The mobile phone market is intensely competitive so a company will need sophisticated systems

to gather information about the market and competitors. The market is also fast changing so a
rolling budget approach may be suitable to keep budget targets up to date. It will be very important
to incorporate the latest information into budgets and a participative approach will be important as
production managers and sales managers may have local knowledge which would improve the
budgeting process.

The decision to stock goods that are sold at a loss is an example of a strategic decision to engage
in loss leader pricing. A loss leader is a product that is sold at a loss in order to attract customers
into the store, with the expectation that they will also purchase other products at a profitable price.
The decision to engage in loss leader pricing is a strategic decision because it is part of the overall
pricing strategy of the retailer. The retailer is willing to sell some products at a loss in order to
increase overall sales and profitability. This decision is based on the assumption that customers
who come into the store to purchase the loss leader product will also purchase other products at a
profitable price, thereby increasing the overall profitability of the store.
The reason for this decision is that loss leader pricing can be an effective marketing strategy to
attract customers and increase sales. By offering a product at a lower price than competitors, the
retailer can create a perception of value for the customer and encourage them to make a purchase.
Additionally, loss leader pricing can be used to introduce new products or promote seasonal
products.
Overall, the decision to stock goods that are sold at a loss is a strategic decision that is based on
the retailer's pricing strategy. While it may appear to be a short-term loss, the hope is that it will
lead to long-term profitability by increasing overall sales and customer loyalty.

Economic Value Added (EVA) is a measure of financial performance that is used to assess the
value created by a company after deducting the cost of capital from its operating profit. EVA can
be used to evaluate the performance of different divisions of a company, and this can affect the
behavior of divisional senior executives in the following ways:
• Focus on profitability: Divisional senior executives may be more focused on profitability
because EVA measures the economic value created by the division after taking into account
the cost of capital. This means that if a division is not profitable enough to cover its cost of
capital, it will have a negative EVA. As a result, senior executives may be more focused
on increasing profitability to improve the division's EVA.
• Capital allocation: The use of EVA to assess divisional performance can also affect the
allocation of capital within the company. Senior executives may allocate capital to
divisions with a positive EVA and withdraw capital from divisions with a negative EVA.
This can lead to a more efficient allocation of resources and may encourage divisions to
make more strategic investments.
• Long-term planning: Senior executives may also be more focused on long-term planning
because EVA takes into account the cost of capital. This means that investments that
generate positive cash flows over the long term will have a positive impact on EVA. As a
result, senior executives may focus on making long-term investments that generate
sustainable cash flows.
Overall, the use of EVA to assess divisional performance can affect the behavior of divisional
senior executives by encouraging them to focus on profitability, allocate capital more efficiently,
and make long-term investments that generate sustainable cash flows.
In order to set prices that will maximize profitability, firms need to consider both short-term and
long-term costs. The relevant cost information that should be presented in price setting decisions
includes the following:
Short-Term Cost Information:
• Direct Materials Cost: The cost of raw materials needed to produce a product or service.
• Direct Labor Cost: The cost of wages and benefits paid to employees who directly work
on the production of a product or service.
• Variable Overhead Cost: The cost of production that varies with changes in production
volume, such as electricity or supplies.
• Fixed Overhead Cost: The cost of production that remains constant regardless of
production volume, such as rent or insurance.
• Selling and Distribution Costs: The cost of advertising, shipping, and other expenses
related to the sale of a product or service.
Long-Term Cost Information:
• Research and Development Costs: The cost of developing new products or improving
existing products.
• Capital Expenditures: The cost of acquiring and maintaining the long-term assets needed
for production, such as equipment or facilities.
• Training and Development Costs: The cost of training employees to improve their skills
and knowledge.
• Environmental and Social Costs: The cost of complying with environmental regulations
and social responsibility programs.
• Opportunity Costs: The cost of giving up potential profits by choosing one option over
another.
It is important for firms to consider both short-term and long-term costs when setting prices, as
some costs may only be relevant in the short-term while others may only become relevant in the
long-term. By considering all relevant cost information, firms can make informed decisions about
pricing strategies that will maximize profitability in both the short-term and long-term.

