducing the volume of other components that
are currently sold to the external market. These other components, although different,
require the same machine time per unit as those required by PQR, have a direct cost of
$6 per component and currently are sold for $9 each.
Alternatively PQR can buy the components from the external market for $14 each.
5. The machine will require 1000 hours of skilled labour. The current market rate for
engineers with the appropriate skills is $15 per hour. PQR currently employs engineers
that have the necessary skills at a cost of $12.50 per hour, but they do not have any
spare capacity. They could be transferred from their existing duties if temporary
replacements were to be engaged at a cost of $14 per hour.
6. The project would be supervised by a senior engineer who currently works 150 hours
per month and is paid an annual salary of $42,000. The project is expected to take a
total of one month to complete, and if it goes ahead is likely to take up 10% of the
supervisor’s time during that month. If necessary the supervisor will work overtime
which is unpaid.
7. It will be necessary to hire specialist machine for part of the project. In total the project
will require the machine for 5 days but it is difficult to predict exactly which five days the
machine will be required within the overall project time of one month. One option is to
hire the machine for the entire month at a cost of $5,000 and then sub-hire the machine
for $150 per day when it is not required by PQR. PQR expects that it would be able to
sub-hire the machine for 20 days. Alternatively PQR could hire the machine on the
days it requires and its availability would be guaranteed at a cost of $500 per day.
8. PQR’s fixed production overhead cost budget for the year totals $200,000 and is
absorbed into its project costs using a skilled direct labour hour absorption rate, based
on normal operating capacity of 80%. PQR’s capacity budget for the year is a total of
50,000 skilled direct labour hours. PQR’s latest annual forecast is for overhead costs to
total $220,000, and for capacity to be as originally budgeted.

Performance Management 8 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Required:

(a) You are employed as assistant Management Accountant of the M group.

For each of the resource items identified you are to:
(i) discuss the basis of the valuation provided for each item
(ii) discuss whether or not you agree with the valuation provided in the
context of the proposed tender
(iii) prepare a revised schedule of relevant costs for the tender
document on behalf of the M group.
(15 marks)

(b) Assume that PQR successfully wins the bid to build the machine for a
selling price of $100,000 and that the costs incurred are as expected.
Discuss the conflict that will arise between the profit expected from the
project by the Board of M on a relevant cost basis and the project profit
that will be reported to them by PQR using its routine accounting
practices. Use at least two specific examples from the bid to explain the
conflict that you discuss.
(5 marks)

(c) Discuss two non-financial matters that you consider relevant to this
decision.
(5 marks)

(Total for Question Six = 25 marks)

TURN OVER

Specimen Exam Paper 9 Performance Management

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Question Seven

DEF is a trading company that is divided into three divisions: D, E and F. Each division
maintains its own accounting records and prepares an annual summary of its results. These
performance summaries are shown below for the year ended 30 September 2009.

Division D E F
$000 $000 $000

Sales (net of returns) 150 200 400

Variable production costs 50 70 230
Fixed production costs 60 50 80
Administration costs 30 25 40

Profit 10 55 50

Capital Employed 400 550 415

The following additional information is available:

1. Divisions are free to trade with each other without any interference from Head Office.
The managers of the respective divisions negotiate transfer prices between
themselves. During the year and included in the above costs and revenues are the
following transactions:
 Division D sold goods for $20,000 to Division E. The price negotiated was
agreed on a unit basis between the managers of the two divisions. The variable
production cost of these items in Division D was $18,000. Division D was
operating under capacity and agreed to a transfer price that was little more than
its own variable cost.

 Division F sold goods for $15,000 to Division E. The price negotiated was agreed
on a unit basis between the managers of the two divisions. The variable
production cost of these items in Division F was $9,000. Division F was operating
under capacity and negotiated a transfer price based on its total production cost.

