ACCA Performance Management (F5) Certification Practice Exam

Which of the following is a criticism of TPAR?

1. It focuses on long-term profitability

2. It is easy to apply in all circumstances

3. It concentrates on short-term performance

4. It does not consider fixed costs

The correct answer is: It concentrates on short-term performance

The choice highlighting the concentration on short-term performance aligns with a common criticism of TPAR (Target Profitability and Activity Reporting). TPAR can sometimes encourage a short-term focus because it emphasizes immediate performance metrics and outputs, rather than fostering a holistic view of profitability that incorporates longer-term strategic considerations. This short-term focus may lead managers to prioritize actions that boost immediate results at the expense of sustained organizational growth or long-term profitability. In contrast, TPAR aims to provide a clear picture of how current activities impact profitability, which can inadvertently lead to decisions that sacrifice future opportunities for short-term gains. This criticism emphasizes the potential risk of prioritizing short-term results might lead to neglecting long-term strategic initiatives that are essential for sustainable success. The other potential options do not precisely capture this critique. While TPAR may facilitate discussions around profitability over varying timeframes, the particular concern regarding a short mentality stands out as a significant limitation in its application.