PERFORMANCE MANAGEMENT F-5

ASSIGNMENT# 04

SUBMITTED BY
S. MUNAZZA ALBEEZ
10341

SUBMITTED TO
SIR JALAL AHMED KHAN

Crush Co
The following scenario relates to questions 164 – 168

Crush Co has developed a new product. The first batch of 100 units will take 1,500 labour hours to
produce. Crush Co has estimated that there will be an 85% learning curve that will continue until 6,400
units have been produced. Batches after this level will each take the same amount of time as the 64th
batch. The batch size will always be 100 units.

Note: The learning index for an 85% learning curve is -0.2345

Ignore the time value of money.

164 Calculate the cumulative average time per batch for the first 64 batches.
  A 567.7 hours
 B 565.6 hours
 C 433.3 hours
 D 570 hours
The correct answer is: 565.6 hours

165 The total time for the first 16 batches of 100 units was 9,000 hours. What was the actual learning
rate closest to (to the nearest %)?

 A 80%
 B 75%
 C 78%
 D 73%
The correct answer is C 78%

166 The following statements have been made about Crush Co and the learning curve:

(1) Decisions about allocating resources and costing the new product should be based on the time taken
to produce the 64th batch.

(2) The learning process does not start until the second batch comes off the production line. Which of
the above statements is/are true?

 A 1 only
 B 2 only
 C Neither 1 nor 2
 D Both 1 and 2
The correct answer is A 1 only

167 The following statements have been made about learning curve:

(1) The learning curve must assume a certain degree of motivation among employees of Crush Co

(2) The learning curve phenomenon is not always present Which of the above statements is/are true?

 A 1 only
 B 2 only
 C Neither 1 nor 2
 D Both 1 and 2
The correct answer is: 330.75 hours

168 Which of the following conditions, if present in Crush Co would allow the learning curve to
flourish?

 A The process is a repetitive one

 B There is a continuity of workers
 C There are no prolonged breaks during the production process
 D All of the above
 The correct answer is D All of the above

BBB Co
The following scenario relates to questions 169 – 173.

BBB Co has developed a new product. The first batch of 50 units will take 750 labour hours to
produce. There will be an 90% learning curve that will continue until 3,550 units have been produced.
Batches after this level will each take the same amount of time as the 71st batch. The batch size will
always be 50 units.

Note: The learning index for an 90% learning curve is -0.152

Ignore the time value of money.

169 Calculate the time taken for the 71st batch.

 A 392.35 hours
 B 330.75 hours
 C 393.23 hours
 D 345.65 hours

The correct answer is 330.75 hours

170 The total time for the first 16 batches of units was 8,500 hours. What was the actual learning rate
closest to (to the nearest %)?

 A 92%
 B 89%
 C 78%
 D 85%

The correct answer is A 92%

171 The following statements have been made about BBB Co and the learning curve:

(1) The learning effect comes to an end in BBB Co after the 71st unit, however, some learning effects
can continue indefinitely.

(2) The learning curve is restricted to the manufacturing industry. Which of the above statements
is/are true?

 A 1 only
 B 2 only
 C Neither 1 nor 2
 D Both 1 and 2
 The correct answer is C The learning curve will eventually come to an end in all cases.

172 The costs of producing more units in BBB Co has been reduced due to the following factors. Which
factor from the below is due to the learning curve effect?

 A Bulk quantity discounts received from the supplier

 B Lower labour costs
 C A reduction in materials price
 D Economies of scale achieved in energy costs

The correct answer is B The learning effect leads to a reduction in labour hours per batch,
which therefore lowers the labour costs. The other factors are not affected by the learning
rate

173 The learning curve effect in BBB Co could be extended by which of the following?

 A Increasing staff turnover

 B Increasing the level of staff training
 C Allowing extended breaks in production
 D Introducing a new mechanised process

The correct answer is B

Increasing staff training could lead to an extension of the learning curve as the higher skilled
employees should demonstrate an even greater improvement than if they were not trained.

Ash Co
The following scenario relates to questions 174 – 178.

Ash Co makes product X by mixing together two ingredients, A and B. The standard cost card for one
unit of X is as follows:

Material Kgs per unit $ per kg $ per unit

A 2 1.50 3.00

B 5 1.75 8.75 11.75

The budgeted output for the March was 60 units. After one month of production, 50 units of X were
produced from 110 kg of A and 225 kg of B.
174 Calculate the materials usage variance.

 A $28.75 (F)
 B $146.25 (F)
 C $146.25 (A)
 D $28.75 (A)

C $3.57 (F)

175 Calculate the material mix variance.

 A $14.29 (A)
 B $3.57 (A)
 C $3.57 (F)
 D $14.29 (F)

ANSWER IS B B $3.57 (A)

177 Which of the following factors would result in an adverse material usage variance in Ash Co?

(1) Using an inferior quality of material A or B

(2) Making changes to the production process

(3) Introducing increased quality controls resulting in more items of Product X being rejected.

 A 1 and 3 only
 B 1 and 2 only
 C 2 and 3 only
 D 1, 2 and 3

ANSWER IS D 1, 2 and 3

178 Which of the following factors would result in a material mix variance in Ash Co?

 A The cost of materials A or B changes

 B The production manager in Ash Co deviates from the standard mix
 C The selling price of Product X changes
 D An inferior quality of material A or B is used

ANSWER IS B The production manager in Ash Co deviates from the standard mix Distractors:

Birch Co
The following scenario relates to questions 179 – 183.

179 Calculate the sales volume planning variance.

  A $3,750 (F)
 B $2,250 (F)
 C $3,750 (A)
 D $2,250 (A)

Answer is C $3,750 (A)

180 Calculate the sales volume operational variance.

 A $3,750 (A)
 B $2,250 (A)
 C $2,250 (F)
 D $3,750 (F)

Answer is B $2,250 (A)

181 In a subsequent 4 week period, Birch Co's actual fixed costs were $3,500. There were 18,000 units
produced. The budgeted fixed costs was $3,000 based on budgeted production of 17,500 units.
Calculate the fixed production overhead total variance.

 A $440 (A)
 B $525 (A)
 C $500 (F)
 D $500 (A)

ANSWER is A $440 (A)

182 Which of the following factors would contribute to a planning variance in Birch Co?

 A A better negotiation of the material price with the supplier

 B An increase in wage costs due to unplanned overtime worked
 C An improvement in technology that led to an international reduction in sales price of Product
X

 D A break in production due to a machine breakdown, which was caused by human error

ANSWER IS C An improvement in technology led to an international reduction in sales price

of Product X.

183 A manager in Birch Co asked for the market share variance. Which of the following variances was
she looking for?

 A The sales volume planning variance

 B The sales volume operational variance
 C The sales price planning variance
 D The sales price operational varianc

ANSWER IS B The sales volume operational variance