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i. Changing strategies
ii. International customers
iii. International competitors
iv. Greater product variety
v. Higher selling costs
vi. Shorter product life cycle
vii. Higher design costs
Kavungya answered the question on May 4, 2021 at 19:15
- Discuss the three main elements of strategic costs management.(Solved)
Discuss the three main elements of strategic costs management.
Date posted: May 4, 2021. Answers (1)
- Kisumu Municipal council operates a mini-bus service to take shoppers and tourist from the bus and the railway stations to various locations in the Municipality....(Solved)
Kisumu Municipal council operates a mini-bus service to take shoppers and tourist from the bus and the railway stations to various locations in the Municipality. The following data have been collected for the arrival of passengers at the bus stop outside the railway station:
Time between successive arrivals 0 1 2 3 4 5 6
(minutes)
Probability 0.04 0.16 0.24 0.28 0.16 0.10 0.02
The mini-buses are scheduled to run every 10 minutes but variation in traffic conditions
results in the following distribution.
Time between successive buses 8 10 12 14 16
(minutes)
Probability 0.10 0.38 0.28 0.15 0.09
The number of empty seats on the bus is found to follow the distribution below:
Number of empty seats 0 1 2 3 4 5 6
Probability 0.06 0.18 0.27 0.34 0.11 0.03 0.01
Required:
i. Simulate the arrival of to passengers at the bus stop assuming that the simulation clock
begins at time zero. Use the following random numbers:
18262318624207384092976446757444417165809
i i. Estimate the average time a passenger must wait for a bus and the average length of queue
Date posted: May 4, 2021. Answers (1)
- Describe the advantages and disadvantages of using simulation to investigate queuing situations compared with the use of queuing formulae.(Solved)
Describe the advantages and disadvantages of using simulation to investigate queuing situations compared with the use of queuing formulae.
Date posted: May 4, 2021. Answers (1)
- New Books Publishers (NBP) Ltd. are planning to introduce a new management accounting text
book. The company's management accountant estimates that the initial distribution
for likely sales...(Solved)
New Books Publishers (NBP) Ltd. are planning to introduce a new management accounting text
book. The company's management accountant estimates that the initial distribution
for likely sales is normal with a mean of 20,000 books. In addition, it has been determined that
there is a probability of 0.5 that the likely sales will lie between 16,000 and 24,000 books.
The textbooks will sell for Sh.1,000 per copy but the publishing company pays the author
10% of revenue in royalties while the fixed costs of printing and marketing the book are
calculated at Sh.2.5 million. Using current printing facilities, the variable production costs are
Sh.400 per book, however the NBP Ltd. Has the option of hiring a special machine for
Sh.1.4 million which will reduce the variable production costs to Sh.250 per book.
Required:
a) Show the standard deviation of likely sales is approximately 6,000.
b) Using standard deviation = 6000, determine the probability that the company will at least break even if:
i Existing printing facilities are used.
ii The special machine is hired.
c) By comparing expected profits, decide whether or not the publishing company should
hire the special machine.
d) By using the normal distribution, it can be shown that he following probability
distribution may be applied to the book sales.
Sales Sh „000‟ 0 – 10 10 - 16 16 – 20 20 – 24 24 – 30 30 - 40
Probability 0.05 0.20 0.25 0.25 0.20 0.05
By assuming that the actual can only take the mid-points of theses classes, determine the
expected value of perfect information and interpret it.
Date posted: May 4, 2021. Answers (1)
- Madoadoa Limited is a multi-division manufacturing company. The manufacture of M101.
One of the company?s finished products involves two divisions; Mwanzo and
Mwisho.Mwanzo division manufactures the chassis...(Solved)
Madoadoa Limited is a multi-division manufacturing company. The manufacture of M101.
One of the company‟s finished products involves two divisions; Mwanzo and
Mwisho.Mwanzo division manufactures the chassis for M101 and transfers it to Mwisho
division where it is reworked, fitted and assembled into the finished product. The two
divisions are housed in the same building whose lease is due to expire in two years‟ time.
Data on the operations of the two divisions for the year just ended is as follows:
Mr. Makini, the general manager of Mwisho division, has been considering the possibility of
sourcing the chassis from outside suppliers. He has received a quotation from Samawati
Ltd., a competitor of Mwanzo division offering to supply a minimum of 30,000 and a
maximum of 40,000 units of chassis per year for two years with adequate guarantees as to
quality and continuity of suppliers. The unit price would be Sh.22,000. Mr.Makini is of the
opinion that his division should be allowed to take all its requirement (30,000 units per year)
of chassis from Samawati Ltd., unless Mwanzo division agrees to cut the unit transfer price
to Sh.22,000. He suggests that if Mwanzo division cannot reduce the price it would be better
for it to cease operations and the space it now occupies be taken up by Mwisho division,
which is currently seeking extra warehouse space.
