You are on page 1of 214

Competency-Based Competitive Events *Written Exam* Test: ST-BA-10A Booklet Number _____

Business Administration Core Exam


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

1. A business that is owned by two or more people who share the risk of loss and the chance for profit is known as a A. corporation. C. franchise. B. sole proprietorship. D. partnership. 2. Which of the following usually is the first step in applying written directions to achieve tasks: A. Listening C. Speaking B. Reading D. Questioning 3. What type of information concerning policies and procedures do employees often extract from an internal business report? A. Former local competitors C. Industry research data B. Customer profiles D. New personnel regulations 4. Sometimes, the ability to follow directions is a skill that is necessary for you to get along in the world around you. This is known as a(n) A. academic skill. C. social skill. B. family skill. D. life skill. 5. Eye contact, facial expression, and body language are examples of A. nonverbal cues. C. distractions. B. verbal acknowledgement responses. D. listening skills. 6. One reason that it is important to be very careful when using oral communication in business is that oral communication A. is generally not misunderstood. C. may not be remembered accurately. B. should only be used for urgent messages. D. is an informal communication method. 7. In which of the following situations might it be difficult to give effective verbal directions: A. Managers are organized. C. Information is complex. B. Time is important. D. Employees are focused. 8. What should employees be willing to accept when defending their ideas objectively? A. Personal attack C. Nonverbal support B. Additional responsibility D. Critical feedback 9. Employees should answer the telephone in a businesslike manner in order to A. project the image of the business. C. handle a lot of calls at one time. B. reflect the importance of the job. D. be a candidate for a promotion. 10. A group is a number of people who A. feel the same way about an issue. B. get together to do something.

C. come up with different answers. D. enjoy each other's company.

11. Which of the following is a guideline for writing clear instructions for your coworkers: A. Write complex, lengthy statements. C. Understand the process you are explaining. B. Write from your supervisor's perspective. D. Confine the instructions to one page. 12. The Putnam Company requires its employees to use the Modern Language Association (MLA) stylebook when writing business documents because it provides A. flexibility. C. consistency. B. creativity. D. accuracy. 13. What often appears at the bottom of a business letter if a sales brochure is attached? A. Company signature C. Enclosure notation B. Reference initials D. Writer's identification
Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

14. When writing informational messages, it is most important to communicate A. a request for action. C. an honest opinion. B. emotional appeal. D. accurate content. 15. To make a request of a business associate or customer is one of the reasons why businesspeople write A. persuasive messages. C. sales letters. B. letters of inquiry. D. corporate memorandums. 16. Which A. B. C. D. of the following messages should be communicated to an employee in person: The assistant manager is taking vacation next week. The employee's department will soon be enlarged. The business believes the employee is stealing goods. The business will offer flextime in the summer.

17. The purpose of participating in staff meetings usually is to A. conduct research. C. share information. B. achieve a task. D. develop a message. 18. What is one technique that businesses can use to build positive customer/client relations? A. Being consistent C. Buying advertising B. Resisting change D. Conducting research 19. What staff are responsible for displaying a customer-service mindset? A. Those with direct customer contact C. Management B. All staff D. Those with indirect customer contact 20. In order to handle customer inquiries, employees should have information about A. personal backgrounds. C. financial condition. B. product maintenance. D. expense projections. 21. A customer has informed you that one of your competitors is selling an identical product to the one you carry for $15.00 less than your price. Because your policy is to match competitors' prices, you decide to check with the competitor to confirm the price. The competitor tells you that the price the customer has stated is $20.00 less than the competitor's true price. With what type of customer are you working? A. Disagreeable C. Indecisive B. Suspicious D. Dishonest 22. To help their employees handle complaints fairly, many businesses establish general rules that personnel should follow, which are known as A. policies. C. procedures. B. regulations. D. techniques. 23. Which of the following is an example of an employee reinforcing a firm's image through his/her job performance: A. A customer waits on the telephone for several minutes while Matt confirms shipping information. B. Susan advises her customer that the sofa is only available by special order. C. Jack politely asks if his customer would like a beverage while s/he waits for car service. D. Angela, a human resources manager, prepares the firm's employee newsletter every month. 24. Which of the following is considered to be a shopping good: A. Candy bar C. Sale shirt B. Socks D. Television set 25. Water and air are examples of __________ resources. A. physical C. material B. natural D. unlimited

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

26. When less expensive substitutes for a product are readily available, then demand for that product is likely to be more A. unitary. C. urgent. B. elastic. D. inelastic. 27. Businesses that provide such benefits as physical fitness programs or career planning for their employees do so in order to A. save money on health insurance. C. be socially responsible. B. maximize their profits. D. comply with government regulations. 28. How are products allocated in a traditional economic system? A. By consumers' incomes C. By the marketplace B. By government D. By individuals 29. The difference between the selling price of a product and all the costs and expenses of selling it is known as A. net profit. C. risk. B. overhead. D. gross profit. 30. An ice storm that caves in the roof of a business facility is an example of a(n) __________ risk. A. human C. natural B. economic D. market 31. Which of the following is created when the government allows a single business to influence the entire production of a good or service: A. Natural monopoly C. Conservation B. Price discrimination D. Competition 32. Which of the following is a standard used in measuring an individual worker's productivity: A. Ratio C. Time B. Input D. Method 33. Which of the following is a true statement about emotional intelligence and leadership: A. Leaders learn to outlast business trends. B. Leaders are expected to take action after problems develop. C. Leaders need to be confident that what they are doing is acceptable. D. Leaders have to get along with a variety of people. 34. Which of the following is a good way to help individuals who have a low level of self-esteem: A. Tell them how they can be more like another person. B. Tell them about all of your accomplishments. C. Point out where they have gone wrong. D. Point out their skills and abilities to them. 35. A survey designed to help you assess your strengths and weaknesses is known as a A. group learning exam. C. personal skills inventory. B. group talent test. D. personal behavior survey. 36. When Sam says that his supervisor is a woman, Sam is describing the supervisor's __________ traits. A. negative C. emotional B. mental D. physical 37. How do people react to monotone speakers? A. They are bored. B. They are enthusiastic.

C. They listen attentively. D. They lean toward the speaker.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

38. Bill and Tom were discussing a work problem in the warehouse when Jim came in to pick up supplies. Jim took extra time to gather the supplies so that he could listen to their conversation. What is Jim doing? A. Eavesdropping C. Participating B. Investigating D. Observing 39. Brianna knows that traffic jams cause her stress, so she drives to work before the rush hour whenever possible. Brianna is using A. the punishment technique. C. stimulus control. B. the reward technique. D. extinction. 40. Lisa and Amy are finishing a school project together. When Lisa asks Amy what she thinks about her half of the project, Amy tells Lisa, "That looks good, but let me show you what else you could have done." Amy's comments are an example of A. internal feedback. C. constructive criticism. B. self-control. D. negative feedback. 41. Nick completes a course that will qualify him for a job promotion. This is an example of a(n) __________ change. A. personal C. economic B. social D. irrational 42. Which of the following is central to the concept of empathy: A. Similar occupation C. Friendship B. College degree in psychology D. Respect for others 43. To be culturally sensitive, international businesses must be careful about how brand names A. affect domestic sales. C. look in different fonts. B. translate into other languages. D. relate to the company. 44. Which of the following is a major block to effective communication: A. Nonverbal cues C. Empathy B. Interaction D. Prejudice 45. The main difference between assertive people and aggressive people is that assertive people A. respect their own rights and the rights of others. B. try to avoid conflict with others. C. feel free to make requests of others. D. take advantage of others. 46. To be effective members of a workplace team, individual workers should be A. experienced at working on a team. C. committed to personal career goals. B. skilled in avoiding conflict. D. willing to do whatever is needed. 47. Which of the following is a true statement regarding the new circumstances that people encounter: A. People can control most of the new circumstances they face. B. Everyone experiences new circumstances at some time. C. Very few people experience anticipated circumstances. D. People can usually avoid new circumstances by planning ahead. 48. Trey is planning ahead to overcome obstacles that might stand between him and achieving his goals. Which tip for smart goal-setting is Trey following? A. Developing an action plan for each goal B. Putting goals in writing C. Regularly reviewing and revising goals D. Making sure goals are compatible with each other

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

49. One of the differences among people that can be difficult to change is their A. education. C. mental ability. B. job position. D. language usage. 50. A key factor in successful human relations involves treating others with A. reverence. C. respect. B. indifference. D. admiration. 51. Regular credit accounts are sometimes called open accounts because they allow A. first-time credit users to buy without having a credit check. B. credit users to buy at any time during a set period. C. credit users to make minimum payments any time during the month. D. long-time credit users to make purchases without finance charges. 52. A formal legal agreement between a lender and a borrower usually includes a A. repayment schedule. C. proposal for disbursement. B. tax code listing. D. guarantee of eminent domain. 53. Insurance is a key element in lifelong financial planning that A. provides protection against financial losses. B. protects a person from unethical salespeople. C. guarantees a solid financial future. D. is available only to property owners. 54. A good A. B. C. D. way to prioritize your financial goals is to rank every goal in numerical order. rank goals according to what needs to be done first. assign each goal to a general category. recognize that all the goals are equally important.

55. As Tom uses his credit card to make purchases in a responsible manner, he should remember that credit is a(n) A. asset. C. loan. B. privilege. D. tax. 56. The primary reason that people review their personal credit reports is to A. eliminate the risk of identity theft. B. change or update their credit ratings. C. ensure that they obtain bank loans. D. verify that the credit agencies have correct information. 57. What is the first step Cameron should take to protect himself from identity theft after he loses his wallet? A. Change the passwords for his online banking accounts B. Contact the appropriate government agency to replace the credit cards C. Advise the proper law enforcement authorities about the loss D. Cancel all of his credit and debit cards 58. Many individuals use Form 1040EZ to file their personal income tax if they meet which of the following requirements: A. Itemize all deductions C. Have no more than two dependents B. Are over the age of 65 D. Taxable income is less than $50,000. 59. Which of the following helps individuals select the type of life insurance to buy and the most appropriate investments: A. Financial planners C. Trust departments B. Certified public accountants D. Local bank managers

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

60. When shopping for an investment broker, which of the following things should you always do: A. Run a background check. B. Disclose how much money you have to invest. C. Choose the same broker as your parents. D. Read the broker's advertisements. 61. With an ownership investment, investors do which of the following: A. Buy a home to live in C. Collect popular items B. Pay for the right to own something D. Invest in multiple corporations 62. Which of the following is a benefit of whole-life insurance: A. The policyholder can borrow the policy's cash value. B. It combines death benefits with a savings plan. C. The policyholder earns interest at current rates. D. It has lower premiums than term insurance. 63. What is the recordkeeping process of financial management? A. Scheduling C. Reporting B. Accounting D. Budgeting 64. Accounting standards are necessary in business because A. auditors need a way to evaluate businesses. B. important decisions rely on accounting information. C. the government wants to know what businesses are doing. D. math scores have dropped in recent years. 65. Determining which projects a business should invest in is known as A. the cash conversion cycle. C. capital budgeting. B. return on capital. D. capital structuring. 66. A business's human resources department is responsible for coordinating the __________ for employees. A. purchase orders C. information systems B. sales promotions D. performance evaluations 67. Successful businesses know that their main responsibility is to market A. the lowest priced items. C. what consumers want. B. what is easiest for them to make. D. all the items they can produce. 68. Before businesses can effectively use relevant data, they need to determine the type of A. computer system to purchase. C. report that is required. B. information that is needed. D. collection process to develop. 69. Which A. B. C. D. of the following is an example of a business applying information to accomplish a task: Conducting research on consumer preferences Reviewing data on trends to develop new products Developing questionnaires for local surveys Examining promotional activities of competitors

70. Which of the following is a primary function of information management: A. Monitoring employees C. Storing data B. Placing ads D. Approving credit 71. E-mail is a form of technology that has increased the efficiency of business A. production. C. commercialization. B. communication. D. segmentation.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

72. When Lin sends a business report to a customer by e-mail, the document is sent as a(n) A. fax. C. memo. B. postscript. D. attachment. 73. A benefit of using an electronic calendar to prepare schedules is that it allows employees to A. manage their time. C. delegate tasks. B. communicate with coworkers. D. prioritize a deadline. 74. Which of the following is the address of a web site on the World Wide Web that a business might obtain by conducting a search on the Web: A. Uniform Resource Locator C. Internet Service Provider B. File Transfer Protocol D. Graphics Interchange Format 75. One of the advantages of using word-processing software programs is that they usually contain a A. dictionary. C. flowchart. B. spreadsheet. D. calculator. 76. Which of the following is one way that businesses use database software programs: A. To prepare annual reports C. To maintain customer lists B. To track operating expenses D. To design company stationery 77. Which of the following is a standard function of most spreadsheet software programs: A. Creating slide presentations C. Managing database files B. Preparing promotional brochures D. Performing financial calculations 78. Which of the following is an example of a groupware application: A. Relationship marketing C. Job rotation B. E-mail filters D. Database sharing 79. What procedure should always be performed before posting a web page on a web server? A. Consult an attorney to verify the accuracy of the web-page legal content B. Test the page to identify broken links, missing images, or unclear instructions C. Review the page to make sure the content meets international trade requirements D. Apply for a patent to protect the web-page contents from plagiarism 80. Which of the following is an operations activity in business: A. Contacting customers C. Selecting media B. Obtaining resources D. Analyzing investments 81. An employee notifying a government agency that the business is violating health and safety regulations is an example of A. verbal communication. C. unethical behavior. B. spreading gossip. D. reporting noncompliance. 82. What should employees who are learning a new skill avoid doing? A. Taking shortcuts C. Acting safely B. Following rules D. Asking questions 83. Which of the following is an example of an emergency situation that business employees should know how to handle and report: A. Check fraud C. Bomb threat B. Internal theft D. Stolen identity

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

84. What type of security problem is being described in the following: A vendor has hidden inside a customer's business. After the business closes, the vendor comes out of hiding to steal goods. A. Burglary C. Fraud B. Robbery D. Shoplifting 85. A business purchases new microcomputers for use in its credit department. This is an example of A. purchasing for resale. C. wholesaling. B. financing. D. industrial purchasing. 86. Following up with customers when the product they ordered is delivered and used will often result in A. intervention by your supervisor. C. returned merchandise. B. frustration for you and the customer. D. repeat orders. 87. How does marketing-research data help a business's production planning? A. By identifying resources needed in production B. By determining how products will be produced C. By identifying consumers' needs and wants D. By setting the timetable to use in production 88. One of the reasons that organized workers are more efficient than disorganized workers is that organized workers have A. their materials in order. C. better skills. B. more experience. D. their careers well planned. 89. Sylvia frequently reads the school announcements to help her understand what activities are going on during the week. She has just moved into the area over the summer and has had some difficulty meeting new people in school. She picks one activity to attend weekly so that she will have an opportunity to meet other students outside of the classroom environment. Sylvia is demonstrating the ability to A. set and attain an educational goal. C. turn her goals into wants. B. attain her long-term goals. D. set and attain a social goal. 90. Which of the following reflects a true relationship between making decisions and reaching objectives: A. Decisions support objectives. C. Objectives support decisions. B. Objectives undermine decisions. D. Decisions undermine objectives. 91. Lately, you're feeling like you don't fit in. You've been spending a lot of time by yourself. Then you decide to start thinking positively, and you start going to more school functions and meeting new people. You are using the __________ method of problem solving. A. mind-mapping C. intuitive B. brainstorming D. appreciative inquiry 92. Employees have the right to a safe working environment, which includes proper A. exercise facilities. C. medical benefits. B. health conditions. D. sick-leave policies. 93. Which of the following is a career search tool for determining what you are capable of doing now and might be good at doing with additional training or education: A. Personality test C. Interest survey B. Intelligence test D. Aptitude test 94. Which of the following offers stable employment opportunities because they are usually well established and do not need to pay stockholders or investors: A. Nonprofit institutions C. Corporations B. Partnerships D. Sole proprietorships

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM

95. What information is usually best to discuss in person rather than to provide in an employment application? A. Special qualifications C. Personal references B. Job expectations D. Salary requirements 96. At the conclusion of an employment interview, an applicant who is interested in the position should A. accept the job. C. ask for the job. B. sign a contract. D. take a drug test. 97. One of the purposes of the closing paragraph in a letter of application for a specific job is to A. review your education. C. ask for an interview. B. list all references. D. explain your qualifications. 98. One reason why young people participate in internship programs is because the work experience may lead to A. continuing education. C. full-time positions. B. on-the-job training. D. community service. 99. Employees who are willing to accept more responsibility and continue to learn about all aspects of the business are likely to be considered for A. transfers. C. promotions. B. training. D. counseling. 100. Which of the following statements is true about strategic planning: A. It involves short-term planning for the next six months. B. It involves planning for the next three-t o-five years. C. It is a supervisory technique for improving employee performance. D. It is used primarily by departments that do not meet company goals.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

10

1. D Partnership. Partnerships are owned by two or more people who share the risk of loss and the chance for profit by combining their capital, experience, and abilities. Sole proprietorships are businesses that are owned by one person. A corporation is a form of business ownership that is owned by stockholders who have purchased units or shares of the company. A franchise is a contractual agreement between a parent company and a franchisee to distribute goods and services. Since franchises can be sole proprietorships, partnerships, or corporations, more information would be needed in this question for franchise to be the correct response. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way 2. B Reading. The first step in applying written directions to achieve tasks usually involves reading the directions. Employees need to understand the written directions before they can apply them. Therefore, reading for understanding and meaning is an important step. Employees should listen if the directions are given verbally rather than in writing. If employees do not understand the written directions, they might speak to a manager and ask questions for clarification. However, they should first read the directions. SOURCE: CO:056 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 182-183). New York: Glencoe/McGraw-Hill. 3. D New personnel regulations. Most businesses prepare a variety of internal reports that are intended to inform employees about changes in policies and procedures. These internal reports often explain new personnel regulations. If employees analyze the reports, they will be able to understand and comply with the new personnel policies and procedures. Businesses do not share customer profiles with all employees. Internal business reports concerning policies and procedures usually do not explain industry research data or list former local competitors. SOURCE: CO:057 SOURCE: Locker, K.O. (2000). Business and administrative communication (5th ed.) [pp. 70-71]. Boston: Irwin/McGraw-Hill. 4. C Social skill. Social skills are types of skills valued in a successful society. Following directions in social situations has many benefits to you and those you come in contact with. Skills necessary for you to get along in the world around you are not known as family skills, academic skills, or life skills. SOURCE: CO:119 SOURCE: QS LAP 24Simon Says 5. A Nonverbal cues. Nonverbal cues are unspoken messages shown through eye contact, facial expression, and body language. Acknowledgement responses are short verbal statements such as uh-huh and I see. Nonverbal cues are not distractionsquite the opposite, they usually reinforce the speaker's message. Nonverbal cues are not listening skills in and of themselves, but paying attention to them is. SOURCE: CO:017 SOURCE: QS LAP 1Listen Up 6. C May not be remembered accurately. Listeners generally retain only about 25% of what they hear, and they frequently don't remember it accurately. It is, therefore, important to choose words used in oral communication carefully and to try to make sure that listeners receive the intended message. Oral communication is used for all kinds of messages, not just those that are urgent. Oral communication is considered less formal than written communication, but that is not the reason that it should be used with care. SOURCE: CO:147 SOURCE: Lesikar, R.V., & Flatley, M.E. (2005). Basic business communication: Skills for empowering the Internet generation (10th ed.) [pp. 421-423]. Boston: McGraw-Hill/Irwin.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

11

7. C Information is complex. In some situations, it is difficult to give effective verbal directions. One situation is if the information is complex. Managers sometimes make the mistake of believing that all directions can be given verbally. However, if the information is complex and requires an extensive explanation, it may be better to provide verbal directions as well as written instructions or diagrams. If the complex information is difficult to understand, employees will be better able to follow the directions if they are presented in several ways. It is not difficult to give effective verbal directions if time is important, managers are organized, or employees are focused. SOURCE: CO:083 SOURCE: eHow.com. (1999-2009). How to give verbal instructions. Retrieved June 22, 2009, from http://www.ehow.com/how_2108584_give-verbal-instructions.html 8. D Critical feedback. When employees present their ideas to management or coworkers, they should be prepared to defend those ideas and provide supporting information. They also should be willing to accept critical feedback because others might not agree with the ideas or have different opinions. Being prepared will help employees remain objective and be able to offer logical evidence to back up their ideas. Critical feedback is often useful because it allows employees to view their ideas from a different perspective. Defending ideas usually does not involve accepting additional responsibility or nonverbal support. It is not acceptable to attack employees on a personal level because of their ideas. SOURCE: CO:061 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 204-205). New York: Glencoe/McGraw-Hill. 9. A Project the image of the business. The way in which employees handle telephone calls projects the image of the business and its level of service. Handling calls in a businesslike manner can increase business. Using professional telephone techniques includes making the caller feel important, and not trying to be important. Being businesslike may enable employees to handle a great many calls or to qualify for promotion, but these are not primary objectives. SOURCE: CO:114 th SOURCE: Bailey, L.J. (2007). Working (4 ed) [pp. 209-210]. Mason, OH: South-Western Cengage Learning. 10. B Get together to do something. A group is a number of people who get together to perform a task, solve a problem, make a decision, or just talk about something. The group members may or may not feel the same way about an issue or enjoy each other's company. And, they may very well come up with similar answers. SOURCE: CO:053 SOURCE: QS LAP 29Put In Your Two Cents 11. C Understand the process you are explaining. In order to write accurate instructions, you must be knowledgeable about the sequence and content of steps required for completion of the task. Instructions should consist of simple, brief statements that are written from the employee's perspective. Although instructions should be as brief as possible, the type and complexity of the process or activity will dictate the length of the instructions. SOURCE: CO:016 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 115-122]. Mason, OH: Thomson South-Western.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

12

12. C Consistency. Many businesses and industries develop documents using a specific style, which entails following certain writing standards. By using a specific style, all of a business's or an industry's documents are consistent throughout the company or field. Writing styles provide guidance to the writers in regard to the correct usage of mechanical elements (e.g., punctuation) but do not provide creativity or flexibility. Stylebooks cannot verify the accuracy of the document's contents. SOURCE: CO:089 SOURCE: Research Haven. (n.d.). Writing styles: Your answers to style guides. Retrieved June 22, 2008, from http://www.researchhaven.com/Style/index.htm 13. C Enclosure notation. An enclosure notation often appears at the bottom of a business letter if additional items are included with the letter. The enclosure notation may indicate the number of additional items attached or list the type of item, such as sales brochure, check, contract, etc. The purpose of the enclosure notation is to help the writer and the recipient confirm that all enclosures are included when the letter is sent and received. The reference initials identify the person who typed the letter. The company signature is the typed name of the company. The writer's identification is the writer's name typed below the signature. SOURCE: CO:133 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 310-311]. Mason, OH: Thomson South-Western. 14. D Accurate content. Because informational messages communicate knowledge, facts, or data to the message receiver, it is important that content is accurate. In the workplace, employees and managers often make business decisions based on information they receive in informational messages, so it is very important for the writer to include accurate content in the message. Although a writer might communicate an emotional appeal, an honest opinion, or a request for action in his/her informational message, accurate content is the most important consideration. SOURCE: CO:039 th SOURCE: Bove, C. L., & Thill, J. V. (2008). Business communication today (9 ed.) [p. 95]. Upper Saddle River, NJ: Pearson Prentice Hall. 15. B Letters of inquiry. The function of a letter of inquiry usually is to make a request. Businesspeople often write letters of inquiry to request an appointment with a current customer, a potential customer, or a business associate, particularly if those people are located out of town. For example, a businessperson might write several letters requesting appointments with various customers before arranging a sales trip. Persuasive messages are intended to encourage others to take action rather than to make a request. Sales letters are a type of persuasive message. Corporate memorandums are internal forms of communication. SOURCE: CO:040 SOURCE: Locker, K.O. (2000). Business and administrative communication (5th ed.) [pp. 222, 225]. Boston: Irwin/McGraw-Hill. 16. C The business believes the employee is stealing goods. Information of a private nature should be delivered in person, particularly if the information is of a negative and/or embarrassing nature. In this situation, the staff member should also have a chance to deny the accusation if untrue. Information about a manager's vacation, flextime, or enlarging the department could be openly communicated to the staff. SOURCE: CO:014 SOURCE: Hilgert, R.R., & Leonard, E.C. (2001). Supervision: Concepts and practices of management (8th ed.) [pp. 659-661]. Cincinnati: South-Western College Publishing.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

13

17. C Share information. Staff meetings are a method of communication in business. The purpose of participating in staff meetings usually is to share information. This includes management sharing important information with employees and employees providing information to management, such as updates on current projects. The goal is for everyone in the business to have the information they need to function effectively. The purpose of participating in staff meetings is usually not to achieve a task, conduct research, or develop a message. SOURCE: CO:063 SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill development (2nd ed.) [pp. 326-330]. Mason, OH: South-Western. 18. A Being consistent. Being consistent involves offering the same, reliable goods and services on a regular basis. Businesses that are consistent do what they say they are going to do and do it right the first time. Being consistent is a good technique for building positive customer relations because customers know that they can count on getting what they need from the business. Customers appreciate consistency and usually will continue to buy from the business. Businesses should be open to change in order to meet the changing needs of their customers. Buying advertising and conducting research will not build positive customer relations unless the business also offers consistent service and reliable products. SOURCE: CR:003 SOURCE: Rokes, B. (2000). Customer service: Business 2000 (p. 136). Mason, OH: South-Western. 19. B All staff. The customer-service mindset applies to all employees regardless of whether they ever come into direct contact with customers. It takes all staff focused on customer satisfaction to convince customers that a business is sincerely interested in them. For example, a salesperson's efforts to determine and satisfy customer needs must be supported by all other staff members and vice versa. SOURCE: CR:004 SOURCE: Odgers, P. (2004). The world of customer service (p. 10). Mason, OH: South-Western. 20. B Product maintenance. Business employees should possess certain information in order to satisfactorily handle routine customer inquiries. Customers often ask questions about how certain products should be maintained, and they expect business employees to be able to provide the answers. If business employees do not have this type of information, they may lose sales because customers will feel frustrated by the lack of assistance. Employees are not expected to possess specific information about the business's financial condition, its expense projections, or the personal background of other employees and managers. SOURCE: CR:006 SOURCE: Ingram, T.N, LaForge, R.W., Avila, R.A., Schwepker, C.H., & Williams, M.R. (2008). th Professional Selling: A trust-based approach (4 ed.) [p. 42]. Mason, OH: South-Western Cengage Learning. 21. D Dishonest. A dishonest customer intentionally attempts to avoid paying part or all of the price for a product. A suspicious customer doubts or questions everything and may want facts and proof before being convinced something is true. An indecisive customer frequently has great difficulty in making a choice or buying decision. A disagreeable customer is a client who is unpleasant and hard to help because s/he is argumentative, complaining, irritable, moody, insulting, impatient, and/or has a leave-me-alone attitude. SOURCE: CR:009 SOURCE: EI LAP 1Making Mad Glad

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

14

22. A Policies. Policies are general rules that provide guidelines for employees in handling specific situations. Policies are especially useful in handling complaints since they help to prevent misunderstandings, and they are used to apply fair and consistent treatment in different situations. A procedure is a step-by-step process that personnel follow in performing specific tasks. Regulations are specific rather than general rules. Techniques are skills or ways of doing things. SOURCE: CR:010 th SOURCE: Levy, M., & Weitz, B. A. (2007). Retailing management (6 ed.) [pp. 251-252, 262]. Boston: McGraw-Hill/Irwin. 23. C Jack politely asks if his customer would like a beverage while s/he waits for car service. The manner in which employees perform their tasks is an important factor that affects how customers view a business. When an employee is polite and asks a customer if s/he would like a beverage while waiting for service, the employee is reinforcing a positive view or image of the business. On the other hand, placing a customer on hold, especially if it happens often, might anger the customer and reinforce a negative image of the business. There is not enough information to determine if preparing a newsletter or telling a customer that an item is only available by special order is reinforcing or creating a certain image. SOURCE: CR:002 SOURCE: Odgers, P. (2004). The world of customer service (pp. 6-7). Mason, OH: South-Western. 24. D Television set. A shopping good is one for which the customer preplans the purchase and takes into consideration such factors as price, brand name, and warranties. A sale shirt, a pair of socks, and a candy bar are convenience goods that do not require preplanning. SOURCE: EC:002 SOURCE: Burrow, J.L. (2006). Marketing: Instructor's wraparound edition (2nd ed.) [pp. 273, 275]. Mason, OH: Thomson/South-Western. 25. B Natural. Natural resources are found in nature and used to produce goods and services. Natural resources are limited. Capital goods include all materials used to assist in the production of goods and services. Physical resources are aspects of human resources. SOURCE: EC:001 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 53). Woodland Hills, CA: Glencoe/McGraw-Hill. 26. B Elastic. Elastic demand is demand that changes according to changes in price. If consumers can buy a substitute product when the price of their favorite product goes up, then the demand for the original product is more likely to be affected. Inelastic demand is demand that is not affected by changes in price. Demand is less urgent for products that have substitutes. Unitary demand occurs when sales remain the same because changes in supply and demand are equal. SOURCE: EC:005 SOURCE: EC LAP 11It's the Law (Supply and Demand) 27. C Be socially responsible. Social responsibility is the duty of business to contribute to the well-being of society. This includes contributing to the well-being of the business's employees and to product users, the community, and the business itself. Businesses are not required by law to be socially responsible. Whether businesses' health insurance costs are reduced would depend upon whether employees participated in the fitness programs. Maximizing profits helps the business to grow and prosper and to be socially responsible to itself. SOURCE: EC:070 SOURCE: EC LAP 20Business Connections (Business and Society)

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

15

28. D By individuals. In most cases, individuals produce what they can, and barter to obtain what they cannot produce. Everything that is produced is consumed. In a traditional economic system, there is little or no government involvement in either the production or the distribution of products. In addition, there are no incomes, prices, or markets to consider. SOURCE: EC:007 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 54-55). Woodland Hills, CA: Glencoe/McGraw-Hill. 29. A Net profit. Profit is the monetary reward the business owner receives for taking the risk involved in investing in a business. Net profit is the money remaining after operating expenses are subtracted from gross profit. Gross profit is the money left after cost of merchandise is subtracted from total income. Overhead expenses are a form of operating expenses, such as rent and utilities. SOURCE: EC:010 SOURCE: EC LAP 2Risk Rewarded 30. C Natural. The ice storm is a natural risk because it is an act of nature. Other natural risks include floods, tornadoes, fires, lightning, blizzards, and earthquakes. Market risk is a type of economic risk caused by changes in the market, and human risk is caused by human weakness and unpredictability. SOURCE: EC:011 SOURCE: EC LAP 3Lose, Win, or Draw (Business Risk) 31. A Natural monopoly. In some cases, it may be in the best interests of the public for a single firm to be the producer of a product. Public utilities are an example. Conservation is the preservation and protection of resources. Competition is the rivalry between two or more businesses to attract scarce customer dollars. Price discrimination is the practice of selling the same item to different buyers at different prices. SOURCE: EC:008 SOURCE: EC LAP 16Regulate and Protect (Government and Business) 32. C Time. A worker's productivity can be measured by the time it takes to complete a particular task or job, the amount of work produced, or the monetary value of the work. For example, a salesperson who can make a sale in half the time of another salesperson is said to be twice as productive. Inputs are those resources used in producing goods or services. The method used may increase or decrease productivity, but it is not a standard of measurement. A ratio is a mathematical expression of the comparison between two factors. SOURCE: EC:013 SOURCE: EC LAP 18 Make the Most of It (Productivity) 33. D Leaders have to get along with a variety of people. Emotional intelligence and leadership overlap when it comes to proactive behavior, perseverance, positive working relationships, and confidence. To engage in positive working relationships, leaders have to get along with a wide variety of people, sometimes encouraging others, and sometimes inspiring them. With proactive behavior, leaders are expected to take action before problems develop. With perseverance, leaders learn to outlast disappointment and fatigue. Regarding confidence, leaders need to know that what they are doing and saying is rightnot (merely) acceptable. SOURCE: EI:001 SOURCE: EI LAP 6 EQ and You (Emotional Intelligence)

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

16

34. D Point out their skills and abilities to them. Self-esteem is how you feel about yourself at any given time. The level can fluctuate from high to low. Making positive remarks about an individual's skills and abilities is a good way to support a high level of self-esteem or to raise a low level. All of the other alternatives would lower someone's self-esteem. SOURCE: EI:016 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 197). New York: Glencoe/McGraw-Hill. 35. C Personal skills inventory. A survey designed to help you assess your strengths and weaknesses is known as a personal skills inventory. The survey asks multiple-choice questions related to your behavior, interests, and feelings. The survey is then scored, and you are provided with the results. The survey results often reveal new information about you which could be useful in the assessment process. These surveys are not known as group talent tests, personal behavior surveys, or group learning exams. SOURCE: EI:002 SOURCE: EI LAP 17Assess for Success (Assessing Personal Strengths and Weaknesses) 36. D Physical. When Sam says that his supervisor is a woman, he is describing her physical traits. Physical traits include gender, height, weight, hair color, eye color, and build. Mental traits include such intellectual abilities as learning, remembering, comprehending, analyzing, evaluating, and creating. Emotional traits involve attitudes, feelings, values, and temperament. Negative describes a pessimistic attitude, rather than a trait. SOURCE: EI:018 SOURCE: EI LAP 9You've Got Personality (Personality Traits in Business) 37. A They are bored. Nothing is more boring than listening to someone who speaks in one tone of voice. Speakers need to vary their tone, pitch, and inflection to keep listeners' attention. Otherwise, listeners will be unenthusiastic about the topic, they will not give their undivided attention to the speaker, and will demonstrate their lack of interest through nonverbal signals. SOURCE: EI:020 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 198). New York: Glencoe/McGraw-Hill. 38. A Eavesdropping. Listening to conversations in which you are not participating is called eavesdropping. People with honesty and integrity avoid eavesdropping whenever possible. Jim is listening rather than observing, or watching. There is nothing to suggest that he is investigating anything. SOURCE: EI:022 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (p. 69). Tinley Park, IL: Goodheart-Willcox. 39. C Stimulus control. Stimulus control occurs when a person attempts to avoid situations that cause him/her stress. The reward technique involves positive reinforcement given for showing self-control. The punishment technique is used when negative reinforcement is given for losing self-control. Extinction is the act of withholding reinforcement in order to change a behavior. SOURCE: EI:025 SOURCE: EI LAP 14Control Yourself! (Demonstrating Self-Control)

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

17

40. C Constructive criticism. Constructive criticism is evaluative information designed to help someone improve. Negative feedback is feedback involving criticism, a negative judgment about you or your behavior; it tends to make you want to change or modify your words or actions. Internal feedback is feedback that comes from within yourself. Self-control is the restraint of your feelings, words, and actions. SOURCE: EI:003 SOURCE: EI LAP 15Grin and Bear It (Using Feedback for Personal Growth) 41. A Personal. Personal changes concern our bodies, minds, lifestyles, etc. A new occupation is a personal change that affects one's lifestyle. Improving oneself in order to gain a promotion is a rational, or logical, change, not irrational. A social change is a shift in the values, tastes, or habits of society. Economic changes are fluctuations or "ups and downs" in the economy. SOURCE: EI:026 rd SOURCE: Dalton, M., Hoyle, D.G., & Watts, M.W. (2006). Human relations (3 ed.) [pp. 212, 348]. Mason, OH: South-Western Cengage Learning. 42. D Respect for others. Genuine respect for others and their individual differences is central to the concept of empathy the ability to put yourself in another person's place. You do not need a college degree to feel empathy. Friendship enhances empathy but is not necessary to it. The area or situation may not be work related, so a similar occupation is not necessary. SOURCE: EI:030 SOURCE: EI LAP 12Have A Heart (Empathy) 43. B Translate into other languages. To be culturally sensitive, international businesses must be careful about how brand names translate into other languages. Mistakes in this area can lead to decreases in sales or no sales at all. Domestic sales are not included in international business. Fonts are not necessarily important to cultural sensitivity. Every brand name should relate to the company well, whether in the domestic or international market. SOURCE: EI:033 SOURCE: EI LAP 11Getting to Know You (Cultural Sensitivity) 44. D Prejudice. It is a strong, negative feeling seldom based on fact. Empathy is the ability to put yourself in another person's place. Interaction increases the probability that information is transmitted clearly. Eye contact, posture, and facial expressions are examples of nonverbal feedback which help the sender determine if a receiver is accepting or rejecting what is being communicated. SOURCE: EI:007 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 176-177). Tinley Park, IL: Goodheart-Willcox. 45. A Respect their own rights and the rights of others. Assertive people have a confident attitude based on feelings of self-respect. They respect themselves and others. On the other hand, aggressive people ignore the rights of others and take advantage of them. They feel free to make requests of others. People who are passive try to avoid conflict with others. SOURCE: EI:008 SOURCE: EI LAP 18Assert Yourself (Assertiveness)

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

18

46. D Willing to do whatever is needed. In order to be an effective team member, workers should be willing to do whatever is needed in order to meet the team's goals. This may include carrying out tasks or accepting assignments that are not to the individual's liking. It may also mean that the individual cannot be so committed to personal career goals that s/he cannot set them aside, at least temporarily. Workers do not need to have had previous experience as team members since the role of team player can be learned. Conflict is often part of teamwork and should be managed rather than avoided. SOURCE: EI:045 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 226-229). New York: Glencoe/McGraw-Hill. 47. B Everyone experiences new circumstances at some time. All people experience new circumstances during their lives. Therefore, new circumstances are unavoidable. People cannot always control the new situations or circumstances that occur in their lives, but they can learn how to manage them. People experience both expected and unexpected circumstances. Although it is possible to plan for some new circumstances in advance, people also experience unexpected circumstances. Unexpected circumstances require people to react without preparation. SOURCE: EI:006 SOURCE: QS LAP 15Stuff Happens 48. A Developing an action plan for each goal. By planning ahead for how he will overcome potential obstacles, Trey is developing an action plan for his goal. This will make it easier to face roadblocks if and when they pop up. In this scenario, Trey is not putting his goals in writing, reviewing and revising his goals, or making sure they are compatible with each other. SOURCE: EI:027 SOURCE: EI LAP 10High Hopes (Developing an Achievement Orientation) 49. C Mental ability. A person's mental ability refers to his/her learning and thinking ability. People are born with different levels of mental ability. This ability is difficult to change. Job position is the worker's assigned duties and level of responsibility, which the worker can change by changing jobs or seeking promotions. Language usage is the way the language is used in certain parts of the country. People are able to change the way they speak if they so desire. Education is the amount of learning a person has acquired. Learning is an ongoing process. SOURCE: EI:036 SOURCE: HR LAP 24Treating Others Fairly at Work 50. C Respect. Respect is showing regard for other people and their ideas. In order to have successful human relations, you must have respect for others and for yourself. It is not necessary to admire everyone or to treat them with reverence, but you should not treat anyone with indifference. SOURCE: EI:037 SOURCE: EI LAP 5Can You Relate? 51. B Credit users to buy at any time during a set period. This period is usually 30 days. At the end of that time, the person or business is expected to pay the entire amount that is due. Most credit accounts require a credit check of first-time or regular credit users. Having a credit account for a long time does not eliminate finance charges if the customer does not pay the account according to the account's requirements. SOURCE: FI:002 SOURCE: Kapoor, J.R., Dlabay, L.R., & Hughes, R.J. (2005). Personal finance (p. 158). New York: Glencoe/McGraw-Hill.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

19

52. A Repayment schedule. Individuals and businesses usually borrow money from financial institutions for large purchases, such as business equipment. A borrower must apply for the loan with the lender and provide the lender with necessary financial status information. The lender reviews this information to determine if the potential borrower is a good risk and is likely to pay back the loan. If the lender determines that the borrower meets the necessary criteria, the application is accepted and the loan process begins. The lender develops a formal document (contract) that the borrower must sign. The document contains information regarding the loan repayment terms and schedules. The contract does not include a tax code list, a proposal (request) for disbursement, or a guarantee of eminent domain. SOURCE: FI:063 SOURCE: DuBoff, L.D. (2004). The law (in plain English) for small business (pp. 46-47). Naperville, IL: Sphinx Publishing. 53. A Provides protection against financial losses. Insurance is designed to protect against financial losses, whether those losses are related to property, health, or even life. Insurance does not protect a person from unethical salespeople or guarantee a solid financial future. Insurance is available to property owners and non-owners alike. SOURCE: FI:064 SOURCE: Williams, F. (2003). Investing for life youth handbook. Madison Heights, MI: National Association of Investors Corporation. 54. C Assign each goal to a general category. A good way to prioritize your financial goals is to assign each goal to a general category, such as "must do," "important but not critical," or "not so important." Ranking according to what needs to be done first and ranking every goal in numerical order are two common pitfalls. Another pitfall is ranking everything as very important or thinking that all the goals are equally important. SOURCE: FI:065 SOURCE: QS LAP 31Set Yourself Up 55. C Loan. A loan is a sum of money lent to a person or business for a specific time period that is repayable with interest. Credit is the arrangement by which a person purchases now and pays later. A lending institution issues credit cards, which allow people to purchase now and pay later. The lender provides credit-card users with a limit within which they can charge purchases. The lender pays for the purchases and then sends the credit-card user a bill/statement each month that indicates the monthly minimum payment and interest charges due to the lender. It is important for people to pay credit-card balances responsibly so they do not accumulate so much debt that they cannot afford to pay the lender. Using credit for purchases helps a person build a personal credit history, which lenders consider when a person applies for a large loan to purchase a car or a house. An asset is something of value that a person owns. Credit is not an asset or a tax. Because credit is so widely used, it is not necessarily a privilege. SOURCE: FI:071 SOURCE: Kapoor, J.R., Dlabay, L.R., & Hughes, R.J. (2005). Personal finance (pp. 170-172). New York: Glencoe/McGraw-Hill.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

20

56. D Verify that the credit agencies have correct information. Credit is the arrangement by which individuals or businesses can purchase now and pay later. A credit agency is a business that maintains files of credit information on individuals and businesses. It is important to make sure that credit agencies have accurate information about your credit history because other businesses purchase the reports to make decisions about extending credit to you or providing a loan to you. Although people can provide information to improve their credit ratings, it is the credit agencies that change or update the information. Good credit reports can increase the chances of obtaining a bank loan, but reviewing the reports cannot ensure that people obtain bank loans. People who monitor their credit reports can reduce the risk of identity theft, but cannot eliminate the risk. SOURCE: FI:072 SOURCE: Federal Reserve Bank of San Francisco. (2006, January 24). Your credit report: What it says about you. Retrieved June 23, 2009, from http://www.frbsf.org/publications/consumer/creditreport.html 57. D Cancel all of his credit and debit cards. Identity theft occurs when somebody uses another individual's name and personal information (e.g. credit cards) for fraudulent purposes. The first thing Cameron should do when he realizes he has lost his wallet is to cancel his credit cards. By canceling the credit cards, Cameron will protect himself in the event that someone finds his wallet and attempts to use the credit cards. Financial institutions and businesses (e.g., retailers) issue credit cards, not government agencies. Cameron should contact the proper law enforcement authorities (e.g., police) if he thinks his wallet is stolen. He can report a lost wallet, and he can also change the passwords for his online banking accounts. However, the first thing he should do is to cancel his credit and debit cards. SOURCE: FI:073 SOURCE: Federal Trade Commission. (n.d.). Minimizing your risk. Retrieved June 23, 2009, from http://www.ftc.gov/bcp/edu/microsites/idtheft/consumers/deter.html 58. D Taxable income is less than $50,000. Form 1040EZ is a short and simple tax form that many individuals use to file their personal income tax. However, they must meet certain requirements in order to use this form. One of the requirements is taxable income less than $50,000. If taxable income is more than that amount, they must use one of the other tax forms. To be eligible to use Form 1040EZ, individuals must be under the age of 65, have no dependents, and not itemize deductions. SOURCE: FI:074 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (p. 393). New York: Glencoe/McGraw-Hill. 59. A Financial planners. There are many types of financial planners who help clients develop investment plans and prepare for the future. These planners provide financial services such as recommending and selling life insurance, mutual funds, stocks and bonds, etc. Part of what they do is provide advice on how their clients can achieve their financial goals. Certified public accountants, trust departments, and local bank managers usually do not help individuals select the type of life insurance to buy and the most appropriate investments. SOURCE: FI:075 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (pp. 259-260). New York: Glencoe/McGraw-Hill.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

21

60. A Run a background check. When shopping for an investment broker, you should always run a background check. You're entrusting your money and your financial future to this person, so it's important to make sure s/he deserves that trust. It's not necessary to disclose to a potential broker how much money you have to invest. Certain brokers are more suited to certain investorswhat works for your parents will not necessarily work for you. You may want to read the broker's advertisements, but advertisements don't tell the whole story. A background check will provide much more useful information. SOURCE: FI:076 SOURCE: SEC. (2005, October 30). Protect your money: Check out brokers and investment advisers. Retrieved June 23, 2009, from http://www.sec.gov/investor/brokers.htm 61. B Pay for the right to own something. With an ownership investment, investors pay for the right to own something. When they do this, they may buy a home to live in, collect popular items, or even invest in multiple corporations through stock mutual funds. SOURCE: FI:077 SOURCE: QS LAP 32Risky Business 62. A The policyholder can borrow the policy's cash value. A whole-life insurance policy builds cash value as the policyholder pays premiums at regular intervals. If, at some point, the policyholder needs a loan, s/he can borrow the cash value of the policy. Universal life insurance combines death benefits with an investment and savings plan that earns interest at current market rates. Whole-life insurance rates are higher than term insurance rates because term insurance only pays death benefits if the policyholder dies during the set period of time covered by the policy. SOURCE: FI:081 SOURCE: MSN.com. (2008, September 10). Term or whole life? Retrieved June 23, 2009, from http://www.smartmoney.com/personal-finance/insurance/term-or-whole-life-8011/ 63. B Accounting. Accounting is the process of keeping financial records. Accounting, or recordkeeping, is an important financial activity because businesses need to know their financial status at all times. Without accurate accounting, businesses would not have current information about the amount of money coming in and going out of the operation. Budgeting is estimating what income and expenses will be for a specific period of time. Scheduling is the production activity that establishes the timetable to be followed in production. Reporting is the process of giving information. SOURCE: FI:085 SOURCE: FI LAP 5Show Me the Money 64. B Important decisions rely on accounting information. Accounting standards are necessary because decisions rely heavily on credible accounting information. The standards were not created for auditors, but for the sake of decision makers. The standards do not exist for the government's use, or because math scores are up or down. SOURCE: FI:086 SOURCE: Financial Accounting Standards Board. (n.d.). Facts about FASB. Retrieved August 7, 2009, from http://www.fasb.org/facts/facts_about_fasb.pdf 65. C Capital budgeting. Determining which projects a business should invest in is known as capital budgeting. It is one of the capital investment decisions. Return on capital is a component of working capital management that refers to how well a business is generating cash flow in relation to its invested capital. The cash conversion cycle is a component of working capital management that refers to how long a business's money is "tied up" between purchasing raw materials and receiving cash from sales. Capital structuring refers to determining the optimal mix of financingit is also one of the capital investment decisions. SOURCE: FI:354 SOURCE: FI LAP 7Money Matters (Role of Finance)

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

22

66. D Performance evaluations. Human resources management is the process of planning, staffing, leading, and organizing the employees of a business. An important aspect of human resources management is coordinating performance evaluations with employees and their supervisors. A performance evaluation is a formal assessment by the supervisor of an employee's job performance that lets the employee know how s/he is doing on the job. The human resources department keeps the performance assessment form in the employee's personnel file. Sales promotions are coordinated by the business's promotion function. Information systems are usually computer-based and maintained by technical personnel. Purchase orders are placed and tracked by the purchasing department. SOURCE: HR:410 rd SOURCE: Gitman, L.J., & McDaniel C. (2008). The future of business: The essentials (3 ed.) [p. 297]. Mason, OH: Thomson Higher Education. 67. C What consumers want. Businesspeople have found that it is just plain good business to base their decision making on customer needs and wants. They have learned that it is much better to determine what the customer wants and offer that item, than to develop or manufacture an item and then try to sell it. It is better for businesses to find out what the consumer is willing to buy instead of trying to market what is easiest to make. Successful businesspeople know that the quantity of items they can produce is greater than consumer demand. It is not always effective to market the lowest priced items. SOURCE: MK:001 SOURCE: BA LAP 11Have It Your Way! 68. B Information that is needed. Information is a collection of facts, statistics, or data. Before businesses can use the information, they must determine the type of information that is needed. For example, does a business need economic data because it wants to expand, or does it need marketing data because it wants to attract new customers? The business must decide the type of information it needs before it can obtain and use that data. Businesses do not need to determine the type of computer system to purchase, the type of report that is required, or the type of collection process to develop before using relevant data. SOURCE: NF:077 th SOURCE: Churchill, G. (2001). Basic marketing research (4 ed.) [pp. 180-181, 770-771]. Mason, OH: South-Western. 69. B Reviewing data on trends to develop new products. Simply obtaining information is not useful unless the business applies the information to accomplish a task. Reviewing data on trends for the purpose of developing new products is an example of applying information. The data give the business an idea of what type of new product customers might want and need. Then, the business develops a product based on the information. Conducting research, developing questionnaires, and examining promotional activities are methods of obtaining information. However, they do not involve applying the information to accomplish a task. SOURCE: NF:080 SOURCE: Mescon, M.H., Bovee, C.L., & Thill, J.V. (1999). Business today (9th ed.) [pp. 476-477]. Upper Saddle River, NJ: Prentice Hall. 70. C Storing data. Information management involves gathering, sorting, evaluating, and disseminating information to aid business decisions. Businesses use different types of internal and external information to make decisions, such as sales history, customer profiles, and financial data. In order to obtain the information when the business wants it, the business needs a place to store the information. Today, most businesses store this information on computers. Although the business may store this advertisement, employee, and credit information on its computer, these are not primary functions of information management. SOURCE: NF:110 SOURCE: Ivancevich, J.M., & Duening, T.N. (2007). Business principles, guidelines, and practices nd (2 ed.) [pp. 497-498]. Mason, OH: Thomson.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

