2015年12月ACCA P3考试模拟题及解析

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World Engines (WE) is one of the largest producers of aircraft and shipengines in the world. It has assets in excess of $600bn. It is currentlyconsidering improvements to its marine engine production facilities. Theseimprovements include the introduction of specialist hardware and softwareengine testing technology. Two companies have been shortlisted for supplyingthis technology.
　　
　　Amethyst is a well-established company whose productprovides sophisticated testing facilities and costs $7m. The software thatsupports the product is written in a conventional programming language. Thesolution is widely used,but it is relatively inflexible and it has anout-of-date user interface. Amethyst has been trading profitably for 20 years andcurrently has an annual turnover of $960m.
　　
　　Topaz is a relatively new company (formed three yearsago) whose product is more expensive ($8m) but it offers significant advantagesin high volume performance and stress testing. It has a modular software designthat allows it to be easily maintained and upgraded. It is written in arelatively new powerful programming language and it also has an attractive andcontemporary user interface. Topaz currently has a turnover of $24m per year.Some WE executives are concerned about purchasing from such a young, relativelysmall company, although externally commissioned credit reports show that Topazis a profitable, liquid and lightly geared company.
　　
　　On a recent evaluation visit to Amethyst, WE’s completeevaluation team of five people, including the financial specialist, were killedwhen their aircraft crashed on its approach to landing. It was a small, 12 seatcommuter aircraft that was flying the WE team on a short 100 km flight from theinternational airport to a small rural airport close to Amethyst’s base. Itlater emerged that small commuter airlines and aircraft were subject to lessstringent safety procedures than larger aircraft used by established airlines.
　　
　　Later that year, one of the divisional directors of WEwas given responsibility for picking up and running the testing technologyevaluation project. He has found the following table (Figure 1) produced by thefinancial specialist in the evaluation team who was killed in the air crash.The divisional director recalls that these returns were based on ‘tangiblebenefits resulting from the two options. The returns reflect thecharacteristics of the two products. Topaz produces better returns if demandfor testing is high, but is less effective in low demand circumstances. This isa reflection of the fact that the two solutions differ slightly in terms oftheir functional scope and power’.
　　
　　Figure 1: expected returns for three demand andsupplier combinations.
　　
　　Option Supplier IF High demand IF Low demand
　　
　　A Amethyst $3m per annum $0·5m per annum
　　
　　B Topaz $4m per annum $0·1m per annum
　　
　　The divisional director also recalls a workshopconvened to consider future market demand.
　　
　　‘Demand in the marine industry is currently affected byglobal economic uncertainty and it is increasingly difficult to predict demand.I remember that we were also asked to estimate demand for our marine productsfor the next six years. We eventually came up with the following figures,although it was relatively hard to get everyone to agree and debate at theworkshop became a little heated’.
　　
　　– High demand for six years: probability p = 0·4
　　
　　– Low demand for six years: probability p = 0·4
　　
　　– High demand for three years, followed by low demandfor three years: probability p = 0·2
　　
　　These figures are confirmed by a document alsorecovered from the air crash site. ‘As I recall’, said the divisional director,‘the financial specialist intended to develop a decision tree to help usevaluate the Amethyst and Topaz alternatives. However, there is no evidencethat he ever constructed it, which is a pity because we could have taken theprocurement decision on the basis of that decision tree’.
　　
　　Required:
　　
　　(a) Develop a decision tree from the information givenin the scenario and discuss its implications and shortcomings.Ignore the timevalue of money in your analysis. (9 marks)
　　
　　(b) The divisional director suggests that theprocurement decision could have been taken on the evidence of the decisiontree.
　　
　　Discuss what other factors (not considered by thedecision tree analysis) should also be taken into consideration when decidingwhich option to select. (6 marks)
　　
　　(c) WE executives are concerned about the risk ofTopaz, as a relatively new company, going out of business. They have alsoexpressed concern about the loss of the evaluation team in a fatal accident andthey believe that this should lead to a review of the risks associated withemployee travel.
　　
　　Discuss how EACH of the above risks (supplier businessfailure and employee travel) might be avoided or mitigated. (10 marks)(25marks)
　　
　　Answer:
　　


