Tag (SQ): decision making
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- 1 Marks
Identifies type of bias in presenting market research survey results using averages to suggest better outcomes.
Question
The outcome of a market research survey is presented using averages to intentionally suggest better results than were actually found by the survey. This is an example of which of the following?
AÂ Â Confirmation bias
BÂ Â Reporting bias
CÂ Â Selection bias
DÂ Â Outlier bias
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- 1 Marks
Identifies the organisation structure that may slow decision-making due to dual authorities.
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- 20 Marks
Identify five benefits of outsourcing for Greenfield Enterprises.
Question
(a) Your organisation has outsourced most of its functions to adjust to modern trends in organisational management. Identify FIVE benefits that may accrue to your organisation from this arrangement.
(b) Greenfield Enterprises is operating as a medium-sized company in Lagos but has now decided to expand to all the regional capitals, and has therefore decided to decentralise its operations. State FIVE reasons for the decision to decentralise its operations.
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- 20 Marks
Discuss five ways public sector governance differs from private sector governance.
Question
At a recent conference of public sector governance where private sector governance is compared to that of the public sector, the speaker stresses “Public sector governance is different”.
Required:
(a) Discuss the statement of the speaker of the conference, pointing out five ways by which public sector governance is different.
(b) Discuss five benefits of engaging the stakeholders in public sector governance.
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- 8 Marks
Provide the optimal production plan for Harmony Company Ltd with limited labour hours for three products.
Question
Harmony Company Ltd is preparing for next season’s operations. The company has provided the following information relating to its three products:
| TA | GB | DC | |
|---|---|---|---|
| GH¢ | GH¢ | GH¢ | |
| Selling price | 18.5 | 16.2 | 12.6 |
| Material cost | 8.75 | 10.5 | 3.5 |
| Labour cost | 7.7 | 4.4 | 7.7 |
Labour hours per unit:
| TA | GB | DC | |
|---|---|---|---|
| Labour hours | 3.5 | 2.0 | 3.5 |
Annual Demand:
2,150 units (TA), 3,235 units (GB), 1,556 units (DC)
The company can only make available a total of 18,560 hours in the short run.
Required:
(a) Provide the optimal production plan for Harmony Ltd for the ensuing period.
(b) What is the total incremental benefit of producing DC instead of GB, assuming available resources can only meet demand of DC?
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- 20 Marks
Advise whether Okonku Enterprises should discontinue Double bed production based on contribution and profit impact.
Question
Okonku Enterprises produces Single, Double, and King size beds for sale to hotels in West Africa. Its manufacturing plant is located in Keta and is currently producing at 100% capacity. Below is the annual output and sales for each product and the associated costs.
| Product | Single bed | Double bed | King Size |
|---|---|---|---|
| Units sold | 5,000 units | 3,500 units | 4,000 units |
| Sales | GH₵ 2,500,000 | GH₵ 2,800,000 | GH₵ 3,800,000 |
| Cost | |||
| Material cost | 750,000 | 1,400,000 | 1,520,000 |
| Labour costs | 600,000 | 1,050,000 | 1,200,000 |
| Manufacturing O’head | 200,000 | 650,000 | 300,000 |
| Administrative cost | 200,000 | 100,000 | 200,000 |
| Total cost | 1,750,000 | 3,200,000 | 3,220,000 |
| Profit /Loss | 750,000 | (400,000) | 580,000 |
The Director of Okonku is of the view that the product Double bed is not doing well and must not be produced any longer. The following additional information has been provided.
(i) 40% of the labour cost for all bed types are fixed costs.
(ii) 50% of the manufacturing overhead is variable costs for all products.
(iii) 80% of the administrative cost is fixed.
Required:
(a) Advise whether the company should shut down the production of Double beds.
(b) Should the company accept the new order assuming Double beds will still be produced?
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- 10 Marks
Determine the optimal plant hire contract for Terra Works Ltd using expected value based on sales probabilities.
Question
Terra Works Limited is a company that is engaged in site clearance and site preparation work. Information about its operations is as follows:
(1) It is Terra Works Limited’s policy to hire all the plant and machinery it needs rather than to purchase its own plant and machinery.
(2) Terra Works Limited will enter into an advance hire agreement contract for the coming year at one of three levels – high, medium, or low – which correspond to the requirements of a high, medium, or low level of orders obtained.
(3) The level of orders obtained will not be known when the advance hire agreement contract is entered into. Probabilities have been estimated by management as to the likelihood of the orders being at a high, medium, or low level.
(4) Where the advance hire agreement entered into is lower than that required for the level of orders actually obtained, a premium rate must be paid to obtain the additional plant and machinery required.
(5) No refund is obtainable where the advance hire agreement for plant and machinery is at a level in excess of that required to satisfy the site clearance and preparation orders actually obtained.
A summary of the information relating to the above points is as follows:
| Level of Sales orders | Probability | Revenue GH¢000 | Variable costs GH¢000 | Plant and machinery hire costs | |
|---|---|---|---|---|---|
| Advance GH¢000 | Conversion GH¢000 | ||||
| High | 0.25 | 15,000 | 10,500 | 2,300 | 1,500 |
| Medium | 0.45 | 8,500 | 5,950 | 1,500 | 850 |
| Low | 0.30 | 4,000 | 2,800 | 1,000 | – |
| Low to medium | 850 | ||||
| Medium to high | 1,300 | ||||
| Low to high | 2,150 |
Required:
(a) Prepare a table showing the outcomes for each decision and outcome combination.
(b) Prepare a pay-off matrix and determine the advance hire contract that maximizes the expected value.
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- 10 Marks
Calculate selling price for Product X using Nexco Limited’s normal pricing policy with a 16.67% profit margin.
Question
Nexco Limited has developed a new product, Product X, that it wishes to introduce to the market. The cost per unit is expected to be as follows, assuming annual sales of 40,000 units.
Cost per unit
| Cost Item | GH¢ |
|---|---|
| Direct materials: | |
| Material M1 (2 litres at GH¢15) | 30 |
| Material M2 (0.5 litres at GH¢8) | 4 |
| Direct labour (3 hours at GH¢10) | 30 |
| Fixed overheads (3 hours at GH¢12) | 36 |
| Full cost | 100 |
It has been company policy to price products to achieve a profit of 16.67% (one-sixth) on the sales price.
Required:
(a) Calculate the selling price that would be charged if Nexco Limited applies its normal pricing policy.
(b) If Nexco Limited decided to price products at marginal cost plus, what mark-up on the marginal cost would be required to obtain the same selling price as in (a)?
(c) Suggest two other pricing strategies that might be applied to decide a selling price for Product
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- Tags: Cost-plus pricing, decision making, Pricing, Profit Margin, Selling price
- Level: Level 2
- Topic: Decision making techniques
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