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PM SD20 Sample - Suggested Solutions and Marking Schemes
Association chartered of certified accountant (SBL2020)
London College of Accountancy
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Performance Management (PM) and Marking Scheme
Section C
Health Nuts
(a)(i) Gym
Break-even point
Average sales revenue per customer $ Gym entry 8.
Car park expected value (0 x $1) 0.
9.
Variable cost 1.
Contribution per customer 8.
Total fixed costs 48,
BEP (in customers) 6,
Margin of safety
Total number of customers per day 330 (80 + 40 + 20 + 90)
Number of days in the month 30
Total customers for June 9,
Margin of safety (in customers) 3,900 (9,900 - 6,000)
Margin of safety (%) 39% (3,900/9,900)
Performance Management (PM) and Marking Scheme
(c)
Total sales/contribution from gym
Original number of customers 330
New customers 120
Total number of customers per day 450 Number of days in the month 30
Total customers for the month 13,
null$
Entry fee 8.
Car park 0.
Total sales from gym entry/car park 124,
Contribution per customer $
Sales revenue 9. Less: variable cost 1.
Total contribution 108,
Performance Management (PM) and Marking Scheme
Total sales/contribution from creche
Total customers using the creche per day 120
Number of days in the month 30
Total customers for the month 3,
Number of children per customer 2
Total number of children per month 7,
null$
Price per child 4.
Total sales from creche 28,
Contribution per customer $
Sales revenue 4.
Less: variable cost 0.
Total contribution 25,
Total contribution from gym and creche 133,
Total sales from gym and creche 153,
Weighted average C/S ratio 87%
Budgeted profit per month with creche $
Total contribution from gym and creche 133,
Less: total fixed costs 56,
Budgeted profit 77,
Performance Management (PM) and Marking Scheme
Tonford School
(a)
The primary objective of commercial organisations is to maximise the wealth they generate for their owners (shareholders). In contrast, the objectives of NFPO’s are often non-financial and reflect the interests which the various stakeholders have in an organisation. These stakeholders often have varying interests in the organisation, meaning that the organisation will also have a number of different objectives.
These conflicts may make it difficult to set clear objectives on which all stakeholders agree. Consequently, the organisation’s management will face a dilemma when trying to decide which objectives are most important and therefore prioritised in the course of strategic planning and decision-making. This can be a particular problem when different objectives make different demands on resources or require different courses of action.
Another problem is that these organisations often do not generate revenue but simply have a fixed budget for spending which they have to keep to and are often subject to strong external influences which will influence the setting of objectives e. political factors.
(b)
Note: This solution is longer than one which candidates would need to produce to score the marks available. However, it is intended to illustrate the range of relevant points candidates could have identified from the scenario, and therefore the number of marks potentially available in this question.
Objective 1 – Strive for continuous improvement in performance standards.
The percentage of pupils achieving the target grades is not only below the national target, it is also lower than Tonford School achieved five years ago. As such, the school’s does not appear to be achieving continuous improvement.
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.
There is a danger that if Tonford School focuses only on exam results it will become ‘selective’ and will only accept the most academically gifted pupils. However, such an approach would contradict the objective to provide ‘all children’
Performance Management (PM) and Marking Scheme
with access to high quality education, regardless of their background.
Pupil progress may be a more valuable measure than exam results, because the extent to which pupils’ performance improves provides an indication of the value added by the school, rather than pupils’ inherent ability.
Given the typical range of scores, Tonford School’s performance in this respect (+0) is significantly above the national target (+0) and is at the upper end of the range.
The fact that pupil numbers have increased seems likely to suggest that the school is becoming more popular with parents. Given that parents can choose which school to select for their children, the increase in pupil numbers is likely to reflect a perception among parents that the school is performing well.
The results of the recent inspection visit would seem likely to reinforce this perception.
Note: An alternative interpretation could be that all the other schools in the area are already full, and Tonford has spare capacity, which is why its pupil numbers increased. However, such an explanation seems less likely given the context of the other performance indicators.
Objective 2 – Provide a supportive learning environment, which encourages a high standard of pupil achievement.
The ‘pupil progress’ score suggests the school is providing children with a high quality education and a learning environment which encourages a high standard of pupil achievement. The fact that Tonford School’s 20X7 score is higher than its 20X2 score also suggests an improvement in the learning environment (although here again, to some extent the scores may reflect pupils’ aptitude for learning as well as the efforts of the school).
The school’s inspection grade is higher than five years ago, and is above the national target, which suggests the school is improving, and is performing relatively well. Although there is no indication that the DoE gives any more weighting to any single aspect of the performance data compared to other areas, the inspection grades could potentially be the most important indicator of how well as school is performing.
However, although Tonford School’s grading is ‘Very good’ this suggests there is still room for further improvement, because the school did not achieve the top grade: ‘Excellent’.
Tonford School’s teacher/pupil ratio has remained essentially the same over the last five years – at 19 pupils per teacher, which is favourable compared to the
Performance Management (PM) and Marking Scheme
However, one of the inherent difficulties with qualitative objectives compared to quantifiable objectives is how to measure them.
For example, exam success rate (% of pupils achieving 5 grades A-C) is quantifiable, and relatively easy to measure, using exam results data. However, trying to measure the overall quality of education in a school or whether a school provides a ‘supportive learning environment’ is potentially much more difficult, because there aren’t any specific outputs (e. results) which can be measured.
So, while exam results and pupil progress metrics are indicators of pupil achievement in schools – which can be measured – assessing them only provides a partial assessment of whether schools are providing children with ‘access to high quality education’ or whether they are providing ‘supportive learning environment which encourages a high standard of pupil achievement.’
A related problem is that the aspects of performance which are monitored end up being the ones where performance can most easily be measured, rather than those which are most important in ensuring that the objectives are achieved.
The DoE has recognised these issues though and acknowledged the need for inspectors to visit schools on a regular basis, to gain an insight into the aspects of performance which cannot be reflected in statistical measures.
Subjectivity
Another major problem with assessing qualitative aspects of performance is that they tend to be subjective. For example, people are likely to have different expectations of what constitutes a high quality of education, a supportive learning environment, or the extent to which students are prepared for adult life.
In this respect, one of the key things the DoE has to ensure is that its inspectors are consistent in their grading of schools. For example, if one inspector rates a school as ‘Good’, but another inspector would have rated the same school as ‘Excellent’, this inconsistency would significantly reduce the validity of the performance data which is produced.
Performance Management (PM) and Marking Scheme
Marks Marks
Marking Scheme
Health Nuts
(a) (i) Calculation of breakeven point for the gym 2
Calculation of margin of safety for the gym 1
(ii) Calculation of breakeven point for the gym 1.
Calculation of margin of safety for the cafe 0.
5
(b) Explanation relating to the breakeven points calculations 1.
Explanation relating to the margins of safety 1.
3
(c) Calculation of the weighted ave. C/S ratio for the gym and 5. creche
Calculation of the budgeted profit for the gym and creche 0.
6
(d) Advice as to the viability of closing the café and opening the 6
creche
6
Total marks 20
PM SD20 Sample - Suggested Solutions and Marking Schemes
Course: Association chartered of certified accountant (SBL2020)
University: London College of Accountancy
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