(b) Examine how adopting a Six Sigma approach would help address the quality problems at UPC.(10 marks)

正确答案：
(a) Quality
Quality has become an increasingly important issue in organisations. For some companies it is an important differentiator,
allowing the organisation to pursue a high price/high quality strategy. For other organisations, such as UPC, the quality
threshold requirements for their products have increased significantly over the last few years. Customers have increased
expectations of product construction, longevity and reliability. Quality is rarely absolute; and it is usually constrained by such
factors as selling price. This particularly applies in UPC’s market where it is likely that the quality of the product is limited by
the relatively low price consumers are willing to pay for it. Quality concerns how a product meets its designed purpose and
satisfies its original requirements. The target selling price is likely to be one of those requirements.
At UPC quality appears to be defined in terms of the physical condition of the products (no breakages, cracks or chips) and
in the accurate positioning of the printed image on the product. These are the reasons given by the UPC management for
setting up the inspection team. However, this perception of quality would have to be confirmed by the customer. It may be
that other issues, such as the density of the printed image, are also important to the customer but have not yet been fed back
to UPC.
Many definitions of quality include references to the customer. They stress meeting the requirements of the customer or user
of the product. UPC might benefit from re-considering who it perceives to be the customer. Their current perception appears
to be that the customer is the gift shop that sells the product. It is not the ultimate person or consumer who buys the product
from the shop and uses it. For this consumer, other issues may be significant such as:
– The ability to wash the item in a dishwasher.
– The long-term safety of the product, for example: the handle does not break off a cup and spill its content on the drinker.
– The long-term clarity of the image on the item after many washes.
Investigating the issue of quality from the perspective of the consumer may identify other problems that need addressing.
Finally, quality has to be considered in the context of responsibility. UPC currently uses a courier company to deliver its
products to the gift shops. This means that freedom from breakage is only partly under UPC’s control. The delivery condition
of products is partly determined by the care with which the courier company handles the package. Hence delivery quality
depends on courier performance as well as on packaging care. In contrast, the quality of the printed image on the item is
completely within the control of UPC.
Quality control
Quality Control (QC) is primarily concerned with checking and reviewing work that has been done. It is an inspection system
for ensuring that pre-determined quality standards are being met. In theory, the responsibility for the control of quality lies
with the person undertaking the process, whether it is the production of goods, delivery of a service or the passing of
information. QC is the part of quality management focused on fulfilling quality requirements.
In many quality control systems, sample products are removed and inspected. Defects in these sampled products may lead
to the whole batch being inspected and defective items destroyed. This is essentially the role of the inspection team at UPC,
where 1 in 20 packed packages are inspected for accuracy of printing and correctness of packing. Incorrect packing in a
sampled package will lead to the inspection (and potential re-packing) of all packages packed by that employee. Failure in
the accuracy of the printed image is likely to lead to the destruction of the whole batch, and the re-setting of the production
imaging machine to address the positional inaccuracy of the image. It has to be stressed that, in this instance, quality control
is a sampling activity and so it is very likely that defective batches will get through to the customer. To criticise the inspection
unit for failing to find defective batches (‘the quality inspection team is just not working’) fails to recognise the sampling nature
of the role.

