ACCA

Paper F5
Performance Management
Online Final Mock Examination

Commentary, Marking Scheme and

Suggested solutions

ACF5OFM(D)14 MOCK Suggested solutions

Commentary
Tutor guidance on improving performance on the exam paper.

Section A questions
The Section A questions cover a wide area of the F5 syllabus. They are a mix of narrative questions and
computational questions, and provide a test of your understanding of the subject.
Each question is worth two marks, and you either get the question right (two marks) or wrong (zero marks).
There is no in-between. Some of the questions should seem tricky, and you are unlikely to score 100% on this
section.
However, you should try to achieve a high mark. When you compare your answers with the correct answers, look
carefully at the questions you got wrong and try to understand why you didn't identify the correct answer. Learn
from any mistakes that you have made.

Section B questions
1

OWL
This question focuses on throughput accounting which is often an unpopular topic. However the
calculations involved are straightforward as long as you can remember the key point that throughput is
calculated as sales less material purchases, and factory costs include labour costs.
Part (b) requires suggestions as to how to improve a TPAR. Any sensible suggestions based around
improving throughput (sales minus material costs) per labour hour and reducing factory costs per hour
would score marks.

New Possum
You may have found this one of the easier questions in Section B. You should be familiar with the
technique for constructing the formula for a straight-line demand curve, and Part (b) is a simple test of
your understanding of market penetration and market skimming pricing.

New Drug
In Part (a) make sure you are writing about motivation and not budget setting in general.
Part (b) calls for a 'straightforward' calculation of materials mix and yield variances, except that the
numbers are not convenient round numbers for calculation, and there are four materials in the mix.

DEFG
You need to think carefully about the best way to set out your answer to Part (a) as this will help the
marker follow your workings and award you marks.
To answer Part (b) you should calculate a weighted average C/S ratio. Part (c)is required knowledge and
you should be able to present a number of good points in your answer.

ACF5OFM(D)14 MOCK Suggested solutions

Culture Centre
This is a long question, and you need to absorb the information quickly.
Part (a) asks about the problems of performance measurement for a not-for-profit organisation, and so
should be a test of your basic knowledge of the topic.
Part (b) requires you to identify and calculate comparable ratios or other performance figures for the two
organisations, measuring economy, efficiency and effectiveness. You may think that comparing a culture
centre with a cinema is not a sensible or meaningful comparison to make; however that is not a feature of
this particular question.

ACF5OFM(D)14 MOCK Suggested solutions

Section A
Summary of Section A answers
1

10

11

12

13

14

15

16

17

18

19

20

There should be more than one target and KPI for each of the four perspectives, to create balance
and avoid over-emphasis on just one measure. The four aspects of performance may sometimes
conflict with each other for example there may be a conflict between innovation and learning for
the longer term and short-term financial performance. Compromises between the targets for each
of the four perspectives may therefore be necessary; however, the selected targets for the four
perspectives must all be consistent with each other.

If the price elasticity of demand is greater than 1, an increase in the selling price by x per cent
would result in a fall in sales demand of more than x per cent. Total revenue would fall, but costs
would fall too. The effect on profits may be to increase or reduce profits; either could happen.
For all products, in practice, the price elasticity of demand varies at different price levels.

Primary data is data collected directly from first-hand sources, such as observation, measurement
or surveys. The use of focus groups for market research information is an example of a source of
primary data.
The maximin decision rule (given a number of mutually exclusive options when the future outcome
for each option is uncertain) is to select the option that will provide the best 'worst possible' profit.
The rule is to maximise the minimum possible profit, not to minimise the maximum possible cost.

ACF5OFM(D)14 MOCK Suggested solutions

Some apportionment of general shared overheads, such as the costs of shared accommodation,
cannot be avoided in any absorption costing system, including ABC. Many items of 'overhead'
cost may be attributable directly to a specific activity, but others are not and these shared costs
must be apportioned somehow within the costing system.
The application of ABC depends on having activities for which there is a driver of costs. Each
driver of costs must be a measurable item so that a cost per unit of the driver can be established.

