Capsim Exam

You can produce up to 200%, but anyone working over 100% will be paid

Time and a half (labor costs up 1.5%)

Top 2 factors for each segment (Account for 60-75% of sales)

Traditional (want it after 2 years) 1. Age 2. Price Low-End (want it in 4-7 years) 1. Price 2. Age High End (want new product immediately) 1. Positioning 2. Age Performance (want it to be high quality and last long) 1. Reliability 2. Position Size 1. Position 2. Age

The Proformas are dynamic financial statements that recalculate based on your decisions, true or false?

True

Which of these investments is not a function of the Production department?

Wage Increases

What happens if your product is 1000 outside of reliability expectations?

You loose 1/5 (20%) of your appeal to segment

What happens if you price your product $1 over? $5 over?

You lose 20% of sales, 100% of sales

What might you do if net investments increase?

You may need to increase your borrowing in finance to help pay for the additional investment.

Automation ratings are used to... Automation ratings can be anywhere from... The higher the automation rating;

determine labor costs. 1.0 to 10.0 the lower the labor cost

As you raise automation, the number of hours requires to produce (falls/rises)

falls

When a product is repositioned, the customer cuts the age by?

half

As you raise automation, it becomes (harder/easier) to reposition products?

harder

The (higher/lower) the automation rating, the more costly the project, but the lower the labor costs when the job is finally manufactured

higher

Issuing more shares (does what) to your available cash but it will also (does what) your stock price?

increases, dilutes

Issuing long term debt will increase your available cash but your company will have to pay an (?) for this loan moving forward.

interest expense

The more similar 2 products are, the closer they will appear on a perceptual map and the (less/more) time a project will take?

less

Current debt will be repaid next year but has a (higher/lower) interest rate than long term debt.

lower

When do you retire stocks or bonds?

when the company has excess retained earnings left over at the end of the year.

Increasing automation adds x per unit cost times the lines capacity?

x = $4

Each new unit of capacity costs x per unit?

x = $6

2 issues for group consideration

-Formal interactions (organizing for company) -Group development

Components of marketing

-Price -Promo Budget -Sales Budget -Sales Forecast

HR strategy components

-spend $ on recruiting workers and training -increase productivity -contract negotiation

How long does it take to buy capacity?

1 year

3 ways to formally organize a group

1. By Function (CEO, VP. R&D, VP Marketing, VP Production, VP Finance, etc) 2. By Brand (CEO, Manager Traditional, Manager Low end, Manager High End, Manager performance, etc) 3. Everyone does everything

4 Stages of Group Development

1. Forming (what do we do) 2. Storming (how will we do it) 3. Norming (Agreement in decision making) 4. Performing (We did it, lets do better)

2 Stage Purchase Decision

1. Match product to market 2. Rank Best Product

5 different market segments

1. Traditional 2. Low-End 3. High-End 4. Performance 5. Size

Drift Rates - highest, lowest, average?

1.3 highest, .05 lowest, 1 average

Interest on L-T debt is x% over interest for S-T debt?

1.4%

S Shaped curve can be acquired with levels of

1.5 - 1.8 million

If you retire a bond earlier than 10 years, there is an extra x% brokerage fee?

1.5%

Bonds are sold as a (?) year note, which are not due until (?) years from the point you issued them.

10, 10

For every dollar above the price range will lose how much demand for your product?

20%

New products automatically receive how much awareness?

25%

There is a x% brokerage fee to issue stock and long term debt?

5%

The company will receive how much of the original purchase price when you sell capacity?

65%

What is the interest rate on an Emergency Loan?

7.5%

What is a simulation?

An abstraction of reality

Typical time frame for a new product?

At least 1 year, typically 1.1 - 2.3 years

What are your company's options for raising money?

Borrowing Long-term debt Borrowing Short-term debt Issuing Stock

What happens to stock price when you retire stock? What happens to the ROE?

Both go up

What is the industry newsletter called?

Capstone Courier

Where should product plot within market segment?

Center - 2.5 unites is desirable 2.5 - 4 is acceptable 4 + is unacceptable

Rough Cut / Fine Cut for... Circle Positioning Price MTBF

Circle Rough - dashed outer line is segment limit Fine - heart of segment Positioning Rough - 2.5 - 4 units from center Fine - center -2.5 Price Rough - $1-$5 outside of range Fine - within $1 range MTBF Rough - 1,000 - 5,000 out of range Fine - within 1,000

Who is responsible for predicting the behavior of one or more of your competitors?

