ACCA F5 OFM A

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.

2

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.

3

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.

4

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.

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ACF5OFM(D)14 MOCK Suggested solutions

5

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

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Section A Summary of Section A answers 1

D

2

C

3

A

4

B

5

B

6

D

7

A

8

A

9

C

10

D

11

B

12

C

13

D

14

B

15

A

16

B

17

A

18

C

19

C

20

D

1

D

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.

2

C

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.

3

A

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.

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ACF5OFM(D)14 MOCK Suggested solutions

4

B

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.

5

B

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

D

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.

7

A

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)

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8

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.

9

C

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

D

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

B

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

C

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.

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D

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

B

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

A

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.

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ACF5OFM(D)14 MOCK Suggested solutions

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B

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.

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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

C

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

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C

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

D

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)

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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

1

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

9

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.

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ACF5OFM(D)14 MOCK Suggested solutions

2

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

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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.

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ACF5OFM(D)14 MOCK Suggested solutions

3

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

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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.

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ACF5OFM(D)14 MOCK Suggested solutions

4

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

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(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.

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ACF5OFM(D)14 MOCK Suggested solutions

5

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

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ACF5OFM(D)14 MOCK Suggested solutions