In the original budget, contribution is maximised when both resources are fully utilised, so that:
0.5x + y = 2,000, and
2x + 1.5y = 4,000.
If the number of available machine hours increases to 2,001, contribution will be maximised
where:
(1)

0.5x + y = 2,001 and

(2)

2x + 1.5y = 4,000
Multiply (1) by 4

(3)

2x + 4y = 8,004
Subtract (2) from (3)
2.5y = 4,004; therefore y = 1,601.6
Substitute in (1)
0.5x + 1,601.6 = 2,001; therefore x = 798.8

Total contribution = (1,601.6 $6) + (798.8 $5) = $13,603.6

Shadow price of machine time = $13,603.6 $13,600 = $3.60 per machine hour
6

Internal environmental costs for an organisation are costs that it incurs to deal with environmental
issues such as treating or measuring emissions and handling or recycling waste. Costs of
equipment to clean up waste or emissions, to dispose of waste and costs of measuring waste and
emissions are all such costs.
External environmental costs are costs that are not incurred by the organisation that creates the
emissions or waste; many of these costs fall on society and the taxpayer. Medical treatment costs
for members of the public suffering the effects of emissions are a notable example.

A problem is to decide whether the usage operational variance should be priced at the original
standard price of $3 per kg or the revised standard price of $2.50. It should be priced at the same
rate as the material usage planning variance.
kg
Original standard usage per unit
4.0
Revised standard usage per unit
4.5
Usage planning variance per unit
0.5 Adverse
Actual production
Usage planning variance in total

1,800 units
900 kg Adverse

The rate used to calculate the variance s therefore $2,700 / 900 = $3, which is the original
standard price per kg.
kg
Operational usage variance
1,800 units of output should use ( 4.5)
8,100
They did use
8,300
Usage planning variance in kg
200 Adverse
Original standard price per kg
Usage planning variance in kg

ACF5OFM(D)14 MOCK Suggested solutions

$3
$600 (A)

Whereas control through feedback is based on a comparison of budgeted and actual (historical)
results, feedforward control is based on a comparison of budgets or targets with current forecasts
or future expectations.
Incremental budgeting is budgeting based on 'last year's budget' or 'last year's actual results',
making adjustments for known differences in the future. If is a method of budgeting where
wasteful spending or budgetary slack is common and difficult to eliminate.

ROI = 20%
Capital employed $4 million
Therefore divisional profit = $800,000
Notional capital charge = 9% $4 million = $360,000
Residual income = $800,000 $360,000 = $440,000

10

In target costing, the target cost is based on the selection of a target selling price. Raising the
selling price would be an inappropriate measure because it would undermine the purpose of
target costing.
Unlike lifecycle costing, target costing does not usually measure product development costs within
the target cost, because development work is already under way.
The target cost gap might be reduced by using standard components where possible, rather than
non-standard components (which tend to be more expensive/costly).
Removing non-value-added features from the product design should reduce costs without
reducing the value of the product to the customer.

11

Disseminating information more widely than necessary has a cost. Even if the cost of send in gout
the information electronically is low, it wastes time for the people receiving it who do not need it.
The costs of time inputting data and correcting data, and gathering the same information more
than once are all examples of the cost of inefficiency in data collection rather than information use.

12

Spreadsheet models are quantitative models and do not include qualitative items. Errors in a large
spreadsheet model can be very difficult to trace when they occur. Several individuals may work on
a spreadsheet model, but they should not do so simultaneously.
When a large number of different versions of a draft budget are prepared, there may be problems
with identifying each version and recognising the assumptions in which each version has been
produced.

13

The aim should be to minimise the time when costs are incurred on a product that is not yet on the
market (so minimise time to market) and to minimise the breakeven time or payback period for the
investment. The aim should be to maximise return, and returns should be maximised for products
with a longer commercial life.