The summarized profit and loss accounts of the divisions for the past year ended 31
October 2001 is as follows:
You have been asked to investigate and advise on Makini‟s proposal. You have
gathered the following additional information:
The limitation of the proposed contract with Samawati Ltd. To a two-year period would be
agreeable to Madoadoa Ltd. As the lease for the factory is unlikely to be renewed in two years‟
time and there is no wish to enter into firm commitments beyond that date. If
Mwanzo division is closed, most of the work force could be productively absorbed by other
divisions of Madoadoa Ltd., which operate in the vicinity at no additional cost to those
divisions.
The manager of Mwanzo division complains that his division has to bear exceptionally
heavy depreciation charges and fixed overheads (including central office charges) which are
beyond his control. Without these expenses, he believes that Mwanzo division could match
price quoted by Samawati Ltd., and still make a reasonable profit. He also believes that with
a price of Sh.22,000, it should be possible to operate at full capacity, selling 25% of the
output in the open market. The additional output would increase the direct materials cost
and variable overhead proportionately but he estimates that the total direct labour cost
would only increase by 10%.
The plant used by Mwanzo division has a book value of Sh.150,000,000. Its current resale is
probably Sh.50,000,000. in two years it is estimated that it will have negligible value.
The storage space required by Mwisho division will probably cost Sh.10,000,000 per annum if rented.
Mwanzo division has in stock sufficient raw material for nine months‟ production if
production is continued at the same level as he has achieved last year. If this raw material is
sold off (following the decision to close Mwanzo division), it would probably fetch 25% of
its cost.
Required:
a) Mwanzo division‟s combined profit and loss account for the ensuring two-year
period on the assumption that the division continues to operate after reducing its
transfer price to Sh.22,000 and operating at full capacity as expected.
b) A statement of costs and benefits to Madoadoa Ltd. If a decision to adopt the
proposal made by Mr. Makini rather than the plan put forward by the manager of
Mwanzo division is taken.
Date posted: May 4, 2021. Answers (1)
- Mega Techniques Ltd. makes special purpose equipment according to customer
specifications. During the past year, one of its loyal customers, Pawa Ltd., ordered a
specialized equipment to...(Solved)
Mega Techniques Ltd. makes special purpose equipment according to customer
specifications. During the past year, one of its loyal customers, Pawa Ltd., ordered a
specialized equipment to be fabricated for it. Mega Techniques Ltd. Finished construction the equipment only to be notified that Pawa Ltd. Had recently gone into
liquidation and will not therefore take the equipment.
The original price to Pawa Ltd. had been agreed at Sh.9,108,000 which included an
estimated normal profit mark-up of 10 per cent on total costs. The costs incurred to
manufacture the machine were
The following additional information is provided:
2. In the original machine, there were three types of basic materials:
i Type P could now be sold to a scrap merchant for Sh.540,000.
ii Type Q could be sold to a scrap merchant for Shs. 360,000 but it would take 120
hours of labour paid at Shs. 270 per hour to put it into a suitable condition for
sale.
iii Type R would need to be scrapped at a cost to Mega Techniques Ltd. of
Shs.108,000
3. The materials for the conversion are at present in stock. If not needed for the
conversion they could be used in the production of another machine in place of
materials that would currently cost Sh.684,000.
4. The conversion would be carried out in two departments:
Department X is currently extremely busy and it is estimated that its contribution
overheads and profits is Sh.2.50 for every Sh.1 of labour.
Department Y has idle staff, for organizational reasons its labour force cannot be
reduced below its present level of four employees, all of whom are paid at the
standard rate of Sh.21,600 per week.
5. The designs and specifications of the original machine could be sold in a neighbouring
country for a sum of Sh.270,000 if the machine is scrapped.
6. An additional temporary supervisor would have to be engaged for the conversion work
at a cost of Sh.162,000. It is the company‟s normal practice to charge
supervision to fixed overhead.
7. Pawa Ltd. Had paid Mega Techniques Ltd. A non-returnable deposits of 12% of the
selling price.