In the context of UPC there are at least three further factors that inhibit effective quality control.
– The quality control of the positioning of the image takes place too late in the process. It should take place before packing,
not after it. Valuable packing time and materials can be wasted by packing items with defective images which are found
when the package is inspected.
– The reward system for packers is based on the throughput of packages rather than the quality of packing. In the past
many manufacturing organisations have valued productivity more than quality and reflected this in their reward system.
This is the case at UPC where faults in packing are not reflected in the reward system of the packers. In fact, the very
opposite appears to be true. Packers are incentivised to pack quickly, not effectively. Beckford suggests that ‘a major
barrier to quality may be built into the reward system of the organisation’.
– There is evidence that the inspection team has participated in the achievement of the required throughput targets by
passing packages that did not meet the required quality. This is clearly giving the wrong message, but the inspection
team is only reflecting the need for the company to meet certain deadlines.
Quality Assurance
Quality Assurance (QA) is the part of quality management focused on providing confidence that quality requirements will be
fulfilled. It may be defined as a set of procedures designed to ensure that quality standards and processes are adhered to and
that the final product meets or exceeds the required technical and performance requirements. Quality assurance covers
activities such as product design, development, production, installation and servicing. It also sets the pre-determined
standards required for effective quality control. If quality control is primarily concerned with detecting defective products, then
quality assurance is primarily about the prevention of quality problems through planned and systematic activities.
There is little evidence of quality assurance at UPC. However, the company may wish to consider:
– Setting quality targets and delegating responsibility for achieving those targets to the people who are meant to achieve
them. In UPC it would be preferable to give responsibility for product quality to the employees who actually make the
products and to reflect this in their reward structure. One of the roles of QA is to enable quality improvement initiatives.
A possible initiative is to investigate the purchasing of imaging machines (or adopting the current ones) with a facility
to automatically assess the accuracy of the image before printing. If the image falls outside certain tolerances then it
may be feasible for the machine to automatically adjust it before printing. If these machines were installed, it would be
the responsibility of QA to ensure that they were calibrated correctly and to verify that every product had undergone the
necessary check.
– QA also offers quality advice and expertise and trains employees in quality matters. They would set standards for
materials used in packing and establish systems for monitoring raw materials sent by suppliers to ensure that these
standards were met. It may also be possible to improve how items are physically laid out in the package to reduce the
chance of damage. The internal layout of the packages may be constructed in such a way that they only allow products
to be packed in a prescribed pattern. QA would be involved in defining that prescribed pattern and training packers to
use it – as well as subsequently monitoring that the prescribed pattern had been followed.
– The increased importance of quality means that many customers now demand some proof that the supplier is capable
of consistently producing quality products. This proof is part of the ‘confidence’ factor of QA and may be demonstrated
by a third party certification, such as ISO 9000. Certification helps show the customer that the supplier has a
commitment to consistently supplying a quality product. QA will be concerned with gaining and maintaining such
certification and this should assist the company in securing and retaining contracts.
At UPC the current inspection team is focused on QC. The responsibility for this should be moved to the production process
itself or to the people who actually undertake that process. The inspection team could then focus on QA, setting standards
for quality, establishing how those standards should be monitored, and then ensuring that such monitoring is being
performed. In making this transition, the company will move to a culture of attempting to prevent faults rather than relyingsolely on detecting them.

正确答案：

(b) Accounting in the financial statements for the year ended 31 May 2005
IFRS2 requires an expense to be recognised for the share options granted to the directors with a corresponding amount shown
in equity. Where options do not vest immediately but only after a period of service, then there is a presumption that the
services will be rendered over the ‘vesting period’. The fair value of the services rendered will be measured by reference to
the fair value of the equity instruments at the date that the equity instruments were granted. Fair value should be based on
market prices. The treatment of vesting conditions depends on whether or not the conditions relate to the market price of the
instruments. Market conditions are effectively taken into account in determining the fair value of the instruments and therefore
can be ignored for the purposes of estimating the number of equity instruments that will vest. For other conditions such as
remaining in the employment of the company, the calculations are carried out based on the best estimate of the number of
instruments that will vest. The estimate is revised when subsequent information is available.
The share options granted to J. Van Heflin on 1 June 2002 were before the date set in IFRS2 for accounting for such options
(7 November 2002). Therefore, no expense calculation is required. (Note: candidates calculating the expense for the latter
share options would be given credit if they stated that the company could apply IFRS2 to other options in certaincircumstances.) The remaining options are valued as follows:

正确答案：
(c) Accounting and ethical implications of sale of inventory
Manipulation of financial statements often does not involve breaking laws but the purpose of financial statements is to present
a fair representation of the company’s position, and if the financial statements are misrepresented on purpose then this could
be deemed unethical. The financial statements in this case are being manipulated to show a certain outcome so that Hall
may be shown to be in a better financial position if the company is sold. The retained earnings of Hall will be increased by
$4 million, and the cash received would improve liquidity. Additionally this type of transaction was going to be carried out
again in the interim accounts if Hall was not sold. Accountants have the responsibility to issue financial statements that do
not mislead the public as the public assumes that such professionals are acting in an ethical capacity, thus giving the financial
statements credibility.
A profession is distinguished by having a:
(i) specialised body of knowledge
(ii) commitment to the social good
(iii) ability to regulate itself
(iv) high social status
Accountants should seek to promote or preserve the public interest. If the idea of a profession is to have any significance,
then it must make a bargain with society in which they promise conscientiously to serve the public interest. In return, society
allocates certain privileges. These might include one or more of the following:
– the right to engage in self-regulation
– the exclusive right to perform. particular functions
– special status
There is more to being an accountant than is captured by the definition of the professional. It can be argued that accountants
should have the presentation of truth, in a fair and accurate manner, as a goal.

