Which THREE of the following conditions are required for a sustained learning curve to apply?
An organization has the right to mine for gold on its land. The price of gold and the cost of extraction are such that mining is not currently financially viable. However, the organization has the right to commence mining at any time in the future if the price of gold increases and makes mining financially viable.
This right to commence mining in the future is an option to:
An organization uses a balanced scorecard approach to performance measurement, both at the corporate level and to assess the performance of each of its responsibility centre managers.
Which THREE of the following statements are valid in respect of the effect of this approach on the behavior of the responsibility centre managers?
The following data are available for an investment centre for the latest period. Where appropriate the data have been adjusted to reflect economic values.
What cost of capital has been used to calculate the EVA?
Give your answer to the nearest percentage.
An organization wishes to achieve cost reductions for a product it already has in production without affecting the customer's perception of the product.
It has decided to carry out a systematic examination of the factors affecting the cost of the product in order to identify ways of achieving the specified purpose at lower cost while maintaining the required standard and quality.
Which of the following correctly identifies the activity that the organization is undertaking?
One of an investment centre's products is sold on an external market. Output is limited because the specialist machine that manufactures the product is operating at full capacity.
Current data for the product are as follows.
Investigations have identified that more rigorous maintenance of the machine at an annual cost of $5,000 would reduce the number of breakdowns and increase its capacity to 1,300 units per year.
There would be no change in the selling price if more units were sold. Any additional labor hours would be paid a premium of 25%. A discount of 2% of the cost of all materials purchased is available if the company increases its purchases to 3,700 kg or more per year.
What would be the increase in the investment centre's annual controllable profit if more rigorous maintenance is undertaken?
Which of the following is a key objective when agreeing a basis for setting transfer prices?
The following data relate to an investment opportunity.
The percentage reduction in the annual revenue that could occur before the project is no longer financially viable is:
Beyond Budgeting is essentially an approach that places modern management practices within a cultural framework. Analyze the following statements:
1. The organization structure should have clear principles and boundaries.
2. Managers should be given a high degree of freedom to make decisions.
3. Frontline managers should be made responsible for relationships with customers.
4. Information system should be transparent and ethical.
Which of the above statements relate to Beyond Budgeting?
For a pharmaceutical manufacturer, in which perspective of the Balanced Scorecard should the performance measure 'number of patents granted during the year' be included?
An organization is comprised of two divisions. One of the divisions manufactures a product that it sells both to an imperfect external market and to the other division.
The organization wishes to establish the most suitable basis for the transfer price for this product and is considering either a negotiated transfer price or a market-based transfer price.
Which of the following statements is correct?
An 80% learning curve will apply to the production of a new product. The first unit will require 120 labor hours. The labor rate is $11 per hour.
To the nearest $1, the expected total labor cost for the first 4 units is:
A company has a cost of capital of 12% and a maximum of $20 million to invest. It has identified three possible investment projects, none of which is divisible, as follows.
Which project(s) should the company invest in?
During a Board meeting at a manufacturing company, concerns regarding the analysing of the current inventory management systems and processes are brought up.
Attendees of the meeting have made several claims and suggestions but the managing director admits that he does not know who to believe and so has asked you to let him know which statements of the following
statements are TRUE?
Select ALL that apply.
An electronics company sells a range of tablet computers. Tablet computers come complete with an operating system that is regarded as the market leader. The company aims to launch a new version of its hardware every eighteen months and a major update to its software every three years. The latest version of the tablet computer is always sold at a higher price, but the older version that has been replaced is then sold for a time at a discounted price.
Which pricing model does this company appear to be using?
The following data are available for four projects with unequal lives.
A 10% discount rate is appropriate for all four projects.
Which project has the highest equivalent annual benefit?
Place the correct category of Value Chain activity against each of the activities described below.
A company is considering four mutually exclusive projects. There are three possible future demand conditions but the company has no idea of the probability of each of these demand conditions occurring. The forecast net present values (NPVs) of each of the four projects, under each of the three possible future demand conditions, are as follows.
Using the maximax criterion, which investment should be selected?
ZZZ is a divisionalised company that uses the balanced scorecard approach to monitor divisional performance. Each measure on the scorecard is classified as green (if they are better than expected), amber (if expectations have been met) or red (if they are poorer than expected).
The Southern Division's scorecard shows that 90% of the measures are amber, 3% are green and 7% are red.
All of the red classifications are listed under the Learning and Growth perspective and have arisen largely because the division has lost a lot of staff to a major competitor who offered a better rate of pay.
Which THREE of the following statements are correct?
A manufacturing company has just developed a new product and must now determine the most appropriate pricing strategy for its initial launch.
The product will initially be unique because it will include highly desirable features that no competitive product offers. Its development has involved substantial expenditure and the company wishes to recover this as soon as possible.
The product's uniqueness is expected to last for only six months before a competitor launches a similar product. It is expected that the competitor will avoid any significant development costs by reverse engineering the company's own product.
At that point, to remain competitive, the company must ensure that its selling price matches that of the competitor.
Which of the following pricing strategies would be most suitable for the initial launch of the company's product?
A learning curve applies to the manufacture of the first 256 units of a product.
During the manufacture of the first 255 units, the time taken to produce each successive unit is expected to:
Which of the following statements regarding multinational transfer pricing is INCORRECT?
A company comprises several divisions.
One of these divisions was originally expected to earn an operating profit next year of $800,000 on net assets of $4 million.
However, the divisional manager is considering investing in a project that would generate a project return on investment (ROI) of 38% on additional net assets of $500,000.
What would be the divisional ROI next year if the project was implemented?
Give your answer to the nearest percentage.
Which of the following statements are correct with regard to responsibility centres?
Select ALL that apply.
Juan is looking to invest in the mining industry. He has narrowed his options down to two rival companies, both with sales of £200m. Company A has an EBIT of £10m whereas Company B has an EBIT of £14m.
This would suggest that Company B is the better investment but Juan is suspicious that Company B has more financial backing than Company A.
Which ratios will tell him which company will use his investment the best?
It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.
Which of the following statements is NOT an advantage of using a two-part transfer pricing system?
A company is deciding whether to invest in project A or project B. A decision tree has been prepared to illustrate the investment decision and its associated possible net present values (NPVs).
Which of the following statements is correct?
TESTED 17 May 2024
