A company is considering which one of three alternative courses of action, A, B and C, to take. The profit or loss from each choice depends on which one of four economic circumstances, I, II, III or IV, will apply. The possible profits and losses, in thousands of pounds, are given in the following pay-off table. Losses are shown as negative figures.
【论述题】
State which option would be selected using
The maximax decision rule
The best possible outcomes are as follows.
A (circumstance III): 80
B (circumstance IV): 100
C (circumstance IV): 115
As 115 is the highest of these three figures, action C would be chosen using the maximax criterion.
多做几道
A public health clinic is the subject of a scheme to measure its efficiency and effectiveness. Among a number of factors, the 'quality of care provided' has been included as an aspect of the clinic's service to be measured. Three features of 'quality of care provided' have been listed.
(1) Clinic's adherence to appointment times
(2) Patients' ability to contact the clinic and make appointments without difficulty
(3) The provision of a comprehensive patient health monitoring programme
Required
(i) Suggest a set of quantitative measures which can be used to identify the effective level of achievement of each of the features listed.
(ii) Indicate how these measures could be combined into a single 'quality of care' measure.
【论述题】
The absence of the profit measure in non profit seeking organisations causes problems for the measurement of their efficiency and effectiveness.
Required
(i) Explain why the absence of the profit measure should be a cause of the problems referred to.
(ii) Explain how these problems extend to activities within business entities which have a profit motive. Support your answer with examples.
【论述题】
Compare and contrast the use of residual income and return on investment in divisionalperformance measurement, stating the advantages and disadvantages of each.
Division Y of Chardonnay currently has capital employed of $100,000 and earns an annual profit after depreciation of $18,000. The divisional manager is considering an investment of $10,000 in an asset which will have a ten-year life with no residual value and will earn a constant annual profit after depreciation of $1,600. The cost of capital is 15%.
Calculate the following and comment on the results.
(i) The return on divisional investment before and after the new investment
(ii) The divisional residual income before and after the new investment
Explain the potential benefits of operating a transfer pricing system within a divisionalised company.
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