CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

Pillar E

E1 Enterprise Operations
Specimen Examination Paper
Instructions to candidates
You are allowed three hours to answer this question paper. You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you will not be allowed, under any circumstances, to open the answer book and start writing or use your calculator during the reading time. You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or subquestions). The requirements for questions 2 4 are highlighted in a dotted box. ALL answers must be written in the answer book. Answers or notes written on the question paper will not be submitted for marking. Answer the ONE compulsory question in Section A. This has eight subquestions on pages 2 to 4. Answer ALL SIX compulsory sub-questions in Section B on pages 5 and 6. Answer the TWO compulsory questions in Section C on pages 7 and 8. The list of verbs as published in the syllabus is given for reference on page 9. Write your candidate number, the paper number and examination subject title in the spaces provided on the front of the answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close. Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.

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The Chartered Institute of Management Accountants 2008

E1 Enterprise Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

SECTION A 20 MARKS [Note: The indicative time for answering this section is 36 minutes] ANSWER ALL EIGHT SUB-QUESTIONS IN THIS SECTION.

Instructions for answering Section A

The answers to the eight sub-questions in Section A should ALL be written in your answer book. Your answers should be clearly numbered with the sub-question number and ruled off so the markers know which sub-question you are answering. For multiple choice questions you need only write the sub-question number and the answer option you have chosen. You do not need to start a new page for each sub-question. Each of the sub-questions numbered from 1.1 to 1.6 inclusive, given below, has only ONE correct answer. Each is worth two marks.

Question One
1.1 A B C D The use of skim pricing as a marketing technique will result in non recovery of promotional costs. enticing new customers to buy a product or service. high prices but low profit due to high fixed costs. low prices so denying competitors opportunities to gain market share. (2 marks)

1.2 A B C D

Undifferentiated market positioning involves the targeting of a single market segment with a single marketing mix. a single market segment ignoring the concept of the marketing mix. an entire market with a different marketing mix for each segment. an entire market with a single marketing mix. (2 marks)

1.3 A B C D

The internet is an example of electronic data interchange. distributed processing. a local area network. a wide area network. (2 marks)

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Enterprise Operations

Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

1.4 A B C D

Public relations activity can be used within marketing as part of marketing decision support protocols. a promotional mix. customer complaints and feedback processes. segmentation practices. (2 marks)

1.5 A B C D

Data integrity refers to its accuracy. security of storage. adaptability for multiple use. ethical use of personal details. (2 marks)

1.6 A B C D

Corrective refers to a type of maintenance performed to remedy software defects. allow executive level unstructured decision-making. adjust applications to user preferences. prevent future operation delays. (2 marks)

Section A continues on the next page

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

Required:
Each of the sub-questions numbered 1.7 to 1.8 below requires a brief written response. Each sub-question is worth 4 marks. 1.7 When identifying the requirements of a new system both functional (or logical) and physical aspects should be taken into account. From the listing below identify those that are functional and those that are physical requirements. Work and data flow Peripherals Volumes, frequencies, etc. File size Output formats Control and backup features Screen layouts Data storage facilities (e.g. database) (4 marks)

1.8

Describe the likely features of an organisation that has fully embraced the marketing concept. (4 marks)

Reminder All answers to Section A must be written in your answer book. Answers or notes to Section A written on the question paper will not be submitted for marking. End of Section A

