BME EXAM JAN 2021 – EXERCISE
1. a. In business situations that require analysis of the impact of changing from one
production method to another, what three main areas need to be considered? Give an
example of each.
b. Why are small businesses more likely than large businesses to use job or batch
production?
c. State three factors that may influence choice of production line.
2. Explain the types of cost stated below. Give examples of each for a frozen pizza
company.
a. Direct Costs
b. Indirect Costs
c. Fixed Costs
d. Variable Costs
e. Marginal Costs
3.a. Describe and explain the difference between Quality Assurance and Quality Control.
b. Illustrate with a diagram of Deming Wheel for continuous improvement.
4.a. Identify and explain the three main factors of affecting choice location.
b. Define the expression optimal location.
c. Define the meaning of offshoring.
5.a. State and explain two types of innovation.
b. Describe two in details difference between invention, innovation and creativity.
6.a. State and explain two production planning functions.
b. State and explain two production control functions.
c. State and explain one limitation of production planning and control.
7.
QUALITY ASSURANCE AT THE HAIRDRESSERS
The Kuala Lumpur branch of FatBoyTrims had come bottom of all of the company’s branches
for customer satisfaction. The number of complaints received at head office about this branch
and the quality of its haircutting and styling services had been much greater than for any other
location. Revenue had fallen in recent months and the number of repeat customers had fallen
to 15% of total custom. A competing business nearby, that charged at least 30% more, was
always full. As a consequence, this branch of FatBoyTrims ha spent more on advertising for
new business than any other. The revenue per customer was also low as high-value servicessuch as colouring and tinting – were avoided by customers. A new manager had just been
appointed to the branch and she immediately set about establishing a quality-assurance
approach to improve customer satisfaction. She set quality targets for each stage of the
customer experience.
These included:
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Maximum time for phone to ring.
Maximum waiting time for appointment time.
Maximum time between hair wash and cutting.
All customers to be offered refreshments.
Minimum time spent by stylists with each customer.
Feedback forms to be filled in by 20% of clients and stylists responsible for each client to
discuss answers with client.
Each member of staff was given responsibility for at least one of these targets in an attempt
to achieve continuous improvement in the hairdressers. A record had to be kept of the branch’s
success at meeting these targets. At first, branch costs increased as an additional staff
member had to be recruited to help meet the quality standards. After two months, the number
of repeat clients had reached 36% and the branch reduced its advertising expenditure. After
four months, revenue had climbed by 38% and the branch had reached third place in the
company league table for customer satisfaction. The competing branch had reduced many
prices by 15%.
a. Define the following terms:
a.1. Quality Assurance
a.2. Continuous improvement
b. Outline five drawbacks to this business of not meeting customer expectations.
c. Analyse the benefits to this hairdresser of improving the quality of their service.
d. Discuss the problems the new manager of Fatboy Trims might have when trying to
implement the quality targets she has set.
8.
GILLETTE: MANAGING PRODUCT INNOVATION
Gillete has always believed that continuous new product development resulting from extensive
R&D is necessary to differentiate itself from competitors. True to its corporate mantra of
‘innovation is Gillette’, the company has introduced some of the most successful and widely
acclaimed innovative products in the consumer products industry. Its product range, protected
by trademarks, is legendary with such brands as Sensor, SensorExcel, Mach 3 and Gillete for
Women Venus.
The company’s policy is to generate 40% of its sales from products launched within the last
five years. One reason for Gillette’s strong focus on new product development is that the
competition has successfully learned to copy its products very quickly.For example, Shick (part
of Warner Lambert, later taken over by Pfizer but known as Wilkinson Sword in many parts of
the world) payhad imitated Gillette’s Trac II twin-blade razor within five months of the product’s
launch.
Further product launches have added to the brand value of Gillette. It has succeeded, in some
markets, in making razors less of a commodity product – which consumers just buy on price
and convenience considerations – but a branded consumer product that customers will pay a
premium price for.
a. Define the following terms:
a.1. Innovative products
a.2. Trademarks
b. Explain how the use of innovative products and trademarks can add to the value of a
company such as Gillette.
c. Analyse the importance of companies such as Gillette continuing to spend large sums on
R&D even in a global downturn.
d. Evaluate the factors that determine the level of innovation in an industry.
9.
MIDTOWN IMPERIAL HOTEL
‘We would be mad to accept this special request at $1850 below our normal price and $500
below the cost of providing the conference facilities and equipment hire.’
The hotel manager, Rajesh, was annoyed that Sheila burns, the conference manager of the
Imperial Hotel, had even bothered to consult him about the enquiry from the Friends of
General Hospital for the use of the conference suite for their annual general meeting
involving 100 people. Sheila had been asked for a price to organise the Friends’ AGM and
had used the normal hotel practice of adding a 50% mark-up to the total cost of the facility.
This had been too much for the charity, so they had requested a reduction and had
suggested a lower figure of $2200. As the AGM was planned for the end of February, a very
slack time for all hotels, Sheila had been tempted to take up the offer and had put it to
Rajesh for his approval. She knew that many of the Friends were quite influential people with
business interests and she believed that this could be to the hotel’s long-term advantage.
The costing statement for the conference suite was as follows:
Variable cost per delegate including food, three drinks each and waiting staff $15.
Hotel overhead allocation per conference $1000.
In addition, the Friends had requested some special audio visual equipment, which the hotel
would have to hire in for the day at a cost of $200.
a. Define the following terms:
a.1. Mark-up
a.2. Variable cost
b. Using the cost information from the text, calculate:
b.1. The full cost of the conference for the Friends of the General Hospital (including the
equipment hire).
b.2. The price that the hotel would normally charge for a conference of this size with the
equipment requested.
b.3. The profit the hotel would make at the normal price.
b.4. The contribution to the hotel’s overheads and profit if the conference suite were let
out for $2200.
c. Using monetary and non-monetary information evaluate Sheila Burns’s decision to offer
the hospital the conference facilities at the reduced price.