23

71. B Communication. Communication is the exchange of information. E-mail is the electronic transmission of messages across computer networks, and it is a communication channel. E-mail transmits business messages very quickly and can reach many people simultaneously, which often saves the business time and money (e.g., order processing). E-mail does not always increase the company's production efficiency because other factors affect production. Commercialization is the point at which a product's life cycle begins. Segmentation is the process of dividing the market into similar groups. SOURCE: NF:003 SOURCE: Rue, L.W., & Byars, L.L. (2006). Business management: Real-world applications and connections (pp. 162-163). Woodland Hills, CA: McGraw-Hill. 72. D Attachment. An attachment is a computer file that is sent with an e-mail message. In business, it is common to send information, such as business reports, as e-mail attachments. A postscript is an "afterthought" that the sender includes after the message or letter closing. A memo is a short, informational document that an employee often sends within the company. A fax is a document that is transmitted through telephone wires. SOURCE: NF:004 SOURCE: MediaCollege.com. (n.d.). How to send email attachments. Retrieved June 23, 2009, from http://www.mediacollege.com/internet/email/attachments.html 73. A Manage their time. Many employees use electronic calendars to keep track of their activities and prepare schedules. The benefit of using these devices is that it allows employees to manage their time because they can keep a schedule of their activities. They know what they have to do at a certain time on a certain date, such as attend a meeting. They can also list deadlines for projects. This enables them to plan the use of free time in order to accomplish their assigned responsibilities. Employees do not use an electronic calendar to communicate with coworkers or delegate tasks. Employees use electronic calendars to keep track of deadlines; however, managers usually determine the deadline based on the priority of the project. SOURCE: NF:005 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 359-361). New York: Glencoe/McGraw-Hill. 74. A Uniform Resource Locator. An address on the World Wide Web is known as a Uniform Resource Locator (URL). A URL includes the name of the server where the web-site's files are stored, the file's directory path, and its file name. An example of a URL is http://www.mark-ed.com. A File Transfer Protocol (FTP) is a way of transferring data from one computer to another over the Internet. An Internet Service Provider (ISP) is a commercial company selling Internet access. Graphics Interchange Format (GIF) is a standard format for image files on the World Wide Web. SOURCE: NF:006 nd SOURCE: Rayport, J. F., & Jaworski, B. J. (2004). Introduction to e-commerce (2 ed.) [p. 41]. Boston: McGraw-Hill/Irwin. 75. A Dictionary. Word-processing software programs are used to create text documents. An advantage of using these programs to write business letters, memos, reports, etc., is that the programs usually contain a dictionary that allows the user to check the spelling of words. The dictionary feature helps users to avoid making spelling mistakes in important business documents. Spreadsheet software programs have the capability of performing calculations. Graphics software programs allow users to create flowcharts. SOURCE: NF:007 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 162-163]. Woodland Hills, CA: Glencoe/McGraw-Hill.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

24

76. C To maintain customer lists. Database software programs are designed to sort, arrange, and locate a wide variety of information. Many businesses use database software to maintain customer lists that can be arranged alphabetically, by zip code, by date of last purchase, or by many other criteria. This type of software allows businesses to generate mailing lists of specific customers based on a variety of factors. Businesses use spreadsheet software to track operating expenses, desktop publishing programs to prepare annual reports, and graphics programs to design company stationery. SOURCE: NF:009 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 162-163]. Woodland Hills, CA: Glencoe/McGraw-Hill. 77. D Performing financial calculations. Spreadsheet software enables businesses to perform accounting, financial, and other mathematical functions. A user can enter numerical information in rows and columns, and the software will perform various calculations or analyses. For example, spreadsheet programs can calculate sales forecasts and develop budget projections. Presentation software is used to create slide presentations. Desktop publishing software is used to prepare promotional brochures. Database software is used to manage database files. SOURCE: NF:010 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2009). Marketing essentials (pp. 199-200). Woodland Hills, CA: Glencoe/McGraw-Hill. 78. D Database sharing. Groupware applications refer to the modes that employees who work in different locations use to work together or collaborate so they can accomplish a common goal. One mode of collaboration is sharing a database that links or networks several people via computer. For example, when both a sales representative and a warehouse manager have the ability to turn on their computers and access the same inventory status information to see if a product is in stock for a customer, they are using a groupware application. E-mail filters are computer programs that block out unwanted information. Job rotation is an instructional method in which trainees are rotated periodically from one job to another in order to broaden the trainees' perspective of the business. Relationship marketing is a strategy in which businesses spend time with current and prospective clients outside the office setting to enhance the partnership. SOURCE: NF:011 SOURCE: Net Access. (n.d.). Groupware (intranet). Retrieved August 7, 2009, from http://www.netxs.com.pk/intranet/groupware.html 79. B Test the page to identify broken links, missing images, or unclear instructions. Broken links and unclear instructions make it difficult, if not impossible, for readers to obtain information or purchase products from a web site. Therefore, it is important to make sure that all elements of the web page work properly. Generally, web pages are not patented. A patent doesn't necessarily protect web-page content from plagiarism. Although it is a good idea to consult an attorney regarding legal content posted on web pages, not all web pages include legal content. Therefore, it is not a procedure that should always be performed. Web-page content is not subject to international trade requirements. SOURCE: NF:042 nd SOURCE: Rayport, J. F., & Jaworski, B. J. (2004). Introduction to e-commerce (2 ed.) [p. 160]. Boston: McGraw-Hill/Irwin.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

25

80. B Obtaining resources. Resources refer to any person or item that the business uses to accomplish an objective. Operations management is the process of planning, controlling, and monitoring the day-to-day activities required for the company to function. This includes obtaining and allocating the appropriate type and amount of resources to do the work, such as employees, equipment, and supplies. Contacting customers is a sales activity. Selecting media is a promotional activity. Analyzing investments is a financial activity. SOURCE: OP:189 SOURCE: Gaspar, J., Bierman, L., Kolari, J., Hise, R., Smith, L., & Arreola-Risa, A. (2006). Introduction to business (p. 558). Boston, Houghton Mifflin. 81. D Reporting noncompliance. Certain government agencies have developed health and safety regulations that businesses are expected to follow in order to provide employees with a safe work environment. If businesses do not comply with these regulations, they should be reported for noncompliance so the necessary action can be taken to solve the problem and make the workplace safe for employees. The goal is to correct dangerous situations and keep the workplace safe. An employee notifying a government agency is not an example of spreading gossip, unethical behavior, or verbal communication. In fact, the employee is exhibiting ethical behavior. Also, the employee may have notified the agency in writing which is nonverbal communication. SOURCE: OP:005 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 407-408). Tinley Park, IL: Goodheart-Willcox. 82. A Taking shortcuts. Employees who are learning a new skill should work slowly and cautiously, and avoid taking shortcuts. The quickest way is not necessarily the best way to complete tasks. Employees should practice the new skill using the appropriate steps and following the order in which they were instructed to use them. Employees who are learning a new skill should ask questions, follow rules, and act safely. SOURCE: OP:007 SOURCE: Spears, M.C., & Gregoire, M.B. (2004). Foodservice organizations: A managerial and th systems approach (5 ed.) [pp. 320-323]. Upper Saddle River, NJ: Prentice Hall. 83. C Bomb threat. Emergency situations usually occur unexpectedly. Therefore, business employees should know how to handle and report them even if it is unlikely they will occur. An example of an emergency situation is a bomb threat. Although most businesses will never have a bomb threat, employees should know what to do to be prepared if it happens. Internal theft, check fraud, and stolen identity are not examples of emergency situations. SOURCE: OP:010 SOURCE: Ball, D.A., McCulloch, W.H., Frantz, P.L., Geringer, J.M., & Minor, M.S. (2006). International business: The challenge of global competition (10th ed.) [pp. 281-286] Boston: McGrawHill/Irwin. 84. A Burglary. Any illegal entry into a building to commit theft is called burglary. It can be committed by anyonestrangers, employees, customers, or vendors. Burglars use a variety of methods to gain entry to a business, such as picking locks, hiding in a building until the business has closed for the day, using a stolen or duplicate key, or using force to break open doors or windows. Robbery is theft that involves the use of force, violence, or fear. Fraud is deceiving or cheating a business out of money or property. Shoplifting is the theft of goods by customers. SOURCE: OP:013 SOURCE: Kimiecik, R. C., & Thomas, C. (2006). Loss prevention in the retail business (pp. 16-17). Hoboken, NJ: John Wiley & Sons.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

26

85. D Industrial purchasing. Industrial purchasing is the process of buying goods and services for internal consumption in the business or conversion into a final product. Purchasing for resale is the process of purchasing goods in large quantities and reselling them in smaller quantities. Wholesaling is purchasing goods from manufacturers and reselling them to other businesses. Financing is a marketing function that involves understanding the financial concepts used in making business decisions. SOURCE: OP:015 SOURCE: OP LAP 2Buy Right (Purchasing) 86. D Repeat orders. Since successful selling is all about building customer relationships, it is important not to end contact with your customers once the product they ordered is delivered. What you do after the sale is as important as the steps leading up to it. The customer will appreciate the fact that you followed up afterwards, which will frequently lead to repeat orders. There is no evidence to suggest that following up with customers results in returned merchandise or frustration for either you or the customer. Additionally, there is no reason to think that following up with customers will cause your supervisor to intervene. Following up after orders are delivered is a practice that supervisors wholeheartedly encourage! SOURCE: OP:016 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 612-614). Tinley Park, IL: Goodheart-Willcox. 87. C By identifying consumers' needs and wants. A wide variety of marketing-research data is available from libraries, government agencies, and trade publications. Or, the business can conduct its own research. The data can help the business to produce products that consumers need or want and are willing to buy. Determining how products will be produced is a planning step that involves deciding what equipment will be needed, the number of workers, and the time required. Identifying the resources needed in production is part of the purchasing function. Setting the timetable to be used in production is part of scheduling. SOURCE: OP:017 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 237, 289-290). Tinley Park, IL: Goodheart-Willcox. 88. A Their materials in order. Organized workers are more efficient than disorganized workers because they have their materials in order, they know where to find things, and they plan the use of their time. This prevents delays, reduces frustrations, and decreases the number of mistakes they make. Being organized does not guarantee that they will have better skills, more experience, or well-planned careers. SOURCE: PD:009 th SOURCE: Wallace, H.R., & Masters, L.A. (2006). Personal development for life & work (9 ed.) [p. 300]. Mason, OH: South-Western Cengage Learning. 89. D Set and attain a social goal. Sylvia is actively setting and working toward achieving a social goal. She would like to make friends in an environment where she can really get to know someone outside of the classroom. Setting the goal of attending one function weekly gives Sylvia the opportunity to measure her attainment of the goal that she has set. Sylvia is trying to attain a short-term goal rather than a long-term goal. Sylvia has turned her wants into a goal. The goal Sylvia set is not about education. SOURCE: PD:018 SOURCE: PD LAP 16Go For the Goal (Goal Setting) 90. A Decisions support objectives. First, you set your objectives. Then, you decide which activities to do to reach your objectives. In this way, your decisions support your objectivesnot the other way around. If your decisions undermine your objectives, you really had different objectives than you thought. Your objectives do not undermine your decisions. SOURCE: PD:017 SOURCE: PD LAP 10Weigh Your Options

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

27

91. D Appreciative inquiry. According to the appreciative inquiry problem-solving approach, if you think something is a problem, it is one. In other words, problems are often the result of the way you look at an issue. The best thing to do is to frame the problem in a more positive way and stop thinking of it as a problem. In this case, you stopped thinking of your loneliness as a problem and started thinking of it as a motivation to get out and make some new friends. Mind mapping is a problem-solving method that involves drawing out your problem on a large sheet of paper. Brainstorming is a problem-solving method in which a group throws out possible solutions to the problem. The intuitive problem-solving approach requires you to wait for the solution to flash into your mind. None of these three methods is described in this situation. SOURCE: PD:077 SOURCE: IS LAP 2No Problem 92. B Health conditions. A safe working environment includes safe health conditions. Workers have a right to expect that the physical facility in which they work will be healthy and not contribute to illness. The work area should be well ventilated and have sufficient light. Proper health conditions also include allowing rest breaks and time for meals. A safe working environment does not include medical benefits and sickleave policies. Some larger businesses have on-site exercise facilities, but employees cannot expect all businesses to provide such facilities. SOURCE: PD:021 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [pp. 111-112]. Mason, OH: South-Western. 93. D Aptitude test. An aptitude test measures what a person is capable of doing and what s/he might be capable of doing with additional training or education. Interest surveys measure interest in various occupations. Intelligence tests measure current knowledge. Personality tests measure personality traits. SOURCE: PD:023 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [pp.174-175]. Mason, OH: South-Western. 94. A Nonprofit institutions. Nonprofit institutions are businesses and organizations whose intent is to make enough money to support their mission. They are in business to help others rather than to reward stockholders, investors, or owners. They usually provide stable employment opportunities because they are well established and do not have to make a profit to continue to exist. Partnerships, corporations, and sole proprietorships are in business to earn a profit and pay stockholders, investors, and owners. SOURCE: PD:025 rd SOURCE: Bove, C. L., Thill, J. V., & Mescon, M. H. (2007). Excellence in business (3 ed.) [p. 27]. Upper Saddle River, NJ: Pearson Prentice Hall. 95. D Salary requirements. Some employment applications ask you to indicate your salary expectations or requirements. This type of information is better to discuss in person because the wage you are willing to accept may depend on other factors such as paid benefits, vacation time, tuition reimbursement, etc. It is acceptable to write "open" or "negotiable" in this section which will give you the opportunity to find out more about the position in an interview before making salary decisions. Information that you should routinely provide in an employment application includes your job expectations, personal references, and any special qualifications you may have. SOURCE: PD:027 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [p. 47]. Mason, OH: South-Western.

ST-BA -10A

BUSINESS ADMINISTRATION CORE EXAM KEY

28

96. C Ask for the job. At the conclusion of an employment interview, applicants who are interested in the position should tell the interviewer that they want the job. It is acceptable for applicants to ask for the job by saying that they are qualified to do the work and would like to be considered for the position. Simply asking for the job is the easiest way of letting an interviewer know that you are interested. Employment decisions usually are not made during the interview; therefore, an applicant would not sign a contract or accept the job. Many businesses require applicants to take drug tests after they have been offered jobs. SOURCE: PD:028 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [p. 69]. Mason, OH: South-Western. 97. C Ask for an interview. One of the purposes of the closing paragraph in a letter of application is to ask for an interview. Applicants often restate their interest in the job and ask for an opportunity to discuss their qualifications at the interviewer's convenience. They may include their phone numbers and when they can be reached. References are not included in a letter of application, although they may be listed on a rsum. Applicants review their education and explain their qualifications in earlier paragraphs, rather than in the closing paragraph. SOURCE: PD:030 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 125-126). New York: Glencoe/McGraw-Hill. 98. C Full-time positions. An internship is a non-paid position with a company, organization, or government agency. Internship programs offer practical experience in specific occupations and also teach important job skills. Young people who perform well during an internship may be offered full-time, paid positions. They often have an advantage over other applicants because they have experience, are already working, and are known by management. Internship programs provide a type of on-the-job training. Young people may decide to continue their education after participating in internship programs. Some internship programs are a form of community service. SOURCE: PD:032 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 55). New York: Glencoe/McGraw-Hill. 99. C Promotions. One way to advance in a career is to be promoted. Businesses often promote from within and consider certain traits and qualities when reviewing employees for promotion. Employees who are willing to accept more responsibility and continue to learn about all aspects of the business are likely to be promoted. These employees are behaving in a way that indicates they are capable of doing more and are ready to accept new challenges. These employees often obtain additional training on their own, or regularly participate in training offered by the business. Transfers involve moving to other jobs or to other locations. Not all transfers are promotions. Some transfers are on the same level while others may be demotions. Employees who are willing to accept more responsibility and continue to learn about the business usually do not need counseling. SOURCE: PD:034 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 486-488). New York: Glencoe/McGraw-Hill. 100. B It involves planning for the next three-t o-five years. Strategic planning is long-range planning for the company as a whole and is a responsibility of top-level management. Short-term planning is done by lower level managers. Strategic planning is not a supervisory technique nor is it limited to departments that are not performing well. SOURCE: SM:001 SOURCE: BA LAP 6Manage This!

Competency-Based Competitive Events *Written Exam* Test: ST-BMA-10A Booklet Number _____

Business Management and Administration Cluster Exam


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

1. What is the federal agency responsible for enforcing environmental regulations? A. Food and Drug Administration C. Federal Trade Commission B. Environmental Protection Agency D. National Transportation Safety Board 2. What type of partnership arrangement might restrict a partner's liability? A. "S" C. Limited B. Franchise D. Close 3. Employees are more likely to be able to correctly follow directions if those directions are explained in A. complex terminology. C. excessive detail. B. chronological order. D. technical language. 4. What two elements are necessary for effective two-way communication to take place? A. Sharing and understanding C. Sharing and caring B. Telling and informing D. Words and meaning 5. Which of the following is a reason why you should not speak too fast on the telephone: A. Your caller may become disinterested in what you are saying. B. You run the risk of offending the caller with your tone. C. Your caller may have difficulty understanding what you are saying. D. You may sound as though you have a negative attitude. 6. When participating in group discussions, it is often helpful to A. appoint a leader. C. interrupt a speaker. B. try to socialize. D. be aggressive. 7. Oral presentations are structured in one of four formats. Which of the following examples illustrates the use of the cause and effect method: A. Monet and Cezanne were both impressionist artists; however, their painting techniques and use of color varied greatly. B. The public supports increased spending on national security, and a survey reports that over seventy percent of the citizens fear future terrorist attacks. C. The use of toxic chemicals in the environment can result in the extinction of many species of waterfowl. D. We will begin by discussing the basic steps used in developing effective time management techniques, and the first step is to prioritize all of your commitments. 8. The business manager tried to write a promotional letter that was simple, clear, and interesting so that customers who received it would A. need to read it many times. C. find it entertaining. B. easily understand it. D. ask what it really meant. 9. The type of business letter that is used to introduce an in-depth report is a letter of A. transmittal. C. transferral. B. recommendation. D. authorization. 10. Managers often receive brief summaries of information about the status of activities within their departments in the form of __________ reports. A. short biographical C. detailed annual B. long research D. simple progress 11. What information should be included in the recommendations section of an analytical report? A. Budgetary constraints C. Benefits and risks B. Product characteristics D. Project status data

Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

12. At the beginning of a research report, the writer should include the A. appendices. C. purpose of the study. B. solution to the problem. D. bibliography. 13. Alex is very skilled in building positive customer/client relations because he can express himself without offending others. Alex would be described as having A. generosity. C. character. B. integrity. D. tact. 14. Customers who are satisfied with a business's policies often become loyal customers and tell their family and friends about the business. This helps the business to A. obtain feedback. C. build a clientele. B. adjust its policies. D. segment its market. 15. What is a guideline for salespeople to follow when handling disagreeable customers? A. Serve promptly C. Act offended B. Interrupt often D. Observe closely 16. Which of the following best defines the term economic services: A. Useful, scarce, and transferable goods C. Tangible objects which have monetary value B. Products that do not require distribution D. Productive acts that satisfy economic wants 17. The inputs that allow businesses to operate are called economic A. models. C. resources. B. services. D. incentives. 18. An example of information management is demonstrated when a business uses a working system for A. researching customers' needs. C. hiring appropriate employees. B. storing and retrieving information. D. conducting employee evaluations. 19. A disadvantage of government ownership of business in a communist command economy is A. increased productivity. C. lack of competition. B. efficient use of resources. D. less central planning. 20. What is one way that profitable businesses help to make the economy stronger and healthier? A. By conserving resources for future use B. By more conveniently serving customers C. By increasing tax dollars paid to government D. By developing new and improved goods and services 21. The use of robots in assembly-line work is a form of specialization involving A. capitalism. C. capital goods. B. natural resources. D. human resources. 22. When a country's exports exceed its imports, a trade __________ exists. A. balance C. surplus B. deficit D. expansion 23. A businessperson from a foreign country wearing an amulet to ward off evil is an example of A. a class system. C. a cultural belief. B. cultural baggage. D. ignorance. 24. Which of the following North American attitudes do many foreign businesspeople consider rude and arrogant behavior: A. Directness and impatience C. Honesty and patience B. Politeness and inflexibility D. Dedication and adaptability

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

25. Mr. Fox, a Canadian business owner, wanted to buy franchise rights to Frau Dietrich's Strudel chain, which is headquartered in Hanover, Germany. Mr. Fox was late arriving for the meeting, which is very insulting to Germans. Unfortunately, Mr. Fox did not get the deal because he failed to recognize the importance of __________ to German businesspeople. A. time C. achievement B. space D. education 26. Jack and Anna are U. S. businesspeople who are traveling to Brazil to meet with the president of a large Brazilian coffee-bean producer. A coworker tells them that the hand symbol that means "okay" in the United States is an offensive gesture to Brazilians. The coworker's comment suggests to Jack and Anna that they need be sensitive of their A. body language. C. table manners. B. verbal skills. D. gender differences. 27. Kevin is a Scottish businessperson who wanted to learn some key Japanese phrases to use during his meeting with Mr. Suzuki, the owner of an electronics company in Tokyo. When he greeted Mr. Suzuki for the first time, Kevin wanted to say in Japanese, "Hello, Mr. Suzuki. I am honored to meet you." But instead, Kevin bowed, smiled, and said in Japanese, "Hello, Mr. Suzuki. I would like you to kick me." Of course, Mr. Suzuki was confused and didn't know how to respond. This situation is an example of a problem that relates to A. attitudes toward change. C. differences in work ethic. B. nonverbal cues. D. language barriers. 28. Which of the following is a factor related to appearance that foreign businesspeople must consider when doing business in Middle Eastern countries: A. Most Middle Easterners are Muslim, and pray five times a day. B. Both men and woman are expected to wear modest clothing in public. C. Crossing one's legs is an offensive gesture to Middle Easterners. D. It is common for Middle Easterners to communicate slowly with periods of silence. 29. By demonstrating initiative, an employee can usually increase his/her chances of being A. terminated. C. promoted. B. exploited. D. transferred. 30. An employee who misuses company time is actually A. shoplifting. B. pilfering.

C. robbing. D. stealing.

31. Tim is the technology manager for the MSJ Company. Tim is responsible for backing up the computer system each evening to make sure that the company has a copy of each day's computer activities and transactions. On Tuesday evening, Tim was running late for a meeting and decided not to conduct the backup activities. Later that night, the computer system crashed and all of Tuesday's computer data was lost. By apologizing to his boss for making a poor decision and offering to extra hours to help fix the problem, Tim was A. blaming others for the consequences of his actions. B. accepting the consequences for the decisions he made. C. promising not to make any mistakes in the future. D. taking the time to make informed decisions. 32. An important aspect of managing work commitments is A. planning ahead. C. focusing on unimportant details. B. scheduling activities close together. D. organizing others' activities. 33. A characteristic of positive people that is important to businesses is that people with a positive attitude are usually A. inflexible. C. responsible. B. generous. D. well trained.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

34. Jenny's supervisor has called her into the office to suggest some ways she can be a better salesperson. Why is this feedback important to Jenny? A. It tells her that she is in the wrong field. B. It compares her to the other salespeople. C. It tells her how she can improve her performance. D. It makes her aware of her weaknesses. 35. Assertive people are direct and upfront rather than being A. respectful. C. manipulative. B. considerate. D. talkative. 36. To reach a consensus, the entire group must A. count the votes. B. agree on an alternative.

C. select a leader. D. rely on the majority's opinion.

37. Which of the following is a behavior of an achievement-oriented leader: A. Withholding feedback C. Allowing followers to take moderate risks B. Setting easy goals D. Not allowing followers to take responsibility 38. One way a leader can encourage others to work toward a shared vision is by A. describing the objective. C. reviewing the new assignment. B. explaining how they will benefit. D. guaranteeing a profit for the business. 39. In order to form effective relationships at work, you should A. adapt human relations skills to the different work situations. B. develop a casual relationship with the people at work. C. consider the number of people with whom you are in contact. D. act the same in all situations and with all people. 40. Why do many people invest in certain types of life insurance policies? A. To name important beneficiaries C. To pay for private health care B. To obtain disability income D. To meet future financial needs 41. With a A. B. C. D. lending investment, investors do which of the following: Maintain a minimum amount of money in the investment Hire a financial advisor Allow borrowers to use their money for a price Avoid taking any risk

42. Which of the following identifies the need for capital and helps to reduce business risk: A. Information system C. Marketing plan B. Financial plan D. Cash-flow analysis 43. A business can determine its net income by subtracting total A. sales revenue from trade credit. C. expenses from gross margin. B. liabilities from assets. D. operating expenses from net worth. 44. What is often one of the largest sources of money flowing out of a business? A. Goods and services C. Profit and loss B. Accounts receivable D. Payroll and benefits 45. What category of an income statement indicates total profit? A. Net profit C. Cash flow B. Bottom line D. Gross profit

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

46. The administration of assets refers to decisions about A. accounting. C. spending. B. investments. D. financing. 47. The definition of a budget is A. a plan for limiting your personal spending. B. an estimate of income and expense for a specific period. C. the key to a business's success. D. a method for evaluating a manager's performance. 48. The first task in the HR management activity of staffing is A. screening and selecting applicants. C. determining job descriptions. B. determining need. D. recruiting. 49. Tacit knowledge is often based on experiences and personal expertise, while explicit knowledge is A. based on intuition. C. based on opinions. B. difficult to articulate and measure. D. easy to communicate and quantify. 50. Which of the following is an ethical issue that relates to knowledge management in the workplace: A. The president of a small company asks her/his executive team for input regarding a business decision. B. A project leader requests that each member of his/her team provide a status report to the group. C. An employee deliberately doesn't share information with management that will help the company meet its goals. D. The sales manager of a manufacturing firm shares the firm's quarterly sales goals with the sales staff. 51. Which of the following is an effective technological tool for businesspeople to use to share explicit knowledge simultaneously with coworkers who are in different geographic locations: A. Webcam C. Hyperlinks B. Filters D. Kiosk 52. A business can prevent its trade secrets from further disclosure to third parties by asking the court to issue a(n) A. contract. C. appeal. B. warrant. D. injunction. 53. A company's portion of the total industry sales in a specific market is known as its A. market share. C. ethics. B. efficiency. D. brand value. 54. Which of the following actions is not a part of information management: A. Disseminating information C. Accessing information B. Processing data D. Creating data 55. What type of technology does a business often use to communicate with its salespeople while they are traveling from customer to customer? A. Cellular phones C. Fax machines B. Data processing D. Voice recognition 56. The two best ways to send a document by e-mail are by A. including it as a file attachment or by pasting it into the body of the e-mail. B. rekeying the document as an e-mail or by sending a file attachment. C. rekeying the document in the e-mail or by creating a hyperlink to the document. D. creating a hyperlink to the document or by pasting it into the body of an e-mail.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

57. One way that businesses use the "sort" capability of database software programs is to identify targeted customers and print A. sales catalogs. C. mailing labels. B. budget reports. D. internal memos. 58. Project-management software can help businesspeople allocate necessary resources and A. hire contractors. C. establish credit. B. schedule tasks. D. authorize payments. 59. Which of the following is a typical reason why businesses keep promotional records: A. To prepare for lawsuits in advance C. To keep each promotion under budget B. To time each promotion appropriately D. To answer employees' questions 60. As the use of marketing information systems continues to grow, it is important for businesses to be concerned with their customers' A. rights to privacy. C. level of service. B. access to credit. D. need for information. 61. What type of information should a company's marketing department review to make sure that enough products are available to meet customer demand for an upcoming sales promotion? A. Financial C. Operations B. Inventory D. Performance 62. The purpose of a company's operations function is to manage its A. employees. C. communications. B. long-term goals. D. day-to-day activities. 63. A corporation is building a facility in the city's business district. The city requires that the facility meet certain size, style, structural, and usage requirements. These requirements are outlined in the town's A. partnership agreement. C. zoning ordinances. B. health regulations. D. tax code. 64. Employees can help to protect the business from burglary by A. having an emergency number next to the phone. B. following the proper procedures for closing the business. C. turning off all lights and locking the doors at closing. D. putting all cash in the register at night. 65. What are you doing when you are prioritizing your work? A. Assigning others to complete tasks for a project B. Working on two or more activities at the same time C. Determining which activities are the most important D. Involving others in the decision-making process 66. Bill, Tara, and Lauren work for a small manufacturing firm that produces designer jeans. Bill is the fabric buyer, Tara buys the small items needed to construct the jeans, and Lauren sews the jeans. What does Lauren need from Bill and Tara to do her job? A. Zippers, buttons and snaps from Tara and corduroy from Bill B. Buttons, thread, and denim from Bill and zippers from Tara C. Corduroy from Tara and zippers, snaps, and pins from Bill D. Thread, buttons, and zippers from Tara and denim from Bill 67. Karen needs two coworkers to help her with a marketing project. Which of the following is the type of resource Karen needs to complete the project: A. Financial C. Human B. Technical D. Intangible

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

68. Isabelle asks Todd, one of her project-team members, if he has collected all of the information that he needs to start tabulating a survey. What project-management activity is Isabelle performing? A. Monitoring C. Coordinating B. Initiating D. Assigning 69. Which of the following actions will help a business maintain positive, long-term relationships with its vendors: A. Withholding information C. Negotiating aggressively B. Limiting communication D. Solving problems together 70. Because the Frederick Company has space limitations in its warehouse, it needs to have a shelving unit custom made. What type of order is the Frederick Company likely to place with the shelving manufacturer? A. Reorder C. Blanket B. Open D. Special 71. Which of the following are examples of supplies that a business might keep in inventory for employees to use to perform daily administrative and office tasks: A. Staples, paper towels, copy paper, and pliers B. Pens, paper clips, staples, and copy paper C. Paper clips, hammer, envelopes, and pens D. Envelopes, staples, paper towels, and pencils 72. Planning the quantities to produce is an important part of production planning because it helps to A. prevent losses to the business. C. increase consumer demand for the product. B. sequence the steps in production. D. locate the resources needed for the product. 73. Expenses such as payroll and rent that are necessary to the running of a business are called __________ expenses. A. liability C. variable B. fixed D. operating 74. Which of the following is a way that businesses can make good use of any money they save by controlling expenses: A. To buy new equipment C. To obtain bank loans B. To invest in their competitors D. To purchase excess inventory 75. A basic function of business maintenance is A. construction of displays. B. purchase of stock.

C. control of inventory. D. repair of the firm's equipment.

76. Belinda is reviewing departmental reports to determine why the business's outputs have been decreasing steadily over the last six weeks. Belinda is analyzing issues related to A. human resources. C. finance. B. distribution. D. production. 77. A general guideline for putting together an outfit of clothes is to make sure that the outfit A. minimizes personal strengths. C. has several focal points. B. looks as though it is expensive. D. is appropriate for the occasion. 78. In order to set your personal goals, you must have a clear understanding of A. technology. C. yourself. B. human relations. D. social responsibility.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

79. Which of the following tests would help you to develop self-understanding by measuring your clerical perception, motor coordination, and manual dexterity: A. General Aptitude Test Battery C. Scholastic Aptitude Test B. Standard Proficiency Test D. Activities Preference Inventory 80. Taylor works as a public relations manager. His career is in the area of A. marketing research. C. professional selling. B. operations management. D. marketing communications. 81. Successful entrepreneurs enjoy their work and often start their businesses so that they can share their interests and enthusiasm with others. In other words, successful entrepreneurs have __________ what they do. A. concerns about C. apathy for B. passion for D. reservations about 82. Which of the following is a promotional method that enables businesses to introduce new products and generate new sales leads at the same time: A. Trade shows C. Cash rebates B. Sales contests D. Free samples 83. If an employee continuously fails to follow the firm's rules of conduct, the firm is likely to A. change its policies. C. take disciplinary action. B. promote the employee. D. develop quotas. 84. At the Kimball Manufacturing Company, Ken is the production-line supervisor, Sarah is the lead line worker, Margaret is the production-section supervisor, Maggie is the vice president of production, and William is the plant manager. Following a vertical chain of command, who does Ken report to? A. William C. Maggie B. Sarah D. Margaret 85. The primary purpose of developing organizational goals is to A. ensure profitability. C. assign authority. B. provide direction. D. establish loyalty. 86. An employee's role in helping a business meet its organizational goals is affected by the employee's A. comfort with risk. C. job responsibilities. B. benefits package. D. networking abilities. 87. What section of the project charter describes the boundaries of the project? A. Project resources C. Project background B. Project objectives D. Project scope 88. Which A. B. C. D. of the following is the first step in developing a work breakdown structure (WBS) for a project: Ensure that work tasks are being completed in the proper order. Divide the workload into independent work packages. Evaluate the quality of completed activities in relation to the project goals. Determine how long it will take to complete each work task.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

89. Which of the following is a true statement about the responsibilities associated with managing a project team: A. Project managers are often responsible for coordinating the activities of team members from several departments. B. The most important aspect of managing a project team is developing an overall operating budget for the organization. C. Project managers usually require team members to work out any conflicts they have on their own. D. It is more important for effective project mangers to have financial-management expertise than effective communication skills. 90. Which of the following is an activity performed during the close-out phase of a project: A. Sequencing tasks C. Selecting resources B. Documenting results D. Setting goals 91. An important aspect of Jason's job is developing better, more efficient organizational processes. The aspect of quality management in which Jason is involved is A. improvement. C. deviation. B. assuranc e. D. consistency. 92. The Six Sigma framework of quality management takes a disciplined approach to continuously providing better quality and A. assessing competitors. C. changing intermediaries. B. lowering costs. D. increasing visibility. 93. A primary reason it is important for businesses to continuously try to improve work processes is to A. increase efficiency. C. encourage creativity. B. motivate employees. D. communicate effectively. 94. How can management reduce the business's level of risk associated with ethics: A. Allow employees to follow their own set of ethics. B. Train employees about expectations in relation to workplace ethics. C. Assume employees know what constitutes ethical behavior. D. Advise employees that following business ethics depends on the situation. 95. The MIB Company uses protective computer-software programs to minimize losses associated with its customers' financial transactions. It is managing risks associated with A. performance. C. overhead. B. purchasing. D. security. 96. Which of the following is a risk associated with management's failure to follow business regulations: A. Lower insurance premiums C. Expected customer-satisfaction levels B. Financial losses in relation to lawsuits D. Effective reporting methods 97. Which of the following is an element of the planning function of management: A. Training employees C. Setting goals B. Monitoring work D. Assessing performance 98. Jackie is a manager with the SDP Company and is establishing a systematic way for her department to complete a long-term assignment. What function of management is Jackie carrying out? A. Organizing C. Staffing B. Leading D. Controlling 99. Which of the following is a primary staffing consideration when a manager decides to hire a new employee: A. Reimbursement procedures C. Communication methods B. Investment goals D. Necessary skills

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM

10

100. The scope of control that staff members have over their jobs affects the amount of time that a manager spends A. negotiating employee contracts. C. identifying ways to achieve goals. B. developing workplace policies. D. directing their work activities.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

11

1. B Environmental Protection Agency. The EPA is responsible for enforcing federal environmental laws and regulations. The Food and Drug Administration oversees the safety of the food supply and drugs. The Federal Trade Commission enforces a variety of regulations regarding pricing, advertising, and other business practices. The National Transportation Safety Board investigates transportation safety issues. SOURCE: BL:073 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 86-87]. Woodland Hills, CA: Glencoe/McGraw-Hill. 2. C Limited. A limited partnership permits a partner to invest in a business but have limited liability. For example, the amount of the financial responsibility could be limited to the amount the partner invested. Or, a partner could limit his/her time involved in managing the business. Close and "S" are types of corporations. A franchise is a contractual agreement between a parent company and a franchisee to distribute goods and services. Since franchises can be proprietorships, partnerships, or corporations, more information would be needed in this question for franchise to be the correct response. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way (Types of Business Ownership) 3. B Chronological order. When assigning jobs or tasks to employees, managers need to provide employees with precise, easy-to-follow directions. Often, these directions involve performing tasks that need to be completed in a certain order. Then, the directions should be explained in chronological order so the employees will be able to follow them correctly. For example, employees need to know that steps one and two must be completed before step three. If directions are given out of chronological order, employees might not understand or be able to perform as expected. Directions that are explained in complex terminology, in excessive detail, or in technical language may be difficult for employees to understand and follow. SOURCE: CO:119 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 12-13]. Mason, OH: Thomson South-Western. 4. A Sharing and understanding. Sharing means that there must be one who sends the message and one who reacts to it. Understanding means that both sender and receiver grasp the same message. Telling/Informing is a one-way process. All messages have words but meanings are generally not included. Personal beliefs and attitudes determine if you care about a message or not. SOURCE: CO:147 SOURCE: Cheesebro, T., O'Connor, L., & Rios, F. (2007). Communication skills: Preparing for career rd success (3 ed.) [p. 2]. Upper Saddle River, NJ: Pearson Prentice Hall. 5. C Your caller may have difficulty understanding what you are saying. Pace of speech refers to how fast or slowly you speak. If you speak too fast, your listener will have difficulty understanding you. You may also sound rude or pushy. Speaking too slowly may cause the caller to become disinterested in what you are saying. Attitude is reflected by tone of voice rather than by pace of speech. Choosing the wrong words and phrases can be offensive to callers. SOURCE: CO:114 SOURCE: Odgers, P. (2004). The world of customer service (p. 128-129). Mason, OH: South-Western.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

12

6. A Appoint a leader. When participating in group discussions, it is often helpful to appoint a leader so someone will be able to guide and control the discussion. The leader will be able to encourage all members to participate and keep the discussion on track. Without a leader, the group might lose its focus and discuss issues that are not relevant. A leader can keep the discussion moving rather than allow the group to socialize. Also, a leader can prevent others from interrupting or slow down someone who is dominating the discussion. A leader should be assertive rather than aggressive. SOURCE: CO:053 SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill development (2nd ed.) [pp. 328-329]. Mason, OH: South-Western. 7. C The use of toxic chemicals in the environment can result in the extinction of many species of waterfowl. This example indicates that the extinction of waterfowl (the end result or effect) is caused by the use of toxic chemicals (the cause). The public supports increased spending on national security, and a survey reports that over seventy percent of the citizens fear future terrorist attacks: This is an example of the use of a generalization with an example method of presentation organization. Monet and Cezanne were both impressionist artists; however, their painting techniques and use of color varied greatly: This is an example of the compare and contrast method of presentation organization. An example of the enumeration method of presentation organization is as follows: We will begin by discussing the basic steps used in developing effective time management techniques, and the first step is to prioritize all of your commitments. SOURCE: CO:025 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 144-145]. Woodland Hills, CA: Glencoe/McGraw-Hill. 8. B Easily understand it. Effective written communications are those that are presented clearly, in simple language, and in an interesting style so that readers will easily understand the message. Written business messages do not need to be entertaining. When written communications are unclear, complicated, or difficult to understand, readers tend to lose interest and ignore them. Readers should not have to read written communications many times to find out what they really mean. SOURCE: CO:016 SOURCE: Lesikar, R.V., & Flatley, M.E. (2005). Basic business communication: Skills for empowering th the Internet generation (10 ed.) [pp. 23-25]. Boston: McGraw-Hill/Irwin. 9. A Transmittal. A letter of transmittal is usually placed after the title page to give the reader an introduction to the report that follows. While the letter transfers the report from the writer to the reader, it is not called a letter of transferral. A letter of authorization is used by some organizations to grant permission for a report to be prepared. A letter of recommendation presents the views or opinions of one person about anotherusually someone applying for a job. SOURCE: CO:133 SOURCE: Lesikar, R.V., & Flatley, M.E. (2005). Basic business communication: Skills for empowering th the Internet generation (10 ed.) [pp. 346-347]. Boston: McGraw-Hill/Irwin. 10. D Simple progress. Progress reports often are used to provide business managers with brief summaries of information. They are an effective means of keeping managers informed about the status of activities within their departments. Long research reports and detailed annual reports usually provide extensive information in a lengthy format rather than brief summaries. A short biographical report provides information about individuals rather than activities. SOURCE: CO:094 SOURCE: Lesikar, R.V., & Flatley, M.E. (2005). Basic business communication: Skills for empowering th the Internet generation (10 ed.) [pp. 318, 322]. Boston: McGraw-Hill/Irwin.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

13

11. C Benefits and risks. An analytical report is a document that explains and evaluates an issue, opportunity, or problem. An important aspect of developing an analytical report involves providing recommendations for a course of action related to the issue, opportunity, or problem. When providing recommendations, the writer should clearly state both the benefits and risks associated with the recommendation, so the reader(s) can make informed business decisions. Analytical reports may discuss a particular product, a project, or the business's budget, depending on the report topic. SOURCE: CO:185 SOURCE: Bove, C. L., & Thill, J. V. (2008). Business communication today (9th ed.) [p. 407-413]. Upper Saddle River, NJ: Pearson Prentice Hall. 12. C Purpose of the study. A research report is a written document that summarizes an investigation related to a particular issue or problem. A research report contains many elements. The purpose of the study states why the topic at hand is being investigated. The purpose of the study should be described in the report's introduction, which is at the beginning of the report. Stating the purpose of the study is important because it lets readers know what they are reading and why. Proposed solutions to a problem (recommendations) are addressed near the end of the document after the research has been presented. The appendices are segments that include supporting information, and are added to the end of a document. The bibliography contains the list of resources from which the writer obtained information for the report. The bibliography is generally placed at the end of the research reportafter the recommendations section and before the appendixes. SOURCE: CO:186 SOURCE: Walonick, D. (2005). Elements of a research proposal and report . Retrieved July 27, 2009, from http://www.statpac.com/research-papers/research-proposal.htm 13. D Tact. Tact is the ability to say or do the right thing in all circumstances. Tact helps to build good customer/client relations because it shows courtesy and respect to others. Generosity is a willingness to give of oneself or one's means. Character is the combination of traits or the reputation of an individual. Integrity is adhering to an established set of personal ethics. SOURCE: CR:003 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 259). New York: Glencoe/McGraw-Hill. 14. C Build a clientele. A clientele is a body of customers upon which an organization can rely for considerable repeat business. Building a clientele contributes to the success of the business. Obtaining feedback is finding out how customers feel about the store's policies. Segmenting the market involves dividing the total market into smaller, more specific groups. SOURCE: CR:007 SOURCE: Levy, M., & Weitz, B. A. (2007). Retailing management (6th ed.) [pp. 250-251]. Boston: McGraw-Hill/Irwin. 15. A Serve promptly. The disagreeable customer is often surprised and calmed by employees who are composed, courteous, and efficient. When dealing with disagreeable customers, salespeople should serve them promptly in order to eliminate a reason for complaining. Salespeople should observe closely those customers whom they think may be dishonest. Salespeople should avoid interrupting disagreeable customers or acting offended by their unpleasant behavior. SOURCE: CR:009 SOURCE: IS LAP 1Making Mad Glad

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

14

16. D Productive acts that satisfy economic wants. Services are also defined as intangible activities performed by other people for a certain amount of money. Examples of economic services are a haircut, a physical exam, and dry cleaning. Physical objects that are useful, scarce, and transferable are economic goods. Both goods and services require distribution. SOURCE: EC:002 SOURCE: EC LAP 10Get the Goods on Goods and Services (Goods and Services) 17. C Resources. Economic resources are the natural and human resources and capital goods used to produce goods and services. Economic incentives are the monetary motivations for engaging in economic activity. An economic model serves to illustrate a point about economic happenings. SOURCE: EC:003 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 53). Woodland Hills, CA: Glencoe/McGraw-Hill. 18. B Storing and retrieving information. Information management includes/requires an effective system for storing and retrieving information. A system for researching customers' needs would be used in marketing. Systems for hiring appropriate employees and for conducting employee evaluations would be used in human resources management. SOURCE: EC:071 SOURCE: EC LAP 19Strictly Business (Business Activities) 19. C Lack of competition. Government ownership eliminates competition, which may result in higher prices, smaller selections, and lower product quality. Government ownership usually includes det ailed central planning. Resources may be used less efficiently because businesses are not free to increase their productivity by finding less costly and time-consuming methods of production. SOURCE: EC:007 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 93-94). Tinley Park, IL: Goodheart-Willcox. 20. C By increasing tax dollars paid to government. Profitable businesses can expand, hire more workers, and invest in new businesses. All of these help to make the economy stronger and healthier because they result in more tax dollars paid to the government. The government uses the additional tax dollars to pay for services and programs, such as education and defense, which benefit all citizens. Profitable businesses meet consumers' wants and needs by developing new and improved goods and services, conserving resources for future use, and conveniently serving customers. SOURCE: EC:010 SOURCE: EC LAP 2Risk Rewarded (Profit) 21. C Capital goods. The use of specialized types of machinery to do specific tasks at high rates of speed is specialization involving capital goods. Capitalism is an economic system that is characterized by free enterprise. Natural resources are resources found in nature. Human resources are the people who use their skills in different jobs. SOURCE: EC:014 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 293-294). Tinley Park, IL: Goodheart-Willcox.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

15

22. C Surplus. Countries strive to export more goods and services than they import in order to maintain high levels of production and sales which assure greater earnings. A trade deficit occurs when imports exceed exports. Balance of trade is the difference between a nation's exports and its imports. Expansion is a form of growth. SOURCE: EC:016 SOURCE: EC LAP 4Beyond US (International Trade) 23. C A cultural belief. The belief that one can be protected from evil by doing certain things can be found in many cultures. Businesspeople need to be aware of different cultural beliefs in order to deal effectively with people from other countries. Cultural baggage includes all the ways people interpret the things that happen in their lives. Many people believe that any practice of another culture that differs from their own is a matter of ignorance when, in fact, the issue is often their own lack of understanding. Some beliefs may be shared by several classes, so the amulet does not define the class. SOURCE: EC:045 SOURCE: Bravewell Collaborative. (2009). The power of beliefs and the importance of culture. Retrieved August 11, 2009, from http://www.bravewell.com/integrative_medicine/philosophical_foundation/beliefs_and_culture / 24. A Directness and impatience. Because of cultural differences, some countries believe that U.S. businesspeople are rude and arrogant. This stems from differing viewpoints about time and work ethic. Americans tend to be direct and to the pointthey often want to "get down to business" right away. Then, they can move on to the next issue or task. In this way, U.S. businesspeople have a very strong work ethic. However, businesspeople from other cultures often want to take time to get know the people with whom they do business, and they tend to take a more relaxed, leisurely approach to business encounters. Because Americans value time, they often become impatient with those who want to take more time for business activities. When this comes across in a negative way, others think these people are rude and arrogant. Politeness, honesty, and dedication are positive attributes, and most foreigners appreciate these characteristics in businesspeople. Being inflexible may be viewed as a strength in some cultures and a weakness in others. Being adaptable is a positive attribute to exhibit in any culture because it indicates that the person has respect for others and has tolerance for differences. SOURCE: EC:130 SOURCE: Ball, D.A., McCulloch, W.H., Frantz, P.L., Geringer, J.M., & Minor, M.S. (2006). International th business: The challenge of global competition (10 ed.) [p. 185]. Boston: McGraw-Hill/Irwin. 25. A Time. The concept of time is an important consideration when doing business with foreigners. In some cultures (e.g., Germany), punctuality is very important; therefore, it is important to be on time to any meetings or social gatherings. In other cultures, time is less important or is viewed differently. For example, in some countries, businesspeople will keep people waiting while they finish another activity, so that s/he can provide the visitor with his/her undivided attention. This action may appear rude to people in some cultures, while it is viewed as a courtesy in other cultures. Spatial issues refer to the amount of personal space (close, distant) different cultures allow during interpersonal interaction. Achievement is the level to which a person reaches his/her personal goals. Education is the type and level of training or schooling that a person has obtained. SOURCE: EC:131 SOURCE: InternationalBusinessCenter.org. (1998-2008). Germany: Behavior. Retrieved July 23, 2009, from http://www.cyborlink.com/besite/germany.htm

