Business (AS & A Level) · May / June 2022 · Paper 21 · Question 2

10 15 20 2 Motorcycle Components (MC) MC is a large public limited company that produces a range of components used by motorcycle manufacturers. MC’s mission statement is ‘to be the world leader in delivering quality motorcycle components to our customers’. The motorcycle component industry is very competitive and MC’s customers expect high quality and a short lead time. MC operates a Just in Time (JIT) inventory control system. MC’s good relationships with its suppliers ensure that JIT operates efficiently. The production workers at MC are highly skilled and the business benefits from a low labour turnover. Liquidity management is very important in the motorcycle component industry. The industry average for the acid test ratio is 1. A summary of some key data for MC has been prepared by the Finance Director, as shown in Table 2.1. Table 2.1: Summary financial data as at 30 April 2022 ($ million) Trade receivables 26 Cash 19 Inventory 1 Trade payables 30 Other current liabilities 20 The Operations Director, Jay, is proposing new capital expenditure of $4 million. Jay thinks that automation of the production process will have significant financial benefits for MC. He wishes to gain approval from the Board of Directors to implement a process innovation project. Jay believes that, with good communication and the involvement of employees, he can effectively manage the project.

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