[kainosvik]

Thank you Mike

[kainosvik]

@salmiak said:
Hi guys,

I found the paper OK, even finished 5 minutes before time what makes me thinking that I missed major issues…

For Q1 I calculated that expected value is only positive if target is acquired, higher if with acquisition. In the final section my ccl was that there cannot be made any advice as substancial information: likelihood of change of bidding process, information on target is missing…

Q4 was about right strategy is differentiation by origin

Q4 wass about life cycle

… At least in my opinion 😉

Does anyone agree?

Q4 was about life cycle? Really? I don’t think so.
4a was financial performance. Required ratio analyses and explanation of the ratios
4b was about a learning organization (there is a technical article on it)
4c was about knowledge management.
4b and 4c were on People and Organizations

[kainosvik]

Thanks John,
I really hope I would pick up some of the available marks.

[kainosvik]

@nikaacca said:
I think part A (test section) was diffcult, do you remember questions?

Do you remember the question on return per factory hour? Did you convert the 6 minutes to hour? That is, 0.1hour

[kainosvik]

@vaniaezra said:
For the learning effect. To calculate the revised hour, which should we used, 460th or 1000th unit? So confused with this number 3 questiom

I used neither 460th nor 1,00th. Instead,I used the average hour for the first 1,000 units.

[kainosvik]

@nikaacca said:
Kainosvik , It was A?

Yes, A

[kainosvik]

@nikaacca said:
Kainosvik, yes I wrote it, and mentioned that it would be good , but what about elastic?
when we calculate price -310 zero demand?
every 2$ they loss 2000 demand

Remember that with market skimming,you can always reduce the price. So I don’t think that the elastic price is a problem,at least at the initial launch.
You know you also use market skimming when you are not even sure of how the market would react. Therefore,if you find out after the launch that demand is elastic,you can reduce the price but if demand is inelastic,you can leave the price at the high initial price

[kainosvik]

@nikaacca said:
zahid do you remember what you mark in questions
I need to know , about shadow price, enviromental questions , also current/quick ratio question , question one , minimax regret 350?

Environment- related cost should go to the joint cost center and environment driven to general overhead

[kainosvik]

@nikaacca said:
in section b, when there was discuss about skimming ,I wrote that it’s not suitable decision ,
because as they mentioned the demand was elastic (2 $ change in price change demand)
so if they set high price there will be demand fall if they set price 310 demand will be zero , as we calculated

I very much doubt as other conditions such as
1. It is a differentiated product
2. It has a short life cycle
3. There was a huge investment.
The above conditions make skimming a good option

[kainosvik]

@jenny3549 said:
Can’t remember exactly the options but have a feeling it was none of the above. The learning rate is faster than expected and think all the options suggested slower?

Yeah,also chose none of the above

[kainosvik]

Do you remember the question on what caused the learning rate to decrease from like 80% to 75% ?

[kainosvik]

Q5. ZBB steps- quite easy
Part B. Problems that may arise when changing to ZBB are
1. Resistance from staff as they are already used to the current system and may have even built in slack so may not want to change to another system.
2. Training will be needed
3. Information for ZBB may not be easily available
4. Management may not have the skills to rank decision packages
Part C. Benefits of ZBB.
1. Leads to better allocation of resources
2. Difficult for employees to add budget slack as the decision package will be rejected if too expensive
3. Present errors and inefficiencies will not be perpetuated in future

I messed up with Part A of the question on pricing. My high low was funny.
Part B. b was .001, a was 310 or so. The profit maximizing qty was about 14,600. I got my price. Can’t remember what it was now.
I did a profit statement. Sales revenue was the profit maximizing price multiplied by the profit maximizing quantity. Then less material costs 12 and labor of 6 and variable overhead.
Part C. Market skimming was a suitable option for the company because
1. The product is differentiated and people would like to own it immediately after its launch to be one up on those who do not have it
2. The company had invested heavily in R$D and to recoup the investment,they could use market skimming
3. The product life cycle is short;3 years,therefore market skimming would be a good pricing strategy
4. I tried to calculate the elasticity of demand so as to comment because it seemed that the product had inelastic demand and that meant a further suitability, but unfortunately,I ran out of time.

[kainosvik]

Q1. The costs under both systems were close so adopting ABC may not be worth it. However, they could go ahead and adopt for other merits of ABC but based on the calculations,NO.
Q2. First 30,000 units will be at V.C plus opportunity cost minus cost saved. V.C was 770(I think), opportunity cost, 0 as there was spare capacity and cost saved 30. I then did a little profit statement. However,profit could be maximized if each division is allowed autonomy. Division M will sell at full market price of 800(I believe), and Division S will have a cost savings of 50.
Q3. Don’t remember now
Q4. Revised rate was 2.45 based on average hour for 1,000 units.
Implications of not considering the learning effect are 1. Standard/budgeted hour for labor will be higher than normal. 2. The price of the product (which is based on material and labor will be high. 3. There will always be a huge adverse labor efficiency variance. 4. There will always be a huge overhead efficiency variance if overhead is labour hours driven. 5. The negative variances would lead to de motivation.

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