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Operational level integrated case study – Examiner’s report August 2018 exam session

This document should be read in conjunction with the examiner’s suggested answers and marking guidance.

General comments

This was the fifteenth operational level integrated case study. Overall performance was similar to that of previous sessions and there did not appear to be any evidence of time being an issue.

It is important to remember at the operational level that technical skills are by far the most important element of skills and to score well a candidate needs to demonstrate these skills by applying the knowledge they have gained from studying P1 and F1 to the case study information given to them. In this session, it would appear that candidates heeded the advice to revise technical knowledge from the OTQ’s and to practice past case study questions as I was pleased to notice an improvement in some areas, namely; IAS 16, IAS 38, multi-product break-even analysis and relevant costing. However, gaps in technical understanding, was still a concern particularly when answering questions on: mix and yield variances, decision making with risk, linear programming and shadow pricing, the financial reporting implications of a subsidiary and the EOQ model.

Performance across the skills of business, people and leadership is generally better than that for technical skills, although this gap is reducing. Most candidates’ answers demonstrated application of the pre-seen in both technical and non-technical tasks, however, on occasion, candidates answered the task in a manner of how they probably wanted to be asked rather than the task they were asked (especially relating to cost of quality and working capital management). Common reasons for candidates failing were: a lack of technical understanding and / or a lack of application of technical knowledge to the scenario or short answers which meant that there was no depth to responses.

Most answers were well structured with headings and clearly spaced paragraphs. Whilst there are not specific marks for formatting, there are advantages to setting out answers in this way, not least that it helps the marker to identify the points easily. Having a clear structure should help candidates to ensure that they have addressed all the points that they want to.

As is consistent with other exam sessions, the skill which was demonstrated the best was business skills, closely followed by people skills. Candidates still seem to be comfortable using their knowledge from E1 to demonstrate applied business and people skills. Applying knowledge from P1 and F1 to demonstrate technical skills appeared to be more challenging, although as noted above is improving. There were three marks available for integration and those candidates who fully addressed the tasks in an appropriate manner will have scored these marks.

CIMA Operational case study – Examiner’s report – August 2018 exam session 1

Variant 1

Designed to test ability to: Competency being tested: Syllabus component learning outcome:

Task 1

Describe two methods of digital marketing appropriate for a new range of products, including associated benefits and drawbacks.

People skills E1 – E2(b) - Explain the role of emerging technologies and media in marketing

Demonstrate how to make a short-term decision using a risk-seeking, risk neutral and risk averse approach to decision making. Explain the meaning of, and how to calculate, the value of perfect information.

Technical skillsPeople skills

P1 – D1(b) – Analyse risk using sensitivity analysis, expected values, standard deviations and probability tables.

Task 2

Explain the impact of ABC on product costings. Technical skillsP1 – A1(b) – Compare and contrast activity-based costing with traditional marginal and absorption costing methods.

Explain the information required to calculate the Economic Order Quantity (EOQ) and the appropriateness of using the EOQ model to manage inventory levels.

Technical skills Business skills

F1 – C2(b) – Discuss policies for the management of the total level of investment in working capital and for the individual elements of working capital.

Task 3

Explain the factors to be considered when drafting a person specification for a specific role. Business skills E1 – F1(b) – Apply the elements of the HR cycle.

Apply relevant cost principles to explain how to determine the financial viability of a short-term decision.

Technical skills P1 – C2(a) – Apply relevant cost analysis to various types of short-term decisions.

Task 4

Interpret fixed production overhead variances and explain the suitability of basing fixed production overhead rates on direct labour hours.

Technical skills P1 – A1(d) – Interpret material, labour, variable overhead, fixed overhead and sales variances.

Apply the rules in IAS 38 to explain how R&D Department expenditure should be treated in the financial statements.

Technical skillsLeadership skills

F1 – B2(b) – Apply the rules contained in IFRS to generate appropriate accounting entries in respect of reporting performance, accounting for taxation, employee benefits, non-current assets, accounting for government grants, impairment, inventories and events after the reporting period.


Comments on performance

Task 1

The first element of this task on digital marketing was well answered. Most candidates clearly understood how digital marketing could be applied and gave good examples related to the business. Some candidates could explain the advantages and disadvantages of digital marketing but were less able to explain how the different media would be used. Some candidates unfortunately selected marketing methods which were not digital and obtained no credit for these.

