Question 1: Quality costs and Theory of constraints

Part A

Juran and Feigenbaum suggest that the costs of quality be categorised into prevention, appraisal, internal failure and external failure costs.

Required

Categorise each of the following costs into one of the four categories as shown in the table below:               (3 marks)

(a)      Warranty costs

(b)      Packaging inspection

(c)       Returns resulting from poor quality

(d)      Design reviews

(e)      Scrap

(f)       Lost sales due to poor product performance

(g)      Inspection of raw materials

(h)      Cost of recalling defective products

(i)        Downtime due to defects

(j)       Supplier evaluations

(k)       Reinspection after defect is corrected

(l)       Complaint handling

Only write the letter e.g. (a), (b), (c) etc. in providing your answers

in a table as below:

Part B

Read the following article from the New Zealand Herald:

Waitemata DHB to dump 800 patients

About 800 Auckland patients will be dumped from hospital waiting lists in a single hit

before the end of the month.  The move is the latest in a national round of waiting list culls as District Health Boards (DHBs) strive to meet a government requirement that only

patients who can be guaranteed treatment in six months stay on a list.   Those who are

assessed as not sick enough to warrant treatment within six months are sent back to their GP [General Practice doctor] for monitoring.

A leaked memo, from Waitemata DHB's general manager Rachel Haggerty, obtained by

ACT health spokeswoman Heather Roy, showed the board was planning to cut 400 people from surgery lists and another 400 from outpatient clinic lists before September 30.  Mrs

Roy said the Health Board faced an effective penalty of $3 million if it failed to comply.

That was because the Health Ministry would move it on to its intensive monitoring regime.

Under that regime it would receive funding at the end of each month, rather than the

beginning - costing it large amounts of interest. Mrs Roy said the move was not fair on the patients.  "These 800 patients were referred to specialists because their GPs believe they

need a second opinion or further treatment - this is just another attempt to artificially

improve waiting list statistics.  DHBs shouldn't have to choose between their patients and their funding."

A union for senior doctors, the Association of Salaried Medical Specialists, last week said the Government's waiting list policy amounted to "data cleansing".  In the leaked memo,   Ms Haggerty said the DHB was working to better align its systems so people were turned  back when they first saw a specialist, rather than put on awaiting list and then later taken  off.  Despite increasing the number of first specialist assessments by 11 per cent and

elective surgery by 4 per cent (weighted for complexity) the board was still struggling to meet demand, she said.  The memo went out to Primary Health Organisations (PHOs),

which would have to manage and monitor the patients who were being taken off lists.

This problem has occurred at many District Health Boards including Canterbury.  The

following data relates to the processes and activities of providing surgical health care at Ilam Public Hospital.

Required

Apply the Theory of Constraints (TOC) to the Ilam Public Hospital.  You must identify the constraint and recommend strategies to manage it.                       (7 marks)

TOTAL:  10 MARKS

Question 2: Responsibility accounting and performance evaluation

Part A

Responsibility accounting is the process of assigning authority and responsibility to managers of sub-units in the organisation and then measuring and evaluating their performance. Sub-units may include cost, revenue, profit and investment centres.

Required

(a) Discuss what issues managers of profit centres are responsible for. Also discuss at

least two decisions these managers are responsible for.                                   (2 marks)

(b) Discuss what issues managers of investment centres are responsible for and what the objective of investment centres is. List at least two assets that are under control of managers of an investment centre. (2 marks)

Part B

Makora Industries manufactures sensor lights. They incurred the following costs and expenses in 2019.

During 2019, Makora Industries produced 40 000 units of sensor lights, which were sold for $30 each. Makora’s investment in the business was $2 450 000 at the beginning of 2019 and $2 750 000 at the end of 2019. Makora’s weighted average cost of capital is 12 per cent.

Required

(a) Determine Makora’s return on investment for 2019.     (3 marks)

(b) Compute Makora’s residual income (loss) for 2019.     (1 mark)

(c) Explain how the two performance evaluations in (a) and (b) can cause managers to

make decisions that could be harmful to an entity in the long run.                       (1 mark)

TOTAL:  10 MARKS

Question 3: Balanced scorecard and strategy maps

Part A

Managers increasingly use a mixture of financial and non-financial measures for organisational performance.