The statement that "marginal costing alone is a good measure of decision making" is not entirely
valid. Marginal costing is a technique that focuses on the behavior of costs, particularly on how
costs change as production levels change. This technique separates costs into fixed and variable
components, with the aim of understanding how much it costs to produce each additional unit.
Marginal costing is an important tool for decision making, particularly in short-term decision
making, such as determining whether to accept a special order or whether to discontinue a product
line. However, it is not sufficient as the sole measure of decision making for a few reasons:
It does not consider total costs: Marginal costing only considers the variable costs associated
with producing a product or service, and ignores fixed costs. While variable costs are important,
fixed costs are also a necessary component of decision making. Ignoring fixed costs can lead to
decisions that are not optimal in the long run.
It does not consider opportunity costs: Marginal costing does not consider the opportunity cost
of using resources to produce a product or service. Opportunity cost is the cost of forgoing the next
best alternative use of resources, and it is an important consideration when making long-term
decisions.
It does not consider the time value of money: Marginal costing does not take into account the
time value of money, which is the principle that money today is worth more than the same amount
of money in the future. This is particularly important when evaluating long-term investment
decisions.
In summary, while marginal costing is a useful technique for decision making, it should not be the
sole measure of decision making. It is important to consider other factors such as fixed costs,
opportunity costs, and the time value of money when making decisions.

Standard costing is a costing method that uses predetermined costs for materials, labor, and
overhead to determine the cost of a product or service. On the other hand, Kaizen costing is a cost
management approach that focuses on continuous improvement and cost reduction. The goal of
kaizen costing is to reduce costs through small incremental improvements in all aspects of the
business.
If a company wants to switch from standard costing to kaizen costing, the following changes may
be needed:
• Change in Costing Method: The first change that would be required is the switch from
standard costing to kaizen costing. The company would need to re-evaluate its costing
methodology and ensure that it is in line with the principles of kaizen costing.
• Continuous Improvement Programs: Kaizen costing requires a focus on continuous
improvement programs. The company would need to identify areas for improvement and
implement programs to make small, incremental changes to improve efficiency and reduce
costs.
• Employee Involvement: Employee involvement is an important aspect of kaizen costing.
The company would need to involve employees in the improvement process and empower
them to identify areas for improvement and implement changes.
• Cost Reduction Targets: The company would need to establish cost reduction targets and
monitor progress towards these targets. This would require regular review of costs and
analysis of performance to identify areas for improvement.
• Flexible Budgeting: Kaizen costing requires a flexible budgeting process that can
accommodate changes in the business environment. The company would need to
implement a budgeting process that is responsive to changes in demand, costs, and other
business factors.
In summary, switching from standard costing to kaizen costing would require changes in the
company's costing method, focus on continuous improvement programs, employee involvement,
cost reduction targets, and flexible budgeting. By implementing these changes, the company can
reduce costs, improve efficiency, and remain competitive in a changing business environment.
Benchmarking is a process of comparing a company's performance with that of its competitors or
with best practices in the industry. There are several ways to benchmark, but the three
unmistakable ways of benchmarking are:
• Internal Benchmarking: Internal benchmarking is the process of comparing performance
within the same organization. This involves comparing performance between different
departments or divisions within the same company. Internal benchmarking helps identify
best practices within the organization and promotes knowledge sharing and collaboration.
• Competitive Benchmarking: Competitive benchmarking is the process of comparing
performance against competitors in the same industry. This involves identifying the key
performance indicators (KPIs) of competitors and comparing them to the KPIs of the
company. Competitive benchmarking helps identify areas of weakness and opportunities
for improvement.
• Best Practice Benchmarking: Best practice benchmarking is the process of comparing
performance against best practices in the industry. This involves identifying the best
practices in the industry and comparing them to the practices of the company. Best practice
benchmarking helps identify opportunities for improvement and promotes innovation and
creativity.
By using these three unmistakable ways of benchmarking, companies can identify areas of
improvement and implement changes to improve performance, efficiency, and profitability.

Linear programming is a mathematical optimization technique that can be used to determine the
optimal allocation of limited resources to achieve a specific objective. It involves formulating a
mathematical model of a problem that is represented by a set of linear equations and inequalities,
and then finding the values of the decision variables that maximize or minimize an objective
function subject to the constraints of the problem.
In the context of resource planning, linear programming can be used to determine the optimal
allocation of resources, such as labor, materials, or production capacity, to achieve a desired level
of output or minimize costs. For example, a manufacturing company can use linear programming
to determine the optimal production plan that minimizes the cost of production while meeting the
demand for its products, given constraints such as limited production capacity, labor availability,
and raw material availability.
By using linear programming to determine the optimal allocation of resources, a company can
improve its efficiency and effectiveness, reduce costs, and increase profits. Linear programming
can also be used to perform sensitivity analysis, which helps decision-makers understand how
changes in the constraints or objective function will affect the optimal solution, and to identify
alternative optimal solutions in case the assumptions or data used in the model are not accurate.

