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Issues:
• R&D Expenditure for Project ORG7: RM 2,000,000 (Approved amount: RM5,000,000 ; Final RM2,000,000 recently incurred – reduce profit to negative)
• Revenue and Profit o Desalination and wastewater treatment as well as production of highly pure water (52% of BO revenues and 37% of earnings) o Ownership or operation of water treatment facilities (26% of revenues and 43% of profits) o Consumer products-household bottled water and purification system (22% of revenues and 20% of earnings) o Before tax net profit: 10% of sales o Current Annual targets: 20% growth in revenue and profit o This year revenue: RM120,000,000 o Past 7 years, revenue grew at annual rate of 30%
• Cost Overruns o Order: RM5,000,000 o Number of Project: 12 water purification projects o Time taken from the order to completion: 16 months o Pricing: based on cost estimates by project manager. o Cost Overruns due to local environmental, socio-political and economic issues. o Problem 1 – poor cost information system. Costs were only accumulated and cost overruns can only be detected at the completion of construction. o Problem 2 – little detail in cost report to identify costs overruns. o Methods – better cost tracking system – could not applied to current projects including ORG7 and two recently started projects, but all new project that start in next fiscal year would use the new cost system. o Problem of tracking system- technical difficulties in migrating data from current system, no training, software difficult to use and certain key function were missing.

• Project ORG7 (Mary) o Underestimated cost of projects o Responsible for three projects in various stage of completion o Project ORG7: RM7,000,000 water treatment facility for a mid size city. o Problem: initial geological analysis not revealed certain environmental problems surfaced halfway through

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