EXAMINATION : INTERMEDIATE LEVEL

SUBJECT : PERFORMANCE MANAGEMENT

CODE : B5

EXAMINATION DATE : FRIDAY, 3RD NOVEMBER, 2023

TIME ALLOWED : THREE HOURS (9.00 A.M. – 12.00 NOON)

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GENERAL INSTRUCTIONS

2. There are TWO Sections in this paper. Sections A and B which comprise a total of
SIX questions.

3. Answer question ONE in Section A

4. Answer ANY FOUR questions in Section B.

4. In total answer FIVE questions.

5. Marks are shown at the end of each question.

6. Show clearly all your workings in respective answers where applicable.

7. State clearly any assumptions made in your answers.

8. Graph papers will be provided, where applicable.

9. This question paper comprises 7 printed pages.

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SECTION A
Compulsory Question
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QUESTION 1

Dakau Company has gathered the following information for budgeting of the quarter ending
31st March 2024:

Item TZS.
Sales 270,000,000
Purchases 225,000,000
Salaries and Wages 97,000,000
Rent 5,000,000
Supplies 4,000,000
Insurance 1,000,000
Other cash expenses 6,000,000

A cash balance of TZS.18,000,000 is planned for 31st December 2023. Accounts receivable
are expected to be TZS.30,000,000 on 31st December 2023. All but 0.5% of the receivable
balance on 31st December 2023 will be collected in the quarter ending 31st March 2024. The
company’s sales collection pattern indicates that 95% of sales are collected in the quarter of
sales and 5% in the quarter following the quarter of sales. Accounts payable will be
TZS.15,000,000 on 31st December 2023 and will be paid during the quarter to 31st March
2024. The company’s purchases payment pattern is such that 75% are paid for in the quarter
of purchase and the remaining amount in the quarter after purchase. Expenses are paid in the
quarter in which they are incurred.

REQUIRED:

(a) Prepare a cash budget for the quarter ending 31st March 2024. (10 marks)

(b) Alice, the Director of Finance, suggests that you should consider breaking down the
cash budget to show monthly payments and receipts projections. Comment on the
usefulness of cash budget and the relevance of the breakdown suggested by Alice.
(6 marks)

(c) Alice further suggests that Just in Time (JIT) could improve the cash flows of the
business. Evaluate the relevance of JIT on cash budgeting. (4 marks)
(Total: 20 marks)

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SECTION B
There are FIVE questions. Answer ANY FOUR questions
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QUESTION 2
(a) Kidulile Ltd has been asked to submit a bid for building a special purpose workshop
for Karakana Ltd. It has been estimated that the construction of the factory will
require:
1. 20 tonnes of material A
2. 100 tonnes of material B
3. 50 tonnes of material C
4. 8 tonnes of material D
5. 192,000 direct labour hours
6. The use of special equipment

The following information is also available:

(i) The company has adequate stocks in hand of material A and this material is
used for many purposes by the company. Existing stocks were bought for
TZS.8,000,000 per tonne but presently the material can be replaced at
TZS.9,000,000 per tonne.
(ii) The company presently has a stock of 100 tonnes of material B on hand.
Although it originally cost TZS.1,000,000 per tonne and would cost
TZS.1,200,000 per tonne now, if not used on this contract it will have to be
sold for TZS.500,000 per tonne.
(iii) The company also has a stock of 50 tonnes of material C on hand. This
material originally cost TZS.2,000,000 per tonne but would cost
TZS.3,500,000 per tonne now. If not used on this contract, it could be used
immediately on another contract in place of material E. This material would
otherwise have to be bought at TZS.2,500,000 per tonne.
(iv) The company has no stock of material D on hand; its present purchase price is
TZS.3,000,000 per tonne.

(v) The wage rate is TZS.4,000 per hour. On average, because of weather
conditions, employees work 80% of the time for which they are paid. There
are enough idle hours to accomplish this job for the 120 weeks during which
the construction will be done. If the contract is not undertaken, 40 direct
labour employees would have been redundant, in which case the company
would have to pay each of them TZS.4,000. Each employee works 40 hours a
week.
(vi) Special handling equipment would have to be hired for TZS.10,000,000.
(vii) Specialized brick making equipment, purchased by the company three years
ago would have to be used. Although this equipment has a remaining useful
life of two years, it is unlikely that it would be used on any other contract. Its
disposal value is TZS.16,000,000 but is estimated at zero in a year’s time.

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 (viii) Kidulile will assign one head of department and one site supervisor to oversee
the production on a full time basis. These will continue to receive their usual
salaries during the entire period of the contract at a rate of TZS.3,500,000 and
TZS.2,000,000 per month respectively during the 30 months of the contract. In
addition to this, they will also be entitled to a special weekly allowance of
TZS.500,000 and TZS.300,000 respectively for each of the 120 weeks of the
project.

