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16 ACCA Performance Management questions with answers and explanations.
Printable worksheet with answer key
A product mix is 2 units of A (contribution $8) to 1 unit of B (contribution $12). Fixed costs are $56,000. What are the total break-even units for the mix?
Correct answer: 6,000 units
Average contribution = (2 x 8 + 1 x 12) / 3 = $9.33. Break-even = 56,000 / 9.33.
Product X earns $12 contribution using 2 hours of the scarce resource and product Y earns $15 using 3 hours. Which should be made first?
Correct answer: X, at $6 an hour
Rank by contribution per unit of the scarce resource.
With two or more scarce resources, the best production plan is usually found by:
Correct answer: Linear programming
The optimum lies at a corner of the feasible region.
What is the shadow price of a scarce resource?
Correct answer: The extra contribution from one more unit of the resource
It shows the most worth paying for extra units.
A 4 percent rise in price cuts quantity demanded by 10 percent. What is the price elasticity of demand?
Profit is maximised where:
Correct answer: Marginal revenue equals marginal cost
At that quantity, the next unit adds as much to cost as to revenue.
Demand is P = 100 - 0.02Q and marginal cost is $20. What is the profit-maximising price?
Correct answer: $60
MR = 100 - 0.04Q = 20, so Q = 2,000 and P = 100 - 40 = 60.
A new product is launched at a high price which is later lowered. This is:
Correct answer: Market skimming
Skimming takes high margins from early buyers.
A division is at full capacity. The marginal cost of an item is $14 and it can be sold outside for $22. What is the minimum transfer price?
Correct answer: $22
Minimum = marginal cost plus opportunity cost = 14 + 8.
A company has spare capacity and receives a special order. Which costs are relevant?
Correct answer: Only the extra costs caused by the order
Fixed costs that do not change are not relevant.
Payoffs for three plans in a good, medium and poor market are A: 120, 80, 20; B: 90, 70, 50; C: 60, 60, 60. Which plan does maximin choose?
Correct answer: C
Maximin chooses the best of the worst outcomes: C gives 60.
Using the same payoffs (A: 120, 80, 20; B: 90, 70, 50; C: 60, 60, 60), which plan does maximax choose?
Correct answer: A
Maximax picks the highest possible payoff, which is 120 for A.
Payoffs for three plans are A: 120, 80, 20; B: 90, 70, 50; C: 60, 60, 60. Which plan does the minimax regret rule choose?
Correct answer: B
The largest regrets are A 40, B 30 and C 60, so B has the smallest.
The probabilities of a good, medium and poor market are 0.3, 0.5 and 0.2. Plan A pays 120, 80 and 20. What is the expected value of plan A?
The expected value with perfect information is 88 and the best expected value without it is 80. What is the value of perfect information?
What does sensitivity analysis show?
Correct answer: How far a variable can change before the decision changes
It tests the effect of changes in key variables.