正确答案：
(c) Absolutism and relativism
Absolutism and relativism represent two extreme positions of ethical assumptions.
Definitions
An absolutist assumption is one that believes that there are ‘eternal’ rules that should guide all ethical and moral decision
making in all situations. Accordingly, in any given situation, there is likely to be one right course of action regardless of the
outcome. An absolutist believes that this should be chosen regardless of the consequences or the cost. A dogmatic approach
to morality is an example of an absolutist approach to ethics. A dogmatic assumption is one that is accepted without
discussion or debate.
Relativist assumptions are ‘situational’ in nature. Rather than arguing that there is a single right choice, a relativist will tend
to adopt a pragmatic approach and decide, in the light of the situation being considered, which is the best outcome. This will
involve a decision on what outcome is the most favourable and that is a matter of personal judgment.
Outcomes
If Anne were to adopt absolutist/dogmatic assumptions, she would be likely to decide that she would need to pursue what
she perceives is the right course of action regardless of cost to herself or the relationship with the client or her manager. Given
that she unearthed a suspect and unaccounted-for payment, and that she received an inadequate explanation from the client,
she would probably recommend extension to the audit beyond the weekend.
If Ann were to adopt relativist or pragmatic assumptions, she would have a potentially much more complicated decision to
make. She would have to decide whether it was more important, ethically, to yield to the pressure from Zachary in the
interests of her short-term career interests or ‘hold out’ to protect the interests of the shareholders. Anne could recommend
sign off and trust the FD’s explanation but she is more likely to seek further evidence or assurance from the company before
she does so.

正确答案：
(c) One of the main qualitative benefits that may arise from an investment in a new IT system by Moffat Ltd is the improved level
of service to its customers in the form. of reduced waiting times which may arise as a consequence of better scheduling of
appointments, inventory management etc. This could be assessed via the introduction of a questionnaire requiring customers
to rate the service that they have received from their recent visit to a location within Moffat Ltd according to specific criteria
such as adherence to appointment times, time taken to service the vehicle, cleanliness of the vehicle, attitude of staff etc.
Alternatively a follow-up telephone call from a centralised customer services department may be made by Moffat Ltd
personnel in order to gather such information.
Another qualitative benefit of the proposed investment may arise in the form. of competitive advantage. Improvements in
customer specific information and service levels may give Moffat Ltd a competitive advantage. Likewise, improved inventory
management may enable costs to be reduced thereby enabling a ‘win-win’ relationship to be enjoyed with its customers.

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(b) The relative performance of GBC and TTC is difficult to assess due to the following:
(i) They would appear to have differing objectives. GBC provides free transport for senior citizens and charges lower fares
than TTC. GBC also uses environmentally friendly fuel. Each of these factors inhibits a direct comparison of the two
organisations.
(ii) The organisations are funded differently. It is evident that TTC uses loan finance to fund operations which gives rise to
interest charges which are not incurred by GBC. On the other hand GBC is funded by the government.
(iii) TTC has higher fixed asset values which precipitate much higher depreciation charges.
(iv) There is also a lack of non-financial performance indicators such as the number of on-time arrivals, number of accidents,
complaints re passenger dissatisfaction, staff turnover, adherence to relevant legislation, convenience of pick-up/drop-off
points etc.
The following items of additional information would assist in assessing the financial and operating performance of the two
companies:
(1) The number of staff employed by each organisation would assist in the assessment of the financial and operating
performance. Ratios such as revenue generated per employee and operating costs per employee might provide useful
comparators of financial and operating efficiency.
(2) Safety and accident records of each organisation would give an indication of the reliability and safety afforded to
passengers by each organisation. Passenger safety is of paramount importance to all passenger transport businesses.
(3) Records of late/cancelled buses together with the number of complaints received from the passengers would provide an
indication of the efficiency of the service provided by each organisation.
(4) The accessibility of the services, location of pick-up/drop-off points would provide an indication of the flexibility of service
delivery provided by each organisation.
(5) The comfort, cleanliness and age of the respective bus fleets would provide a further indication of the level of service
quality provided by each organisation.
(6) The fuel emission levels of the buses operated by each organisation would provide an indication of the extent of their
‘social responsibility’.
Notes: (i) Only three items of additional information were required.
(ii) Alternative relevant discussion and examples would be acceptable.

