To ensure you select and use the relevant information in the case study scenario for each individual requirement, you should follow these steps:
1st:Reading
In your exam, before reading the case study scenario, you first need to read the requirements（问题）.This will give you a clear focus when reading the scenario.（先大概扫一遍案例题干和问题，带着问题去阅读理解以便更好理解问题）
2nd:Plan Writing（读完别急着写，规划下怎么写，列个提纲）
It is useful to break down the requirements.Typically, each question requirement includes:
- The topic of the question: what topic does the question cover?
- The focus: which specific part of the topic is this requirement about?
- The instruction verb: what do you need to do?
（写答案时按照上述三个内容展开答案）

Section A – This ONE question is compulsory and MUST be attempted
1 Company information
Arkaig Manufacturing （Arkaig）is a world-leading, listed manufacturer of production machinery（生产生产设备）for other industries.It has customers in the mining（采矿）, cement（水泥）and chemicals（化工）sectors（行业）and seeks to provide them with the equipment, software and service for their products.
The aim of Arkaig is ig imaximise shareholder wealth by providing world-class, tailored（定制）automation solutions, which use technology innovatively, show improved machine downtime（停机时间）and reduced energy consumption for our customers.’
This is supported by an entrepreneurial culture among all employees who should ‘treat the business as if they owned it’.

Strategic internal performance reporting
There has been criticism of the business’ current performance reporting by one of the directors at a recent board meeting.However, the chief executive officer （CEO）believes that the reporting system, which he put in place two years
ago, is an excellent one.（CEO对presenting information有意见）
In preparation for the next board meeting, the CEO needs an evaluation of the current report.As an example, a recent report used by the board for its strategic review is given in Appendix 1.The CEO stressed that it was the report and not the performance of the business which should be evaluated.（强调了，evaluation of report，not performance）

Economic value added
Another criticism of the performance management of Arkaig was that it lacked an over-arching（包罗万象）measure of performance.
As a result, the CEO is considering the introduction of economic value added （EVA™）to replace return on capital employed （ROCE）as a principal performance measure.The CEO wants to present this idea at the next board meeting and so needs an illustrative calculation of EVA™ along with a brief explanation of its benefits as a replacement for ROCE.The data in Appendix 2 should be used for the calculation.
Performance hierarchy
The earlier work requested focuses on the strategic level of the organisation and the CEO is keen to ensure that the other levels of the organisation （tactical and operational）do not get ignored in this discussion.However, before undertaking any specific work, he wants to make a presentation at the next board meeting.
Therefore, he wants you to provide him with a brief description of the nature of the information required for performance measurement at these three different levels and explain how this information is influenced by the extent of planning and controlling activity at each of the levels of the performance hierarchy.He wants examples which would be relevant to Arkaig to illustrate（举例）these points in order that the presentation is made more concrete for the directors.He will then prepare the slides for the presentation himself.

Value chain
In order to analyse the operational aspects of Arkaig, the CEO has employed a consultant to produce a value chain analysis （Appendix 3）.The value chain analysis has highlighted certain critical activities within Arkaig where there was concern about the performance management aspects.The CEO would like you to assess the performance management implications of the consultant’s comments on the critical areas identified for Arkaig.

Required:
It is now 1 September 20X5.
Write a report to the chief executive officer （CEO）of Arkaig to respond to his instructions for work on the following areas:
（i）the performance reporting at Arkaig; （11 marks）
（ii）the introduction of economic value added （EVA™）;
（15 marks）
（iii）the information requested on the performance hierarchy;
（10 marks）
（iv）the value chain analysis prepared by the consultant.
（10 marks）
Professional marks will be awarded for the format, style and structure of the discussion of your answer.（4 marks）
（50 marks）

Appendix 1
Arkaig: Strategic performance report
Year ended 30 June 20X5

Commentary:
1.The company has increased its return on capital employed on the previous year and exceeded the industry benchmark.
2.Revenue has fallen by 2·9% on the previous year but the order book has grown by 0·7%, indicating sustained sales levels going forward.
Question
3.The net profit margin has increased to 4·9%, again exceeding the industry benchmark of 4·6%.
4.The company has continued to emphasise（强调）its entrepreneurial culture to its employees.

Appendix 2
Economic value added
The following details have been gathered for the 20X5 EVA™ calculation:
1.The operating profit of Arkaig was $3,175m.This includes a depreciation charge of $1,780m.
2.Amortisation charges of $95m in the year have been incurred.
3.The corporation tax rate is 25%.Tax of $694m was paid in the year.
4.The company has spent $90m this year and each year for the previous 10 years on long-term brand building.
5.The economic depreciation for the year is estimated to be $1,907m.
6.This year and each year for the previous 10 years, economic depreciation has included a $10m write-down of the value of brand building.
7.Research and development expenditure of $705m was incurred in the period leading to an economic asset of $4,233m at the year end.
8.Interest paid in the period was $213m.