The second element of this task was poorly answered by a large proportion of candidates. Many candidates tried to apply maximax, maximin and minimax regret decision criteria to the decision, resulting in the wrong supplier selection, in most cases. Some candidates explained the different measures however, they did not then link this to risk attitude. Many also failed to recognise that the supplier selection should be based on the cost.

Task 2

Overall, this task was well done. In the first element, most candidates were able to explain the differences between ABC and traditional absorption costing and were then able to explain why this resulted in differences in the overhead costs for the infusion products. Weaker candidates were not able to clearly explain the connection between the differences in the two products (for example, the shape of the teabag) and the impact that this would have on the cost driver. However, most candidates gave good answers to this and scored well. The part of the requirement about ABC’s suitability for black and green tea tended to be less applied and whilst candidates picked up a few marks for more generic points such as improved costing, pricing and cost control, they did not score as well as here.

The second element of the task was reasonably well answered. Most candidates were able to state the elements that went into the EOQ model, but few gave examples of the type of costs which would constitute holding and ordering costs. Some candidates gave very vague answers on the appropriateness of EOQ and failed to question the appropriateness of whether the assumptions underpinning the model (such as constant and known demand) applied in this case.


Task 3

The first element of this task on the person specification was not as well done as it could have been. In some answers there was a lot of repetition; experience was repeated in various forms as were qualifications. Where candidates used a framework, for example BADPIGS, answers were better but even then, most did not address the specific role of a blender and what qualities would be needed. Some points were quite generic, and in a lot of cases, candidates didn’t explain why a particular trait would be required.

The second element of the task was generally well answered, although most failed to recognise that the fixed overhead element of gross profit was not relevant. Some candidates didn’t actually explain why some of the costs were relevant or not relevant and were therefore not awarded the marks. A number also tried to work out a revised costing at the end which was not required and would have wasted time. Others also discussed non-financial factors, which has been asked for in this type of question in the past but was not required on this occasion and therefore gained no credit.

Task 4

The variance analysis element of the task produced a mixed quality of answers. Many candidates had a clear understanding of the fixed overhead expenditure variance, fewer candidates were quite so clear when explaining the efficiency and capacity variances. Some candidates thought it would be enough to restate the issues in the scenario which would have affected performance and made no attempt to separately explain the efficiency and the capacity variance or to identify each of the issues with the individual variances. Most candidates were able to comment on the reasons why direct labour hours was not the best basis for overhead absorption and why machine hours were better.

The second element of the task was fairly well answered particularly where candidates remembered the criteria for capitalisation of development expenditure in IAS 38. However, remembering the criteria was not enough to gain full marks as it had to be applied to the particular situation. Candidates tended to score better on the requirement to explain the treatment in the financial statements.


Variant 2


Task 1

Interpret a linear programming graph to find the optimal solution to a short-term product mix decision and explain how to determine the amount to pay for additional resource.


P1 – C2(c) - analyse product mix decisions, including circumstances where linear programming methods are needed to identify ‘optimal’ solutions.

Explain the potential benefits and drawbacks of taking a direct collaborative approach to the supply of tea leaves.

Business skills E1 – D1(b) - demonstrate how supply chains can be established and managed.

Task 2

Interpret raw materials price, mix and yield variances. Technical skills P1 – A1(d) - interpret material, labour, variable overhead,

fixed overhead and sales variances.Analyse financial information on the working capital position and revenue of a potential new supplier.

Technical skillsBusiness skills

F1 – C2(a) – analyse trade receivables, trade payable and inventory ratiosF1 – C2(c) – evaluate working capital policies

Task 3

Explain how a quality issues with raw materials and the repercussions of this issue will affect the cost of quality report.

Technical skills P1 – A2(a) – discuss the role of quality costing as part of a total quality management (TQM) system.

Explain the legal and ethical implications to the business of a supplier using child labour and actions that should be taken in this situation.

People skillsLeadership skills

E1 – A2(a) – discuss the purpose and principles of good corporate governance, the ethical responsibilities of the organisation and individuals, and ways of achieving corporate social responsibility.

Task 4

Explain the decision points on a decision tree and the limitations of using the decision tree to make a one-off decision about a product recall.

Technical skillsPeople skills P1 – D1(b) – analyse risk using sensitivity analysis, expected

values, standard deviations and probability tables.

