Page 1 of 7
CMA SEPTEMBER-2022 EXAMINATION MANAGEMENT LEVEL
SUBJECT: E2. ENTERPRISE MANAGEMENT
Time Allocated: Three hours Total Marks: 100
Instructions to Candidates
There are 3 Sections (A, B & C) in this paper. You are required to answer ALL questions.
Answers should be properly structured, relevant and computations need to be shown.
You are strongly advised to carefully read ALL the question requirements before attempting the question concerned (that is all parts and/or sub-questions).
ALL answers must be written in the answer book. Answers written on the question paper will not be submitted for marking.
Start answering each question from a fresh sheet. Your answers should be clearly numbered with the sub-question number then ruled off, so that the markers know which sub-question you are answering.
Section No of questions in the Section
No of sub-questions in the Section
Marks allocation
A 01 08 20%
B 01 05 30%
C 02 50%
TURN OVER
Page 2 of 7
SECTION A – 20 MARKS
This section consists of 1 question and 8 sub-questions.
You are advised to spend no longer than 36 minutes on this section. Section will carry 20 marks and one sub-question will carry 2.5 marks each.
QUESTION 1
(a) What concepts stands for 'Enterprise Management'? Discuss.
(21/2 Marks) (b) “Advertising is used to build brand loyalty and sales promotion is used to break brand
loyalty”. Discuss.
(21/2 Marks) (c) Discuss about 'conflict reduction' and 'conflict resolution'.
(21/2 Marks) (d) Explain why a direct relationship between the cost of production and selling price may
be inappropriate as a pricing strategy.
(21/2 Marks) (e) “Higher the return, higher will be the risk”. In this context discuss the various risks
associated with portfolio planning.
(21/2 Marks) (f) Why it is important to do external analysis for the corporate appraisal?
(21/2 Marks) (g) What do you understand about 'Transaction Cost Theory'(TCT)?
(21/2 Marks) (h) 'Project Management is about specially for the accomplishment of a project'-Discuss.
(21/2 Marks)
END OF SECTION A
SECTION B Starts on page 3
Page 3 of 7
SECTION B – 30 MARKS
This section consists of 1 question and 5 sub-questions.
You are advised to spend no longer than 9 minutes on each sub-question in this section.
Section will carry 30 marks and one sub-question will carry 6 marks each.
QUESTION 2
(a) Understanding of environment by business managers enables them not only to identify and evaluate, but also to react to the forces external to their firm. In light of the statement, explain by giving any five points why in the present day competitive market, it is essential for a business enterprise to remain alert and aware of its environment.
[Marks: 6]
(b) 'Scientific Management provided a major input into a set of theories jointly known as the 'classical' approach to management. Despite their different approaches and backgrounds, a common characteristic to their work was a formal approach to organization and management'.
What are the common basic principles are viewed as main contributions to the development of organizational and managerial theory and practice.
[Marks: 6]
(c) 'In order to meet organizational objectives, all organization, regardless of size, will require expertise and support of a team or people with a variety of skills. Some of these will be internal to the organization, while others may be external.'
Explain-(i) Why use professional advisors? (ii) When do you seek professional advice?
[Marks: (3+3) = 6]
(d) Care Ltd. deals in medical equipment business. They import goods from Korea and sell in domestic market. Recently the Korean company increased prices making goods expensive. Bangladesh being price sensitive market will not accept the increased price. The Director of the company is thinking of options of importing goods from other countries like Thailand and China. He is also thinking of purchasing goods from the existing supplier in Korea but without packing so that it is cheaper. He will save freight charges. All this will reduce the total cost and will enable him to make profits as before.
(i) Identify the concept of management involved in the above case.
(ii) State what is the director of Care Ltd. planning to do?
(iii) Mention what steps must be followed by Care Ltd. to make sure that their objective of profit maximization is achieved.
[Marks: (1+1+4 = 6]
(e)
(1) Nico is the name of a coffee shop. Use the following information to draw the estimated Cash Flow Statement for the next four months. At the beginning of January 2022 we had favorable bank balance of BDT 8,000.
MONTH ESTIMATED SALES (BDT ESTIMATED PURCHASES (BDT)
January 10,000 4,500
February 8,500 3,000
March 8,000 3,000
April 12,500 6,000
SECTION B Continues on page 4
Page 4 of 7 Other information:
(i) We bought a new motor vehicle in January. We paid BDT 10,000 deposit and monthly payments thereafter are BDT 400 for the next two years.
(ii) The average expenses per month are (BDT):
Wages 1600
Rental 1500
Telephone 450
Electricity 200
Fuel 400
(iii) 20% of all the sales on credit. These customers pay 30 days later.
(iv) In March we will sell an old laptop for BDT 1,000 cash.
(v) In March we will buy a new laptop. The deposit will be BDT 800 and the monthly Installment thereafter will be BDT 400 for the next two years.
(2) You want to know how your customers feel about your products or services rendered.
Construct an after-sales service evaluation questionnaire for your business.
