Students often find the constructed response questions in Section C of the Performance Management exam challenging. The purpose of this article is to identify the reasons why sitting the Performance Management exam seems to cause such a problem for students and try and improve performance in the future.
As you are aware, Performance Management builds on the blocks of knowledge gained from sitting the Management Accounting (MA) exam. One of the reasons why problems arise is because once students have completed the Applied Knowledge exams and move on to the next level of exams this is often the first time that students have had to tackle long, written questions. No longer is it sufficient to simply learn material and churn out calculations. Although Performance Management still uses objective testing, the skills to answer the Section C constructed response questions become fourfold, with candidates being required to do all of the following:
Section C of the exam comprises of two 20 mark questions which can come from any of the syllabus areas C, D and E. The questions can also draw on the syllabus area A. You have 36 minutes to spend on each question and you need to ensure you don’t run over your time as you need to ensure you have time to answer Sections A and B.
When it comes to answering the constructed response questions, be sure that you are strict with your time allocation. If you are spending too long on one part of the question, it is either because you can't do it anyway (in which case move on and come back to it later) or you are saying too much and going beyond what the examiner expected of you. How much an examiner expects you to write is directly linked to the marks available and therefore the time available.
To spend half an hour, for example, on part (c) of a question, which is only worth five marks is madness: the examiner expected you to spend nine minutes on it. As well as allocating time to individual questions, you should allocate time to individual requirements in questions.
Remember: the requirement should always be the first thing that you look at in a question. What is the point in reading a scenario if you don't know what you are looking for? When you read each part of the requirement, highlight the 'content' - what the question is about, for example target costing, and the 'instruction' - what it is telling you to do. This helps you to focus your mind on answering the actual question rather than answering what you thought the question was going to ask you.
As regards the content, you have either studied the area and can tackle it, or not. This instruction could be a whole variety of verbs ranging from numerical requirements such as calculate, produce, derive and apply; or more wordy requirements such as describe, interpret, outline, compare, identify, discuss, explain, evaluate, suggest and justify. The possibilities are endless and the one thing you can be sure of is that the verb used has been carefully thought about by the examiner, obviously taking into account any restrictions imposed by the syllabus. If you don't read and understand the instruction carefully, then you will find that you are not actually answering the question. If you are not answering the question, then you are not earning marks. For example, being asked to justify the use of target costing as opposed to traditional absorption costing is different from being asked to explain target costing. Each of the common exam 'instructions' are dealt with below.
Calculate and derive
Some instructions are easier to understand than others. For example, there can be no confusion as to what the word 'calculate' means; if you are asked to calculate a number you just have to work it out. Similarly, 'derive' should pose little problem. In the context of Performance Management, you might have to derive an equation showing the relationship between price and quantity or derive a target cost for a product. Being able to 'derive' a figure sometimes requires more than simply being able to calculate a figure, as a candidate may have to use their powers of deduction to derive something. However, the mechanics of 'deriving' or 'calculating' would actually be very similar in most cases.
Estimate
If a question asks you to 'estimate' a figure it suggests that the answer cannot be calculated with certainty. For example, if you are asked to estimate the time taken to produce a batch of items where an 80% learning curve has been shown to exist, you are making an estimate rather than an exact calculation. This is due to the fact that the learning rate itself reflects what a business THINKS will happen but it is not certain until it has happened. Once again, however, as with a 'derive' instruction, the mechanics of 'estimating' are much the same as 'calculating'. There is often a set approach to the question, for example, tabular or algebraic, in the case of learning curves.
Why, then, do candidates often still perform poorly on the numerical parts of the Performance Management exam? Usually poor numerical answers often arise merely as a result of candidates failing to study the whole syllabus well enough in the first place. Anyone who thinks they can question spot exam questions for a particular sitting, based on topics that have been examined or not examined in recent diets, is sadly mistaken. Certain publications publish 'top tips' which should most certainly be ignored.
If exams were this predictable, they would not be a true test of candidates' knowledge as students would then simply be able to learn distinct areas of the syllabus and ignore the rest. You need to study all of the Performance Management syllabus or you are not giving yourself a real chance.
The other reason why candidates score poorly on numerical questions is because they approach the question in a disorganised fashion, with no logical progression through the calculations and no clear, numbered workings. You should go into the exam with a metaphorical management accounting toolbox, full of all the tools that are going to help you answer the questions. So, for example, if it is a linear programming question, go in your toolbox and pull out your five-step guide for linear programming:
To give another example, if it is a pricing question that can be solved algebraically, pull your pricing tool out of your management accounting toolbox and follow your five-step guide:
The problem with Performance Management is that students go into the exam with only a few tools in their 'box'. If you put the work in, you will reap the rewards.
Requirements that necessitate candidates writing in a coherent, organised manner are also a big issue in Advanced Performance Management. Candidates are not penalised for the fact that English may be their second language, and I do not think it is this that causes the real problem. The issue is often that candidates appear unable to grasp what to write and how much to write, i.e. they don't understand the instruction.
