SECTION-A
Question 1: Task in this question requires each student to carry out local market study, survey and analysis. Each one should visit the local market places, select any ONE product (electronic / automobile / any other consumer products) with all brands available in the Oman market, study the product in detail, and carry out the survey and provide answers for the following questions in the report:
(a) Mention all details of the product (Name, specifications, prices and manufacturers etc.,).
(b) Description of any one of the products (using your own sentences with 200 words approx.).
(c) Compare between any two brands and their local demand in the market (using your own sentences with 200 words approx.).
(d) Identify which brand of product is the market leader in Oman market and discuss what market strategies made the brand as the market leader (using your own sentences with 200 words approx.).
‘Break-even analysis helps a manager to understand more clearly the nature of relevant costs and their importance in managerial decision making, resulting in that the manager is able to take more soundly decisions and is more confident about their eventual outcome'. Explain its relevance to any manufacturing industry, supporting your answer with an example.
‘Investment in any new project involves financial and marketing risks and needs proper assessment by applying appraisal techniques. Discount cash flow criteria are important for decision making.' Explain how DCF techniques are useful in overcoming financial risks at the time of taking investment decision, supporting your answer with an example.
Question 2: 'Break-even analysis helps a manager to understand more clearly the nature of relevant costs and their importance in managerial decision making, resulting in that the manager is able to take more soundly decisions and is more confident about their eventual outcome'. Explain its relevance to any manufacturing industry, supporting your answer with an example.
Question 3: 'Investment in any new project involves financial and marketing risks and needs proper assessment by applying appraisal techniques. Discount cash flow criteria are important for decision making.'
Explain how DCF techniques are useful in overcoming financial risks at the time of taking investment decision, supporting your answer with an example.
SECTION-B
M/S Al-Khoudh metal processing industry plans to manufacture a new product. The product needs a special component. The industry has reviewed that the special component can be produced in the plant or bought in. An investment is required to start the production of the component for which two mutually exclusive projects A and B representing different production processes are available. The alternative option is to buy in from another company representing project C. The details of the projects A and B are given in the Table Q4:
|
Data
|
Project-A
|
Project-B
|
|
Capital (RO)
|
240,000.000
|
600,000.000
|
|
Life (years)
|
6
|
6
|
|
Liquidation value (RO)
|
0
|
60,000.000
|
|
Capacity (units per year)
|
8,000
|
10,000
|
|
Salaries per year (RO)
|
50,000.000
|
50,000.000
|
|
Other fixed costs per year (RO)
|
40,000.000
|
160,000.000
|
|
Wages per year (RO)
|
220,000.000
|
80,000.000
|
|
Cost of materials per year (RO)
|
400,000.000
|
450,000.000
|
|
Other variable costs per year (RO)
|
30,000.000
|
30,000.000
|
|
Cost of capital (%)
|
10
|
10
|
(i) Using the information from the table Q4 and Discount Cash Flow criteria, calculate Net Present Value (NPV) considering costs only, if the industry plans to manufacture 5,000 units per year,
(ii) Suggest suitable project for the company and justify your answer.
(iii) Using the annual cost data from the table Q4, determine which project incurs less cost if the industry considers to produce 8,000 units per year.
(iv) If the industry considers the third option, project C is to buy in 8,000 components per year from another company at a price of RO 120.000 per unit, how much amount of money is to be paid per year.
(v) Analyzing the results from above questions, (i), (ii), (iii) and (iv), recommend which option should be considered best for the company.
(vi) Using the cost data of the projects, determine Break Even point and margin of safety (units and value) for the two projects (A & B) If the companies sell 8,000 units of new product per year at a price of RO 200.000.
M/S Al-Hail company manufactures bicycles and supplies to the market. A local sub-contracting company manufactures and supplies wheels to the M/S Al-hail company through a purchase contract. The sub-contracting company initially purchases aluminium billets as raw material and manufactures wheels by forming each billet into either 10 front or 10 rear wheel rims. Finally, all rims (front and rear) are assembled with spokes, front and rear hubs. Front wheels comprise a front rim, 36 spokes and a front hub. Rear wheels comprise a rear rim, 42 spokes and a rear hub.
(i) Draw the Bill of Material (BOM) tree for the front and rear wheels.
(ii) Front and rear rims are also sold to the dealers as spares. Rims are manufactured in batches of 600 or multiples of 600. Spokes are manufactured in batches of 5,000 or multiples of 5,000. Using Tables Q5(i) and Q5(ii) below, complete the Material Requirements Planning (MRP) calculations to determine when the Purchase Orders should be placed for the front rims and the spokes.
|
|
Week
|
|
|
11
|
12
|
13
|
14
|
|
Front wheel
|
1000
|
900
|
900
|
900
|
|
Rear wheel
|
900
|
900
|
900
|
1000
|
|
Front rim
|
600
|
500
|
400
|
400
|
Table Q5(i)
|
|
Lead Time
|
Stock on Hand
|
Batch Size
|
|
Front wheel
|
1
|
600
|
-
|
|
Rear wheel
|
1
|
400
|
-
|
|
Front rim
|
2
|
0
|
600
|
|
Spokes
|
1
|
15,000
|
5,000
|
Table Q5(ii)