Explain why brand values are not reflected in the financial statements and whether an inventory write off is an adjusting event. Technical skills

F1 – B2(b) – apply the rules contained in IFRS to generate appropriate accounting entries in respect of reporting performance, accounting for taxation, accounting for government grants, impairment, inventories and events after the reporting period.



Task 1

Answers to the first element of this task were mixed. Many candidates were able to competently explain the constraints, feasible region and optimal solution, although a common error was to ignore the minimum production constraint for Everyday Blend which was a little disappointing. Most candidates however failed to address the final bullet point about the binding constraint: some added a few brief comments about shadow price but failed to explain what this meant and how it could be determined. There appeared to be a lack of technical understanding here.

The second element of this task on the benefits and drawbacks of a direct collaborative approach to the supply of tea leaves was largely answered well. Many candidates demonstrated a good understanding of the pre-seen and were also able to link their answers to the new unseen information about the crop disease and how a direct collaborative supply would have helped mitigate some of the supply issues. Candidates that did not score well here did so because either their answers were too brief, or they ignored the drawbacks of the approach, despite the task clearly asking for both benefits and drawbacks.

Task 2

The first element of this task was reasonably well attempted by most candidates in respect of explaining the meaning of and reasons for the price variance, although was less well attempted in respect of the mix and yield variances. Whilst most candidates could give a vague notion of what the mix variance represented overall, very few articulated what the adverse and favourable variances for the individual tea leaves meant in the context of the average standard price. This meant that relatively easy marks of interpretation were often missed. Regarding the yield variance, this was often completely ignored or given only a brief mention. Many candidates stated that the yield variance was the result of the number of batches actually produced being different to the budgeted number and failed to identify that more tea leaves were being used per batch as a result of having to increase the leave content to 3.2 grammes per bag rather than the standard of 3.0 grammes per bag. This demonstrated a complete lack of technical understanding on the yield variance.

The second element of this task was generally well answered; most candidates could interpret the data given correctly, although some read the numbers the wrong way around to show that the company was improving when it wasn’t. Some candidates failed to comment at all about the data given and instead discussed the working capital cycle of Thomas Fine Teas: clearly a pre-prepared answer to a question that they thought they might be asked.


Task 3

The majority of candidates seemed well prepared for the first element of this task on quality costs and scored well. However, there were a number of candidates that failed to talk about quality cost reporting at all, instead commenting on quality issues in general or in some cases talking about the financial reporting implication of the costs, and as a result scored very poorly as they did not answer the task given. Candidates need to make sure that they read the task very carefully before launching into an answer.

The second element of this task on the implications of a supplier using child labour was less well answered on the whole. Many candidates focused on the negative impact that this would have on brand image of Thomas Fine Teas, which whilst valid was not the whole picture as the circumstances and practices of the country in question needed to be considered. Indeed, there was a clue in the unseen information that other suppliers also used child labour, therefore indicating that this was a common and probably lawful practice in these countries. As a result of an unbalanced explanation of the implications many candidates then commented that the supplier agreement should be stopped immediately and failed to consider the ethical responsibility of Thomas Fine Teas to the children involved.

Task 4

The first element of the final task was generally well attempted. Most candidates were able to explain the decisions that needed to be made and how the tree could be used to reach a decision: indeed, many candidates gave the decision, even though this had not been asked for. Some candidates missed out on easy marks by forgetting to answer the limitations of the approach, although those that did attempt this generally did well.

The second element of this task was reasonably well answered. Many candidates seemed prepared for a task on why the value of a brand could not appear on the statement of financial position and gave full answers that addressed the key points of IAS 38 regarding control, reliable measurement and the separability of the asset. This was encouraging as often tasks on financial reporting standards are poorly attempted. The part of the task about the inventory write off wasn’t as well attempted. Often candidates missed that this was an IAS 10 issue and instead explained inventory valuation methods in depth which did not address the issue of which year the write off should be recorded in.


Variant 3


Task 1

Apply decision criteria under conditions of uncertainty and explain the other factors to be considered in a short-term decision.

Technical skillsBusiness skillsPeople skills

P1 – D1(c) – apply decision models to deal with uncertainty in decision making.

Explains the elements to consider in establishing an effective business to business marketing function.

People skills E1 – E2(a) – apply the main techniques of marketing.