Before changing a budget type, the following five steps should be taken:
• Review the current budget: The first step is to review the current budget in detail. This
involves understanding the purpose of the current budget, the assumptions made, and the
processes used to create it.
• Identify the need for change: The second step is to identify the need for change. This
involves assessing whether the current budget type is effective and whether it meets the
needs of the organization.
• Analyze the options: The third step is to analyze the options available for a new budget
type. This involves researching different budgeting methods and assessing their suitability
for the organization.
• Develop a plan: The fourth step is to develop a plan for implementing the new budget
type. This involves outlining the steps that need to be taken, the resources required, and the
timeline for implementation.
• Communicate the change: The final step is to communicate the change to all
stakeholders. This involves explaining why the change is necessary, what the new budget
type will entail, and how it will affect the organization.
By following these five steps, organizations can ensure that they are making an informed decision
when changing their budget type. This helps to minimize the risks associated with changing a
budget type and ensures that the new budget type is effective and meets the needs of the
organization.
• Tax Optimization: One common strategy involves setting transfer prices artificially high
or low for goods, services, or intellectual property transferred between subsidiaries in
different countries. By doing so, the company can shift profits to jurisdictions with lower
tax rates, thereby reducing its overall tax burden. This practice, while legal in some
contexts, can attract scrutiny from tax authorities if deemed as tax avoidance.
• Cost Allocation: Multinationals can allocate costs disproportionately among subsidiaries
to optimize their overall profitability. By assigning higher costs to subsidiaries in high-tax
jurisdictions and lower costs to those in low-tax jurisdictions, the company can again
minimize its tax liability while maximizing income.
• Access to Financing: Transfer pricing can also impact the allocation of financing and
interest payments within a multinational corporation. By setting transfer prices for intra-
group financing arrangements, companies can potentially shift profits to jurisdictions with
favorable tax treatment on interest income or deductions.
• Market Entry and Expansion: Transfer pricing can be used strategically during market
entry or expansion into new territories. By setting transfer prices at levels that facilitate
market penetration while optimizing tax outcomes, companies can maximize income while
minimizing tax exposure in new markets.
• Intellectual Property Management: Multinationals often employ transfer pricing to
manage intellectual property (IP) rights across jurisdictions. By transferring IP rights to
subsidiaries in low-tax jurisdictions and charging royalties or licensing fees, companies
can effectively shift profits to these locations, maximizing income while leveraging
favorable tax regimes.
What is the relation of the cost of conformance and with selling price?
The cost of conformance is the cost associated with ensuring that a product or service meets certain
quality standards or specifications. This includes costs related to inspection, testing, and other
activities aimed at preventing defects or non-conformances.
The selling price, on the other hand, is the price at which a product or service is sold to customers.
The selling price is usually determined by considering various factors such as production costs,
market demand, competition, and profit margin.
The relation between the cost of conformance and the selling price can vary depending on the
industry, market conditions, and other factors. In general, a higher cost of conformance may lead
to a higher selling price, as the cost of ensuring quality is passed on to the customer. However, in
some cases, a company may absorb some of the cost of conformance to remain competitive and
maintain market share.
It's important to note that while higher costs of conformance may increase the selling price, they
can also lead to improved product quality, customer satisfaction, and brand reputation, which can
ultimately result in increased sales and profits over the long term.
Loss Leader is on consumer goods or commercial goods (MCQs)
A loss leader is a pricing strategy that is used in both consumer and commercial goods industries.

In consumer goods, a loss leader is a product sold at a low price, sometimes even below cost, to
attract customers to a store. The idea is that while the store may lose money on that particular item,
it will make up for it by selling other, higher-priced items to the same customers. For example, a
grocery store might sell milk at a loss to get customers in the door, hoping that they will also
purchase other items at the store.

In commercial goods, a loss leader can be a product or service offered at a low price to attract
customers to a business. The business may not make a profit on the initial sale, but it hopes to
build a relationship with the customer that will lead to future sales. For example, a printing
company might offer a deep discount on the first order of business cards for a new customer,
hoping that the customer will continue to use their services in the future.
If a potential customer has visited Bola Tech and wishes to offer a contract subject to the
condition that the fixed costs of 75,000 are waived, the decision criteria for the contract would
depend on whether the variable costs associated with fulfilling the potential customer's contract
can be covered by the revenue generated from the contract.
As per the pricing policy, the minimum price to be offered for the service is calculated based on
the relevant costing method. Therefore, Bola Tech would need to calculate the variable costs
associated with fulfilling the potential customer's contract in August.
If the variable costs are lower than the revenue generated from the contract, Bola Tech may
decide to accept the contract even if the fixed costs are waived. This is because the revenue
generated from the contract will cover the variable costs and contribute towards the company's
overall profits.
However, if the variable costs associated with fulfilling the potential customer's contract are
higher than the revenue generated from the contract, Bola Tech may need to decline the contract
even if the fixed costs are waived. This is because accepting the contract would result in a loss
for the company, which is not sustainable over the long term.
In summary, the decision criteria for the contract would depend on whether the revenue
generated from the contract can cover the variable costs associated with fulfilling the contract,
even if the fixed costs are waived.
State four non-monetary factors that should be taken into account before tendering for
project.