Questions
Question1
Provide example of one Saudi Company and analyze the steps that the managers in this company can take to achieve its vision and use core competencies. (2 Mark)
Question2
The following data were obtained from the accounting information system of ABC Corporation:
Units Total Cost
Month Produced
January 60 SAR1,533.4
February 50 1,300
March 80 2,000
April 30 833.5
- Use the data for February and March and the two – point method to determine a cost function.
- Use the high – low method to determine a cost function.
(2 Mark)
Question3
XYZ Corporation sells its product for $17 per unit. Its variable cost is $10 per unit, and total fixed costs are $800. Assuming next period’s estimated sales are 300, calculate the following amounts:
- Degree of operating leverage
- Margin of safety in units
- Margin of safety in revenues
Answer
Saudi Company
Core competencies distinguish a firm from its rivals and offer a competitive edge in the
market. Typically a core talent relates not to financial or physical assets but the abilities or
experiences in an activity. The strategic strength of a company is an organizational core
competence. For example, in Saudi Aramco’s oil and energy systems, the strategic strength rests.
In establishing the core skills of Saudi Aramco, the first is to identify the skills, skills,
knowledge, experience, technology, or processes underpinned by your company's distinctive
range of services or products. The debate will also help to build strategic responsiveness to
benefit competitively. As a high-level company, Saudi Aramco develops new core skills and
expands its current to current and existing markets (Paramitha & Nurcahyo, 2018). A firm at this
operating level identifies and develops the necessary skills to fulfill these requirements and
wishes of its consumers in new and future markets.
There are six crucial steps for selecting Saudi Aramco core competencies
i. Clear mission and vision statements
Strong core competencies come from a clear perspective of where they plan to go crucial.
The company has written value statements, which they review from time to time. The changes
are factored in regarding the theme, target, and the goals and objectives they anticipate
achieving. The mission statements emphasize targeting to supply energy globally and become
the leading company in both the chemicals business and integrated energy (Chiu et al., 2019). On
the other hand, the vision describes the company's focus on optimizing income, facilitating
sustainable and diversified expansion, and offering a competitive and vibrant country energy
market.
ii. Knowledge of the business
As the world's top and trustworthy oil supplier to worldwide markets, Saudi Aramco
plans to expand on that success and enhance every area of the upstream sector. The firm has
found new gas and petroleum fields (Chiu et al., 2019). It plans to boost gas production with
enormous investments in domestic and foreign resources – helping the country expand while
maintaining the stability of the markets and fulfilling national and international energy
requirements.
iii. Drafting the company’s core competencies
The company may opt to use competency based software. The techniques are infinite,
and some are more suited than rivals for Saudi Aramco. Recall, they are distinctive competencies
for the firm. The firm should establish web research where appropriate, compare itself with its
competitors, communicate to its customers and contact its partners and suppliers (Paramitha &
Nurcahyo, 2018). Sometimes, except via other individuals, it is challenging to see their entire
organization's competencies.
iv. Validating core their company competencies
A simple option to fail is to have just a few heads that define central powers for the
company as a whole. Specifically, each employee affected by these essential skills should
receive feedback if the firm is in an employee-driven business. Like the previous stage, managers
may wish to leave their company and hear from customers or fuel consumers (Paramitha &
Nurcahyo, 2018). Receive comments and add them to their final version, though.
v. Preach the core competencies
The other simplest means of failure is to leave your critical competencies in a binder to
pile up or conceal them in a dark area of the firm's website. The management should study how
to obtain the new skills and how they may be employed in their company (Paramitha &
Nurcahyo, 2018); publicize them, and use them in their day-to-day corporate world.
vi. Executing the core competencies
The firm should invest a lot of effort making sure its skills last and deliver the critical
value. In order to make a difference, Saudi Aramco's fundamental competencies must be
incorporated into regular business activity (Chiu et al., 2019). It can also engage them in all
performance assessments of employees, reorganization of a manufacturing line, or more
participation of customers in strategic planning.
Question 2
a. Two-method
Cost function (Y) = f+ vX
= (2000+1300)+130
= 34130
b. High-low method
Y=f+ vX
Cost per unit=(2000-1300)/(80-50)=23.3
Fixed cost=Y-vX
= 1300-(70/3)
=1276.67
Question 3
a. Degree of operating leverage
Degree of Operating Leverage = Contribution / EBIT.
= (Q*CM)/(Q*CM-Fixed cost)
=[300*(17-10)]/[300(17-10)-800]
=2100/1300
=1.6
b. Margin of safety in units
= (Current Sales Level – Breakeven Point) / Current Sales Level x 100.
={[300*17-(800/17)]/5100}100
=[5052.95/5100]100
=99.1%
c. Margin of safety in revenues
MSR=Change in total revenue/change in quantity
={(2100-800)/(17-10)}
=185.71
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