Task 2

Explain the expenditure to be capitalised, the effect of foreign exchange and how to determine the annual depreciation charge for new machinery.

Technical skills

F1 – B2(b) – apply the rules contained in IFRS to generate appropriate accounting entries in respect of reporting performance, accounting for taxation, employee benefits, non-current assets, accounting for government grants, impairment, inventories and events after the reporting period.

Explain the effect on the budget of flexing it and why flexible budgeting is useful for planning and control purposes.

Technical skills

P1 – B4(a) – discuss the concept of the budget as a control system and the use of responsibility accounting and its importance in the construction of functional budgets that support the overall master budget.

Task 3

Analyse financial information about customers to assess creditworthiness and explain additional information that should be considered.

Technical skills

F1 – C2(a) – analyse trade receivables, trade payables and inventory ratios.F1 – C2(b) discuss polices for the management of the total level of investment in working capital and for the individual elements of working capital.

Identify quality failure costs arising from quality issues and actions that could be taken to mitigate quality failures.


P1 – A2(a) – discuss the role of quality costing as part of a total quality management (TQM) system.

Task 4Explain planning and operational sales variances. Technical skills P1 – A1(d) – interpret material, labour, variable

overhead, fixed overhead and sales variances.Explain how to perform a review of staff in the business and ways in which to ensure an effective staffing policy.

Business skills E1 – F2(b) – demonstrate the role of the line manager in the implementation of HR practices.



Task 1

For the first element of the task the majority of candidates explained and applied the three decision criteria well. However, few explained any other factors regarding the consultant’s information and operational manufacturing issues which was also asked for. Therefore, most candidates missed marks on this element of the task. It cannot be emphasised enough that all parts of a task must be answered: future candidates should practice reading past case studies and ensure that they can pick out everything that is required of them.

The second element of this task was poorly answered due to lack of knowledge and understanding of a business to business (B2B) marketing function. Many answers were structured using the marketing mix and, while this was not a bad approach, the descriptions presented under the headings of the 4Ps were vague and not particularly relevant to B2B. Answers that scored well were specifically focused on B2B marketing and applied to the context of the case. Other answers were far too brief and lacking in detail.

Task 2

In previous sessions, tasks about the financial reporting standards in the F1 syllabus were the least well answered of all the disciplines. This was not the case for the first element of this task and many answers scored full marks. However, answers that did not earn a pass for this task often failed to justify why a cost could be capitalised or not. Simply stating “capitalise” or, “don’t capitalise”, even if correct, does not gain marks unless explained. A number of candidates invented costs, usually training, and then went on to explain why they should or should not be capitalised. This approach earned no credit as it was outside the remit of the task. Answers should be applied to the facts given in the case in question and expenditure that have been relevant to previous case questions may not apply to every case.

The second element of this task was also well answered as most could explain what a flexible budget is and how it was useful for the company for control purposes. The explanation of how a flexed budget can be useful for planning purposes was less well answered, although there were some excellent and well applied answers that used examples from the preseen. Less able candidates often simply repeated the statement, “a flexed budget is extremely useful for planning and control”, without any attempt at an explanation as to how it is useful. This earned minimal credit.


Task 3

Candidates were first asked to analyse a set of financial data relating to four potential credit customers and suggest how other financial information from the financial statements would be useful. Very good answers were able to explain the quick ratio, explain possible credit control policies, identify risks, offer sensible comments on what the size of the revenue indicated and explain the other information needed. Poor answers either ignored the need to explain the other information or made suggestions for information that was not based on the financial statements. In addition, many answers only repeated the data given without adding any value. It is not enough to state that “customer D has the longest payable days”, an answer should explain why this fact has an impact on the company’s decision to grant the usual credit terms.

The second element of this task seemed to present many with timing issues. Almost half of the answers submitted began by explaining what a cost of quality report is, what the four types of cost are and how an increase in the cost of conformance will reduce the cost of non- conformance. Many of these answers were well illustrated with examples from the preseen. However, this does not answer the task given and therefore earned minimal credit. Unfortunately, this approach meant that candidates were short of time to address the actual task which was about how to classify three specific quality issues and suggest and classify actions that would have prevented them.

Task 4

In the first element of this task, although the sales price variance was reasonably well explained, the mix and quantity variances were not. Many candidates stated that a sales mix variance is caused by changing the mix of materials input into the process when manufacturing the tea. This is quite shocking and future candidates will be expected to know the difference between a revenue and a cost.