14

Management control information or tactical information is information that is produced or used at

middle management level for purposes such as budgeting and budgetary control. Information
about staffing levels and cash flows is relevant to budgeting. Information about competitors costs
is more relevant to higher level management decision making, and is an example of strategic
management information.

15

To persuade the manager of Division X to transfer components to Division Y instead of selling

them in the market, the transfer price must be at least $12 $1 selling costs = $11.
To persuade the manager of Division Y to buy components from Division X and not buy them in
the market from an external supplier, the transfer price should not exceed $12.
Of the prices suggested in the question, only $11 is suitable.

ACF5OFM(D)14 MOCK Suggested solutions

16

Effectiveness means achieving targets or objectives. The objective of a school or university is to

raise standards of education; the objective of a fire service is to fight fires (among other
objectives) and the objective of a hospital should be successful treatment of patients.
Raising degree standards represents effectiveness for a university. Improving the teacher: pupil
ratio in a school and improving patient turnover times are measures of efficiency rather than
effectiveness. Reducing costs in the fire service is an example of economy.

17

A
Month
1
2
3
4
5

Hours worked
400
152
210
289
400
1,451

Cumulative
units
1
2
4
8
16

Cumulative
hours
400
552
762
1,051
1,451

Average time
400
276
190.5
131.375
90.6875

Learning rate
0.69
0.69
0.69
0.69

Note. The learning rate is calculated by dividing the cumulative average time for units made to
date by the previous cumulative average time (since output has doubled since then.)
The learning rate is 69%.
A quicker method of finding the correct answer is simply to compare the cost of making the first
unit with the cost of making the first 16 units.
Cumulative average time for first 16 units = 1,451 / 16 = 90.6875
If the learning rate is b:
400b4 = 90.6875
b4 = 0.2267188
b = 0.69 = 69%
18

Participative budget takes longer than top-down budgeting because of the length of time needed
for discussions and negotiations between the budget participants. With top-down budgets,
decisions can be made without the need for lengthy consultations.
Although participative budgeting involves managers at lower levels within the organisation, senior
management make the final decisions, and management must still accept budget responsibilities
for the aspects of operations under their control and direction.
A 'blame' culture may exist in any organisation when things go wrong. However it is probably more
likely to exist when budget targets have been imposed by senior management, so that managers
can deny responsibility and put the blame for poor performance on to something or someone else.

ACF5OFM(D)14 MOCK Suggested solutions

19

This is a make or buy problem.

P
$

Cost of in-house production

Cost of buying
Extra cost of buying
Machine hours per unit
Extra cost per hour saved
Priority for buying
Quantity of units required
Total machine hours needed
Total machine hours available
Shortfall in machine hours

5
9
4

0.25
$16
3rd
20,000
5,000

Q
$

2
4
2

0.10
$20
4th
8,000
800

R
$

S
$

6
10
4

0.50
$8
1st
15,000
7,500

4
7
3

0.30
$10
2nd
16,000
4,800

18,100
15,000
3,100

The least-cost option is to save 3,100 hours of machine time by purchasing 6,200 units of R
externally.
20

Market share in retrospect = 350,000 units

Target market share = 20% = 70,000 units
Target sales in retrospect to achieve market share
Actual sales
Market share variance in units of sale
Standard contribution per unit
Market share variance in $ contribution

units
70,000
64,000
6,000 (A)
$2.50
$15,000 (A)

ACF5OFM(D)14 MOCK Suggested solutions

Section B
1

OWL
Marking scheme
(a)

(b)

Marks
1.5

Throughput per unit: 0.5 each product; nil if anything other than material
purchases used
Throughput/hour: 0.5 each product; nil if anything other than material
purchases used
Factory cost/hour: 0.5 each product has to be correct costs to get marks
TPAR: 0.5 for each product

1.5
1.5
1.5
6

Significance: TPAR less than 1; therefore unprofitable/not viable

Suggestions to improve ratio: 1 mark per correct point eg reduce
purchases,
better cost control, train staff so more efficient, use lower grade of labour
(if possible), increase selling price (only if market will take it) etc

