OPM530 - Test 1 - Intersession July 2013

QUESTION 1

Mega & Hasbul Berhad (MHB) is considering two different locations in Johor for the new factory to produce smart condoms. The cost structure for factory at Endau will be RM100,000 for the fixed  cost and RM150 for the variable cost per unit. Whilst the cost for the factory at Triang will be RM130,000 and RM130 respectively.

The selling price for each smart condom is RM210.

a)    Compute the total cost for each location if MHB wants to produce 2,500 units of smart condoms? Determine the best location in terms of the best cost.

(3 marks)

Answer:   Total cost = Fixed cost + variable cot   TC Endau = RM100,000 + RM150 ( 2,500) = RM475,000   TC Triang = RM130,000 + RM130 ( 2,500) = RM455,000   For 2,500 – Triang the best location (lowest cost)

(1 mark)   (1 mark)   (1 mark)

 

b)    Determine which location will generate more profit for a production volume of 4,000 units?

(3 marks)

Answer:   Total profit = total revenue – total cost   TP  Endau = (RM210 X 4,000) – [RM100,000 + (RM150 x 4,000) = RM140,000   TP Triang = (RM210 X 4,000) – [RM130,000 + (RM130 x 4,000) = RM190,000   For 4,000 –  Triang generates more profit / income

(1 mark)     (1 mark)   (1 mark)

 

c)    At what volume will Endau factory can be the best location to produce smart condom with minimum cost?

(3 marks)

Answer: TC  Endau = TC Triang RM100,000 X RM150x = RM130,00 + RM130x RM20x = RM30,000 X = 1,500 lamps   Endau is the best location for production of 1,500 lamps

(1 marks)   (1 marks)   (1 mark)

 

d)    Calculate the breakeven point for Triang.

(2 marks)

Answer:  BEP Bandar Enstek   BEP = TR = TC   RM210 x = RM130,000 + RM130x RM80x = RM130,000 X = 1,625 lamps

(1 mark)       (1 mark)

 

QUESTION 2

 

Briefly explain any three (3) reasons why company globalizes their business operations. Illustrate your answer with appropriate example.

 (9 marks)

Answer: 1)    Reduce costs (labour, taxes, tariffs, etc) 2)    Improve the supply chain 3)    Provide better goods and services 4)    Attract new markets 5)    Learn to improve operations 6)    Attract and retain global talent Students are required to explain any three reasons. Answer must be supported by relevant examples. Other answers – subject to lecturer’s discretion. (any three points X 3 marks = 9 marks)