[Marks: (4+2) = 6]
END OF SECTION B
SECTION C Starts on page 5
Page 5 of 7
SECTION C – 50 MARKS
This section consists of 2 questions.
You are advised to spend no longer than 45 minutes on each question in this section. Section will carry 25 marks and allocation of marks for each sub-question is indicated next to the sub- question.
QUESTION 03
PQS Ltd is the leading manufacturer and exporter of high quality leather products – Product A and Product B. Selling price per unit of Product A and Product B is Tk. 620 and Tk. 420 respectively. Both the products pass through three processes – Tanning, Dyeing, and Finishing during manufacturing process. Allocation of costs per unit of leather products manufactured among the processes is given below:
Particulars Tanning Dyeing Finishing Total
Direct Materials per unit 140 180 140 460
Direct labor per unit 90 120 90 300
Cost Allocation to Product A 70% 50% 70%
Cost Allocation to Product B 30% 50% 30%
General overheads per unit of leather products manufactured are Tk 230 which is allocated equally between Product A and Product B. Above cost allocation is the basis for the decisions regarding pricing of the products.
In the industry, all the major production processes have environmental impact at all stages of the process, including generation of waste, emission of harmful gases, noise pollution, water contamination etc.
The management of the company is worried about the above the above environmental impact and has taken initiative to preserve the environment like – research and development activities aimed at reducing pollution level, planting trees, treatment of harmful gases and airborne emissions wastewater treatment etc.
The management of the company desires to adopt Environmental Management Accounting as a part of strategic decision making process. Pricing of the products should also factor in environmental cost generated by each product.
General Overheads per unit of leather products manufactured are Tk 230 which includes:
Treatment Cost of harmful gases Tk. 80 Wastewater treatment cost Tk. 100 Cost of planting of trees Tk. 20
Process wise information related to generation of wastewater and harmful gases is given below:
Particulars Tanning Dyeing Finishing Total
Wastewater generated (litres per week) 900 600 0 1500
Emission of harmful gases (cc per week) 400 300 100 800
Cost Allocation to Product A 70% 50% 70%
Cost Allocation to Product B 30% 50% 30%
The remaining overheads cost and cost of planting trees can be allocated equally between Product A and Product B.
SECTION C Continues on page 6
Page 6 of 7 Required:
(i) Calculate the product wise profitability based on the original cost allocation.
(ii) Recalculate the product wise profitability based on activity based costing (Environment driven cost).
(iii) Analyze the difference in product profitability as per both the methods. State why the management of environmental costs is becoming increasingly important in organization.
(iv) Recommend and explain the four management accounting techniques for the identification and allocation of environmental costs.
[Marks: (4+7+7+7) = 25]
QUESTION 04
The board of directors of Predator Co, a listed company, is considering making an offer to purchase Target Co, a private limited company in the same industry. If Target Co is purchased it is proposed to continue operating the company as a going concern in the same line of business.
Summarized details from the most recent set of financial statements for Predator and Target are shown below:
Predator Statement of financial position as at 31 March
Target Statement of financial position as at 31 March
Tk.m Tk.m Tk. ’000 Tk. ’000
Freehold property 33 460
Plant & equipment 58 1,310
Inventory 29 330
Receivables 24 290
Cash 3 20
Less current liabilities (31) 25 (518) 122
116 1,892
Financed by:
Ordinary shares 35 160
Reserves 43 964
Shareholders’ funds 78 1,124
Medium-term bank loans 38 768
116 1,892
Predator Co 50 cents ordinary shares, Target Co, 25 cents ordinary shares.
Predator Co Target Co
Year PAT Dividend PAT Dividend
Tk.m Tk.m Tk. ’000 Tk. ’000
T5 14.30 9.01 143 85.0
T4 15.56 9.80 162 93.5
T3 16.93 10.67 151 93.5
T2 18.42 11.60 175 102.8
T1 20.04 12.62 183 113.1
T5 is five years ago and T1 is the most recent year.
SECTION C Continues on page 7
Page 7 of 7
Target's shares are owned by a small number of private individuals. Its managing director who receives an annual salary of Tk.120,000 dominates the company. This is Tk.40,000 more than the average salary received by managing directors of similar companies. The managing director would be replaced, if Predator purchases Target.
The freehold property has not been revalued for several years and is believed to have a market value of Tk.800,000.
The balance sheet value of plant and equipment is thought to reflect its replacement cost fairly, but its value if sold is not likely to exceed Tk.800,000. Approximately Tk.55,000 of inventory is obsolete and could only be sold as scrap for Tk.5,000.
The ordinary shares of Predator are currently trading at 430 Centex-div. A suitable cost of equity for Target has been estimated at 15%.
Both companies are subject to corporation tax at 22.5%.
Required:
(a) Estimate the value of Target Co using:
(i) the net asset method of valuation.
(ii) the dividend valuation model.
(iii) the P/E ratio method.
(b) Advise the Board of Predator as to how much it should offer for Target's shares.
[Marks: (7+7+7+4) = 25]
* End of Question Paper *