Refer to Table 1 and other information. Assume that Total Quality Management (TQM) is implemented successfully. Calculate the: capacity utilisation

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

1. [1] Capacity utilisation = current output level / maximum output level X 100
2. [1] Production increases 10% to 14 X 1.1 = 15.4m
3. [2] Capacity utilisation = 15.4 / 16 X 100
4. [3] = 96.25% or 96.3%
5. [2] Or if calculation with no increase 14 / 16 X 100 = 87.5%
6. [1] contribution per unit = selling price – unit variable cost
7. [1] original unit contribution 40 – 20 = $20
8. [1] unit variable cost falls by 5%: 20 X 0.05 = $1
9. [1] new unit variable cost = 20 – 1 = $19
10. [2] 40 – 19 = new unit contribution of 21
11. [3] Increase in contribution per unit = 1
12. [3] OR Increase in contribution per unit = 5%
13. OFR
14. [Knowledge] Quality relates to whether a product meets customer expectations.
15. [Knowledge] Quality assurance is a system of agreeing and meeting quality standards at each stage of production to ensure customer satisfaction.
16. [Knowledge] TQM is an approach to quality that aims to involve all employees in quality improvements. TQM includes: quality chains, quality circles, zero defects, concept of internal customers and kaizen.
17. [Application] Effect on capacity utilisation and unit cost in FF.
18. [Application] Glasses frame manufacture and nine stages of production process, with employees only involved in one task at present.
19. [Application] High reject level by wholesalers (7%).
20. [Application] Only 85% of sales delivered on time.
21. [Application] Employees know rejected frames can be recycled.
22. [Application] Problems with raw materials supplies.
23. [Application] Breakdowns with machinery.
24. [Application] Unreliable electricity supply.
25. [Application] Increasing employee dissatisfaction, higher absence rates, complaints, lower productivity.
26. [Analysis] Quality chains and internal customers will reduce rejects as next stage employees will be unwilling to accept sub-standard items.
27. [Analysis] TQM makes explicit the need for quality assurance throughout the process so decreases likelihood of poor work.
28. [Analysis] Delivery times likely to be lowered or met more often as fewer rejects hold up production.
29. [Analysis] Raw material supplies will be more closely checked when delivered, so less likely that faulty materials will enter the production process.
30. [Evaluation] Change to TQM incurs costs especially of training which in short term may offset any quality improvement.
31. [Evaluation] Change to TQM requires change in supervisors' approach. How possible is this?
32. [Evaluation] Does Chang have the skills needed to get employees on board? As well as TQM there may need to be management training to facilitate the culture change.
33. [Evaluation] TQM can only succeed if training is given to all employees.
34. [Evaluation] Other possibilities exist to reduce production problems, e.g. paying a bonus for achieving target wastage rates. These may be more appropriate for FF and cheaper.
35. [Evaluation] Judgement as to whether TQM will be sufficient to solve production problems.