Required:
a) The minimum price that Mega Techniques Ltd. should accept from Zimwi Systems Ltd.
for the converted machine. Explain clearly how you arrive at your figure.
b) State clearly any assumptions that you have made in arriving at your conclusions in (a) above.
Date posted: May 4, 2021. Answers (1)
- Kamau and Njoroge are two cousins specializing in hawking business along River
road. Kamau specializes in second hand shirts while Njoroge specializes in cheap
electronic goods. However,...(Solved)
Kamau and Njoroge are two cousins specializing in hawking business along River
road. Kamau specializes in second hand shirts while Njoroge specializes in cheap
electronic goods. However, sales have been decreasing partly due to the harsh
economic condition in Kenya and partly due to restrictions by the City Council.
Each of the cousins is considering expanding to include in their lines of business,
items on which their rivals now have a monopoly. Each knows that the other is
considering this expansion and this influences each of their decisions.
Kamau figures out that if he does not expand his business and his cousin does, it will
hurt his trade by Sh.500 of profit per day. If neither of them expands inventory to
include the extra product, Kamau thinks it will boost his net profit by Sh.500 per day
due to his superior location. If he expands and his cousin does also, he believes the
combination of location and expanded inventory will increase his profits by Sh.1,000
per day. However, if he alone expands and his cousin does not, this will result in no
net increase in business.
Required:
i Prepare a game matrix and show that a pure strategy does not exist.
ii Solve the above game to determine the average winnings (or losses) each of the cousins would expect.
Date posted: May 4, 2021. Answers (1)
- Briefly explain four ways in which competitive situations (or games) can be classified.(Solved)
Briefly explain four ways in which competitive situations (or games) can be classified.
Date posted: May 4, 2021. Answers (1)
- Boots Ltd. manufactures a range of five similar products, A, B, C, D and E. the table below shows the quantity of each of the...(Solved)
Boots Ltd. manufactures a range of five similar products, A, B, C, D and E. the table below shows the quantity of each of the required inputs necessary to produce one unit of each product, together with the weekly inputs available and selling prices of each product.
Required:
a) Formulate this problem as a Linear Programming problem.
b) The problem has been solved using a computer package and the following final table of a simplex solution has been produced:
Where A, B, C, D and E are the weekly production levels for the five products; X is the
amount of raw material that falls short of the maximum available; S, T an U are the
respective number of hours short of maximum weekly input of forming, firing and packing
time.
i Use this table to find the optimum weekly production plan.
ii Describe the implications of using this plan in terms of unused resources and overall
contribution to profit.
iii In the context of this problem explain the meaning of “The dual or shadow price of a resource”
iv There is a proposition that the company manufactures an additional product which would sell at Sh.50 per unit. Each unit will need 6 kg of raw material, one hour of forming time, five hours of firing time and one hour of packing time. Is it a worthwhile proposition?
Date posted: May 4, 2021. Answers (1)
- Kiko Ltd. is a large cash and carry warehouses which sells electronics. Kiko Ltd. Purchases
the most popular model of calculators (FX 100) directly form the...(Solved)
Kiko Ltd. is a large cash and carry warehouses which sells electronics. Kiko Ltd. Purchases
the most popular model of calculators (FX 100) directly form the manufacturer at a cost of
Sh.250 each. Average sales per a 300 day year are 475 calculators. Whenever an order with
the manufacturers is placed, Kiko Ltd, Incurs a cost of Sh.50. The stock holding costs are
estimated at Sh.12.50 plus 10% opportunity cost of capital. The lead-time is three days.
During the last 50 stock cycles, the demand during the lead-time has generated the following
frequency distribution:
Lead time demand 0 1 2 3 4 5 6 7 8
Number of stock cycles 1 2 6 8 10 8 8 5 2
Each time the warehouses runs out of stock, an emergency order is placed with an extra cost
of Sh.20 per calculator.
Required:
a) The economic order quantity (EOQ) and the reorder level.
b) The total annual relevant costs for the order quantity in (a) above.
Date posted: May 4, 2021. Answers (1)
- Mount Sinai Health Centre specializes in the provision of sports/exercise and
medical/dietary advice to clients. The service is provided on a residential basis and
clients reside for...(Solved)
Mount Sinai Health Centre specializes in the provision of sports/exercise and
medical/dietary advice to clients. The service is provided on a residential basis and
clients reside for whatever number of days that suit their needs.
