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Syllabus F: Performance measurementPerformance MeasurementROIResidual IncomeBalanced Scorecard

ACCA · Question 38 · Syllabus F: Performance measurement

SECTION B - MULTI-TASK QUESTION 3 (PERFORMANCE MEASUREMENT)

Scenario: EcoTransit operates a fleet of electric city buses.
Financial Data for the year:

  • Revenue: $8,000,000
  • Operating Profit (PBIT): $1,200,000
  • Capital Employed: $6,000,000
  • Cost of Capital: 10%

Non-Financial Data:

  • Total bus journeys scheduled: 50,000
  • Journeys arriving on time: 46,000
  • Total passenger complaints: 1,500

Calculate/Identify the following 5 items:

  1. Return on Investment (ROI) %
  2. Residual Income (RI) $
  3. Operating Profit Margin %
  4. On-time arrival rate %
  5. Under which Balanced Scorecard perspective would 'Passenger Complaints' be monitored?

Select the option that correctly identifies all 5 answers.

Answer options:

A.
  1. 15%, 2. $400,000, 3. 20%, 4. 92%, 5. Internal Business Process.
B.
  1. 20%, 2. $600,000, 3. 15%, 4. 92%, 5. Customer Perspective.
C.
  1. 20%, 2. $120,000, 3. 15%, 4. 8%. 5. Customer Perspective.
D.
  1. 133%, 2. $600,000, 3. 15%, 4. 92%, 5. Learning and Growth.

How to approach this question

1. ROI = PBIT / Capital. 2. RI = PBIT - (Capital * Cost of Capital). 3. Margin = PBIT / Revenue. 4. On-time = On-time journeys / Total journeys. 5. Complaints relate to how the user views the service.

Full Answer

B.1. 20%, 2. $600,000, 3. 15%, 4. 92%, 5. Customer Perspective.✓ Correct
Part 1: ROI = ($1,200,000 / $6,000,000) × 100 = 20%. Part 2: Imputed interest = 10% × $6,000,000 = $600,000. RI = $1,200,000 - $600,000 = $600,000. Part 3: Operating Profit Margin = ($1,200,000 / $8,000,000) × 100 = 15%. Part 4: On-time rate = (46,000 / 50,000) × 100 = 92%. Part 5: Passenger complaints directly measure customer satisfaction, which falls under the Customer Perspective of the Balanced Scorecard.

Common mistakes

Calculating Asset Turnover instead of ROI, or calculating the delay rate (8%) instead of the on-time rate.
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