Required

In the following list of eight performance measures, identify those that are financial and those that are non-financial.         (2 marks)

(a)      Customer satisfaction ratings

(e)      Annual average purchase amount per customer

(f)       Defect rate

(g)      Number of new products developed annually

(h)      Revenues from new products introduced this year

Only write the letter e.g. (a), (b), (c) etc. in providing your answers

in a table as below:

Part B

Part of the process for developing a balanced scorecard is to identify one or more   measures for each of the four perspectives: Financial; Customer; Internal business process; and Learning and growth.

Required

Categorise each of the following 12 potential balanced scorecard measures according to the four perspectives as shown in the table below:                                                  (3 marks)

(a)      Percentage of customer orders delivered on time

(b)      Ratio of research and development cost to number of new products developed

(c)      Economic value added (EVA)

(d)      Number of hours of employee training

(e)      Direct labour price variance

(f)       Market share

(g)      Percentage of customer orders delivered without error

(h)      Days in accounts receivables

(l)       Customer satisfaction ratings

Only write the letter e.g. (a), (b), (c) etc. in providing your answers

in a table as below:

Part C

Chelsea Hooks has been working at a veterinary surgery for two years and she has to be on call every night. As this was not suiting her lifestyle, she decided to join a small group  of vets, BetterPetVets. Members in BetterPetVets veterinary practice share the

responsibility for attending emergencies with other members of the group. Chelsea

specialises in the treatment of large farm animals. All of the other vets in BetterPetVets

can treat large farm animals but none specialise in this area. Chelsea’s friend just finished an accounting degree and recommended that BetterPetVets considers implementing a

balanced scorecard as they develop the policies and practices for the new group.

Required

(a) Recommend two measures for each of the four perspectives of the balanced scorecard that BetterPetVets could use to assess their performance.               (4 marks)

(b) Construct a strategy map to reflect the links between the measures selected in (a). (1 mark)

TOTAL:  10 MARKS

Question 4: Rewards, incentives and risk management

Part A

You are on the board of a computer software company that has three distinct divisions:

home networks, small business systems and ERP systems. In a bid to encourage higher    performance, it has been proposed that the company would benefit from creating a reward system with a profit-sharing component for divisional managers. At present, divisional

managers are paid a fixed salary.

The proposal is for the company to pool five per cent (5%) of the company’s profits each month and pay this amount at the end of the year based on divisional managers’

performance against targets. The targets will be set in the preliminary performance review at the beginning of the year. Targets will cover both divisional and company-wide

performance. It is thought that this approach will encourage a commitment to the

organisation and encourage individuals to strive for better results. There will be a vote for the current proposal at the next board meeting.

Required

(a) What is the main advantage of this proposed system?                                        (1 mark)

(b) What is the focus of this proposed incentive system? Discuss how this may influence

managers’ decisions and the impact of their decisions on the organisation.     (3 marks)

(c)  Give two examples of decisions that divisional managers could make to advantage

themselves with the proposed reward system.                                                  (2 marks)

(d) Outline two issues that an alternative reward system could include to overcome potential problems identified in (b and c) above.          (2 marks)

Part B

Required

Discuss two systems that organisations can implement or have in place to manage risks effectively.                     (2 marks)

TOTAL:  10 MARKS

Question 5: Sustainability management accounting

Part A

The managers of Ceres Ltd are considering developing and implementing sustainability practices in their organisation.

Required

(a) What would be the main reason for developing and implementing sustainability practices, and what type of information will be required?                                                    (2 marks)

(b) Discuss three factors managers will have to consider when developing and

implementing sustainability practices in Ceres Ltd.                                            (3 marks)

Part B

Sustainability costs are typically classified into five category levels: Contingent costs;

Conventional costs; Image and relationship costs; Potentially hidden costs; and Societal costs.

Required

Classify the following 9 sustainability costs according to their appropriate category level. (3 marks)

(a)      Clean-up costs from a chemical accident

(b)      Costs associated with prolonged licensing permits

(c)      Decommissioning of site

(d)      Environmental labelling

(e)      Habitat and wetland protection

(f)       Landscaping around site

(g)      New capital equipment costs

(h)      Personal injury

(i)       Sustainability reports

Only write the letter e.g. (a), (b), (c) etc. in providing your answers

in a table as below:

Part C

Required

Discuss life cycle costing and life cycle analysis.                                                     (2 marks)

TOTAL:  10 MARKS

Question 6: Integrated Reporting

Required

(a) What is the difference between practices of Sustainability Reporting and those of      (2 marks)

Integrated Reporting?

(b) Discuss four drivers of Integrated Reporting.      (4 marks)

(c) Is integrated reporting a good idea? Justify your answer. (4 marks)

TOTAL:  10 MARKS