The second element was well answered by those that knew and could explain the stages in a Human Resource Plan. Many demonstrated an excellent knowledge of the data provided in the preseen and used this to illustrate and explain the stages and scored well. Less good answers focused on the individuals’ needs for training and development rather than the organisation’s needs, but earned some credit nonetheless.


Variant 4


Task 1

Explain how the expenditure on a development project will be treated in the financial statements. Technical skills

F1 – B2(b) – Apply the rules contained in IFRS to generate appropriate accounting entries in respect of reporting performance, accounting for taxation, employee benefits, non-current assets, accounting for government grants, impairment, inventories and events after the reporting period.

Explain how a feedforward control approach differs from a feedback control system and the benefits of using a feedforward control approach.


P1 – B4(a) – Discuss the concept of the budget as a control system and the use of responsibility accounting and its importance in the construction of functional budgets that support the overall master budget.

Task 2

Interpret the meaning of variances in an operating statement and gives reasons for why they have arisen.

Technical skills P1 – A1(d) – Interpret material, labour, variable overhead, fixed overhead and sales variances

Explain how an MRP system may benefit the business in the future. Business skills E1 – D2(b) – Explain how relationships within the

supply chain can be managed.

Task 3Explain probability tables and the limitations of using expected value to make a decision. Technical skills

P1 – D1(b) – analyse risk using sensitivity analysis, expected values, standard deviations and probability tables

Explain ways of promoting a new product using a limited budget. People skills E1 – E2(a) – Apply the main techniques of

marketing

Task 4

Explain a multi-product breakeven chart and its usefulness to the business.


P1 – C2(b) – apply breakeven analysis in multiple product contexts

Explain the implications of actions on the working capital position, the risks associated with these actions and ways to mitigate those risks.

Technical skillsBusiness skills

F1 – C2(b) – Discuss policies for the management of the total level of investment in working capital and for the individual elements of working capital



Task 1:

The first element of this task was reasonably well answered. Many candidates correctly classified the equipment as a tangible asset and were able to explain why the training costs could not be classified as an asset. Some candidates failed to comment on the costs of registering the patent and those that did often included this as part of the development cost rather than as an intangible asset in its own right. As for variant 1, most candidates knew the capitalisation criteria for development expenditure in IAS 38, but not all commented on whether these criteria had been met based on the information given to them.

Answers in the second element of this task were mixed. Some candidates demonstrated little more than a basic understanding of feedforward control being forward looking and feedback control being backward looking, and others seemed confused and talked only about cash forecasting and rolling budgets. Other candidates wasted time discussing approaches to budgeting such as top down or zero-based budgeting, demonstrating perhaps a lack of technical understanding of feedback and feedforward control systems. Those that scored well here did so because they clearly demonstrated understanding of the different approaches with applied examples of the application of each.

Task 2:

The first section of this task on sales, materials and efficiency variances in the context of the green tea products was mostly well answered, although few candidates accurately discussed the sales mix between Super and Healthy blends. Most made the link between the extra quantity in tea bags and more paper when discussing the materials variance and many also linked the extra labour hours to both of the efficiency variances. As with other variants it would appear that there is a knowledge gap in being able to understand mix variances and future candidates would be advised to ensure that this gap is filled.

The second element of the task was reasonably well answered, with most candidates demonstrating a good understanding of what an MRP system is. Most candidates were able to give some sensible benefits to the business of implementing such a system, although few linked this to the potentially more complex supply chains as the business developed. Some candidates focused their response too much by discussing only the benefit of Just in Time and others concentrated on the disadvantages rather than the benefits, which had not been asked for this time.


Task 3:

The first element of this task was generally well answered, with candidates demonstrating understanding of the concepts involved in establishing the expected values and the impact of the stepped fixed costs. Although not required, many made recommendations as to the best option to choose. The requirement to discuss the limitations of using the probability tables was generally very well answered, most understanding the concepts of subjective values and estimates in a changing environment. Some candidates did waste time here though because they included the benefits of using expected values, despite this not being asked for.

