[pritamsu]

kirinski said 3 hours, 14 minutes ago:

I thought that the exam was very hard, bordering on a disaster.
After having spent months studying and revising CostVolumeProfit charts and limitations, drawing Decision Trees and calculating the value of perfect / imperfect information (both new areas of syllabus), performing complex costing excercises with Leraning Curves etc, and becoming a professional linear programmer (seriously, I could coach students on this item now) – NONE – absoluetly NONE of thsis – came up.

When I saw the contents of the paper, the only Question that I was happy to see was the Variances part 1. Easy really (again, spent a lot of time revising this). This is the only question which actually was expected, so not sure why anyone would complain about this one.
First, take original budgeted contribution, then adjust for sales volume variance (which in this case consisted of 2 parts: operational FAV and planning ADV – as the market went down by 10% so this was planning var)
So you get flexed budgeted contribution
Apply all basic variances
Reconcile to the actual contribution

The part of the question asking about applicability of standards in TQM environment was more difficult, but essentially standards are of limited use in the highly automated environment such as TQM and JIT.
Not sure if I answered enough on the subject though, tried to make a few points.

The question on multiplicative models and seasonal variations: had NO idea where to start so did not even try.
Answered A LOT on the imposed budget style and bad forecasting.
– de-motivational effect
of imposed budget where the GM is not interested in reality nor opinions of others
– the incentive scheme perceived as “bogus” since GM clearly has no intention of ever paying bonuses
– cost of disposing of the bl**dy unsold sauces
– issues with deep discounting of sauces when need to shift inventory – inbuild expectations by the customers of low prices in the future
– damage to the company’s image due to deep discounting practices (perceived inferiot quality)

I think I did OK on the target pricing in NHS trust.
I think the question was not that bad.
Target price fot the operations on heart (which are paid AT COST but within certain annual budget): target price = total annual budget / divided by the planned number of operations on heart
– since no surplus is re-funded to the trust, there is no point worrying about creating such surplus
Hence, just keep within annual allocation for these operations.

For all other operations (which are paid at a fixed fee):
the fixed fee here is similar to the “competitive or optimum price” in the normal manufacturing environment.
So steps are the same from this point:
– fixed fee is your “target price”
– deduct from this the necessary margin/profit %
– arrive to target cost
– compare to current cost, close the gap

the difficulties are to do with the regional differences (NHS trust in the Soust of UK would have different costs to NHS trust in the North due to different salaries’ and wages, rent etc)
So in the South you would have more difficulties closing the gap than you would in the North.
– deep cost cutting is always controversial, especially when it comes to HEALTH. The tax-payers (who ultimately fund the Trust) are not going to be too happy about DEEP cost cutting excercises (and they WILL know, through newspapers, investigative journalism etc).
Reputational image to the hospital and political pressure may follow.
– cost cutting could affect quality, e.g. reduced spending on cleaning would increase infection rates etc

Buy or make: I came to the conclusion that none of the 2 products should be outsourced. I totally ignored the depreciation and insurance, as surely these are NOT relevant? – yes the question did state that 40% of the total charge are connected to the production of keypads and screens, but surely the depreciation is not going to immediately disappear into the window (on existing plant) if you outsource??
I mean, where does all this plant go? – out of the window? Or may be I misunderstood this requirement.

Then there were marks available for discussing the implications of outsourcing:
-social aspect (redundancies which are NOT the case as we are told that labout is in short supply?? – REALLY? Which planet is the examiner ON? – short supply of labour to put together a few bits and pieces of keypad? – it’s hardly a realistic scenario in the current economic environment!!!)
– moving the primary function elsewhere. The only point of RobberCo existing is to make keypads and screens, if it’s outsourced, what’s the point of this company?
– reliability – flexibility of supplier
– quality control. This is essential as RobebrCo undertakes any repairs FREE, so if anything is faulty, this will cost the company dearly in the end
– potential delays in transporting the parts and also potential delays at CUSTOMS – whoever worked in the industries whereas custom clearance is needed, would know very well that delays are inevitable, if not all the tme, at least time to time
– commercial secrets etc, said it was unlikely as pretty standard products and no “know-hows” expected
– value attached to the products being made “in-house” is unlikely to apply – these are keypads and not Italian designer shoes, so who cares where the keypad is made !!!

Finally, ROI and RI.
The theoretical discussion about goal congruence etc was OK and should score some marks. I did not to it brilliantly but I think more or less OK.
Original ROI / RI was easy – just annualise!
Then I said that if we calculate the “old ROI” we get a healthy growth from prior 3 motnhs, so it’s the “stupid” managers’ decision to charge head office costs, which is eroding ROI.
And that the divisions, if they WERE assessed on the original basis, would have shown great results.

Then I said it was indeed very strange that the head office decided to impose their costs and not to lower the target ROI. It’s illogical and simply not acceptable.
Don’t know if this was the clever comment to make. Who knows.
I know that in real life the divisional managers should have told the head office to go away and re-think such approach.

On the new project, charged depreciation over 6 months to arrive to the value of net assets – but stupidly forgot to adjust the net profit for the amount of depreciation!
so don’t expect any marks here…

Overall, because I did not answer at all the forecasting of sales and did not attempt the part of Make or Buy about how many to produce if more labour available (run out of time), also not sure if answered Make or Buy original correctly (I said NOT to buy, make for both products), I can only hope to get something like 50-55.
I am hoping that I shall scrape this one – due to my written parts, but who knows…. may be not.

If not, not a big deal and shall re-sit in December, with the hopes that all my hard studying would pay off !!!! (linear programming, decision trees, risk and uncertainty, CVP analysis, Buildign Blocks, optimum price equations, learning curves etc etc – all that was simply wasted on this sitting! – not to mention my scientific calculator which did not get used….I may as well take it back to the shop)

Am I upset?
Not really, as we have been told many times that we should not try to “predict” the exam topics.
However, this exam, in my view, was simply not wide enough – my coverage of the syllabus was very wide, however this made little difference to my performance, which was just well below what I have expected it to be.

To all those who think they failed: the game is not yet over, let’s wait for the results and see! You and I may have just scraped above 50!
After all, pigs CAN fly, right? – Keep your hopes alive!

Feel quite relieve from ur answers, though did not attempt the question on forecasting on first part n part of RI, TQM is a technique to achieve quality, high quality product, through good quality material and efficiency, TQM cannot replace Std costing, std costing investigate on discrepancies between budgeted and actual, just hope we get the 50 marks!

[pritamsu]

@suthan said:
F5 This time, have never seen a past paper like that before. Even well prepare students could easily fail this exam……..

Very Well said, i was very confident before exams, but this paper give me food for thought

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