[Michal]

In Q1, 3.8 4 and 4.2 were average revenue per customer visit. (Customer spend AFAIK means how much each customer spends during visit – therefore avg revenue per customer)

360 days * number of customer visits (expected value for each abc) * 3.8/4/4.2 gives revenue for the year for each abc.

[Michal]

Revenue up 2 or 2.5% dont remember. COS% (59.33%) * new Revenue. (as it was driven by volume increase, therefore cost of sales stays the same %wise assuming that volume increase had the same product mix as total company. (which wasn’t specified so fair assumption)

In next point of 1.5% selling price increase new cos% from below * old_revenue (before 1.5% selling price increase, as price increase flows down all the way to profit and does not increase COS).
New cos / 2 * (1.5/1,4) = New COS/2 * 1.07

I used exactly the same method ish123, as change in exchange rate from 1.4 to 1.5 gives 7% incremental cost.

Found this Q quite straight forward, as I have done quite a lot of such modelling at work, BUT ran out of time to do all the calcs 🙂 so stopped at half way at A and went on to score some marks on section B.

[Michal]

I found the Q you have mentioned yinka228 and fair enough I think your method of calculating all of them was good choice.

I am wondering why there was so many marks for this part. (17 or something so significant).

In previous papers, I have found nearly the same paper (Q3 2014 June 2014 part a) which showed as per previous comments to use minimax, maximin, min regret and EV. But the calcs were giving only 9 marks (complication of 2 firms and JV).

I don’t think the Examiner would scale up the marks to 17. Am I missing something?

[Michal]

I am pretty sure that the Q asked for 1 method to be chosen and justified why selected. Calculating all the methods would take way too much time to gain most of marks.

[Michal]

Any comments on other parts?

I found the paper completely different that past papers with overload of information and required calculations (even though basic calcs – took a lot of time to calculate and cross check).

Ran out of time on last Q (2), where even at fast pace, couldn’t restate all budget in time and provide enough rationale to why rolling budget could be better for the company – outside of focus on the gap to hit full year operating margin (which the company failed before). – I have personally found the Q2 very entertaining, as new CEO comes in and says that he can save 2% or 2.5% rolliing Qrt on Qrt in admin costs and increase sales by 2% and then do price increase to drive another 1.5%. Very realistic indeed. 🙂

[Michal]

It was unreasonable for me to select any other options based that Net margin % was lower and total return was within 20k difference across options. Didn’t believe that board would make a decision to potentially gain 20k, loosing 1% net margin with potentially unrealistic demand. Maybe I am just too risk averse, as I wouldn’t recommend such project at my work place. 🙂

[Michal]

In my opinion, Q1(C) – Maximax was an overkill to calculate. Used expected values technique.

I have approached it from calculating expected demand.
This resulted in 1400, 1420, 1400.
Range was from 1200 to 1600 (median point 1400).

Therefore assumed that 1,400 seems quite right.

Then went to calculate net margin, net margin %, breakeven point and margin of safety.

A 11% B 11.1% C 10%

Margin of safety in units 95k, 96k, 81k.
Breakeven point for B was 1,150 units.

Minimum demand as per question was ca. 1,200 units, therefore highly unlikely to happen below.

Selected B based on highest net margin%, breakeven point below minimum demand, distribution weighting of 30% of 1,600 – which gives a chance of upside.

[Michal]

Used different perspective on Q1 than previous posters – was thinking about BCG, SAF and Ashridge, but it seemed to easy to just outline benefits & advantages. So did a bit different way:

Q1(a) – SWOT for QTS & QTSBA combined – outlined strengths, weekneses and opportunities and threats in relation to acquiring A2K. Then used TOWS to outline how acquiring and merging A2K with QTSBA would: a) bring trainers, which are scarce resource, b) cost synergies – admin, sales&mark, back office, c) e-learning team, which QTSBA lacks, d) new perspective on courses (humorous and challenging, compared to QTS’s structured offering) – could broaden the niche/expand category, e) bringing mgt team and empowering trainers/e-learning – quick fixes, f) improving profitability through synergies outlined above – A2K had lower profitability than the group, therefore had to be quickly improved otherwise would dilute current results etc. – Wrote quite a bit on Q1(a) – went over about 10 mins, so had to speed up the rest to make up the time.

[Author]

Posts