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ACCA Performance Management (PM) 2023 past questions and answers

This 2023 ACCA Performance Management (PM) set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2023 set with instant marking.

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Sample ACCA Performance Management (PM) 2023 questions

1. A manufacturer uses activity-based costing. Annual set-up costs of £180,000 are driven by 60 batches, while inspection costs of £120,000 are driven by 240 inspections. Product R is made in 30 batches and requires 80 inspections during the year. What overhead cost should be assigned to Product R?
  1. £120,000
  2. £150,000
  3. £130,000
  4. £100,000

Answer: C. £130,000

Set-ups: £180,000 × 30/60 = £90,000. Inspections: £120,000 × 80/240 = £40,000, giving £130,000. The main distractor £150,000 incorrectly allocates inspection costs using batches rather than inspections.

2. A factory makes a product that sells for £480 per unit. Direct material is £180 per unit and is the only cost treated as variable under throughput accounting. Each unit uses 30 minutes of the bottleneck resource. The factory's operating cost is £120 for each hour the bottleneck is available. Using throughput accounting ratio = throughput per bottleneck minute ÷ operating cost per bottleneck minute, what is the ratio?
  1. 5.0
  2. 4.0
  3. 2.5
  4. 7.5

Answer: A. 5.0

Throughput per unit is £480 − £180 = £300, or £10 per bottleneck minute. Operating cost per minute is £120/60 = £2. The ratio is £10/£2 = 5.0; using all production costs as variable would understate throughput.

3. A company needs 4,000 components. Making each component would use materials costing £14, labour costing £8 and variable overhead of £3. A further £6 of fixed overhead is allocated per unit but would continue whichever option is chosen. A supplier offers the components for £27 each. There is no alternative use for the capacity. Which decision minimises relevant cost, and by how much in total?
  1. Buy; save £8,000
  2. Make; save £8,000
  3. Buy; save £24,000
  4. Make; save £24,000

Answer: B. Make; save £8,000

Relevant make cost is £14 + £8 + £3 = £25 per unit; the unavoidable allocated fixed overhead is irrelevant. Buying costs £27, so making saves £2 × 4,000 = £8,000. Including the £6 allocated fixed cost would wrongly favour buying.

4. A business has 2,000 machine hours available, and machine hours are the only limiting factor. Product M earns contribution of £48 per unit and uses 2 machine hours. Product N earns contribution of £40 per unit and uses 1.25 machine hours. Demand for both products exceeds the available capacity. Which product should be prioritised to maximise contribution?
  1. Product M, because it earns the higher contribution per unit
  2. Either product, because both earn positive contribution
  3. Product M, because it uses more machine hours per unit
  4. Product N, because it earns the higher contribution per machine hour

Answer: D. Product N, because it earns the higher contribution per machine hour

M earns £48/2 = £24 per machine hour; N earns £40/1.25 = £32 per machine hour. N should be prioritised. Comparing contribution per unit, rather than per limiting-factor hour, gives the wrong ranking.

5. A company is deciding whether to launch a service. If demand is high (probability 0.6), the launch will earn £80,000; if demand is low (probability 0.4), it will lose £20,000. Rejecting the launch gives a certain profit of £32,000 from an alternative use of resources. Using expected monetary value, what should the company do?
  1. Reject the launch; its expected value is £32,000
  2. Launch; its expected value is £56,000
  3. Launch; its expected value is £40,000, which exceeds £32,000
  4. Reject the launch; the possible loss makes the launch's expected value negative

Answer: C. Launch; its expected value is £40,000, which exceeds £32,000

Launch EMV = (0.6 × £80,000) + (0.4 × −£20,000) = £40,000, which exceeds the certain £32,000 alternative. The £56,000 distractor omits the probability-weighted loss outcome.

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