正确答案：
(b) An illustration of each of the problems using the data from the Battamould division/TRG scenario is as follows:
Meeting only the lowest targets
– In the scenario, the budgeted variable cost of $200 per tonne has been agreed. There is no specific incentive for the
Bettamould division to try to achieve a better level of performance.
Using more resources than necessary
– In the scenario, the current budget allows for 5% machine idle time. There is evidence that a move to outsourcing
machine maintenance from a specialist company could help reduce idle time levels and permit annual output in excess
of 100,000 tonnes.
Making the bonus – whatever it takes
– At present, the only sanction/incentive is to achieve 100,000 tonnes of output. There is no mention of any sanction for
example, if processing losses (and hence costs) rise to 20% of material inputs.
Competing against other divisions, business units and departments
– At present, the Bettamould division sources its materials from chosen suppliers who have been used for some years.
There is evidence that materials of equal specification could be sourced for 40% of the annual requirement from another
TRG division which has spare capacity. Why has this not been investigated?
Ensuring that what is in the budget is spent
– In the Bettamould scenario, there is a fixed cost budget allowance of $50,000,000. We are told in the question that
salaries of all employees and management are paid on a fixed salary basis. Bettamould’s management will not want a
reduction in the fixed budget allowance, since this could lead to the need to reduce the number of employees, which
they may see as having a detrimental effect on the ability of the division to meet its annual budget output target of
100,000 tonnes.
Providing inaccurate forecasts
– In the scenario there may have been deliberate efforts to increase the agreed budget level of aspects of measures and
costs. For example, by putting forward the argument that the budget requirement of 15% processing losses is acceptable
because of the likelihood that ageing machinery will be less effective in the coming budget period.
Meeting the target but not beating it
– In the scenario the bonus of 5% of salary is payable as long as the 100,000 tonnes of output is achieved. This does
not require that actual results will show any other aspects of the budget being improved upon. For example there is no
need to consider a reduction in the current level of quality checks (25% of daily throughput) to the 10% level that current
evidence suggests is achieved by competitor companies. The current budget agreement allows the Bettamould division
to transfer its output to market based profit centres at $200 + $500 = $700 per tonne. There is no specified penalty
if costs exceed this target level.
Avoiding risks
– Bettamould has not yet incorporated the changes listed in note 4 in the question. For example why has the sourcing of
40% of required materials from another TRC division not been quantified and evaluated. It is possible that the division
with spare capacity could supply the material at cost (possibly based on marginal cost) which would be less than
currently paid to a supplier external to TRC. It may be that Bettamould have not pursued this possibility because of risk
factors relating to the quality of the material transferred or its continued availability where the supplying division had an
upturn in the level of more profitable external business.

正确答案：

 

正确答案：
(ii) Consultation – it may not be possible to hold extensive consultations on specialist issues within a small firm, due to a
lack of specialist professionals. There may be a lack of suitably experienced peers to discuss issues arising on client
engagements. Arrangements with other practices for consultation may be necessary.
Training/Continuing Professional Development (CPD) – resources may not be available, and it is expensive to establish
an in-house training function. External training consortia can be used to provide training/CPD for qualified staff, and
training on non-exam related issues for non-qualified staff.
Review procedures – it may not be possible to hold an independent review of an engagement within the firm due to the
small number of senior and experienced auditors. In this case an external review service may be purchased.
Lack of specialist experience – where special skills are needed within an engagement; the skills may be bought in, for
example, by seconding staff from another practice. Alternatively if work is too specialised for the firm, the work could be
sub-contracted to another practice.
Working papers – the firm may lack resources to establish an in-house set of audit manuals or standard working papers.
In this case documentation can be provided by external firms or professional bodies.