Answers in the second element of the task were generally good. Most candidates gave good examples of how to use social media and web-based systems, with better candidate answers elaborating on the importance of maintaining these systems, whilst understanding that these were still more cost effective (if properly managed) than traditional forms of advertising. Other methods such as offers, and promotions were also in the main effectively discussed with good application to the scenario. Some candidates did structure their answers along the lines of the 4P’s, despite only being asked for promotion methods which resulted in lower marks because much of the answer was not relevant to the task given.

Task 4:

The first element of this task was answered reasonably well. Most candidates were able to explain the difference between the two lines on the chart and made sensible comments about breakeven. As a result, they were also able to explain the limitations in an effective manner.

In the second element of this task, answers were generally good. Many candidates demonstrated understanding of the cash flow implications and risks associated with the current working capital practices of taking bulk discounts and extending credit terms. Many realistic mitigations were also discussed, and there was good reference to the case scenario.


Variant 5


Task 1

Explain the meaning of and give reasons for direct labour variances. Technical skills P1 – A1(d) – Interpret material, labour, variable

overhead, fixed overhead and sales variances.

Explain how the acquisition of a subsidiary will impact the financial statements of the business and how a potential impairment in the value of goodwill will be treated in future years.

Technical skills

F1 – B3(c) – Produce the consolidated statement of financial position and statement of comprehensive income in accordance with relevant IFRS for a group comprising of one or more subsidiaries (being either wholly or partially directly owned) or associates, including interests acquired part way through an accounting period.

Task 2

Explain the benefits of managing a subsidiary autonomously and managing a subsidiary centrally within a functional organisational structure.

Business SkillsLeadership Skills

E1 – A1(b) – Explain the different structures organisations may adopt.

Explain how to determine the trend and seasonal variations from source data on sales and the usefulness of this approach.

Technical skills

P1 – B2(a) – Calculate projected product/service volumes, revenue and costs employing appropriate forecasting techniques and taking account of cost structures.

Task 3Explain a table of sensitivity information and the usefulness of the analysis to management. Technical skills

P1- D1(b) – Analyse risk using sensitivity analysis, expected values, standard deviations and probability tables.

Explain how the marketing mix of a new product differs to the marketing mix for existing products.

Business skillsPeople skills

E1- E1(b) – Apply the elements of the marketing mix.

Task 4

Apply relevant costing principles to establish the costs relevant to a one-off contract.


P1 – C2(a) – Apply relevant cost analysis to various types of short-term decisions.

Explain the potential benefits and drawbacks of factoring receivables. Technical skills

F1 – C2(b) – Discuss policies for the management of the total level of investment in working capital and for the individual elements of working capital.



Task 1:

Answers to the first element of this task on direct labour variances were mixed. Many candidates clearly understood how direct labour variances were calculated and could provide plausible reasons for the causes of the variances from the information provided, thereby earning good marks. Other candidates demonstrated a lack of knowledge of this area, especially in relation to the mix and productivity variances. This is consistent with other variants in this session and for similar questions in previous sessions: when preparing for the case study candidates need to ensure that their technical knowledge in this area is complete.

In the second element of this task several candidates did not have the financial reporting knowledge to provide a satisfactory response, and many candidates’ answers were lacking in depth, making only one or two relevant points. Weaker candidates went off at a tangent, or, perhaps in desperation, provided an answer in terms of growing the size and profitability of the business which were not relevant. Those candidates that did understand what was required in terms of the consolidation of the financial statements, were often unable to go on and satisfactorily discuss the impairment of goodwill in future financial statements. This was surprising considering the case study clearly referred to the impact of paying too much to acquire a business.

Task 2:

The first element of this task was reasonably well answered by most candidates, who often discussed the question in terms of the relative advantages and disadvantages of a divisional or more functional organisation structure. There was good understanding and application demonstrated by candidates, many of whom earned the full marks available.

In contrast, many candidates struggled with the second element in this task. Common problems were a failure to be able to explain how seasonal variations were calculated, and whether time series analysis would be appropriate. Regarding appropriateness, far too many candidates simply said that it would help with planning or budgeting. What was expected was a critical discussion of issues such as the past may not indicate the future, the influence of random variations and the assumption of linearity.


