2. Final_exam Nguyen Huu Minh

FINAL EXAMINATION

FINAL EXAMINATIONSubject : Management Decision Making

Date of exam : On Sunday, July 27, 2014

Duration : 240 minutes

Class : IEMBA IEI01

Student’s Name: NGUYEN HUU MINH ID: VN1001482

Date of birth: 01/01/1974 Class: IEMBA IEI01 Total number of pages:.........................

Student’s Signature(Full name and Signature)

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Examiner’s Signature

(Full name and signature)

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Paper Code

FINAL EXAMINATION

FINAL EXAMINATIONSubject: MANAGEMENT DECISION MAKING Date of exam: On Sunday, July 27, 2014

Class: IEMBA IEI01

Time allowed: 240 minutes

MarkQuestion 1:………….

Question 2:……………




Sum :………………..

Lecturer’s comment.........................................................................................................................................

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Lecturer’s Signature(Full name and Signature)

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ANSWER ALL QUESTIONS:

1. Examine the case and explain the financial implications of selling rinse stryrene to a

waste exchange. Would converting the rinse stryrene into concerte coating and selling

it as a by-product be more financially advantageous? (30 Marks).

Use of rinse styrene in concrete coating had a $ 0.40 increase per pound of styrene.

On the other hand, use of styrene resulted in 2.5 pounds of CO2 emissions, during the

production of gel coating. Therefore, use of 600 pounds of styrene amounts to 600 * 2.5 =

1500 pounds of CO2 emissions. The styrene is again used in the production of cement. It

use in this process results in the decrease of CO2 emissions by 0.06 per pound of styrene.

This is a 2.4% decrease (0.06/2.5 * 100). If rinse styrene is used in production of concrete

coating, there is a reduction of the emissions by 7.3 pounds. This means that the level of

emissions decreases to 14.1 pounds, (21.4 -7.3 = 14.1), which is 34.11%. The byproduct

synergies are important in that they reduce the hazardous waste being released to the

environment. It also reduces the CO2 emissions greatly. There is a 34.11% decrease in

emissions during manufacture of concrete coating, and a 2.4% decrease in emissions during

cement manufacture. Use of byproduct synergies by CCP has a positive impact on the

environment.

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FINAL EXAMINATION

2. Analyse and consider the environmental impact of implementing BPS (by-product

synergy). What do you expect to be the key tradeoffs in this decision to implement

BPS? Why does CCP use tryrene if it is toxic and expensive? What would be the

outcome if they use less of it? (30 Marks).

a. Analyse and consider the environmental impact of implementing BPS (by-product

synergy).

CCP would reduce the cost of disposing rinse styrene. Rinse styrene is a hazardous

waste material and the implementation of the by-product synergies would ensure that there

is no waste matter to be disposed. This is important in that the rinse styrene will be used in

the production of concrete coating and reduce the emissions that are as a result of

production of the chemicals used instead of styrene.

b. What do you expect to be the key tradeoffs in this decision to implement BPS? Why

does CCP use tryrene if it is toxic and expensive?

CCP is also facing the balance amongs these factors when making decisions about

the amount of styrene that companies use to rinse the shaker and mixer. The more we use

styrene the cleaner equipment is; this helps preventing the next consignment from pollution

and meets the technical parameters. However, despite additional styrene levels reduces the

risk of pollution for the next consignment, the amount of styrene supplements may reduce

profit (refer to Appendix 5 for the data analysis of the impact of styrene to compliance the

technical parameters of the product). In addition, styrene is an expensive chemical and once

it is used to rinse the shaker, it becomes toxic waste and the discharge is also costly. CCP

purchased styrene with the price $0.70/pound and styrene discharge with an average cost of

$ 0.20/pound. With the current use of 550 pounds/ production batch, purchasing costs and

styrene flushing discharge accounts for a significant percentage of the total cost of $ 4620/

a batch of 10 covering gel barrels. Gromacki explained, "We use styrene—despite its cost

—because the risk of using something else is so great we don't want to take the chance on

quality."

According to appendix 5 of the case study shows that If the vessels are rinsed using

500 pounds of styrene, then there will be 95.02% conformity to spec. If 100 batches are to

FINAL EXAMINATION

be rinsed, then; 95.02/100 = 0.9502 * 100 batches = 95.02 batches.

Therefore, out of 100, (100 – 95.02= 4.98 batches) are lost due to contamination.

This number is decreased if the amount of styrene is increased. For example, if 600 pounds

of styrene are used, there is 99.96% conformity. This means, if 100 batches are being

cleaned, then; 99.96/100 = 0.9996 * 100 = 99.96 batches. That means that 99.96 batches

conform to spec, while 0.04 batches are lost. When the rinse styrene is increased by 100

pounds, (100/500 = 0.2 * 100% = 20%) which is a 20% increase of the styrene used, there

is a decrease in the batches lost, (4.98 – 0.04 = 4. 94), which translates to a 99.2% decrease

in the batches lost (4.94/4.98 *100% = 99.2%). This shows that there is need to use to a

reasonable amount of styrene.

c. What would be the outcome if they use less of it?

The technicians of the CCP has reduced the levels of styrene in the past years and

they believe that they can not reduce further if they do not apply risks which are

unacceptable for product quality. As Gromacki remembered, "We were in a 'zero progress'

situation. If we used less styrene to rinse the vessel—the traditional waste minimization

approach through source reduction— we would run the risk of contamination. This meant

that all of the traditional pollution waste reduction methods were off the table for us."