3
4
10

Total

Suggested solution
(a)

O
$
85,000
23,000
62,000

Sales
Material purchases
Throughput

5,000
$8.85

L
$
77,000
21,000
56,000

Hours
Throughput per hour W1)

5,000
$12.4

Direct labour
Factory overhead
Factory costs
Factory cost per hour W2)

$
18,000
15,000
33,000
$6.6

$
22,500
25,000
47,500
$9.5

$
20,000
20,000
40,000
$8

1.88

0.93

1.40

TPAR (= W1/W2)
(b)

W
$
63,000
18,750
44,250

5,000
$11.2

Division W's TPAR is less than 1. This means that its costs are greater than its return, and this is
not a viable financial position.
Division W needs to increase its TPAR above 1.0 by finding ways to increase throughput per
bottleneck hour or reduce factory costs per bottleneck hour.
The division could improve its throughput per hour by reducing holding of inventory and so
reducing material purchases. However this would be a once-only measure and longer-term
improvements in the TPAR are needed.
Stricter cost control and cost reduction initiatives would also help to improve this ratio. These
could include: sourcing alternative cheaper suppliers, using cheaper labour or better trained
labour that will be more efficient.

ACF5OFM(D)14 MOCK Suggested solutions

An increase in selling price would also increase throughput, throughput per bottleneck hour and
the TPAR - but care would need to be taken here. If a rise in selling price results in a loss in
quantity of units sold this may not be a wise move.

10

ACF5OFM(D)14 MOCK Suggested solutions

New Possum
Marking scheme
Marks
1
2
1
4

(a)

Calculation of b
Calculation of a
Expression of demand function

(b)

Market penetration, definition low price strategy

Explanation of the strategy (1 mark per point or 2 if full, well-made point)
Market penetration, definition high price strategy
Explanation of the strategy (1 mark per point or 2 if full, well-made point)

Total

1
2
1
2
6
10

Suggested solution
(a)

When demand is linear the equation for the demand curve is:
P = a bQ
where
P = price
a = the price at which demand would be nil
b = the change in price/change in quantity
Q = the quantity demanded
b = (20 15) / (50,000 45,000) = 5 / 5,000
b = 0.001
15 = a 0.001 50,000
15 = a 50
a = 65
Therefore the demand curve is P = $65 0.001Q
where Q is the quantity sold per quarter.

(b)

Two pricing strategies for new products are market penetration pricing and market skimming
pricing.
Market penetration pricing
This is a strategy of low prices when the product is first launched in order to obtain high sales
volume. The aim of the low price is to encourage consumers to try the product and drive as much
sales volume as possible This strategy is particularly appropriate when barriers to entry are low
and the company is trying to prevent competitors from entering the market. If a company
succeeds with this type of pricing then they will establish a dominant market position which,
coupled with low prices, will discourage new entrants.
This type of pricing is also appropriate when a company wants its new product to reach the
growth and maturity stages of the product life cycle as quickly as possible. The product's
introductory stage is shortened due to the heightened demand and it starts to generate cash very
quickly.
If the product is known to have a high price elasticity, it is more appropriate to charge a low price
and generate a high demand.

ACF5OFM(D)14 MOCK Suggested solutions

11

Market skimming pricing

This strategy involves charging high prices when a product is first launched and spending heavily
on advertising and sales promotion to encourage consumers to buy. The main aim of market
skimming pricing is to gain high unit profits early in the product's life. As competitors become
aware of the profit-earning opportunities they will want to enter the market, so the company who
got there first will want to 'cream' as much profit as possible at an early stage.
This policy is appropriate when the product is new and different. Customers will be prepared to
pay high prices so as to be able to be one of the first to own the product. Market skimming is
also appropriate when the new product is likely to have a short life cycle, therefore the company
will want to recoup development costs and make profits relatively quickly.

