Bachelor of Business (University of Technology Sydney) Exam Autumn 2018: Helpful Questions and Answers.

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Bachelor of Business (University of Technology Sydney) Exam Autumn 2017: Helpful Questions and Answers MANAGEMENT DECISIONS & CONTROL – MARKING GUIDE AUTUMN 2017 SECTION 1: BASIC CONCEPTS 1... 0 MARKS Provide answers to the following questions: Each of these questions are worth 2 marks: - 2 marks for providing a relevant and valid explanation - 1 mark for simply identifying - 1. Steve is trying to improve the development of new products, by giving members of the R&D team cash bonuses based on the number of patent applications they file with regulators. However, some employees are knowingly filing applications that are incomplete or copies of existing patents. Is an example of (circle one): Gaming OR Manipulation (1 mark) Explain why? (1 mark): 2. “Managers can achieve maximum employee motivation and performance by setting accurate targets using an expectation budget.” Explain what is wrong with this statement? (2 marks) 3. Explain why improvements in customer satisfaction would not necessarily flow through to improved profitability? (2 marks) 4. When following a rational decision-making process to make a tactical decision such as deciding to accept or reject a special order, our analysis typically doesn’t include costs such as depreciation, rent or investment in equipment. Explain why? (2 marks) 5. Explain why, according to expectancy theory, a pay-for-performance system will fail to motivate employees? (2 marks) SECTION 2: APPLIED THEORY & SHORT ANSWER 10 MARKS The questions in this section all relate to the following information: The Liquidity Group is a firm that owns 23 liquor-based establishments located in Australia and New Zealand. These establishments include: Type Number Locations Features Pop-up Bar 5 Melbourne, Sydney, Gold Coast, Perth, Queenstown • Limited range of beer, wine and pre-mixed spirits • Open only during summer months Laneway cocktail bars 7 Melbourne (x2), Sydney (x2), Gold Coast, Noosa, Christchurch • High-end spirits and wine • Bar snacks Traditional pubs 4 Sydney (x2), Darwin Melbourne • Full bar • Bistro food Upmarket pubs 3 Perth, Sydney, Queenstown • Full bar • Bistro food • Traditional pubs that have been renovated/refurbished Function Centre 1 Noosa • Limited range of beer, wine and pre-mixed spirits • Kitchen facilities available for hire Multi-story establishments 3 Gold Coast, Wellington Sydney • Full bar • Full restaurant • Dance club The CEO, Georgia Mitchell, has become increasingly frustrated with the lack of accuracy in the organisation’s financial targets. She recently commented “These figures are meaningless, often there are so many variances across the board: positive, negative, big, small…it is almost by complete chance when our targets match an actual figure!”. As a result, whenever she has to assess the performance of individual bars she tends to dismiss information in the variance reports and instead relies on her own intuition and long experience with the business. By way of context, the financial reports are produced by a small Finance team (3 employees plus the financial controller), who, like Georgia, are headquartered in Sydney. Each year they forecast Liquidity’s overall annual profit target by first estimating budgeted profit for each establishment, aggregating these together and then adding company-level costs. Although each establishment’s profit is estimated separately, time pressure forces the team to use rules of thumb and simple short- cuts in the budgeting process. For example, they often use an incremental approach, where last years’ annual budget figures are adjusted for overall changes in general economic trends (e.g. inflation and economic growth). However, as pop-up bars are a new venture for Liquidity they have no prior year data. Instead, the team benchmarked the pop-up bars’ profit using budget figures from the laneway cocktail bars operating in similar cities. To account for the fact that pop-up bars are only open 3 months per year, the team divided the laneway bars’ annual profit by four. Once the team develops the targets, they are approved by the financial controller and then sent to the bar managers of each establishment. At the end of the financial year the bar managers then submit their actual profit figures to the Finance team, who calculates the variances and prepares the financial report for the CEO. 1. Explain why might the Finance team’s estimates of profit for the pop-up bars be inaccurate? (2 marks) 2 marks for providing a valid explanation why estimates of profit for the pop-up bars could be inaccurate - . 2. Describe three factors the Finance team should consider to develop a more accurate sales forecast for each pop-up bar? In your answer be specific about the information, assumptions or calculations required. (3 marks) 1 mark for each factor. Factors listed must be distinct from one another and relevant and specific to the sales of Liqudity’s pop-up bars. Examples: 3. Recently several of the individual bar managers have been lobbying Georgia to allow them to have input into the Liquidity’s budgeting process, in particular, in forecasting the budgeted profit for their own establishments. Provide two reasons explaining why using a more bottom-up budgeting approach would be beneficial for Liquidity? (2 marks): 1 mark for each reason explaining an advantage of bottom-up budgeting to Liquidity. Only award half marks if answers are vague or not specifically related to Liquidity. Students could discuss, for example: 4. Francis Mountain, the financial controller, is hesitant to include the bar managers in the budgeting process as he believes that their participation would lead to budgetary slack. Do you think Francis’ concerns are valid? Explain why or why not? (3 marks) SECTION 3: CASE ANALYSIS 20 MARKS All questions in this section refer to the case study of KaBOOM! that has been provided at the end of the exam paper. 1. Explain two reasons why would it be problematic for KaBOOM! Board Members to rely solely on the financial information presented in Exhibit 3 to assess the organization’s performance (4 marks): 2. KaBOOM!’s managers would like your input in developing a dashboard measuring important aspects of performance. For each of the following aspects of performance, complete the table below by designing an appropriate i) leading measure and ii) lagging measure (6 marks). 1 mark per measure, which must be relevant (i.e apply to the performance aspect and correctly classified as leading or lagging). Only award half marks if measures are not clearly measures (e.g. do not have units). Examples may include: Aspect of performance i) Leading measure ii) Lagging measure Maintaining a steady rate of playgrounds built # of playgrounds under construction # of playgrounds built Ensuring builds are completed on-time Growing the corporate funder base Maintaining employees’ planning skills and expertise 3. There is disagreement within the Board about whether KaBOOM should hold managers’ accountable for the organisation’s social impact. Some have suggested the use of measures such as the level of children’s access to play equipment, the frequency and duration of play, and even health outcomes such as average childhood obesity rates. However, others are not convinced that this is feasible, necessary or desirable. Provide two arguments for why KaBOOM! should not hold managers accountable for measures of the organisations’ social impact. Support your arguments with examples from the case and concepts and explanations you have learnt in the subject (10 marks). [Show More]

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