Budgeted estimates for the year ending 300 June 2002 are as follows:
1. The maximum capacity of the center is 50 clients per day for 350 days in the year.
2. Clients will be invoiced at a fee per day. The budgeted occupancy level will vary with
the client fee level per day and is estimated at different percentages of maximum
capacity as follows:
3. Variable costs are also estimated at one of the three levels per client day. The high
most likely and low levels per client per day are Sh.1,900, Sh.1,700 ad Sh.1,400
respectively.
4. The range of cost levels reflects only the possible effect of the purchase prices of
goods and services.
Required:
i. A summary which shows the budgeted contribution to be earned by Mount Sinai Health
Centre for the year ended 30 June 2002 for each of the nine possible outcomes.
ii. State the client fee strategy for the year to end 30 June 20002 which will result from the use
of each of the following decision rules.
(a) Maximax;
(b) Maximin;
(c) Minimax regret.
Date posted: May 4, 2021. Answers (1)
- Skyline Ltd. operates daily round-trip flights on the Nairobi-Mogadishu route using a fleet of
three light aircraft. These three aircraft are Skyline 1, “Skyline 2 and...(Solved)
Skyline Ltd. operates daily round-trip flights on the Nairobi-Mogadishu route using a fleet of
three light aircraft. These three aircraft are Skyline 1, “Skyline 2 and Skyline 3. The
standard quantity of fuel used on each round-trip over this twelve-month period has a mean
of 100 KL and a standard deviation of 10 KL. (1 KL = 1,000 litres)
James Thuo, the operations manager of Skyline Ltd., uses a statistical quality control (SQC)
approach in deciding whether to investigate the variances from the standards fuel usage per
round-trip flight. He investigates all those flights with fuel usage greater than two standard
deviations from the mean. In addition, James Thuo monitors trends in the SQS charts to
determine if additional investigations decisions should be made.
James Thuo received the following reports for round-trip fuel usage for the month of May
2001 from the pilots of the three planes operating on the Nairobi-Mogadishu route:
Required:
a) Using the +-2 rule, indicate the variance investigation decisions which should be made.
b) Present the SQC charts for round-trip fuel usage by each of the three aircraft I May 2001.
c) What inferences can be made from the three SQC charts developed in (b) above?
Date posted: May 4, 2021. Answers (1)
- Kelele Company Ltd. manufacturers crockery. The company is considering the use of simple
and multiple linear regression analysis to forecast annual sales for they are 2001...(Solved)
Kelele Company Ltd. manufacturers crockery. The company is considering the use of simple
and multiple linear regression analysis to forecast annual sales for they are 2001 because
previous forecasts have been inaccurate. The sales forecast will be used to initiate the
budgeting process and to identify more accurately the underlying process that generates
sales.
The financial controller of the company has considered many possible independent variables
and equations to predict sales and has narrowed his choices to four equations. He used
annual observations from twenty prior years to estimate each of the four equations.
The following is a statistical summary of the four equations and definitions of the variables
used in the exercise.
Required:
a) Using the relationship T = a + bx, write Equations II and IV
b) If the actual sales for the year 2000 were sh.7,500,00, what would be the forecast sales for the year 2001?
c) Explain the meaning and significance of the coefficient of determination.
d) Explain why the Financial Controller might prefer Equation III to Equation II.
e) Explain the advantages and disadvantages of using Equation IV to forecast annual sales.
Date posted: May 4, 2021. Answers (1)
- K.K Limited manufactures security systems for homes. To enable the company offer a
better quality product at a lower cost than its competitors, the company has...(Solved)
K.K Limited manufactures security systems for homes. To enable the company offer a
better quality product at a lower cost than its competitors, the company has decided to
expand its present facility to accommodate a new line. A project team has been formed
within the company to direct and coordinate the plant expansion.
This team met weekly to monitor the status of the project.
Prior to the start of the plant expansion, the management developed the following list of
required activities:
Required:
a) Determine the critical path and list the critical activities.
b) Determine the minimum time and minimum cost network.
c) K. K Ltd knows that other companies are working on a competing product. The
company estimates that the delay of every week beyond the 40th week in bringing out
the new line will cost the firm sh. 1,000,000 in lost profit..
What will be the cost to the firm if the project is completed in 50 weeks?
d) Is it advisable to crash the profits from 51 to 45 weeks? Why?