REQUIRED:
Calculate the minimum bid which Kidulile Ltd could make for the contract and state
any two factors that would determine the amount of mark-up that the company can put
on the bid. (12 marks)

(b) Explain the “difference between “uncertainty” and “risk” as used in decision theory”,
clearly indicating the decision-making approaches suitable under each. (8 marks)
(Total: 20 marks)

QUESTION 3

Azori Limited produces Mama Lishe, a product used in bakery products. The actual and
budgeted quantities (in kgs) of materials required to produce Mama Lishe and budgeted prices
of materials in August 2023 are as follows:

Material Actual quantity (kg) Budgeted Quantity (kg) Budgeted Price (TZS.)
E 24,080 25,200 200
P 15,480 16,800 450
B 36,120 33,600 150
T 10,320 8,400 300

REQUIRED:

(a) Calculate the total material efficiency variance for August 2023. (5 marks)
(b) Calculate the total material yield and mix variance for August 2023. (10 marks)
(c) What conclusion would you draw from the variance analysis? (5 marks)
(Total: 20 marks)

QUESTION 4
HQ Bank is one of the most popular banks in the country. The bank’s vision is to be the
leading and most innovative financial solutions provider in Tanzania, recognized for
excellence in customer service, technological advancement, and contributing to the socio-
economic development of the country. The bank has been facing challenges in achieving its
strategic objectives and aligning its operations with its long-term goals due to intense
competition from local and foreign banks; as a result of banking sector reforms since 1991 by
dismantling state ownership and allowing foreign banks entry into the banking sector.
Recently, the bank management implemented the Balanced Scorecard (BSC) framework to
help address these issues.

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 Extracts from HQ’s Bank’s Balanced Scorecard (BSC) are shown below:
Performance Perspective
2022 2022
Financial Perspective Actual Target
Return on Investment (ROI) 14% 15%
Interest income (TZS) 750million 700million
Net interest margin (%) 24% 25%

Customer perspective
Number of first-time homebuyers given a mortgage by HQ Bank 96,000 90,000
Number of complaints (per 1,000 customers) 1.8 2.5

Internal processes perspective

A number of business processes within the HQ Bank re-
engineered and simplified 120 110
Number of new services made available through mobile 2 5
banking
Incidences of fraud on customers’ accounts or credit card (per
1,000 customers) 5 15
Learning and growth perspective
Number of colleagues trained to provide advice to SMEs 1,200 1,300
Number of hours (paid for by HQ Bank) used to support
community projects 800,000 750,000
Number of community organizations supported (either through
funding or by volunteers from the HQ Bank) 8,500 8,000

REQUIRED:
(a) As a Management Accountant of the HQ Bank explain the concept of the “Balanced
Scorecard”. (4 marks)
(b) Explain why the balanced scorecard approach to performance measurement is more
useful to measure performance for HQ Bank than a traditional approach using solely
financial performance measures. (8 marks)
(c) Using all of the information provided, including HQ Bank’s vision and values, discuss
the performance of HQ Bank in 2022.
Note: Use each of the four headings of the balanced scorecard to structure your
discussion. (8 marks)
(Total: 20 marks)

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QUESTION 5
(a) The Managing Director (MD) of Geita Products has recently read an article about
management accounting, which stated that ‘understanding cost classifications and cost
behaviour is essential to interpreting a management accounting information’. He has
asked you to prepare a briefing note for distribution to the management team on the
subject of cost classifications and cost behaviour.

REQUIRED:
Describe the main classifications of cost (Direct and Indirect, Product and Period
Relevant and irrelevant, including examples to illustrate your answer. (6 marks)

(b) Gikaro sounds Ltd produces two types of music systems, Amshaamsha and Tulivu.
You are able to ascertain the following data:
Activity data:
Usage measures Tulivu Amshaamsha Total
Units produced per year 5,000 50,000 55,000
Prime costs (TZS.) 39,000,000 369,000,000 408,000,000
Direct labour hours 5,000 45,000 50,000
Machine hours 10,000 90,000 100,000
Production runs 10 5 15
Number of material movements 120 60 180

Activity cost (overheads) data:

Activity Cost (TZS)
Setups 60,000,000
Materials handling 30,000,000
Power 50,000,000
Testing 40,000,000
Total 180,000,000

REQUIRED:
(i) Calculate the unit cost of each product using Machine hours as an overhead
absorption basis. (6 marks)
(ii) Calculate the unit cost of each product using the Activity Based Costing
(ABC). (8 marks)
(Total: 20 marks)

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QUESTION 6

(a) Comment on the “role of flexible budgeting in performance management” of a

manufacturing firm. (6 marks)

(b) Briefly explain any four (4) objectives of budgetary planning and control system in an
organization. (4 marks)

(c) Distinguish between “Marginal Cost” and “Differential Cost”. (4 marks)

(d) Songwe health centre specializes in the provision of sports/exercise and medical/dietary
advice to clients. The service is provided on a residential basis and clients stay for
whatever number of days suits their needs. Budgeted estimates for the next year ending
30th June are as follows:

1. The maximum capacity of the centre is 50 clients per day for 350 days in a year.

2. Clients will be invoiced at a fee per day. The budgeted occupancy level will vary
with the client fee level per day and is estimated at different percentages of
maximum capacity as follows:

Client fee per day Occupancy Level Occupancy as a

percentage of
maximum capacity
TZS.18,000 High 90%
TZS.20,000 Most likely 75%
TZS.22,000 Low 60%
3. Variable costs are also estimated at one of the three levels per client day. The high
most likely, and low levels per day are TZS.9,500, TZS.8,500 and TZS.7,000
respectively. The range of cost levels reflect only the possible effect of the
purchase prices of goods and services.

REQUIRED:

(i) Prepare a summary which shows the budgeted contribution earned by Songwe
Health Centre for the year ended 30th June for each of the above nine possible
outcomes. (4 marks)
(ii) State the client fee strategy for the next year to 30th June which will result from
the use of maxima decision rule. (2 marks)
(Total: 20 marks)

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