Further clarification on of all the main instructions you would expect to find in a Performance Management exam is given below:
Describe
When you are asked to 'describe' something you are expected to give some sort of narrative about it. For example, if you were being asked to describe suitable non-financial performance indicators for a hospital, you would be expected to describe indicators such as number of patient complaints, bed occupancy rate, number of admissions per employee. It would not be enough to merely 'list' these indicators. You would have to go a step further and describe how they might be calculated. As always, you should be guided by the mark allocation in deciding how much time you spend answering the requirements and therefore what level of detail you should go into.
Interpret
When you are asked to 'interpret' something, for example, the balanced scorecard approach, you are being asked to explain the approach in your own words and give your opinion about it. It is quite a high-level requirement that will usually be reflected with higher marks than, for example, 'outline'.
Outline
As suggested previously, this is quite a straightforward, low-level requirement. An outline should be fairly brief and well organised. It is simply an overview, without the level of detail that would be required by the 'describe' instruction, for example. Since it requires less detail, you could be asked to outline a bigger topic than you would have time to describe. In Section D of the Study Guide, you are asked to 'outline the objectives of a budgetary control system'. This is something that could be discussed at length but the Study Guide is clear in that it only expects your knowledge to be sufficient enough to outline.
Compare
The instruction 'compare' requires you to discuss similarities between two or more things and draw conclusions. For example, if you are asked to compare product costs using activity-based costing as opposed to traditional costing, you need to say why the costs are different. This will involve looking in detail at the activity-based costs and ascertaining the reason why the overheads absorbed into one product are, for example, higher under activity-based costing than traditional absorption costing. In this kind of question, ‘comparing’ needs to be preceded by a degree of analysis.
Identify
This means to pinpoint and list. It can be quite a simple requirement, requiring knowledge rather than skill. For example, in the Study Guide, it states that candidates must be able to 'identify and explain the interrelationship between price, mix and yield'. This simply requires candidates to understand what the relationship is and then state it and explain it. Sometimes, however, candidates may have to identify points from within a question scenario, and this can be a more demanding requirement because it requires more skill.
Discuss
This is a higher level skill and requires a candidate to give their own thoughts on a subject, supporting it with facts and logical reasoning.
For example, you could be asked to discuss the effect that variances have on staff motivation. You would need to discuss the fact that they can be demotivational, for example, if they lead to managers being assessed for cost increases that were beyond their control. The material price variance may be adverse but this could be because the market price for materials increased. This will be demotivational unless the price variance is broken down into its controllable and uncontrollable aspects, i.e. planning and operational variances are calculated.
The opinions you give in any discussion must be sound and well-reasoned. It is no good saying that variances are demotivational without explaining why. Also, you are expected to look at both sides of the story. The 'discuss' instruction is always a good test of candidates real understanding.
Explain
This means that you need to give a reason for something; say why it is as it is rather than just stating that it is. It is a very common requirement and appears many times in the Study Guide. It requires understanding as well as knowledge.
Evaluate
This requirement would not be expected to arise much in Performance Management. Most of the evaluation work is reserved for Advanced Performance Management. If you are asked to evaluate something, you are being asked to decide on the merits of it. It is most definitely a higher level skill.
Suggest
The use of the word 'suggest' itself suggests that there may be more than one answer to the question being asked. It means give a suitable idea or solution, bearing in mind that there will probably be more than one. For example, you might be asked to suggest how a target cost gap can be closed. Your answer could only ever be a suggestion as there will be many possible ways to close a cost gap.
Justify
With this requirement, you need to tell the reader why a particular answer or position makes sense. For example, if you had to justify the use of throughput accounting within an organisation, you would have to mention the need to maximise the use of bottlenecks, the introduction of just-in-time, the recognition that material costs are the only variable costs presuming this was in fact the case (otherwise you would struggle to justify the use of throughput accounting in the first place).
Narrative questions
Answering narrative questions requires a structured approach using clear paragraphs and headings where possible. Using the Word item type in CBE you should jot down a very short answer plan of bullet points and then these bullet points essentially become the headings to your answer. Each paragraph should make one clear point and state why that point is relevant to the company in the question.
Numerical questions
Answering numerical questions also requires a structured layout so that your calculations can be followed. Any workings should be clearly labelled. Using the spreadsheet tool with its functionality can allow you to work through calculations quite quickly and save you time in the exam.
Contrary to popular belief, Performance Management is not a disproportionately hard exam. It does require students to work hard in order to gain knowledge of all areas. All constructed response questions require the organised approach set out above, whereby you highlight the content and instruction of all requirements at the beginning of each question. Keep referring back to them, particularly on narrative questions, to make sure that you are not going off on a tangent. And remember, practice makes perfect. Keep practising past questions in the CR Workspace on ACCA’s website until your approach and layout becomes second nature, leaving you with plenty of time to think about the issues in the question.
Written by a member of the Performance Management examining team