Question 1

A manufacturing company has recently introduced a Total Quality Management (TQM) system. The company has invested heavily in the education and training of its staff, in addition to implementing new product design engineering. There is a plan to sample units from each batch of products manufactured to test for errors, although this has not yet been implemented due to budget constraints.
The company is experiencing high levels of customer complaints, with many faulty units being returned by the customer for refund or replacement. Sales revenue has fallen recently, mainly due to negative press coverage linked to dissatisfied customers.
Select the statement MOST likely to apply.

Options :

A : The high level of external failure costs is the result of a lack of expenditure on prevention costs.

B : The high level of internal failure costs is the result of a lack of expenditure on appraisal costs.

C : The high level of external failure costs is the result of a lack of expenditure on appraisal costs.

D : The high level of internal failure costs is the result of a lack of expenditure on prevention costs.

Answer: C

Question 2

A project has a positive net present value (NPV) when discounted at a company's weighted average cost of capital (WACC). The project has also been evaluated using a range of other investment appraisal techniques.
It has now been recognized that the project is of much higher risk than the average risk of the company's existing portfolio of projects. It has therefore been decided that the discount rate to be used when evaluating this project should be the WACC adjusted for risk.
As the result of changing the discount rate as described, which of following statements are correct?
Select ALL that apply.

Options :

A : The net present value would decrease.

B : The internal rate of return would decrease.

C : The accounting rate of return would decrease.

D : The internal rate of return would remain unchanged.

E : The profitability index would remain unchanged.

F : The net present value would increase.

Answer: A,D

Question 3

A company manufactures and sells a range of products. Relevant data for one unit of a particular product are as follows.

The company is using target costing to ensure that it achieves a contribution of 40% of the market selling price.
In order to achieve the target cost, by how much does the company need to reduce the variable cost per unit?

Options :

A : $ 2.10

B : $ 0.50

C : $ 1.40

D : $ 2.60

Answer: B

Question 4

How does beyond budgeting NOT help to resolve the weaknesses of traditional budgeting? Select ALL that apply.

Options :

A : Managers are set goals and targets to achieve rather than abiding by strict budgets and variances.

B : Managers have a much larger scope of business goals that when achieved, will increase shareholder value.

C : Managers are given more freedom and control over their business units under Beyond budgeting.

D : Managers focus on keeping costs low in the short term to ensure maximised profits.

E : Managers are given incentives to meet or undercut budgets.

F : Managers are encouraged to designate responsibility to others to lessen their workload so they may concentrate on important tasks.

Answer: A,D

Question 5

A manufacturing company is in the process of introducing just in time (JIT) and total quality management (TQM) into every aspect of its value chain.
Which TWO of the following are appropriate changes to make to the support activities in the organization's value chain?

Options :

A : Inbound logistics would need to ensure that materials of appropriate quality are delivered on a just in time basis.

B : Operations would need to be carried out on a right first time basis as any failure could delay production.

C : After sales service would need to ensure that appraisal costs are kept to a minimum.

D : Procurement would need to arrange to purchase goods so that they are delivered as required.

E : Firm infrastructure would need to arrange appropriate training courses for staff.

F : Technology development would need to ensure that processes are continually improving.

Answer: A,D