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Question Five
The question tested the candidates’ knowledge of environmental accounting techniques and their application to environmental performance management in the context of an oil refinery (PLX).
 
Requirement (a) asked about the different cost categories that would aid transparency of environmental reporting. The article in the students’ accountant written by the previous examiner provided widely accepted categories but reasonable suggestions by the candidates were accepted. Long lists (without discussion) of possible specific cost lines were given some limited credit.
 
Requirement (b) concerned the three techniques mentioned in the scenario. Most candidates gave an answer on activity-based costing (ABC) though a number fell short of gaining full marks as they did not relate ABC to environmental reporting or the situation at PLX. Answers were generally poor on input/output analysis with few candidates emphasising that it was based on the physical (rather than financial) quantities moving through the refining process. It was disappointing to see many candidates unable to explain how the lifecycle view might be relevant especially as the next part of the question deals with this aspect.
 
Requirement (c) provided an opportunity to apply lifecycle costing to a product where the environment was significant. Many students scored the calculation marks on offer but then faltered when discussing the results. Little credit was gained by discussing the stage of the product lifecycle as the question asked about lifecycle costing.

Question Four
The question concerned an entertainment company (ENT) that had four divisions: restaurants, cafes, bars and dance clubs. The candidates were requested to use the BCG matrix to analyse the business then to evaluate this analysis as a management system and finally, to consider the reward packages described at ENT.
 
Requirement (a) concerned a BCG analysis of ENT and its use to evaluate ENT’s performance. Many candidates did not know that the growth element of the analysis referred to the growth of the market sector and either ignored this element or calculated the growth of the division instead. This lead to poor marks as half of the analysis was therefore missing and the conclusions compromised as a result. Also, some candidates chose to ignore most of the forecast numerical data and only calculate the current position of the company. This wasted an opportunity to score marks on the historical trends and also, the expected future position which is relevant if giving strategic advice.
 
Requirement (b) was also affected by this lack of knowledge of the method. However, there were a number of excellent answers in which, better candidates demonstrated good confidence in exposing the weaknesses of the BCG model and suggesting possible alternative solutions to performance management at ENT.
 
Requirement (c) requested an evaluation of the divisional managers’ remuneration package. The candidates were asked to consider the link with the current divisional performance system and also the BCG analysis. The answers to this part often represented the candidate’s best work on this question although few candidates displayed a clear grasp of the scenario. Better candidates noted the problem of applying a uniform package based on cost performance where they noted from the BCG analysis that some divisions showed growth or growth prospects that required a different style of management. They also commented on the lack of alignment of the divisional performance measure with the cost-based bonus element of the package.

Question Three
This question applied Fitzgerald and Moon’s building block model to an accountancy practice (APX). The structure of the question was straight-forward with firstly, a description of the model then an application of the model in evaluating APX’s performance management system and finally, detailed improvements that would arise from that evaluation.
 
It was sad to note how many of the candidates, who attempted this question, did not even know the names of the three building blocks. This demonstrated inadequate preparation for the examination.It had a knock-on impact to the remaining parts of the question as often only the dimensions aspect of the model was discussed.
 
Requirement (a) asked for a brief description of the model and often only the dimensions aspect was correctly identified. Within each of the building blocks, weak knowledge of the aspects emphasised by the model were demonstrated. For example, very few candidates appreciated the distinction between the upstream determinants of performance and the downstream results of performance within the dimensions block.
 
Requirement (b) requested an evaluation of APX’s performance management system using the model. Many candidates offered an irrelevant assessment of APX’s performance. To illustrate why this is irrelevant consider the analogous question ‘evaluate the accounting system at company X’ and then consider the response, ‘ Company X is performing well with profit increasing by 10% to $100m in the last year.’ The response does not address the question which is about the system and not the performance. Many candidates only evaluated the performance measures with little comment given to the standards applied to these or the reward system at APX.
 
Requirement (c) sought suggestions for improvements for APX from the analysis in the previous parts. Better candidates had read the full requirement and so held back from offering improvements to the faults recognised in part (b) until the answer to this part. Again, answers were limited due to the poor quality of responses to the earlier parts although some candidates offered valuable practical ideas to the management at APX.