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

16

26. A Body language. Body language is a person's nonverbal cuesfacial expressions, movements, posture, and gestures. It is important for foreign businesspeople to understand that gestures, which may be appropriate or positive to people in one country, may be offensive to people in another country. Taking the time to research a country's culture and behavioral expectations can prevent foreign businesspeople from making embarrassing mistakesmistakes that may affect the outcome of business transactions. Verbal skills refer to oral language. Table manners are elements of body language. Gender differences are the different ways in which males and females are perceived in other cultures. SOURCE: EC:132 SOURCE: InternationalBusinessCenter.org. (1998-2008). Brazil: Appearance. Retrieved July 23, 2009, from http://www.cyborlink.com/besite/brazil.htm 27. D Language barriers. Misusing and mispronouncing words in another language can create a lot of misunderstandings and be very embarrassing in a business situation. When language is an issue, it is often best to hire a professional translator for meetings with foreign businesspeople. Nonverbal cues (body language) are gestures, facial expressions, and the way people carry their bodies. The example does not provide enough information to determine if Kevin and Mr. Suzuki have different work ethics or if they have attitude problems related to change. SOURCE: EC:133 SOURCE: Ball, D.A., McCulloch, W.H., Frantz, P.L., Geringer, J.M., & Minor, M.S. (2006). International th business: The challenge of global competition (10 ed.) [pp. 198-200]. Boston: McGrawHill/Irwin. 28. B Both men and woman are expected to wear modest clothing in public. When businesspeople visit a foreign country, they should try to learn about the culture so that they don't do something offensive. Before going to a foreign country, businesspeople should research the country's standards for appearance and dress. For example, wearing shorts or tank tops in Middle Eastern country is exhibiting an inappropriate appearance. Middle Eastern businesspeople would not take foreigners seriously and would be quite offended if they walked around in shorts and tank tops. Other aspects of the culture that foreign businesspeople may want to research include nonverbal behavior such as facial expressions and gestures and communication styles. Because government and religion are closely connected in many Middle Eastern countries, visitors should also understand the religious practices of Middle Eastern countries. SOURCE: EC:134 SOURCE: InternationalBusinessCenter.org. (1998-2008). United Arab Emirates: Appearance. Retrieved July 23, 2009, from http://www.cyborlink.com/besite/uae.htm 29. C Promoted. Employees with initiative have a much better chance of being selected for promotion or advancement because they have shown their willingness to do more. They also enjoy greater job security and, therefore, are much less likely to be threatened by exploitation, termination, or transfer. SOURCE: EI:024 SOURCE: EI LAP 2Hustle! (Taking Initiative at Work) 30. D Stealing. Stealing is taking something that belongs to someone else with no intention of returning it. Misusing company time is a form of stealing because the company is paying for that time, and it cannot be replaced. Ethical employees work during all of the hours for which they are paid. Robbery is theft that involves the use of force, violence, or fear. Pilfering is taking small sums of money or inexpensive items. Shoplifting is theft of goods by customers. SOURCE: EI:004 SOURCE: EI LAP 4Work Right (Ethical Work Habits)

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

17

31. B Accepting the consequences for the decisions he made. When you are willing to accept the consequences (good and bad) of your behavior, which is based on the decisions you make, you are taking responsibility for your actions. In the example, Tim admits that he made a mistake by not conducting computer backup activities, so is accepting the responsibility for his behavior. When you blame others for your actions, you are not accepting responsibility for your behavior. Taking responsibility for your actions often involves admitting and learning from your mistakes and trying to do better in the future, rather than promising not to make any more mistakes. It does not always involve making informed decisions because some people make decisions without knowing all the facts, or they make impulsive decisions. SOURCE: EI:075 SOURCE: McGuirk, S. (n.d.). Personal responsibility and decision making: The moments of truth. Retrieved August 6, 2009, from http://www.hsc.unt.edu/departments/oasis/documents/personal_decision_making.ppt 32. A Planning ahead. If you plan ahead, you leave yourself enough time to complete important tasks, which is important when unexpected situations occur that require immediate attention. Scheduling activities too close together may be stressful, particularly if unexpected situations or delays occur. When you focus on the unimportant details, you are wasting time and energy. Managing work commitments does not always involve organizing others' activities. SOURCE: EI:077 SOURCE: Time Management. (n.d.). Manage your scheduling commitmentssix effective guidelines to get things done (part 1). Retrieved July 31, 2009 http://www.timemanagment.info/111/manage-your-time-scheduling-commitments-sixeffective-guidelines-to-get-things-done/ 33. C Responsible. Positive people accept responsibility for their own actions and don't try to blame others when they make a mistake. They care about their job duties and are willing to learn new tasks or to take on new duties. This makes them valuable employees. Positive people are flexible and adaptable. They are also generous, but that is not important to the business. Whether they are well trained is related to their background rather than their attitude. SOURCE: EI:019 SOURCE: EI LAP 3Opt for Optimism 34. C It tells her how she can improve her performance. Constructive feedback on the job is essential in order for employees to grow professionally. It should be given in a tactful way that does not attack, embarrass, or discourage the recipient. The other alternatives are results of destructive feedback on the job. SOURCE: EI:003 SOURCE: EI LAP 15Grin and Bear It (Using Feedback for Personal Growth) 35. C Manipulative. Assertive people are direct and upfront rather than being manipulative. This is part of honest communication. Assertive people may also be considerate, respectful, or talkative, but these qualities are not necessarily associated with being direct and upfront. SOURCE: EI:008 SOURCE: EI LAP 18Assert Yourself (Assertiveness) 36. B Agree on an alternative. To reach a consensus, the entire group must agree on an alternative. Consensus is not about voting, having a leader, or relying on the majority's opinion because, with consensus, everyone's say is equal. SOURCE: EI:011 SOURCE: QS LAP 17All Aboard

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

18

37. C Allowing followers to take moderate risks. Achievement-oriented leaders allow their followers to take moderate risks. This can lead to greater accomplishments for the team, as well as more confidence for the individuals. Achievement -oriented leaders set challenging goals for their followers, not easy goals. They also provide feedback and expect their followers to take responsibility. SOURCE: EI:027 SOURCE: EI LAP 10High Hopes (Developing an Achievement Orientation) 38. B Explaining how they will benefit. People tend to work harder to achieve a vision or goal if they understand how they will benefit. Therefore, a leader should explain the benefits they will receive so employees will be encouraged to work toward a shared vision. Simply describing the objective or reviewing the new assignment will not encourage employees to work unless they also understand how they will benefit. Generating a profit is a benefit to the business that will not necessarily encourage employees to work unless they will share in the profit. SOURCE: EI:060 SOURCE: DuBrin, A.J. (2004). Leadership: Research findings, practice, and skills (4th ed.) [p. 291]. New York: Houghton Mifflin. 39. A Adapt human relations skills to the different work situations. This approach helps people to get along well with others. A casual relationship is relatively unstructured and has few rules. This is not always appropriate for the job, nor is it appropriate to act the same in all situations with all people. Neither approach would be acceptable when dealing with supervisors, subordinates, and even some coworkers. You may come in contact with a great many people at work, but the number of people is not the most important consideration. SOURCE: EI:037 SOURCE: EI LAP 5Can You Relate? 40. D To meet future financial needs. There are many types of life insurance available to meet an individual's future financial needs. Some types of life insurance have cash value and can be redeemed at the end of the payment period. Other types are intended to make a lump sum payment to beneficiaries upon an individual's death. Many people decide what their financial needs or goals are in the future, and then invest in the types of life insurance policies that will meet those needs. Disability insurance, rather than life insurance, provides income to those who become disabled. Certain types of health insurance will pay for private health care. Individuals name their beneficiaries when purchasing life insurance policies, but that is not why they invest in those policies. SOURCE: FI:064 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (pp. 466-469). New York: Glencoe/McGraw-Hill. 41. C Allow borrowers to use their money for a price. With a lending investment, investors allow borrowers to use their money for a price. The extra money received provides the motivation for lending. With any investment, an investor might decide to hire a financial advisor. No investment avoids risk altogether. Money market accounts (specific lending investments) sometimes require investors to maintain a minimum amount of money in the investment. SOURCE: FI:077 SOURCE: QS LAP 32Risky Business

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

19

42. B Financial plan. The risk of financial loss is the basic risk in business. The key to reducing financial risk is the estimate of financial needs, capital, to support alternative target returns for each aspect of the business. Therefore, the development of a financial plan is a critical step in reducing business risk. The marketing plan is a set of procedures or strategies for attracting the target customer to a business. The information system provides an organized way of gathering, sorting, analyzing, evaluating, and distributing the data the business needs. Cash-flow analysis predicts whether the cash generated by a business can cover the operating expenses and loan repayments. This analysis identifies the need for capital but does not create it. SOURCE: FI:084 SOURCE: BA LAP 2Risk Management 43. C Expenses from gross margin. Cost of goods sold is subtracted from net sales to determine gross margin. Subtracting operating expenses from gross margin calculates net income, or profit. Subtracting liabilities (debts) from assets (items of value) gives a business's net worth, or the value of the business. Operating expenses, the costs of operating a business, would not be subtracted from net worth. Sales revenue, the income of a business, cannot be subtracted from trade credit, which is an agreement whereby the supplier sells products to a buyer but does not require immediate payment. SOURCE: FI:085 SOURCE: FI LAP 5Show Me the Money (Nature of Accounting) 44. D Payroll and benefits. Payroll and benefits are often one of the largest sources of money flowing out of a business because businesses must pay employees for their labor. Many businesses also pay for employee benefits, such as health insurance, paid vacation, sick leave, tuition reimbursements, and retirement savings. Businesses bring money in by selling goods and services. Accounts receivable are all the monies owed to a firm by its customers. Profit and loss indicates if the business is making sufficient money to cover its expenses. SOURCE: FI:091 SOURCE: FI LAP 6Count the Cash (Cash Flow) 45. D Gross profit. Gross profit is determined by subtracting the cost of goods sold/cost of sales from revenue. It is the total amount of money a business makes as a profit before all other remaining expenses have been deducted. Determining the gross profit helps businesses to see how much money they invested in making or obtaining their products versus how much it costs to operate the business. The bottom line is net profit, which is the money remaining after operating expenses are subtracted from gross profit. Cash flow is the movement of money into and out of a business. SOURCE: FI:094 SOURCE: FI LAP 4Watch Your Bottom Line (Income Statements) 46. B Investments. The administration of assets refers to decisions about investments. Each company has assetsthings it owns that are of value. Financial managers are responsible for determining what types of assets the company should own, as well as the proper mix of those assets. Financial managers do not necessarily make decisions about accounting. They do make decisions about company spending, but this is not necessarily involved in the administration of assets. Financing decisions are referred to as the acquisition of funds. SOURCE: FI:354 SOURCE: FI LAP 7Money Matters (Role of Finance)

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

20

47. B An estimate of income and expense for a specific period. A budget is an estimate of income and expense for a specific period. Budgets are made of two large categories, income and expense, and are tied to a specific period of time. A budget might act as a plan for limiting personal spending, but only as it relates to the definition of income and expense. Budgets are not defined as a method for evaluating a manager's performance, mainly because there is often good reason to stray from budgeted amounts. (Budgets are estimates.) A budget can be part of the reason for a business's success, but it must be combined with effective management, well-trained employees, a solid business plan, etc. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks 48. B Determining need. The first task in the HR management activity of staffing is determining need. A company cannot fill job positions with appropriate employees until it knows exactly where human resources are lacking. Determining job descriptions, recruiting, and screening and selecting applicants are all staffing activities that occur after need has been determined. SOURCE: HR:410 SOURCE: HR LAP 35People Pusher (Nature of Human Resources Management) 49. D Easy to communicate and quantify. Explicit knowledge is knowledge or information consisting of words, numbers, codes, processes, and formulas that are easily stored, shared, and quantified (measured). Tacit knowledge is knowledge consisting of personal opinions, experiences, expertise, or understanding that is not easily articulated, stored, or quantified. In some cases, tacit knowledge might evolve from a gut feeling or intuition about something. SOURCE: KM:001 SOURCE: The OR Society. (2003). Explicit and tactic knowledge. Retrieved July 27, 2009, from http://www.orsoc.org.uk/about/topic/projects/kmwebfiles/explicit_and_tacit.htm 50. C An employee deliberately doesn't share information with management that will help the company meet its goals. Knowledge management is the process of leveraging the expertise, insight, and information of internal and external resources to help an organization achieve its goals. If an employee is unwilling to share information that will help the company improve its performance, achieve a competitive advantage, or develop innovative processes, an ethical issue may exist. For example, the employee might be unwilling to share information because s/he has a grudge against a certain manager. Or, the employee might be unwilling to share information with coworkers because s/he wants to use the knowledge as leverage with management for career-advancement purposes. The remaining examples do not provide enough information to determine if an ethical issue exists in relation to knowledge management. SOURCE: KM:002 SOURCE: Wang, Chi-Chien. (2004, September 19). The influence of ethical and self-interest concerns on knowledge sharing intentions among managers: An empirical study. International Journal of Management , Vol. 21, Issue 3, pp. 370-380. 51. A Webcam. A webcam is a video camera that attaches to a personal computer and transmits real-time images through the Internet. Webcams are tools that many businesses use to share information and knowledge through videoconferences with people who are located in different geographic locations. Filters are computer programs that block out unwanted information (e.g., spam). A hyperlink is a component of an electronic document that can be clicked on in order to jump to another place within the document or into a different document. A kiosk is a stand-alone structure located in public places and is designed to provide information and sell products. SOURCE: KM:003 SOURCE: Bove, C. L., & Thill, J. V. (2008). Business communication today (9th ed.) [pp. 21, 49]. Upper Saddle River, NJ: Pearson Prentice Hall.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

21

52. D Injunction. An injunction is a court order forbidding a business or a person to perform certain activities. For example, if a former restaurant-chain employee discloses to others a trade secret, such as the chain's fried-chicken recipe, the restaurant chain can request an injunction, which legally requires the former employee to stop circulating the recipe. A warrant is a legal document granting permission to do something, such as search a building or facility for evidence. An appeal is a request to review the decision of a lower court. A contract is a legal agreement between two or more parties stating that one party is to do something in return for something provided by the other party. SOURCE: KM:004 SOURCE: Nolo. (2009). Trade secret basics faq. Retrieved July 27, 2009, from http://www.nolo.com/article.cfm/pg/5/objectId/90781CA8-0ECE-4E38BF9E29F7A6DA5830/catId/1FBE2D95-203C-4D38-90A2A9A60C6FD618/310/119/FAQ/ 53. A Market share. A company's portion of the total industry sales in a specific market is known as its market share. Increased market share is a positive result for any company. Efficiency refers to how well a company is getting its job done compared to the amount of effort it's putting in. Ethics refer to a business's moral standards. Brand value refers to the worth of a brand. SOURCE: MK:019 SOURCE: MK LAP 3Just Do ItRight (Company Actions and Results) 54. D Creating data. Information management does not involve creating data, just processing it. Information management is the process of accessing, processing, maintaining, evaluating, and disseminating knowledge, facts, or data for the purpose of assisting business decision making. SOURCE: NF:110 SOURCE: NF LAP 3In the Know (Nature of Information Management) 55. A Cellular phones. Many businesses provide their outside salespeople with cellular phones, which enables the business to communicate with salespeople when they are traveling. The benefit of using cell phones is that salespeople can call in orders from distant locations or receive important information from the business that will help them in selling to customers. Data processing gathers and analyzes information but does not communicate with salespeople while they are traveling. Fax machines are not widely used to communicate with salespeople while they are traveling from one customer to another, although a business might fax information to a salesperson's hotel. Voice recognition is a feature of some cell phones. SOURCE: NF:003 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [p. 158]. Woodland Hills, CA: Glencoe/McGraw-Hill. 56. A Including it as a file attachment or by pasting it into the body of the e-mail. If the sender is unsure of the receiver's ability to read a document type, pasting the document into the e-mail is the best choice. If maintaining the format is important and the sender knows the receiver can read the document type, a file attachment is best. While rekeying is a possibility, the amount of time required makes this a poor choice. Hyperlinks lead to places on the World Wide Web or to other places in the document, so cannot be used to locate a file on either a local or network computer. SOURCE: NF:004 SOURCE: Microsoft Corporation. (2003, August 20). Compose and send e-mail messages using Outlook Express. Retrieved August 11, 2009, from http://www.microsoft.com/windows/ie/using/howto/oe/composesend.mspx#EAAA

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

22

57. C Mailing labels. Database software programs have the ability to sort customer lists based on a variety of criteria such as zip code, name, type of business, etc. Once a list of customers has been identified based on specific criteria, the database software can generate mailing labels for the targeted customers. This enables a business to send information to select customers rather than to the entire customer list. Database software programs are not used to print sales catalogs, budget reports, or internal memos. SOURCE: NF:009 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (p. 199). New York: Glencoe/McGraw-Hill. 58. B Schedule tasks. Project management is the process of planning, scheduling, and monitoring the progress of a project to achieve a specific goal. There are computer-software programs available that help businesspeople manage their projects. The software can help businesspeople determine the resources that they will need to complete the project, such as materials and supplies, people (e.g., contractors, employees), and money; however, the software does not handle the hiring process. Software can also help businesspeople schedule the various tasks needed to complete the project on time and within budget. Businesspeople do not use project-management software to establish credit or authorize payments. SOURCE: NF:130 SOURCE: Campbell, G.M., & Baker, S. (2007). The Complete idiot's guide to project management (4th ed.) [pp. 366-367]. New York: Penguin Group. 59. B To time each promotion appropriately. A typical reason businesses keep promotional records is to time each promotion effectively. They also want to evaluate the effectiveness of each promotion. Businesses do not keep promotional records to prepare for lawsuits in advance, although the information may come in handy if there's a dispute about something. Businesses do not keep promotional records for the purpose of answering employees' questions, although the records may be useful in a discussion. Although keeping a promotion within budget is important, it is not the typical reason businesses keep the records in the first place. SOURCE: NF:001 SOURCE: NF LAP 1Record It (Business Records) 60. A Rights to privacy. More and more businesses are using marketing information systems to collect personal information about customers. What businesses do with this information is important because they risk violating their customers' rights to privacy. Businesses need to protect their customers' rights to privacy because customers who feel that businesses have misused their private information may stop buying from those businesses or go so far as to take legal action. Customers' access to credit, level of service, or need for information are not affected by a business's use of a marketing information system. SOURCE: NF:013 th SOURCE: Etzel, M.J., Walker, B.J., & Stanton, W.J. (2007). Marketing (14 ed.) [p. 191]. Boston: McGraw-Hill/Irwin. 61. B Inventory. Companies keep many types of records about their various business activities. Management and employees use the records to make decisions about day-to-day and future actions. The goal of a sales promotion is to stimulate short-term sales. A company that is planning a sales promotion featuring specific products needs to make sure that there are enough products available at the right time to meet the anticipated increases in customer demand. By reviewing inventory reports, employees can see how much stock is available and how much they need to order to ensure stock is available during the sales promotion. Accounting, operations, and performance data do not provide enough information to make an informed decision about inventory issues. SOURCE: NF:014 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

23

62. D Day-to-day activities. Operations management is the process of planning, controlling, and monitoring the day-to-day activities required for the company to function. This includes obtaining and allocating the appropriate type and amount of resources to do the work, such as employees, equipment, and supplies. Strategic management involves determining, monitoring, and managing long-term goals for the company. Communication is the exchange of information, which is necessary in the workplace to complete a wide range of internal and external business activities. SOURCE: OP:189 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 358-359]. Cincinnati: South-Western. 63. C Zoning ordinances. Zoning ordinances are regulations that govern the ways in which land and buildings may be used in certain jurisdictions. In many towns and cities, land is designated for commercial (business) or residential use. Although zoning ordinances vary by community, they may regulate the size of the facility. In many situations, cities require that some buildings be designed to accommodate a certain style (e.g., American colonial). A company that wants to build a facility in a certain location must consider the city's zoning ordinances to make sure that the regulations are compatible with the company's needs and goals. Health regulations are laws that are designed to protect the health and wellbeing of society. A partnership agreement is a written agreement (contract) signed by business partners that specifies the terms of the partnership arrangement. The tax code outlines the tax obligations and laws that individuals and businesses must follow. SOURCE: OP:339 SOURCE: Beatty, J. F., & Samuelson, S. S. (2008). Essentials of business law (3rd ed.) [p. 744]. Mason, OH: Thomson/South-Western. 64. B Following the proper procedures for closing the business. Businesses should establish definite procedures that must be followed in closing and locking the business to reduce the risk of burglary. Locking doors would be one procedure to follow, but some lights should be left on both inside and outside the business. Burglary takes place during hours the business is not opened, so having an emergency number by the phone would not help. SOURCE: OP:013 SOURCE: American Bankers Association (2005). Today's teller: Developing basic skills (p. 164). Washington: Author. 65. C Determining which activities are the most important. When you are prioritizing your work, you are ranking activities in the order of their relative importance. For example, suppose your supervisor wants you to submit a budget analysis on Thursday at 3:00 p.m. and a project-status report for a meeting on Friday at 10:00 a.m. Because the budget analysis takes more time to prepare and is due before the project-status report, you determine that it is important to complete the budget analysis before the project-status report. When you work on two or more activities at the same time, you are multi-tasking. When you assign authority or responsibility to another person, you are delegating. Group decision making occurs when several people are choosing among two or more alternatives or courses of action. SOURCE: OP:228 SOURCE: Eruptingmind.com. (2009). How do I prioritize? Retrieved July 27, 2009, from http://www.eruptingmind.com/how-do-i-prioritize/

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

24

66. D Thread, buttons, and zippers from Tara and denim from Bill. Work efforts are often interdependent workers rely on each other to accomplish a task or goal. In many situations, specific people are responsible for providing specific elements to complete a project or achieve a goal. In the example, Lauren needs several items from Bill and Tara so that she can perform her job of sewing the jeans. Because Bill is the fabric buyer, he is responsible for buying the denim so Lauren can make the jeans. Tara buys the small items needed to make the jeans, so she is responsible for obtaining items such as thread, buttons, zippers, snaps, and pins. Corduroy is a different type of fabric used to make various types of apparel items. SOURCE: OP:230 SOURCE: Campbell, G.M., & Baker, S. (2007). The Complete idiot's guide to project management (4th ed.) [pp. 95-100]. New York: Penguin Group. 67. C Human. Human resources are people who work to produce goods and services. Karen's coworkers are people she needs to help her complete the project. Technical resources might include computers, telephones, and fax machines. Financial resources include monetary lenders and cash. Intangible resources are not capable of being detected through the senses. SOURCE: OP:003 SOURCE: QS LAP 19Get What You Need 68. A Monitoring. Controlling is an important aspect of managing projects effectively. Controlling is the management function that monitors the work effort. Monitoring is periodically checking on the progress of something. Because Isabelle is asking Todd about the status of his work, she is monitoring his work effort. Initiating is the first step of the project-management process, which involves authorizing the work to begin. Isabelle had to coordinate and assign work activities before team members could begin to work on their tasks. SOURCE: OP:340 SOURCE: Campbell, G.M., & Baker, S. (2007). The complete idiot's guide to project management th (4 ed.) [pp. 250, 285-286]. New York: Penguin Group. 69. D Solving problems together. Trust, honesty, and collaboration help a business build positive, long-term relationships with its vendors. When the business and a vendor collaborate, they work together to solve problems and implement strategies that will help both of them achieve their business goals. Limiting communication, negotiating too aggressively, and withholding information may hurt a business's relationships with its vendors. SOURCE: OP:241 SOURCE: Monczka, R.M., Handfield, R.B., Giunipero, L.C., & Patterson, J.L. (2009). Purchasing and th supply chain management (4 ed.) [pp. 114-115, 122-123]. South-Western Cengage Learning. 70. D Special. A special order is a request for a custom product or a product that a vendor does not normally carry in stock. Because the Frederick Company needs a shelving unit that has unusual measurements, the vendor needs to custom make it for the company. An open order is an order for staple goods that is placed with one of several available vendors who can meet the business's immediate requirements (e.g., time, price, quantity). A blanket order is an order that covers all or part of a retailer's seasonal requirements. A reorder is an order for items that the business has previously purchased. There is not enough information provided to determine if the Frederick Company has previously ordered the same custom-made shelves. SOURCE: OP:250 SOURCE: Cash, R. P., Thomas, C., Wingate, J. W., & Friedlander, J. S. (2006). Management of retail buying (p. 208). Hoboken, NJ: John Wiley & Sons.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

25

71. B Pens, paper clips, staples, and copy paper. Inventory is all the stock that a business has on hand. Businesses often carry many types of inventory-items for resale, maintenance supplies, office supplies, etc. Businesses keep office supplies on hand so employees have the tools they need to do their jobs. Types of office supplies that employees use include pens, paper clips, staples, copy paper, envelopes, and pencils. Pliers and hammers are tools. Paper towels and light bulbs are types of maintenance supplies. SOURCE: OP:336 SOURCE: eHow.com. (1999-2009). How to manage office supplies inventory. Retrieved July 29, 2009, from http://www.ehow.com/how_4518917_manage-office-supplies-inventory.html 72. A Prevent losses to the business. A business should try to produce only as much as it can produce well. If production quantities exceed consumer demand, the business will lose money on unsold products. If the business does not produce enough to meet consumer demand, it will lose sales to competitors. Planning production quantities does not help increase demand, locate resources, or sequence production steps. SOURCE: OP:017 SOURCE: BA LAP 1Nature of Production 73. D Operating. Operating expenses include variable and fixed expenses. Variable expenses may be different from month to month, e.g., payroll and supplies. These are directly affected by production or sales. Fixed expenses, on the other hand, remain the same for an extended period of time, e.g., mortgage or rent. A liability is a debt owed either short -term (due in the current fiscal year) or long-term. SOURCE: OP:024 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 767-769). Woodland Hills, CA: Glencoe/McGraw-Hill. 74. A To buy new equipment. One way that businesses can use the money saved by controlling expenses is to buy new equipment. Employees need up-t o-date equipment in order to do their jobs properly and efficiently. Controlling expenses provides businesses with the money they need to obtain new equipment that keeps up with the advances in technology. Buying new equipment helps businesses to remain competitive and earn profits.Businesses would not use money saved by controlling expenses to invest in their competitors, purchase excess inventory, or obtain bank loans. SOURCE: OP:025 SOURCE: Think Big. (2009, April 29). Steps for reducing business expenses. Retrieved August 11, 2009, from http://www.associatedcontent.com/article/1682579/steps_for_reducing_business_expenses. html?cat=3 75. D Repair of the firm's equipment. Maintenance of a business includes repairing the business's equipment and preventing the need for repairs by taking care of the equipment on a routine basis. The visual merchandising, or display, department is responsible for the construction and installation of displays. Purchasing handles the buying of stock, and inventory is monitored by receiving and purchasing. SOURCE: OP:032 SOURCE: Berman, B., & Evans, J.R. (2004). Retail management: A strategic approach (9th ed.) [pp. 318-320]. Upper Saddle River, NJ: Prentice Hall.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

26

76. D Production. Business analysis is the process of investigating and evaluating a business issue, problem, process, or approach. Analysis helps the business determine if it is accomplishing goals or if it needs to make adjustments, so it can accomplish its goals. Businesses analyze many types of situations. Production is the process of producing goods and services. When the business detects production problems (e.g., output decreases), it needs to obtain data to find out why problems are occurring, so it can take the appropriate steps to resolve the problem. Distribution is the business function of moving or transferring the ownership of goods or services from producers to consumers. Finance is the business function that involves the management of money. Human resources are the people who work to produce goods and services. There is not enough information provided to determine if the production issues relate to the production-workers' performance levels, raw materials and inventory shortages, or equipment malfunctions. SOURCE: OP:327 SOURCE: B2T Training. (2009). Essential skills for business analysis. Retrieved August 3, 2009, from http://www.b2ttraining.com/curriculum/training-program/Business-Analyst-Skills/ 77. D Is appropriate for the occasion. The clothing outfits you choose should suit the occasionwhether professional or personal. Colors, patterns, and textures should be well balanced. An outfit should have one focal point and should maximize personal strengths. Clothing that looks, or is, expensive would not be appropriate for all occasions. SOURCE: PD:002 SOURCE: PD LAP 5Brand ME! (Personal Appearance) 78. C Yourself. In order to set goals for yourself, you must have a clear understanding of what your skills and abilities are. You cannot be successful unless you know who you are, what you want to achieve, and what you are capable of doing. An understanding of human relations will help you in your interactions with others. An understanding of technology will help you toward career success. Social responsibility is the duty of business to contribute to the well-being of society. SOURCE: PD:018 SOURCE: PD LAP 16Go For the Goal (Goal Setting) 79. A General Aptitude Test Battery. The General Aptitude Test Battery (GATB) will measure your aptitude in the following areas: verbal, numerical, and spatial aptitude; general learning; form and clerical perception; motor coordination; and finger and manual dexterity. It is often available through the school system. The Activities Preference Inventory is a professionally prepared test created to help you identify your areas of greatest interest by asking you about activities that appeal to you. The Scholastic Aptitude Test and a Standard Proficiency Test are used to determine levels of academic achievement. SOURCE: PD:013 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 258-260). New York: Glencoe/McGraw-Hill.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

27

80. D Marketing communications. Taylor's career in public relations is in the area of marketing communications. Marketing communications involves marketing activities that inform, remind, and/or persuade the targeted audience. Examples of marketing communication techniques include advertising, direct marketing, digital marketing, publicity/public relations, and sales promotion. Taylor's career is not in the areas of operations management, professional selling, or marketing research. Employees working in operations management focus on planning, organizing, coordinating, and controlling the resources needed to produce/provide a business's goods and/or services. Careers in professional selling involve marketing and management activities that determine customer needs/wants and respond through planned, personalized communication to influence purchase decisions and enhance future business operations. Marketing research jobs focus on marketing activities that involve determining information needs, such as designing data-collection processes, collecting data, analyzing data, presenting data, and using data for marketing planning. SOURCE: PD:025 SOURCE: PD LAP 15Go For It! (Careers in Business) 81. B Passion for. Successful entrepreneurs are all passionate and enthusiastic about what they are doing. They enjoy their work, and they often start their businesses so that they can share their natural talents, interests, or hobbies with others. Successful entrepreneurs do not have concerns or reservations about what they are doing; if they did, they wouldn't have started their businesses in the first place. Entrepreneurs certainly are not apathetic or indifferent about what they are doing; they are dedicated to it. SOURCE: PD:066 SOURCE: PD LAP 4Own Your Own (Career Opportunities in Entrepreneurship) 82. A Trade shows. A trade show is a promotional method that many businesses use to introduce new products, generate new sales leads, and contact current customers at the same time. A trade show gives businesses the opportunity to display their products and meet with a large number of potential and current customers. Many businesses spend a significant portion of their promotional budgets on trade shows because they are an effective promotional method. Cash rebates involve returning part of the price a customer pays for a good or service. A sales contest is a way of motivating salespeople to increase their sales performance. Free samples are offers of a small amount of a product. SOURCE: PD:036 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 789-790). Woodland Hills, CA: Glencoe/McGraw-Hill. 83. C Take disciplinary action. A firm's rules of conduct outline its policies and expectations regarding employees' behavior in the workplace. Often, businesses document the rules of conduct in an employee handbook. If employees break the firm's rules of conduct, the firm may take action to discipline the employee. Disciplinary actions that a firm might take include counseling, revoking privileges, and implementing unpaid suspensions. Serious offenses may result in dismissal. Employees who do not follow the company's rules of conduct are not usually promoted. Although it is possible for a business to change certain policies, not all policies address the rules of conduct. For example, the business might change aspects of its selling policies, some of which may not address the sales staff's conduct in relation to the selling process. Quotas are specific goals (e.g., sales dollars) to be met. SOURCE: PD:251 th SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10 ed.) [pp. 529-530, 533-534]. Cincinnati: Thomson/South-Western.

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

28

84. D Margaret. Companies develop a chain of command for employees to follow. The chain of command defines the level of authority and the specific individual who supervises particular employees. Having a chain of command helps provide structure for business. Because Ken is a production-line supervisor, he would report to Margaret, who is the section supervisor. Margaret reports to William, who manages the entire plant. William reports to Maggie, who is the vice-president of production. Because Sarah is the lead line worker, she reports to Ken who is the production-line supervisor. Line workers might report to Sarah. SOURCE: PD:252 SOURCE: Daft, R.L., & Marcic, D. (2001). Understanding management (3rd ed.) [pp. 224-227]. Cincinnati: Thomson/South-Western. 85. B Provide direction. Organizational goals are the overall objectives that a group wants to achieve. Developing organizational goals provides the foundation for and direction to achieve the objectives or desired outcomes. Depending on the nature of the group or organization, one goal might involve achieving a profit, although profitability cannot be ensured. Groups develop organizational charts to outline the chain of command or levels of authority. Organizational goals cannot establish loyalty. SOURCE: PD:254 SOURCE: Associated Content. (2008, October 3). The nature of organizational goals. Retrieved July 31, 2009, from http://www.associatedcontent.com/article/1059363/the_nature_of_organizational_goals.html 86. C Job responsibilities. A business needs its employees to carry out their job responsibilities in order for the business to achieve its overall objectives or organizational goals. Management determines these goals and assigns job responsibilities to the employees who will accomplish the goals. For example, the primary responsibility of an accounts-receivable employee is to process the business's financial receipts. By fulfilling this responsibility, the employee is helping the business achieve its overall goal of acquiring income, so it can continue to operate. The benefits package does not affect the employee's role in helping a business achieve its goals. Employees are given specific goals to accomplish in relation to their jobs, which may or may not include some risk taking. Networking, which is the exchange of information with others for the purpose of professional or business development, may or may not be an important aspect of an employee's job responsibilities. SOURCE: PD:255 SOURCE: Success Factors. (n.d.). Goal management. Retrieved July 31, 2009, from http://www.successfactors.com/goal-management/small/ 87. D Project scope. A project charter is a document that outlines the purpose and terms of the project, describes the team members' responsibilities, and serves as a contract with the project's stakeholders. An important element of the project charter is the project scope. The project scope provides details about the boundaries of the project, including specific deliverables, requirements, and timelines. The project objectives section of the project charter describes the desired outcomes of the project. The project background section describes historical information that is relevant to the project. The project resources section summarizes the various types of resources that will be needed to complete the project (e.g., human resources, materials, etc.). SOURCE: PJ:005 SOURCE: Baker, N. (2009, February 23). Project charter example for every project manager. Retrieved July 28, 2009, from http://www.brighthub.com/office/project-management/articles/5159.aspx

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

29

88. B Divide the workload into independent work packages. A work breakdown structure (WBS) is the process of dividing project tasks into meaningful components to complete the project. The related activities in each component make up the work package. Work packages help the project manager effectively schedule, assign, and monitor project activities. After dividing the entire workload into independent work packages, the project manager can determine timeframes, monitor the work, and evaluate the quality of the work after the activities have been performed. SOURCE: PJ:006 SOURCE: Campbell, G.M., & Baker, S. (2007). The complete idiot's guide to project management (4th ed.) [p. 102]. New York:Penguin Group. 89. A Project managers are often responsible for coordinating the activities of team members from several departments. Many types of projects require the input and skills of team members from different departmentsfinance, legal, production, research and development, etc. When managing crossfunctional project teams, the project manager must understand each team member's role in the project so s/he can effectively coordinate all of the activities that need to be completed for the project. Although the project manager may be responsible for developing a budget for the project, the operations manager is usually responsible for developing the business's operating budget. Because team members have different experiences, skills, and perceptions, project managers may, in some situations, need to intervene and help resolve conflicts. Although financial-management expertise may be important, project managers must have effective communication skills in order to guide the team members' activities and help them to resolve problems and conflicts. SOURCE: PJ:007 th SOURCE: Daft, R.L., & Marcic, D. (2009). Understanding management: Instructor's edition (6 ed.) [pp. 269-270]. Mason, OH: South-Western Cengage Learning. 90. B Documenting results. An important part of closing a project is documenting the project's results. This involves advising the stakeholders of the project's outcomes, which is often provided in a formal report. Setting goals, selecting resources, and assigning tasks in a logical sequence are activities that take place when initiating a project. SOURCE: PJ:008 SOURCE: Campbell, G.M., & Baker, S. (2007). The complete idiot's guide to project management (4th ed.) [pp. 332-333]. New York:Penguin Group. 91. A Improvement. Quality management is the coordination of resources to ensure the degree of excellence of a process, good, or service. Quality improvement involves using a systematic approach to increase the levels of excellence in relation to a process, good, or service. Quality assurance is the processes involved in checking processes or products to ensure that they are consistently meeting the business's quality standards. Deviation is the degree to which a process or product does not meet the business's quality standards. SOURCE: QM:001 SOURCE: BusinessDictionary.com (2009). Quality improvement. Retrieved July 31, 2009, from http://www.businessdictionary.com/definition/quality-improvement.html

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

30

92. B Lowering costs. Quality management involves the coordination of resources to ensure the degree of excellence of a process, good, or service. First implemented by Motorola, Six Sigma is a qualitymanagement framework that involves continuously setting higher goals of perfection. The Six Sigma framework builds upon previous goals to set higher goals in order to continuously improve the quality of the business's goods, services, or processes. An important aspect of the Six Sigma philosophy is continuously lowering costs while improving quality. The ultimate goal is to maximize outputs, have no process or product defects, and minimize production costs. The focus of the Six Sigma framework involves the efficient allocation of its own internal and external resources rather than the assessment of competitors. Continuous improvement may or may not require intermediary changes and increases in visibility. SOURCE: QM:002 th SOURCE: Daft, R.L., & Marcic, D. (2009). Understanding management: Instructor's edition (6 ed.) [pp. 576-577]. Mason, OH: South-Western Cengage Learning. 93. A Increase efficiency. Continuous improvement is an ongoing process that looks for ways to increase the levels of excellence in relation to a process, good, or service. The improvement of processes is often related to increased efficiency. When a business wants to improve efficiency, it is looking for ways to maximize the use of its resources, such as money and time. It might also involve applying employees' skills in new and different ways, which will streamline processes and improve efficiency. Continuous improvement may or may not involve finding ways to motivate employees, encouraging employees' creativity, or communicating more effectively. SOURCE: QM:003 SOURCE: Smith, A. (2008, April 4). Continuous process improvement: The search for efficiency through redesign. Retrieved August 4, 2009, from http://businessmanagement.suite101.com/article.cfm/continuous_process_improvement 94. B Train employees about expectations in relation to workplace ethics. Employees must clearly understand the business's ethical standards and expectations. Offering ethics training can help employees understand the business's rules and ethical standards. Employees who do not have a clear understanding of the business's expectations in relation to ethical behavior put the business at risk. Employees who do not follow the business's ethics guidelines may cross a legal line without knowing they have done so. Because employees' experiences and beliefs often vary and because there are many gray areas in the business world, the business should not allow employees to follow their personal set of ethics or assume that the employees know what the business considers ethical behavior. Ethics are a set of principles that do not vary by situation. SOURCE: RM:041 SOURCE: Head, G. (2005, February). Why link risk management and ethics. Retrieved August 3, 2009, from http://www.irmi.com/expert/articles/2005/head02.aspx 95. D Security. Risk management is a business activity that involves the planning, controlling, preventing, and procedures to limit business losses. Businesses use technology to minimize security risks. One way that businesses control security risks is by installing firewalls on computer networks to prevent computer hackers from obtaining confidential financial data (e.g., customers' credit-card numbers). Another way that businesses control security risk is by limiting employees' access to certain financial information, which often involves the use of passwords and security codes. Purchasing is the function of acquiring goods and services for use in the business or for resale. Overhead is business expenses such as payroll, rent, and utilities. Performance is the degree to which someone or something successfully accomplishes an activity. SOURCE: RM:042 SOURCE: Harwood, M. (2009, July 28). TJX settles data breach for $9.7 million. Retrieved August 3, 2009, from http://www.securitymanagement.com/news/tjx-settles-data-breach-97-million005941

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

31

96. B Financial losses in relation to lawsuits. Risk management is a business activity that involves the planning, controlling, preventing, and procedures to limit business losses. An important aspect of risk management involves complying with laws. If a business does not comply with laws, then it may face a lawsuit. If the business loses the lawsuit, it may be required to pay money to the plaintiff. For example, if an employee is severely injured on the job, s/he might decide to file a lawsuit against the business for negligent behavior. If the court finds that the business acted negligently because it didn't follow safety regulations, then the business may be required to pay the employee, which is costly to the business. Acquiring insurance that offers lower premiums saves the business money and is not always related to business regulations. Customer-satisfaction levels are not always related to the business's compliance issues. Businesses that develop and implement effective reporting methods can minimize their risk in relation to compliance. SOURCE: RM:043 SOURCE: Head, G. (2005, February). Why link risk management and ethics. Retrieved August 3, 2009, from http://www.irmi.com/expert/articles/2005/head02.aspx 97. C Setting goals. The management function of deciding what will be done and how it will be accomplished is planning. An important aspect of the planning function is determining the goals or desired outcomes. All other functions of managementorganizing, staffing, controlling, and directingare affected by the planning function. Monitoring work is an element of the control function of management. Training employees and assessing their performance are elements of the staffing function of management. SOURCE: SM:063 SOURCE: McNamara, C. (1997-2008). Planning in organizations . Retrieved July 29, 2009, from http://managementhelp.org/plan_dec/plan_dec.htm 98. A Organizing. The management function of setting up the way the business's work will be done is organizing. Organizing involves determining how to best use the available resources (i.e., financial, material, human) in the most efficient manner to achieve the business's goals. Leading is guiding or directing the actions of others in a desired manner. Staffing is the management function of finding workers for a business. Controlling is the management function that monitors the work effort. SOURCE: SM:064 SOURCE: McNamera, C. (n.d.). Management function of organizing: Overviews of methods . Retrieved July, 29, 2009, from http://managementhelp.org/orgnzing/orgnzing.htm 99. D Necessary skills. Staffing is the management function of finding workers for a business. An important aspect of staffing involves hiring employees to do the work. To hire qualified employees, the manager must know what skills are needed to perform the work. Investment goals, communication methods, and reimbursement procedures are not primary staffing considerations when a manager decides to hire a new employee. SOURCE: SM:065 SOURCE: Taleo Corporation. (2009). Staffing management . Retrieved July 29, 2009, from http://www.taleo.com/research/g-staffing-management-19.php

ST-BMA-10A

BUSINESS MANAGEMENT AND ADMINISTRATION CLUSTER EXAM KEY

32

100. D Directing their work activities. Directing is the management function of providing guidance to workers and work projects. When managers are directing the staff members' work, they are monitoring and evaluating the work to determine if it is being done correctly. This often involves observing the employees and providing feedback. The scope of control that an employee has over his/her work affects how much a manager directs the employee's work. If an employee has a great deal of control over his/her work, has authority to make decisions about how his/her work is accomplished, and works independently in a responsible manner, then the manager does not need to spend a lot of time directing the employee's work activities. Planning is the management function of deciding what will be done and how it will be accomplished. Identifying ways to achieve goals is an element of the planning function. Negotiating employee contracts is an activity associated with the staffing function of management. SOURCE: SM:066 SOURCE: Management Study Guide. (1998-2009). Directing function of management. Retrieved July 29, 2009, from http://www.managementstudyguide.com/directing_function.htm

Competency-Based Competitive Events *Written Exam* Test: ST-ECON-10A Booklet Number _____

Economics Applications in Business


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

1. The law that requires businesses to hire, train, transfer, and promote employees without regard to race, color, gender, religion, or national origin is the __________ Act. A. Civil Rights C. Robinson-Patman B. Sherman Antitrust D. Federal Reserve 2. A business that fails to protect its employees from unnecessary risk or health hazards on the job may be sued for A. misrepresentation. C. libel. B. negligence. D. incompetence. 3. An advantage to a business of filing Chapter 11 bankruptcy is that the process allows the business to A. liquidate. C. eliminate taxes. B. reorganize. D. sell assets. 4. If all of the individuals who own a business share unlimited liability for the business's losses, these individuals are part of a(n) A. public corporation. C. "S" corporation. B. close corporation. D. general partnership. 5. Which of the following is a characteristic of a business-format franchise: A. Products are bought directly from the supplier. B. Continuous assistance is provided by the franchisor. C. It is the least popular franchise arrangement. D. The name of the business is chosen by the franchisee. 6. Mr. Brown has inherited a small sum of money, and he wants to become a business owner. However, he has a full-time job that he plans to keep and very little time to operate his own business. What type of ownership should he consider? A. Franchise C. Corporation B. Sole proprietorship D. General partnership 7. Which of the following is an example of an economic good: A. Guitar lessons C. Automobile B. Medical exam D. Photo developing 8. Buildings, robots, and blast furnaces that businesses use to produce other goods and services are examples of A. equipment. C. supplies. B. raw materials. D. installations. 9. A farmer recently purchased 1,400 acres of farm land and six new pieces of farm machinery. What categories of resources did the farmer acquire? A. Capital and labor C. Natural and capital B. Natural and land D. Labor and human 10. A transportation service makes sure that its trucks are well maintained and driven with care. This is an example of a way to A. retrain human resources. C. renew natural resources. B. conserve the firm's capital goods. D. increase the number of capital goods. 11. When natural resources are limited, producers who need them are often willing to A. stop production. C. hire more workers. B. pay higher prices. D. expand operations. 12. When consumers attempt to obtain maximum satisfaction from limited resources, they are A. determining needs. C. economizing. B. producing. D. utilizing resources.
Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

13. What are producers most likely to do if they decide their incomes are inadequate? A. Continue to increase production C. Choose not to supply needed resources B. Choose not to make goods and services D. Continue to buy more resources 14. There are seven cookies on a plate in the kitchen. There are 12 hungry cookie monsters. Attempting to make more cookies, the monsters discovered that there was not enough flour to make more. This creates a situation known as A. limited capital goods. C. limited human resources. B. limited natural resources. D. scarcity. 15. Before producing any widgets, a business has total costs of $25,000 that increases to $27,500 when the business produces 1,000 widgets. What is the marginal cost of producing each widget? A. $2.50 C. $25.00 B. $2.75 D. $27.50 16. Selling barbecue supplies at a park picnic area is an example of __________ utility. A. time C. place B. form D. possession 17. Which of the following is characteristic of a buyer's market: A. Low prices C. Low supply B. Steady demand D. High demand 18. Which of the following would affect demand for a consumer magazine: A. The number of inserts in the magazine C. The magazine's delivered circulation B. The usefulness of the magazine D. The cost of advertising in the magazine 19. The first season Mazda marketed the Miata, a small sports car, it was in high demand due to its low sticker price. The following season, in order to increase profits, Mazda raised the price and demand fell. This is an example of A. a seller's market. C. a buyer's market. B. inelastic demand. D. elastic demand. 20. What do consumers, producers, and resource owners need to have in order to make economic decisions? A. Limited liability C. Rationing skills B. Economic incentives D. Information about prices 21. Excess demand and excess supply cause changes in A. market price. C. price index. B. price determination. D. relative price ratio. 22. Which of the following is a good guideline for a business that wants to be socially responsible: A. Offer a safe work environment C. Limit expensive product testing B. Use unethical business schemes D. Promise customers what they want 23. Which A. B. C. D. of the following statements about wholesale trade businesses is true: They operate only from distribution centers. They operate only from mail-order warehouses. They operate from a variety of business premises. They operate in areas convenient to ultimate consumers.