　　(a) A decision tree for the information in the scenariois given below.
　　
　　The expected value of Amethyst is:
　　
　　($18m x 0·4) + ($3m x 0·4) + ($10·5m x 0·2) = $10·5mMINUS cost of $7m = $3·5m
　　
　　The expected value of Topaz is:
　　
　　($24m x 0·4) + ($0·6m x 0·4) + ($12·3m x 0·2) = $12·3MINUS cost of $8m = $4·3m
　　
　　The analysis suggests that the Topaz option should bechosen.
　　
　　This decision tree is based on the informationavailable at this point in time. The probabilities set in the workshop aresubjective and are not based on an analysis of past statistical data. As thedivisional director recalls in the scenario, ‘it was relatively hard to geteveryone to agree and debate at the workshop became a little heated.’ Thesensitivity of the outcome to slight alterations in probability assessmentsshould be undertaken. It is also unlikely that the predicted returns will becompletely accurate. The basis of these estimates is not given, but a furthersensitivity analysis, this time focusing on returns, would be valuable. Thepredicted annual return of Topaz ($4m per annum) under conditions of highdemand needs particular attention. This value (and its associated probability)contributes about 78% of the total expected value of this option. If the annualreturns are overestimated by 10% (say $3·6m per annum not $4·0m), then thisceases to be the best option.Software prices may also be negotiable, andchanges in prices and structure may also need to be experimented with. Thedecision tree will have been just one input into the procurement decision.
　　
　　(b) As highlighted in the first part of the answer, thedecision tree is only one input to the procurement decision. The scenariostates that the returns used in the decision tree analysis were based ontangible benefits. The business case for each option would also have to stateintangible benefits offered by each option. For example, the Topaz optionoffers a more contemporary user interface and this may provide intangiblebenefits associated with a better user experience. Intangible benefits need tobe identified and listed for each option.
　　
　　Importantly, the risk associated with each option willalso have to be considered and documented. An element of this is reflected inthe scenario. Amethyst, a well-established supplier, is perceived as a lessrisky option than the relatively newly formed, smaller Topaz. The relativesupplier risk is not reflected in the decision tree. This risk, and other risksidentified for each option, must be documented in the business case.
　　
　　Amethyst option
　　
　　Topaz option
　　
　　High p = 0·4
　　
　　Low p = 0·4
　　
　　High then low p = 0·2
　　
　　High p = 0·4
　　
　　Low p = 0·4
　　
　　High then low p = 0·2
　　
　　6 x $0·1m
　　
　　6 x $4m
　　
　　3 x $4m + 3 x $0·1m
　　
　　6 x $0·5m
　　
　　6 x $3m
　　
　　3 x $3m + 3 x $0·5m
　　
　　It may also be necessary to assess the relative impacton the organisation of each option. The options appear to differ in theirfunctional scope and power and these differences might have disproportionateeffects on the degree of change necessary within the organisation toaccommodate the solution and the effect that each option has on organisationalprocesses and the people with responsibility for those processes.
　　
　　Finally, an effective selection process should allocateappropriate weight to features associated with the supplier of the solution.This is not just financial robustness, but also factors such as theavailability of support, the presence and effectiveness of a user group,process certification etc. Similarly, the product needs to be assessed forfunctional fitness and for overall product characteristics, such as usability,flexibility and its overall design philosophy. We are told that Topaz ismodular and up-to-date and this may be in its favour, but it will not bereflected in the decision tree analysis.
　　
　　(c) The risk assessment for Topaz has documentedconcerns about the long-term viability and stability of the supplier. Currentfinancial analysis reveals a profitable, liquid and lowly geared company.However, the company is relatively young and it has a very small turnovercompared to WE. It also has to be recognised that WE intends to enter along-term relationship with this supplier. Hence the continuing success andviability of Topaz is important to WE. A risk avoidance strategy would be toavoid purchasing from small, newly-established companies. Hence Topaz would notbe considered.
　　
　　Should this risk actually take place, and Topaz goesout of business, then its impact may be mitigated by the following:
　　
　　– The software used in the product is perceived to beinnovative, modular and up-to-date. WE should ensure that this software islodged in an escrow agreement. In such an agreement the source code is storedwith an independent third party. If Topaz goes out of business, then theircustomers (including WE) have access to the software source code which shouldallow them, or their appointed agents, to maintain and support it.
　　
　　– WE should also consider establishing in-houseexpertise in the programming language used by the Topaz product. This couldhave two objectives:
　　
　　(1) As a basis for developing a long-term in-housesoftware application that could be used to replace the software elements of theproduct offered by Topaz. The team could also be used to develop other significantapplications required by the company. The software is contemporary and powerfuland so other applications within WE should not be difficult to find.
　　
　　(2) To provide a basis for enacting the escrowagreement if Topaz goes out of business. Access to the source code isparticularly appropriate if an in-house team is able to pick up the software,maintain it and develop it.
　　
　　– WE is a very significant company, with considerableassets. It should be relatively easy for it to maintain funds which could beused for purchasing Topaz should it run into difficulties. Many large companiestake this approach as it secures software supply and potentially severs thesupply, in this case, of the software to competitors.
　　
　　WE need to maintain a contingency plan for moving to analternative supplier or an in-house team. This contingency plan could be linkedto monitoring the financial performance of Topaz. Many financial organisationsoffer a continuous monitoring facility to ensure that suppliers are not justevaluated at the point of purchase, but throughout the subsequent businessrelationship. This is particularly important when the supplier’s application isbusiness-critical to the customer and any interruption in supply would havesignificant implications.
　　
　　The key lessons learned from the fatal air crash shouldresult in WE developing risk avoidance or mitigation actions to make sure thatsuch catastrophic events do not happen again, or, if they do happen, that theyhave less impact on the organisation.
　　
　　Potential actions include:
　　
　　1. Not permitting teams to travel together – thecomplete evaluation team was in the aircraft. Many organisations insist thatkey employees do not travel together to conferences and meetings.
　　
　　2. Looking for safer transport alternatives – the fataljourney was on a small commuter plane travelling a distance which might havebeen undertaken by car or train. The riskiness of different ways of travellingneeds to be considered. Small commuter airlines and aircraft may have lessstringent safety procedures than larger, mainstream airlines. Again, this wouldhave to be investigated.
　　
　　3. Eliminating unnecessary travel – was the journeynecessary? Encouraging employees to work from the home or the office reducesthe risk of travel accidents by avoiding travel in the first place. The companymight not only consider electronic meetings as a way of cutting costs, but alsoas a way of reducing the chance of fatal travel accidents.
　　
4. Finally,ensuring that all documentation is up-to-date and self-explanatory, so that itcan be picked up easily by other employees of the organisation, hence avoidingthe situation described in the scenario where the divisional director has topiece together fragments of documentation left by the unfortunate team.



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