Management II – Model Questions

Q1.

A. Explain using Demand and Supply curves, as appropriate, the market effect of a ‘price ceiling’
introduced by the government in order to control the price of a commodity.

B. The variation of the demand and the supply of a certain commodity against its price, using the
common notation, is given by the following 2 equations.

Qd = 512 – 32P

Qs = -128 + 32P

i. Compute the quantity demanded and the price at equilibrium. Graphically Illustrate the
point of equilibrium.
ii. Write an expression for the new equilibrium price in the event the government imposes
a tax ‘t’ per each unit of the commodity sold.

iii. Compute the respective amounts of Tax burden that would be borne by,

a. Consumers
b. Suppliers

Q2.

i. Explain the relationship between Gross National Disposable Income (GNDI),

Consumption, Investment, Government Spending and the Trade Balance.
ii. Using the result of (a) above, show the relationship between National Savings and
Investment requirements, in terms of the Current Account balance.

B. The GDP is given by the equation Y = C + I + G + (X-M).

Explain how the above equation is affected by each of the following economic transactions.
i. Increase of the trading stock of the Firms
ii. Cost of building of new houses by the Households for domestic living
iii. Cost of Construction of a new highway by the government
iv. Payment of Teachers’ Salaries by the government

C. Explain the terms Employable Age Population, Labour Force and Unemployment Rate
 Q3.

a. Explain what is meant by Price Elasticity of Demand (PED) of a Good

b. Explain three factors that determine Price Elasticity of Demand.
c. Explain the variation of the quantity demanded for each of the following types of goods
against their price and /or income of the consumers as relevant.
i. Normal Goods
ii. Inferior Goods
iii. Luxury Goods

d. Price elasticity of demand for the airline industry is -2.4 (p-elastic). How much will the
demanded quantity drop, if the price increases on average by 10%
e. The year on year growth in Nominal GDP of a country from year 2010 to 2011 was 4.8%
while the overall prices rose by 2.7% during the period. Compute the Real GDP growth
rate during the period.

Q4. A manufacturing company engaged in production of electrical assembly kits is producing a

certain type of assembly kit ‘X’ at one of its manufacturing plants. Assembly kit type X incurs a
variable manufacturing cost of $ 25 per unit and variable selling and administrative expenses of
$ 5 per unit. While the fixed manufacturing costs for the period amount to $ 150,000, fixed
selling and administrative cost amount to $ 50,000. The sales price of a unit is $ 50. Compute the
Operating income using respectively the Variable Costing method and the Absorption costing
method for the last accounting period, if the number of units of ‘X’ manufactured and sold
during the period were respectively 15,000 and 12,000. (10 marks each for the 2 methods)

Q5.

a. Briefly explain the concept of ‘standard costing’. (5 marks)

b. A factory that produces automatic pencils has following standard costs: Direct materials
price standards are Rs. 240 per square foot for ‘casing material’ and Rs 50 for each
‘movement mechanism’. Direct Material quantity standards are 0.125 square foot of
casing material and one movement mechanism per pencil. Direct labor time standards
are 0.01 hour per pencil for the stamping department and 0.05 hour per pencil for the
assembly department. Direct labor rate standards are Rs 200 per hour for the stamping
department and Rs 240 per hour for the assembly department. Standard variable
overhead rate and the standard fixed overhead rate for the factory are estimated to be
respectively Rs 600 and Rs 400 per direct labour hour.

Compute the standard manufacturing cost of one automatic pencil. (15 marks)
Q6.

a. Explain the 5 different types of marketing management orientation adopted by companies

in formulating an overall marketing strategy (8 marks)
b. Analyze and compare the marketing mix models expressed in terms of 4Ps and 4Cs (7 marks)
c. Explain the terms ‘customer equity’ and ‘share of customer’ (2 marks)
d. Explain the terms product idea, product concept and product image as applicable to new
product development (3marks)

Q7.

a. Explain the following terms as applicable in capacity planning

i. Design Capacity
ii. Effective Capacity
i. Utilization
ii. Efficiency
b. Explain Polya’s 4 step process to problem solving.
c. State the management principles upon which the ISO 9000 family of quality management
systems is based.