24. Prime Time DVDs wants to borrow cash in order to enlarge the business. The company's efforts to obtain funds are part of the business activity of A. strategic management. C. marketing. B. financial analysis. D. operations management.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

25. Harbor Towers Restaurant is considering hiring a new chef and changing its menu in an effort to increase sales. Which of the business activities should be considered first? A. Financial analysis C. Marketing B. Human resources management D. Operations management 26. Darrin's Daycare needs a reliable method for ensuring that children are released to the proper person, not to a stranger. To address this concern, the daycare needs to A. reduce unnecessary procedures. B. make sure it is headed in the right direction. C. conduct research regarding profit opportunities. D. eliminate process variation. 27. Which of the following is an environmental factor that affects the performance of businesses that market products on a global level: A. Health coverage C. Political risk B. Storage space D. Land formation 28. An example of a barrier that affects businesses that operate in the global environment is a(n) A. import quota. C. trade agreement. B. payroll tax. D. export contract. 29. One reason why a company may decide to do business with international firms is to A. hire diverse employees. C. develop special services. B. reach new markets. D. achieve departmental goals. 30. An important factor that has a significant effect on the general business environment is A. technology. C. reputation. B. geography. D. organization. 31. A nation's government affects the business environment because it A. limits demand. C. establishes taxes. B. controls performance. D. identifies exports. 32. What do businesses often need to do to adapt to today's markets? A. Participate in international trade C. Analyze organizational resources B. Hire new management staff D. Remodel corporate facilities 33. So that the business can adapt to changing markets, it's important for the business to develop an internal environment that encourages A. exclusivity. C. creativity. B. insensitivity. D. transferability. 34. The government owns or controls most resources and businesses in a __________ economic system. A. market C. capitalistic B. communist command D. mixed 35. What type of economic system exists in the United States? A. Traditional C. Socialism B. Communism D. Market 36. One of A. B. C. D. the results of freedom in the marketplace is that people can buy anything they can afford that can legally be sold. people and businesses can own things of value. government decides how to use an individual's private property. businesses use resources efficiently.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

37. Alex owns a guitar, several books, a car, and a telescope. Alex's possessions are examples of A. capital goods. C. private property. B. economic resources. D. equal distribution. 38. The greatest motivating factor in a market economy is the A. thrill of competition. C. satisfaction of doing a good job. B. chance to make a profit. D. opportunity to produce goods and services. 39. If a business's total expenses are greater than its total income, the result will be A. a gain. C. break-even. B. a loss. D. retained earnings. 40. Which of the following is a technique that many businesses use to reward employees whose efficient work habits save money and increase profits: A. Rebates C. Quotas B. Premiums D. Bonuses 41. Which of the following is a way to reduce or eliminate business risk by transferring the risk factor to some other person or business: A. Inspecting office equipment C. Forming a corporation B. Training employees D. Conducting marketing research 42. Which of the following protects businesses from the risk of breach of contract: A. Warranty C. Surety bond B. Guarantee D. Fidelity bond 43. A market that has a large number of buyers and sellers of identical products characterizes A. a monopoly. C. perfect competition. B. an oligopoly. D. monopolistic competition. 44. The federal regulation which prohibits price discrimination is the __________ Act. A. Federal Trade Commission C. Celler-Kefauver B. Sherman Antitrust D. Robinson-Patman 45. In which of the following situations would competition affect the market price of financial services: A. Savings and loan tellers go on strike for higher pay. B. State law requires federal insurance on all bank accounts. C. Computers increase efficiency of all financial institutions. D. A new bank opens in a town served by four financial institutions. 46. In order to have exclusive rights to their literary and artistic works, authors and artists can apply for a A. copyright. C. tariff. B. patent. D. trademark. 47. One way in which government helps to protect business property is by A. setting tariffs. C. issuing bonds. B. granting subsidies. D. registering trademarks. 48. The government uses some of the tax money it collects from individuals and businesses to support public welfare programs. What is the benefit of these welfare programs to businesses in a private enterprise economy? A. Recipients don't have to work. B. Businesses must budget more money for taxes. C. Funds received by recipients are spent in businesses. D. Government has control of how the recipients spend their money.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS C. IRA contributions D. Transaction fees

49. Which of the following can be taxed twice: A. Corporate dividends B. Capital gains

50. The tax that businesses pay on the profits they earn is an example of __________ tax. A. income C. sales B. excise D. property 51. One of the main functions of a country's monetary policy is to A. monitor government spending. C. issue new currency. B. supervise the banking system. D. regulate the economy. 52. A country's easy monetary policy is often used to correct the problem of A. high taxes. C. globalization. B. unemployment. D. import quotas. 53. When consumer spending increases, the demand for money tends to A. increase. C. stabilize. B. decrease. D. contract. 54. Which A. B. C. D. of the following statements is true about the demand for money: As inflation increases, the demand for money decreases. Interest rates do not affect the demand for money. The demand for money is congruent. The demand for money varies.

55. One function of the U.S. Federal Reserve System is to A. regulate the domestic money supply. C. develop international trade regulations. B. establish the national inflation rate. D. determine federal taxation policies. 56. Which of the following statements is true about the Federal Reserve System (Fed): A. As the central bank, the Fed is privately owned by commercial banks. B. The Fed implements monetary policies, which are legislated by the President. C. Although the Fed monitors the money supply, it does not influence economic stability. D. The Secretary of the Treasury serves as the Fed's chairperson. 57. What does a country's government primarily attempt to achieve with its fiscal policy? A. Equality in extending credit C. Increase in gross domestic product B. Balance in exercising influence D. Decrease in economic recessions 58. A government's fiscal policies that are intended to encourage economic growth are known as __________ policies. A. expansionary C. appropriate B. complementary D. realistic 59. Which of the following is an important tool that governments use to keep the economy balanced and running smoothly: A. Fiscal policies C. Monetary systems B. Inflation rates D. Property taxes 60. Who is likely to bear the burden of a tax placed on the producer of a good or service when demand is inelastic? A. The shareholders of the firm, whose dividends will decrease B. The producer, who pays higher production costs C. The residents of the community, whose real estate taxes will increase D. The consumer, who will pay a higher price

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

61. Why do governments often change their monetary policy by increasing the money supply? A. To lower interest rates and encourage economic growth B. To promote excessive spending by the public C. To discourage investment and consumer demand D. To monitor the level of inflation 62. A government often increases its spending and reduces taxes in response to which of the following economic situations: A. Liquidity C. Injunction B. Elasticity D. Recession 63. Which of the following is an example of using efficient equipment to increase productivity: A. Allowing employees to set goals C. Delegating responsibility B. Applying the latest technology D. Asking employees for suggestions 64. Which A. B. C. D. of the following is a true statement about productivity: Productivity is unimportant to businesses. Most businesses try to increase productivity. Productivity cannot be measured. Most businesses reduce productivity to lower prices.

65. A disadvantage of the specialization of labor is A. easier transfer of workers. B. increased production rate.

C. simplified worker training. D. increased worker dependency.

66. What technique is a company using to combat the disadvantages of labor specialization when it expands job tasks to include other like tasks? A. Job enrichment C. Job enlargement B. Job rotation D. Job satisfaction 67. Union members who stop work in order to support the striking members of another union are participating in a __________ strike. A. sympathetic C. limited B. jurisdictional D. wildcat 68. Which of the following is a court order that management might obtain to keep employees from carrying out certain acts: A. Boycott C. Strike B. Lockout D. Injunction 69. Bob has just passed the state exam and become a licensed electrician. For what level of union membership does Bob now qualify? A. Apprentice C. Mediator B. Master D. Journeyman 70. Businesses follow the law of diminishing returns in order to combine the right amount of variable resources to achieve production levels that A. increase expenses. C. control budgets. B. maximize profits. D. restrict revenues. 71. According to the law of diminishing returns, what usually decreases at some point with the addition of more employees if all other factors stay the same? A. Depreciation C. Inequality B. Productivity D. Consumption

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

72. When a business changes the shape of a product, it is creating __________ utility. A. time C. form B. place D. possession 73. A large manufacturing plant operating at a lower per unit cost of production than its many smaller competitors is benefiting from A. economies of scale. C. geographic monopoly. B. barriers to entry. D. higher sales prices. 74. Economies of scale is an economic concept that involves the __________ of a production facility. A. type C. value B. location D. size 75. What usually decreases when the economy is experiencing a period of contraction? A. Unemployment C. Interest rates B. Consumer spending D. Cost of living 76. Which of the following is an economic factor that often causes consumers to reduce spending: A. Family issues C. Low prices B. Personal needs D. Interest rates 77. Because the economy was experiencing a rapid inflation rate and consumer spending fell, the NOP Manufacturing Company had to A. purchase new equipment. C. hire temporary employees. B. increase its inputs. D. reduce its outputs. 78. Low unemployment levels lead to higher wages for employees, which often result in an increase in the A. inflation rate. C. money market. B. price index. D. poverty level. 79. Why might businesses decide to hold on to products to sell later when the economy is experiencing high levels of inflation? A. Income will remain constant. C. Cash will be in short supply. B. Taxes will limit production. D. Prices will continue to rise. 80. As the gross domestic product increases, it is easier for all levels of government to A. carry out their functions. C. reduce their spending. B. maintain trade deficits. D. conserve natural resources. 81. If each citizen in the United States increased the amount s/he spent on U.S. consumer goods, the gross domestic product (GDP) would probably A. decrease. C. stay the same. B. increase. D. not be affected. 82. When a nation's unemployment rates are low, consumer spending tends to A. halt. C. resume. B. decrease. D. increase. 83. Why do governments usually calculate the unemployment rate on a monthly basis? A. To help workers find new jobs C. To determine which businesses are failing B. To detect changes in the economy D. To prepare for receiving less tax money 84. A person who quits one job and spends a short amount of time out of work while looking for a new position is an example of __________ unemployment. A. structural C. cyclical B. frictional D. seasonal

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

85. The best time for a business to purchase new equipment is when A. interest rates are low. C. job growth declines. B. consumer demand decreases. D. the gross domestic product falls. 86. A business borrowed $50,000 at 6% interest to purchase inventory last year and $50,000 at 7.5% interest to purchase inventory this year. How much more interest did the business need to pay to purchase inventory this year than it paid last year? A. $550 C. $600 B. $750 D. $500 87. Your chances of finding and maintaining a job are greatest during the business cycle phase known as A. expansion. C. trough. B. contraction. D. recession. 88. During which phase of the business cycle are industries and businesses producing and selling goods at their maximum? A. Trough C. Peak B. Expansion D. Contraction 89. If the Federal Reserve System increases the cost of borrowing money, what phase of the business cycle is likely to follow? A. Peak C. Contraction B. Expansion D. Trough 90. A nation that exports more than it imports maintains a A. lower standard of living. C. trade deficit. B. balance of trade. D. trade surplus. 91. Promoting U.S. tourism to American tourists is one way that the U.S. government tries to reduce the A. trade deficit. C. cash flow. B. balance of trade. D. balance of payments. 92. In a floating exchange-rate system, currency values are determined by A. the World Trade Federation. C. a nation's import quotas. B. changes in supply and demand. D. a corporation's business strategies. 93. A country is experiencing civil unrest. What is likely to happen to the value of its currency? A. It will decrease. C. It will stabilize. B. It will increase. D. It will not be affected. 94. Businesses that want to trade with foreign countries need to understand the __________ of those countries. A. geographical landmarks C. environmental aspects B. historical significance D. cultural characteristics 95. A group of businesspeople agreed not to hire a job applicant from another country because the group did not understand the person's behavior. The group is practicing a form of A. academic discrimination. C. economic classification. B. peer pressure. D. ostracism. 96. A business that overworks and underpays employees in a country with few labor regulations is often referred to as a(n) A. labor union. C. work -farm. B. sweatshop. D. operating mill.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS

97. Which of the following is a global trade issue that directly affects children in developing countries: A. Labor laws C. Exchange rates B. Tariffs D. Quotas 98. After a business designates categories of expenses in its budget, it A. applies a formula. C. allocates a dollar amount. B. appoints an accountant. D. attaches a time limit. 99. What might result if a business's merchandising budget called for purchasing more goods than customers wanted? A. Surplus profit C. Increased costs B. Additional sales D. Expanded market 100. The difference between a budgeted amount and an actual amount is called A. a variance. C. a safety net. B. the balance sheet. D. financial evaluation.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

10

1. A Civil Rights. The Civil Rights Act requires businesses to hire, train, transfer, and promote employees without regard to race, color, gender, religion, or national origin. The Robinson-Patman Act deals primarily with pricing practices. The Sherman Antitrust Act deals with monopolies and competition. The Federal Reserve Act created the Federal Reserve. SOURCE: BL:001 SOURCE: The U.S. National Archives and Records Administration. (n.d.). Teaching with documents: The Civil Rights Act of 1964 and the Equal Employment Opportunity Commission. Retrieved August 12, 2009, from http://www.archives.gov/education/lessons/civil-rightsact/http://www.archives.gov/education/lessons/civil-rights-act/ 2. B Negligence. A business might be sued for negligence if it does not take reasonable precautions to protect workers from risks or health hazards on the job. The basis of negligence is that the problems could have been easily avoided if the business had made some minor adjustments. Consequently, businesses usually try to make the workplace as safe as possible in order to avoid being sued for negligence. Misrepresentation involves making unrealistic claims about products. Libel is making false statements that harm an individual's reputation. Incompetence involves not having the skills or abilities necessary to perform satisfactorily. SOURCE: BL:001 SOURCE: Beatty, J. F., & Samuelson, S. S. (2008). Essentials of business law (3rd ed.) [pp. 143-144]. Mason, OH: Thomson/South-Western. 3. B Reorganize. There are several forms of bankruptcy and one is Chapter 11. The advantage to a business of filling Chapter 11 bankruptcy is that the process allows the business to reorganize in an attempt to keep operating. Businesses that are unable to pay their debts but think that they can become solvent by reorganizing often file Chapter 11. As a result, they have time to restructure or find additional financing to pay creditors. A business liquidates when it files Chapter 7 bankruptcy. Filing bankruptcy does not eliminate the obligation to pay taxes. As part of reorganizing, a business might sell certain assets to generate income to pay creditors. However, selling assets is not usually considered an advantage. SOURCE: BL:001 SOURCE: Beatty, J. F., & Samuelson, S. S. (2008). Essentials of business law (3rd ed.) [p. 599]. Mason, OH: Thomson/South-Western. 4. D General partnership. With a general partnership, all partners are liable for the debts of the business. If one partner refuses to pay her/his share of the debts, the other partners will be responsible for paying them. Owners of close, public, and "S" corporations have limited liability. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way (Types of Business Ownership) 5. B Continuous assistance is provided by the franchisor. A business-format franchise is a more complex and more popular type of franchise arrangement than the product trade-name franchise. It involves a close, continuous, working relationship between the franchisor and the franchisee. Examples of the businessformat franchise are McDonald's, Holiday Inn, and Jiffy Lube. Products and other materials usually must be purchased from the franchisor's list of approved vendors. The franchisee must operate under the trade name of the franchisor. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way (Types of Business Ownership)

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

11

6. C Corporation. A corporation is owned by stockholders who have purchased stock. By investing in a corporation, Mr. Brown will be one of the owners who will share in the profits of the business but will not be responsible for the day-to-day operations. A general partnership is an agreement in which all partners are liable for a business's losses. A sole proprietorship is a form of business ownership in which the business is owned by one person. A franchise is a contractual agreement between a parent company and a franchisee to distribute goods or services. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way (Types of Business Ownership) 7. C Automobile. In order for something to be called an economic good, it must be a physical object, capable of satisfying human wants and needs, and have monetary value. Of the items listed, the automobile is the only economic good. The other alternatives are economic services. SOURCE: EC:002 SOURCE: EC LAP 10Get the Goods on Goods and Services (Goods and Services) 8. D Installations. Marketers classify industrial goods according to their uses. These classifications include installations that are high-cost, long-lasting items that are used to produce other goods and services. Examples of installations include buildings, robots, and blast furnaces used to smelt iron. Equipment is industrial goods used in the operation of a business, but it is not used in the actual production of a good or service. Raw materials are materials in their natural state such as trees. Supplies are industrial goods that are constantly being purchased and used up in the operation of a business. SOURCE: EC:002 SOURCE: EC LAP 10Get the Goods on Goods and Services (Goods and Services) 9. C Natural and capital. Land is a natural resource, and machinery used to produce goods and services is a capital good. Human resources, or labor resources, are people who work to produce goods or services. SOURCE: EC:003 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 53). Woodland Hills, CA: Glencoe/McGraw-Hill. 10. B Conserve the firm's capital goods. Capital goods are manufactured or constructed items that are used to produce goods and services. Trucks that are taken care of will last longer. Adding more trucks would be an example of increasing the number of capital goods. Natural resources are items that are found in nature and used to produce goods and services. Human resources, or workers, are retrained to develop new skills. SOURCE: EC:003 SOURCE: Burrow, J.L. (2006). Marketing: Instructor's wraparound edition (2nd ed.) [pp. 273, 275]. Mason, OH: Thomson/South-Western. 11. B Pay higher prices. When natural resources are limited, producers often are willing to pay higher prices in order to obtain the resources. Producers would not be willing to stop production because that would force them to go out of business. Limited natural resources would reduce the need for more workers and would discourage producers from expanding operations. SOURCE: EC:003 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 53-54). Woodland Hills, CA: Glencoe/McGraw-Hill.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

12

12. C Economizing. When people economize, they try to get the most for their money. Producing involves creating products from resources. The needs and wants of consumers are determined before goods and services are produced. Resources are utilized in the production of goods and services. SOURCE: EC:001 SOURCE: The Pennsylvania State University. (2009). Cutting corners and economizing. Retrieved August 12, 2009, from http://pubs.cas.psu.edu/FreePubs/pdfs/ui345.pdf 13. B Choose not to make goods and services. Producers must receive enough income so that they are able to continue making or providing goods and services. If they decide that their incomes are inadequate, they may choose not to make goods and services, and production would cease. If their incomes are inadequate, producers probably would not buy more resources or continue to increase production. Resource owners, not producers, supply needed resources. SOURCE: EC:001 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 105-106). Upper Saddle River, NJ: Prentice Hall. 14. D Scarcity. Scarcity is the gap between unlimited wants for goods and services and limited resources. In this case, the cookie monsters' wants are unlimited, and the flour is the limited resource. Natural resources are any resource that is found in nature and used to produce goods and services. Human resources are people, or employees, valued for mental and physical labor. Capital goods are manufactured materials used in the production of goods and services. SOURCE: EC:001 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (p. 4). Upper Saddle River, NJ: Prentice Hall. 15. A $2.50. Marginal cost is the change in cost involved in increasing or decreasing production. It is often used to calculate the extra cost of producing one more item. In this situation, total cost of operating the business is $25,000 before any widgets are produced. To determine the marginal cost of producing each additional widget, first calculate the change in total cost by subtracting the total cost before production from the total cost once production begins ($27,500 - $25,000 = $2,500). The change in total cost is $2,500 from zero production to producing 1,000 widgets. To calculate marginal cost, divide the change in total cost by the number of widgets products ($2,500 1,000 = $2.50). SOURCE: EC:023 SOURCE: Gottheil, F.M. (2002). Principles of economics (3rd ed.) [pp. 182-184]. Mason, OH: SouthWestern. 16. C Place. Place utility is usefulness created by making products available at the location where they are needed or wanted by consumers. Time utility is usefulness created when products are made available at the time they are needed or wanted by consumers. Form utility is usefulness created by changing the form or shape of a good. Usefulness created when ownership of a product is transferred from the seller to the user is possession utility. SOURCE: EC:004 SOURCE: EC LAP 13Use It (Utility) 17. A Low prices. A buyer's market is the best time to buy, since consumers are able to conserve their money by purchasing products at reduced prices. High demand and low supply would indicate a seller's market. Steady demand is not a characteristic of a buyer's market. SOURCE: EC:005 SOURCE: EC LAP 11It's the Law (Supply and Demand)

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

13

18. B The usefulness of the magazine. The primary factor in determining demand is product usefulness, or utility. Consumers will buy magazines that are useful or of particular interest to them. The cost of advertising in the magazine would affect the decision of businesses interested in purchasing advertising. Inserts are advertisements printed on separate sheets for inclusion in newspapers. Delivered circulation would be an indication of demand since it is a figure based on the number of copies sold on newsstands and through subscriptions. SOURCE: EC:005 SOURCE: EC LAP 11It's the Law (Supply and Demand) 19. D Elastic demand. Elastic demand is present when a change in price corresponds to a change in demand. Demand for the Miata fluctuated with the change in the price of the product. Had there been no change in the demand for the car, it would have been an example of inelastic demand. A buyer's market was not established because there was no change in the supply of the car. A seller's market was not established because there was not an increase in demand for the car. SOURCE: EC:005 SOURCE: EC LAP 11It's the Law (Supply and Demand) 20. D Information about prices. Information about prices is necessary in deciding whether to buy, what to buy, and how much to buy. Information is one of the functions of relative prices. Economic incentives are monetary motivators that encourage producers to change and reallocate their resources. In a market economy, these incentives are profit. Rationing is a function of relative prices that determines who gets the goods and services produced or how scarce resources will be distributed. Limited liability is a condition in which business owners risk only the amount of their investment. SOURCE: EC:006 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 534). Woodland Hills, CA: Glencoe/McGraw-Hill. 21. A Market price. Market price is the actual price that prevails in a market at any particular moment. Excess demand and excess supply cause fluctuations in market price. The relative price ratio is the relationship between two prices as compared to each other. The price index compares today's prices with those of previous years. Price determination is the process of setting prices. SOURCE: EC:006 SOURCE: WhiteNova. (2001). Changes in supply, demand, and market equilibrium. Retrieved August 12, 2009, from http://www.whitenova.com/thinkEconomics/supply.html 22. A Offer a safe work environment. Businesses on local, state, and national levels are becoming increasingly aware of the importance of being responsible to consumers, to the community, and to their employees. These businesses offer employees safe, secure places to work; and they follow ethical business practices in developing and maintaining good customer relations. This includes offering honest values and testing products thoroughly. SOURCE: EC:070 SOURCE: EC LAP 20Business Connections (Business and Society) 23. C They operate from a variety of business premises. Wholesale trade businesses are operated in a variety of types of business premises. These include distribution centers, warehouses, trucks, and offices. Traditionally, wholesale trade businesses do not sell to ultimate consumers. SOURCE: EC:070 SOURCE: EC LAP 20Business Connections (Business and Society)

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

14

24. B Financial analysis. Financial analysis includes the process of obtaining funds and using them to achieve the goals of the business. In this case, the goal of Prime Time DVDs is to grow. Marketing is the process of creating, communicating, and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders. Strategic management is the process of planning, controlling, and organizing an organization or department. Operations management is the process of planning, controlling, and monitoring the day-to-day activities required for continued business functioning. SOURCE: EC:071 SOURCE: EC LAP 19Strictly Business (Business Activities) 25. A Financial analysis. This is the process of planning, maintaining, monitoring, controlling, and reporting the use of financial resources. It would show how the business is doing at any point in time, and this would enable Harbor Towers to plan for improvements. Human resources management is the process of planning, staffing, leading, and organizing employees. Marketing is the process of creating, communicating, and delivering value to customers and managing customer relationships in ways that benefit the organization and its stakeholders. Operations management is the process of planning, controlling, and monitoring the day-to-day activities required for continued business functioning. SOURCE: EC:071 SOURCE: EC LAP 19Strictly Business (Business Activities) 26. D Eliminate process variation. Since Darrin's Daycare needs a reliable method for ensuring that children are released to the proper person at the end of the day, the business needs to eliminate process variationa part of operations management. This means the daycare needs to make sure that its end-ofthe-day procedures do not vary/change, so no children are released to a stranger by mistake. Making sure the business is headed in the right direction is part of strategic management, not operations management. Conducting research regarding opportunities is part of marketing. Reducing unnecessary procedures, while part of operations management, is not the solution to the daycare's problem in this case. SOURCE: EC:071 SOURCE: EC LAP 19Strictly Business (Business Activities) 27. C Political risk. The environment in which businesses operate have an effect on their performance. Many businesses market products on a global level so the political situation in different countries is an important environmental factor. Businesses often evaluate the risk of operating in certain countries based on the political stability of the government. If the government is unstable, it may be too risky for a business to operate in that country. Storage space, health coverage, and land formation are not environmental factors that affect the performance of businesses that market products on a global level. SOURCE: EC:104 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2003). Small business management: An entrepreneurial emphasis (12th ed.) [pp. 105-106]. Cincinnati: Thomson/South-Western. 28. A Import quota. The global environment is the general conditions under which businesses operate at an international level. Trade barriers affect the global environment. Trade barriers prevent international trade from occurring. Some trade barriers include tariffs, economic sanctions, embargoes, and import quotas. An import quota is trade restriction that limits amount of goods that can move into a country. Trade agreements, payroll taxes, and export contracts are not trade barriers. SOURCE: EC:104 th SOURCE: Pride, W.M., Hughes, R.J., & Kapoor, J.R. (2008). Business (9 ed.) [pp. 80-81]. Boston: Houghton Mifflin.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

15

29. B Reach new markets. Many companies are experiencing a lot of domestic competition. Because globalization is making international trade a viable option, many of these companies are going to other countries to find new markets that are willing to buy their products. In many situations, entering new markets can help the companies achieve their overall business objectives. A company may develop new goods and services for a new market, but this is not always a feasible option. Companies engage in international business for many reasons but would not do so just to hire diverse employees. SOURCE: EC:104 SOURCE: Gibson, J.L., Ivancevich, J.M., Donnelly, J.H., & Konopaske, R. (2003). Organizations: th Behavior, structure, processes (11 ed.) [p. 54]. New York: McGraw-Hill/Irwin. 30. A Technology. The general business environment is the overall environment that has an impact on most businesses. An important factor that has a significant effect on the general business environment is technology. Advances in technology change the way most companies do business, regardless of size and industry. To remain competive and successful, businesses usually need to keep up with new technology. Geography, reputation, and organization are not factors that have a significant effect on the general business environment. SOURCE: EC:105 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2003). Small business management: An entrepreneurial emphasis (12th ed.) [pp. 33-35]. Cincinnati: Thomson/South-Western. 31. C Establishes taxes. The business environment is the situation or set of circumstances in which a business operates. Taxes are monies that businesses must pay to the government. Most businesses pay many levels of taxeslocal, state (provincial), and federal. These taxes affect a business's profits. Controlling performance, limiting demand, and identifying exports are not government activities that affect the overall business environment. SOURCE: EC:105 th SOURCE: Pride, W.M., Hughes, R.J., & Kapoor, J.R. (2008). Business (9 ed.) [pp. 14-15, 20]. Boston: Houghton Mifflin. 32. C Analyze organizational resources. Organizational resources are everything the business uses to operate. These resources include tangible items such as equipment and capital, as well as intangibles such as patents and brand names. It is important to analyze the resources that are available in order for businesses to adapt to today's markets. They need to determine if they have the capacity to adapt using current resources. For example, a business might find that it needs new equipment in order to increase productivity and remain competitive in today's market. Businesses do not necessarily need to hire new management staff, participate in international trade, or remodel corporate facilities to be able to adapt to today's markets. SOURCE: EC:107 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2003). Small business management: An entrepreneurial emphasis (12th ed.) [p. 41]. Cincinnati: Thomson/South-Western. 33. C Creativity. Creativity is the ability to generate unique ideas, goods, or services. To thrive in the marketplace, a business must to be able to adapt to the markets' changing needs and wants. This often involves developing new products, altering existing products, changing a process, or appealing to a new market segment, which requires creative employees. The business must encourage its employees to voice their ideas by fostering a creative work environment. A business that encourages insensitivity, exclusivity, and transferability is not likely to help it to adapt to today's changing markets. SOURCE: EC:107 SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach (5th ed.) [p. 500]. Mason, OH: South-Western.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

16

34. B Communist command. Communism is a command economic system in which the government is in control of the economic system, and there is no private ownership of the means of production and distribution. In a communistic system, the government decides how, when, and by whom resources will be used. In a capitalistic, market, or mixed economic system, individuals and businesses own and control the means of production and distribution. SOURCE: EC:007 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 94-96). Tinley Park, IL: Goodheart-Willcox. 35. D Market. In countries with market economic systems, individuals and groups rather than the government own or control the means of production. The market system has been operating in the United States for many years. Socialism is an economic system in which government and private ownership of business coexist. Communism is an economic system in which the government owns all business. Traditional is an economic system in which people produce only what they must have in order to exist. SOURCE: EC:007 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 91-99). Tinley Park, IL: Goodheart-Willcox. 36. A People can buy anything they can afford that can legally be sold. The marketplace is any place where buying and/or selling of products takes place. In a private enterprise system, the markets are selfregulated and self-controlled. Government's role is limited. Owning things of value and deciding how to use those things are characteristics of private property. Freedom in the marketplace does not ensure that businesses will use resources efficiently. SOURCE: EC:009 SOURCE: EC LAP 15People Power (The Private Enterprise System) 37. C Private property. Private property is anything of value that people own. It can be business or personal property. Other examples of private property include land, jewelry, buildings, and clothing. Economic resources are the human and natural resources and capital goods used to produce goods and services. Capital goods are manufactured or constructed items that are used to produce goods and services. Equal distribution of goods and services is not possible, even in economic systems set up for that purpose. SOURCE: EC:009 SOURCE: EC LAP 15People Power (The Private Enterprise System) 38. B Chance to make a profit. Profit is the greatest motivating factor in a market economy. The opportunity to produce goods and services, engage in competition, and have the satisfaction of doing a good job are all important to a market economy, but not as motivating as profit. SOURCE: EC:009 SOURCE: EC LAP 15People Power (The Private Enterprise System) 39. B A loss. Unless a business takes in more money than it spends, the business will not gain but lose money. It will also not have retained earningsincome that the business is able to keep. Break-even occurs when income and expenses are equal. SOURCE: EC:010 SOURCE: EC LAP 2Risk Rewarded

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

17

40. D Bonuses. A bonus is an extra payment over and above salary given to an employee as a reward or incentive. Many businesses reward employees for efficient work habits through monetary bonuses and other rewards. Employees who work efficiently usually save money for the business, which in turn increases profits. A premium is an item a business offers free to the purchaser of a particular product. Quotas are specific goals to be met. Rebates are a return of part of the price a customer pays for a good or service. SOURCE: EC:010 SOURCE: EC LAP 2Risk Rewarded 41. C Forming a corporation. Forming a corporation is a way of transferring risk by limiting risk to the investments of shareholders. A corporation is owned by its stockholders, and their risks are limited to losing only the amount of money they have invested in the corporation. Training employees, conducting marketing research, and inspecting equipment may help to prevent risks. SOURCE: EC:011 SOURCE: EC LAP 3Lose, Win, or Draw (Business Risk) 42. C Surety bond. A surety bond is a guarantee that protects a business when another person or business fails to fulfill the terms of a contract between them. A guarantee assures the customer of the quality of the product and promises to refund the purchase price of faulty products. A warranty is a contractual agreement in which the seller promises to repair or replace faulty products. A fidelity bond protects a business from losses due to employee theft. SOURCE: EC:011 SOURCE: EC LAP 3Lose, Win, or Draw (Business Risk) 43. C Perfect competition. Perfect competition seldom exists, but when it does, no one seller or buyer can influence the price. Monopolistic competition has many businesses selling similar products. Oligopoly has a few large companies who control the market. There is no competition in a monopoly because there is only one seller. SOURCE: EC:012 SOURCE: EC LAP 8Ready, Set, Compete! 44. D Robinson-Patman. This regulation states that all businesses purchasing similar amounts and types of merchandise must be charged the same price. The Celler-Kefauver Act protects competitors from takeovers that would limit competition. The Sherman Antitrust Act prevents unregulated monopolies from forming. The Federal Trade Commission Act established a regulatory agency to monitor any business activities that prevent fair competition. SOURCE: EC:012 SOURCE: EC LAP 8Ready, Set, Compete! 45. D A new bank opens in a town served by four financial institutions. The new bank will increase the competition for customers. When given a choice between the same type of good or service, consumers will usually choose the lower priced one. Therefore, the prices of competing services will probably decrease. New regulations, increased efficiency, and striking tellers would all affect prices, but they are not the result of competition. SOURCE: EC:012 SOURCE: EC LAP 8Ready, Set, Compete!

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

18

46. A Copyright. A copyright is legal protection of books and other artistic works granted by government and giving the creators sole rights to them for a certain number of years. Anyone who copies these materials without permission will be guilty of copyright infringement. A patent is legal protection of an invention or a process granted by government to its owners for a certain number of years. A tariff is a tax on imported goods. A trademark is a symbol, design, or word used by a producer to identify a good or service. It may be registered with the government to prevent use by others. SOURCE: EC:008 SOURCE: EC LAP 16Regulate and Protect (Government and Business) 47. D Registering trademarks. Trademarks are symbols, designs, or words used by producers to identify goods or services. They can be registered with the government to prevent their use by others. A subsidy is government financial help given to a business. Bonds are interest-bearing certificates issued by government and promising to pay bond owners a certain sum at a specified time. Tariffs are taxes on imported goods. Both tariffs and bonds raise revenues for the government. SOURCE: EC:008 SOURCE: EC LAP 16Regulate and Protect (Government and Business) 48. C Funds received by recipients are spent in businesses. When government provides funds for the needy, businesses benefit as well. People who receive the funds use them to purchase goods and services they otherwise could not afford to buy. It is not a benefit to any business when people are unable or unwilling to work. In a private enterprise economy, there is very little government control of how the money is spent. It is not a benefit to budget more money for taxes. SOURCE: EC:008 SOURCE: EC LAP 16Regulate and Protect (Government and Business) 49. A Corporate dividends. When corporate income is paid out as dividends, it is taxed at the corporate level before it is taxed as shareholders' income. Capital gains are taxed once, usually as shareholders' income. IRA contributions are taxed onceeither before they're invested or when they're withdrawn, depending on the type of IRA. If transaction fees result in income, they're taxed once as income. SOURCE: EC:072 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (p. 657). New York: Glencoe/McGraw-Hill. 50. A Income. Income tax is a tax on profit. When businesses earn a profit from supplying goods and services to consumers, they pay a certain percentage of that profit to the government. The tax that businesses pay on the profits they earn is not an example of excise or sales tax. Property tax is a tax on material goods rather than on profit. SOURCE: EC:072 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 181-183]. Cincinnati: South-Western. 51. D Regulate the economy. A monetary policy is the government policy that determines the amount of money that will be in circulation and the level of interest rates. By adjusting interest rates and the money supply, a government is able to regulate the country's economy. For example, increasing the money supply and lowering interest rates usually helps the economy to grow. If a government raises interest rates and reduces the money supply, economic growth usually slows down. A country's monetary policy does not supervise the banking system, issue new currency, or monitor government spending. SOURCE: EC:073 SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies (16th ed.) [pp. 279-280]. Boston: McGraw-Hill/Irwin.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

19

52. B Unemployment. If a country is experiencing a time of high unemployment, it often relaxes the monetary policy to stimulate economic growth. For example, interest rates might be lowered to encourage businesses to borrow money to expand. As a result, more jobs become available and the high unemployment problem is eliminated. A country's easy monetary policy is not used to correct the problem of high taxes, globalization, or import quotas. SOURCE: EC:073 SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies (16th ed.) [pp. 278-279]. Boston: McGraw-Hill/Irwin. 53. A Increase. Because a country's government issues and controls its money supply, a nation has a limited amount of paper currency in circulation at any given time. When consumer spending increases, such as during the traditional holiday gift-giving season, the demand or desire for money increases. Money demand does not decrease, stabilize, or contract when consumer spending increases. SOURCE: EC:096 SOURCE: Moffatt, M. (n.d.). What is the demand for money? Retrieved August 12, 2009, from http://economics.about.com/cs/money/a/money_demand.htm 54. D The demand for money varies. Because governments issue and determine how much paper currency is in circulation, they control the money supply. The demand for money varies and is affected by many factors. For example, when consumer spending or inflation increases, the demand for money increases. When interest rates increase, the demand for bonds tends to increase, which usually lowers the demand for money. The term congruent does not affect the demand for money. SOURCE: EC:096 SOURCE: Moffatt, M. (n.d.). What is the demand for money? Retrieved August 12, 2009, from http://economics.about.com/cs/money/a/money_demand.htm 55. A Regulate the domestic money supply. The Federal Reserve System (Fed) is the central banking organization of the United States that monitors and regulates the flow of credit and money. The Fed does not establish the inflation rate, develop international trade regulations, or determine taxation policies. SOURCE: EC:097 SOURCE: Sexton, R. L. (2003). Essentials of economics (p. 396). Mason, OH: South-Western. 56. A As the central bank, the Fed is privately owned by commercial banks. The Federal Reserve System (Fed) is the central banking organization of the United States. It monitors and regulates the flow of credit and money. Although the Fed is closely tied to the government, commercial banks own it. The President appoints members to the Fed's Board of Governors, which is the body that establishes and enforces monetary policies. The President's appointments may influence the make-up of the board, but the President does not legislate the policies. The Fed's policies affect the nation's economy. The Fed's chairperson is a member of the Board of Governorsnot the Secretary of the Treasury. SOURCE: EC:097 SOURCE: Sexton, R. L. (2003). Essentials of economics (pp. 396-399). Mason, OH: South-Western. 57. B Balance in exercising influence. With its fiscal policy, a country's government primarily attempts to achieve balance in exercising influence. The Keynesian economic theory states that governments can influence macroeconomic productivity levels by raising or lowering tax levels and public spending. Finding the right balance between the influences is important to the success of the policy. Fiscal policy does not primarily attempt to achieve equality in extending credit, an increase in the gross domestic product, or a decrease in economic recessions. SOURCE: EC:074 SOURCE: Investopedia.com (n.d.). What is fiscal policy? Retrieved August 12, 2009, from http://www.investopedia.com/printable.asp?a=/articles/04/051904.asp

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

20

58. A Expansionary. A fiscal policy is the government policy that sets levels of government spending and taxation. The type of fiscal policy that a government uses depends on what the government wants the economy to do. For example, if the economy is slowing down and heading into a recession, a government would use an expansionary fiscal policy to encourage economic growth. To do this, the government might spend more and cut taxes to encourage businesses to expand. Complementary, appropriate, and realistic are not types of fiscal policies that are intended to encourage economic growth. SOURCE: EC:074 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 389-391). Upper Saddle River, NJ: Prentice Hall. 59. A Fiscal policies. A fiscal policy is the government policy that sets levels of government spending and taxation. Governments use different fiscal policies to keep the economy balanced and running smoothly. For example, if the economy is slowing down and heading into a recession, a government would increase spending and reduce taxes to encourage growth. If the economy is growing too fast, a government would reduce spending and increase taxes to slow the economic growth. The goal is to maintain a balance that leads to a healthy economy. Governments do not use inflation rates, monetary systems, or property taxes to keep the economy balanced and running smoothly. SOURCE: EC:074 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 391-392). Upper Saddle River, NJ: Prentice Hall. 60. D The consumer, who will pay a higher price. Inelastic demand is a form of demand in which changes in price do not affect demand. When demand is inelastic, the burden of the tax can be shifted to the consumer, who is willing to pay a higher price to meet the same demand. When demand is elastic (that is, when consumers are willing to forego consumption instead of paying more), the producer pays higher production costs, not when demand is inelastic. Residents of the community are not affected in this situation. As owners of the firm, shareholders do not absorb the tax burden in a situation with inelastic demand. SOURCE: EC:098 SOURCE: Clayton, G. (2005). Economics: Principles and practices (p. 225). Columbus, OH: Glencoe/McGraw-Hill. 61. A To lower interest rates and encourage economic growth. A government's monetary policy determines the amount of money that will be in circulation and the level of interest rates. Governments change their monetary policies from time to time in response to various economic situations. For example, a government might increase the money supply to boost a sluggish economy. When more money is in circulation, interest rates tend to decrease which makes it easier for businesses to borrow money and use that money to expand. The result is economic growth. Governments do not increase the money supply to promote excessive spending by the public, to discourage investment and consumer demand, or to monitor the level of inflation. SOURCE: EC:098 SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies (16th ed.) [pp. 278-279]. Boston: McGraw-Hill/Irwin. 62. D Recession. When a government increases its spending and reduces taxes, it is changing its fiscal policy. Governments often change their fiscal policies in response to economic situations such as recession. A recession is a six-months' contraction in GDP. To stimulate the economy and help it recover from a recession, governments often increase spending and reduce taxes. The result is that more money is available, which encourages economic growth. Elasticity, injunction, and liquidity are not economic situations to which governments respond by changing their fiscal policies. SOURCE: EC:098 SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies (16th ed.) [p. 215]. Boston: McGraw-Hill/Irwin.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

21

63. B Applying the latest technology. Workers can increase their productivity if they have the latest and best equipment with which to work. Businesses should keep up with improvements in technology in order to update equipment as needed. The other alternatives relate to participative decision making and may, or may not, involve the use of equipment. SOURCE: EC:013 SOURCE: EC LAP 18Make the Most of It (Productivity) 64. B Most businesses try to increase productivity. Increased productivity provides greater profits for the business and enables it to compete more effectively. Businesses can increase productivity in several ways, such as providing updated equipment, training employees, and paying fair wages. Productivity is important to a business and can be measured in a variety of ways. One way is to measure the monetary value of work produced. Reduced productivity would probably mean higher prices. SOURCE: EC:013 SOURCE: EC LAP 18Make the Most of It (Productivity) 65. D Increased worker dependency. Specialization of labor means that workers need to rely on each other because each one does only part of the whole job. This is a disadvantage of specialization because if one worker is slow or doesn't do the work properly, everyone involved is affected. Increased production rate, simplified worker training, and easier transfer of workers are all advantages of the specialization of labor. SOURCE: EC:014 SOURCE: New World Encyclopedia. (2008, October 16). Division of labor: Disadvantages . Retrieved August 12, 2009, fromhttp://www.newworldencyclopedia.org/entry/Division_of_labor 66. C Job enlargement. A company may enlarge the jobs of its employees in order to combat boredom and repetition. Job rotation occurs when a company rotates employees through different departments. Job enrichment occurs when a company adds interest to tasks to increase satisfaction. Job satisfaction exists when employees like what they are doing. SOURCE: EC:014 SOURCE: Reh, F. (2009). Job enlargement . Retrieved August 12, 2009, from http://management.about.com/cs/people/g/jobenlargement.htm 67. A Sympathetic. Sympathetic strikes are often carried out by another local union belonging to the same national union as the striking union. A jurisdictional strike arises from a conflict between two competing unions over which union should be permitted to do a particular kind of work. A wildcat strike occurs when members of a local union stop work without the consent of their national organization. Union strike activities are limited by union rules, but limited does not refer to a type of strike. SOURCE: EC:015 SOURCE: EC LAP 5Organized Labor 68. D Injunction. An injunction is a common strategy used by management during labor disputes. It is a court order which forbids employees from carrying out certain activities such as picketing or destroying property. A lockout occurs when management refuses to allow employees to work. A boycott occurs when union members refuse to buy a company's products. A strike occurs when union members refuse to work. SOURCE: EC:015 SOURCE: Beatty, J. F., & Samuelson, S. S. (2008). Essentials of business law (3rd ed.) [p. 382]. Mason, OH: Thomson/South-Western.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

22

69. D Journeyman. A journeyman is a skilled craftsman who has taken courses in an occupational area, has passed an exam, and has been licensed by the state. A master is a skilled craftsman or tradesman who has worked as a journeyman and who is a team leader for other employees in the same occupation. An apprentice is a worker who is just beginning in an occupation. A mediator is not a level of union membership but a person who is involved in union negotiations. SOURCE: EC:015 SOURCE: Montgomery County Government. (2002-2009). When is a journeyman electrician's license required? Retrieved August 12, 2009, from http://permittingservices.montgomerycountymd.gov/dpstmpl.asp?url=/permitting/l/nfje.asp 70. B Maximize profits. Businesses realize that they need to combine the right amount of variable resources in order to achieve production levels that maximize profits. Too many of one type of resource, such as employees, will eventually reduce the level of productivity according to the law of diminishing returns. When the level of productivity decreases and costs remain the same or increase, businesses lose money. Properly combining resources allows businesses to achieve high production levels and maximize profits. Businesses do not follow the law of diminishing returns in order to control budgets, increase expenses, or restrict revenues. SOURCE: EC:023 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 109-110). Upper Saddle River, NJ: Prentice Hall. 71. B Productivity. The law of diminishing returns states that if all the factors of production remain the same except one, additions to the one variable factor will eventually decrease the level of productivity. Most businesses are most productive with a certain number of employees because there is only a certain amount of space, equipment, and supplies available. When a business hires additional employees but does not increase these other factors, overall productivity eventually decreases because employees get in each other's way and do not have the equipment they need. Depreciation is the reduction in value of goods occurring over a period of time. Inequality means that two or more entities are not equal. Consumption is the process or activity of using goods and services. SOURCE: EC:023 SOURCE: Gottheil, F.M. (2002). Principles of economics (3rd ed.) [pp.173-175]. Mason, OH: SouthWestern. 72. C Form. Changing the shape of a product makes it more useful to consumers, e.g., sand into glass. Place utility is created when products are available where they are needed. Ti me utility is created when products are available when they are needed, and possession utility is created when ownership of a product is transferred from the seller to the person or business that will use it. SOURCE: EC:004 SOURCE: EC LAP 13Use It (Utility) 73. A Economies of scale. A larger firm can often use its personnel, equipment, and plant more efficiently, resulting in economies of scale. Economies of scale can be a barrier to entry, but in this case there are many small competitors, indicating that entry is not a hurdle. A geographic monopoly results from a plant's location, not from its size. Lower per unit cost of production can benefit a large manufacturing plant by resulting in lower sales prices, not higher ones. SOURCE: EC:077 SOURCE: Clayton, G. (2005). Economics: Principles and practices (p. 170). Columbus, OH: Glencoe/McGraw-Hill.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

23

74. D Size. Economies of scale is the concept that increasing the scale of production will lead to a decrease in the cost of production while increasing the output. The concept is based on the idea that increasing the size of a production facility will make it possible to increase production while decreasing the cost of producing each item. In other words, it is more economical to operate a large plant than to operate a small plant. The concept of economies of scale does not involve the location, value, or type of a production facility. SOURCE: EC:077 SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies (16th ed.) [pp. 404-406]. Boston: McGraw-Hill/Irwin. 75. B Consumer spending. Business cycles are the periods of expansion and contraction in economic activities. During the contraction stage of the business cycle, product demand and consumer spending decrease, while unemployment and loan interest rates increase. Consumer spending decreases because people are concerned about the state of the economy. Also, many people may be out of work and not have money to spend. Interest rates increase during this time, which also increases the cost of living. SOURCE: EC:081 SOURCE: Burrow, J. (2006). Marketing (2nd ed.) [p. 395]. Mason, OH: South-Western. 76. D Interest rates. When interest rates increase, consumers often reduce spending, particularly on expensive items that they finance or buy on credit. The higher interest rates make these purchases even more costly. When consumption decreases, there is less demand for goods so production also decreases. The result often is a downturn in the economy. Therefore, the level of consumer spending is a good indicator of the health of the economy. Personal needs and family issues are not economic factors that cause consumers to reduce spending. Low prices often encourage consumers to increase spending because they think they are getting more for their money. SOURCE: EC:081 SOURCE: Arnold, R.A. (2004). Economics (6th ed.) [p. 185]. Cincinnati: Thomson/South-Western. 77. D Reduce its outputs. Inflation refers to the rise in prices within an economic system. When inflation levels are high, the economy often experiences a period of contraction. Consumer purchasing power decreases, which often reduces the demand for goods and services. To stay in business, the NOP Manufacturing Company might reduce outputs (e.g., production, personnel) because of a lower demand for its products. When outputs decrease, the inputs also decrease. Interest rates are often low during an economic expansion, which means it costs less to obtain loans for large purchases (e.g., equipment). SOURCE: EC:083 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 118-120). Tinley Park, IL: Goodheart-Willcox Company. 78. A Inflation rate. Many factors have an effect on the inflation rate and are also affected by the inflation rate. In business, low unemployment levels often lead to higher wages for employees because there are fewer people looking for work, and businesses must be competitive to attract skilled employees. This often means that businesses pay higher wages to get and keep qualified workers. Increases in wages often result in an increase in the inflation rate. On the other hand, a decrease in the inflation rate often results in higher unemployment levels and lower wages for employees. Low unemployment levels and higher wages do not result in an increase in the price index, the money market, or the poverty level. SOURCE: EC:083 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 342-343). Upper Saddle River, NJ: Prentice Hall.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

24

79. D Prices will continue to rise. When inflation is at a high level, prices are also high. During times of inflation, prices often continue to rise. As a result, some businesses might decide to hold on to products to sell later because they anticipate that prices will continue to increase and they can sell products for more at a later time. Consequently, inflation can cause a decrease in supply because businesses are waiting to sell products at the highest price possible. Businesses do not hold on to products to sell later because taxes will limit production, cash will be in short supply, or income will remain constant. SOURCE: EC:083 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 119-120). Upper Saddle River, NJ: Prentice Hall. 80. A Carry out their functions. As the GDP rises, more people are employed and more businesses are started; therefore, all levels of government have more tax dollars with which to work. Under these circumstances, the government usually increases its spending for domestic and defense programs. Conserving natural resources is not the responsibility of all levels of government. Trade deficits occur when the country imports more goods than it exports. Government would not want to maintain trade deficits because a trade deficit lowers the GDP. SOURCE: EC:017 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 313-314). Upper Saddle River, NJ: Prentice Hall. 81. B Increase. Personal consumption expenditures, a GDP component, represent all of the consumer goods sold during the year. An increase in the sale of consumer goods will result in an increase in GDP unless there is a drop in one of the other GDP components such as government purchases, private investment, or net exports. SOURCE: EC:017 SOURCE: Pride, W. M., Hughes, R. J., & Kapoor, J. R. (2008). Business (9th ed.) [pp. 19-20]. Boston: Houghton Mifflin. 82. D Increase. During the expansion phase of a business cycle, business tends to grow and unemployment rates tend to drop. Because unemployment rates are relatively low, people are working and earning money, which increases consumer spending. To resume something means to start after it has stopped. Consumer spending may decrease when unemployment rates are high, but it does not stop (halt); therefore, it cannot resume. SOURCE: EC:082 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 333-334). Upper Saddle River, NJ: Pearson Education, Inc. 83. B To detect changes in the economy. The unemployment rate is an indication of the health of the economy. If the rate is low, then most people who want to work have jobs and income to support themselves. If the unemployment rate starts to increase, it is an indication that workers are losing their jobs, which might result in a slowdown in the economy. By calculating the unemployment rate on a monthly basis, governments are able to detect changes in the economy at an early stage. Then, they may be able to take steps to correct problems before they become serious and lead to a recession. Governments do not calculate the unemployment rate to help workers find new jobs, determine which businesses are failing, or prepare for receiving less tax money. SOURCE: EC:082 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 334-335). Upper Saddle River, NJ: Prentice Hall.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

25

84. B Frictional. Frictional unemployment describes people who are temporarily between jobs. These people have the skills and training they need to work but are unemployed because they are looking for jobs or are between jobs. They will be out of work for only short periods of time; therefore, they do not contribute to the national unemployment problem. Structural unemployment results when people have job skills, but the jobs that require those skills do not currently exist. Cyclical unemployment occurs during periods of time when there is low demand for workers. Seasonal unemployment occurs when people are out of work because of factors that involve the time of year. SOURCE: EC:082 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (p. 331). Upper Saddle River, NJ: Prentice Hall. 85. A Interest rates are low. Interest is the money payments for the use of borrowed money. Payment amounts vary when interest rates change. The best time for a business to make an expensive purchase is when the interest rates are low because the business will pay less money to finance the loan so it can obtain the equipment. Low interest rates are common during an expansion of the business cycle. Declines in consumer demand, job growth, and the gross domestic product are economic conditions that often occur when the business cycle experiences a contraction. SOURCE: EC:084 SOURCE: O'Sullivan, A., & Sheffrin, S.M. (2003). Economics: Principles in action (pp. 312-313). Upper Saddle River, NJ: Prentice Hall. 86. B $750. An increase in interest rates affects businesses by making it more expensive to borrow money for routine operating activities such as purchasing inventory. If a business borrowed $50,000 at 6% interest, it paid $3,000 in interest ($50,000 x 6% or .06 = $3,000). If it borrows $50,000 at 7.5% interest, it pays $3,750 in interest ($50,000 x 7.5% or .075 = $3,750). Subtract the previous interest from the current interest to determine how much more it costs the business to purchase inventory this year ($3,750 $3,000 = $750). SOURCE: EC:084 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 441-442]. Cincinnati: South-Western. 87. A Expansion. This stage of the business cycle is characterized by increased spending and borrowing, increased demand for goods and services, increased employment rates, and decreased interest rates on loans. During contraction, businesses begin to lay off workers, while during a trough, unemployment is very high. A recession is not a business cycle but a six-month contraction in economic activity. SOURCE: EC:018 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 64-67). Woodland Hills, CA: Glencoe/McGraw-Hill. 88. C Peak. Peak is the top of the business cycle where productivity and sales are considered the highest. During the expansion phase, productivity and sales are increasing. Trough is characterized by very low production and small sales. Contractions are characterized by a decrease in production and sales. SOURCE: EC:018 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 64-67). Woodland Hills, CA: Glencoe/McGraw-Hill.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

26

89. C Contraction. Contraction is the phase of the business cycle characterized by decreased demand for goods and services, rising unemployment, increased saving by consumers, and reduced sales and profits for businesses. Raising interest rates slow business activities, and the contraction phase often follows. Expansion is the first stage of the business cycle, characterized by increased spending and borrowing, increased demands for goods and services, increased employment rates, and decreased interest rates on loans. Peak is the second phase of the business cycle, which is the high point of economic activity and during which demand begins to exceed production capacities. Trough is the fourth phase of the business cycle, which is considered the low point of economic activity and is characterized by high rates of unemployment and business failure. SOURCE: EC:018 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 64-67). Woodland Hills, CA: Glencoe/McGraw-Hill. 90. D Trade surplus. A trade surplus exists when a nation's exports are greater than its imports. A trade surplus increases the gross domestic product and can lead to a higher standard of living and more job opportunities. A balance of trade is the difference between the exports and imports of a nation. A trade deficit exists when imports are greater than exports. SOURCE: EC:016 SOURCE: EC LAP 4Beyond US (International Trade) 91. A Trade deficit. A trade deficit is an unfavorable balance of trade in which a nation's imports are greater than its exports. Nations try to sell or export more than they buy in order to make more money than they spend. By promoting U.S. tourism to Americans, the government is trying to encourage citizens to spend their vacation money in the U.S. This tactic helps to reduce the trade deficit by keeping the U.S. dollars spent on vacations in the U.S., rather than having the money spent in foreign countries. Balance of trade is the difference between the value of a nation's exports and its imports. Cash flow is the movement of money, or cash, into and out of a business. Balance of payments is the difference between all monies coming into a country and going out of a country. SOURCE: EC:016 SOURCE: EC LAP 4Beyond US (International Trade) 92. B Changes in supply and demand. The value of a nation's currency fluctuates in a floating exchange-rate system. Although many factors can affect the value of a nation's currency, the floating-exchange rate is driven by the supply of and demand for the currency. For example, suppose that a lot of people want to exchange their currencies for the U.S. dollar on Tuesday. The increase in demand will cause the price of the U.S. dollar to increase. If demand drops, so will the value of the U.S. dollar. A specific nation's import quotas, a powerful corporation's business strategies, and the activities of the World Trade Federation may affect the supply or demand for a particular nation's currency. SOURCE: EC:100 SOURCE: Lowe, R.E., Malouf, C.A., & Jacobson, A.R. (2003). Consumer education & economics th (5 ed.) [pp. 178-179]. New York: Glencoe/McGraw-Hill. 93. A It will decrease. A country's economic and political stability can affect the value of its currency. If a country is experiencing civil unrest, its political environment is volatile. Because foreign business partners and investors are uncertain about the country's future, they are likely to decrease their business activities, causing the country's currency value to decrease. The value of the currency in a politically unstable environment is not likely to increase, stabilize, or remain unaffected. SOURCE: EC:100 SOURCE: Lowe, R.E., Malouf, C.A., & Jacobson, A.R. (2003). Consumer education & economics th (5 ed.) [pp. 178-179]. New York: Glencoe/McGraw-Hill.