12

ACF5OFM(D)14 MOCK Suggested solutions

New Drug
Marking scheme
(a)

1 mark per appropriate comment

(b)

Mix variance
Actual quantity actual mix
Actual quantity standard mix
Mix variance in $

Max

Marks
4
1
1
1
3

Yield variance
'Should yield'
Variance in kg
Variance in $

1
1
1
3

OR Yield variance
Standard mix actual quantity
Standard mix standard quantity
Yield variance in $
Total

1
1
1
3
10

Max

Suggested solution
(a)

Managers who set the budgets know the functional area well and can set realistic goals.
As they have been part of the goal setting process, these managers are more likely to feel
personal ownership of the targets. They will be motivated to prove that they can achieve these
commitment to the organisation's objectives is increased.
Budgets set by process managers are likely to contain a greater level of operational detail.
Specific resource requirements are likely to be included, ensuring that co-ordination between
departments/business units is improved.
Budget slack is more likely to be included when managers are responsible for setting their own
targets. They know they can easily meet their targets, so they will not be inspired to make any
performance improvements.
Participative budgets are more time consuming than imposed budgets. Thus an earlier start to the
budgeting process could be required. Process managers may complain that they are too busy to
spend much time on budgeting.
Subsequent changes to the budget you were involved in setting is perhaps more demotivating
than having no input.

(b)

Mix variance
(Note. Some rounding differences may occur in answers. These are acceptable if the calculations
are correct.)

K
A
B
O

Actual quantity
Actual mix
kg
291.6
242.6
198.2
392.0
1,124.4

(0.33/1.26)
(0.28/1.26)
(0.23/1.26)
(0.42/1.26)

ACF5OFM(D)14 MOCK Suggested solutions

Actual quantity
Standard mix
kg
294.49
249.87
205.25
374.8
1,124.4

13

Mix variance
kg
2.89 (F)
7.27 (F)
7.05 (F)
17.2 (A)

Standard
cost per kg
$
104
49
186
72.5

Mix variance
$
300.56 (F)
356.23 (F)
1,311.3 (F)
1,247.0 (A)
721.09(F)

Yield variance
Method 1
1,124.4 kg should have yielded (1.26)
But did yield
Yield variance in units
standard material cost per unit of output
Yield variance in $

892.38 units
930.00 units
37.62 units (F)
$121.27
$4,562.18 (F)

Method 2: Yield variance calculated for individual materials

Material
K
A
B
O

Actual output,
standard mix
(930 units)
kg
306.9
260.4
213.9
390.6
1,171.8

Actual mix
kg
294.5
249.9
205.2
374.8
1,124.4

Usage
variance in kg
kg
12.4 (F)
10.5 (F)
8.7 (F)
15.8 (F)

Standard price
per kg
$
104.00
49.00
186.00
72.50

Usage
variance in $
$
1,289.60 (F)
514.50 (F)
1,618.20 (F)
1,145.50 (F)
4,567.80 (F)

The two methods of calculating the yield variance differ by $5.62 due to rounding differences.

14

ACF5OFM(D)14 MOCK Suggested solutions

DEFG
Marking scheme
(a)

Calculation of gross contribution for each service in total

Deduction of attributable fixed costs
Calculation of general fixed costs
Discussion of financial viability

(b)

Calculation of total gross contribution

Calculation of average C/S ratio
Calculation of Breakeven sales revenue

(c)
Total

1 mark per limitation explained

Marks
2
1
2
1
6
1
1
2
4
5
15

Suggested solution
(a)

Selling price
Variable cost
Gross contribution
Sales units
Gross contribution
Attributable fixed costs
Net contribution
General fixed costs (W1)
Profit

D
Per
service
$
18
8
10

E
Per
service
$
16
10
6

F
Per
service
$
12
13
(1)

1,000
$
10,000
4,400
5,600

2,300
$
13,800
3,700
10,100

1,450
$
(1,450)

(1,450)