正确答案：

(b) Carrying out a systematic PESTEL analysis is a key step in developing alternative scenarios about the future. Johnson and
Scholes define scenarios as ‘detailed and plausible views of how the business environment of an organisation might develop
in the future based on groupings of key environmental influences and drivers of change about which there is a high level of
uncertainty’. In developing scenarios it is necessary to isolate the key drivers of change, which have the potential to have a
significant impact on the company and are associated with high levels of uncertainty. Development of scenarios enables
managers to share assumptions about the future and the key variables shaping that future. This provides an opportunity for
real organisational learning. They are then in a position to monitor these key variables and amend strategies accordingly. It
is important to note that different stakeholder groups will have different expectations about the future and each may provide
a key input to the process of developing scenarios. By their very nature scenarios should not attempt to allocate probabilities
to the key factors and in so doing creating ‘spurious accuracy’ about those factors. A positive scenario is shown below and

should provide a shared insight into the external factors most likely to have a significant impact on Airtite‘s future strategy.
For most companies operating in global environments the ability to respond flexibly and quickly to macro-environmental
change would seem to be a key capability.
The scenario as illustrated below, clearly could have a major impact on the success or otherwise of Airtite’s strategy for the
future. The key drivers for change would seem to be the link between technology and global emissions, fuel prices and the
stability of the global political environment. Through creating a process which considers the drivers which will have most
impact on Airtite and which are subject to the greatest uncertainty, Airtite will have a greater chance of its strategy adaptingto changing circumstances.

正确答案：
(b) There are several issues which have to be addressed if an international conceptual framework is to be successfully developed.
These are:
(i) Objectives
Agreement will be required as to whether financial statements are to be produced for shareholders or a wide range of
users and whether decision usefulness is the key criteria or stewardship. Additionally there is the question of whether
the objective is to provide information in making credit and investment decisions.
(ii) Qualitative Characteristics
The qualities to be sought in making decisions about financial reporting need to be determined. The decision usefulness
of financial reports is determined by these characteristics. There are issues concerning the trade-offs between relevance
and reliability. An example of this concerns the use of fair values and historical costs. It has been argued that historical
costs are more reliable although not as relevant as fair values. Additionally there is a conflict between neutrality and the
traditions of prudence or conservatism. These characteristics are constrained by materiality and benefits that justify
costs.
(iii) Definitions of the elements of financial statements
The principles behind the definition of the elements need agreement. There are issues concerning whether ‘control’
should be included in the definition of an asset or become part of the recognition criteria. Also the definition of ‘control’
is an issue particularly with financial instruments. For example, does the holder of a call option ‘control’ the underlying
asset? Some of the IASB’s standards contravene its own conceptual framework. IFRS3 requires the capitalisation of
goodwill as an asset despite the fact that it can be argued that goodwill does not meet the definition of an asset in the
Framework. IAS12 requires the recognition of deferred tax liabilities that do not meet the liability definition. Similarly
equity and liabilities need to be capable of being clearly distinguished. Certain financial instruments could either be
liabilities or equity. For example obligations settled in shares.
(iv) Recognition and De-recognition
The principles of recognition and de-recognition of assets and liabilities need reviewing. Most frameworks have
recognition criteria, but there are issues over the timing of recognition. For example, should an asset be recognised when
a value can be placed on it or when a cost has been incurred? If an asset or liability does not meet recognition criteria
when acquired or incurred, what subsequent event causes the asset or liability to be recognised? Most frameworks do
not discuss de-recognition. (The IASB’s Framework does not discuss the issue.) It can be argued that an item should be
de-recognised when it does not meet the recognition criteria, but financial instruments standards (IAS39) require other
factors to occur before financial assets can be de-recognised. Different attributes should be considered such as legal
ownership, control, risks or rewards.
(v) Measurement
More detailed discussion of the use of measurement concepts, such as historical cost, fair value, current cost, etc are
required and also more guidance on measurement techniques. Measurement concepts should address initial
measurement and subsequent measurement in the form. of revaluations, impairment and depreciation which in turn
gives rise to issues about classification of gains or losses in income or in equity.
(vi) Reporting entity
Issues have arisen over what sorts of entities should issue financial statements, and which entities should be included
in consolidated financial statements. A question arises as to whether the legal entity or the economic unit should be the
reporting unit. Complex business arrangements raise issues over what entities should be consolidated and the basis
upon which entities are consolidated. For example, should the basis of consolidation be ‘control’ and what does ‘control’
mean?
(vii) Presentation and disclosure
Financial reporting should provide information that enables users to assess the amounts, timing and uncertainty of the
entity’s future cash flows, its assets, liabilities and equity. It should provide management explanations and the limitations
of the information in the reports. Discussions as to the boundaries of presentation and disclosure are required.