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

27

94. D Cultural characteristics. The cultural characteristics of a country include the customs, habits, and traditions of the people who live in that country. Businesses that want to trade with foreign countries need to understand their unique cultural characteristics because culture has an effect on what people in other parts of the world want to buy. Some products need to be modified in order to make them appealing to people in other countries. Also, the marketing techniques that a company uses may need to be changed in order to conform to the way that business is conducted in foreign countries. Businesses do not need to understand the geographical landmarks, historical significance, or environmental aspects of foreign countries in order to trade with them. SOURCE: EC:045 SOURCE: Johansson, J.K. (2000). Global marketing: Foreign entry, local marketing & global management (2nd ed.) [pp. 60-61]. Boston: Irwin/McGraw-Hill. 95. D Ostracism. Ostracism is the practice of excluding an individual from a group because of his or her behavior. People from one culture may ostracize people from other cultures because they do not understand them. Peer pressure, the pressure of one's peers to behave in certain ways, might, or might not, lead to ostracism. Economic classification is the practice of grouping people according to their economic status. Academic discrimination is a bias based on an individual's academic achievement. SOURCE: EC:045 SOURCE: Hitlan, R. (n.d.). Workplace ostracism. Retrieved August 12, 2009, fromhttp://www.uni.edu/~hitlan/Hitlan_GD_RevisionC.pdf 96. B Sweatshop. A business that overworks and underpays its employees is often referred to as a sweatshop. Some businesses move their manufacturing operations to developing countries that do not regulate working conditions and wages in order to cut costs and maximize profits. A labor union is a group of workers who have come together for a common purpose to improve the terms and conditions under which employees work. Work-farm and operating mill are not terms commonly used to describe the characteristics of a business that overworks and underpays employees in a country with few labor regulations. SOURCE: EC:101 SOURCE: Global Exchange (2007, April 3). Sweatfree campaigns . Retrieved August 12, 2009, from http://www.globalexchange.org/campaigns/sweatshops/ 97. A Labor laws. To protect children, many countries regulate the number of hours, wages, and ages that children can work. Because some countries do not regulate children's working conditions, it is possible for some unscrupulous businesses to hire very young children to work long hours for very little pay. Many countries and international organizations are working to create awareness and improve working conditions in areas where there are no labor laws to protect children. A tariff is a tax on imported goods. Exchange rates refer to the value of a nation's currency in relation to another nation's currency. A quota is a trade restriction that limits the quantity of goods that can move into or out of a country. Tariffs, exchange rates, and quotas are not global trade issues that directly affect children in developing countries. SOURCE: EC:101 SOURCE: Koschwanez, T. (2004, November 17). Child labor a global issue. Retrieved August 12, 2009, from http://media.www.westerncourier.com/media/storage/paper650/news/2004/11/17/News/Child .Labor.A.Global.Issue-807787.shtml

ST-ECON-10A

ECONOMICS APPLICATIONS IN BUSINESS KEY

28

98. C Allocates a dollar amount. After a business designates categories of expense in its budget, it allocates a dollar amount. When developing a budget, a business organizes its budget information by creating categories for items such as rent, insurance, and utilities. Once the categories are designated, management allocates a dollar amount to each one. After designating expense categories, businesses do not necessarily apply a formula, appoint an accountant, or attach a time limit to each category. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks (Nature of Budgets) 99. C Increased costs. Merchandising budgets determine inventory levels by regulating and planning for the amount of products expected to be sold to customers. When there is more merchandise available than customers want, the business's costs increase for storing, protecting, and insuring the excess merchandise. Accurate merchandising budgets help prevent this situation. Purchasing more goods than customers want to buy will not help a business to increase its sales, expand its market, or generate surplus profit. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks (Nature of Budgets) 100. A A variance. The difference between a budgeted amount and an actual amount is called a variance. A balance sheet is a snapshot of a company's financial condition, with no direct connection to the differences between budgeted and actual amounts. Such a difference is not a safety netit might even be an alarm. A difference is not a financial evaluation either, just a difference that must be evaluated. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks (Nature of Budgets)

Competency-Based Competitive Events *Written Exam* Test: ST-FIN-10A Booklet Number _____

Finance Cluster Exam


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

ST-FIN-10A

FINANCE CLUSTER EXAM

1. What is one of the main sources of law in the United States? A. United Nations C. U.S. Constitution B. Supreme Court D. Electoral College 2. Basic torts relating to businesses often involve disputes concerning A. defamation. C. contracts. B. assaults. D. emotional stress. 3. The Sarbanes-Oxley Act of 2002 is legislation that was passed in response to recent A. tax settlements. C. accounting scandals. B. investment options. D. collection activities. 4. When individuals purchase items such as high-performance sport cars, rare collectibles, and jewelry containing large, precious gemstones, they must often pay ___________ taxes. A. property C. estate B. gift D. luxury 5. One of the main functions of compliance in the finance industry is to A. prevent discrimination. C. increase profitability. B. maintain stability. D. limit management. 6. Which of the following reasoning processes does a virtual auditor use to identify financial system transactions that are very similar to each other but are not exactly alike: A. Comparative reasoning C. Temporal reasoning B. Contextual reasoning D. Cross-source reasoning 7. When making a telephone call to another business, it is courteous to A. identify yourself and your company. C. ask who is answering the phone. B. state the purpose of the call. D. call at your convenience. 8. How group members interact usually depends on A. who is the oldest. B. who knows the most.

C. who is the most outgoing. D. who asks the first question.

9. Which of the following is a characteristic of effective oral presentations: A. Provides discussion C. Identifies conflict B. Gathers information D. Attracts attention 10. Which of the following would be a correct salutation in a business letter when you do not know the name of the person to whom you are writing the letter: A. Dear Accounting Manager: C. Dear Sir: B. Dear Madam: D. Dear Accounting Department: 11. Which of the following is an example of persuasive messages that businesses write: A. Handwritten note C. Collection letter B. Electronic mail D. Interoffice memo 12. A characteristic of a simple written report is that it usually is A. abstract. C. short. B. formal. D. detailed. 13. Which A. B. C. D. of the following information should be shared immediately with all staff: An employee of the business may soon be transferred out of town. An employee of the business has been caught shoplifting. A customer has requested that the business extend its hours. A customer has complained about the service s/he received.
Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

ST-FIN-10A

FINANCE CLUSTER EXAM

14. When participating in staff meetings, business employees should be prepared to A. remain silent. C. comment on every detail. B. join in the discussion. D. argue. 15. To provide good service, employees should give customers A. personal opinions. C. complete attention. B. limited information. D. unsolicited advice. 16. A customer asked a salesperson whether a hair dryer purchased last month could be returned or exchanged. In order to answer the question, the salesperson should be familiar with the business's A. policies. C. finances. B. promotions. D. products. 17. A salesperson who frequently handles customer complaints should think of each complaint as an opportunity to A. get to know the customer. C. ask personal questions. B. satisfy the customer. D. use feedback techniques. 18. One of the responsibilities of finance professionals is to provide clients with services that the clients usually are A. incapable of understanding. C. unable to obtain by themselves. B. not willing to purchase. D. convinced they do not need. 19. Which of the following is not part of the data cleansing process used in customer relationship management databases: A. Deleting unformatted data C. Updating expired data B. Removing duplicate records D. Identifying garbage data 20. The state of technology that exists in a society can limit a country's ability to A. pay for needed supplies. C. tap its natural resources. B. identify potential workers. D. purchase new equipment. 21. When a business makes decisions about how to use its scarce resources, the business is A. directing. C. economizing. B. controlling. D. organizing. 22. Ten thousand people wanted to attend a concert, but the stadium only seats 3,000. Because of the high demand, concert officials increased the price of admission to a point where only 3,000 people were able to afford the price. Which of the following best relates to the other 7,000 people who were unable to attend the concert: A. Price incentives C. Excess supply B. Price rationing D. Limited demand 23. The use of government production quotas often creates problems for which of the following economic systems: A. Socialist command C. Market B. Traditional D. Communist command 24. One of the disadvantages of private enterprise is A. unequal distribution of income. B. limited government control.

C. pricing system. D. competition.

25. Job enlargement, job rotation, and job enrichment are all ways that a company can __________ of labor specialization. A. handle the productivity C. combat the disadvantages B. define the categories D. transfer the risk

ST-FIN-10A

FINANCE CLUSTER EXAM

26. Which of the following types of legal union representation is preferred by unions in states without right-towork laws: A. Closed shops C. Open shops B. Agency shops D. Union shops 27. Determine the amount of government spending that will be included in GDP based on the following information: $6.5 million in wages to military personnel, $4.8 million to buy equipment, $2.3 million in veterans' benefits, and $1.7 million in welfare payments. A. $13.6 million C. $11.3 million B. $10.5 million D. $15.3 million 28. A high level of self-esteem can help individuals to A. cope with criticism. B. avoid disappointments.

C. prevent problems. D. keep from getting angry.

29. Feelings, values, and temperament are examples of __________ traits. A. undesirable C. mental B. physical D. emotional 30. The salesperson who talks in a monotone voice during the sales presentation is A. attracting attention. C. showing a lack of interest. B. creating enthusiasm. D. appearing confident. 31. Christie's coworkers know that she won't repeat what they tell her if they ask her not to do so. This indicates that Christie is a(n) __________ coworker. A. tactful C. trustworthy B. straightforward D. efficient 32. Your manager has reminded you to correct register errors as they occur to ensure close-out accuracy. This type of comment is A. constructive criticism. C. positive feedback. B. internal feedback. D. destructive criticism. 33. When people dread change for no apparent reason, their feelings may be A. reasonable. C. logical. B. sensible. D. irrational. 34. Showing empathy for others is behavior that A. is hard to learn. B. can be learned.

C. must be taught. D. has few benefits.

35. Technical words that have meaning in a specific occupational area are called A. demographics. C. jargon. B. feedback. D. collateral. 36. Which of the following is an example of aggressive behavior: A. Beginning a conversation with strangers C. Standing very close to others when talking B. Openly expressing your negative thoughts D. Refusing to do things you don't wish to do 37. Mr. and Mrs. Smith are planning to purchase a new, 24-foot, camper trailer. Which of the following types of credit would be best for the Smiths if they now have less than half the purchase price: A. Regular credit C. Installment credit B. Revolving credit D. Open credit

ST-FIN-10A 38. Saving A. B. C. D.

FINANCE CLUSTER EXAM the money that you might ordinarily spend each day on a cup of coffee and a donut can help you achieve larger financial goals. will not result in significant savings. is the sacrifice you must make for future financial security. is not a practical step in reaching your financial goals.

39. Which of the following is a financial want rather than a financial need: A. Education C. Clothing B. Food D. Shelter 40. Which of the following is not a key factor involved with compounding growth: A. The risk of the stock market C. How long your money is invested B. The amount of money you invest D. How much your investment grows each year 41. Which A. B. C. D. of the following are examples of deposit-taking financial institutions: Credit unions, savings and loan associations, and commercial banks Commercial banks, corporations, and mutual savings banks Savings and loan associations, mutual savings banks, and insurance firms Commercial banks, credit unions, and brokerages

42. Sam purchases 50 shares of stock in an open corporation. In which of the following financial markets is Sam investing: A. Securities C. Diversified B. Real estate D. Money 43. Which of the following is not a factor contributing to financial convergence and consolidation: A. Technological advances C. Financial deregulation B. Desire for illiquid assets D. Desire for lower costs 44. Falling interest rates typically cause A. stock prices to decrease. B. stock prices to increase.

C. a stock market to crash. D. no change in stock prices.

45. When an emerging market suffers an economic decline, foreign investors usually A. use the opportunity to invest more in the emerging market. B. quickly withdraw their money from the emerging market. C. help the emerging market to recover economically. D. pay less for each transaction in the emerging market. 46. The two major sections on a balance sheet are A. assets and liabilities. B. assets and income. 47. The stock table term PE stands for A. profit-earnings. B. price-earnings. 48. Certificates of deposit and collectibles are types of A. accounts. B. investments.

C. cash flow and liabilities. D. expenses and assets.

C. percentage-earnings. D. price-expenses.

C. securities. D. earnings.

49. When John was injured in an auto accident on his way to work, what kind of insurance paid his hospital bill? A. Health C. Term B. Disability D. Life

ST-FIN-10A

FINANCE CLUSTER EXAM

50. The section of the marketing plan that should address where the business will be located is the __________ section. A. price C. product B. place D. promotion 51. A business owner applying for a bank loan would probably ask the accounting department to provide records that show the value of the company's total A. equipment. C. inventory. B. cash. D. assets. 52. The information about profit in a business's income statement helps to establish a business's stock's A. goals. C. value. B. style. D. brand. 53. Which of the following often prepare budgets in business: A. Sales cashiers C. Middle managers B. Inventory clerks D. All employees 54. A manager is most likely to use financial information when A. establishing lines of authority within an organization. B. researching the demographics of a new target market. C. calculating the number of on-the-job injuries in the past year. D. determining resources available to fund a new project. 55. Which A. B. C. D. of the following is a common financial-information management problem: Multiple financial data sources and systems within an organization Overreliance on a master source and system for financial data Strict organizational data governance policies and processes Insufficient financial information due to compliance regulations

56. Which of the following is an example of a businessperson exhibiting unethical behavior in relation to a business's financial information: A. A banker requests financial information from a business to process a loan. B. An auditor verifies the accuracy of a corporation's financial statements. C. An unauthorized employee reviews a client's financial information. D. A manager examines the business's financial records to develop a budget. 57. One step that financial-services companies can take to protect their clients' online business transactions from hackers is to A. use Intranet capabilities. C. limit the number of client transactions. B. install firewalls. D. avoid encryption methods. 58. A business wants to determine which customers are most likely to buy $100,000 in products from them in the next year, so it uses its computer system to search for customers who meet a set of criteria related to sales. What process is the business using to obtain the desired financial information? A. Data mining C. Surveying B. Accounting D. Industry forecasting 59. Alyssa is starting a small business out of her home. When she accesses a business how-to web site, Alyssa finds software downloads and printable worksheets that will help her plan and manage her business's income and expenses. The software and worksheets are types of A. budgeting tools. C. statistical information. B. legal data. D. organizational charts.

ST-FIN-10A

FINANCE CLUSTER EXAM

60. Businesses often use computer-spreadsheet software for what-if financial planning by plugging in different numerical data into formulas, which provide possible A. distribution methods. C. financial outcomes. B. production strategies. D. accounting standards. 61. To obtain specific financial information from a complex database, the user has to set A. queries. C. tabs. B. symbols. D. panels. 62. What type of database should a business use to compare financial data? A. Ordinal C. Decisive B. Abstract D. Relational 63. One reason why it is important for a business to accurately report its financial position is to provide A. useful information to investors. C. industry forecasts to the media. B. summaries of economic indicators. D. price quotations on securities. 64. When a small business experiences a steady increase in cash inflow over an extended period of time, the business might decide to A. sell unnecessary assets. C. purchase office equipment. B. obtain a high-interest loan. D. buy less inventory. 65. The accounting system used to report a business's financial position that is intended for internal users is the __________ accounting system. A. computerized C. management B. financial D. manual 66. What is the accounting system that businesses use to report financial transactions when they occur? A. Payable C. Receivable B. Cash D. Accrual 67. By reviewing various accounting reports, the financial officer of the MIB Company has noted that the company's cash inflows have decreased between 3 percent and 5 percent for three consecutive quarters. This trend is most likely due to A. higher expenses. C. fewer expenses. B. higher sales. D. fewer sales. 68. By reviewing a prospective customer's borrowing and repayment history, a business can determine if it should A. offer credit to the prospective customer. B. provide the prospective customer with a high credit rating. C. increase the prime lending rate. D. charge sales tax. 69. Mason is reviewing financial documents for his company to make sure that he hasn't forgotten to include important data or has not made any mistakes. The reason that Mason is reviewing these documents is to A. forecast the business's long-term finances. B. determine if he needs to take out a short-term loan. C. verify that the information is correct. D. identify the business's financial resources. 70. Susan wants to obtain a loan to purchase business equipment. She calls different banks to obtain information about the interest rates and the types of loans available, so she can determine which bank is the best option. Susan is analyzing the financial information that she is collecting to A. correct inaccurate financial data. C. determine business profitability. B. guide her decision making. D. solve a business problem.

ST-FIN-10A

FINANCE CLUSTER EXAM

71. Which of the following phrases summarizes the overall purpose of employee orientation: A. "Starting off on the right foot" C. "Walking down the wrong path" B. "What you don't know won't hurt you." D. "Been there; done that" 72. Which A. B. C. D. of the following is an example of corporate responsibility: A company uses recycled materials in its products. A company expands its facilities. A company hires minority employees. A company pays its taxes on time.

73. Which of the following do many businesses include on their web sites in order to obtain feedback from customers: A. Computer programming code C. Electronic file attachment B. Portable document format D. E-mail inquiry field 74. What type of computer software program do businesses use to store valuable information about customers? A. Interactive C. Spreadsheet B. Database D. Publishing 75. When creating and posting information to a web site, one of the most important considerations is the A. domain name. C. home page. B. search engine. D. shopping cart. 76. Businesses should organize their records in a systematic manner so that information can be A. available to everyone. C. distributed freely. B. accessed when needed. D. published in newsletters. 77. Which of the following is an ongoing population trend that affects how businesses market their goods and services: A. Migration C. Behavior B. Consumption D. Lifestyle 78. One reason for a business to monitor its internal records is to obtain information that it can use to A. make decisions about future operations. C. handle employee problems and complaints. B. track the activities of its competitors. D. understand global economic conditions. 79. When a business conducts an environmental scan, which of the following issues is a political factor that it should consider: A. Shifts in consumer lifestyles C. Changes in regulation B. Fluctuation of unemployment rates D. Widespread use of wireless devices 80. A national pizza chain guaranteed 30-minute delivery, but several of its drivers had serious car accidents while rushing to meet this deadline. A negative outcome of the delivery guarantee for the pizza chain is that it caused an increase in A. sales. C. business risk. B. economic risk. D. employment. 81. The overall purpose of business security is to provide the business with A. protection. C. employee safety. B. gross profit. D. risk management. 82. When unforeseen events change the project entirely, it is helpful to have A. patience. C. volunteers. B. self-control. D. a back-up plan.

ST-FIN-10A

FINANCE CLUSTER EXAM

83. Why have some major retail businesses decentralized their purchasing operations? A. Their stores are geographically distant. C. They maintain a wider variety of suppliers. B. Their buyers prefer to be independent. D. They obtain lower prices for smaller orders. 84. One of the benefits of production to consumers is that production A. creates form utility. C. makes use of automation. B. provides a way to earn profits. D. provides a way to be competitive. 85. Employees who record all purchases made with money from the petty cash fund are helping the business to A. improve cash flow. C. control its expenses. B. comply with the law. D. reduce major spending. 86. Determine whether the following statement is true or false: Housekeeping practices in the selling area can affect a client's image of the business. A. True, the appearance of a business is the most important factor affecting business image. B. False, housekeeping practices are unrelated to business image. C. False, customers are more concerned with price than with the appearance of a business. D. True, the appearance of a business affects the customer's overall impression. 87. The supervisor's response to an employee's orderly and systematic behavior on the job should be A. favoritism. C. criticism. B. indifference. D. praise. 88. Why do we need creativity? A. It indicates one's intelligence. B. It moves the world along. C. It shows businesses which employees can think in concrete terms. D. It helps businesses to identify employees who will succeed in performing routine tasks. 89. According to Maslow's theory of the hierarchy of needs, we are primarily motivated by our __________ needs. A. high level C. satisfied B. unsatisfied D. fulfilled 90. To stay competitive in their industries, it is important for entrepreneurs to keep up-to-date with A. personal distribution policies. C. suppliers' buying trends. B. customer-pricing strategies. D. technological developments. 91. Some job application forms ask why the applicant left a previous job. Which of the following would be an acceptable answer to this question: A. "I couldn't get along with my supervisor." C. "I was seeking a more responsible job." B. "I was expected to do too much work." D. "I wanted to get out of a difficult situation." 92. Which of the following statements about working in the financial-services industry is false: A. Someone who works in financial services is limited to working at an investment firm, a bank, or an insurance company. B. Financial services professionals can be found in all kinds of companies, from large corporations to sole proprietorships. C. Financial services professionals can expect to earn higher-than-average salaries. D. The financial-services industry includes real estate brokers, fund managers, and auditors. 93. Which of the following titles belongs to a financial manager: A. Treasurer C. Procurement clerk B. Bill and account collector D. Billing clerk

ST-FIN-10A

FINANCE CLUSTER EXAM

94. Prospective members of professional organizations are frequently asked to provide documentation of such entry requirements as A. experience, position, and income. C. education, experience, and position. B. position, income, and education. D. education, income, and race. 95. Which of the following do many financial services providers obtain after completing specific training: A. Referral C. Bonus B. Promotion D. License 96. Which of the following provides an opportunity for building professional, finance-oriented relationships: A. Brainstorming C. Networking B. Product development D. Market segmentation 97. Which of the following is an example of an unethical activity that relates to risk management: A. Requesting various documents to process a loan request B. Withholding information from insurance underwriters C. Issuing bonds to raise funds for a corporation D. Using third-party debt collectors to obtain overdue payments 98. Is it ethical for an employee to bypass internal business policies and sell expensive products to individuals or businesses without verifying their credit histories? A. No, most companies provide employees with a great deal of flexibility in terms of following internal business policies. B. No, the employee may be jeopardizing the business's financial well-being without first obtaining permission from management. C. Yes, the employee is actually helping the business meet its financial goals more quickly by skipping an unnecessary step. D. Yes, various government regulations state that businesses must offer credit to all individuals and businesses. 99. Many computer software programs help businesses determine their levels of business risk, which is helpful when they develop A. endorsement records. C. contingency plans. B. content theories. D. monetary regulations. 100. An employee with the DPB Company left a small box in the middle of the business's reception area. Unfortunately, a client did not see the box, fell, and was seriously injured. Now, the DPB Company must pay several thousand dollars to cover the client's medical bills. This hurts the company's financial wellbeing. What internal steps could the company have taken to control the risk associated with this type of financial loss? A. Review and evaluate health insurance options B. Purchase and maintain a crime insurance policy C. Implement and monitor safety policies D. Develop and follow a detailed business plan

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

10

1. C U.S. Constitution. There are several sources of law in the United States. One of the main sources is the U.S. Constitution and its amendments which guarantee certain rights to citizens. The Supreme Court interprets laws. The United Nations is an international organization. The Electoral College determines the presidency. SOURCE: BL:067 SOURCE: Miller, R.L., & Jentz, G.A. (2005). Fundamentals of business law (6th ed.) [p. 5]. Mason, OH: Thomson/South-Western. 2. C Cont racts. Business torts are wrongful actions against a business that cause it harm in some way. Disputes concerning contracts are often the basis for businesses suing individuals or other businesses. Many businesses have contractual arrangements with employees or vendors. If these contracts are broken, the business might be harmed and seek compensation through the legal system. Basic torts relating to businesses do not involve disputes concerning assaults, defamation, or emotional stress. SOURCE: BL:069 SOURCE: Miller, R.L., & Jentz, G.A. (2005). Fundamentals of business law (6th ed.) [pp. 82-86]. Mason, OH: Thomson/South-Western. 3. C Accounting scandals. The Sarbanes-Oxley Act of 2002 is federal legislation that was passed in response to recent major corporate and accounting scandals. These scandals include Enron and WorldCom which resulted in a loss of public trust in current accounting and reporting procedures. The law established new and improved accounting procedures for public companies and accounting firms. The Sarbanes-Oxley Act was not passed in response to recent investment options, tax settlements, or collection activities. SOURCE: BL:133 SOURCE: Wikipedia (n.d.). Sarbanes-Oxley Act. Retrieved August 13, 2009, from http://en.wikipedia.org/wiki/Sarbanes-Oxley_Act 4. D Luxury. Governments increase their revenues by charging taxes on non-essential, often very expensive goods and services, such as high-end automobiles, rare collectibles, and jewelry. This type of tax is called a luxury tax. An individual who receives a certain amount of money as a gift may be required to pay a gift tax. Property taxes are paid on buildings (e.g., homes) and land. A person who inherits some or all of a deceased person's assets pays an estate tax, which is based on the net value of the assets or estate. SOURCE: BL:134 SOURCE: Answers.com. (2009). Luxury tax. Retrieved August 13, 2009, from http://www.answers.com/topic/luxury-tax 5. B Maintain stability. The financial industry is required to comply with various rules and regulations established by government. One of the main functions of compliance is to maintain the stability of the financial industry. By requiring compliance with rules and regulations, the government limits the risks that financial institutions might take. By limiting risks, the government is able to maintain the stability of the financial industry. The function of compliance is not to prevent discrimination, increase profitability, or limit management. SOURCE: CC:003 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (pp. 26-27). Boston: Addison Wesley.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

11

6. A Comparative reasoning. A virtual auditor, which is a type of compliance technology, uses multiple reasoning processes to continuously review financial transactions and processes to identify errors and/or compliance violations. Comparative reasoning is used to identify financial system transactions that are very similar to each other but not exactly alike. For example, after identifying two close matches, comparative reasoning is used to determine if one transaction was entered multiple times or if the two entries in the system are for two separate transactions. Contextual reasoning is used to consider each financial transaction's circumstances and how it compares to historical patterns in the system. Temporal reasoning involves considering the timing of a financial transaction. Cross-source reasoning is used to compare financial transactions and processes in multiple financial systems. SOURCE: CC:004 SOURCE: Oversight Systems, Inc. (n.d.). IT's role in financial process improvements. Retrieved June 1, 2009, from http://www.oversightsystems.com/whitepapers/IT_4_biz_improvement_060725.pdf 7. A Identify yourself and your company. Frequently, the person answering the telephone is not the person with whom you wish to speak. When you identify yourself to the other person, you provide the person with an immediate point of reference. It may be inappropriate to state the purpose of the call to the person answering the phone. Asking that person's name would only be appropriate under certain circumstances. Business calls should be made at an appropriate time whenever possible, not simply at any time that is convenient. SOURCE: CO:114 SOURCE: Odgers, P. (2004). The world of customer service (pp. 128-129). Mason, OH: SouthWestern. 8. B Who knows the most. Interaction among the group members has a lot to do with the topic at handand who knows the most about it. The members want to know who knows the most about the subject. This may or may not be the oldest member, the one who asks the first question, or the one who is the most outgoing. SOURCE: CO:053 SOURCE: QS LAP 29Put In Your Two Cents 9. D Attracts attention. An effective oral presentation immediately attracts the attention of the audience and keeps the listeners focused on the message. There are several ways that a person can begin a presentation in order to attract attention. Some examples include asking a question, offering something for free, or making a surprising announcement. People usually gather information and identify possible conflicts before developing an oral presentation. Not all presentations provide a time for discussion. SOURCE: CO:025 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 333-334]. Mason, OH: Thomson South-Western. 10. A Dear Accounting Manager:. The salutation addresses the person to whom you are writing, either by name or by title. It is generally followed by a colon. "Dear Sir" or "Dear Madam" would be incorrect since the gender of the individual is unknown. "Dear" would not be used in writing to a department. A more appropriate form would be "Attention: Accounting Department." SOURCE: CO:133 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 306-307]. Mason, OH: Thomson South-Western.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

12

11. C Collection letter. A collection letter is a type of persuasive message that many businesses write to customers who are delinquent in making payments on their accounts. The purpose of the collection letter is to persuade customers to send payment or to contact the business to make some type of arrangement. Collection letters should not offend customers but should convince them to respond immediately. Many businesses write electronic mail, handwritten notes, and interoffice memos, but these types of messages are not necessarily persuasive. SOURCE: CO:031 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 306-307]. Mason, OH: Thomson South-Western. 12. C Short. A characteristic of a simple written report is that it usually is short and to the point. The purpose of writing simple reports is to present basic information in an abbreviated form so that the recipients can read it quickly and use the information in their decision making. Simple written reports are informal rather than formal. They should address the issue in simple terms rather than present abstract information. Simple written reports provide the basic points rather than detailed information. SOURCE: CO:094 th SOURCE: Lehman, C. & DuFrene, D. (2005). Business communication (14 ed.) [p. 337]. Mason, OH: South-Western. 13. D A customer has complained about the service s/he received. This kind of complaint is the type of information that should be shared with all staff right away since it could affect the entire company. In addition, all staff should be reminded of company policy in such areas. Information about employees' problems is likely to be passed through the grapevine, but it should not be announced to staff. Such business decisions as the transfer of employees or changes in hours are usually announced at an appropriate time after they have been made by management. SOURCE: CO:014 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [p. 10]. Mason, OH: Thomson South-Western. 14. B Join in the discussion. For staff meetings to be effective, all employees should participate in the discussion. The purpose of staff meetings usually is to discuss issues that are of importance to the business, or to solve problems. Therefore, employees should join in the discussion rather than remain silent because their ideas and opinions are valuable. Employees should not comment on every detail. Employees should adequately explain their ideas, but it is not effective to start an argument with those who disagree. SOURCE: CO:063 SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill development (2nd ed.) [pp. 327-330]. Mason, OH: South-Western. 15. C Complete attention. Each customer is entitled to an employee's complete attention. Employees should focus their attention on each customer in turn, not on what is going on around them. Employees are able to provide good service if they pay attention to what their customers want. Employees should not offer unsolicited advice or personal opinions to customers. Employees should provide customers with all available information. SOURCE: CR:004 SOURCE: Cheesebro, T., O'Connor, L., & Rios, F. (2007). Communication skills: Preparing for career rd success (3 ed.) [p. 230]. Upper Saddle River, NJ: Pearson Prentice Hall.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

13

16. A Policies. Policies are established by businesses to ensure that employees make consistent decisions in handling transactions. All staff should be thoroughly familiar with the business's policies and use them as guidelines. Salespersons should also be familiar with the business's products and promotions, but that information will not help in this situation. Some salespersons are knowledgeable about the business's finances, but that information would also not be useful here. SOURCE: CR:007 th SOURCE: Levy, M., & Weitz, B. A. (2007). Retailing management (6 ed.) [pp. 250-251]. Boston: McGraw-Hill/Irwin. 17. B Satisfy the customer. Salespeople should think of each complaint as an opportunity to satisfy the customer and to increase sales. Frequently, customers will make additional purchases at the time of the complaint if they are satisfied with the way in which the complaint was handled. Salespeople should never ask personal questions. The purpose of effectively handling customer complaints is to satisfy customers rather than to get to know them. When customers complain, they are providing the salesperson with feedback. SOURCE: CR:010 SOURCE: Townsley, M. (2002). Retail: Business 2000 (p. 126). Mason, OH: South-Western. 18. C Unable to obtain by themselves. Financial professionals provide many types of services that clients may be unable to obtain by themselves. For example, financial professionals analyze financial data and are able to provide information about the strength and safety of various products. Clients often do not have the ability to track the growth of these products and rely on professionals for guidance and advice. Finance professionals do not provide clients with services that clients usually are not willing to purchase, incapable of understanding, or convinced they do not need. SOURCE: CR:012 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (p. 26). Boston: Addison Wesley. 19. A Deleting unformatted data. Data cleansing is the ongoing process of detecting and correcting inaccurate customer relationship management (CRM) data. Data cleansing is conducted to help ensure the usefulness and validity of CRM data. It involves removing duplicate records, updating expired data, identifying garbage data (junk data), completing incomplete records, etc. However, it does not include the deletion of unformatted data. Deleting the data could result in the loss of potentially valuable information. Instead, the unformatted data should be standardized so that it more closely resembles the format of other data in the CRM database. SOURCE: CR:024 SOURCE: Knol BETA. (2009). CRM data cleansing & management . Retrieved August 13, 2009, from http://knol.google.com/k/neil-sequeira/crm-data-cleansing-management/s2w9p78k2qby/1# 20. C Tap its natural resources. Natural resources can be limited by the lack of technology in a society. Some countries are not able to tap their natural resources because they lack the technology to do so. The state of technology does not limit a country's ability to identify potential workers. Financial assets rather than technology affect whether a country can purchase new equipment or pay for needed supplies. SOURCE: EC:003 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 83-87). Tinley Park, IL: Goodheart-Willcox.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

14

21. C Economizing. Economizing is the process of deciding how scarce resources will be used or which goods and services will be purchased or provided so that the most satisfaction can be obtained. All businesses try to economize in order to obtain the greatest satisfaction from their limited resources. Controlling is the management function that monitors the work effort. Organizing is the management function of setting up the way the business's work will be done. Directing is the management function of providing guidance to workers and work projects. SOURCE: EC:001 SOURCE: The Pennsylvania State University. (2009). Cutting corners and economizing. Retrieved August 13, 2009, from http://pubs.cas.psu.edu/FreePubs/pdfs/ui345.pdf 22. B Price rationing. Rationing occurs when there are limited resources, goods, and services. Those who are willing to pay (and have the ability to pay) are able to purchase them. Price incentives relate to profits that motivate people to sell. Limited demand did not occur in this case since there was more demand than supply. Excess supply did not occur in this situation since supply was limited to meet excess demand. SOURCE: EC:006 SOURCE: AmosWEB. (2000-2009). Price rationing. Retrieved August 13, 2009, from http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=price+rationing 23. D Communist command. In a communist command economy, government decides how much will be produced and sets monthly and yearly production quotas for each business. When a business meets its quota, government may raise it for the next year. If a business fails to meet its quota, it may be penalized. The quota system creates surpluses of some products and shortages of others because government planners do not know enough about what is really needed or wanted by consumers. Production quotas are not set by governments in traditional, socialist command, or market economies. SOURCE: EC:007 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 93-94). Tinley Park, IL: Goodheart-Willcox. 24. A Unequal distribution of income. One of the disadvantages of private enterprise is that poverty and income are not distributed equally. Limited government control, competition, and pricing system are all advantages of private enterprise. SOURCE: EC:009 SOURCE: EC LAP 15People Power (Private Enterprise) 25. C Combat the disadvantages. Businesses use all these methods of combating the disadvantages of labor specialization, which include increased interdependency, increased boredom, decreased pride in work, decreased morale and enthusiasm for the job, increased chance of worker obsolescence because of technological advances, and increased difficulty transferring or obtaining another job. Transferring the risk would mean purchasing insurance, but division of labor is not an insurable risk. The productivity of labor specialization comes from its advantages. The categories of labor specialization are by trade or profession, by task, or by stage of production. SOURCE: EC:014 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [p. 172]. Cincinnati: Thomson/South-Western.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

15

26. D Union shops. In union shops, employees are required to join unions after their probationary period, which usually lasts 30 to 90 days. Although closed shops would be preferred by unions since all employees must belong to the union before they can be hired, closed shops are illegal in all states. In agency shops, all employees are required to pay union dues but do not have to join unions. In open shops, employees do not have to join unions and do not have to pay union dues. SOURCE: EC:015 SOURCE: Answers.com. (2009). Union shop. Retrieved August 13, 2009, from http://www.answers.com/topic/union-shop 27. C $11.3 million. Government spending includes everything purchased by local, state, and federal governments and ranges from wages paid to military personnel to money spent to buy equipment. However, not all government spending is included in GDP. Transfer payments are not included. These are payments of tax dollars for which the recipients do not produce goods or services. Examples of transfer payments include veterans' benefits and welfare payments. In this situation, determine the amount of government spending that will be included in GDP by adding the wages paid to military personnel and the money spent to buy equipment ($6.5 million + $4.8 million = $11.3 million). SOURCE: EC:017 SOURCE: Clayton, G.E. (2005). Economics: Principles & practices (pp. 342-343). New York: Glencoe/McGraw-Hill. 28. A Cope with criticism. When self-esteem is well maintained, individuals can handle problems more easily, overcome the disappointments that are part of life, and cope with any criticism they may receive. Selfesteem cannot prevent feelings of anger from arising occasionally. SOURCE: EI:016 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 197). New York: Glencoe/McGraw-Hill. 29. D Emotional. Feelings, values, and temperament are examples of emotional traits. Emotional traits also include attitudes. Emotional traits may be desirable or undesirable, depending on their nature. Mental traits are those associated with an individual's intellectual abilities. Physical traits include age, gender, height, and build. SOURCE: EI:018 SOURCE: EI LAP 9You've Got Personality (Personality Traits in Business) 30. C Showing a lack of interest. Salespeople can express their interest and enthusiasm by varying their tone of voice. A monotone voice is unenthusiastic, and this feeling will be transmitted to the customer. If the salesperson does not sound enthusiastic, s/he cannot create enthusiasm, attract interest, or appear confident. SOURCE: EI:020 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 198). New York: Glencoe/McGraw-Hill. 31. C Trustworthy. Being trustworthy means that people can rely on you to do what you say you will do. Trustworthy people will not tell anything they have been asked not to tell or pass along rumors that might not be true. An efficient person is one who performs in an effective, organized manner. A straightforward person is direct, open, and honest. A tactful person has the ability to do or say the right thing in any circumstances. SOURCE: EI:022 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (p. 9). Tinley Park, IL: Goodheart-Willcox.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

16

32. A Constructive criticism. Constructive criticism is evaluative information designed to help someone improve. In this case, criticism is used by the manager to let you know how you can improve your job performance. Internal feedback is feedback that comes from within, or self-evaluation. Positive feedback is feedback involving praise. Destructive criticism is evaluative information that serves only to hurt or discredit someone. SOURCE: EI:003 SOURCE: EI LAP 15Grin and Bear It (Using Feedback for Personal Growth) 33. D Irrational. Thoughts and feelings that are not based on fact are often irrational or unreasonable. While such fears are very real to the people who have them, they must be overcome so that they do not interfere with the individuals' lives. Such feelings may be overcome by sensible, reasonable, or logical thought processes. SOURCE: EI:026 SOURCE: Dalton, M., Hoyle, D.G., & Watts, M.W. (2006). Human relations (3rd ed.) [pp. 366-370]. Mason, OH: South-Western Cengage Learning. 34. B Can be learned. Empathy is the ability to put oneself in another's place. If you are not already an empathetic person, you can become one with a bit of effort. It is not necessary for empathy to be taught. It can be learned without great difficulty, and its use has many benefits. SOURCE: EI:030 SOURCE: EI LAP 12Have a Heart (Empathy) 35. C Jargon. It is important that employees learn and become proficient in their industry's jargon. Feedback is the receiver's response to the message. Demographics describe the characteristics of a population. Collateral is something of value a borrower promises to a lender to guarantee repayment of a loan. SOURCE: EI:007 SOURCE: Cheesebro, T., O'Connor, L., & Rios, F. (2007). Communication skills: Preparing for career rd success (3 ed.) [p. 230]. Upper Saddle River, NJ: Pearson Prentice Hall. 36. C Standing very close to others when talking. Aggressive behavior is characterized by a willingness to ignore the rights of others and to exploit them in order to achieve personal goals. It is sometimes described as "in-your-face" behavior because aggressive people tend to get "in the faces" of people to whom they are talking. Beginning a conversation with strangers, openly expressing negative thoughts, and refusing to do things you don't wish to do are examples of assertive behavior. SOURCE: EI:008 SOURCE: EI LAP 18Assert Yourself (Assertiveness) 37. C Installment credit. Installment credit is a type of credit account set up to handle one total amount of credit that is to be paid off in regular installments. It is commonly used to purchase large, expensive items. Revolving credit is a type of credit account that limits the total amount of money that may be owed and charges interest on outstanding balances. Open or regular credit allows credit users to buy at any time during a set period, usually 30 days. SOURCE: FI:002 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 685-686). Woodland Hills, CA: Glencoe/McGraw-Hill.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

17

38. A Can help you achieve larger financial goals. Making purposeful spending decisions, instead of spending out of habit or impulsively, is an important step in achieving larger financial goals. Even small daily savings add up to significant amounts over time. Day -to-day spending does not have to be sacrificed entirely for future financial security, as long as you're aware of your spending and are making purposeful decisions. Small savings every day are a very practical step in reaching your financial goals. SOURCE: FI:065 SOURCE: QS LAP 31Set Yourself Up (Setting Financial Goals) 39. A Education. Education is a financial want rather than a financial need. Financial needs are the basics that are necessary for survival. Food, clothing, and shelter are necessary for survival, but education isn't. SOURCE: FI:270 SOURCE: QS LAP 30Supersize Your Money 40. A The risk of the stock market. The risk of the stock market is not a key factor involved with compounding growth. Compounding growth is earning interest upon interest. The three key factors involved with compounding growth are the amount of money you invest, how long your money is invested, and how much your investment grows each year. SOURCE: FI:270 SOURCE: QS LAP 30Supersize Your Money 41. A Credit unions, savings and loan associations, and commercial banks. Deposit-taking financial institutions accept funds from customers (depositors) and pay interest on the funds. Credit unions, commercial banks, savings and loan associations (banks), and mutual savings banks are types of deposit-taking financial institutions. A corporation is a form of business ownership that is owned by stockholders who have purchased units or shares of the company. Brokerages are financial intermediaries that sell securities. Insurance firms sell insurance and securities. Corporations, brokerages, and insurance firms are not types of deposit-taking financial institutions. SOURCE: FI:336 SOURCE: Encyclopedia of Business and Finance. (2009). Financial institutions: Deposit taking. Retrieved August 13, 2009, from http://www.enotes.com/business-financeencyclopedia/financial-institutions 42. A Securities. A financial market is an organized effort or exchange that facilitates the buying and selling of financial assets. There are many types of financial markets, including the securities market, which involves the buying and selling of stock. Money markets facilitate the buying and selling of low-risk, shortterm financial products (e.g., treasury bills). Real estate (property markets) involves the buying and selling of land and buildings. Diversified is not a type of financial market. SOURCE: FI:337 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (pp. 292-293). New York: Glencoe/McGraw-Hill. 43. B Desire for illiquid assets. Liquid assets are financial assets such as stocks that can easily be converted into cash. Illiquid assets, therefore, are assets that cannot be easily converted into cash or sold without a significant drop in their value. Subprime mortgage assets, for example, became illiquid assets during the recent financial crisis. Financial firms don't merge because they want illiquid assets that are worth very little. Instead, financial convergence and consolidation may be driven by financial companies' desire to acquire more liquid capital. Technological advances, financial deregulation, and a desire for lower costs have also contributed to financial convergence and consolidation. SOURCE: FI:573 SOURCE: MBA Research and Curriculum Center. (2009). Introduction to finance course guide (pp. 5-106, 5-107). Columbus, Ohio: Author.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

