EXAM COVER SHEET

NOTE: This exam paper may be

RETAINED by the student
EXAMINATION DETAILS
Course Code

ACCT 2195 (Vietnam)

Course Description

Accounting, Behaviour and Organizations

Date of
exam

Duration of exam
including reading time

Start and end time of exam

Total number of pages (incl. this cover sheet)

04

2 hrs 15 mins

Pages

INSTRUCTIONS TO CANDIDATES
Write your full name and student number on each examination booklet together with the number of
examination books used. Students must not write during reading time.
This is a CLOSED BOOK Exam.
This examination paper contains 4 questions.
Attempt all questions and all parts of questions. Commence each question on a new page. Carry out
the instructions on the front cover of the examination booklet.
This examination paper adds to 40 marks and comprises 40% of the total marks allocated in this
course. To obtain a pass in this course, you must achieve at least 50 marks overall.
You may take in non-text storing, non-programmable calculators. However, the use of other
electronic devices (eg. computers, electronic dictionaries, phones) is not allowed.Only non-text
storing, non-programmable calculators may be used.
The use of dictionaries, whether in electric form or print form, is not permitted.
Essential tables, rates and formula sheets are attached to this paper refer to appendices

ACCT2195, Final Examination Semester 3, 2013 (Vietnam)

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Case Study Dak Lak Coffee Company

The Dak Lak Coffee Company was established in 1981 in Dak Lak province. The company
processes various grades of coffee and sells them to exporters and retailers in Vietnam. The
coffee industry has continued to grow worldwide. Over the last three decades Dak Lak Coffee
Company (DLCC) has grown from a small firm to the 3 rd largest firm in Vietnam in terms of
market share by volume.
Though there were significant changes to the industry during this time and new business
opportunities emerged, DLCC decided to focus only on the coffee processing business, as this
was its core strength. However, in 2010, the top management of DLCC reviewed its strategic
position and decided they had to expand their portfolio, as the market was getting more
competitive.
As a result of it new strategic plan, the company started its own Retail Division. A chain of
coffee shops was opened across South Vietnam using the brand name Coffee Day. The Retail
Division purchased processed coffee from the DLCC Processing Division. The mission
statement for Coffee Day says: We aim to bring the love and cultural aspect of coffee
drinking and communicate its context and place to customers in Vietnam through our unique
blend and taste.
The decision to move into the retail market was a good one as there was
phenomenal growth in this new business. The number of coffee shops grew from 15 to 50 from
2010 to 2013. The division is now aiming to be amongst Vietnams top ten coffee retailers
within next three years.
The management treated each division as a profit centre and the retail division was allowed to
purchase processed coffee either from the Processing Division or from an outside supplier.
Likewise, the Processing Division was allowed to sell either to the retail division or externally.
At this stage, the Processing Division was utilising 60% of its installed annual capacity.
Due to volatility in the price of coffee in world market, coffee companies usually buy forward
contracts to fix the price in advance and rule out any adverse price movement. The Retail
Division estimated its need for year 2014 and invited bids both internally and externally.
The first bid it received was from Trang & Trang Company (T&T) for $15 per kg. On further
negotiations, T&T was ready to give a discount of 10% on this price.
The Processing Division, on the other hand, gave a bid of $15 per kg, the market price at which it
sold coffee to its external customers. The required quantity was equal to 10% of the Processing
Divisions installed capacity.
Costs relating to processing of coffee are as follows:

ACCT2195, Final Examination Semester 3, 2013 (Vietnam)

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Cost (per kilogram of processed coffee)

Coffee bean (raw material), not including process loss
Direct Labour
Utilities (60% variable)
Selling and administration costs (75% variable)
Delivery & transportation
Corporate cost allocation
Packaging (each 5 kg bag)

$
3.0
2.0
3.0
3.0
0.5
0.5
2.0

If an internal transfer to the Retail Division occurs, it is estimated that 50% of packaging cost
and 2/3 (two thirds) of the variable selling and administration costs can be saved. In addition to
the above, there is 10% material lost in process, which is unavoidable.
____________________________________________________________________________

REQUIRED
Based on the facts given in above case:
QUESTION ONE
a) Identify the Retail Divisions business mission as per BCG model.
b) Identify the means of competitive advantage and list two key success factors of the Retail
Divisions strategy.
c) Discuss the type of organisational structure DLCC should have considering it now has
two divisions. Give one advantage and one disadvantage of this type of structure. In your
answer you must refer to the type of work units and justify your choice.
d) Identify one performance measure that can be used for each perspective of the balanced
score card of the Retail division.
(2+3+3+4=12 marks)
QUESTION TWO
a) Discuss two reasons why it is necessary for DLCC to determine a transfer price for
processed coffee.
b) Explain in detail why transfer pricing may become a problem at DLCC. In your answer
refer to the three factors that create the transfer pricing problem.
ACCT2195, Final Examination Semester 3, 2013 (Vietnam)

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(2 + 4 = 6 marks)
QUESTION THREE
Based on the scenario given in the case and existing capacity utilisation levels, answer the
following:
a) From the perspective of Dak Lak Coffee Company, determine the optimal sourcing
decision for processed coffee. You must explain your answer fully. Marks will be
awarded for complete and properly labelled calculations to support your answer. State
any assumptions you make.
b) The Processing Divisions manager has submitted the bid for processed coffee at $15 per
kilogram as this is the current market price. Given your answer to question 3 a), do you
believe this is an appropriate transfer price? Explain your answer fully. In your answer
you must refer to:
The behaviours that are likely to occur if this transfer price is used;

The impact of these behaviours on the companys interests as a whole.

c) Recommend an appropriate transfer trice. Justify your choice of transfer price. In your
answer you must refer to the following:

The minimum and maximum transfer prices that the Processing Division could
offer, which would still lead to the optimal sourcing decision (you must explain
why these are minimum and maximum transfer prices);

The behaviours that are likely to occur if this transfer price is used;

The impact of these behaviours on the companys interests as a whole.

(9 + 3 + 4 = 16 marks)

QUESTION FOUR
The Processing Division has been operating for several months and sales of its processed coffee
on the external market have been growing at such a rate that it has no spare capacity to satisfy
the Retail Divisions demand for processed coffee in the foreseeable future.
In light of these changed circumstances, from the perspective of DLCC Company, determine the
optimal sourcing decision for the processed coffee. You must explain your answer fully. Marks
will be awarded for complete and properly labelled calculations to support your answer. State
any assumptions you make.
(6 marks)

ACCT2195, Final Examination Semester 3, 2013 (Vietnam)

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