G
Per
service
$

Overall total

20
13
7
1,970
$
13,790
2,650
11,140

$
36,140
10,750
25,390
8,930
16,460

Working 1
Total fixed costs = (1,000 $2) + (2,300 $3) + (1,450 $2) + (1,970 $4) = $19,680
General fixed costs = $(19,680 4,400 3,700 2,650) = $8,930
The above table shows that services D, E and G are financially viable as they make a positive
contribution towards the organisation's general fixed costs.
Each unit of service F provided results in a negative contribution of $1, and hence the service
should not be offered unless there are other business reasons for continuing to provide it, such as
a contract already in force.
(b)

We can calculate the breakeven point using the average C/S ratio. We assume a constant product
sales mix as per the draft budget.
Total sales revenue = (1,000 $18) + (2,300 $16) + (1,450 $12) + (1,970 $20) = $111,600
Total gross contribution (from profit statement in (a)) is $36,140
Average C/S ratio = 36,140 / 111,600 100% = 32%
Breakeven point in sales revenue = Fixed costs / C/S ratio = ($10,750 + $8,930) / 0.32 = $61,500

ACF5OFM(D)14 MOCK Suggested solutions

15

(c)

Although breakeven analysis can give firms an indication of the minimum sales revenue or sales
units that are required to cover total costs, it is based on a number of assumptions that really form
the basis for its limitations.
(1)

Units are sold in a constant mix (as set out in the budget), which is unlikely to be the case
in reality. The proportions in which products are sold vary according to such factors as
changing consumer tastes, availability of substitute products, changes in price and so on.

(2)

Selling price is assumed to remain constant regardless of the number of units sold. This is
unrealistic for most 'normal' products as consumers are often only persuaded to purchase
more if prices are reduced. As soon as selling prices change, the breakeven point will
change.

(3)

Inventory levels are ignored as it is assumed that production and sales are the same.
Although firms are increasingly striving to carry less inventory, it is unlikely that production
and sales will exactly match.

(4)

The analysis suggests that any activity level above the breakeven point will result in profits
being made. This is not necessarily the case in reality, as changes in cost and revenues
as more units are sold may result in a second breakeven point after which losses may be
made. This is particularly true of electronic products such as computer games that have a
very short shelf life.

(5)

Costs are expected to behave in a linear fashion. Unit variable costs are expected to
remain constant regardless of activity levels and fixed costs are not expected to change.
This assumption ignores the possibility of economies of scale that could result in lower unit
variable costs, or the fact that fixed costs may have to increase after a certain level of
activity due to, for example the need to rent additional premises.

16

ACF5OFM(D)14 MOCK Suggested solutions

Culture Centre
Marking scheme
(a)

(b)

Multiple objectives
Measuring outputs
Lack of profit measure
Nature of service provided / Difficult to define a unit
Financial constraints
Political, social and legal considerations
But maximum mark for part (a)
Calculations (appropriate and correct): 1 mark each measure for
economy,
effectiveness and efficiency for CC
Comment on contrast with Big Screen (appropriate): 1 mark each
measure

Max

Marks
2
2
2
2
2
2
9
3
3
6
15

Suggested solution
(a)

A number of difficulties arise when attempting to measure the performance of the Culture Centre.
Multiple objectives
The Culture Centre will have multiple objectives, eg attract visitors to the town, showcase new
artists, and improve the cultural life of local people. Even if they can all be clearly identified it may
be impossible to say what the overriding objective is.
Measuring outputs
Outputs can seldom be measured in a way that is generally agreed to be meaningful as it is
difficult to judge whether non quantifiable objectives have been met. (For example, how can we
measure the quality of an exhibition?)
Data collection can be problematic. For example, the quality of service offered to visitors may be
measured by the number and type of letters received either complaining or praising the centre. If
this measure is used it ignores the majority of visitors who will not bother to write.
Lack of profit measure
The Culture Centre is not expected to make a profit, and as there is no admission charge.
Financial indicators are therefore less important than for profit-seeking organisations and the
financial target may simply be to avoid a loss or keep costs within budget.
Nature of service provided
Like many non-profit seeking organisations that provide services, the Culture Centre, will find it
difficult to define a cost unit. This problem does exist for commercial service providers but
problems of performance measurement are made simple because profit can be used.
Financial constraints
Although every organisation operates under financial constraints, these are more pronounced in
non-profit seeking organisations. For instance, a commercial organisation's borrowing power is
effectively limited by managerial prudence and the willingness of lenders to lend, but a local
authority's ability to raise finance for the Culture Centre (whether by borrowing or via local taxes)
may be subject to strict control by Central Government.

