Drill 25 ·
AP Business with Personal Finance: Measuring Performance Using KPIs Drill 25 is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.
A co-working space reads three KPIs against monthly targets and reports the result to its owners; uses an invented company and original figures.
Pinehaven Workspaces rents desks in a shared co-working office. Each month the manager compares three key performance indicators (KPIs) against the targets the owners set. The variance column shows actual minus target: a positive number means the KPI beat its target, and a number in parentheses means it fell short.
Pinehaven Workspaces: monthly KPIs versus target
| KPI | Actual | Target | Variance (actual - target) |
|---|---|---|---|
| Desks occupied (of 200) | 150 | 160 | (10) |
| Member retention rate | 92% | 85% | 7% |
| Monthly revenue | $48,000 | $50,000 | ($2,000) |
Question 1. According to the table, which KPI beat its target this month?
Explanation: Q25.1: Member retention rate (B) beat its target: actual 92% versus a target of 85%, a positive variance of 7%. Desks occupied (A) shows a variance of (10), below target. Monthly revenue (C) shows ($2,000), also below target. So choice D is wrong because retention did beat target.
Question 2. The 85% figure that Pinehaven set in advance as the level it wanted member retention to reach is best described as a:
Explanation: Q25.2: A target (C) is a planned performance level set in advance, which is exactly what the 85% retention figure is. A variance (A) is the difference between actual and target, reported in the last column, not the planned level itself. A liability (B) is something the firm owes and is unrelated. A dividend (D) is a distribution of profit to owners, also unrelated.
Question 3. Monthly revenue came in at $48,000 against a $50,000 target. What was the actual revenue as a percent of target? Round to the nearest whole percent.
Explanation: Q25.3: Percent of target = actual / target = $48,000 / $50,000 = 0.96 = 96% (A). Choice B, 104%, would apply if actual had exceeded target by the same gap, which it did not. Choice C, 92%, is the retention rate from another row, not this calculation. Choice D, 4%, is the shortfall percentage, not actual as a percent of target.
Question 4. The owners' main goal this quarter is to keep existing members from leaving. Based on the KPIs, why can the manager report that the firm is performing well on that specific goal?
Explanation: Q25.4: The goal is keeping existing members, and member retention rate is the KPI that measures exactly that; it beat target at 92% versus 85% (D), so the firm is doing well on this specific goal. Choice A names revenue, which both missed target and is not the retention measure. Choice B names desks occupied, which also missed target and is not the retention measure. Choice C is false because two of the three KPIs fell short of target.
Question 5. The manager must give the owners a quick monthly summary that shows, at a glance, how each KPI did against its target. Which format best communicates that to the owners?
Explanation: Q25.5: For owners who need an at-a-glance read of performance versus plan, a short table or bar chart placing each KPI's actual beside its target with the variance flagged (D) communicates the result most clearly. Choice A buries the comparison in day-by-day detail the owners did not ask for. Choice B drops two of the three KPIs and all the targets, so it cannot show performance against plan. Choice C hands over unprocessed data that the owners would have to analyze themselves, which is not a summary at all.