The STMA/THE Questions

Part A

1. Critically discuss why strategy became increasingly important and elaborate on the current challenges. (170 words)

[Marks: 5]

2. Time Plc. is a small business that produces watches. The company has total fixed costs of $8,360,000 per month and variable cost per unit is $108. The company has estimated monthly sales demand for calculators, at a range of possible selling prices, as follows:

Selling price ($)	Units sold
160	180,000
192	160,000
224	140,000
256	130,000
288	100,000
304	80,000

Required: Advice Time Plc. on the profit maximizing selling price for the calculator. (70 words)

[Marks: 5]

3. QWE manufactures two products from different combinations of the same resources. Unit selling prices and unit cost details for each product are as follows:

Product	X	Y
	$/Unit	$/Unit
Selling Price	300	280
Direct Material A($8 per Kg)	40	32
Direct Material B($10 per Kg)	60	40
Skilled labour ($16 per hour)	64	48
Variable overhead ($6 per machine hour)	36	24
Fixed overhead	60	70
Profit	40	66

The maximum monthly demand for products X and Y is 1,600 units and 2,000 units, respectively, and this is the normal monthly production volume achieved by QWE. However, for the next year the achievable production level will be reduced due to a shortage of available resources. The resources that are expected to be available each month are as follows:

Direct material A	12,000 kg
Direct material B	13,000 kg
Skilled labour	14,000 hours
Machine time	20,000 machine hours

Required: Using linear programming (simultaneous equations method) identify the monthly production schedule and the total contribution for products X and Y that maximises the profits of QWE per month. (250 words)

[Marks: 10]

4. Rami Industries wants to launch a new product (K2) in the market. The company expects 30% margin on selling price. The current market price of the similar product is $300. The production cost of this product currently comes around $240 per unit.

Required: Calculate the reduction required in cost to meet the target cost per unit. (20 words)

[Marks: 5]

5. PLC Industries has developed a new product called K2 with a full cost of $730. The company desires a 20% mark up on selling price.

Required: If the company adopts cost plus pricing method for the selling prices, calculate the mark up and the selling price of K2. (25 words)

[Marks: 5]

[Marks: 5+5+10+5+5 = 30]

Part B

1. Critically discuss the costs and benefits of TQM. (100 words)

[Marks: 5]

2. A company sells three products X, Y and Z. In 2019 the quantity sold, sales revenue, total variable costs products were:

	Products
	X	Y	Z
Quantity	8,000	9,000	13,000
Sales Revenue	1,200,000	630,000	1,300,000
Variable cost	640,000	360,000	780,000

Fixed costs were $405,000.

Required: (350 words)

1. Compute the breakeven sales (units). Prove your answer.
2. Calculate the sales (in units) required to earn a target profit $607,500. Prove your answer.
3. Calculate the reduction needed in the fixed costs to break even at 4,500 units, in case the selling price increased by 20% and the variable cost increased by 10% for the three products.

[Marks: 5+5+5=15]

3. The demand for product M2 at Jana Company is 600 KG per week. The setup cost for placing an order to replenish inventory is $25. The order is delivered by the supplier which charges $0.10/KG for the cost of transportation. This transportation cost increases the cost of M2 to $1.25/KG. M2 loses its freshness while stored at the Jana Company warehouses. To account for this, the Jana Company charges an annual holding cost of $2.6/KG.

Required: Determine how often Jana Company should order for M2 and what size each order should be. (85 works)

[Marks: 10]

[Marks: 5+15+10 = 30]

Part C

1. Identify an organisation you are familiar with that has exploited technological change to its advantage and another organisation that has not coped well with change.

Required: Critically discuss what made the first organisation successful and elaborate on the consequences for not coping with change for the second one. (150 words)

[Marks: 10]

2. Consider what information sources may be useful to evaluate the organisations position relative to its competitors in an industry (position could be market share or it could be in terms of cost structure, size, financial stability, product differentiation, etc.). Assume for this activity that the concern is around market share and financial stability. (250 words)

[Marks: 10]

3. Think of an example of a value chain activity that is sensitive to scale economies and one which is not. Critically discuss the reason for this difference. (130 words)

[Marks: 10]

4. Explain how an organisations management accounting system (MAS) can contribute towards the development of a cost leadership strategy. (190 words)

[Marks: 20]

[Marks: 10+10+10+10 = 40]

Total Marks: 30 + 30 + 40 - 10 Marks of deductions for general presentation and word count]