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9 November 2018

Neil’s Reaction: BM Case Study Exam (November 2018)

Home > Blog > Neil’s Reaction: BM Case Study Exam (November 2018)
Neil at CAH2(blog)

After every Case Study exam session, ICAEW invite Tutors to comment on the exam paper - we've sent the review below. Read it if you're interested, ignore it if you're fed up of hearing about BM. But as you enjoy your freedom this weekend, do spare a thought for all the examiners and markers trapped in a conference centre surrounded by scripts and marking keys. They are the ones working hard now!

Requirement 1 was a conventional analysis of the BM Income Statement down to Operating Profit, and candidates also had to answer 4 specific questions about writing-off the £78,000 due from Titanic Cruises since December 2017.  They needed to analyse revenue using the limited customer information and cost of sales using the table of supplier purchases and the information in Note 1.  There was sufficient information in the Exam Paper on 2018 to supplement that provided in the Advance Information for candidates to develop their analysis.  The structure provided for answering the “twist” will have reduced their decision making.

In Requirement 2 candidates were asked to calculate BM’s cost of sales, GP and OP for 2019 and 2020 as a result of using a new supplier, Wisher.  They had to evaluate the assumptions and the information about Wisher by reference to the supplier criteria in the Advance Information, including  business trust and ethical issues.  The calculations were straight forward given the guidance in the Exam Paper.   As the “next logical step”, candidates could have calculated the price increase from Wisher to break even in 2019.  The assumptions for discussion were the timing and  cost of purchases from Wisher, the increase in production overheads, and pressures on BM’s other production and operating costs.  This was a straight forward requirement, with only the slightly unusual format of the financial analysis a possible concern for candidates in terms of time management.

Requirement 3 was the evaluation of the financial, operational and strategic issues (including business trust and ethical issues) relating to a new customer for BM in the cruise industry, using the customer criteria in the Advance Information.  The financial appendix required the comparison of two different pricing models and a calculation of potential future sales.  There was nothing in the content that should have caused candidates concern.

Overall, the content of the exam requirements was clear and not unexpected.  There was detailed guidance to candidates on how to structure their answers to all three requirements.  Those that had prepared well, and made use of all the information provided in the Exam Paper in their discussions, should have found this Case Study well within their capabilities.