Appendix 3
Value chain analysis
Primary activities:
– Inbound logistics （receiving, handling and storing inputs）– Warehouse and distribution operations are controlled by an old information system which feeds into operations management information.
– Operations – Not a critical area of concern at present.
– Outbound logistics （delivering the product to customers）– Warehouse and distribution operations are controlled by an old information system which is fed from operations management information.
– Marketing and sales – Not a critical area of concern at present.
– After-sales service – This is an important area of revenue generation for Arkaig.However, certain directors are worried about over-focusing on this activity.
Secondary activities:
– Procurement – Not a critical area of concern at present.
– Technology development – Not a critical area of concern at present.
– Human resource management – Arkaig aims to recruit, retain and motivate staff who can fit with its entrepreneurial culture.
– Firm infrastructure （planning, finance, quality control, legal matters）– Not a critical area of concern at present.
Note: The areas noted as not critical do not require comment.

Answer
1
To: The CEO of Arkaig Manufacturing （Arkaig）
From: An Accountant
Date: September 20X5
Subject: Performance reporting and management issues at Arkaig
（写的时候注意结构）
Mind set

This report evaluates the current performance report used by the board for strategic review.Next, the use of economic value added （EVA™）at Arkaig is illustrated and its use compared to return on capital employed （ROCE）.Then, the differences between performance measurement and management at the different levels of the management hierarchy are discussed with reference to Arkaig.Finally, the implications of a value chain analysis for performance management are assessed.（Introduction很重要，不光写给考官看，也写给自己看）

（i）Strategic performance reporting
The current report has a number of strengths and weaknesses.These will be discussed according to whether the report:
– addresses the overall aims of the business;
– contains appropriate information for decision-making; and
– is well-presented.
The primary aim of Arkaig is to maximise shareholder wealth by providing suitable products for its customers.These products should have a number of qualities: be world-class; tailored; use technology innovatively; show improved machine downtime; and reduce energy consumption for customers.
This should be supported by an entrepreneurial culture among the employees.

Overall, the report contains a number of common financial measures but they are only loosely connected to the stated mission.
The following problems are noted about how the report measures the achievement of the mission:
1.There is no direct measure of shareholder wealth in the report.The overall measure of performance for shareholders is provided through the absolute profit after tax and ROCE.It usefully benchmarks the net profit margin and ROCE with industry averages.However, these measures are only indirectly linked to value.The suggestion to use EVA™ is, therefore, appropriate for Arkaig.

2.The supporting pillars（支柱）of the mission are all qualities of the products produced by Arkaig.The report does not measure any of these individually.There is an indirect measure of customer attitude through the revenue growth figure but without competitor comparison or a market share, it is not possible to draw a conclusion about any of the qualities of the products.
These elements relating to the products are difficult to measure overall as they are likely to be dependent on each product line individually.For each in turn:
（a）The ‘world class’ nature of the offering could be measured by market share or customer survey responses.
（b）The tailored nature of the products could be measured by the cost of individual design for each installation or customer survey responses.
（c）Technological innovation could be measured through comparison of features with the competition or alternatively, by number of industry awards won.
（d）Machine downtime and energy consumption requires specific testing of each product line.

3.There is no measure of the employee culture although there is a comment that it is being achieved but this lacks evidence.
The report shows the financial performance by sector as well as in total for the business and the provision of some industry averages is useful in benchmarking performance.
For planning purposes, the lack of external information about customers and competitors makes some of the numbers difficult to interpret.For example, there is no indication whether the fall in revenue is due to general economic conditions or specific faults with Arkaig.
For control purposes, there is previous year information given but not sufficient to establish a trend （which requires at least three years of information）.There is no indication of whether the business is meeting its budgets through the provision of variances.
In terms of presentation, the report is clear and it avoids overloading the reader with data.It uses terms which would be easily recognisable to those used to reading accounts.It is helpful that a narrative commentary is provided.However, often the commentary does not go beyond restating the figures in the table.It should provide the significant explanations for each of the major changes commented upon.For example, by stating why the ROCE has exceeded the industry average.
The commentary is an appropriate place to handle the less quantitative aspects of performance such as innovation and employee culture but it does not offer anything substantive.For example, it would be helpful to state what mechanisms are in place to emphasise the entrepreneurial culture （such as percentage of employees who own shares and the total proportion of equity owned by staff）.