3. An investment of $3M would be required fro Research and Development,

Marketing and technical support to bring the by-product online. How would you

factor this into your financial analysis? (20 Marks).

a. Financial Implications

In section 1 of (figure -2) it had been shown that profit was high in waste exchange

but it had negative pattern. Profit of new business was not higher as compared to waste

exchange but it had upward trend. In section 2 of figure-2, profit from new business was

higher as compared to waste exchange and it had upward trend. On the other side, profit

form waste exchange was lower as compared to new concrete coating business and it had

negative trend. It was concluded that concrete coating business was beneficial in long term.

Cost of waste was increasing which had negative impact on the profitability of waste

exchange.

FINAL EXAMINATION

In section 3 of (figure -3) it had been shown that the profit was high in business as

usual but it had negative pattern. Cost of disposal was increasing so profit was decreasing.

Profit of new business was not higher as compared to business as usual but it had upward

trend because profit was increasing. In section 4 of figure-3, profit from new business was

higher as compare to business as usual and it had upward trend. On the other side, profit

from business as usual was lower as compare to new concrete coating business and it had

negative trend. It was concluded that concrete coating business was beneficial in long term.

All three alternatives were compared to each (See figure-4) other and it was found

that exchange waste was more profitable as compare to business as usual. New business

was more profitable than exchange waste. New business of concrete coating would be the

most profitable business.

b. Environmental Implications

Emission of carbon dioxide was increasing with the increase in styrene that had its

impact on the cost. Initial investment for new business would be $3,000,000 but there was

no disposing cost for the new business.

Emission of carbon dioxide was increasing with the increase in styrene that had its impact

on the cost. Initial investment for new business would be $3,000,000 but there was no

disposing cost for the new business.

When cement industry continued to use styrene, carbon dioxide emission would be

decreased. If Cook Composites and Polymers Co decided to start new business, it would

decrease carbon dioxide. Both options helped to reduce carbon emission but new business

required investment.

Certified Emissions Reduction (CER) can be used to find the opportunity cost of

each business.

c. Conclusion

It was found though quantitative analysis that new business was the best option for If

Cook Composites and Polymers Co.

4. Consider the quantitative elements of the case. How do emissions change at the

cement kiln if one pound of rinse styrene is replaced with the equivalent amount of the

fossil fuels? (10 Marks).

FINAL EXAMINATION

1 Pound rinse styrene, to produce: 20 Pound cement

1 Pound Cement product, to release: 0,25 Pound CO2 (fossil using)

0,19 Pound CO2 (rinse styrene using)

20 Pound Cement product, to release: 5 Pound CO2 (fossil using)

3,8 Pound CO2 (rinse styrene using)

Amount of CO2 emissions when one pound of rinse styrene is replaced with

equivalent amount of fossil fuels: 1,2 Pound CO2.

5. How may we calculate the emissions change associated with producing concrete

coatings based on rinse styrene instead of the conventional methods? (10 Marks).

Mike Gromacki has to decide the best alternatives, to ensure that the emissions are

reduced. The vice president should opt for the production of concrete coating using rinse

styrene. 1 pound of rinse styrene results in a decline in the CO2 emissions by 1.2 pounds,

than the use of conventional concrete coating. This means that is rinse styrene is used; 21.4

pounds – 1.2 pounds = 20.2 pounds of CO2 would be produced. On the other hand, the cost

of production increases since more styrene is used. This is because the concrete coating

produced contains 50% of styrene. If the management decides to reduce the amount of

styrene in the production of cement, and instead divert it to the production of concrete

coating, they increase the emissions of cement kiln by 1.2 pounds (Lee, Toffel and Gordon

19). This means that the overall emissions of the CO2 remain the same. This is because an

increase in the amount of styrene in the production of concrete coating reduces the CO2 by

1.2 pounds. There is an equivalent increase in the CO2 emissions when a pound of styrene

is diverted from the combustion of kiln to produce cement, to the production of concrete

coating.

However, the overall environmental hazard will increase since the production of a single

pound of styrene results in the emission of 2.5 pounds of CO2.

FINAL EXAMINATION

Appendix

Table 1

ProductionProduction capacity (vessel volume)

550 gal * 15 = 8250 gal

Sales cost : 2003 $825 (million)

2004 $965 (million)

2005 $1104 (million)

2006 $1138 (million)

2007 $1071 (million)

Rinse styreneAmount of Rinse styrene

550pound per batch

Rinse styrene buying cost

$0.7 per pound

WasteWaste Amount ?Disposal cost of waste

$0.2 per pound

Increasing 5% per year

ExchangeAmount of exchange

?

Exchange cost $0.2 per poundCO2

Carbon Dioxide emissions amount

Production + Transportation + disposal

Carbon Dioxide emission cost

$0.2 per pound

$ 0.20

Carbon Dioxide emission at Gel coat mfg.

2.5 CO2

/styrene pound 2.5

0.50

0.50 Gel Coat

Carbon Dioxide emission

0.25 CO2

/cement pound 0.25

0.05

at cement mfg. 0.19 CO2

/cement pound 0.19

0.04

0.09 Cement

Carbon Dioxide emission

21.4 CO2/ cement pound 21.4

4.28

at concrete coating mfg.

14.1 CO2

/cement pound 14.1

2.82

7.10

Concrete

FINAL EXAMINATION

Figure 0-1

Figure 0-2

FINAL EXAMINATION

Figure 0-3

Figure 0-4

2. Final_exam Nguyen Huu Minh

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