Page 7 - CIMA MCS Workbook February 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

For the more standardised treatments, it would be possible to take the list of standard prices and
deduct a specified margin (which would need to be determined and agreed across the business)
to get to the target cost.

However, Crowncare would find it difficult to compare this target cost with the actual costs spent
on each service as it is not very good at tracking low level costs, such as the amounts spent on
consumables or the time spent by its staff on work other than patient facing work.

Not knowing whether the target cost could be achieved would mean that the purpose of the
target costing exercise would be defeated. Unless Crowncare is willing to spend time and money
in gaining the ability to better track its costs, target costing is unlikely to be useful to the group.

3. BENCHMARKING

Benchmarking is the study of the business practices of best‐performing businesses or business
units in order to improve the performance of one's own company. It would involve the gathering
of data that can be compared to Crowncare or units within Crowncare to enable relative levels of
performance in many different areas to be evaluated. Where there is a gap between Crowncare’s
performance and that of the best performer, Crowncare should aim to identify the practices that
have given the other party an edge and adopt them wherever possible.

It is a continuous process and is not a replacement for traditional measures of performance such
as profit targets.

It can identify areas where Crowncare is lagging behind, perhaps in the adoption of new
technology or where new methods of working or enhanced IT systems produce greater efficiency
levels.
Benchmarking comes in various forms – competitive, internal, functional and strategic.

Competitive benchmarking.

The most obvious form of benchmarking involves identifying areas where competitors in the same
industry as Crowncare are outperforming us. Crowncare is dominant in the market around
Capital City, so it may not be wise to make comparisons to such competitors as Smilebrite, as
Crowncare itself is most likely to be the best performing business in the area.

Therefore, Crowncare should look to competitors further afield in different cities or even in
different countries.

The biggest issue with competitive benchmarking is that our competitors (or potential future
competitors) are unlikely to be willing to give away sensitive information for us to make
comparisons to, but it might be possible to make observations about the following areas:

 Customer service: While it would be difficult to do a ‘mystery shopping’ exercise as this
would potentially involve committing to unneeded dental treatment, we could gather
review data for our competitors from review sites. We could look at their brochures to
see what kinds of promises they make in terms of patient care in comparison to our own
and identify the level of technology they use.

 Product range and pricing: Gathering brochures or price information from websites from
our competitors would allow us to make comparisons about the ranges offered. Perhaps

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