2. Included in the Administration costs for each division are the following management
charges from Head Office:
D: $10,000 E: $8,000 F: $15,000

3. At the start of each year Head Office sets each division a target Return on Capital
Employed. The target depends on their nature of the work and their industry sector. For
the year ended 30 September 2009 these targets were:
D: 6% E: 3% F: 15%

Performance Management 10 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Required

(a) Discuss the shortcomings of the above performance summaries when

measuring the performance of each division.
(5 marks)

(b) Discuss the potential problems of negotiated transfer pricing, and how
these have impacted on the performance of each of Divisions D, E, and F
for the year ended 30 September 2009.
(6 marks)

(c) Prepare an alternative statement that is more useful for measuring and
reporting the performance of Divisions D, E, and F.
(8 marks)

(d) Discuss how the use of “Dual” transfer prices could affect the
measurement of divisional performance within DEF. Illustrate your answer
with suggested dual prices.
(6 marks)

(Total for Question Seven = 25 marks)

(Total for Section B = 50 marks)

End of Question Paper

TURN OVER

Specimen Exam Paper 11 Performance Management

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

MATHS TABLES AND FORMULAE

Present value table

Present value of 1 unit of currency, that is 1 r 

n
where r = interest rate; n = number of
periods until payment or receipt.

Periods Interest rates (r)

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 0.980 0.961 0.943 0.925 0.907 0.890 0.873 0.857 0.842 0.826
3 0.971 0.942 0.915 0.889 0.864 0.840 0.816 0.794 0.772 0.751
4 0.961 0.924 0.888 0.855 0.823 0.792 0.763 0.735 0.708 0.683
5 0.951 0.906 0.863 0.822 0.784 0.747 0.713 0.681 0.650 0.621
6 0.942 0.888 0.837 0.790 0.746 0705 0.666 0.630 0.596 0.564
7 0.933 0.871 0.813 0.760 0.711 0.665 0.623 0.583 0.547 0.513
8 0.923 0.853 0.789 0.731 0.677 0.627 0.582 0.540 0.502 0.467
9 0.914 0.837 0.766 0.703 0.645 0.592 0.544 0.500 0.460 0.424
10 0.905 0.820 0.744 0.676 0.614 0.558 0.508 0.463 0.422 0.386
11 0.896 0.804 0.722 0.650 0.585 0.527 0.475 0.429 0.388 0.350
12 0.887 0.788 0.701 0.625 0.557 0.497 0.444 0.397 0.356 0.319
13 0.879 0.773 0.681 0.601 0.530 0.469 0.415 0.368 0.326 0.290
14 0.870 0.758 0.661 0.577 0.505 0.442 0.388 0.340 0.299 0.263
15 0.861 0.743 0.642 0.555 0.481 0.417 0.362 0.315 0.275 0.239
16 0.853 0.728 0.623 0.534 0.458 0.394 0.339 0.292 0.252 0.218
17 0.844 0.714 0.605 0.513 0.436 0.371 0.317 0.270 0.231 0.198
18 0.836 0.700 0.587 0.494 0.416 0.350 0.296 0.250 0.212 0.180
19 0.828 0.686 0.570 0.475 0.396 0.331 0.277 0.232 0.194 0.164
20 0.820 0.673 0.554 0.456 0.377 0.312 0.258 0.215 0.178 0.149

Periods Interest rates (r)

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694
3 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579
4 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482
5 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402
6 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335
7 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279
8 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233
9 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194
10 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162
11 0.317 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135
12 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112
13 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093
14 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078
15 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.079 0.065
16 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054
17 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045
18 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0.038
19 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031
20 0.124 0.104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026

Performance Management 12 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Cumulative present value of 1 unit of currency per annum, Receivable or Payable at the end of
1 (1 r )  n
each year for n years r

Periods Interest rates (r)

(n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10%
1 0.990 0.980 0.971 0.962 0.952 0.943 0.935 0.926 0.917 0.909
2 1.970 1.942 1.913 1.886 1.859 1.833 1.808 1.783 1.759 1.736
3 2.941 2.884 2.829 2.775 2.723 2.673 2.624 2.577 2.531 2.487
4 3.902 3.808 3.717 3.630 3.546 3.465 3.387 3.312 3.240 3.170
5 4.853 4.713 4.580 4.452 4.329 4.212 4.100 3.993 3.890 3.791
6 5.795 5.601 5.417 5.242 5.076 4.917 4.767 4.623 4.486 4.355
7 6.728 6.472 6.230 6.002 5.786 5.582 5.389 5.206 5.033 4.868
8 7.652 7.325 7.020 6.733 6.463 6.210 5.971 5.747 5.535 5.335
9 8.566 8.162 7.786 7.435 7.108 6.802 6.515 6.247 5.995 5.759
10 9.471 8.983 8.530 8.111 7.722 7.360 7.024 6.710 6.418 6.145
11 10.368 9.787 9.253 8.760 8.306 7.887 7.499 7.139 6.805 6.495
12 11.255 10.575 9.954 9.385 8.863 8.384 7.943 7.536 7.161 6.814
13 12.134 11.348 10.635 9.986 9.394 8.853 8.358 7.904 7.487 7.103
14 13.004 12.106 11.296 10.563 9.899 9.295 8.745 8.244 7.786 7.367
15 13.865 12.849 11.938 11.118 10.380 9.712 9.108 8.559 8.061 7.606
16 14.718 13.578 12.561 11.652 10.838 10.106 9.447 8.851 8.313 7.824
17 15.562 14.292 13.166 12.166 11.274 10.477 9.763 9.122 8.544 8.022
18 16.398 14.992 13.754 12.659 11.690 10.828 10.059 9.372 8.756 8.201
19 17.226 15.679 14.324 13.134 12.085 11.158 10.336 9.604 8.950 8.365
20 18.046 16.351 14.878 13.590 12.462 11.470 10.594 9.818 9.129 8.514