18

44. B Stock prices to increase. Falling interest rates typically cause stock prices to increase. When interest rates fall, it becomes less expensive for companies to acquire funds needed to finance projects and operations. Because their borrowing costs decrease, the companies' earnings often increase. As a result of higher earnings, the companies' stock prices increase as well. Falling interest rates usually cause a positive change in stock prices, not a decrease in stock prices. A stock market crash is a sudden, dramatic decline in stock prices. SOURCE: FI:574 SOURCE: Andrews, J.A. (2004). Forces that move stock prices. Retrieved August 13, 2009, from http://www.daytradersclub.net/forces-that-move-stock-prices/ 45. B Quickly withdraw their money from the emerging market. When an emerging market suffers an economic decline, market prices are likely to decline as well. Rather than investing more in the emerging market at the lowered prices and helping the emerging market to recover, foreign investors are typically selfinterested. Therefore, they are likely to withdraw their money from the emerging market and invest the funds in more stable markets elsewhere in the world. The loss of foreign investors' funds often wreaks even more havoc on the emerging market. An economic decline is not likely to reduce transaction costs in the emerging market. SOURCE: FI:575 SOURCE: MBA Research and Curriculum Center. (2009). Introduction to finance course guide (pp. 5-156, 5-157, 5-158). Columbus, Ohio: Author. 46. A Assets and liabilities. Assets and liabilities are the two major sections that must "balance" on a balance sheet. Cash flow, income, and expenses are important items on financial statements, but they are not the major sections on a balance sheet. SOURCE: FI:274 SOURCE: QS LAP 36The Source Is With You 47. B Price-earnings. The stock table term PE stands for price-earnings. Profit-earnings, percentage-earnings, and price-expenses are not reported on stock tables. SOURCE: FI:275 SOURCE: QS LAP 37Table Talk 48. B Investments. There are a wide range of investments available to individuals who want the opportunity to increase their worth. Some investments are riskier than others, which means that individuals might lose money rather than make money. Certificates of deposit are safe investments because they pay a guaranteed amount of interest over a specific period of time. Collectibles are a riskier type of investment because the collectible, such as a baseball card, might lose value over time and not have any worth. Certificates of deposit and collectibles are not types of accounts or securities. Certificates of deposit earn interest while collectibles may or may not increase in value. SOURCE: FI:077 SOURCE: QS LAP 32Risky Business 49. A Health. Health insurance covers such medical expenses as hospital bills, doctors' fees, lab charges, and other medical costs. Disability insurance is sometimes called loss-of-income insurance because it pays a percentage of a worker's normal wages to the worker when s/he cannot work because of an illness or injury. Life insurance pays a sum of money at the time of death. Term is a form of life insurance that covers a specific number of years. SOURCE: FI:081 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [pp. 378-381]. Mason, OH: South-Western.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

19

50. B Place. Place decisions also include where products or supplies will be purchased and how the inventory of products or supplies will be managed. The price section should identify the range of prices to be offered. The promotion section should describe how efforts will be coordinated to increase sales. The product section should describe the quality, variety, and style of goods or services sold by the business. SOURCE: FI:084 SOURCE: BA LAP 2Risk Management 51. D Assets. All the items that a business owns that have value are its assets. Businesses applying for loans usually have their accounting department compute the total value of their assets to present to the lending institution as verification of their ability to repay the loan. Cash, inventory, and equipment are types of business assets whose value would be listed on a balance sheet. SOURCE: FI:085 SOURCE: FI LAP 5Show Me the Money 52. C Value. The value of a business's stock depends on how much profit the business has been able to make over time and the potential of the business to continue making profit. Investors usually are willing to pay more for stock in a business that is earning a significant profit. When investors pay higher prices for stock, the value of the stock increases. Stock is an inanimate object and does not have style or distinguishing features. Goals are objectives. Stock is not identified by brand but by a symbol that designates its name on the stock market. SOURCE: FI:094 SOURCE: FI LAP 4Watch Your Bottom Line (Income Statements) 53. C Middle managers. Budgets are often prepared by the ones responsible for managing people and money, including everyone from top executives to middle managers. Middle managers often supervise business departments and are responsible for the financial activities of those departments. Not all employees prepare budgets. Inventory clerks and sales cashiers are entry-level employees who do not prepare a business's budget. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks 54. D Determining resources available to fund a new project. Managers use financial information on many occasions, including when planning strategies, executing strategies, and evaluating the execution of strategies. For example, a manager would use financial information to determine what financial resources are available to fund a new project that s/he is planning. To research the demographics of a new target market, information gathered through market research would be more useful. Financial information is not used to calculate the number of on-the-job injuries or to establish lines of authority within an organization. SOURCE: FM:001 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). South-Western Cengage Learning.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

20

55. A Multiple financial data sources and systems within an organization. One of the most common problems faced by financial-information management is multiple financial data sources and systems within an organization. Because of the different, sometimes incompatible data sources and systems, it is often difficult for managers to get a single view of their companies' financials. Therefore, organizational overreliance on a master source and system for financial data is not typically a financial-information management problem. Few companies have a single master source of data nor a single system for recording and reporting the data. Rather than strict organizational data governance policies and processes, most companies suffer from inadequate data governance. Due to increased compliance regulations, most companies have much more financial information than ever before. SOURCE: FM:002 SOURCE: Ventana Research. (2009, January). Financial information management benchmark research. Retrieved August 13, 2009, from http://www.ventanaresearch.com/executive_summaries/espdfs/Ventana_Research_Financial _Information_Management_Benchmark_Research_Executive_Summary_2009.pdf 56. C An unauthorized employee reviews a client's financial information. Businesses have an ethical duty to protect their clients' financial information. Businesses must develop and implement procedures that reduce the risk of theft or unauthorized access to confidential financial information by internal and external sources. Verifying the accuracy of financial statements, requesting financial information to process a loan, and examining financial records to develop a budget are necessary and ethical practices. SOURCE: FM:003 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (p. 339). Mason, OH: South-Western Cengage Learning. 57. B Install firewalls. To protect their clients' financial well-being, financial institutions must take great care to ensure that their online systems are safe from hackers. One way financial institutions protect their clients from hackers is by installing firewalls. A firewall is a type of computer security system that interfaces between the business's computer system and the Internet. The firewall protects sensitive information from hacking activities. Encryption is another way that financial-services businesses protect online financial information. Encryption is the process of transforming information into a secret code so only the recipient can read it. Intranet refers to a system of networked computers within a business. Limiting the number of online transactions does not secure or protect financial information from hackers. SOURCE: FM:011 SOURCE: Miller, R.L., & Jentz, G.A. (2002). Management and e-commerce: The online legal environment (pp. 195-196). Cincinnati: West Legal Studies in Business, South-Western College Publishing. 58. A Data mining. Data mining is the process of searching computer databases to look for patterns of information and correlations among information. Businesses use the information they obtain from data mining to make business decisions, such as analyzing and determining the customers who possess the highest buying potential. By having this type of information available, businesses can target their marketing efforts to these customers. Accounting is the process of keeping and interpreting financial records. Surveying is a marketing research technique that involves asking customers questions to learn their opinions and the reasons behind those opinions. Industry forecasting involves making predictions of the future prospects for entire industries (e.g., housing, retailing). SOURCE: FM:012 th SOURCE: Zikmund, W.G., & Babin, B.J. (2010). Exploring marketing research (10 ed.) [pp. 172-173]. Mason, OH: South-Western Cengage Learning.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

21

59. A Budgeting tools. A budget is an estimate of income and expense for a specific timeframe. A budget is an important financial tool that helps the business manage its money. Many web sites provide budgeting tools such as software downloads or free printable worksheets. Legal data, statistical information, and organizational charts are not tools that help small-business owners plan and manage their income and expenses. SOURCE: FM:013 SOURCE: About.com. (2009). Budget worksheet. Retrieved August 13, 2009, from http://financialplan.about.com/cs/budgeting/l/blbudget.htm 60. C Financial outcomes. Computer spreadsheet software has the ability to calculate formulas and organize numerical data. When a business inputs different values or sets of numerical data in a spreadsheet, the spreadsheet software calculates the values or sets of data, which provides different outcomes based on the values or sets of data that were used. By reviewing the various outcomes, the business can determine the best course of action to take under particular circumstances; the what ifs of specific situations. Production strategies are the activities used to produce goods and services. Distribution methods are the strategies that a business uses to make sure that products are delivered to the right people at the right place at the right time. Accounting standards are the degrees to which accounting practices (financial recordkeeping) meet certain criteria. SOURCE: FM:014 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: SouthWestern Cengage Learning. 61. A Queries. Businesses store their financial information in databases. Businesses can retrieve, manipulate, and analyze different types of financial information. To obtain specific information from a computer system, the business must input the type of data and parameters for the data it wants. This process is setting the queries. The query is the mechanism used to obtain the desired information from the database. Symbols might be used to set the query, but not always. Tabs are tools used to indent words and phrases in a word-processing program. Businesses do not set panels to obtain financial data from databases. SOURCE: FM:015 SOURCE: Chapple, M. (2009). What is a database? Retrieved August 13, 2009, from http://databases.about.com/od/specificproducts/a/whatisadatabase.htm 62. D Relational. A relational database contains tables of separate, yet related, files or data organized in a computer system. Businesspeople can obtain various types of financial information from the relational database to compare with other information. Abstract, decisive, and ordinal are not types of databases that businesses use to compare financial data. SOURCE: FM:015 SOURCE: HowStuffWorks.com. (1998-2009). What are relational databases? Retrieved August 13, 2009, from http://computer.howstuffworks.com/question599.htm 63. A Useful information to investors. Investors often rely on the financial information that businesses provide when making decisions about investing in a business. Therefore, a business should accurately report its financial position so investors will be able to makes decisions based on correct information. If a business misrepresents its financial position, investors may lose money because the business is not as profitable as they were led to believe. Misrepresenting financial information on purpose also is a violation of several government rules and regulations. Businesses do not accurately report their financial position to provide summaries of economic indicators, industry forecasts to the media, or price quotations on securities. SOURCE: FM:004 SOURCE: Gitman, L. J., & Madura, J. (2001). Introduction to finance (pp. 498-501). Boston: Addison Wesley.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

22

64. C Purchase office equipment. A business monitors its cash flow to determine how much money is flowing into and out of the business. Monitoring cash flow helps the business plan how and when it will pay its bills. If the business is making more sales and the cash inflows are steadily increasing, it may decide to use the cash surplus to buy office equipment (e.g., computers, printers, etc.). Businesses usually want low-interest loans. The business might sell assets or buy less inventory if it experiences a severe or ongoing cash inflow shortage. SOURCE: FM:005 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: SouthWestern Cengage Learning. 65. C Management. Businesses often prepare financial reports that are intended for internal use, or use by the management of the business. These reports are used to make day-t o-day operating decisions. The management accounting system reports financial information that helps businesses to decide if they have funds to hire more employees and increase production, or if they need to reduce costs and improve the rate of collections. The financial accounting system is used to report a business's financial position to external users. Computerized and manual are ways of recording the accounting information. SOURCE: FM:006 SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2007). Accounting: Real-world applications & connections (First-Year Course) [pp. 34-35]. New York: Glencoe/McGraw-Hill. 66. D Accrual. The accrual accounting system records transactions at the time they occur even if no money changes hands at the time. Most businesses use this method because it reflects the business's current financial position based on what has been earned and expenses that have been incurred. For example, the business records a sale when it is made even though the business will not be paid until a later date. The cash accounting method records income and expenditures at the time the money changes hand. SOURCE: FM:006 SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2007). Accounting: Real-world applications & connections (First-Year Course) [p. A-26]. New York: Glencoe/McGraw-Hill. 67. D Fewer sales. Cash inflow is the movement of funds into the business. Cash flows into the business from a variety of sources, but the primary source of cash inflow is from sales. The amount of cash that a business has flowing into the business usually increases when it sells more goods and services. Outflows are the funds that move out of the business, which are usually expenses. Common business expenses include payroll, rent, inventory, equipment purchases, and utilities. Because its cash inflow is steadily decreasing, the MIB Company needs to determine why sales are falling off, and take steps to improve the situation. These steps may include reducing spending or correcting problems with the business's product. SOURCE: FM:008 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: SouthWestern Cengage Learning. 68. A Offer credit to the prospective customer. Credit is the arrangement by which businesses or individuals can purchase now and pay later. Before offering credit options to a prospective customer, the business should review the customer's borrowing and repayment history by obtaining a credit report. The credit report, which is generated by a credit-rating agency, indicates the prospect's borrowing and repayment history and provides a credit rating. The credit rating indicates the extent to which the business or individual pays its debts in a timely manner. The government, rather than businesses, sets the prime lending (interest) rate and establishes sales-tax rates. Various jurisdictions have laws that require businesses to collect sales tax from customers on certain purchases. SOURCE: FM:009 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 267-268). Mason, OH: SouthWestern Cengage Learning.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

23

69. C Verify that the information is correct. Businesspeople analyze and review financial information for many reasons. In Mason's situation, the purpose of reviewing the documents is to ensure that all the information is provided and that it is correct. Because the example does not specify the type of financial documents that Mason is reviewing, it is not possible to know if the documents contain loan or forecasting information, or if they identify business's financial resources. SOURCE: FM:010 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: SouthWestern Cengage Learning. 70. B Guide her decision making. Many businesspeople analyze financial data to make business decisions, such as obtaining a loan with the best interest rates and payment plans. Susan is not analyzing the information to correct inaccurate data, nor is she trying to determine her business's profitability. There isn't enough information available to determine if Susan is trying to solve a business problem. SOURCE: FM:010 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 342-343). Mason, OH: SouthWestern Cengage Learning. 71. A "Starting off on the right foot." Employee orientation is a company's attempt to get its employees off to a good start on the job. It includes job preparation or induction training in which new employees are acquainted with their surroundings, receive general information about the company and its policies, and are given specific information about their jobs. The other alternatives do not reflect the nature of orientation. SOURCE: HR:360 th SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10 ed.) [pp. 286-287]. Cincinnati: Thomson/South-Western. 72. A A company uses recycled materials in its products. Showing concern for the environment is one way that companies demonstrate corporate responsibility. Corporate responsibility involves going above and beyond just following rules and regulationshiring minority employees and paying taxes on time are actions expected of each and every company by the law. Expanding facilities does not necessarily exhibit concern for the community, the environment, or employees. SOURCE: MK:019 SOURCE: MK LAP 3Just Do ItRight (Company Actions and Results) 73. D E-mail inquiry field. Many businesses provide a feedback option on their web sites that enables customers to e-mail the business concerning problems or to ask questions. The e-mail inquiry field is an effective method of providing customer service as long as the business responds in an appropriate amount of time. A portable document format allows users to view files created by another operating system. An electronic file attachment allows a user to send an attachment with an e-mail message. Computer programming code is used to create software, web pages, etc. SOURCE: NF:004 SOURCE: CT-CLIC.com (2007-2009). Online inquiry form. Retrieved August 13, 2009, from http://www.ct-clic.com/ContactForm/default.asp

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

24

74. B Database. Database software programs are designed to sort, arrange, and locate a wide variety of information. Many businesses use database software to store valuable information about customers and arrange it according to various criteria. Businesses can add to this information at any time, sort it alphabetically, or use it to print mailing labels. Spreadsheet software programs are used to organize financial information. Businesses do not use interactive or publishing software to store information about customers. SOURCE: NF:009 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 163-165]. Woodland Hills, CA: Glencoe/McGraw-Hill. 75. C Home page. The design and content of the home page is extremely important because many visitors do not go beyond that page. Therefore, it is important to create an home page that provides an overview of the web site and links to other pages on the site. If the goal is to have visitors follow links to access additional information or make a purchase, the home page must generate interest and encourage visitors to continue. A search engine is a software program that automatically crawls the Web looking for information pertaining to specified search terms and displays a list of results. A domain name is a business's web address. A shopping cart is a computer program designed to act as an online catalog and order-processing center. SOURCE: NF:042 SOURCE: Miles, J.E., & Dolce, C. (2006). E-Commerce (p. 192). New York: Glencoe/McGraw-Hill. 76. B Accessed when needed. Businesses need to organize their records in a systematic manner so that information can be accessed when it is needed. This is what record keeping is all aboutmanaging the information a business needs in order to make operational and financial decisions. Some business records contain confidential information and should not be distributed freely, available to everyone, or published in newsletters. However, this information should be organized so that employees who are supposed to use it can access it when needed. SOURCE: NF:001 SOURCE: NF LAP 1Record It (Business Records) 77. A Migration. Migration is a population trend that indicates movement of people throughout the country as well as into and out of the country. Migration trends are important to businesses because businesses need to know where their customers are located. For example, many people are leaving colder climates and migrating to what is considered the Sunbelt. This movement affects businesses because the types of products they sell and the way they sell them will change. Also, the increased migration of ethnic groups into the country creates a need for new goods and services that meet the needs of a multicultural population. Lifestyle, consumption, and behavior are not population trends; however, these factors also affect how businesses market their goods and services. SOURCE: NF:013 SOURCE: OECD. (2004, January 21). Trends in international migration reflect increasing labour-related immigration and persistent integration problems. Retrieved August 13, 2009, from http://www.oecd.org/document/50/0,2340,en_2649_201185_24968882_1_1_1_1,00.html 78. A Make decisions about future operations. Companies keep many types of internal records about their various business activities. These records might contain information about sales, agreements with vendors, financial status, etc. Management and employees use the records to make decisions about dayto-day and future actions. For example, records that indicate that sales are increasing and the company is profitable might encourage the business to decide to expand. Monitoring internal records does not help a business to track the activities of competitors or understand global economic conditions. Businesses do not use internal records to handle employee problems and complaints. SOURCE: NF:014 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

25

79. C Changes in regulation. An environmental scan is an analysis of external forces that influence a business's success. By examining political, economic, socio-cultural, and technological factors that affect the business, it can take steps to ward off the threats and to take advantage of the opportunities based on the information that the scan provides. Political factors that a business might examine include changes in regulation (laws) that govern how the business operates. The fluctuation of unemployment rates is an economic factor. Shifts in consumer lifestyles are socio-cultural factors. Widespread use of wireless devices is a technological factor. SOURCE: NF:015 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 30-32, 84-86). New York: Glencoe/McGraw-Hill. 80. C Business risk. The firm's business risk increased because of the chance of accident or injury, which could result in lawsuits, medical expenses, and other losses. Economic risks are risks caused by changes in the market that force a lowering of prices, a change of product, or failure of businesses. Increased sales and employment would be positive outcomes of a business's policy. SOURCE: OP:007 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 399-402). Tinley Park, IL: Goodheart-Willcox. 81. A Protection. Business security provides protection for the business and/or its property. The goal is to prevent financial loss. Employee safety is a concern in specific situations, such as robbery or shoplifting. Risk management is a business activity, rather than a marketing function, which involves managing marketing activities to optimize the relationships of potential loss to gain. Gross profit is money left after cost-of-merchandise expense is subtracted from total income. SOURCE: OP:013 SOURCE: Stutts, A. T., & Wortman, J. F. (2006). Hotel and lodging management: An introduction (2nd ed.) [pp. 198-201, 205-206]. Hoboken, NJ: John Wiley & Sons. 82. D A back-up plan. A back-up plan is an alternate way to carry out a project. When unforeseen events change the project, if you have a back-up plan, the project can still be completed. The back-up plan might call for doing the project on another day or asking for help from people outside the project. Having selfcontrol and patience will help the project manager deal effectively when unforeseen events occur. However, a back-up plan is still needed for the project to proceed. One aspect of a back-up plan might involve asking volunteers to help. SOURCE: OP:002 SOURCE: QS LAP 18Make It Happen 83. A Their stores are geographically distant. Some retail chains have grown so large that central buying can no longer effectively purchase for geographically distant stores. In response to this development, many large retail firms have decentralized their purchasing operations by dividing the country into districts and delegating part of central buying's responsibility to district managers who are more familiar with local stores. Businesses usually obtain lower prices for large orders. Businesses do not decentralize their purchasing operations because buyers prefer to be independent. Both centralized and decentralized purchasing operations are able to maintain a wide variety of suppliers. SOURCE: OP:015 SOURCE: OP LAP 2Buy Right (The Nature of Purchasing)

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

26

84. A Creates form utility. One of the benefits of production is that it creates form utilityusefulness created by altering or changing the form or shape of a good to make it more useful to the consumer or user. Without production, many resources would be of little use to consumers. All of the other alternatives are benefits of production to businesses. SOURCE: OP:017 SOURCE: BA LAP 1Nature of Production 85. C Control its expenses. Most businesses have a petty cash fund from which employees withdraw small sums of money to buy such items as stamps, pens, note pads, or tape that are needed unexpectedly or in a hurry. Employees should record each of these purchases so that the business knows what was purchased and can control the amount spent if necessary. Keeping a record also helps to protect the petty cash fund from employee theft. There is no law that a business must record petty cash purchases. Keeping a record of the petty cash does not improve cash flow, the movement of funds in and out of the business, or reduce major spending since all petty cash purchases are small. SOURCE: OP:025 SOURCE: Think Big. (2009, April 29). Steps for reducing business expenses. Retrieved August 13, 2009, from http://www.associatedcontent.com/article/1682579/steps_for_reducing_business_expenses. html?cat=3 86. D True, the appearance of a business affects the customer's overall impression. From the minute customers enter a business, they are aware of its appearance. Although important to business image, appearance is not necessarily the most important factor. It depends on the type of business as to whether price or appearance is the more important factor affecting image. With a discount business, price is more important than appearance, as compared to a high-fashion boutique, where an attractive decor is essential. SOURCE: OP:032 SOURCE: Stutts, A. T., & Wortman, J. F. (2006). Hotel and lodging management: An introduction (2nd ed.) [pp. 88, 99-101]. Hoboken, NJ: John Wiley & Sons. 87. D Praise. When you work in an efficient, effective manner, you are more likely to receive such rewards as praise, raises, and promotions. A response to orderly behavior that is critical or indifferent may damage employee morale. Favoritism should be avoided since it gives an employee an unfair advantage over other employees. SOURCE: PD:009 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 722-733). Tinley Park, IL: Goodheart-Willcox. 88. B It moves the world along. Without creativity, we would still be living in caves. Everything in our existence is based on something that was once a new idea. Without creativity, we'd have no new goods or services. Many highly intelligent people are not creative. Creative people think in abstract terms so that they are able to see what is not readily apparent. Creative people prefer variety and change to routine. SOURCE: PD:012 SOURCE: PD LAP 2Creativity 89. B Unsatisfied. These are needs which have not yet been fulfilled. Usually, lower level needs such as those for food and shelter must be satisfied before we are motivated by higher level needs. SOURCE: PD:013 SOURCE: Lussier, R.N., & Achua, C.F. (2010). Leadership: Theory, application, & skill development (4th ed.) [pp. 81-83]. Mason, OH: South-Western Cengage Learning.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

27

90. D Technological developments. Entrepreneurs who do not keep up with their industry's technological developments run the risk of falling behind their competitors. As a result, the competitors who keep up with the latest developments might be able to provide products that those who do not keep up with technology cannot. Consumers do not establish pricing strategies; businesses create them. Personal distribution policies for companies are important in regard to serving customers but do not necessarily relate to the industry's technological developments. Watching their suppliers' buying trends does not necessarily help businesses stay competitive in their industries. SOURCE: PD:066 SOURCE: PD LAP 4Own Your Own (Career Opportunities in Entrepreneurship) 91. C "I was seeking a more responsible job." This is a positive response which indicates that the applicant is interested in getting ahead and is willing to accept additional responsibility. A job applicant should not make negative remarks about his/her previous employer(s) or coworkers. Even though all of the other alternatives could be true statements, they are negative and will reflect poorly on the job applicant. SOURCE: PD:027 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [p. 47]. Mason, OH: South-Western. 92. A Someone who works in financial services is limited to working at an investment firm, a bank, or an insurance company. The financial-services industry includes a wide range of career possibilities across many kinds of companies, not simply investment firms, banks, and insurance companies. People who work in financial services can expect to earn higher-than-average salaries. They include real estate brokers, fund managers, and auditors. SOURCE: PD:152 SOURCE: QS LAP 51Careers in the Money 93. A Treasurer. A treasurer is a title for a type of financial manager, or a person who is responsible for overseeing part or all of an organization's finances. Treasurers are responsible for an organization's financial goals and objectives. They oversee investments, cash management, and capital raising. Bill and account collectors, procurement clerks, and billing clerks are all types of financial clerks who are responsible for financial recordkeeping. SOURCE: PD:152 SOURCE: QS LAP 51Careers in the Money 94. C Education, experience, and position. A professional organization is a group of persons in the same profession who form a society to further their common interests. While education, experience, and/or position may be entry requirements for some professional organizations, the disclosure of confidential information such as income is not usually required. Race is not a valid consideration among entry requirements. SOURCE: PD:036 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 789-790). Woodland Hills, CA: Glencoe/McGraw-Hill. 95. D License. Depending on location, many financial services providers are required to complete specific training and obtain a license to practice. The license guarantees that the provider has the necessary education and training to advise clients about financial products and offer other types of financial planning services. The purpose of completing specific training in the area of financial services is to obtain a license rather than a promotion, a bonus, or a referral. SOURCE: PD:082 SOURCE: Kapoor, J.R., Dlabay, L.R., Hughes, R.J., & Hoyt, W.B. (2005). Business and personal finance (pp. 260-261). New York: Glencoe/McGraw-Hill.

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

28

96. C Networking. Networking is the exchange of information with others for the purpose of professional or business development or advancement. Because the financial-services marketplace is very competitive, financial-services professionals and businesses need to communicate with other individuals and businesses to build clientele and promote their products. By participating in groups and speaking with other professionals, financial-services professionals can build new business relationships, obtain referrals, and acquire leads to increase clientele. Product development is the process of creating new goods and services. Brainstorming is a creative-thinking technique. Market segmentation is dividing a large market into small markets. SOURCE: PD:153 SOURCE: Futrell, C.M. (2000). ABC's of relationship selling (6th ed.) [pp. 184-185]. Boston: Irwin/McGraw-Hill. 97. B Withholding information from insurance underwriters. In the insurance industry, underwriters assess the risks of insuring an applicant and approve compensation for loss under the terms of an insurance policy. Withholding information that may affect the approval of the applicant or the compensation associated with a claim is unethical behavior. Requesting documents to process a loan, issuing bonds to raise funds for a corporation, and using third-party debt collectors to obtain overdue payments are ethical activities. SOURCE: RM:041 SOURCE: Head, G. (2005, February). Why link risk management and ethics. Retrieved August 13, 2009, from http://www.irmi.com/expert/articles/2005/head02.aspx 98. B No, the employee may be jeopardizing the business's financial well-being without first obtaining permission from management. Business policies are the rules or guidelines that employees must follow. One reason that businesses develop credit policies is to protect the business from financial losses. Offering credit to a customer who does not meet the business's credit criteria may be costly to the business because the customer may not be able to make installment payments for the product. Employees who bypass these types of policies without proper authorization from management are breaking company rules, are not behaving ethically, and are, in many situations, fired for such behavior. Although some businesses have flexible policies, not all businesses do. Governments regulate credit practices, but they do not require businesses to offer credit to individuals and businesses that have poor credit scores or do not meet basic criteria. SOURCE: RM:041 SOURCE: Dlabay, L.R., & Burrow, J.L. (2008). Business finance (pp. 267-268). Mason, OH: SouthWestern Cengage Learning. 99. C Contingency plans. A contingency plan is an alternative course of action. A contingency plan states specific guidelines that a business uses when responding to undesirable circumstances. Businesses often use computer software programs to obtain numerical data about their levels of risk in different areas of the business. They use this information to make business decisions and to help them develop alternative action plans when circumstances occur that increase or decrease risk at a given time. Content theories are theories of motivation that focus on internal needs, drives, and incentives that cause people to behave in a certain manner. An endorsement is approval by a reputable external source. Governments develop monetary and fiscal regulations. Risk management software programs do not help businesses develop content theories, endorsement records, and fiscal policies. SOURCE: RM:042 SOURCE: McIntosh, J. (2007, November 14). Plan for crisis at work: Risk assessment and contingency planning in business. Retrieved August 13, 2009, from http://strategic-businessplanning.suite101.com/article.cfm/plan_for_crisis_at_work

ST-FIN-10A

FINANCE CLUSTER EXAM KEY

29

100. C Implement and monitor safety policies. Businesses can take many actions to control their level of risk. Developing, implementing, and monitoring specific safety policies is one way to lower risks associated with accidents in the workplace. Accidents can be costly to the business, especially if it does not carry sufficient comprehensive property insurance to cover these types of situations and the severe injuries that may result. Crime insurance policies protect businesses from losses associated with theft. Health insurance is a benefit that businesses offer to their employees to help offset medical expenses. A business plan is the written business model, which shows how the business works now and how it is intended to work in the future. SOURCE: RM:058 SOURCE: SCORE. (n.d.). Risk management . Retrieved August 13, 2009, from http://www.ctclic.com/Newsletters/customer-files/riskmanagement.pdf

Competency-Based Competitive Events *Written Exam* Test: ST-HOTR-10A Booklet Number _____

Hospitality and Tourism Cluster Exam


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

1. Which of the following is an important factor that affects the legal procedure: A. Misdemeanor C. Jurisdiction B. Freedom D. Larceny 2. What type of corporation sells millions of shares and must furnish complete information about its earnings, assets, and debts? A. Open C. "S" B. Close D. Limited 3. Which A. B. C. D. of the following is true regarding passenger rights in the air travel industry: It is legal for an airline to overbook a flight. If baggage is lost, airlines pay a flat fee to reimburse the passenger. There is an international "Bill of Rights" to protect air travel consumers. Airlines must provide monetary compensation if a flight is delayed due to bad weather.

4. Which of the following services would be distributed by a producer to agent to consumer channel: A. Legal defense of airlines C. Lodging at a bed and breakfast B. Food-service at a local restaurant D. Travel planning 5. In which of the following situations might vertical conflict occur in a channel of distribution: A. Two similar businesses compete for the same target market. B. A manufacturer decides to sell its products on its web site. C. Distributors for a product agree to charge the same price. D. An organization sells additional franchises in the same city. 6. Which of the following is a guideline that employees should follow to be effective listeners: A. Read directions C. Interrupt often B. Ignore body language D. Ask questions 7. Which of the following is not a barrier to effective verbal communication: A. Asking for clarification C. Interrupting the speaker B. Thinking of what to say next D. Judging the speaker's appearance 8. Which of the following is a technique you can use to demonstrate a positive attitude over the telephone: A. Use a wide vocabulary in conversations. C. Be informed about your business's rules. B. Smile when you answer the telephone. D. Shut out all distractions while talking. 9. Once you know your group's purpose, what should you do next in a discussion? A. Contribute in a useful way. B. Find out what people know about the subject. C. Volunteer a new idea. D. Agree on ground rules. 10. What does an enclosure notation at the bottom of a business letter signify? A. The sender prepared the letter. C. The sender wishes a reply. B. Copies of the letter were sent to others. D. Something is being sent with the letter. 11. When developing persuasive business letters, it is most important for the writers to think about the readers' A. nonverbal cues. C. decision-making styles. B. personal images. D. possible objections. 12. Which of the following types of material are often included as attachments to the appendix of short reports: A. Supporting documents C. Title page B. Table of contents D. Conclusions and recommendations

Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

13. Three types of communication usually found in a business with a formal communication network are A. upward, horizontal, and diagonal. C. downward, upward, and lateral. B. grapevine, informal, and standard. D. informational, official, and conversational. 14. When Brian got a new job, he made sure he knew how to use the cash register, became familiar with all the products and prices, and kept his work station very organized. In which way did Brian demonstrate the customer-service mindset? A. Being accurate C. Following-up B. Following-through D. Being efficient 15. Slow/Methodical customers take a lot of time to make buying decisions because they are either indecisive or shy. The shy customers are also referred to as __________ customers. A. leave-me-alone C. irritable B. impatient D. silent 16. A food server who has mixed up an order and brought the wrong menu items is an example of the __________ contributing to customer complaints. A. consumer C. business B. employee D. product 17. Which A. B. C. D. of the following is an example of distribution in the travel and tourism industry: A travel agency advertising a fly/drive package An airline flying passengers to their destination A tour operator developing a charter bus trip An attraction offering a reduced rate on admission

18. Lois is a high school senior who wants to go on her senior trip and have a new outfit for graduation. Unfortunately, Lois is unable to afford both. Which of the following categories of wants is displayed by Lois: A. Unlimited C. Competing B. Unique D. Noneconomic 19. Products that are available when they are needed have __________ utility. A. possession C. place B. form D. time 20. When customers buy the exact amount of goods that producers are selling at a specific price, the __________ price exists. A. production C. unit B. market D. equilibrium 21. One of the responsibilities of the business activity of human resources management is to A. buy resources. C. promote goods. B. obtain funds. D. hire employees. 22. When a business keeps a risk because management is unaware of it, the business is __________ the risk. A. avoiding C. retaining B. preventing or controlling D. transferring 23. Indirect competition occurs only between businesses that A. offer similar products. C. offer dissimilar products. B. are in different cities or towns. D. are in the same city or town. 24. Which of the following is an advantage of specialization of labor: A. Labor regulations C. Increased production B. Income negotiations D. Higher worker morale

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

25. What is a business calculating when it determines how much it earns from the sale of one additional item? A. Net worth C. Marginal revenue B. Gross profit D. Disposable income 26. An import ant personality trait in hospitality and tourism is leadership, which is demonstrated by individuals when they A. analyze employee productivity. C. plan and organize their work. B. feel what others are feeling. D. guide the actions of others. 27. Which of the following is a way to show interest and enthusiasm: A. Exhibiting indifference C. Meeting deadlines B. Asking irrelevant questions D. Avoiding direct eye contact 28. Your supervisor has given you a job to do which must be completed before you leave for the day. Another employee has finished her assignment and offers to help you. This person is demonstrating A. assertiveness. C. empathy. B. honesty. D. initiative. 29. When Mary filled out her expense account, she included the cost of a breakfast that was actually free with her hotel room. Mary's action is a form of A. compliance. C. accuracy. B. cheating. D. borrowing. 30. Feedback that you receive from self-evaluation is called __________ feedback. A. external C. internal B. indirect D. eternal 31. One of A. B. C. D. the barriers to assertiveness for some people is that they are able to confront others in difficult situations. believe their ideas are as important as anyone's. know how to refuse others when necessary. believe they have no control over their behavior.

32. How does a group reach a decision by consensus? A. The majority of the group members reach agreement. B. Group members vote to determine the best option. C. Each member agrees to the same course of action. D. The group leader solicits suggestions and makes the final decision. 33. A change leader might find it difficult to get support from others in a group because the others may A. dislike the status quo. C. have a lot of good ideas. B. fear the unknown. D. trust the change leader. 34. To develop effective political relationships within an organization, it is important for an individual to A. go around the boss. C. be a team player. B. participate in the grapevine. D. ignore conflict. 35. What do companies try to accomplish when extending credit to customers? A. Increase sales C. Reduce assets B. Reduce expenses D. Increase liabilities 36. In what A. B. C. D. primary way does a T account benefit an accountant in maintaining financial records? Increases the accuracy of calculations Reveals the motives behind a purchase Shows the parts of a business transaction Heightens the awareness of spending problems

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

37. Managers who make a return on the business investment are A. receiving a bonus. C. charging a fee. B. making a profit. D. earning a salary. 38. Business accounting information often is summarized in which of the following types of financial statements: A. Trade report C. Balance sheet B. Sales forecast D. Fiscal policy 39. What do businesses often need to do to continue operating when they experience negative cash flow? A. Hire employees C. Borrow funds B. Increase prices D. Stop discounts 40. Income from sales, cost of goods sold, gross profit on sales, operating expenses, and net profit or loss are all part of a(n) A. marketing plan. C. sales budget. B. balance sheet. D. income statement. 41. Finance is the business function that involves managing A. money. C. marketing. B. information. D. production. 42. Which A. B. C. D. of the following is an advantage of a rolling budget? It allows you to have a year-long budget in place at all times. It requires less effort than an annual budget. It sets an annual budget that does not change. It has to be consulted less frequently by managers.

43. Which of the following is an example of helpful, printed information that businesses often give new employees during orientation: A. Application form C. Company handbook B. Annual report D. Promotional brochure 44. Which of the following pieces of marketing information would be most useful to hotel staff wanting to personalize a repeat guest's stay at the hotel: A. The hotel restaurant chef's specialties and nightly specials B. Room accommodations that the guest has selected in the past C. Weddings, conventions, and other special events at the hotel D. The total number of rooms that the hotel has booked for the night 45. Which A. B. C. D. of the following statements regarding using the Internet to administer questionnaires is true: Data-entry and administrative costs are higher for online questionnaires. Online questionnaires require more time for data entry and collection. Interviewers are more likely to influence respondents' answers online. Respondents are more likely to misunderstand online questionnaires.

46. Research data displayed in charts, tables, and maps are an example of A. graphic presentation. C. visual association. B. simple tabulation. D. functional distribution. 47. Why do business managers often prepare and use presentation software to support reports? A. To record minutes of meetings C. To simplify complex information B. To analyze financial data D. To design marketing materials

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

48. What do business managers often prepare for other managers in the company to provide research information that will help with the decision-making process? A. Formal letters C. Written reports B. Inter-office memos D. Short e-mails 49. The development of goods and services that best satisfy consumer needs and wants is a major goal of A. product/service management. C. financing. B. purchasing. D. marketing-information management. 50. Which of the following is a characteristic of travel and tourism marketing: A. Standard C. Precise B. Controllable D. Variable 51. One reason that hotels create guest history records is to provide information for use by the hotel's __________ staff. A. accounting C. housekeeping B. personnel D. marketing 52. Internet Explorer is an example of __________ software. A. computer server C. web browser B. bookmark D. cookie. 53. A hotel wants to purchase computer software that would store, manage, and retrieve customer information in order to better serve customer needs and increase sales. What type of software should the hotel buy? A. Spreadsheet C. Word processing B. Database D. Computer-aided design 54. Hospitality and tourism businesses maintain accurate records of their income and expenses in order to comply with the government's A. ethics codes. C. policies. B. tax laws. D. objectives. 55. Maintaining comprehensive records about its customers' purchasing habits helps a company to A. negotiate with competitors. C. obtain favorable credit ratings. B. plan future business activities. D. increase brand loyalty. 56. One reason why it is important for hospitality and tourism businesses to identify and respond to current business trends is to A. control performance. C. encourage feedback. B. remain competitive. D. improve motivation. 57. Companies obtain internal information about their various business activities to operate effectively by monitoring A. internal records. C. industry trends. B. trade publications. D. government statistics. 58. While conducting an environmental scan, a convention bureau obtained information revealing that consumer confidence was gaining strength in the nation. This is an example of a(n) __________ factor. A. economic C. technological B. demographic D. political 59. Which of the following is a growing trend that is having a significant impact on the hospitality and tourism industry: A. Reduced population movements C. Decreased diversity B. Flexible work schedules D. Limited technology

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

60. Which of the following is a true statement about accident prevention: A. Employees can reduce their risk for accidents by practicing good health habits. B. Motor vehicles are rarely a factor in work-related accidents. C. Heavy loads should be lifted by using muscles in the upper arms and back. D. It is easier to prevent unsafe acts than unsafe conditions. 61. To prevent point-of-sale fraud, businesses usually use A. surveillance equipment to maintain terminals. C. guidelines for unlocking display cases. B. procedures for making bank deposits. D. specific credit-card procedures. 62. What do managers often do after a project has been successfully completed? A. Give up power C. Prepare a report B. Close the front office D. Provide feedback to vendors 63. Obtaining goods that will satisfy the needs and wants of a business's customers is a function of A. advertising. C. marketing. B. selling. D. purchasing. 64. While an adventure tour guide is leading a white-water rafting group, a group member falls and breaks an ankle. What are the primary provisions the guide needs to help the injured group member? A. Toolbox and flashlight C. Map and compass B. Medical kit and cellular phone D. Prescription pain medication 65. Which of the following is a reason why hospitality and tourism businesses try to decrease their operating expenses: A. To improve service C. To expand sales B. To promote efficiency D. To increase profit 66. Which of the following would not be part of the responsibilities of a hotel's maintenance department: A. Changing a business's layout C. Selling goods B. Inspecting mechanical equipment D. Routine repairs 67. Access control systems, video systems, and cash-control devices are all A. new inventory trends. C. antirobbery systems. B. customer interactive systems. D. types of electronic games. 68. Businesses that ask several vendors to submit prices before making a purchasing decision are managing the A. bid process. C. inventory plan. B. operating system. D. stock method. 69. A hotel's employees are usually expected to dress in a manner which reflects A. the business's image. C. their self-concept. B. the latest fashions. D. their personal taste. 70. It is usually most effective for goals to be phrased in __________ terms. A. specific C. general B. complex D. simple 71. Eric earns extra money by giving riding lessons to elementary-school students at a summer camp. Today, one of his young students nearly falls off the horse and starts crying. Eric isn't sure how to calm the student's nerves. This is an example of a __________ problem. A. work C. peer B. personal D. school

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

72. One of the most effective methods of locating job leads is asking for tips from A. friends. C. minors. B. retirees. D. nonworkers. 73. Matt just received a letter telling him that someone else had been hired for a job for which Matt had been interviewed. Since Matt didn't get the job, does he need to write an interview follow-up letter to the company? A. No, it's too late to send a follow-up letter. B. Yes, he should already have sent a follow-up letter. C. Yes, the company will be expecting to hear from him. D. No, since Matt wasn't hired, he doesn't need to write. 74. Publications that provide specific information about particular fields and new products and styles are known as A. consumer panels. C. market papers. B. trade journals. D. consumer surveys. 75. Lisa is opening a new bed and breakfast and might benefit from joining a hospitality trade association because she can A. discuss personal business with her colleagues. B. earn a college degree and become a certified hotelier. C. obtain credit to purchase equipment for the business. D. network with others who have expertise in the industry. 76. Which of the following is a hospitality and tourism business that focuses its efforts on providing shelter for travelers: A. Airline C. Tour wholesaler B. Motel D. Restaurant 77. Which of the following is a factor that may have an effect on the prices of hospitality and tourism products: A. Hidden costs C. Unique values B. Personal preferences D. Past experiences 78. A representative from a local distributor shows you calendars featuring photos of the most scenic locations within the community, a board game developed by the local chamber of commerce, a Fourth of July banner, and a holiday ornament designed by senior citizens. If your Welcome Center specializes in selling community-based products that can be promoted throughout the year, which would you buy? A. Banner C. Board game B. Calendar D. Holiday ornament 79. What is the core product that cruise lines provide passengers? A. Food service C. Transportation B. Entertainment D. Luggage handling 80. A large company that owns a chain of economy hotels recently developed plans to start a chain of upscale hotels. This is an example of A. multicorporate franchising. C. product extensions. B. market potential. D. property management systems. 81. Which of the following is a consideration when a restaurant is selecting suppliers: A. The dependability of the supplier C. Operating expenses B. The supplier's market share D. Tying agreements 82. An e-mail consisting of words on a screen that one hotel employee sends to a coworker is an example of A. nonstatic communication. C. a personalized message. B. noninterative content. D. a software program.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

83. Which of the following is a purpose of using color in advertising: A. To increase circulation C. To de-emphasize the product B. To reduce the cost of the ad D. To affect a mood 84. An important aspect of typography in advertising involves the effective use of A. art. C. copy. B. type. D. media. 85. Which of the following often is an important part of creating effective advertising layouts: A. Developing a message C. Writing a signature B. Selecting a slogan D. Using a large visual 86. Certain types of drawing media make it possible to A. modify existing photographs. B. produce multimedia presentations.