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

SECTION B 30 MARKS [Note: The indicative time for answering this section is 54 minutes] ANSWER ALL SIX SUB-QUESTIONS. EACH SUB-QUESTION IS WORTH 5 MARKS.
Question Two
TF7 is a progressive manufacturing company which is open to new approaches and willing to learn from good ideas wherever they are practiced. One of the first within its industry to invest heavily in new technology, TF7 runs its database over office-wide networks and links employees computers by wireless local area network (LAN) connections. TF7 has, in the past, only dealt with wholesalers but, thanks to email links from a new Internet home page, it now receives a substantial number of enquiries from ultimate customers of its products. TF7 feels that this will represent the majority of business in the future, but has not attempted to forecast future demand accurately. In response to employees spending more time communicating with potential customers by email, TF7 is considering expanding its technology, including the connection of its database to a web server. This would enable potential customers to search for product specifications, availability, and delivery and price information for themselves. It would also allow customers to place orders and view shopping cart items through a browser facility. Before making such an investment, TF7 has commissioned management consultants to conduct an organisational review. The consultants have produced a draft report in which they outline a number of interim findings, including the following: TF7 should gain significant benefits over its rivals through its database operations. TF7 should consider developing further the interconnection of applications so long as contingency plans are made for the potential of systems failure. Although there has been considerable expenditure on hardware, TF7 now needs to invest in software applications. TF7s management information systems and executive information systems are undeveloped to the detriment of the company both operationally and strategically. Culturally, TF7 needs to adjust from business to business trading (B2B) to business to consumer trading (B2C) more fully. Currently training is conducted by TF7s own staff. The staff training programme needs to be reviewed to take account of new skill requirements demanded by new working practices. In house training should continue but a mixture of TF7 trainers (and managers) and specialist providers should deliver a programme designed by TF7s Human Resources Department. The effectiveness of staff training events needs to be more carefully assessed. Future market demand for TF7s products needs to be accurately forecast.

You work in TF7s technical department and report directly to the Chief Executive who has asked for a series of brief notes so that he is prepared when discussing the draft report with the management consultants.

The requirement for this question is on the next page

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

Required: (a)
Identify the types of benefits TF7 is likely to be enjoying as part of its database operations. (5 marks)

(b)

Explain the value of good information management and executive information systems. (5 marks)

(c)

Explain the issues TF7 needs to be aware of when adjusting from business to business trading (B2B) to business to consumer trading (B2C). (5 marks)

(d)

Explain how TF7 can assess the effectiveness of staff training events. (5 marks)

(e)

Identify the advantages that TF7 might achieve by using a mixture of its own staff and specialist providers in delivering a training programme. (5 marks)

(f)

Briefly describe the techniques that organisations find useful in forecasting future market demand for their products and services. (5 marks)

(Total for Question Two = 30 marks)

(Total for Section B = 30 marks)

End of Section B

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CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

SECTION C 50 MARKS [Note: The indicative time for answering this section is 90 minutes] ANSWER BOTH QUESTIONS IN THIS SECTION. EACH QUESTION IS WORTH 25 MARKS.

Question Three
YO employs buyers, designers, machinists and tailors to produce coats, jackets, trousers, dresses and skirts that its sales team sells. YO has a long standing relationship with MX which sells directly to the public from a chain of out of town stores. Over 80% of YOs sales are to MX whose approach has been to sell clothing in great volumes at lower prices than the high street stores. It expects its suppliers (including YO) to take account of new fashion designs and manufacture its clothes at competitive prices. MX is rethinking its strategy and wishes to move more upmarket by introducing a better quality clothing range, which it believes its customers will be prepared to pay a little more for. Already YO has noticed that MX has started to be more demanding and has sent back any batches it feels are in the slightest way unsuitable. MX wants to work with fewer suppliers but develop a better relationship with each of them. MX wants to renegotiate its contract with YO (which expires soon in any case). MX is prepared to talk with YO about the need to improve the quality of its products and has indicated that if it receives the right assurances, it would be prepared to pay a slightly higher unit cost per item. It also proposes to work more closely with YOs designers to maximise production of the type of clothing that it feels its customers want. If these talks are unsuccessful, MX will use one of its other suppliers when the existing contract expires. YO is aware that MX has experimented by using a few trusted overseas suppliers who have managed to achieve both relatively low prices and superior quality through the adoption of total quality management (TQM) techniques. Anxious to maintain its relationship with MX, YO recognises that it must change from its present focus on price to one that includes quality considerations.