正确答案：
(b) Management judgement may have a greater impact under IFRS than generally was the case under national GAAP. IFRS
utilises fair values extensively. Management have to use their judgement in selecting valuation methods and formulating
assumptions when dealing with such areas as onerous contracts, share-based payments, pensions, intangible assets acquired
in business combinations and impairment of assets. Differences in methods or assumptions can have a major impact on
amounts recognised in financial statements. IAS1 expects companies to disclose the sensitivity of carrying amounts to the
methods, assumptions and estimates underpinning their calculation where there is a significant risk of material adjustment
to their carrying amounts within the next financial year. Often management’s judgement is that there is no ‘significant risk’
and they often fail to disclose the degree of estimation or uncertainty and thus comparability is affected.
In addition to the IFRSs themselves, a sound financial reporting infrastructure is required. This implies effective corporate
governance practices, high quality auditing standards and practices, and an effective enforcement or oversight mechanism.
Therefore, consistency and comparability of IFRS financial statements will also depend on the robust nature of the other
elements of the financial reporting infrastructure.
Many preparers of financial statements will have been trained in national GAAP and may not have been trained in the
principles underlying IFRS and this can lead to unintended inconsistencies when implementing IFRS especially where the
accounting profession does not have a CPD requirement. Additionally where the regulatory system of a country is not well
developed, there may not be sufficient market information to utilise fair value measurements and thus this could lead to
hypothetical markets being created or the use of mathematical modelling which again can lead to inconsistencies because of
lack of experience in those countries of utilising these techniques. This problem applies to other assessments or estimates
relating to such things as actuarial valuations, investment property valuations, impairment testing, etc.
The transition to IFRS can bring significant improvement to the quality of financial performance and improve comparability
worldwide. However, there are issues still remaining which can lead to inconsistency and lack of comparability with those
financial statements.

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(ii) Principles-based approach
Advantages of a principles-based approach
The rigour with which governance systems are applied can be varied according to size, situation, stage of development
of business, etc. Organisations (in legal terms) have a choice to the extent to which they wish to comply, although they
will usually have to ‘comply or explain’. Explanations are more accepted by shareholders and stock markets for smaller
companies.
Obeying the spirit of the law is better than ‘box ticking’ (‘sort of business you are’ rather than ‘obeying rules’). Being
aware of overall responsibilities is more important than going through a compliance exercise merely to demonstrate
conformance.
Avoids the ‘regulation overload’ of rules based (and associated increased business costs). The costs of compliance have
been a cause of considerable concern in the United States.
Self-regulation (e.g. by Financial Services Authority in the UK) rather than legal control has proven itself to underpin
investor confidence in several jurisdictions and the mechanisms are self-tightening (quicker and cheaper than legislation)
if initial public offering (IPO) volumes fall or capital flows elsewhere.
Context of developing countries
Developing countries’ economies tend to be dominated by small and medium sized organisations (SMEs). It would be
very costly and probably futile, to attempt to burden small businesses with regulatory requirements comparable to larger
concerns.
Having the flexibility to ‘comply or explain’ allows for those seeking foreign equity to increase compliance whilst those
with different priorities can delay full compliance. In low-liquidity stock markets (such as those in some developing
countries) where share prices are not seen as strategically important for businesses, adopting a more flexible approach
might be a better use of management talent rather than ‘jumping through hoops’ to comply with legally-binding
constraints.
The state needs to have an enforcement mechanism in place to deal with non-compliance and this itself represents a
cost to taxpayers and the corporate sector. Developing countries may not have the full infrastructure in place to enable
compliance (auditors, pool of NEDs, professional accountants, internal auditors, etc) and a principles-based approach
goes some way to recognise this.

