QUESTION: 137

M, a manufacturing company, has had some problems with defects in one of the main products it produces. This product has been made by the company for many years and is very profitable. Last month it had over 300 defects reported by customers which is more than 15% of products sold. This is a reputation risk for M and is also affecting profitability. Which of the following controls could M introduce to reduce defects and also increase profitability?

M could increase the number of quality control staff.
M could introduce a procedure where quality control staff sign a form at the end of each day to say they have examined 1 in 10 products for defects and they are satisfied with the quality.
The production director could examine one in every 10 products and sign a form to say they are satisfactory.
M could service machinery at least once a month as recommended by the machinery supplier.
M could check all employees qualifications to ensure they are qualified for their jobs.

Answer(s): B,D,E

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QUESTION: 138

Division A of X plc produced the following results in the last financial year. Net profit $200,000 Gross capital employed $1,000,000 For evaluation purposes all divisional assets are valued at original cost. The division is considering a project that has a positive NPV, will increase annual net profit by $15,000, but will require average inventory levels to increase by $50,000 and non-current assets to increase by $50,000.
X plc imposes a 16% capital charge on its divisions. Given these circumstances, will the evaluation criteria of return on investment (ROI) and residual income (RI) motivate division A managers to accept the project?

ROI Yes RI Yes
ROI Yes RI No
ROI No RI Yes
ROI No RI No

Answer(s): D

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QUESTION: 139

S Doc is an out-of-hours service provided by a country's government. The service allows members of the public to call and speak to a nurse who can advise on medical situations which are not obviously emergencies. Depending on the situation the caller can be referred to the full emergency services, or be advised to go to Accident and Emergency at the nearest hospital. Alternatively, a callout from a general practitioner (GP) can be organised; the caller can be advised of where GP services are available; advice can be given over the phone; or a decision can be taken that no further action is required at least until normal services resume on the next working day. There has been a suggestion that the nurses who take these calls could be replaced by suitably trained operatives who have available to them a specially designed expert system. Which of the following are advantages of using an expert system instead of nurses?

The operatives would be too careful and therefore would recommend unnecessary treatments or interventions.
Some callers may present with complicated scenarios that a non-medically trained operative or expert system would be unable to recognise (for example, psychological issues).
Using an expert system would make operatives less inclined to feel sorry for the caller and ensure that only relevant facts were considered in coming to a decision.
The use of an expert system would ensure that only relevant questions were asked of the caller and that operatives did not miss something vital due to distraction or fatigue.
The expert system will always follow the same path whereas the nurses may have more knowledge about some health issues and very little about others.

Answer(s): C,D,E

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QUESTION: 140

You have just been employed as a management accountant in a small business with an annual turnover of $0.5 million.
You have a wide range of duties because the business is small.
Which of the following is an ethical risk?

Being asked to buy very small gifts for key clients.
Being asked to work weekends, playing golf with clients.
Being asked to work weekends, taking clients to night clubs making sure they have as much alcoholic drink as they want so that they will sign contracts.
Being asked to work weekends working out tenders for new contracts.

Answer(s): C

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