ACF5OFM(D)14 MOCK Suggested solutions

17

Political, social and legal considerations

Unlike Big Screen, the Culture Centre may be subject to strong political influences. Local
authorities, for example, have to carry out central government's policies as well as their own
(possibly conflicting) policies.
Whereas profit-seeking organisations are unlikely in the long term to continue services making a
negative contribution, non-profit seeking organisations may be required to offer a range of
services, even if some are uneconomic.
(b)

Economy
Average cost of staff
Culture Centre: $532,000 / 28 = $19,000
Big Screen: $312,000 / 22 = $14,182
Average cost of fees to artists/film distributors
Culture Centre: $125,000 / 15 = $8,333
Big Screen: $350,000 / 65 = $5,834
The Culture Centre seems to achieve worse economy than Big Screen. A comparison of staff
costs show that the Culture Centre has higher average costs than Big Screen. However the
desired skills and experience are not likely to be the same for both organisations. A better
comparison would be to compare these ratios with other culture centres in other parts of the
country.
The Culture Centre also has higher average cost of fees to artists/film distributors. However, again
there is a difficulty comparing these two organisations because of the differences in the nature of
showing a film and an artist's exhibition.
Effectiveness
The Culture Centre attracts 125,000 visits per year. This in itself may be the measure of success
or otherwise of the centre (although this should be compared against a benchmark such as other
similar attractions or prior year data once it exists).
It should be noted, however, the average visits per local resident last year was lower than Big
Screen.
Measures of success in meeting objectives such as 'to improve the cultural life of local residents'
will prove very difficult as this is hard to quantify.
The other data given does not enable a view to be taken on other objectives such as attracting
new businesses.
Efficiency
The Culture Centre could monitor the percentage of total days or hours which it was open. This
would highlight the efficiency of usage of available resources and focus managers' attention on
the need to meet customers' needs. The data indicates that the Culture Centre is open far less
than Big Screen. Research would need to be undertaken to determine whether opening hours
similar to Big Screen would be beneficial for the Culture Centre.
% days open

Culture Centre
255 / 365 = 70%

Big Screen
363 / 365 = 99%

% hours open

70% 8/24 = 23%

99% 14 /24 = 58%

Another measure of efficiency might be cost per artist/film. The data shows that this is far higher
for the Culture Centre. However, again there is a difficulty here of not comparing like with like. For
example, the set-up costs for an exhibition may be far higher with more space required. In
addition the Culture Centre has a museum as well as being an art gallery. The costs of the Culture
Centre could be split between its different functions but this in itself is problematic.

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ACF5OFM(D)14 MOCK Suggested solutions

Cost per artist/film

Culture Centre: 1,226,000 / 15 = $81,733
Big Screen: 1,154,000 / 65 = $17,754
= $81,733 = $17,754
These measures go some way towards assessing the Culture Centre's performance; however
they need to be compared to a similar organisation in order to be able to draw meaningful
conclusions from the data.

ACF5OFM(D)14 MOCK Suggested solutions

19

BPP House, Aldine Place, London W12 8AA

Tel: 0845 0751 100 (for orders within the UK)
Tel: +44 (0)20 8740 2211
Fax: +44 (0)20 8740 1184
www.bpp.com/learningmedia

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ACF5OFM(D)14 MOCK Suggested solutions