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(ii) Market Penetration
With regard to existing products it would appear that a strategy of market penetration is being followed, whereby attempts
are made to sell existing products into existing markets. This is a low risk strategy which is most unlikely to lead to high
rates of growth, reflected in the forecast increase of 2% per annum in the years ending 30 November 2008 and 2009.
Management seeks here to increase its market share with the current product range. In pursuing a penetration strategy
the management of Vision plc may to some extent be able to exploit opportunities including the following:
– Encouraging existing customers to buy more of their brand
– Encouraging customers who are buying a competitor’s brand to switch to their brand
– Encouraging non-users within the segment to buy their brand
‘Strengths’ within the current portfolio will need to be consolidated and any areas of weakness addressed with remedial
action.
Market Development
The purchase of the retail outlets will enable management to sell existing products via new channels of distribution. The
products of both the Astronomy and Outdoor Pursuits divisions could be sold via the retail outlets. Very often new
markets can be established in geographical terms. Management could, for example, look to promote the sale of
microscopes and associated equipment to overseas hospitals.
Product Development
The launch of the Birdcam-V is an example of a product development strategy whereby new products are targeted at
existing markets. Very often, existing products can be improved, or if an organisation possesses adequate resources,
completely new products can be developed to meet existing market needs. Some of the main risks here lie in the ‘time
to market’ and product development costs which frequently go well beyond initial estimates.
Diversification
The purchase of Racquets Ltd is an example of diversification on the part of Vision plc since the products and markets
of Racquets Ltd bear no relationship to the existing products and markets of the company. In this regard the
diversification is said to be unrelated.
The establishment of the Oceanic division could be regarded as a related diversification since existing technology will be
used to develop new products for new markets. The success of this strategy will very much depend on the strength of
the Vision brand.

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(c) The following are important considerations regarding the quality of the business software:
– The software is error-free as this will improve its reliability. Whilst in practice this might not always be achievable the
directors of SSH must recognise the dangers involved in supplying bespoke software which may prove damaging to their
clients’ businesses with the resulting loss of client goodwill.
– The software should meet quality control standards such as those specified by the ISO (International Standards
Organisation).
– The software must be delivered on time. Late delivery of business software will prove problematic since clients may rely
on updated software to meet new customer needs or to fulfil revised business objectives.
– The software must meet the initial specification of the customer. In meeting the specification SSH will be demonstrating
that the software has been produced correctly with an appropriate focus on the requirements of end users.
– The software must be usable i.e. as well as being able to do what it is supposed to do it is important that it is easy to
use.
– The software should be capable of being updated in the light of future changes that occur in the clients’ requirements.

正确答案：
(c) Ways in which each of the problems might be overcome are as follows:
Meeting only the lowest targets
– To overcome the problem there must be some additional incentive. This could be through a change in the basis of bonus
payment which currently only provides an incentive to achieve the 100,000 tonnes of output.
Using more resources than necessary
– Overcoming the problem may require a change in the bonus system which currently does not provide benefit from any
output in excess of 100,000 tonnes. This may not be perceived as sufficiently focused in order to achieve action. It may
be that engendering a culture of continuous improvement would help ensure that employees actively sought ways of
reducing idle time levels.
Making the bonus – whatever it takes
– It is likely that efforts to change the ‘work ethos’ at all levels is required, while not necessarily removing the concept of
a bonus payable to all employees for achievement of targets. This may require the fostering of a culture for success within
the company. Dissemination of information to all staff relating to trends in performance, meeting targets, etc may help
to improve focus on continuous improvement.
Competing against other divisions, business units and departments
– The problem may need some input from the directors of TRG. For example, could a ‘dual-cost’ transfer pricing system
be explained to management at both the Bettamould division and also the Division with spare capacity in order to
overcome resistance to problems on transfer pricing and its impact on divisional budgets and reported results? In this
way it may be possible for the Bettamould division to source some of its input materials at a lower cost (particularly from
TRG’s viewpoint) and yet be acceptable to the management at the supplying division.
Ensuring that what is in the budget is spent
– In order to overcome the problem it may be necessary to educate management into acceptance of aspects of budgeting
such as the need to consider the committed, engineered and discretionary aspects of costs. For example, it may be
possible to reduce the number of salaried staff involved in the current quality checking of 25% of throughput on a daily
basis.
Providing inaccurate forecasts
– In order to overcome this problem there must be an integrated approach to the budget setting process. This may be
achieved to some extent through all aspects of the budget having to be agreed by all functions involved. For example,
engineers as well as production line management in reaching the agreed link between percentage process losses and
the falling efficiency of machinery due to age. In addition, TRC may insist an independent audit of aspects of budget
revisions by group staff.
Meeting the target but not beating it
– To overcome the problem may require that the bonus system should be altered to reflect any failure to control costs per
tonne at the budget level.
Avoiding risks
– In order to overcome such problems, TRC would have to provide some guarantees to Bettamould management that the
supply would be available during the budget period at the initially agreed price and that the quality would be maintained
at the required level. This would remove the risk element that the management of the Bettamould division may consider
currently exists.

