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Exam was okay. Although I made a silly mistake under the BCG matrix – with the cash cow and star. I didn’t answer the risk and uncertainty part particularly well also.
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treated it as revenue. The best I could think under d circumstance. I dnt think it Wud b variable costs. seems pretty high. N also given d contribution to sale ratio. its den easy to get the contribution. N derive ur profit by subtracting fixed costs
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?
For question 2, can anyone remember the mark split for A and B?
Also how did you guys do the FX part for A? I knew it will consume lot of time so took a shortcut by looking at the percentage increase from 1.4 to 1.5 meaning 7% decrease in COS and as it applies to only 50% of the COS I just decreased total COS by 3.5% (I know its not the correct way but hoping after rounding the figure should be close)
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@ Michael. d marks would be a located within the computation of the 4 criteria. Let’s say 4 or 6 marks for dat. Den for each calculation u r meant to evaluate it I. E discuss it. dat would be another 4 or 5 marks. Den lastly ur choice of criteria 1 or 2 marks den d justification may b up to 4 marks. Dats my thinking
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@mona216 said:
In question one part c I used the maximax, maximin approach but I have a question.Was the figures of 3.8 /4/4.2 meant to be revenue per day or costs incurred per day??From my point of view 3.8 /4/4.2 were sales and by applying the contribution/sales ratio you would have obtained the contribution value.
@ish123 said:
For question 2, can anyone remember the mark split for A and B?Also how did you guys do the FX part for A? I knew it will consume lot of time so took a shortcut by looking at the percentage increase from 1.4 to 1.5 meaning 7% decrease in COS and as it applies to only 50% of the COS I just decreased total COS by 3.5% (I know its not the correct way but hoping after rounding the figure should be close)
I think that exchange rate changed from 1.5 to 1.4 so making raw materials more expensive. In the narrative explained something in this sense also.
That’s what I thought then I was confused as it said amounts spent at each site (or something like that) so thought of it as cost of sales
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 * 1.07I 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.
I founf the paper easy and question 1 especially tricky. Loads of information to go through for question 3 and 4. I messed up with the risk uncertainty question in question 1 and BCG matrix in part A of the question 3. Question 4 was never seen before in any of the past papers in any of the past papers. I hope for the best.
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@rubyguby said:
It was suspiciously easy. I just hope I didn’t miss anything…Just like you i considered 50% of the COS being the ingredient which I divided by 1.4 to find out how much was in local currency and then multiply that value with the new exchange rate => increase in the cost of the ingredient.
@agostinho said:
I think that exchange rate changed from 1.5 to 1.4 so making raw materials more expensive. In the narrative explained something in this sense also.Are you sure? I thought it said from Q2 the fx has changed to $1 to 1.5. Then the narrative stated for the previous calculation they were using 1.4? I could be wrong.
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.
Was confident coming out as I understood all the theory in this paper.
Question 1,c, I basically just calculated the likelihood of each restaurants % visitor rates using the figures then multiplied these by the expected spend per person which produced a table of figures – I then pointed out the highest payoff and stated that the s/h would have selected this due to there fairly high risk appetite. This was the maximax option.
I found the performance report in q1,a strange as the figures were all the same?? anyway explained the weaknesses in the report and what they could do to improve.
the budgeting question part a was tricky although I think the majority of my calculation will be near the mark. Though it was mainly a case of taking the percentage applicable an then adding on a bit or taking away a bit depending what the situation was for example the exchange rate change.
Diary incremental Luxury rolling.
Q3 again did not appear straight forward but I think I grew into it. felt there were a number of further metrics which would have helped each division better monitor performance, stated a few example like price elasticity etc. Second part I think was to do with identifying the correct strategic objectives and then the right metrics to ensure these are met – the objectives will be set based on which cube within the BCG matrix the division is within.
As with all these exams everyone has a slightly different approach and style and will make differing cases and points – I just hope I have picked up enough marks to pass well as I studied very hard.
Based on my understanding :
For the COS in Q1, the value of C$1 – V$1.40 increased to 1.50 thus the C$ currency strengthened. This would lead to reduction in cost due to gain in forex. I calculated by translating 50% of COS with 1.4 then divide by new rate 1.5.As for the risk and uncertainty question. The paragraph indicated that the directors are risk seekers but there was a phrase following saying something like “other models should still be calculated” My interpretation is “maximax is applicable, but still do the other generic methods, e.g. maximin, minimax regret & EV for P5 sake” haha
I see someone mentioning all three projects just over $200k which is what I got. Wasn’t particularly comfortable with this area but there was my approach:
Revenue avg per customer: $4
Customers: 1200
Daily revenue: $4800
Yearly revenue (x365): $1,752,000
Contribution (multiplied the above by this rate – something like 58%): $1,016,160
Less fixed costs ($900k): $116,160
Multiply by probability (10%)
EV = $16,160Then repeated process for the other two demand levels and added up as my EV. Repeated this process for project B and C.
I assumed MaxiMax would be the project with the highest return, regardless how low that percentage.
Then vise versa for MaxiMin.
But appears we needed to use the annuity tables for this, according to some comments? :/
Looks good except question explicitly said days were 360. No annuity tables required lol.
I thought the exchange rate moved favourably also
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@ jeffy. The report was a template which the franchises are meant to populate n share with their stakeholders. This suggest dat dere is no need to talk about the figures. my approach to discuss th e evaluation wss under d following headings. ( purpose, audience, info for decision making n layout) . then the metrics are largely financial n most time profit measures. A balanced score card kinda metric can b into duce or more appropriately the building block as des is developed for service org just lik bavus
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@rontjx said:
Based on my understanding :
For the COS in Q1, the value of C$1 – V$1.40 increased to 1.50 thus the C$ currency strengthened. This would lead to reduction in cost due to gain in forex. I calculated by translating 50% of COS with 1.4 then divide by new rate 1.5.Wat part of question 1 is des?
The reason you got C is because you relied only on contribution and disregarded the fixed costs. Incorporating fixed costs would have given you format A for all three decisions criteria.
There something that I don’t get from your calculation. Maximax, etc uses payoff tables and these plotted the profit/contribution per demand scenario. C/S ratio per customer was given then it was just a matter of multiplying the contribution per customer by the expected number of customers by 360 (not 365) by the probability then subtract the fixed cost to get the net pay off. Format A was the best at 80% (1,400) under all instances.
Yes @Farai that is the correct method. However as format C had the highest c/s ratio you should have found that at the highest demand this was most profitable, as the higher contribution covered the increased fixed costs. At lower levels of demand A was better as it had lower fixed costs.
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I referred to maximax the while scenario but went overkill on the probability percentages and chose format A with the 1400 demand as the preferred choice based on my calculations and came to a conclusion of 3.7…. does this ring bells with anyone else or did I totally go off on a tangent?
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