Question Tag: Decision Making

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  • 5 Marks

SCS – Nov 2024 – L3 – Q4a – Capital Budgeting Framework

Explanation of the five key elements in the capital budgeting framework for investment appraisal.

One of the Board members, Dr. Halimatu Sadia, has expressed concerns regarding Dr. Ayimadu Baffour’s consistent failure to conduct investment appraisals and capital budgeting when making long-term investment decisions.

Required:

Advise Dr. Ayimadu Baffour on the capital budgeting and strategic planning framework used for conducting investment appraisals by briefly outlining the FIVE key elements of the framework.

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  • 12 Marks

SCS – Nov 2024 – L3 – Q1a – Charles Handy’s Cultural Types

Discuss the application of Charles Handy's cultural types to BOGML's growth phases and analyze their impact.

Charles Handy identified four distinct categories of corporate culture (cultural stereotypes) that can exist within an organization. Since its formation, BOGML has exhibited all four categories of corporate culture during different phases of its growth.

Required:
Identify and explain the specific and appropriate category of corporate culture applicable, and discuss its impact on the company for each of the following phases of growth when Dr. Ayimadu Baffour:

i) Created the functional departments.
ii) Stated that BOGML is built around him and without him the company will not exist.
iii) Insisted on retaining all authority for decision-making.
iv) Emphasized getting work done through teamwork.

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  • 16 Marks

MA – Nov 2024 – L2 – Q5a – Limiting Factor Decision and Profit Maximization

Determination of the optimum production plan considering scarce resources.

Manche produces two products from different quantities of the same resources using a just-in-time (JIT) production system. The selling price and resource requirements of each of the products are shown below:

Product C L
Unit Selling Price (GH¢) 130 160
Resources per Unit:
Direct Labour (GH¢8 per hour) 3 hours 5 hours
Material A (GH¢3 per kg) 5 kg 4 kg
Material B (GH¢7 per litre) 2 litres 1 litre
Machine Hours (GH¢10 per hour) 3 hours 4 hours
Fixed Overhead (GH¢8 per hour) 1 hour 1 hour

Market research shows that the maximum demand for products C and L during August 2024 is 500 units and 800 units respectively. This does not include an order that Manche has agreed with a commercial customer for the supply of 250 units of C and 350 units of L at selling prices of GH¢100 and GH¢135 per unit, respectively. Failure by Manche to deliver the order in full by the end of August will cause Manche to incur a GH¢5,000 financial penalty.

At a recent meeting between the Purchasing Manager and Production Manager to discuss the production plans of C and L for August, the following resource restrictions for the year were identified:

  • Direct Labour Hours: 90,000 hours
  • Machine Hours: 90,000 hours

The resource restrictions were evenly distributed throughout the year.

Required:

i) Prepare the optimum production plan for August 2024 using relevant computations. 
ii) Determine the contribution from adopting this plan. 
iii) Using relevant computations, show whether Manche should complete the order from the commercial customer assuming any excess labour hours for not making the contract can be used to produce 300 units of product ‘F’ with a contribution of GH¢55 per unit.

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  • 10 Marks

MA – Nov 2024 – L2- Q1b – Return on Investment (ROI)

Computation of ROI for different one-off transactions and advice on whether they should be undertaken.

Dondo LTD is a manufacturing company based in Nsawam. The following data represents the budgeted performance of Dondo LTD for the year 2025:

Amount (GH¢’000)
Profit 660
Plant and equipment (net of depreciation) 1,560
Working capital 750

Dondo LTD is considering undertaking the following separate one-off transactions:

  1. A cash discount of GH¢16,000 will be offered to its customers annually. This will, on average, reduce the trade receivables figure by GH¢60,000.
  2. An increase in average inventories by GH¢80,000 throughout the year. The increased inventory level is expected to increase sales, resulting in GH¢30,000 increased contribution per annum.
  3. At the beginning of the year, the company will buy a plant worth GH¢360,000. This is expected to reduce operating costs by GH¢105,000. The plant has a five-year useful life with nil residual value.

Required:

i) Compute the ROI for each of the one-off transactions above. 
ii) Advise Dondo LTD on whether the above one-off transactions should be carried out.

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  • 10 Marks

BMIS-Nov 2024-L1-Q1C- Decision-Making in Hospital Management

Centralised vs Decentralised decision-making in hospital management.

For each of the decisions below, identify whom you would expect to make the decision and briefly explain why.