正确答案：

Tutorial note:
In order to apply any piece of legislation, judges have to determine its meaning. In other words they are required to interpret the
statute before them in order to give it meaning. The diffi culty, however, is that the words in statutes do not speak for themselves and
interpretation is an active process, and at least potentially a subjective one depending on the situation of the person who is doing
the interpreting.
Judges have considerable power in deciding the actual meaning of statutes, especially when they are able to deploy a number of
competing, not to say contradictory, mechanisms for deciding the meaning of the statute before them. There are, essentially, two
contrasting views as to how judges should go about determining the meaning of a statute – the restrictive, literal approach and the
more permissive, purposive approach.
(a) The literal approach
The literal approach is dominant in the English legal system, although it is not without critics, and devices do exist for
circumventing it when it is seen as too restrictive. This view of judicial interpretation holds that the judge should look primarily
to the words of the legislation in order to construe its meaning and, except in the very limited circumstances considered below,
should not look outside of, or behind, the legislation in an attempt to fi nd its meaning.
Within the context of the literal approach there are two distinct rules:
(i) The literal rule
Under this rule, the judge is required to consider what the legislation actually says rather than considering what it might
mean. In order to achieve this end, the judge should give words in legislation their literal meaning, that is, their plain,
ordinary, everyday meaning, even if the effect of this is to produce what might be considered an otherwise unjust or
undesirable outcome (Fisher v Bell (1961)) in which the court chose to follow the contract law literal interpretation of
the meaning of offer in the Act in question and declined to consider the usual non-legal literal interpretation of the word
(offer).

(ii) The golden rule
This rule is applied in circumstances where the application of the literal rule is likely to result in what appears to the court
to be an obviously absurd result. It should be emphasised, however, that the court is not at liberty to ignore, or replace,
legislative provisions simply on the basis that it considers them absurd; it must fi nd genuine diffi culties before it declines
to use the literal rule in favour of the golden one. As examples, there may be two apparently contradictory meanings to a
particular word used in the statute, or the provision may simply be ambiguous in its effect. In such situations, the golden
rule operates to ensure that preference is given to the meaning that does not result in the provision being an absurdity.
Thus in Adler v George (1964) the defendant was found guilty, under the Offi cial Secrets Act 1920, with obstruction
‘in the vicinity’ of a prohibited area, although she had actually carried out the obstruction ‘inside’ the area.
(b) The purposive approach
The purposive approach rejects the limitation of the judges’ search for meaning to a literal construction of the words of
legislation itself. It suggests that the interpretative role of the judge should include, where necessary, the power to look beyond
the words of statute in pursuit of the reason for its enactment, and that meaning should be construed in the light of that purpose
and so as to give it effect. This purposive approach is typical of civil law systems. In these jurisdictions, legislation tends to set
out general principles and leaves the fi ne details to be fi lled in later by the judges who are expected to make decisions in the
furtherance of those general principles.
European Community (EC) legislation tends to be drafted in the continental manner. Its detailed effect, therefore, can only be
determined on the basis of a purposive approach to its interpretation. This requirement, however, runs counter to the literal
approach that is the dominant approach in the English system. The need to interpret such legislation, however, has forced
a change in that approach in relation to Community legislation and even with respect to domestic legislation designed to
implement Community legislation. Thus, in Pickstone v Freemans plc (1988), the House of Lords held that it was permissible,
and indeed necessary, for the court to read words into inadequate domestic legislation in order to give effect to Community
law in relation to provisions relating to equal pay for work of equal value. (For a similar approach, see also the House of Lords’
decision in Litster v Forth Dry Dock (1989) and the decision in Three Rivers DC v Bank of England (No 2) (1996).) However,
it has to recognise that the purposive rule is not particularly modern and has its precursor in a long established rule of statutory
interpretation, namely the mischief rule.

The mischief rule
This rule permits the court to go behind the actual wording of a statute in order to consider the problem that the statute is
supposed to remedy.
In its traditional expression it is limited by being restricted to using previous common law rules in order to decide the operation
of contemporary legislation. Thus in Heydon’s case (1584) it was stated that in making use of the mischief rule the court
should consider what the mischief in the law was which the common law did not adequately deal with and which statute law
had intervened to remedy. Use of the mischief rule may be seen in Corkery v Carpenter (1950), in which a man was found
guilty of being drunk in charge of a carriage although he was in fact only in charge of a bicycle.