- 20 Marks
MA – Mar 2025 – L2 – Q1 – Performance analysis
Analyze VAL's 2024 performance in financial, internal efficiency, and external effectiveness using provided data.
Question
========== Question Title: MA – Mar 2025 – L2 – Q1 – Performance analysis
Level: LEVEL 2
Professional Bodies: ICAG
Programs: PROFESSIONAL PROGRAM
Subjects: Management Accounting
Topics: Performance analysis, Financial performance, Internal efficiency, External effectiveness
Series: MARCH 2025
Total Marks: 20
Question Tags: Performance analysis, Financial performance, Internal efficiency, External effectiveness, Revenue calculation, Profitability, Customer satisfaction, Operational efficiency
Question Short Summary: Analyze VAL’s 2024 performance in financial, internal efficiency, and external effectiveness using provided data.
——————————————————————— Question:
QUESTION ONE
Vovome Advisory Limited (VAL) began trading three years ago, on 1 January 2022. It specialises in the provision of expert advice to clients in accountancy, taxation and regulatory compliance. It has a team of professional advisers, each specialising in one of these three areas of advice.
VAL has a target for delivering its services to clients promptly. From the time the client asks for advice, VAL undertakes to provide a formal report to the client within 10 working days.
The following information relates to the financial year ended 31 December 2024:
i) The professional advisers are budgeted to work 220 days each year. They charge GH₵1,400 per day to new clients and GH₵1,200 to established clients.
ii) As a marketing measure intended to win new business, the advisers also give consultations to potential clients on a ‘no fee’ basis. These consultations, which are budgeted to take one day each, are accounted for as business development costs in the marketing budget.
iii) The professional advisers are also required to attend some ‘workshops’ with new clients who are having difficulties with implementing the advice that they have been given by VAL. These workshops, which are also given on a ‘no fee’ basis, are budgeted to last two days.
iv) VAL also has a help desk to provide client support. It responds to telephone and e-mail enquiries from all new and established clients.
v) The team of professional advisers is exactly 50. It is a policy of VAL to limit the team to 50, regardless of the volume of demand for its services.
vi) All professional advisers are paid a salary of GH₵100,000 per year. In addition, they are entitled to share equally in an annual bonus. The bonus is 50% of the amount by which fee income generated exceeds budget minus the revenue forgone as a result of having to give workshops for clients. This revenue forgone is assessed at a notional daily rate of GH₵1,200 per adviser/day.
vii) Operating expenses of the business, excluding salaries of the advisers, were GH₵3,100,000 in 2024. The budget for these expenses was GH₵2,800,000.
Other information:
| Budget 2024 | Actual 2024 | |
|---|---|---|
| Professional advisers, by category | ||
| Accounting | 15 | 10 |
| Tax | 20 | 20 |
| Compliance | 15 | 20 |
| Enquiries about seeking new advice | ||
| New clients | 2,600 | 2,200 |
| Established clients | 4,000 | 3,700 |
| Number of chargeable client days | ||
| New clients | 2,600 | 2,750 |
| Established clients | 5,100 | 5,500 |
| Average client days per job | 4 | 4 |
| Mix of chargeable client days | ||
| Accounting | 1,155 | 1,650 |
| Tax | 1,540 | 3,300 |
| Compliance | 1,155 | 3,300 |
The following are actual results for each of the three years 2022-2024
| 2022 | 2023 | 2024 | |
|---|---|---|---|
| Number of clients | 160 | 248 | 347 |
| Number of complaints from clients | 50 | 75 | 95 |
| Number of accounts in dispute | 10 | 7 | 5 |
| Support desk: Percentage of calls resolved | 86% | 94% | 97% |
| Percentage of jobs completed within 10 days | 90% | 95% | 98% |
| Average time to complete a job (days) | 12.6 | 10.7 | 9.5 |
| Chargeable client days | 7,200 | 7,750 | 8,250 |
| Number of consultations (business development) | 50 | 100 | 150 |
| Number of workshops given | 110 | 135 | 165 |
| Revenue (GH₵000) | 8,920 | 9,740 | ? |
| Net profit (GH₵000) | 1,740 | 1,940 | ? |
Required:
Using the information provided, analyse and discuss the performance of VAL for the year ended 31 December 2024, under the following headings:
a) Financial performance and competitiveness;
b) Internal efficiency; and
c) External effectiveness.
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