  1. Decisions about the medical treatment or surgical treatment for individual patients.
  2. Establishing policy on hygiene standards in the hospitals.
  3. Scheduling operations in the operating theatres of each hospital.
  4. Discharging patients from hospital.
  5. Deciding the visiting times for patients in each hospital.
  6. Prescribing drugs for the treatment of patients.
  7. Hiring new staff, such as hospital porters and nurses.
  8. Dealing with payments from insurance companies for the treatment of insured patients.

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  • 10 Marks

BMIS – Nov 2024 – L1 – Q1c- Types of Organisations

Identify who should make various decisions in a hospital management context, explaining why.

Within the same business organisation, some decision-making might be centralised, with decisions made by senior management. Other decisions might be decentralised, and taken by managers or employees involved in operations.

Okpoti LTD owns and operates five private hospitals. It has a head office and each hospital has its own management team and staff (including medical staff such as doctors and nurses).

Decisions are expected to be made on the following:

  1. Decisions about the medical treatment or surgical treatment for individual patients.
  2. Establishing policy on hygiene standards in the hospitals.
  3. Scheduling operations in the operating theatres of each hospital.
  4. Discharging patients from hospital.
  5. Deciding the visiting times for patients in each hospital.
  6. Prescribing drugs for the treatment of patients.
  7. Hiring new staff, such as hospital porters and nurses.
  8. Dealing with payments from insurance companies for the treatment of insured patients.

Required:
For each of the decisions above identify from the list below whom you would expect to make the decision and briefly explain why.
i) Head office management
ii) The management of each hospital
iii) Staff in each hospital

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  • 20 Marks

AAA – Nov 2022 – L3 – SB – Q3 – Audit Reporting

Examines joint auditors' roles, options for audit disputes, acquisition processes, and reporting requirements.

During the audit of Kofo Plc in 2018, it was observed that there was an omission of liability to the tune of N2 billion. Upon investigation, it was discovered that the error was as a result of unrecorded liability relating to unremitted statutory taxes to the government in prior years. A compensating error was noticed in unsubstantiated investment and receivables balances schedule provided by the management.

The explanation provided by management for this error was that having noted this disparity, the internal audit team was commissioned to reconcile the ledger balances to establish the actual payment to be made to the government. The result of that exercise led to an initial adjustment of N500 million. However, upon further review by the Internal Audit and Risk Management team, the total disparity noted was N5 billion as opposed to the N2 billion initially noted. The reason being that the report with which the Internal Audit Team carried out the reconciliation was understated. Some liability balances were excluded from the report as a result of the approach used to set up the Information System (I.T) System. Therefore, the general command entered into the system to spool the report did not capture the entire transactions. To gain comfort, the audit team:

(i) Reviewed the reconciliation memo to have an understanding of management’s thought process;
(ii) Requested the updated spool of ledger balances from the I.T system;
(iii) Asked the Information Technology team to perform a walkthrough test of the transaction spool;
(iv) Requested the breakdown of the excluded balances and traced them to the supporting documents to which they relate; and
(v) Checked to see that there were no unusual remittances from the bank statements.

You are a member of the audit team which reviewed Kofo Plc’s compliance with International Standards on Auditing (ISA 250) on Non-Compliance with Laws and Regulations (NOCLAR).

Required:

a. Outline the audit procedures to be performed to help identify instances of non-compliance with laws and regulations. (5 Marks)

b. State what the auditor should do when they become aware of an issue of non-compliance with laws and regulations. (5 Marks)

c. State the types of policies and procedures the entity may implement to assist in the prevention and detection of non-compliance with laws and regulations. (4 Marks)

d. Discuss what the auditor should do under the following situations:

  • i. Reporting non-compliance to those charged with governance (2 Marks)
  • ii. Reporting non-compliance in the audit report (2 Marks)
  • iii. Reporting non-compliance to the authorities (2 Marks)

(Total 20 Marks)

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  • 15 Marks

FM – Nov 2017 – L3 – Q6 – Ethical Issues in Financial Management

Explore ethical considerations in capital investment and apply the Black-Scholes model in company valuation.

You have recently taken up employment with Large Plc., a Nigerian company with manufacturing subsidiaries in many countries across Africa. As the Financial Analyst, you report directly to the Managing Director who currently requires briefings on the following areas:

(i) Ethical issues and capital investment decisions,
(ii) Options and company valuation

Required:

a. Explain, with examples, ethical issues that might affect capital investment decisions and discuss the importance of such issues for Strategic Financial Management. (8 Marks)

b. Explain the circumstances in which the Black-Scholes Option Pricing (BSOP) model could be used to assess the value of a company, including the data required for the variables used in the model. (7 Marks)

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  • 3 Marks

FR – Nov 2023 – L2 – Q6b – Ethical Issues in Financial Reporting

List three types of non-financial information useful to stakeholders for decision-making.

