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: 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.