Competitive Intelligence Officer

The more ambitious the MTBF, the higher the products..?

Cost

Drift rates - which direction to they spread?

Down and to the right (Start in upper left hand corner)

Who is responsible for R&D, Marketing, Production, or Finance?

Functional Manager

Cycle Time

How fast you can get a product out. Affected by automation, distance moved on perceptual, and number of products under way.

Proformas are essentially if-then statements, which means...

If your decisions come true then this is what everything will look like at the end of the year.

If you sell capacity, when does it happen and how much do you make?

Immediately, 65%

Action Steps: Research the opportunity in the segment in the Courier Select appropriate product attributes - Performance, Size, MTBF Display the R&D worksheet. Enter the product attributes Note the R&D completion date Display the Production worksheet Order capacity and automation (optionally, wait a year) Display the Finance worksheet Fund the plant with stock and bond issues Save the decisions

Inventing a new product

What happens to stock price when you set a dividend?

It goes up

Prices are established by the:

Marketing Department

Action Steps: Research the competitive environment in the Courier Display the Marketing worksheet Enter decisions for Price, Promotion and Sales Budgets Observe the decision impact upon the computer's forecast Develop a worst case estimate for demand Enter your worst case estimate for in the sales forecast Save the decisions

Marketing a product

Action Steps: Estimate peak demand for each product for this year and next year Examine unit costs and margins Display the Production worksheet Increase or decrease capacity as required Increase automation as required Observe the net cost of the investment Display the Finance worksheet Fund the investment with a mix of stock issues, bond issues, and depreciation Save the decisions

Modifying plant and equipment

It takes how long to add more capacity or automation to a product line?

One year

Who is responsible for one of the five products in your starting product line?

Product Manager

Action Steps: Examine the proforma Income Statement Examine the proforma Balance Sheet Display the Finance worksheet Issue or repurchase stock as required Issue or repay bonds as required Issue short term debt as required Issue a dividend as required Save the decisions

Raising money and paying debt

Action Steps: Research current customer buying criteria in the Courier Display the R&D worksheet Adjust Performance, Size, MTBF Observe impacts upon Age, material cost, and completion dates Save the decisions

Reposition a product

Products are invented and revised by which department?

Research and Development

Action Steps: Estimate a best case for demand for each product this year Display the Production worksheet Observe existing inventory Schedule production to meet best case demand less existing inventory Save the decisions

Scheduling production

LABOR NEGOTIATION Scenario One First offer If several companies meet or exceed initial union expectations, the best offer is selected as new expectation and the company with that offer settles. Second offer - 2 options...?

Second offer 1. Any company not meeting new expectation will go on strike. They will settle half way between their second offer and the union expectation 2. Any company meeting or exceeding new expectation will settle halfway between their first offer and the new expectation.

LABOR NEGOTIATION Scenario Two First Offer If one company meets or exceeds the union expectations, that offer is selected as new expectation. That company settles. Second offer - 2 options?

Second offer 1. Any company not meeting new expectation will go on strike. They will settle half way between their second offer and the union expectation 2. Any company meeting or exceeding new expectation will settle halfway between their first offer and the new expectation.

Labor Negotiation Scenario Three If no team meets the union expectations on the first offer, the union views the second offers.

Second offer 1. Any company not meeting new expectation will go on strike. They will settle half way between their second offer and the union expectation 2. Any company meeting or exceeding new expectation will settle halfway between their first offer and the new expectation.

Who is responsible for one of the five market segments?

Segment Manager

What are the x and y axis of the perceptual map? (Criteria)

Size and Performance

2 Stage Purchase Decision, Stage 2 characteristics

Stage 2 - Rank Best Product a) Positioning (size, performance) b) Age (perceived age since introduction or revision, when people in each segment will want it) c) MTBF (Mean time before failure) = (drives reliably)

2 Stage Purchase Decision, Stage 1 characteristics

Stage One - Match Product to market a) Product plots within segment b) Product falls within price guidelines c) Product falls within reliability guidelines

What do you set in R&D?

- Position - MTBF - Age - New Product Development