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Professional Pilot Paper – Options module

Advanced Performance Management

Time allowed Reading and planning: Writing:

15 minutes 3 hours

This paper is divided into two sections: Section A – THIS ONE question is compulsory and MUST be attempted Section B – TWO questions ONLY to be attempted Do NOT open this paper until instructed by the supervisor. During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper P5

Section A: THIS ONE question is compulsory and MUST be attempted

1

Mackerel Contracting (Mackerel) is a listed defence contractor working mainly for its domestic government in Zedland. You are a consultant brought in to advise Mackerel on a number of issues facing the company. The board need a report from you: • outlining the external factors affecting the profitability of a potential new contract and how these factors can be built in to the choice of the design budget which is ultimately set, • advising on a proposed change to the company’s information systems and • advising on suitable performance measures for Mackerel. Firstly, Mackerel is currently considering tendering for a contract to develop a new armoured personnel vehicle (APV) for the army to protect its soldiers during transport around any future battlefield. The invitation to tender from the government specifies that the APV should take two years to develop and test, and be delivered for a full cost to Mackerel of no more than $70,000 per unit at current prices. Normally, government contracts are approximately priced on a cost plus basis with Mackerel aiming to make a 19% mark-up. At the last briefing meeting, the institutional shareholders of Mackerel

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