Date posted: May 3, 2021. Answers (1)
- Kanorer Enterprises Ltd has two divisions Mugaa and Gwashati. Mugaa division manufactures an intermediate product for which there is no external market. Gwashati division incorporates...(Solved)
Kanorer Enterprises Ltd has two divisions Mugaa and Gwashati. Mugaa division manufactures an intermediate product for which there is no external market. Gwashati division incorporates the intermediate product into a final product, which it sells. One unit of the intermediate product is used in the production of the final product. The expected units of the final product which Gwashati division estimates it can sell at various selling
prices are as follows:
Required:
a) Profit statements for each division and the company as a whole for the various selling
prices.
b) Which selling prices maximize the profits of Gwashati division and the company as a
whole? Comment on why the selling price (which is selected by the company) is not
selected by Gwashati division.
c) It has been argued that full cost is an inappropriate basis for selling transfer prices.
Outline the objections which can be raised against this basis.
Date posted: May 3, 2021. Answers (1)
- ABC Lt. Is a manufacturing company that makes only three products P, Q, and R. Data for the period ended last month are as follows:
Required:
Using...(Solved)
ABC Lt. Is a manufacturing company that makes only three products P, Q, and R. Data for the period ended last month are as follows:
Required:
Using activity based costing (ABC) show the cost and gross profit per unit for each product during the period.
Date posted: May 3, 2021. Answers (1)
- Explain the advantages of using Value Added Statements (VAS) for interdivision for comparisons in decentralized firm.(Solved)
Explain the advantages of using Value Added Statements (VAS) for interdivision for comparisons in decentralized firm.
Date posted: May 3, 2021. Answers (1)
- Some businesses which supply two or more separate markets from a single source may decide to charge a higher price for sales to home markets...(Solved)
Some businesses which supply two or more separate markets from a single source may decide to charge a higher price for sales to home markets than for export sales. The businesses may justify their pricing policy by stating that they need to earn foreign exchange from foreign markets and recover their research and development costs, plus production overheads against home demand.
Required:
i Critically explain briefly the rationale for such a differential pricing policy.
ii Should earning of foreign exchange be a factor in a firm's pricing policy.
Date posted: May 3, 2021. Answers (1)
- Alvis Kiptoo has budgeted that output and sales of his single product will be 100,000
units in the coming year. At this level of activity, his...(Solved)
Alvis Kiptoo has budgeted that output and sales of his single product will be 100,000
units in the coming year. At this level of activity, his unit variable costs are budgeted at
Sh.50 and his unit fixed costs at Sh.25. His sales manager estimates that the demand for
the product would increases by 1000 units for every decreased of Sh.1 in unit selling
price (and vice versa) and that at a unit selling price of Sh.200 demand would be nil.
Information about two price increases has just been received from suppliers: one is for
materials (which are included in Alvis Kiptoo‟s variable costs) and one is for
fuel (which included in his fixed costs). Their effect will be to increase both the variable
and fixed costs by 20% each over the budgeted figures.
Alvis Kiptoo aims at maximizing profits from his business.
Required:
a. Calculate before the cost increases the budgeted contribution and profit at the budgeted levels of 100,000 units.
b. Calculate the level of sales at which profits would be maximized and the amounts of these maximum profits before the cost increases.
c. Show whether and by how much Alvis Kiptoo should adjust his selling price in respect to increases in:
- Fuel costs.
- Material costs.
Date posted: May 3, 2021. Answers (1)
- The Executive Furnitures Ltd. (EFL) produces a unique type of computer desks. Four of
EFL?s main outlets are S1, S2,S3, and S4.These outlets already have requirements
in...(Solved)
The Executive Furnitures Ltd. (EFL) produces a unique type of computer desks. Four of
EFL‟s main outlets are S1, S2,S3, and S4.These outlets already have requirements
in excess of the combined capacity of its three production plants P1,P2, and P3. The
company needs to know how to allocate its production capacity to maximize profits.
Distribution costs (in Sh.) per unit from each production plant to each outlet are given in
the following table:
Since the four outlets are in different parts of the country and as there are differing
transportation costs between the production plants and the outlets along with slightly
different production costs at different production plants there is a pricing structure which
enables different prices to be charged at the four outlets. Currently, the price per unit
charged is Sh.2,300 at S1, Sh.2,350 at S2, Sh.2,250 at S3, and Sh.2,400 at S4. The variable unit
production costs are Sh.1,500 at plants P1 and P 3 and Sh.1,550 at plant P2. The demand at
S1,S2, S3 and S4 are 850, 640, 380 and 230 desks respectively while the plant capacity at plant
P1, P2 and P3are 625, 825 and 450 desks respectively.
Required:
Using the transportation algorithm, determine the contribution to profit for the optimal
allocation.
Date posted: May 3, 2021. Answers (1)