Businesses are increasingly accepting that they are not only accountable to investors and lenders, but also accountable to a much wider group of people or stakeholders to which non-financial information is useful in understanding and taking informed decisions on financial statements of the entities.

Required:
State THREE of such useful non-financial information. (3 Marks)

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  • 40 Marks

PM – May 2021 – L2 – Q1 – Costing Systems and Techniques

Analyze linear programming application in production and pricing strategy for maximizing scarce resources.

The Managing Director of NTAMS Manufacturing Company Limited, located in Lagos, attended a seminar titled “Optimizing scarce resource utility in a manufacturing setting with particular reference to linear programming.” Upon his return, he initiated a management meeting to discuss key insights, prompted by the board’s decision to prioritize two primary products.

The following are cost data for the anticipated products “Biggi” and “Smalli”:

Costs Biggi (₦) Smalli (₦)
Material Costs (5kg @ ₦50/kg) 250 (3kg @ ₦50/kg) 150
Labour Costs:
Machining Time (4 hours @ ₦15/hr) 60 (2 hours @ ₦15/hr) 30
Processing Time (4 hours @ ₦10/hr) 40 (5 hours @ ₦10/hr) 50

The company adheres to a pricing policy where total cost of production is marked up by 20%. Annual overhead is ₦10,000,000, allocated on a 3:2 basis between Biggi and Smalli, with a projected production of 200,000 Biggis and 100,000 Smallis.

Available resources for the upcoming year:

  • Materials: 1,800,000 kg
  • Machine Time: 800,000 hours
  • Other Processing Time: 1,400,000 hours

Required:

As the management accountant:

  1. Explain briefly the concept of linear programming and its usefulness.
    (5 Marks)
  2. Compute the Prices for Biggi and Smalli using the company’s pricing policy.
    (5 Marks)
  3. Advise the company on the output levels needed to maximize total profit, with full financial analysis support.
    (10 Marks)
  4. Explain the meaning and limitations of “shadow prices” and calculate them for constraints.
    (12 Marks)
  5. Assuming consistent conditions for three years with an investment cost of ₦45,000,000 and a 15% cost of capital:
    • Determine if this venture is justified.
      (4 Marks)
    • Find the breakeven discount factor for this project.
      (4 Marks)

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  • 14 Marks

MA – Nov 2016 – L2 – Q1a – Introduction to management accounting

Discuss the importance of Management Accounting in a modern business environment and compare it with Financial Accounting.

The Management Accountant plays an important role in the modern business environment, and his/her activities may be categorized as providing information under the key headings of planning, control, and decision making.

You have just been appointed to a new role as Management Accountant in Akwaba Ltd, a large engineering company producing a wide range of parts for the automobile industry. This new role has been created following a majority decision of the Board of Directors based on the advice of the company’s auditors. However, the Managing Director comes from a marketing background and does not understand why the company needs another accountant as there is already a Financial Accountant employed on a full-time basis. She voted against the creation of the new position and considers the cost of your remuneration to be an unwelcome burden which will only serve to reduce the company’s reported profits. According to her, the equation Y = a – bx which management accountants always use is not relevant in the modern-day business environment.

You are aware of the strong opinion of the Managing Director, and as your first task, you decide to attempt to convince her of the importance of Management Accounting in the modern business environment and also suggest some ways that you can ensure your future role in Akwaba Ltd is financially viable.

Required:

Prepare a Memorandum to the Managing Director in which you address her concerns using the following guidelines:

i) Distinguish clearly between Financial Accounting and Management Accounting under any FOUR different headings. (6 marks)

ii) For each of the THREE key headings of planning, control, and decision making, outline one Management Accounting technique and how it would lead to stronger commercial success for the company. (6 marks)

iii) Identify any THREE qualitative (non-financial) issues that you should consider as a Management Accountant when providing information for decision making in Akwaba Ltd. (2 marks)

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  • 8 Marks

BMIS – May 2020 – L1 – Q1b – Management and leadership

Identify decision-makers for various management tasks in a hospital.

Within the same business organisation, some decision-making might be centralized, with decisions made by senior management. Other decisions might be decentralized and taken by managers or employees involved in operations.

A company owns and operates five private hospitals. It has a head office, a management team, and staff in each hospital (including medical staff such as doctors and nurses). Decisions now need to be made on the following:

i) Decisions about the medical treatment or surgical treatment for individual patients.
ii) Establishing policy on hygiene standards in the hospitals.
iii) Scheduling operations in the operating theatres of each hospital.
iv) Discharging patients from the hospital.
v) Deciding the visiting times for patients in each hospital.
vi) Prescribing drugs for the treatment of patients.
vii) Hiring new staff, such as hospital porters and nurses.
viii) Dealing with payments from insurance companies for the treatment of insured patients.