C. design meeting announcements. D. create interactive communications.

87. Which of the following has a significant impact on the composition of a print ad: A. Dialogue C. Production costs B. Storyboard D. Color harmonies 88. The statement, "For a brochure that tells the whole story of Ebony Resorts, call your local travel agent or 1-800-555-5555," at the end of an advertisement is an example of a A. slogan. C. seal. B. brand. D. close. 89. Before returning an advertising proof to the newspaper, the advertiser should A. check for and mark all errors in the ad. C. make sure enough stock is on hand. B. check the prices at competing stores. D. make only the major corrections. 90. Participating in community outreach activities might be considered a form of A. customer service. C. target marketing. B. promotion. D. publicity. 91. A travel agent who prepares a factual announcement and asks the media to present it free of charge to the public is A. using a public relations agency. C. using a news release. B. advertising the business. D. setting up an advertising campaign. 92. Asking customers to sign a guest book during a restaurant's grand opening provides an opportunity to A. obtain publicity. C. work out problems with service. B. create a mailing list. D. count how many people attended the event. 93. Which A. B. C. D. of the following is an example of the pyramid type of display arrangement in a restaurant display: A large basket that contains menu items Three rows of menu item pictures placed alongside a wall Shelving that holds an assortment of menu items Many levels of menu items that rise to a narrow point

94. Presenting fresh merchandise and keeping displays spotless are two important activities in __________ displays. A. maintaining C. storing B. moving D. tearing down

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM

95. Which of the following examples best illustrates the concept of promotion in the hospitality and tourism industry: A. American Hawaii Cruise Lines provides an itinerary that includes stops on several islands. B. Marriott provides a home page on the Web and offers online booking for locations worldwide. C. Choice Hotels International offers a range of products from economy to luxury accommodations. D. Amazon.com offers its online customers guaranteed Christmas delivery on all in-stock products. 96. A hotel purchases theater tickets for upcoming plays, arranges discounts at local restaurants, and advertises that, for one price, a guest can stay at the hotel, receive two tickets to a play, and a discount on meals. This special promotion is known as a(n) __________ plan. A. budget C. package B. group D. advertising 97. Servers who can easily sell patrons additional food or beverage items they had not originally planned to buy are using __________ selling. A. substitute C. suggestion B. inappropriate D. high pressure 98. Which of the following steps in the selling process would salespersons take first: A. Demonstration C. Close B. Follow-up D. Approach 99. What hospitality service is a hotel employee most likely to recommend to a guest with young children? A. Interpreting C. Courier B. Dining D. Baby-sitting 100. What is the most efficient way to follow procedures for processing complimentary offers, coupons, and discounts at an amusement park? A. Follow the instructions on the computer terminal screen B. Keep written instructions in files C. Ask the supervisor to demonstrate the process D. Look in the operations manual while the customer is waiting

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

10

1. C Jurisdiction. Jurisdiction involves whether a specific court has the authority to hear a case. Not all courts are able to hear all types of cases. For example, depending on the business dispute, a legal procedure might take place in a state court or a federal court. Also, a court in one state might, or might not, have jurisdiction over a business that is incorporated in another state. Freedom is not a factor that affects the legal procedure. Misdemeanor and larceny are types of crimes. SOURCE: BL:070 SOURCE: Miller, R.L., & Jentz, G.A. (2005). Fundamentals of business law (6th ed.) [pp. 33-36]. Mason, OH: Thomson/South-Western. 2. A Open. The open, or public, corporation usually sells millions of shares of stock to many stockholders. The public corporation must furnish information to the public and to prospective investors about its earnings, assets, and debts. A close corporation may be owned by just a few people and does not offer its shares for sale to the general public. The "S" corporation is a private, state-chartered corporation that was developed to help small businesses by taxing them as individuals in a partnership. It is limited to 75 or fewer shareholders. Limited is a type of partnership. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way 3. A It is legal for an airline to overbook a flight. Since there are no laws to protect the travel consumer from overbooking, bumping passengers from flights is common when traveling by air. The U.S. Department of Transportation does, however, require that airlines first ask for volunteers to give up their seats in exchange for compensation. This may be in the form of cash or a voucher. The amount a passenger is compensated for lost luggage is subject to negotiation. Most airlines have a ceiling on the amount paid ($2,500/passenger); international travelers are paid $9.07/lb. Currently, there is no international "Bill of Rights." The United States Congress has developed several options for an airline passenger "Bill of Rights," but there is nothing on the law books as of yet (August, 2009). Airlines are not required to pay any compensation for flight delays due to bad weather. SOURCE: BL:135 SOURCE: Travel Images. (n.d.). United States: The rights of air passengers . Retrieved August 13, 2009, from http://www.travel-images.com/passenger-rights-us.html#overbooking 4. D Travel planning. Travel planning is provided by travel agents who sell transportation, lodging, tours, etc., to consumers for the companies that provide each of these services. Other services, such as legal defense, lodging, and food service, use a direct producer to consumer channel because the services must be delivered directly to the user. SOURCE: CM:003 SOURCE: CM LAP 1Channel It (Channels of Distribution) 5. B A manufacturer decides to sell its products on its web site. Vertical conflict in a channel of distribution occurs when there is disagreement between different levels of members in the same channel. An example of a vertical channel is a manufacturer selling to wholesalers who then sell to retailers. Conflict may occur if the manufacturer decides to sell its products on its web site as well as sell them to wholesalers. Both the wholesalers and the retailers may feel that they will lose sales because the products are available directly to the ultimate consumer. Horizontal conflict may occur if an organization sells additional franchises in the same city or if two similar businesses compete for the same target market. Distributors for a product agreeing to charge the same price is price fixing. SOURCE: CM:008 SOURCE: Zikmund, W., & d'Amico, M. (2001). Marketing: Creating and keeping customers in an e-commerce world (7th ed.) [pp. 371-372]. Mason, OH: South-Western.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

11

6. D Ask questions. Effective listeners concentrate on what is being said and ask questions when they don't understand or want clarification. Managers often assume that employees know more than they do and give incomplete or vague instructions. Employees should pay close attention to what is being said and ask questions to make sure they understand. Employees should not interrupt often, only when it is necessary to clarify a point they don't understand. Employees should observe a speaker's body language because nonverbal clues also send a message. Reading directions will not help employees be effective listeners. SOURCE: CO:017 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [pp. 206-208]. Mason, OH: South-Western. 7. A Asking for clarification. Effective listeners give full attention to what is being said and ask questions to make sure that they understand the message. Listeners who interrupt are focusing on themselves rather than the speaker. Judging the speaker's appearance distracts the listener from what is being said. Thinking of what to say next instead of listening to what is being said is a common barrier to effective communication. SOURCE: CO:147 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 180-182). New York: Glencoe/McGraw-Hill. 8. B Smile when you answer the telephone. Your attitude is projected over the telephone. A smile or a frown can actually be "heard" in your voice by the person on the other end of the line. A smile indicates a positive attitude, and a frown indicates a negative attitude. Using a wide vocabulary, being informed about the business's rules, and shutting out distractions while you are talking to a caller are all helpful in providing service, but they are not ways to demonstrate a positive attitude. SOURCE: CO:114 SOURCE: Mancuso, J. (2007). The everything guide to being an event planner (p. 73). Cincinnati: Adams Media. 9. D Agree on ground rules. Once you know your group's purpose, you can (as a group) lay some simple ground rules for appropriate behavior during the discussion. Finding out what people know about the subject and contributing in a useful way occur later in the process. Volunteering a new idea is a discussion tool for contributing in an open-minded way. SOURCE: CO:053 SOURCE: QS LAP 29Put In Your Two Cents 10. D Something is being sent with the letter. The word "Enclosure" at the bottom of the page indicates that other material accompanies the letter. This lets the recipient know s/he should look for additional material and lets the sender know if the material was not enclosed. Reference initials indicate who prepared a letter. The copy notation (cc) preceding a name (or names) signifies that copies of the letter were sent to persons other than the addressee. A request for a reply is usually included within the body of the letter. SOURCE: CO:133 SOURCE: Brizee, A. (2009, April 17). Writing the basic business letter. Retrieved August 11, 2009, from http://owl.english.purdue.edu/owl/resource/653/01/

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

12

11. D Possible objections. The purpose of a persuasive letter is to convey information that encourages the reader to take a specific course of action. For example, the purpose of a sales letter is to motivate a person to buy a particular product. An objection is a reason for not taking a specific course of action. When developing persuasive messages, it is important for the writers to think about the readers' possible objections and acknowledge them. By acknowledging the objections and providing a rationale that removes the objections, the writers better position themselves in persuading the readers to take specific actions. Because each reader has different personal images and decision-making styles, it is not feasible for the writer to consider these factors if the letter is going to a lot of people. The readers' nonverbal cues cannot be seen when writing persuasive messages. SOURCE: CO:031 SOURCE: Hayden, K. (2008, December 19). Persuasive letter writing lesson. Retrieved August 11, 2009, from http://www.brightbulb.com/education/k-12/articles/16333.aspx 12. A Supporting documents. The purpose of the short report is to present information in a concise and simple manner. Therefore, documents that support the information presented in the appendix of a short report often are included as attachments rather than as parts of the main body. Readers of the report have the option to review the supporting documents or to rely solely on the information in the short report. Table of contents, title page, and conclusions and recommendations are main parts of the short report. SOURCE: CO:094 SOURCE: Smith, S.E. (2009). In a book, what is an appendix? Retrieved August 11, 2009, from http://www.ask.com/bar?q=what+is+an+appendix&page=1&qsrc=121&ab=5&u=http%3A%2 F%2Fwww.wisegeek.com%2Fin-a-book-what-is-an-appendix.htm 13. C Downward, upward, and lateral. Communication in a business with a formal staff communication system usually moves in three directionsup, down, and sideways. Upward communication is from employees to management, downward communication is from management to employees, and lateral is communication between staff members on the same level. Grapevine communication is unofficial information passed from one person to another in writing or through conversation. An informal communication system usually has an active grapevine. The other alternatives are not types of communication. SOURCE: CO:014 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 250-251]. Cincinnati: South-Western. 14. D Being efficient. Being efficient demonstrates the customer-service mindset. Specifically, this means knowing how to operate equipment and software, becoming familiar with all the products the business offers, and keeping work spaces organized for action. Being accurate is demonstrated through doublechecking work for accuracy. Following-through means always doing what you say you're going to do. Following-up with customers suggests to customers that you care about their continued satisfaction. SOURCE: CR:004 SOURCE: HR LAP 32Customer-Service Mindset 15. D Silent. Silent customers are too sensitive to talk very much even when they need help. They are not hard to help, but they do require a lot of the sales agent's time. Impatient customers feel they must be helped immediately, regardless of the circumstances. Irritable or moody clients may be pleasant one day and touchy or unpredictable the next. Leave-me-alone customers prefer, or pretend to prefer, to be left alone to find what they want. SOURCE: CR:009 SOURCE: EI LAP 1Making Mad Glad

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

13

16. B Employee. Employees can contribute to customer dissatisfaction by being inaccurate and providing unsatisfactory servi ce. Serving the wrong menu items is one way that restaurant employees can cause customers to complain. The product was not at fault even though it was the wrong item. The business was not at fault because the correct menu items were available. The customer was not at fault because the desired item was ordered. SOURCE: CR:010 SOURCE: Ramsey, R.D. (2005, October). Handling Customer Complaints in American Salesman v. 50, Issue 10, pp. 15-20. 17. B An airline flying passengers to their destination. The concept of distribution (place) in the travel and tourism industry involves delivering the travel and tourism product to the customer. In this example, the product is transportation that the airline provides by flying passengers to their destination. For distribution to occur, the customer must participate in the experience such as fly on the airplane, go on the bus trip, or visit the attraction. The bus trip is the product. Advertising is a promotional consideration. Offering a reduced rate is a price factor. SOURCE: DS:075 SOURCE: Morrison, A. (2002). Hospitality and travel marketing (3rd ed.) [pp. 339-340]. Albany, NY: Delmar/Thomson. 18. C Competing. Competing wants exist when we want more than one thing at the same time. A unique want causes consumers to exert special effort to obtain items. Unlimited wants prove that as soon as one want is satisfied there is at least one other waiting to take its place. Noneconomic wants are those that can be obtained without spending money. SOURCE: EC:002 SOURCE: EC LAP 10Get the Goods on Goods and Services 19. D Time. If a customer needs a product tonight and it is available, that product has time utility. Form utility occurs when the shape of a product is altered, place utility involves having the product where it is needed, and possession utility is created when ownership of a product is transferred from the seller to the person or the business that will use it. SOURCE: EC:004 SOURCE: EC LAP 13Use It 20. D Equilibrium. Equilibrium price is also called market-clearing price because that is often the result of reaching the equilibrium point. Market price is the actual price that prevails in the marketplace at any particular moment. Unit price indicates the price of products by the ounce, pound, or other measurement to enable customers to compare product values. Production price is the total amount of money spent on materials, labor, taxes, etc., to produce economic goods and services. SOURCE: EC:006 SOURCE: AmosWEB (n.d.). Equilibrium price. Retrieved August 11, 2009, from http://www.amosweb.com/cgi-bin/awb_nav.pl?s=gls&c=dsp&k=equilibrium+price 21. D Hire employees. Human resources management is the process of planning, staffing, leading, and organizing employees. One of the responsibilities of human resources management is to hire employees, which are the human resources needed to operate the business. Finance is the business activity that obtains funds. Marketing is the business activity that promotes goods. Purchasing is the business activity that buys resources. SOURCE: EC:071 SOURCE: EC LAP 19Strictly Business

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

14

22. C Retaining. Sometimes, management is unaware of a risk and keeps the riskdoing nothing about it. Since management in unaware of the risk, it is not avoiding, preventing/controlling, or transferring the risk. Avoiding risk means not being exposed to the risk at all. Preventing/controlling risk means taking measures to reduce the risk. Transferring risk means passing the risk to someone else. SOURCE: EC:011 SOURCE: EC LAP 3Lose, Win, or Draw (Business Risk) 23. C Offer dissimilar products. Indirect competition is rivalry between or among businesses that offer dissimilar goods or services. It is the opposite of direct competitionwhich is rivalry between or among businesses offering similar goods or services. The location of the businesses is not a factor in determining whether competition is direct or indirect. SOURCE: EC:012 SOURCE: EC LAP 8Ready, Set, Compete! 24. C Increased production. Workers who specialize in one job or kind of job can produce at a faster rate as their familiarity with the job increases. This means increased worker production and increased production for the company. A disadvantage is that the workers' morale may be lowered because they do the same task over and over. Labor regulations are legal guidelines. Income negotiations deal with salary structure. SOURCE: EC:014 SOURCE: AmosWEB (n.d.). Specialization. Retrieved August 11, 2009, from http://www.amosweb.com/cgi-bin/awb_nav.pl?s=gls&c=dsp&k=specialization 25. C Marginal revenue. Marginal revenue is the change in revenue generated by the sale of one additional item. For example, a business sells one item, and the marginal revenue is $2.00. The business sells another item, and the marginal revenue is $2.00. Every time the business sells another item, the marginal revenue is $2.00. Businesses compare the marginal revenue with the marginal cost to determine at which level the business earns the most profit. Gross profit is the money left after cost of goods expense is subtracted from total income. Net worth is the total value of the business. Disposable income is the amount of money people have to spend, or dispose of, after they have paid their taxes. SOURCE: EC:023 SOURCE: Gottheil, F.M. (2002). Principles of economics (3rd ed.) [pp. 203-205]. Mason, OH: SouthWestern. 26. D Guide the actions of others. Individuals who are leaders not only have the ability to decide what needs to be done, but they can guide the actions of others to do the work. Good leaders generally plan and organize their work, but that is not what makes them good leaders. Analyzing employee productivity is often a responsibility of leaders rather than a personality trait. Displaying empathy by feeling what others are feeling is a desirable personality trait but does not indicate leadership. SOURCE: EI:018 SOURCE: EI LAP 9You've Got Personality (Personality Traits in Business) 27. C Meeting deadlines. Interest and enthusiasm are qualities that people observe and perceive. We show interest and enthusiasm with our actions, questions, and facial expressions. Meeting deadlines shows employers that you are interested in meeting their needsan action. Direct eye contact helps to reinforce this communication. Asking irrelevant questions and exhibiting indifference are ways of showing a lack of interest or concern. SOURCE: EI:020 SOURCE: The Professional Personal Development Center at Penn State University (2003). Module 10: List ways you can show interest and enthusiasm on the job . Retrieved August 11, 2009, from http://voc.ed.psu.edu/projects/caps/10CAPS.html

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

15

28. D Initiative. Initiative is defined as the willingness to act without having to be told to do so, or the willingness to accept or seek additional or unpleasant duties. The employee who offers to help another is showing initiative by seeking additional duties. Empathy means the ability to put yourself in another person's place. Assertiveness is behavior that is characterized by respect for personal rights as well as for the rights of others. Honesty is truthfulness. SOURCE: EI:024 SOURCE: EI LAP 2Hustle! (Taking Initiative at Work) 29. B Cheating. Cheating is dishonest behavior that involves tricking or misleading others. Mary is misleading her company by asking it to reimburse her for more meals than she paid for. She is not borrowing money, which is obtaining funds through a loan that will be repaid. She is not in compliance with the company's rules but breaking them. Her expense account is actually inaccurate. SOURCE: EI:022 SOURCE: Wells, J.T. (2003). The padding that hurts: Auditors cannot ignore expense account cheating by management in Journal of Accountancy vol 195, Issue 2, pp. 67-69. 30. C Internal. This is information you obtain by constantly monitoring your own actions. External feedback comes from others, directly or indirectly. Although people often obtain ongoing feedback, eternal feedback does not exist. SOURCE: EI:003 SOURCE: EI LAP 15Grin and Bear It (Using Feedback for Personal Growth) 31. D Believe they have no control over their behavior. Some people have the mistaken idea that their behavior is controlled by their circumstances. They behave in a certain way in response to their situation. Being able to confront others, to refuse others, and to believe your ideas are as important as others' ideas are characteristics of assertiveness. SOURCE: EI:008 SOURCE: EI LAP 18Assert Yourself (Assertiveness) 32. C Each member agrees to the same course of action. A consensus is a decision-making outcome that requires the substantial agreement of each group memberevery member must agree to a decision or outcome. In consensus building, every group member has an equal level of power, so there are no leaders. Voting is a decision-making method in which votes are counted for or against an alternative, and whichever alternative has the greatest number of votes, wins. With consensus, no member wins because each member must agree with the decision. Majority rule is not a consensus because most, not all, of the members make the decision. SOURCE: EI:011 SOURCE: QS LAP 17All Aboard! 33. B Fear the unknown. A change leader is someone who has the ability to guide or direct others with the intention to transform or alter something. Change leaders often run into problems when people resist change. People resist change because they are afraid they won't be able to adapt to the change. People also resist change when they are content with the way things are, distrust the change leader, and like the status quo. When people are content with the way things are, they often do not share their ideas because by doing so, change may occur. SOURCE: EI:005 SOURCE: QS LAP 2320/20 Foresight

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

16

34. C Be a team player. Being a team player is a good way to earn the respect and trust of others. Being respected and trusted is an important part of developing effective political relationships within an organization. Others usually are willing to develop relationships with those who do what they say they will do, help the team, and put the goals of the organization before their personal goals. The grapevine often spreads rumors and false information. It should be avoided. It is not effective to go around the boss or ignore conflict. It is helpful to keep the boss informed and deal with conflict in order to correct problems. SOURCE: EI:034 SOURCE: Lussier, R.N. (2003). Management fundamentals: Concepts, applications, skill development (2nd ed.) [pp. 279-280]. Mason, OH: South-Western. 35. A Increase sales. Credit encourages customers to buy more freely, which helps the business extending credit to increase its sales. Companies also offer credit as a way of gaining new business and ultimately increasing profits. Offering credit will increase expenses, but additional sales from credit transactions may be worth this additional cost. Liabilities and assets are not usually affected by the extension of credit. SOURCE: FI:002 SOURCE: College of Business and Economics at Western Washington University (n.d.). Credit and collections. Retrieved August 12, 2009, from http://www.cbe.wwu.edu/SBDC/article.asp?i=15 36. C Shows the parts of a business transaction. As a way to apply the double-entry accounting system when maintaining financial records, a T account shows the parts of a business transaction. It does not reveal motives, increase accuracy, or heighten awarenessthough analysis of the parts of a business transaction may result in any of the three. SOURCE: FI:069 SOURCE: Guerrieri, D.J., Haber, F.B., Hoyt, W.B., & Turner, R.E. (2004). Accounting: Real-world applications & connections (pp. 73-74). New York: Glencoe/McGraw-Hill. 37. B Making a profit. Managers are responsible for making a profit, or return, on the business investment. This means that the business needs to take in enough money to pay its operating expenses, loans, and taxes and have money left over for the owner. Making a return does not involve earning a salary, receiving a bonus, or charging a fee. However, managers usually earn a salary and may receive a bonus if they help the business to make a significant profit. SOURCE: FI:084 SOURCE: BA LAP 2Risk Management 38. C Balance sheet. A balance sheet is a financial statement that captures the financial condition of the business at that particular moment. A balance sheet lists a business's assets, liabilities, and net worth at a specific point in time. Business accounting information often is summarized in a balance sheet to present the data in a form that businesses can use to make decisions. Fiscal policy is the government policy that sets levels of government spending and taxation. A sales forecast is a prediction of future sales over a specific period of time. A trade report provides information about exports and imports. SOURCE: FI:085 SOURCE: FI LAP 5Show Me the Money 39. C Borrow funds. A negative cash flow indicates that a business will need to borrow funds or withdraw cash from a bank account in order to continue operations. A negative cash flow means that the business is spending more money than it is taking in each month. A short-term solution to a negative cash flow problem is to borrow funds to cover expenses. Increasing prices might cause customers to buy elsewhere if they do not want to pay more for goods and services. Businesses experiencing periods of negative cash flow often lay off employees rather than hire new ones. Stopping discounts will not eliminate a negative cash flow situation because it might cause customers to buy elsewhere. SOURCE: FI:091 SOURCE: FI LAP 6Count the Cash (Cash Flow)

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

17

40. D Income statement. An income statement is a financial summary that shows how much money the business has made or lost. It is also called a profit-and-loss statement. A balance sheet shows a firm's assets, liabilities, and owner's equity. A marketing plan is a set of procedures or strategies for attracting the target customer to the business. A sales budget is an estimate of expenditures related to sales. SOURCE: FI:094 SOURCE: FI LAP 4Watch Your Bottom Line (Income Statements) 41. A Money. Finance is the business function that involves managing money. It also encompasses all the tools and analysis that financial managers use to make the decisions involved in money management. The finance function does not manage information, marketing, or productionthose are separate business functions. SOURCE: FI:354 SOURCE: FI LAP 7Money Matters (Role of Finance) 42. A It allows you to have a year-long budget in place at all times. One advantage to rolling budgets is that there is always a year-long budget in place. As each month goes by, another one is added. A rolling budget does not require less effort than an annual budget, but the effort is divided up throughout the year. Rolling budgets do not set an unchangeable annual budget. Indeed, they are often more flexible than a typical annual budget because they are assessed more frequently. Managers consult rolling budgets more frequently, not less. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks 43. C Company handbook. Many businesses develop company handbooks that they give to new employees during the orientation process. The handbooks usually contain information about company policies and procedures and employee benefits and responsibilities. The information in the handbook answers many of the questions that new employees often have about the company. Annual reports and promotional brochures do not contain the type of business information that is useful to new employees. Application forms are completed before employees are hired and begin the orientation process. SOURCE: HR:360 SOURCE: Small Business Notes (n.d.). Employee handbook . Retrieved August 12, 2009, from http://www.smallbusinessnotes.com/operating/hr/employeehandbook.html 44. B Room accommodations that the guest has selected in the past. Although knowing the chef's specials and specialties, special events at the hotel, and the total number of booked rooms might be nice, that information would not be as useful in this situation as the guest's past room accommodations. Hotel staff could more successfully personalize the guest's stay if they knew such details as whether the guest prefers a smoking or non-smoking room, a handicap-accessible room, a king bed, a suite, etc. SOURCE: IM:420 SOURCE: Kaser, K., & Freeman, J.T. (2002). Hospitality marketing (pp. 174-175). Mason, OH: SouthWestern.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

18

45. D Respondents are more likely to misunderstand online questionnaires. Self-administered questionnaires posted online have several advantages over other typical survey methods. For example, it takes much less time to enter and collect data via a questionnaire online versus other survey methods. As a result, data-entry and administrative costs are quite low. Also, because the interviewer is not personally reading survey questions to respondents, there is less chance of the interviewer influencing the questionnaire responses. However, because respondents are not interacting with live people while completing the questionnaire, the respondents have no one to explain the questions to them if they do not understand the questions. And, if they do not understand the online questions, there is a greater chance that respondents will not answer questions accurately, which can skew research results. SOURCE: IM:297 th SOURCE: Zikmund, W.G., & Babin, B. (2010). Essentials of marketing research (4 ed.) [p. 179]. Mason, OH: South-Western Cengage Learning. 46. A Graphic presentation. Businesses often include research data in reports in order to communicate the information to others. To make the data more interesting and easier to understand, businesses often present the data in a graphic format such as in charts, tables, and maps. The graphic presentation of research data supports and reinforces the information that is presented in a written format. Research data displayed in charts, tables, and maps are not an example of simple tabulation, visual association, or functional distribution. SOURCE: IM:347 SOURCE: Churchill, G., & Iacobucci, D. (2002). Marketing research: Methodological foundations (8th ed.) [pp. 948-949]. Orlando, FL: Harcourt. 47. C To simplify complex information. Presentation software is used to produce multimedia presentations that often include slides, video, graphics, sound, color, etc. The use of this type of software often helps business managers to present complex information in a simplified manner by displaying it in a visual format. For example, statistics can be presented in the form of a colorful pie chart, or a complicated production process can be shown on film. Used in conjunction with a report, the visual presentation helps readers to understand the information because they are able to see it. Spreadsheet software is used to analyze financial data. Word processing software is used to record minutes of meetings. Graphics and design software are used to design marketing materials. SOURCE: IM:386 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 201-202). New York: Glencoe/McGraw-Hill. 48. C Written reports. In most cases, business managers prepare written reports for other managers in the company to provide research information that will help with the decision-making process. Written reports usually are preferred because research information is often lengthy, technical, and complex. By presenting the research information in a written report, other managers have an opportunity to read, reread, and analyze the information at their convenience. Once they fully understand the information, they can use it to make decisions. Inter-office memos and e-mails often are short and do not contain a lot of detailed research information. Formal letters usually are sent to other businesses or customers rather than to other managers in the company. SOURCE: IM:390 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (p. 190). New York: Glencoe/McGraw-Hill.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

19

49. A Product/service management. This marketing function involves obtaining, developing, maintaining, and improving a product or service mix in response to market opportunities. Financing is not a marketing function but a business function that involves understanding the financial concepts used in making business decisions. Purchasing is a business activity rather than a marketing function. Marketinginformation management involves gathering, accessing, synthesizing, evaluating, and disseminating information for use in making business decisions. SOURCE: MK:002 SOURCE: MK LAP 1Work the Big Six (Marketing Functions) 50. D Variable. Travel and tourism marketing involves the marketing of services to customers who participate in producing and experiencing the services. As a result, the service varies for each customer. For example, one person's experience with an escorted tour might be completely different from another person's experience. Furthermore, the way the service is marketed varies depending on the target market. For example, a travel agency might market a luxury cruise to senior citizens and a Disney cruise to families with young children. Consequently, the marketing varies, and the outcome is often unpredictable. It is not a precise, controllable, or standard process because of the many variables. SOURCE: MK:013 SOURCE: Morrison, A. (2002). Hospitality and travel marketing (3rd ed.) [pp. 33-34]. Albany, NY: Delmar/Thomson. 51. D Marketing. A guest history record is created from the information that the guest provides on the hotel's registration card. It is used in such marketing efforts as compiling mailing lists or developing advertising strategies for the hotel. Another use might be to provide future services to that guest. The housekeeping, accounting, and personnel departments would not be likely to make use of this record in their work. SOURCE: MP:034 SOURCE: UrVenue (n.d.). Guest history. Retrieved August 12, 2009, from http://urvenue.com/www_features/GuestHistory.html Pizam, A. and Holcomb, J. (2008). International dictionary of hospitality management (p. 127). St. Louis, MO: Elsevier Science & Technology Books. 52. C Browser. A browser is software that allows a computer to access information on the Internet. It has the capability of searching for and locating information on the Web and displaying that information, which then can be printed or saved. Microsoft's Internet Explorer is an example of a web browser. Mozilla Firefox is another browser. A cookie is a bit of information that a web site collects about each viewer. A bookmark is Internet Explorer's term for marking a web site for later reference. A server is a computer that provides services to another computer. SOURCE: NF:006 SOURCE: Wikipedia.com (2009, August 10). Internet explorer. Retrieved August 12, 2009, from http://en.wikipedia.org/wiki/Internet_Explorer 53. B Database. A database program allows the organized collection of information with pieces of information related to one another. This information can be used to maintain, analyze, and combine customer information. Spreadsheets, word-processing software, and computer-aided design do not perform the functions required by the hotel. SOURCE: NF:009 SOURCE: Chapple, M. (n.d.). What is a database? Retrieved August 12, 2009, from http://databases.about.com/od/specificproducts/a/whatisadatabase.htm

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

20

54. B Tax laws. Hospitality and tourism businesses keep records about their income, expenses, and equipment depreciation because they are required by law to file tax returns. They must pay taxes on their income and assets; therefore, they maintain accurate financial records to avoid paying more taxes than necessary. Ethics codes are rules that govern behavior. Policies are general rules to be followed by company personnel. Objectives are goals. SOURCE: NF:001 SOURCE: NF LAP 1Record It (Business Records) 55. B Plan future business activities. Customer records (e.g., invoices) help businesses determine what customers are buying, when they are buying, and how much they are buying. Analyzing past sales records (e.g., invoices) helps a business forecast future sales, which aids in planning other activities such as promotion. Businesses do not keep customer records so that they can negotiate with competitors. To obtain a favorable credit rating, a business must pay its bills when they are due. Maintaining records provides information about customers' purchasing habits, but the records themselves do not increase brand loyalty. SOURCE: NF:002 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp.120-121]. Mason, OH: South-Western. 56. B Remain competitive. Current business trends, such as computerization and mass marketing, are constantly changing the way that companies do business. Businesses continually monitor these trends to develop new and better ways of producing products and serving customers. Businesses that fail to identify and respond to current trends may be unable to remain competitive because they are doing business the old-fashioned way when customers expect innovative techniques. Businesses do not identify and respond to current trends to control performance, encourage feedback, or improve motivation. SOURCE: NF:013 SOURCE: Ivancevich, J. M., & Duening, T. N. (2007). Business principles, guidelines, and practices (2nd ed.) [pp. 5-6]. Mason, OH: Thomson. 57. A Internal records. Companies keep many types of internal records about their various business activities. These records might contain information about sales, agreements with vendors, financial status, etc. Management and employees use the records to make decisions about day-to-day and future actions. For example, records that indicate that sales are increasing and the company is profitable might encourage the business to decide to expand. Businesses monitor their activities on an internal basis. Trade publications, industry trends, and government statistics are examples of external data. SOURCE: NF:014 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western. 58. A Economic. An environmental scan is an analysis of external forces that influence a business's success. By examining political, economic, socio-cultural, and technological factors that affect it, the business can take steps to ward off threats and to take advantage of opportunities based on the information that the scan provides. Economic factors provide information about the way a country earns and spends its money. Information that reveals information about consumer spending habits is an economic factor. Political factors that a business might examine include changes in regulations and the laws that govern how the business operates. Information about demographics or lifestyles falls into the socio-cultural category. Technological factors often include information about advancements in technology, such as computers and satellites. SOURCE: NF:015 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 30-32, 84-86). New York: Glencoe/McGraw-Hill.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

21

59. B Flexible work schedules. The work schedules of employees throughout the world are becoming more flexible as businesses allow them to work from home, work compressed work weeks, and work part-time. As a result, employees have more time to plan leisure and travel activities. For example, there is a trend towards weekend getaways and short trips planned on the spur of the moment. This trend impacts the hospitality and tourism industry by increasing demand for facilities that people can reach quickly. It also increases demand for services to identify and book travel options. The movement of the population is growing, diversity is increasing, and technology is expanding. SOURCE: NF:048 SOURCE: Goeldner, C.R., & Ritchie, J.R. (2003). Tourism: Principles, practices, philosophies (9th ed.) [pp. 569-570]. New York: John Wiley & Sons. 60. A Employees can reduce their risk for accidents by practicing good health habits. People who eat a balanced diet, get plenty of sleep, and exercise regularly, are more rested, alert, and able to concentrate on their work. It is easier to create a safe work environment than to prevent humans from making mistakes. Many work-related deaths are caused by accidents involving motor vehicles. In many of those cases, substance abuse was involved. Leg muscles should be used to lift heavy loads in order to reduce back strain. SOURCE: OP:009 SOURCE: The Institute of Medicine (2003). The future of the public's health in the 21st century (pp. 275-292). Washington, D.C.: National Academies Press. 61. D Specific credit-card procedures. To prevent point-of-sale fraud, businesses establish detailed steps or procedures to follow when accepting credit cards. These include checking the card's expiration date, the status of the card, and comparing the signature on the card with the customer's signature. Use of procedures for making bank deposits helps to prevent robberies. Development of guidelines for unlocking display cases and techniques for monitoring hard-t o-see areas of a business help to prevent shoplifting. SOURCE: OP:013 SOURCE: University of Lethbridge (2007). Fraud P&D tip - Theft of cash at point-of-sale. Retrieved August 12, 2009, from http://www.uleth.ca/audit/Fraud%20Prevention%20and%20Detection/fraudpd2.htm 62. C Prepare a report. When a project has been successfully completed, it's a good idea to have a final meeting. Group members often will have suggestions for improvement that the manager can include in a report. Managers usually prepare some type of brief report that explains the project, what worked, and what didn't work. This is particularly helpful if the project is one that will be completed again. The information in the report will make next year's project much easier to plan and manage. In many cases, there is no front office to close. Managers do not actually give up power or authority. The project they were in charge of is simply over. After the project has been completed, managers often obtain feedback from the group to include in a report. SOURCE: OP:002 SOURCE: QS LAP 18Make It Happen 63. D Purchasing. Purchasing is a business function which involves the planning and procedures necessary to obtain goods and services for use in the business or for resale. Personal selling is planned, personalized communication designed to influence purchase behavior and to ensure satisfaction. Advertising is any paid form of nonpersonal presentation of goods, services, or ideas. Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relations in ways that benefit the organization and its stakeholders. SOURCE: OP:015 SOURCE: OP LAP 2Buy Right (Purchasing)

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

22

64. B Medical kit and cellular phone. Medical kits should contain items needed to initiate emergency care (e.g., a splint). Depending on the location of the accident and the extent of the injury, a cellular phone would be useful to call for additional help and transportation of the injured party. A toolbox, flashlight, map, and compass may be helpful but are not the primary items needed for the described situation. Most first-aid or medical kits include nonprescription pain relievers, such as Ibuprofen, rather than medication prescribed by medical doctors. SOURCE: OP:119 SOURCE: Brouhard, R. (2006, October 1). First aid kits: Building and storing your first aid kit. Retrieved August 12, 2009, from http://firstaid.about.com/od/emergencypreparation/qt/1staidkit.htm 65. D To increase profit. Decreasing expenses is perhaps the best way that businesses can help to increase profit. A business's profit is significantly affected by its expenses. The more a business's expenses decrease, the greater the profit. Businesses try to decrease expenses without affecting their level of service. Promoting efficiency often helps businesses to decrease expenses. Expanding sales while decreasing expenses usually leads to increased profit. SOURCE: OP:024 SOURCE: Manning, S. (2009, July 29). Meltdown 101: What companies do to cut costs. Retrieved August 12, 2009, from http://www.wtop.com/?nid=111&sid=1728610 66. C Selling goods. Selling goods involves planned, personalized communication intended to influence purchase decisions and enhance future business opportunities. It is not a maintenance function. The maintenance department makes periodic inspections and repairs of various machines, elevators, air conditioners, and heating systems to keep them in good working order. The maintenance department also makes seasonal or permanent changes to the hotel's physical layout, as the business requires. SOURCE: OP:032 SOURCE: Bardi, J.A. (2007). Hotel front office management (4th ed.) [p. 81]. Hoboken, NJ: John Wiley & Sons. 67. C Antirobbery systems. Since robbery is a violent crime involving the use of force, retailers train employees in coping with robbers and also install antirobbery defense systems intended to discourage and apprehend robbers. Panic buttons are hidden alarms that can silently alert security or police, while video systems are visible, closed-circuit TV monitors that are focused on the cash drawer. Cash-control devices, such as safes, make it more difficult, if not impossible, for a robber to get access to cash. Customer interactive systems may be a kiosk, which allows the customer to browse merchandise by touching prompts on the screen. A trend is the general direction in which people or events are moving. PlayStation and Xbox are types of electronic games and do not include panic buttons, video systems, and cash-control devices. SOURCE: OP:113 SOURCE: PBS (2004). Annual report (p. 37). Retrieved August 12, 2009, from www.pbs.si/FileBroker.aspx?Id=904 68. A Bid process. Businesses often ask several vendors to submit prices before making a purchasing decision in order to obtain the best price. This is an example of managing the bid process because vendors submit their prices and qualifications for providing the requested items. The vendors' goal is to win the bid, and the business's goal is obtain the best price. Businesses that ask several vendors to submit prices before making a purchasing decision are not managing the operating system, inventory plan, or stock method. SOURCE: OP:160 SOURCE: Van Weele, A.J. (2002). Purchasing and supply chain management: Analysis, planning and practice (3rd ed.) [pp. 52-55]. London: Thomson Learning.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

23

69. A The business's image. Most businesses have a particular image and expect their employees to conform to that image, whether it tends to be formal or casual. Dressing according to personal taste, self-concept, or in the latest fashion would not always be appropriate business attire. SOURCE: PD:002 SOURCE: PD LAP 5Brand ME! (Personal Appearance) 70. A Specific. Goals should be as specific as possible, not stated in general terms. A time limit should be set for achieving the goals. These guidelines apply to both simple and complex goals. SOURCE: PD:018 SOURCE: PD LAP 16Go for the Goal (Goal Setting) 71. A Work. Eric's uncertainty over how to handle his riding student is a work problem, since it occurs at his place of employment. Problems at work can be diverse. They can involve people, processes, and technology. Eric's problem isn't personal because it doesn't affect him or anyone close to him directly. It isn't peer-related because it involves a young student instead of a friend or classmate. And, it isn't related to school, either. SOURCE: PD:077 SOURCE: IS LAP 2No Problem 72. A Friends. Letting friends and acquaintances know that you are looking for a job is one of the most effective methods of locating job leads. These people often will be willing to pass on information about new openings, resignations, and retirements they learn about. Retirees, nonworkers, and minors usually are out of the mainstream of the employment scene and would not have information concerning job leads. SOURCE: PD:026 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 112-113). New York: Glencoe/McGraw-Hill. 73. B Yes, he should already have sent a follow-up letter. A follow-up letter should be sent as soon as possible after a job interview. Since the company has had time to make a hiring decision and notify Matt of its choice, we can assume that he did not write immediately following the interview. However, it is never too late to send a follow-up letter. Businesses do not generally expect to hear from job applicants after an interview, but they receive a positive impression of those who do write. SOURCE: PD:029 SOURCE: Bailey, L.J. (2003). Working: Career success for the 21st century (3rd ed.) [pp. 71-72]. Mason, OH: South-Western. 74. B Trade journals. These publications, also known as trade papers, enable businesses to keep abreast of current trends in the field. Consumer panels are composed of individuals who provide the business with information about consumers' opinions and reactions to products. Consumer surveys are usually in the form of questionnaires or interviews conducted by businesses to obtain feedback from consumers. Trade journals contain market information, but they are not called market papers. SOURCE: PD:036 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (p. 240). Tinley Park, IL: Goodheart-Willcox.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

24

75. D Network with others who have expertise in the industry. A trade association is a group of persons in the same industry or geographic area who form a society to solve their common problems. Because Lisa is a business owner, she might join a hospitality and tourism trade association to network with others who work in the hospitality and tourism industry. By networking with others who have expertise in that industry, Lisa has an opportunity to get ideas that will help her business grow. She may also get advice about how to solve problems and deal with difficult issues that occur in the industry. Although some trade associations provide certification, they are not a means to earn a college degree. A trade association might help Lisa locate financial sources, but it would not extend credit to her so she can purchase equipment. As a business owner, the primary reason Lisa should join a trade association is to discuss professional business with colleagues rather than personal issues. SOURCE: PD:061 SOURCE: Kaser, K., & Freeman, J.T. (2002). Hospitality marketing (pp. 294-295). Mason, OH: SouthWestern. 76. B Motel. Hospitality and tourism involves activities such as welcoming special guests and providing sleeping accommodations for people who are away from home. A motel provides this service. An airline provides a service that transports travelers to their desired destinations. A tour wholesaler plans and prepares packages for travelers; the packages include a combination of accommodations, transportation, entertainment, and meals. A restaurant sells food and beverages to travelers. SOURCE: PD:111 SOURCE: Silva, K.E., & Howard, D.M. (2006). Hospitality and tourism (pp. 5-9). Woodland Hills, CA: Glencoe/McGraw-Hill. 77. A Hidden costs. In many cases, there are hidden costs associated with hospitality and tourism products that have an effect on the total price. For example, a resort package might include meals and some activities but charge for beverages and certain specialties. The price of renting a car might not include the cost of gasoline or excess mileage. These additional costs need to be considered because they have an effect on the final price and may even make the final price extremely expensive. Personal preferences, unique values, and past experiences are not factors that have an effect on the prices of hospitality and tourism products; however, they can affect a customer's total costs. SOURCE: PI:039 SOURCE: Todd, G., & Rice, S. (2002). Travel perspectives: A guide to becoming a travel professional (3rd ed.) [pp. 188-189]. Albany, NY: Delmar/Thomson Learning. 78. C Board game. If your Welcome Center specializes in selling community-based products that can be promoted throughout the year, you should buy the board game. The board game is a community-based product because it was developed by the local chamber of commerce. Also, it can be promoted throughout the year because it is not related to a specific holiday or time period. The other products are community-based, but they have time limitations, and customers would only want to purchase them during certain seasons of the year. SOURCE: PM:260 SOURCE: Cash, R. P., Thomas, C., Wingate, J. W., & Friedlander, J. S. (2006). Management of retail buying (pp. 168-173). Hoboken, NJ: John Wiley & Sons.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

25

79. C Transportation. In the hospitality and tourism industry, the core product is the primary service that is provided. In the case of cruise lines, the core product is transportation because that is what the cruise lines are selling. Cruise lines are offering the service of transporting passengers from one location to another. In conjunction with transportation, some cruise lines offer food service. Some cruise lines offer movies and music to entertain passengers, but entertainment is not the core product. Luggage handling is available to passengers who check their luggage. However, luggage handling is not the core product. Customers pay for transportation, not for food service, entertainment, or luggage handling. SOURCE: PM:081 SOURCE: Morrison, A. (2002). Hospitality and travel marketing (3rd ed.) [p. 250]. Albany, NY: Delmar/Thomson. 80. C Product extensions. A product extension is a good or service added to an existing product line or product category. An example is a hotel chain adding a new line of hotels. Valet service and full-service dining can be found in many upscale hotels but not at an economy facility. A company that owns more than one type of hotel and offers different levels of service or amenities have extensions from the main product (hospitality services). Market potential refers to estimated revenues or income that can be generated from a specific market segment. Franchising is a method of distributing goods and services through a licensing arrangement between a parent company and another individual or company outside the parent company. Multicorporate franchising is not a term used in the hospitality and tourism industry. Property management systems are the central computer or technological systems that a hotel uses. SOURCE: PM:099 SOURCE: Burrow, J.L. (2002). Marketing (pp. 268-269). Mason, OH: South-Western. 81. A The dependability of the supplier. The supplier's reputation for delivering the goods that were ordered at the time promised is a very important factor. The restaurant will suffer if the supplier is not dependable. The supplier's market share, or portion of the industry market, would not be a consideration for the restaurant. The restaurant's operating expenses are the costs of running the business and do not include cost of goods. Tying agreements that require the purchase of certain goods in order to get others are illegal. SOURCE: PM:263 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2003). Small business management: An entrepreneurial emphasis (12th ed.) [pp. 512-513]. Cincinnati: Thomson/South-Western. 82. A Noninteractive content. Noninteractive content is basically static. There are no audio files to listen to or videos to watch. Plain text e-mail used in correspondence between friends, family members, and coworkers is a good example of noninteractive content. This type of e-mail is static rather than nonstatic because it contains only fixed text rather than graphics, sound, or video. Marketers send personalized emails in an attempt to make customers feel special. Specific types of software programs are needed to operate e-mail. SOURCE: PR:165 SOURCE: PR LAP 13E -Mail as a Marketing Tool 83. D To affect a mood. The use of color in advertising can affect people's moods or feelings. The colors you choose to use in advertisements influence the people seeing the ads. The use of color increases the cost of an ad, but advertisers often feel the expense is offset by the increased reader response. Color is used to emphasize products and attract attention to them. Using color in ads does not increase media circulation. SOURCE: PR:123 SOURCE: GardenGates (n.d.). How to use color in advertising. Retrieved August 12, 2009, from http://www.ehow.com/how_4785186_use-color-advertising.html

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

26

84. B Type. The lettering used in an advertisement is type. The effective use of type is an important aspect of typography. However, typography involves more than the type or lettering. It involves the style and size of type as well as the space between letters or words. Typography has a significant effect on the look of an ad and helps to convey a message and express a certain feeling. Typography does not involve the use of art, copy, or the media. SOURCE: PR:295 SOURCE: Lane, W.R., King, K.W., & Russell, J.T. (2005). Kleppner's advertising procedure (16th ed.) [p. 547]. Upper Saddle River, NJ: Pearson/Prentice Hall. 85. D Using a large visual. The purpose of creating effective advertising layouts is to design an ad that attracts attention. An important part of creating effective advertising layouts often involves using a large visual because large visuals attract attention. A large visual might be a photograph, an illustration, or another type of image that is appropriate for the product and the target market. Selecting a slogan, writing a signature, and developing a message are activities that take place before the advertising layout is created. SOURCE: PR:275 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 429-430). New York: Glencoe/McGraw-Hill. 86. A Modify existing photographs. There are many types of drawing media available that have different capabilities. Certain types of drawing media make it possible to modify existing photographs. With the use of these programs, it is possible to remove or add people, eliminate red-eye, change the background, combine photographs, etc. Graphic designers have the ability to create exactly the photograph they want to use in an advertisement. Presentation software is used to produce multimedia presentations. Word processing programs are used to design meeting announcements. Communications programs are used to create interactive communications. SOURCE: PR:334 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 200-201). New York: Glencoe/McGraw-Hill. 87. D Color harmonies. The various colors in an ad need to go together, or be in harmony, for the ad to be visually appealing. Color is an important element of an ad bec ause color attracts attention and helps to create a mood. Therefore, it is important to use colors that go together well and create the desired look. Storyboard is the outline of a television commercial. Production costs do not impact the composition of a print ad because composition involves the design of the ad. Dialogue is important in television commercials and radio spots. SOURCE: PR:314 SOURCE: Lane, W.R., King, K.W., & Russell, J.T. (2005). Kleppner's advertising procedure (16th ed.) [pp. 521-524]. Upper Saddle River, NJ: Pearson/Prentice Hall. 88. D Close. The close is the action step in a print advertisement. A good close will ask a reader to respond in some way. A brand is a name, term, symbol, or design that identifies a product and distinguishes it from competitors' products. A slogan begins as a successful headline and through continuous use becomes a standard statement, such as AT&T's "Reach out and touch someone." A seal, such as that awarded by the Good Housekeeping Institute, is awarded only when a product meets established standards. SOURCE: PR:126 SOURCE: Arens, W.F. (2004). Contemporary advertising (9th ed.) [p. 422]. Boston: McGraw-Hill Irwin.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

27

89. A Check for and mark all errors in the ad. The proof should be precisely as the advertiser planned. If it is not, all errors should be marked for correction. However, proofing is not an opportunity to make changes to the advertisementonly corrections. Product availability and competitor pricing should have been considered prior to development of the ad. SOURCE: PR:130 SOURCE: Port Stephens Tourism Limited (n.d.). Port Stephens visitors guide. Retrieved August 12, 2009, from http://www.portstephensvisitorguide.org.au/?act=showdoc&id=1&fv=freeview 90. B Promotion. Promotion refers to the various types of communications that businesses use to inform, persuade, or remind customers of their products. Participating in community outreach activities might be considered a form of promotion because the activities often receive publicity which benefits the businesses that participate. Businesses are often recognized by the media for their participation, so people in the community become aware of the businesses and their community involvement. This reminds people of the businesses and often encourages them to become customers because the businesses are supportive of the community. Participating in community outreach activities is not considered a form of customer service or target marketing. Businesses might receive publicity as a result of participating in community outreach activities. SOURCE: PR:341 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 135-137). New York: Glencoe/McGraw-Hill. 91. C Using a news release. A news release is a factual announcement sent to the media to be used as a news item. Businesses use news releases so that they can inform the public about their operations without having to pay a fee. A business that uses a public relations agency pays the agency to prepare the news release. Advertising is any paid form of nonpersonal presentation of ideas, images, goods, or services. SOURCE: PR:057 SOURCE: Arens, W.F. (2004). Contemporary advertising (9th ed.) [p. 348]. Boston: McGraw-Hill Irwin. 92. B Create a mailing list. A restaurant can purchase or create a guest book that has a place for customers to sign their names, provide their addresses, and indicate if they want to be put on the mailing list. This information provides an easy way to send out promotional materials to customers who have already expressed an interest in the restaurant. Publicity is obtained through press coverage and word-of-mouth advertising. A "soft opening" allows a restaurant to work out problems with service before its "grand opening." Because not every customer will sign the guest book, a more accurate count of attendees can be obtained by physically counting the number of people who walk through the doors. SOURCE: PR:068 SOURCE: Rainsford, P., & Bangs, D.H. Jr. (2001). The restaurant start-up guide (2nd ed.) [pp. 125-126]. Dearborn Trade. 93. D Many levels of menu items that rise to a narrow point. A pyramid display arrangement involves a base and many levels that taper towards the top. The display actually looks like a triangle. It is an effective method of displaying all types of merchandise, such as menu items. The pyramid shape attracts attention and makes the items appear more interesting. Three rows of menu item pictures might be a step display, which is similar to the pyramid display arrangement. A large basket of menu items and shelving that holds an assortment of menu items are not examples of the pyramid type of display arrangement. SOURCE: PR:026 SOURCE: Griner, C. (2004). Floriculture (pp. 414-417). Albany, NY: Delmar Thomson. Elements of design (n.d.). Retrieved August 12, 2009, from http://classjump.com/nicole_rogers_harrison/documents/Elements%20of%20Design%20Work sheet.doc

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

28

94. A Maintaining. Since in-store displays are an important factor in motivating customers to buy, retailers cannot let their displays become stagnant. They must constantly find new ways to display, updating them with new ideas and fresh merchandise to keep customers' interest. In some cases, simply moving a display to a new place may freshen it up. Moving, storing, and tearing down displays do not involve presenting fresh merchandise and keeping displays spotless. These are definitely maintenance activities. However, even when moving or storing displays, for instance, you should keep them as clean as possible and in good condition. SOURCE: PR:052 SOURCE: Bond, R. (2001). Retail in detail (2nd ed.) [pp. 73-80]. Grants Pass, OR: OasisPress. 95. B Marriott provides a home page on the Web and offers online booking for locations worldwide. The Internet provides companies the opportunity to promote directly to customers all over the world. Choice Hotels' various product offerings in this example illustrate the marketing element of price. The marketing element of place is illustrated in the American Hawaii Cruise Lines example. While Amazon.com illustrates promotion, it is not an example of promotion in the hospitality and tourism industry. SOURCE: PR:121 SOURCE: Burke, J., & Resnick, B. (2000). Marketing & selling the travel product (2nd ed.) [pp. 92-93]. Albany, NY: Delmar/Thomson 96. C Package. These arrangements can consist of anything from sports packages, to theater, to getaway weekends. A group plan is when a hotel gives discounts for large groups of people staying at the hotel. A budget plan covers the costs of operating the hotel. An advertising plan is a plan to promote the hotel. SOURCE: PR:082 SOURCE: Vallen, G.K., & Vallen, J.J. (2000). Check-in, check -out (6th ed.) [pp. 47-50]. Upper Saddle River, NJ: Prentice Hall. 97. C Suggestion. Suggestion selling is a sales technique in which the salesperson attempts to increase the customer's purchase by suggesting additional products after the original decision to buy has been made. An example of suggestion selling in a restaurant would be to suggest a basket of onion rings or an order of mushrooms to accompany a steak. Substitute selling involves suggesting something other than the original request when the business does not have the item requested. There is no pressure implied in this situation, and suggestion is a legitimate and appropriate sales technique. SOURCE: SE:875 SOURCE: Farese, L.S.; Kimbrell, G.; & Woloszyk (2006). Marketing essentials (pp. 321-323). Woodland Hills, CA: Glencoe. 98. D Approach. The approach is the beginning of a sale when the customer and the salesperson first communicate. The salesperson cannot demonstrate a product until s/he knows what kind of product the customer needs. The close is the point in the selling process at which the customer makes a favorable buying decision. Follow-up is all the sales activities which occur after a sales presentation or a sale has been made to ensure customer or user satisfaction. SOURCE: SE:046 SOURCE: Futrell, C.M. (2006). Fundamentals of selling (9th ed.) [pp. 308-309]. Boston: McGraw-Hill Irwin.

