Question 1

In order to remain competitive an organization wishes to achieve cost savings for one of its existing products.
Which of the following correctly describes methods which the organization can use to achieve these cost savings?
Select ALL that apply.

Options :

A : Functional analysis is carried out only on existing products and is concerned only with minimizing the cost of the originally defined functions of a product.

B : Value engineering is a fundamental rethinking and radical redesign of an organization-s existing processes.

C : Target costing is continuously setting new stretch targets while the product is in production.

D : Value analysis is examining a product-s costs in order to achieve its purpose at a reduced cost while maintaining its reliability and quality.

E : Kaizen costing is seeking to make cost savings by continuously making small incremental cost reductions while the product is in production.

Answer: A,D

Question 2

Which TWO of the following expressions are correct?

Options :

A : 1 + money rate = (1 + real rate) x (1 + inflation rate)

B : 1 + real rate = (1 + money rate) / (1 + inflation rate)

C : 1 + real rate = (1 + inflation rate) / (1 + money rate)

D : 1 + money rate = (1 + inflation rate) / (1 + real rate)

E : 1 + inflation rate = (1 + money rate) x (1 + real rate)

Answer: A,B

Question 3

GHY has two subsidiaries. GHY-Motor manufactures car engines and GHY-Build designs and assembles cars. In the car industry it is common for manufacturers to buy parts, including engines, from other manufacturers.
GHY has granted GHY-Motor and GHY-Build full autonomy. GHY-Build is considering using an engine from another company for a new model that it is designing. GYY-Motor has a suitable engine, but it charges more than GHY-Build's preferred supplier.
Which of the following statements is correct? Select ALL that apply.

Options :

A : GHY should consider permitting GHY-Motor to charge part of the selling price on engines sold to GHY-Build to head office.

B : Forcing GHY-Motor to grant a discount to GHY-Build could lead to dysfunctional behavior.

C : There could be significant non-financial issues associated with GHY-Build-s decision to buy another engine.

D : Parent companies should never grant subsidiaries full autonomy on matters such as intra-group sales.

E : The threat of dysfunctional behavior is largely theoretical and managers can be trusted to maximise shareholder wealth.

Answer: A,B,C

Question 4

Firefighters risk serious and potentially fatal accidents whenever they attend an incident.
Which of the following statements is correct?

Options :

A : The risk of serious accidents should be accepted in all but the most extreme incidents.

B : The risk of serious accidents should always be accepted because that is what firefighters are paid to do.

C : The risk of serious accidents should be avoided because the risk has a high probability and a high impact.

D : Every incident should be the subject of a detailed and thorough risk assessment before the firefighters are permitted to respond.

Answer: A

Question 5

A large company that sells a single product has many customers. The contribution per unit of the product is $40. Data for the company as a whole are given below.

Using customer profitability analysis, what is the total annual profit for this customer?

Options :

A : $1,660,000

B : $1,780,000

C : $1,460,000

D : $2,340,000

Answer: A