Required:
For each of the decisions above, identify from the list below whom you would expect to make the decision and briefly explain why.

  • Head Office Management
  • The Management of each hospital
  • Staff in each hospital

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  • 10 Marks

BMIS – May 2019 – L1 – Q3a – Teams

State the potential drawbacks of working as a team.

Working as a team is always encouraged. Teams combine the skills of different individuals and avoid complex communication between different business functions. Every member of the team can be a powerful motivator and team loyalty can be used to control the performance and behaviour of individuals. In fact, teams make fewer, but better-evaluated, decisions than individuals.

Required:
Despite all the advantages that are associated with working as a team, state SEVEN (7) potential drawbacks in working as a team. (10 marks)

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  • 20 Marks

BMIS – May 2019 – L1 – Q2 – Introduction to business strategy

Explain the need for planning before embarking on a business venture and the advantages of a formal system of strategic planning.

TestCo Company Ltd (TCL) introduced a product, YZ Sap, into the North East Region market and the patronage was very encouraging. In a conversation with a friend, the Managing Director of TCL, Asembibeba, made a strong case for taking risks without necessarily planning for the outcome. In his opinion, introducing YZ Sap into the North East Region without a formal planning process and its positive outcome suggests that planning is not necessary when entering a new untapped market.

Required:

a) Write a note to Asembibeba explaining clearly FIVE (5) reasons why there is the need for planning before embarking on a business venture. (10 marks)

b) Write a second note to Asembibeba explaining FIVE (5) advantages of a formal system of strategic planning when embarking on a business venture. (10 marks)

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  • 20 Marks

BMIS – Nov 2018 – L1 – Q7 – Management and leadership

Explain key features of supervision and identify managerial skills important to a good leader.

A Supervisor’s role as the lowest level of management is to interface between managerial and non-managerial staff. Management can be exercised over resources, activities, projects, and other essential non-personal things, while Leadership can only be exercised over people.

Required:

a) Explain FOUR (4) key features of supervision. (10 marks)

b) State FIVE (5) range of business and managerial skills important to a good leader. (10 marks)

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  • 10 Marks

BMIS – March 2024 – L1 – Q1b – Business and Organisational Structure

Explain five reasons why Asanko Ltd, a multinational dry dock company, might have adopted a decentralization policy for its operations.

Asanko Ltd is a dry dock company which repairs fishing trawlers. The company has its headquarters in Ghana with subsidiaries in Sierra Leone, Gambia and Liberia. The company has adopted decentralisation policy for its operations.

Required: Explain FIVE (5) reasons which might have accounted for the company’s decision to adopt this policy for its operations.

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  • 10 Marks

BMIS – Jul 2023 – L1 – Q1b – The business organisation and its stakeholders

Explains five reasons why a partnership may not be a suitable form of business organization.

Your childhood friend who knows nothing about business operations has decided to establish a form of business organization with funds bequeathed to him by his late uncle. While you believe a limited liability company is most suitable, he prefers either a sole proprietorship or partnership.

Required:
Explain to your friend FIVE (5) reasons a Partnership form of business would not be a good idea.

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  • 10 Marks

BMIS – Mar 2023 – L1 – Q5a – Introduction to information technology and information systems

Differentiates between data and information and explains essential qualities of information.

One of the most important resources Management of an organization requires in order to make meaningful decisions is credible information which has often been wrongly referred to as data.

Required:
i) Distinguish between data and information.
(2 marks)
ii) Explain FOUR (4) essential qualities of information.
(8 marks)

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  • 10 Marks

BMIS – May 2017 – L1 – Q3a – Business and organizational structure

Identify and explain three advantages and two disadvantages of centralization.

a) Djaba Ltd uses an organisational structure in which most power and critical decision-making responsibilities are concentrated with a few key leaders. The organisation often houses its primary decision makers or executives in a central headquarters with offices and meeting areas for leaders to discuss business.

Required:
Identify and explain THREE advantages and TWO disadvantages of this organisational structure to Djaba Ltd. (10 marks)

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  • 10 Marks

BMIS – Aug 2022 – L1 – Q1b – Business and organisational structure

Defines centralization and explains the benefits of centralizing operations in an organization.

Alpha & Omega Ltd, a medium-sized company with branches throughout the country, has decided to close many of its loss-making outlets after which it will centralize its operations instead of branch managers taking decisions.

Required:

i) Define centralization.
(2 marks)

ii) Explain FOUR (4) benefits Alpha & Omega will gain in centralizing its operations.
(8 marks)

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