PRIFYSGOL ABERTAWE

SWANSEA UNIVERSITY
School of Engineering
SEMESTER 2 EXAMINATIONS
May/June 2009

EG-386
Engineering Management
LEVEL 2 & 3

UNIVERSITY CALCULATORS ONLY

Translation dictionaries are not permitted, but an English dictionary may
be borrowed from the invigilator on request.
Time allowed:

2 hours
Answer TWO Full questions

Please insert any standard constants here.

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1.
a.
During its first year of trading a company carried out a number of transactions. The
impact of ten of these transactions on the company balance sheet is listed below:
i.
Cash up by 10,000 and Long Term Liabilities up by 10,000.
ii.
Fixed Assets up by 9,000 and Cash down by 9,000.
iii.
Raw Material Stock up by 10,000, Trade Creditors up by 5,000 and Cash down
by 5,000.
iv.
Raw Material Stock down by 2,000, Finished Stock up by 5,000 and Cash down
by 3,000.
v.
Finished Stock down by 3,000, Retained Profit up by 9,000 and Trade Debtors
up by 12,000.
vi.
Retained Profits down by 1,000 and Tax up by 1,000.
vii.
Retained Profits down by 2,000 and Accruals up by 2,000.
viii. Fixed Assets down by 900 and Retained Profits down by 900.
ix.
Prepayments up by 8,000 and Cash down by 8,000.
x.
Cash up by 15,000 and Trade Debtors down by 15,000.
Describe, in no more than a couple of sentences, the general nature of each of these
transactions.
[2.5 Marks Each]
b.
Say how each of the following events will ultimately affect the amount of cash
showing up on the Cash Flow Statement of a company. In each case explain which, if any, of
the main sections of the Cash Flow Statement are affected:
i.
ii.
iii.
iv.
v.
vi.

An increase in the level of stock in trade.

A rights issue of ordinary shares.
Depreciating a fixed asset.
Selling stock.
Taking out a loan.
Purchasing of fixed assets.
[3 Marks Each]

c.
Identify two factors that can cause the Operating Profit of a company in a particular
year to be:
i.
Higher than the cash flow shown under the Operating Activities of the Cash Flow
Statement.
[3 Marks]
ii.
Lower than the cash flow shown under the Operating Activities of the Cash Flow
Statement.
[4
Marks]
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2.
A massive housing programme is planned by the Ambridge New Town Development
Corporation. A total of 36 million has been earmarked for housing units over the next 3
years and the programme includes houses with a building cost of 48,000 and flats costing
30,000. A site of 20 hectares is available and the density is to be 40 houses or 50 flats to the
hectare. Flats are to be rented out at 30 per week and houses at 50 per week.
The scheme must include a minimum of 200 houses and 100 flats that are needed for the staff
of the Tardy Timepiece Company, soon to move to the nearby industrial estate. Suppose
Ambridge New Town Development Corporation aim to maximise the return on this 36
million development.

i.
Write out the problem in standard normal form and from this construct the Simplex
Table showing the initial feasible solution.
[15 Marks]
ii.
Using the Simplex method determine how many houses and flats should be built, the
corresponding rental income, how much land is used and how much of the available budget is
spent.
[20 Marks]
iii.
If the company had an extra hectare of land available and an additional pound on the
budget, by how much would this boost rental income?
[5 Marks]
iv.
If the rent on a flat went up by 1 a week and the rent on a house went down by 3
week would the solution found in question 2.i above remain optimal?
[10 Marks]

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3.
a.
i.
In no more than a sentence for each, explain the terms Intellectual Property (IP) and
Intellectual Property Rights (IPR).
[4 Marks]
ii.

What are the most common forms of IPR and what aspects of IP do they protect?
[8 Marks]

iii.
What are the three characteristics that an invention must have in order for it to be
patented? Illustrate your answers with specific examples.
[9 Marks]
iv.
In no more than a couple of paragraphs explain the application procedure for
obtaining a patent on an invention.
[4 Marks]
b.
i.

Write out the total cost equation in the Economic Order Quantity Model (EOQ) for
stock control. From it derive an expression for the quantity of stock that needs to be
ordered so that this stock cost will be minimised.
[7 Marks]

ii.

Suppose the demand for an item is normally distributed with a mean of 200 units a
week and a standard deviation of 40 units a week. The reorder cost is 200 per order,
the holding cost is 6 per unit per year and the lead time is fixed at 3 weeks per year.
Assume 52 working weeks in a year. Identify an ordering policy that will give a 95%
chance of avoiding a stock out during the lead time. (See Z Table on following page).
[15 Marks]

iii.

What is the cost of holding the safety stock in this case?

[3 Marks]

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