Required: (a)
Explain the way in which MX is proposing to manage its suppliers as part of a value system or network. (10 marks)

(b)

Explain the term total quality and the requirements of achieving it within YO. (10 marks)

(c)

Describe the way in which YOs human resource policies must alter in order to meet MXs new requirements. (5 marks)

(Total for question three = 25 marks

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Enterprise Operations

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

Question Four
M is Chairman and Managing Director of the company OK1 which he started 15 years ago. The company has been very successful and, through a series of acquisitions, has diversified its operations and employs 3,500 people. M is a major force in the company. His management style is very autocratic and he is unwilling to involve others in decisions about the future strategic direction of the company. Recently, M announced to the Board that he is intending that OK1 becomes listed on the stock exchange. Some of OKs main competitors include explicit reference to their commitment to act in a socially responsible manner in their mission statements, so informing their strategies and policies. This is not the case for OK1. Indeed, M sees social responsibility as conflicting with the main interest of the company which is that of creating maximum wealth. The Finance Director of the company has become increasingly concerned about the decisions being made by M and the fact that he has put pressure on her to participate in some questionable accounting practices. She has had to cover up Ms substantial remuneration package, which M has awarded to himself. She is also aware that M has accepted bribes from foreign suppliers and of insider dealing relating to a number of the acquisitions. There is a lack of appropriate control systems and accountability in the company. The Finance Director has discussed her concerns with other members of the Board, including the Marketing Director, Production Director and HR Director. However, they seem willing to overlook the wrongdoings of M and never challenge the decisions made by him. The opportunity to do so is limited, since the Board meets on an irregular and infrequent basis. At the last Board meeting, M set out his plans to close the majority of existing factories and move operations to L country where he has been in secret negotiations with representatives of the government. The main objective is to benefit from low cost labour, since the country has very little employment legislation to protect workers and has a poor human rights record. It is not clear how many jobs will be lost or how many new jobs will be created. The HR Director is aware of the need to develop human resource plans in the light of Ms plans.

Required: (a)
Explain the corporate governance and ethical issues facing OK1. (10 marks)

(b)

Explain the main arguments for and against the view that socially responsible business decisions can achieve competitive performance and improve stakeholder value. (10 marks) Explain the main stages involved in developing human resource plans and programmes following the announcement of M to close the majority of existing factories and move operations. (5 marks) Learning outcome E 1 A (Total for Question Four = 25 marks)

(c)

(Total marks for Section C = 50 marks)

End of Question Paper

Enterprise Operations

Specimen Exam Paper

CIMA 2010 Chartered Management Accounting Qualification - Specimen Examination Paper E1

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb. LEARNING OBJECTIVE
Level 1 - Knowledge What you are expected to know.

VERBS USED
List State Define

DEFINITION
Make a list of Express, fully or clearly, the details/facts of Give the exact meaning of

Level 2 - Comprehension What you are expected to understand.

Describe Distinguish Explain Identify Illustrate

Communicate the key features Highlight the differences between Make clear or intelligible/state the meaning or purpose of Recognise, establish or select after consideration Use an example to describe or explain something

Level 3 - Application How you are expected to apply your knowledge.

Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate

Put to practical use Ascertain or reckon mathematically Prove with certainty or to exhibit by practical means Make or get ready for use Make or prove consistent/compatible Find an answer to Arrange in a table

Level 4 - Analysis How are you expected to analyse the detail of what you have learned.

Analyse Categorise Compare and contrast Construct Discuss Interpret Prioritise Produce

Examine in detail the structure of Place into a defined class or division Show the similarities and/or differences between Build up or compile Examine in detail by argument Translate into intelligible or familiar terms Place in order of priority or sequence for action Create or bring into existence

Level 5 - Evaluation How are you expected to use your learning to evaluate, make decisions or recommendations.

Advise Evaluate Recommend

Counsel, inform or notify Appraise or assess the value of Propose a course of action

Specimen Exam Paper

Enterprise Operations