Periods Interest rates (r)

(n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20%
1 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833
2 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528
3 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106
4 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589
5 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991
6 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326
7 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605
8 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.078 3.954 3.837
9 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031
10 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192
11 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4.656 4.486 4.327
12 6.492 6.194 5.918 5.660 5.421 5.197 4.988 7.793 4.611 4.439
13 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4.533
14 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4.802 4.611
15 7.191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4.675
16 7.379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4.938 4.730
17 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4.775
18 7.702 7.250 6.840 6.467 6.128 5.818 5.534 5.273 5.033 4.812
19 7.839 7.366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4.843
20 7.963 7.469 7.025 6.623 6.259 5.929 5.628 5.353 5.101 4.870

TURN OVER

Specimen Exam Paper 13 Performance Management

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Formulae

TIME SERIES

Additive model:
Series = Trend + Seasonal + Random
Multiplicative model:
Series = Trend*Seasonal*Random

REGRESSION ANALYSIS

The linear regression equation of Y on X is given by:

Y = a + bX or Y – Y = b(X – X ),
where:
Covariance ( XY ) n  XY  (  X )(  Y )
b= = 2 2
Variance ( X ) n  X  ( X )

and a= Y –bX
or solve
 Y = na + b  X
 XY = a  X + b  X2

Exponential Y = abx
Geometric Y = aXb

LEARNING CURVE

Yx = aXb
where:
Yx = the cumulative average time per unit to produce X units;
a = the time required to produce the first unit of output;
X = the cumulative number of units;
b = the index of learning.

The exponent b is defined as the log of the learning curve improvement rate divided by log 2.

Performance Management 14 Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for
each question in this paper.

It is important that you answer the question according to the definition of the verb.
LEARNING OBJECTIVE VERBS USED DEFINITION
Level 1 - Knowledge
What you are expected to know. List Make a list of
State Express, fully or clearly, the details of/facts of
Define Give the exact meaning of

Level 2 - Comprehension
What you are expected to understand. Describe Communicate the key features
Distinguish Highlight the differences between
Explain Make clear or intelligible/state the meaning or
purpose of
Identify Recognise, establish or select after consideration
Illustrate Use an example to describe or explain something

Level 3 - Application
How you are expected to apply your knowledge. Apply Put to practical use
Calculate Ascertain or reckon mathematically
Demonstrate Prove with certainty or to exhibit by
practical means
Prepare Make or get ready for use
Reconcile Make or prove consistent/compatible
Solve Find an answer to
Tabulate Arrange in a table

Level 4 - Analysis
How you are expected to analyse the detail of Analyse Examine in detail the structure of
what you have learned. Categorise Place into a defined class or division
Compare and Show the similarities and/or differences
contrast between
Construct Build up or compile
Discuss Examine in detail by argument
Interpret Translate into intelligible or familiar terms
Prioritise Place in order of priority or sequence for action
Produce Create or bring into existence

Level 5 - Application
How you are expected to use your learning to Advise Counsel, inform or notify
evaluate, make decisions or recommendations. Evaluate Appraise or assess the value of
Recommend Propose a course of action

Specimen Exam Paper 15 Performance Management

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper P2
Published November 2009

Performance Pillar

Management Level Paper

P2 – Performance Management

Specimen Paper

Wednesday Afternoon Session

Performance Management 16 Specimen Exam Paper