Reference no: EM133164600

Management in Organisations

Question 1: Which one of the following is true of FINANCIAL accounts?
a. They can be in any format management wish
b. They are largely forward looking
c. They are subject to strict audit requirements
d. They are used for decision making by the owners of the business

Question 2: Which one of the following statements is true?
a. An investor concerned with a company's solvency would look at the current ratio
b. An investor concerned with a company's profitability would look at the return on capital employed
c. An investor concerned with a company's working capital efficiency would look at the gross profit margin
d. An investor concerned with a company's liquidity would look at the gearing ratio

Question 3: An investor concerned with a company's solvency is more likely to calculate:
a. Current ratio
b. Gross margin
c. Interest cover
d. Asset turnover ratio

Question 4: Which of these will be classified as a cash flow from Investing activities for a manufacturing firm
a. Sales
b. Acquisition of shares in a smaller firm
c. Repayments of long-term loans
d. Payment of wages

Question 5: Which one of the following does the statement of financial position show?
a. All the resources and debts of an organization.
b. All the financially measurable obligations and resources controlled by organization.
c. The market value of an organization.
d. All the borrowings and assets controlled by an organization.

Question 6: Which of the following appraisal measures both ignore the time value of money?
a. Simple payback period and Accounting rate of return (ARR)
b. Net present Value (NPV) and Simple payback period
c. Internal rate of return (IRR) and Accounting rate of return (ARR)
d. Net present Value (NPV) and Internal rate of return (IRR)

Question 7: An investor concerned with whether a company is efficient in the use of its assets is more likely to calculate:
a. Current ratio
b. Gross margin
c. Return on capital employed
d. Asset turnover ratio

Question 8: Which of these is a component of Current Liability?
a. Revenue
b. Trade Payables
c. Inventory
d. None of the above

Question 9: Which of the following is a disadvantage of the simple payback period method of investment appraisal?
a. It relies on profit and not actual cashflows
b. Flows which happen later in the investment may not be included in the
calculation
c. Discount rates are only estimates and may change in the future
d. It is difficult for managers to understand

Question 10: "Lime Grove" is a company which manufactures chocolate bars to sell to retailers. It needs to invest in a new machine to make the chocolate bars, and has a choice of 2 machines, Machine A or Machine B.
Machine A costs £200,000 and Machine B costs £300,000. Sales research to decide which type of chocolate bar will sell the best has already been undertaken costing £50,000. Ongoing maintenance costs on Machine A will be £10,000 per year, and for Machine B £5,000 per year. The machines will both last 5 years and be subject to straight line depreciation in the accounts with a zero-residual value.
In a net present value (NPV) calculation, which of the following would be relevant costs for the calculation?
a. The machine cost and maintenance costs
b. Depreciation and maintenance cost
c. The research, machine cost and maintenance cost
d. The machine cost only

Question 11: At a 13% cost of capital (discount rate), what is the present value of £200 received in 3 years' time?

a. 140.00
b. 150.30
c. 155.70
d. 138.60

Question 12: A new machine is required to wrap the chocolate bars in a sweet factory. Initial capital expenditure is £90,000. As the old machine was inefficient, there would be cost savings as follows:
year 1 £43,000,
year 2 £38,000,
year 3 £33,000,
Year 4 £28,000

Scrap value after 4 years £10,000

What is the payback period?
a. 2 years and 4 months
b. 2 years and 5 months
c. 3 years and 2 months
d. 2 years

Question 13) LinTech Plc uses high-low method to identify costs and allocate to fixed or variable costs accordingly. An extract of total costs incurred by LinTech Plc, is shown below:

Output (Units) Total Costs (£)
20,000 302,500
25,000 375,000

What is the estimated total costs for an output of 28,500 units?
a) £425,750
b) £413,250
c) £395,250
d) £437,500

Question 14) TVC Corporation's master budget calls for the production of 6,000 units of bolts monthly. The master budget includes indirect labour of £396,000 annually; TVC considers indirect labour to be a variable cost. During the month of August, 5,600 units of bolts were produced, and indirect labour costs of £30,970 were incurred. Calculate the flexible budget variance for indirect labour.
a. £170 Favourable
b. £2,030 Favourable
c. £2,030 Adverse
d. £170 Adverse

Question 15) A project has direct labour of £3 per unit and materials of £2 per unit. There are fixed costs of £550,000 per year. If the company wishes to make a target profit of £50,000, how many items must it sell, if the selling price per unit is £10?

a. 110,000
b. 120,000
c. 60,000
d. 55,000