Task 3:

In the first part of this task most candidates could use the information provided to explain the break-even point, and margin of safety. Many candidates could also discuss the sensitivity analysis data, but there was sometimes confusion here. For example, a number of candidates thought that marketing costs were the riskiest because of the 25.1% sensitivity quoted, and a common, but erroneous, statement was that sales price was of little concern because of its 5.5% sensitivity. This demonstrated a lack of real understanding of the data provided. What was often poorly answered was the requirement to explain the usefulness of the information provided for future decision making. Many candidates simply made a short statement saying it would be useful for forecasting or planning which was an obvious statement to make. What was expected from candidates was a more critical discussion of issues such as risk, that the table only shows the change in one variable at a time, and the often inter-related nature of some of the variables in the table.

In the second element of this task most candidates demonstrated an understanding of the 4P’s of the marketing mix and could illustrate each of the four elements using the case study information provided. There were high marks for this element, which shows how comfortable candidates are generally with tasks rooted in the E1 syllabus.

Task 4:

Most candidates earned very good marks in the first element of this task. A significant majority of candidates started their answers by explaining the principles of relevant costing, and then went on to use the information about the one-off contract to explain which costs were relevant and which were not. This was the right approach to have taken, and high marks were typically awarded. There are still a few candidates who do not understand the basic principles of relevant costing, but they were in the minority.

The second element of this section was again well attempted by a significant majority of candidates. Candidates could usually come up with two or three benefits and drawbacks of factoring, and marks awarded usually came down to the depth of the candidates’ answers. A lot of answers tended to be only one-line statements of benefits and drawbacks, which though relevant, lost some of the marks available either because of a lack of depth, or because they were general statements rather than being applied to the case study.


Tips for future candidates

There are a number of key points to take into account when preparing for future Operational level case study examinations. These remain the same from previous reports but are worthy of repetition. These points are:

• The Operational level case study examination is weighted 64% technical skills. It is really important that your technical knowledge is comprehensive so that you can apply it to the scenario you are faced with.

• Application to the scenario is key to achieving a good mark. Simply reproducing rote-learned answers or pure knowledge of a topic area will score very few, if any, marks. Similarly taking a scatter gun approach to an issue and commenting on everything that you know about it from a theoretical point of view will only score a few marks.

• It is important to take time to plan your answer so that you are able to apply your knowledge to the specifics of the case. I suggest that for certain tasks you plan your answers in the answer screen itself. For example, if you are asked for the potential benefits and problems of outsourcing a particular function, I suggest that you first note down headings for benefits and problems. Then under each heading list your benefits and problems; these will become your sub-headings. Then you can write a short paragraph under each sub-heading. This will allow you time to think about all of the points that you want to make and will help to give your answer a clear format. Ultimately, it should save you time.

• Preparation on the pre-seen material is vital. Ensure that you are very familiar with the business, especially the financial information, before the exam as this will help you with applying your knowledge and will save you time. Similarly, an awareness of the industry that the business is in will help you to think of the wider issues that might impact on decisions that you could be asked to comment on.

• The information given to you within the case study itself, especially financial information, is given to you for a reason. Make sure that use this information in forming your answer. For example, reasons for variances are often given to you in the unseen information, the skill is to pick this out and use it.

• The case study examination covers all of the P1, E1 and F1 syllabi and therefore no topic area is off limits to the examiner. Make sure that you do not leave topic areas out of your preparation. Given previous comments in this report and other reports, it is evident that F1 knowledge of financial reporting standards is often poor as well as linear programming in P1. Please pay special attention to this and the technical areas of P1.

• Be prepared to give balanced arguments or appraisals. Quite often you will be asked whether a tool or technique is appropriate or suitable or useful to the business – it is just as likely to be appropriate / suitable / useful as not appropriate / not suitable or not useful.


• Make sure that when practicing you answer all elements being asked for. The weighting of the marks will be evident from the time given for the task overall and the number of separate elements within each task.

• Be aware of using unsupported assertions. Making statements such as, “this improves decision making”, “this graph is essential” or “planning is enhanced” is not enough to gain any marks. Candidates must explain “how” the model or technique achieves these assertions. Wild enthusiasm is not enough without sound and reasoned explanation. Answers can often be improved by adding “because of ….” at the end of a sentence to explain why something is as it is.

• Please take care over how your answer looks. Some answers are very difficult to read because of poor spelling and grammar. Whilst this examination is not a test of English, it is important that answers are presented well so that markers can see that you have demonstrated clear understanding of the issues.


Documents

test · Web viewHowever, gaps in technical understanding, was still a concern particularly when answering questions on: mix and yield variances, decision making with risk, linear