ST-HOTR-10A

HOSPITALITY AND TOURISM CLUSTER EXAM KEY

29

99. D Baby-sitting. If child care is offered by a hotel, employees might advise guests with young children about the service. By providing baby-sitting services, the hotel provides the parents with options allowing them to attend adult functions (e.g., theater productions, meetings, formal dinners). A courier provides delivery service. Dining information is usually available to all guests, not just to guests with young children. An interpreter is a person who translates different languages. SOURCE: SE:221 SOURCE: Vallen, G.K., & Vallen, J.J. (2000). Check-in, check -out (6th ed.) [pp. 78-79]. Upper Saddle River, NJ: Prentice Hall. 100. A Follow the instructions on the computer terminal screen. Today, with so many procedures to follow, amusement park cashiers are fortunate to be able to use electronic terminals. For special transactions, terminals provide step-by-step "prompts," or instructions, for cashiers to follow. This makes the process quick and accurate and allows cashiers to concentrate their energies on interacting with and helping customers, not trying to learn various special procedures. There should be no need to ask a supervisor to demonstrate the process since the terminal will do it. However, if the cashier needs help, it is a good idea for the cashier to consult the supervisor. Keeping written notes in company files will slow down the assistance given customers. Following prompts on the computer screen also should make it unnecessary to look through operations manuals. This should only be done if the cashier has a problem and only after s/he has helped the customer and sent the person on his/her way. SOURCE: SE:149 SOURCE: Automators Technical Services (2007). Advantages of Automators POS system. Retrieved August 13, 2009, from http://automators.us/pos -advantage.html

Competency-Based Competitive Events *Written Exam* Test: ST-MATH-10A Booklet Number _____

Math Applications in Business


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

Sample A

MATH APPLICATIONS IN BUSINESS

1. Bob and Stan are business partners. They agreed to divide their partnership income in the ratio of four to seven. Their net income this year is $358,000. What is each partner's share of the business's net income, rounded to the nearest dollar? A. $177,000 and $181,000 C. $153,429 and $204,571 B. $143,200 and $250,600 D. $130,182 and $227,818 2. A small manufacturing facility has an assessed value of $200,000. The tax rate is $2.65 per $100 of assessed value. What amount of real property tax does this business owe? A. $5,300 C. $3,500 B. $5,100 D. $6,000 3. Five years ago, Cheryl purchased 400 shares of ABC stock at $23.78 per share. Earlier this month, she sold the 400 shares of stock at $65.93 per share. She paid a transaction fee of $30 for each of the two stock transactions. Cheryl's long-term capital gains tax rate is 15%. How much capital gains tax does she owe? A. $2,529 C. $2,520 B. $2,511 D. $4,200 4. While taking an order, a customer asks Ali about delivery charges. Ali knows that the business charges $1.25 per pound to ship an order, and charges an additional 5% to ship orders going to locations over 600 miles away. The order costs $11, 865.75, weighs 55 pounds, and is being shipped 572 miles. Ali should tell the customer that the delivery charge for the order is A. $68.75. C. $55.25. B. $98.40. D. $72.20. 5. Last month, you made 88 sales presentations to prospective clients. Twenty-five percent of those presentations resulted in sales. How many sales did you make last month? A. 35 sales C. 22 sales B. 18 sales D. 44 sales 6. The president of the non-profit organization where you work has asked you to give a presentation to the organization's board of trustees. You are to discuss the organization's revenue during the last fiscal year. Last year, the organization received $647,000 from individual donors, $125,000 from corporations, $175,000 from grants, and $433,000 from earned income. You want to create a pie chart to show the percentages of revenue that came from the different sources. What percentage of the pie chart (to the nearest tenth) should you use to represent the individual donors? A. 46.88% C. 55.9% B. 46.9% D. 55.94% 7. When a business customer wants to return part of an order to the SBS Company, Luanne must inform the customer that the company charges a 5% restocking fee based on the dollar amount of the returned items. If the customer wants to return 16 cases of product X at $89.75 per case, and 36 cases of product Y at $27.50 per case, Luanne must tell the customer that the restocking fee amount will total __________. A. $120.20 C. $119.60 B. $118.70 D. $121.30 8. What is the ratio of a pound of yellow squash @ $ .40 a pound and a pound of butternut squash @ $1.20 a pound? A. 1 to 2 C. 1 to 3 B. 1 to 4 D. 1 to 1 9. Calculate a business's gross profit based on the following information: $367,500 in income from sales, $105,250 in payroll, $25,700 in rent, and $140,125 in cost of goods. A. $227,375 C. $96,425 B. $122,125 D. $236,550

Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

Sample A

MATH APPLICATIONS IN BUSINESS

10. Employers are required to pay the federal government 6.2% of the first $7,000 of their employees' wages for unemployment taxes. If a small business has 14 employees and they earn between $12,000 $50,000 a year, what amount will the business pay for unemployment taxes for the year? A. $6,607 C. $6,670 B. $6,760 D. $6,076 11. Cognos Corporation employs 500 salespeople. In 2000, the company sold a total of 34,000 computer operating systems worldwide. In 2001, the company hired 25 additional salespeople and sold 43,000 systems. What effect did hiring additional salespeople have on the company's productivity? A. Sales increased by 86 systems per salesperson. B. Sales increased by 17 systems per salesperson. C. Sales increased by 14 systems per salesperson. D. Sales increased by 360 systems per salesperson. 12. If total cost is $1,000 with zero quantity produced and $1,250 with 1,000 items produced, what is the marginal cost of producing each item? A. $.12 C. $1.00 B. $.25 D. $1.25 13. The Axelrod Company is considering buying new computers for its accounting department. Now, the business can obtain 12 computers for $565 each. If the company waits two years to purchase the computers, and inflation increases two percent the first year, and three percent the second year, how much will the 12 computers cost the company in two years? A. $7,119.00 C. $7,123.07 B. $7,051.20 D. $7,191.03 14. Calculate U.S. gross domestic product using the following information: Honda production in Ohio, $3.5 million; Ford production in Mexico, $3.8 million; wages paid to military personnel, $6.8 million; and Social Security payments to senior citizens, $3.4 million. A. $17.5 million C. $14.1 million B. $11.8 million D. $10.3 million 15. There are 634,820 people in the labor force in a large metropolitan area. If 34,290 are currently out of work, what is the rate of unemployment? A. 6.3% C. 5.4% B. 5.8% D. 6.9% 16. Calculate a nation's trade deficit if it imports $125 billion in goods this year, exports $106 billion in goods, and has a GDP of $178 billion. A. $19 billion C. $53 billion B. $37 billion D. $72 billion 17. A California-based technology company recently spent $2.5 billion to build a computer-chip factory in northeastern China. If one U.S. dollar is equal to 6.834 Chinese yuan, what was the cost of the factory in yuan? A. 15.0 billion yuan C. 2.734 billion yuan B. 366.0 million yuan D. 17.085 billion yuan 18. A chain of kitchenware stores in the U.S. sells a popular line of Belgian lace tablecloths imported from Belgium. The chain's best-selling tablecloth measures 1.8 meters by 2.77 meters. What is the approximate size of the tablecloth using the customary system of measurement commonly used in the U.S.? (Remember, one centimeter is roughly equal to 0.39 inches.) A. 5 feet, 10 inches by 9 feet C. 4 feet, 2 inches by 6 feet B. 1 foot, 8 inches by 2 feet, 7 inches D. 6 feet, 4 inches by 8 feet, 6 inches

Sample A

MATH APPLICATIONS IN BUSINESS

19. The average start-up costs for a SuperSubs franchise include: $15,500 for franchise fees; $37,000 for facility lease and renovations; $12,000 for equipment and installation; $8,575 for start-up inventory; and $6,000 in legal fees. SuperSubs also charges first-time franchisees a 3% support-service fee, which is based on the average start-up costs. Calculate the average amount that a new franchisee pays for support-service fees. A. $3,448.25 C. $2,276.25 B. $3,744.25 D. $2,372.25 20. Frank and Thomas just started a business together. They invested a total of $68,000 of their own money in the business. Frank contributed four times as much money as Thomas did in the new venture. How much money did Frank invest in the business? A. $13,600 C. $17,000 B. $51,000 D. $54,400 21. Determine if Lindsey, a small-business owner, has the needed income available to make a 5% down payment for a $78,500 piece of equipment if she uses $1,200 from her savings account, $650 in dividend earnings, $900 in rental-property income, and $1,900 from cashed-in savings bonds. A. Yes, in fact, Lindsey has $725 more than she needs for the down payment. B. No, Lindsey needs an additional $450 to make the down payment. C. Yes, Lindsey has just enough money to make the down payment. D. No, Lindsey needs an additional $150 to make the down payment. 22. Marty recently took out a personal loan from his credit union for $7,500. The interest rate for the loan is 10.875%, and the term of the loan is 36 weeks. Using the exact interest method, what is the amount of interest on the loan, rounded up to the nearest cent? A. $564.66 C. $563.12 B. $56.32 D. $570.94 23. Nicki is purchasing a new home. Her mortgage lender has informed her that she will be required to make a 20% down payment on the $224,000 purchase price. In addition, according to the Good Faith Estimate, Nicki will be expected to pay closing costs totaling 3.75% of the purchase price. How much money will Nicki need to bring to the closing table to pay for her down payment and closing costs? A. $53,200 C. $45,640 B. $44,800 D. $56,800 24. Caroline plans to save 15% of her monthly take-home pay to use as a down payment for a new car. Her net income per pay period is $1,176.25. She is paid every two weeks. How much money does Caroline expect to save for the car down payment each month? Round your ans wer to the nearest dollar. A. $382 C. $353 B. $176 D. $765 25. Richard earns $14.55 per hour during a regular 40-hour work week, time-and-a-half for overtime, and double time on holidays. According to Richard's pay stub, he worked 49 hours last week. What is his total gross pay for last week if he worked the standard 40 hours plus 5 hours overtime and 4 hours on Saturday, which was New Year's Day? A. $712.95 C. $778.43 B. $807.53 D. $843.90 26. Janell made a deposit to her savings account. She deposited a check for $33.21, three $20 bills, two $5 bills, 14 dimes, 26 nickels, and 178 pennies. She also received four $10 bills in cash back. What was the amount of Janell's net deposit? A. $63.21 C. $74.48 B. $67.69 D. $107.69

Sample A

MATH APPLICATIONS IN BUSINESS

27. When Geoff received his latest credit card statement, he discovered that three unauthorized charges had been made to his account. These charges were for $55.68, $189.00, and $265.23. In addition, Geoff noted that one authorized transaction had been posted incorrectly to his account. The credit card statement indicated that this transaction totaled $43.12 even though Geoff had actually charged just $23.12. The new balance on Geoff's credit card statement was $1042.64. After removing the unauthorized transactions and correcting the transaction that had been posted incorrectly, what should Geoff's correct new balance be? A. $552.73 C. $532.73 B. $489.61 D. $512.73 28. Justin's gross income for the year is $37,800. He contributes $2,000 per year to an approved retirement plan. Justin is single and claims one exemption for himself. The amount of the exemption is $3,650. He is taking the $5,700 standard deduction for a person filing an income tax return as an individual. What is Justin's taxable income? A. $26,450 C. $32,100 B. $28,450 D. $35,800 29. What is the rate of commission (rounded to the nearest hundredth of a percent) for a load mutual fund that has a net asset value of $37.70 and an offer price of $39.14? A. 4.56% C. 3.68% B. 3.82% D. 5.02% 30. According to today's stock quotation table, MetLife is currently selling for $34.53 and pays a dividend of $0.74 per share per year. What is the current yield of MetLife stock? A. 2.1% C. 24.5% B. 6.3% D. 74.0% 31. Shane invested $2,575 dollars in Starbucks stock. He paid $18.70 per share of stock. How many shares of stock did Shane purchase? A. 152.7 shares of stock C. 143.1 shares of stock B. 135.5 shares of stock D. 137.7 shares of stock 32. An entrepreneur invests $25,000 in a new business venture and obtains additional financing from the following investors: $5,000 from a friend, $10,000 from a parent, and $10,000 from another relative. If the business fails, what is the total amount that the entrepreneur could lose? A. $35,000 C. $40,000 B. $25,000 D. $50,000 33. A business buys insurance on property that is valued at $390,000. What is the monthly premium if the rate is $48 for each $30,000 worth of property? A. $576 C. $612 B. $598 D. $624 34. A business carries $300,000 worth of insurance on a building which is valued at $125,000. How much can the business expect to receive in a settlement if the building is completely destroyed in a fire? A. $175,000 C. $125,000 B. $100,000 D. $300,000 35. A business borrowed $4,000 from the Fifth National Bank. The business owns $7,000 worth of inventory and still has $24,000 of its original initial investment in the business. What is the liability of the business? A. $7,000 C. $24,000 B. $4,000 D. $35,000

Sample A

MATH APPLICATIONS IN BUSINESS

36. A business had $8,250 in total cash available at the beginning of the month and paid out $4,125 in cost of goods sold, $950 in variable expenses, and $2,570 in fixed expenses. What is the ending cash balance? A. $565 C. $600 B. $590 D. $605 37. Pete is preparing a cash flow statement for his new business. If the start-up costs are $27,645 and he has $36,200 cash, how much cash is available for Pete to operate the business? A. $9,125 C. $8,555 B. $7,545 D. $8,265 38. The balance sheet of a business showed total assets of $94,841.20 and total liabilities of $11,287.90. Thus, the owner's equity was A. $83,553.33. C. $94,841.02. B. $83,553.30. D. $94,841.20. 39. The "Big Kahuna" surf shop brings in $295,000 in sales during the year. Its cost of goods sold totals $80,000, and its operating expenses are $31,000 for the same year. What is the net income or net loss for the surf shop? A. $51,000 net loss C. $184,000 net income B. $215,000 net income D. $111,000 net loss 40. A new business anticipates that an average of three-fifths of its sales transactions will be credit card transactions. The business expects to process 183 credit card purchases per day. How many sales does the business anticipate will take place each day? A. 244 C. 549 B. 305 D. 915 41. A business has cash-on-hand of $15,000, accounts receivable of $25,000, and monthly operating expenses of $31,250. If the business expects to be paid only half of the accounts receivable this month, calculate its current financing needs. A. $3,125 C. $3,550 B. $3,275 D. $3,750 42. Pedro estimates the start-up costs for his new business to be $36,000 and plans to use the $9,500 in his savings account to help finance the business. If Pedro's uncle gives him 8% of the estimated start-up costs, and Pedro's sister provides Pedro with 9% of the estimated start-up costs, how much money will Pedro need to borrow from other sources to open his business? A. $20,240 C. $22,380 B. $20,380 D. $22,640 43. Fly Right Flight Training is applying for a business loan. The business's assets total $223,714, and its total liabilities are $93,581. What is the business's debt ratio, rounded to the nearest tenth of a percent? A. 23.9% C. 37.0% B. 41.8% D. 42.7% 44. A business distributed 10,000 25-cents-off coupons and estimates that 75% of these coupons will be redeemed. Calculate the amount of money a business should include in its promotional budget to compensate for these coupons. A. $2,100 C. $1,875 B. $1,800 D. $2,500 45. If a business budgets $275,000 in salaries, $32,000 in rent and utilities, and $58,250 in other expenses, what should it budget for sales in order to earn $130,500 in income before taxes? A. $365,250 C. $505,500 B. $495,750 D. $525,000

Sample A

MATH APPLICATIONS IN BUSINESS

46. Calculate the cash available for purchasing new equipment next month if the company forecasts cash receipts of $30,000, salaries of $15,500, other operating expenses of $12,250, and income from investments of $1,150. A. $5,250 C. $4,150 B. $2,700 D. $3,400 47. If a hotel forecasts that it will sell 65 of its 85 available rooms next week, what will be the occupancy percentage? A. 67% C. 57% B. 76% D. 83% 48. A business's total debt is $325,000, and its total assets amount to $850,000. Calculate the business's debt ratio. A. 33% C. 42% B. 38% D. 45% 49. A business's profit-and-loss statement indicates sales of $50,000, expenses of $10,000, and cost of goods sold of $30,000. What is the amount of gross profit? A. $10,000 C. $30,000 B. $20,000 D. $40,000 50. A business keeps a petty-cash fund of $100 on hand. fund to pay for a COD package, and Kip used $12.40 A. $63.55 B. $61.35 On Tuesday, Sarah used $24.65 of the petty-cash to purchase stamps. What is petty-cash balance? C. $62.95 D. $61.15

51. A large business currently employs 1,500 people and estimates that 82 will be eligible to retire within a year. How many new employees will the business need to hire if it expects an additional 7% will leave for other reasons? A. 128 C. 150 B. 187 D. 105 52. Audrey is a manager who is in the process of setting up interviews for a sales position. She plans to conduct three rounds of interviews. During the first round, she will conduct 30-minute telephone interviews with nine candidates. During the second round, she will conduct 90-minute personal interviews with the top five candidates. During the third round, she will interview each of the two final candidates over a 120-minute lunch meeting with other sales-staff members. How many hours will Audrey allocate to the entire interviewing process? A. 14 hours C. 12 hours B. 16 hours D. 18 hours 53. The Turbo Company and the worker's union have finally negotiated an agreement. Tom is a union worker who currently earns $41,000 a year. Next year, his salary will be $42,640. Tom's salary will increase by _________ percent. A. 7 C. 6 B. 4 D. 3 54. Leigh recently hired a new administrative assistant. She spent 12 hours reviewing applications and three hours selecting the top six candidates for the position. Then, Leigh interviewed each of these six candidates for 40 minutes apiece. Following the interviews, she spent another two hours checking the references of her top choice for the position. Finally, Leigh's manager met with her top choice for the job for half-an-hour. Leigh's time is worth $36 per hour, and her manager's time costs $48 per hour. Overhead costs for the hiring process were $185. What was the total cost of hiring the new administrative assistant? A. $1,212 C. $954 B. $780 D. $965

Sample A

MATH APPLICATIONS IN BUSINESS

55. Due to an economic slowdown, The Inverness Company is eliminating a position in its marketing department. The employee, who has worked for the company for 9 years, earns an annual salary of $42,016. The company's severance package will pay the employee 80% of his/her weekly pay for eight weeks and an additional $500 for each year s/he worked for the company. Calculate the dollar amount of severance package that the Inverness Company will pay the employee. A. $8,466.60 C. $8,823.40 B. $9,671.20 D. $9,276.80 56. Kate's quarterly sales goal was $250,000, and she earned $274,000 in sales for the quarter. Kate earns a 6% bonus on the amount that exceeds her sales goal. Calculate the dollar amount of Kate's bonus. A. $1,360 C. $1,280 B. $1,520 D. $1,440 57. According to company standards, Frank should be able to assemble five widgets per minute. If Frank worked 40 hours and assembled 11,400 widgets last week, did he make his weekly quota? A. No, Frank made 8% less than his quota. B. Yes, Frank made his exact quota for the week. C. No, Frank made 5% less than his quota. D. Yes, in fact, Frank exceeded his quota by 3%. 58. Mr. Henry earns $78,000 per year and is ordered by the court to pay 22% of his income for child-support. How much money does Mr. Henry's employer need to withhold from his weekly paycheck for childsupport? A. $360 C. $315 B. $330 D. $345 59. In its sampling plan, a sporting-goods business states that it wants to survey one of every four 18- to 34year-old males in the metropolitan Portland area. If there are 130,664 18- to 34-year-old males living in the Portland area, how many of them will be included in the sample? A. 41,964 C. 36,336 B. 32,666 D. 30,864 60. Hailey mailed satisfaction surveys to 750 recent customers. She received 314 replies, but 27 of these surveys were incomplete and had to be thrown out. What was the survey's response rate, rounded to the nearest tenth? A. 41.9% C. 45.5% B. 38.3% D. 49.2% 61. A marketing-research firm recently conducted a survey for a restaurant trade association to evaluate consumers' buying behavior. Use the following information to determine the mode of a survey question about the number of times people go out to dinner per week: 56 of the respondents go out to dinner once a week; 64 of the respondents go out to dinner twice a week; 37 of the respondents go out to dinner three times a week; 14 of the respondents go out to dinner four or more times a week. A. 14 C. 37 B. 42 D. 64 62. The Kendall Company has developed a marketing research brief that outlines a problem regarding customers complaining about a defective product. The brief states that during the first quarter of the year, two percent of the customers who purchased the model XN2 complained about faulty construction, and three percent of the customers had the same complaint during the second quarter. If the Kendall Company sold 575,600 of the model XN2 during the first and second quarters of the year, how many customers complained about the defective product? A. 26,225 C. 28,780 B. 29,675 D. 27,390

Sample A

MATH APPLICATIONS IN BUSINESS

63. A pie chart shows that 32% of the 250,000 households surveyed own two televisions, 39% own three televisions, and the remaining households own four or more televisions. How many households own more than three televisions? A. 65,000 C. 97,500 B. 80,000 D. 72,500 64. Calculate the business's percentage of market share, if the total market size is 475,500, and the business sells to 57,060 members of the market. A. 12% C. 10% B. 17% D. 15% 65. A business had $815,250 in sales last year and expects an 8% increase this year. What is the sales forecast for the coming year if prices remain the same and the business plans to spend $62,000 remodeling its offices? A. $895,630 C. $862,140 B. $877,250 D. $880,470 66. Calculate the marketing cost per unit a business sold for a certain period if the total marketing expenses were $625,500, and it sold 1,425,850 units. A. $.44 C. $.84 B. $2.28 D. $1.76 67. If a business currently has 325 customers who each spend $25,000 a year and develops a marketing plan to increase the number of customers by 8%, by what amount will the business's income increase? A. $600,000 C. $650,000 B. $625,500 D. $675,500 68. A business uses a spreadsheet software program to track monthly sales for each salesperson and calculate commissions. Based on the following spreadsheet data, how much more will the business owe its salespeople for last month if it decides to raise the commission rate by 1%: Salesperson A B C D A. $2,578.70 B. $2,391.20 Commission Rate 5% 5% 5 1/2% 5 1/2% Last Month $62,500 $66,350 $65,100 $63,920 Commission Due $3,125.00 $3,317.50 $3,580.50 $3,515.60 C. $2,625.30 D. $2,856.50

69. A specialty business analyzes a database of its 1,000 regular customers and finds that 82% of them visit the business twice a week and spend $65 each visit. Based on this information, calculate the total amount this group spends each week. A. $106,600 C. $110,500 B. $102,800 D. $130,000 70. A business is planning a major project that it estimates will take 1,380 hours to complete. If the business assigns three part-time employees who each work 25 hours a week and one full-time employee, how many weeks will it take those employees to complete the project? A. 13 C. 14 B. 12 D. 15

Sample A

MATH APPLICATIONS IN BUSINESS

71. Yvonne is responsible for her small business's purchasing activities. She just received an invoice from one of her suppliers. This particular supplier gives Yvonne a 15% discount on everything she orders, excluding shipping and handling. According to the invoice, the gross amount is $3,764.00 before Yvonne's discount, and the shipping charges are $56.35. What total amount due should be shown on the invoice? A. $3,820.35 C. $3,247.30 B. $3,199.40 D. $3,255.75 72. Every 28 days, Sammy's sporting goods store sells 84 children's 20-inch bicycles. The lead time for the bikes is three days. Safety stock is four bikes. What is the reorder point for the bicycles? A. 4 bicycles C. 7 bicycles B. 13 bicycles D. 15 bicycles 73. The dating terms that the SSL Company negotiated with a vendor are 3/10 net 30 on a purchase order made August 18. Calculate the discounted amount SSL would owe for an order of $386.69 if it pays by th August 25 . A. $375.09 C. $366.06 B. $379.03 D. $369.09 74. Last week, the Flash Camera manufacturing plant produced 4,898 cameras on Monday, 4,234 cameras on Tuesday, 5,221 cameras on Wednesday, 3,794 cameras on Thursday, and 4,746 cameras on Friday. What is the mean of this set of production data, rounded to the nearest whole number? A. 4,579 C. 4,626 B. 1,427 D. 4,746 75. A team of five quality-control associates at a small manufacturing firm found that 0.5% of the products coming off the assembly line last quarter were defective. If the company produced 110,400 products last quarter, what was the average number of defective products that each quality control associate found? A. 110.4 defective products C. 110.0 defective products B. 87.2 defective products D. 124.8 defective products 76. A business earned a net profit of $1,150 last week with a total income of $2,750. If the cost of goods sold was $840, what was the amount of operating expenses? A. $850 C. $820 B. $740 D. $760 77. A business employee purchases $1,750 worth of office supplies and receives an invoice offering a 2% discount for paying within 15 days. If the employee pays the invoice within that time, the business will save A. $30. C. $40. B. $35. D. $50. 78. The EverRun Company estimates its fixed costs to manufacture sneakers at $80,000. The variable costs to produce each pair of shoes are $9. The company is debating whether to sell the shoes at $59 per pair or $73 per pair. What is the difference in breakeven points using the two different prices? A. $5,714 C. $4,330 B. $2,340 D. $3,150 79. One type of service contract costs $1,200 per year and can be renewed annually at a $100 increase in price. Another type of contract costs $3,300 for three years. How much will a business save by purchasing the three-year contract rather than renewing the one-year contract? A. $900 C. $100 B. $300 D. $600

Sample A

MATH APPLICATIONS IN BUSINESS

10

80. A business has a lease for 3,750 square feet of space at $2.80 per square foot per month. If the rent will increase by 5% next year, calculate the monthly amount the business will pay in rent. A. $11,025 C. $11,000 B. $10,500 D. $10,250 81. Calculate the amount a business can save in payroll expenses for a 12-week period by replacing three full-time employees who each earn $550 a week with six part-time employees who each work five hours a day, five days a week for $9.25 an hour. A. $3,925 C. $3,550 B. $3,005 D. $3,150 82. A business budgets a 6% increase in sales next month and expects a 4% increase in expenses which usually are 52% of sales. If current sales are $68,500, what amount will the business spend on expenses next month? A. $40,661.60 C. $40,023.40 B. $37,757.70 D. $35,520.50 83. The Darby Company hired a commercial carpet cleaning service to clean the carpet in the business's conference room and two executive offices. The carpet cleaners charged $0.23 per square foot of carpet. The dimensions of the conference room are 35 feet by 28 feet, and the two executive offices both measure 18 feet by 14 feet. How much did it cost for the Darby Company to have its carpet cleaned? A. $283.36 C. $292.10 B. $341.32 D. $508.76 84. Kayla is a business professional who must take several hours of continuing-education classes this year to keep her licensure. She has decided to attend four six-hour workshops that will cost $600 each to attend. She is also taking two four-hour classes that will cost $150 per credit hour. Calculate the amount of money Kayla will pay for her continuing education, if her employer pays 60% of the continuingeducation expenses. A. $1,440 C. $1,980 B. $2,400 D. $2,200 85. Britni was recently promoted from line worker to team leader. Along with the change in title and responsibilities, Britni's gross pay per two-week pay period increased from $820 dollars to $1,040. Britni works 40 hours per week. What is Britni's new hourly wage? A. $10.25 per hour C. $10.50 per hour B. $13.00 per hour D. $12.75 per hour 86. Due to a 20% increase in the cost of raw materials, the APS Manufacturing Company decides to increase the selling price of its goods. If it is selling an item at $142.00, and it wants to maintain the same profit margin, what is the new selling price? A. $174.60 C. $172.20 B. $176.80 D. $170.40 87. A business bundles together three products and sells them as a single unit for 15% less than it would be if each item were purchased individually. If the individual selling prices of each item are $9.25, $11.50, and $24.95, what is the selling price of the bundled package? A. $42.26 C. $36.42 B. $40.68 D. $38.84 88. Calculate the subtotal of a purchase order using the following information: 12 cases of paper towels at $19.85 per case; 4 cases of hand soap at $26.95 per case; 3 buckets with wringers at $71.50 each; 2 wet-floor signs at $21.25 each; and 3 window squeegees at $17.49 each. The sales -tax rate is 7.25%. A. $702.99 C. $662.89 B. $655.47 D. $710.37

Sample A

MATH APPLICATIONS IN BUSINESS

11

89. Calculate the stock-turn rate for an item when the total number of units sold is 6,225, and the average number of items in stock is 1,245. A. 4 C. 5 B. 3 D. 7 90. Sales for product X increased 6% each year for the past three years, and trends indicate that sales for the item will continue to increase at the same rate next year. If the Bennett Company sold 600,921 of product X last year, how many of product X should Bennett order this year? A. 676,936 C. 669,663 B. 663,796 D. 636,977 91. The Columbus Dispatch charges non-profit organizations $145 per column inch for a one-column width advertisement in its Sunday newspapers. How much would a non-profit pay for a Sunday advertisement that is four column inches long and two column widths wide? A. $714 C. $1,160 B. $580 D. $1,813 92. The HiTech Electronics Company is determining if it should offer its customers a coupon or a rebate as a promotion for a new electronics product that it is releasing. Determine which of the following is the better promotional offer for customers if the product sells for $799: A 15% coupon or a $110 rebate. A. The rebate. By using the rebate, the customer will pay $689.15; by using the coupon, the customer will pay $679. B. The coupon. By using the coupon, the customer will pay $689.15; by using the rebate, the customer will pay $699. C. The rebate. By using the rebate, the customer will pay $669.15; by using the coupon, the customer will pay $689. D. The coupon. By using the coupon, the customer will pay $679.15; by using the rebate, the customer will pay $689. 93. Kyle is happy with the IMK Company's level of service, so he tells five coworkers about his experiences with the company on Tuesday. On Wednesday, Kyle and his five coworkers each tell six of their family members about IMK's wonderful levels of service. On Thursday, Kyle, his five coworkers, and all of the family members who have heard about IMK each tell seven of their friends about IMK. By Thursday evening, how many people had heard about the IMK's Company's wonderful service levels? A. 248 C. 294 B. 186 D. 310 94. Tim works for a video-game resale store. The store's policy states that customers who want to sell their used video-games back to the store will receive $14 for games that were released within the current year, $9 for games that are 1- to 4-years-old, and $5 for games that are 5- to 7-years-old. If a customer wants to sell back 4 games that have been released within the current year, 8 games that are 3-years -old, 2 games that are 4-years -old, and 12 games that are 6-years-old, how much money can Tim offer to buy the customer's used video games? A. $206 C. $186 B. $179 D. $209 95. Calculate the total owed for the following sales transaction that has a sales-tax rate of 6.75%: 4 towels for $6.00 each; 3 candles for $4.75 each; 6 dishes for $ 8.29 each; 2 glass bowls for $12.59 each. A. $120.81 C. $120.32 B. $121.64 D. $121.44 96. Leslie works as a cashier at a gift shop. A customer, who is purchasing a $180 item that is already marked down 15%, presents Leslie with a 25% off coupon. What price should Leslie charge the customer for the item? A. $114.75 C. $110.75 B. $109.25 D. $113.25

Sample A

MATH APPLICATIONS IN BUSINESS

12

97. Josephine is a manager who spends 28% of her time at work directing employees. If Josephine works 50 hours a week, how many hours per month does she spend conducting directing activities? A. 46 C. 52 B. 48 D. 56 98. In which of the following situations will a business plan that includes quarterly sales quotas for each of the five salespeople help a company to track its progress and make adjustments: A. Each salesperson sells 85% of quota. C. Actual sales decrease 5% every summer. B. Quarterly sales quotas remain the same. D. Each salesperson has a specific territory. 99. When developing a business plan, an entrepreneur analyzed the amount of capital that would be needed to operate the business for the first three months. If the total amount of capital needed is $150,000, what amount will the entrepreneur need to obtain from other sources if family members will invest 60% of that amount and the entrepreneur will invest $25,000? A. $35,000 C. $75,000 B. $60,000 D. $40,000 100. If a business sells 550,000 widgets and has 220,000 widgets in inventory, how does its inventory turnover rate compare to the industry average of 4? A. 2.5 more C. 1.5 more B. 1.5 less D. 2.5 less

Sample A

MATH APPLICATIONS IN BUSINESS KEY

13

1. D $130,182 and $227,818. Although some business partners split their partnership income evenly, many do notespecially partners who have invested different amounts of money into their businesses. To determine each partner's share of the net income, first add their shares together (4 + 7 = 11). Then, express each partner's share of the net income as a fraction of the total shares (Bob's share = 4/11; Stan's share = 7/11). Finally, multiply each partner's fraction of the total shares by their business's net income for the year and round to the nearest dollar (4/11 X $358,000 = $130,182; 7/11 X $358,000 = $227,818). SOURCE: BL:003 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 522-525]. Mason, OH: South-Western Cengage Learning. 2. A $5,300. Businesses are required to pay property tax on the value of their assets. To calculate property tax, divide the assessed value of $200,000 by $100 ($200,000 $100 = $2,000). Then, multiply that figure by the tax rate of $2.65 ($2,000 X $2.65 = $5,300). SOURCE: BL:009 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 182-183]. Cincinnati: South-Western. 3. C $2,520. A capital gain (or loss) is the difference between the cost of an investment and the selling price of that same investment. The federal government typically levies a tax on investors' capital gains. To determine how much capital gains tax Cheryl owes, first determine her original investment by multiplying the number of shares of stock by the purchase price (400 X $23.78 = $9,512). Next, add any broker or transaction fees to the original investment amount ($9,512 + $30 + $30 = $9,572). Then, calculate Cheryl's proceeds from the stock sale by multiplying the number of shares of stock by the selling price (400 X $65.93 = $26,372). The next step is to determine Cheryl's capital gains by subtracting the total cost of the stock, including transaction fees, from Cheryl's proceeds from the stock sale ($26,372 $9,572 = $16,800). Finally, multiply Cheryl's capital gains by her long-term capital gains tax rate to determine how much capital gains tax she owes ($16,800 X 15% = $2,520). SOURCE: BL:134 SOURCE: Perez, W. (2009, January 3). Capital gains tax: Essential tax tips for capital gains and losses. Retrieved August 17, 2009, from http://taxes.about.com/od/capitalgains/a/CapitalGainsTax.htm 4. A $68.75. When placing orders, customers often ask the business's employees about the availability of stock, shipping dates, and delivery charges. Businesses determine delivery charges in a variety of ways, which may be based on the order's weight and shipping distance. To calculate the shipping charges for the order, Ali must multiply the total weight of the order by the cost per pound (55 lbs. X $1.25 = $68.75). Because the shipping distance is less than 600 miles away, the additional 5% charge does not apply. The example does not indicate that the dollar amount of the order affects the delivery charges. SOURCE: CM:002 SOURCE: Etzel, M.J., Walker, B.J., & Stanton, W.J. (2007). Marketing (14th ed.) [p. 357]. Boston: McGraw-Hill/Irwin 5. C 22 sales. To determine how many sales you made last month, multiply the total number of sales presentations by the percentage of presentations that resulted in sales (88 X 25% = 22). SOURCE: CO:025 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 172-183]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

14

6. B 46.9%. To determine what percentage of the pie chart should represent individual donors, first add together the revenue from the different sources ($647,000 + $125,000 + $175,000 + $433,000 = $1,380,000), Then, divide the revenue from individual donors by the total revenue to determine the percentage of total revenue that came from individual donors ($647,000 / $1,380,000 = 46.88405%). Finally, round this percentage to the nearest tenth to determine the correct answer (46.88405% = 46.9%). SOURCE: CO:087 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 167-172]. Mason, OH: South-Western Cengage Learning. 7. D $121.30. Businesses develop policies about returning goods. In some situations, it is very costly to return and store unwanted goods, so a business might implement a restocking fee to cover these costs. To determine the restocking fee, first calculate the price extensions of each item being returned (16 X $89.75 = $1,436; 36 X $27.50 = $990). Then, add together the price extensions to obtain the total dollar amount of products being returned ($1,436 + $990 = $2,426). Finally, multiply the dollar amount of the returned merchandise by the restocking percentage to obtain the restocking fee in dollars ($2,426 X .05 or 5% = $121.30). SOURCE: CR:007 SOURCE: Kozierok, C. (1997-2004). Restocking fees-a balanced look . Retrieved August 17, 2009, from http://www.pcguide.com/buy/ven/eval/guarFees-c.html 8. C 1 to 3. It will cost three times as much to buy one pound of butternut squash as it will to buy one pound of yellow squash. By comparing relative prices of goods and services, people choose the combinations that are most advantageous for them to buy. Likewise, owners of resources can determine where they can most advantageously sell their resources by comparing relative prices in different markets. SOURCE: EC:006 SOURCE: Keeler, J.P. (2001, November 17). Relative prices and the business cycle. Retrieved August 27, 2009, from http://mises.org/journals/scholar/Keeler.pdf 9. A $227,375. Gross profit is the amount of money that is left after the cost of goods is subtracted from the income from sales. In this example, calculate gross profit by subtracting cost of goods from income ($367,500 - $140,125 = $227,375). Payroll and rent are operating expenses and are not used to calculate gross profit. SOURCE: EC:010 SOURCE: EC LAP 2Risk Rewarded 10. D $6,076. Governments collect unemployment taxes from businesses in order to provide compensation for workers who have lost their jobs. This temporary compensation helps unemployed workers get by until they acquire new jobs. To calculate the amount of unemployment taxes the business owes, first multiply the number of workers by $7,000 to obtain the taxable income (14 X $7,000 = $98,000). Then, multiply the taxable income by the tax rate to obtain the unemployment tax owed for the year ($98,000 X .062 or 6.2% = $6,076). SOURCE: EC:072 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [p. 309]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

15

11. C Sales increased by 14 systems per salesperson. Production is determined by dividing the input (salespeople) by their output (number of systems sold). In 2000, Cognos Corporation's productivity was 68 systems per salesperson (34,000 systems / 500 salespeople = 68). In 2001, Cognos Corporation's productivity was 82 systems per salesperson (43,000 systems / 525 salespeople = 82). The difference in productivity from 2000 to 2001 is 14 systems per salesperson (82 - 68 = 14). SOURCE: EC:013 SOURCE: EC LAP 18Make the Most of It (Productivity) 12. B $.25. Marginal cost is the change in cost involved in increasing or decreasing production. It is often used to calculate the extra cost of producing one more item. In this situation, total cost of operating the business is $1,000 before any items are produced. Once production begins, there are additional costs. To determine the marginal cost of producing each additional item, first calculate the change in total cost by subtracting the total cost before production from the total cost once production begins ($1,250 $1,000 = $250). The change in total cost is $250 from zero production to producing 1,000 items. To calculate marginal cost, divide the change in total cost by the number of items produced ($250 1,000 = $.25). SOURCE: EC:023 SOURCE: Gottheil, F.M. (2002). Principles of economics (3rd ed.) [pp. 182-184]. Cincinnati: SouthWestern. 13. C $7,123.07. The rate of inflation increases the prices of goods and services and reduces a business's purchasing power. If the rate of inflation is 2% the first year and 3% the second year, 12 computers that cost a total of $6,780 now (12 X $565 = $6,780) will increase to $7,123.07 in two years. To calculate the increase in price for the first year, multiply the current cost by the rate of inflation ($6,780 X 2% or .02 = $135.60). Then, add the increase resulting from the inflation to the original price to determine the new cost of the computers after the first year ($6,780 + $135.60 = $6,915.60). To calculate the increase in price for the second year, multiply the new cost for the first year by the rate of inflation for the second nd year ($6,915.60 X .03 = $207.47). Then, add the increase resulting from the 2 year's inflation to the total costs calculated for the first year ($6,915.60 + $207.47 = $7,123.07). SOURCE: EC:083 SOURCE: McConnell, C.R., & Brue, S.L. (2005). Economics: Principles, problems, and policies (16th ed.) [pp. 147-148]. Boston: McGraw-Hill/Irwin. 14. D $10.3 million. The output of all labor and capital within a country's boundaries is included in gross domestic product regardless of who owns those resources. Therefore, Honda production in Ohio ($3.5 million) is counted in U.S. GDP. Ford production in Mexico ($3.8 million) is counted in Mexico's GDP. Government purchases counted in GDP include wages paid to military personnel ($6.8 million) but not transfer payments such as Social Security benefits ($3.4 million). In this situation, the only figures counted in U.S. GDP are Honda production in Ohio and wages paid to military personnel ($3.5 million + $6.8 million = $10.3 million). SOURCE: EC:017 SOURCE: Clayton, G.E. (2005). Economics: Principles & practices (pp. 342-343). New York: Glencoe/McGraw-Hill. 15. C 5.4%. The unemployment rate is the percentage of those unemployed people in the labor force who are actively looking for work. To calculate the rate of unemployment, divide the number of unemployed by the number in the labor force (34,290 / 634,820 = .0540 or 5.4%). The rate of unemployment is used to analyze the condition of the economy. A low unemployment rate indicates a healthy economy because most of the people who want to work are working. However, a high unemployment rate indicates a slowdown in the economy because more people are out of work. SOURCE: EC:082 SOURCE: O'Sullivan, A., & Sheffrin, S. M. (2003). Economics: Principles in action (pp. 335-336). Upper Saddle River, NJ: Prentice Hall.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

16

16. A $19 billion. A trade deficit means that more goods and services are imported than exported. To calculate a nation's trade deficit, subtract exports from imports ($125 billion - $106 billion = $19 billion). A trade deficit decreases the gross domestic product (GDP), but GDP does not determine a trade deficit. SOURCE: EC:016 SOURCE: EC LAP 4Beyond US (International Trade) 17. D 17.085 billion yuan. Since one U.S. dollar is equal to 6.834 Chinese yuan, multiply the dollar amount of the factory by 6.834 yuan to calculate the cost of the factory in China's currency ($2.5 billion X 6.834 yuan = 17.085 billion yuan). SOURCE: EC:100 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 550-551]. Mason, OH: South-Western Cengage Learning. 18. A 5 feet, 10 inches by 9 feet. In Europe, the metric system of measurement is commonly used. Units of lengths in Europe include the centimeter, meter, and kilometer. In the U.S., however, the customary system of measurement is much more common. The customary system uses inches, feet, yards, and miles to measure length. To convert the tablecloth's dimensions from meters to feet and inches, first convert the European measurements from meters to centimeters (1.8 meters X 100 = 180 centimeters; 2.77 meters X 100 = 277 centimeters). Next, multiply the measurements in centimeters by 0.39, since one centimeter is roughly equal to 0.39 inches (180 X 0.39 = 70.2 inches; 277 X 0.39 = 108.03 inches). Finally, divide the dimensions in inches by 12 to express the size of the tablecloth in feet and inches (70.2 / 12 = 5 feet, 10 inches; 108.03 / 12 = 9 feet). SOURCE: EC:131 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 558-561]. Mason, OH: South-Western Cengage Learning. 19. D $2,372.25. Individuals who are interested in opening a franchise must consider the start -up costs, which varies and depends on the type of franchise. To calculate the average support-service fee for a new SuperSubs franchisee, first add together the start-up costs to obtain the total of the average start-up costs ($15,500 + $37,000 + $12,000 + $8,575 + $6,000 = $79,075). Then, calculate the amount of the fees by multiplying the total costs by the fee percentage ($79,075 X .03 or 3% = $2,372.25). SOURCE: EN:009 SOURCE: WSI. (n.d.). What start up costs are associated with a Subway franchise? Retrieved August 13, 2009, from http://www.wsicorporate.com/article/subway_franchise_start_up_cost 20. D $54,400. To determine how much money Frank invested in the business, first assign the variable x to the amount that Thomas invested (x = Thomas' investment). Then, since Frank contributed four times as much money as Thomas, multiply Thomas' investment by four (4x = Frank's investment). Then, create a mathematical equation to show that Thomas's investment and Frank's investment together total $68,000 (x + 4x = $68,000). To determine the value of x, first add together x and 4x (5x = $68,000). Then, divi de both sides of the equation by 5 (5x / 5 = $68,000 / 5). By doing so, we can see that Thomas's investment was $13,600 (x = $13,600). Finally multiply Thomas's investment by four to determine the amount that Frank invested (4x = [$13,600 X 4] = $54,400). SOURCE: EN:016 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 144-155]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

17

21. A Yes, in fact, Lindsey has $725 more than she needs for the down payment. Income is the money resource owners receive for supplying goods and services. Sometimes, small-business owners obtain funds for expensive purchases from various income sources, such as savings accounts, sales, investments, rentals, etc. To determine if Lindsey has enough cash available for the equipment down payment, first calculate the dollar amount she needs for the down payment by multiplying the cost of the equipment by the down payment percentage amount ($78,500 X .05 or 5% = $3,925). Then, add together all of the money from her sources of income ($1,200 + $650 + 900 + $1,900 = $4,650). Lindsey has enough money for her down payment, and in fact, has more than she needs by $725 ($4,650 $3,925 = $725). SOURCE: FI:061 SOURCE: Saez, E. (2007, April 15). Sources of income for top .01 percent excluding capital gains. Retrieved August 19, 2009, from http://www.visualizingeconomics.com/2007/04/16/sourcesof-income-for-top-001-percent -excluding-capital-gains/ 22. C $563.12. To find the amount of interest on the loan using the exact interest method, use the simple interest formula "Interest = Principal X Rate X Time." When using the exact interest method, time is equal to the term of the loan expressed as days divided by the number of days in a year, which is 365. So, in this case, first convert the term of the loan from weeks to days by multiplying by the number of days in a week (36 X 7 = 252 days). Then, calculate the factor Time by dividing the number of days of the loan by the number of days in a year (252 / 365 = 0.6904109). Next, multiply the principal amount of the loan by the interest rate and the time to determine the amount of interest on the loan ($7,500 X 10.875% X 0.6904109 = $563.11638). Finally, round this answer up to the nearest cent to determine the amount of interest on the loan ($563.11638 = $563.12). SOURCE: FI:002 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 330-332]. Mason, OH: South-Western Cengage Learning. 23. A $53,200. To determine how much money Nicki will need to bring to the closing table to pay for her down payment and closing costs, first multiply the purchase price by the percentage of that amount required as a down payment ($224,000 X 20% = $44,800). Next, multiply the purchase price by the percentage of that amount necessary for closing costs ($224,000 X 3.75% = $8,400). Finally, add the down payment and closing costs together to find how much Nicki needs to pay out of her pocket to purchase the house ($44,800 + $8,400 = $53,200). SOURCE: FI:063 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 208-213]. Mason, OH: South-Western Cengage Learning. 24. A $382. To calculate how much money Caroline expects to save for her car down payment each month, first divide the number of weeks in a year by two, since she is paid every two weeks (52 weeks / 2 weeks = 26 pay periods per year). Then, multiply the number of pay periods per year by Caroline's net income per pay period to determine her take-home pay per year (26 X $1,176.25 = $30,582.50). Next, divide her yearly take-home pay by 12 to determine her take-home pay per month ($30,582.50 / 12 = $2,548.5416). Finally, multiply her monthly take-home pay by 15% and round to the nearest dollar to find how much money Caroline has budgeted for the car down payment each month ($2,548.5416 X 15% = $382.28124 = $382). SOURCE: FI:066 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 342-345]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

18

25. B $807.53. Richard's gross pay consists of his total income for the week before income taxes and other deductions are subtracted from his pay. To determine Richard's total gross pay for last week, first multiply his standard 40 hours worked by his regular hourly rate (40 X $14.55 = $582.00). Then, determine his hourly rate for overtime hours by multiplying his regular hourly rate by 1.5 ($14.55 X 1.5 = $21.825). Next, multiply the number of overtime hours by the hourly rate for overtime (5 X $21.825 = $109.125). To calculate his hourly rate for holiday hours, multiply the regular hourly rate by two ($14.55 X 2 = $29.10). Multiply his hourly rate for holiday hours by the number of hours worked on New Year's Day, which is a holiday ($29.10 X 4 = $116.40). Finally, to determine his total gross pay, add his earnings for regular hours, overtime hours, and holiday hours together and round to the nearest cent ($582.00 + $109.125 + $116.40 = $807.525 = $807.53). SOURCE: FI:068 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 286-287]. Mason, OH: South-Western Cengage Learning. 26. B $67.69. To determine Janell's net deposit, first determine how much money she had of each denomination of bill and coin. To do so, multiply the number of bills or coins of a certain denomination by the value of that bill or coin (3 X $20 = $60; 2 X $5 = $10; 14 X $0.10 = $1.40; 26 X $0.05 = $1.30; 178 X $0.01 = $1.78). Next, add up how much cash and coin Janell gave to the bank ($60.00 + $10.00 + $1.40 + $1.30 + $1.78 = $74.48). Then, to determine Janell's subtotal on her deposit slip, add the amount of Janell's check to the cash and coin that she had ($33.21 + $74.48 = $107.69). Determine how much cash back Janell received by multiplying the number of bills she received by the denomination of these bills (4 X $10 = $40). Finally, subtract the amount of cash back from the deposit slip subtotal to find Janell's net deposit after receiving $40 cash back ($107.69 - $40 = $67.69). SOURCE: FI:560 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 87-89]. Mason, OH: South-Western Cengage Learning. 27. D $512.73. One aspect of using credit wisely involves reviewing credit card statements to determine if they are correct. To calculate Geoff's correct new balance, first determine the amount that he was overcharged for the incorrect transaction by subtracting the correct transaction amount from the amount appearing on his credit card statement ($43.12 - $20.00 = $23.12). Then, add together all of the unauthorized charges posted to his account ($55.68 + $189.00 + $265.23 = $509.91). Finally, subtract the total unauthorized charges and overcharged amount from the new balance appearing on the statement ($1042.64 - $509.91 - $20.00 = $512.73). SOURCE: FI:071 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 129-134]. Mason, OH: South-Western Cengage Learning. 28. A $26,450. Justin's taxable income is equal to his gross income minus any adjustments to income, deductions, and exemptions. Contributions to approved retirement plans, business losses, and alimony payments are all considered to be adjustments to income. So, to determine Justin's taxable income, subtract his contributions to his approved retirement fund, his exemption amount, and his standard deduction from his gross income for the year ($37,800 - $2,000 - $3,650 - $5,700 = $26,450). SOURCE: FI:074 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 47-49]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

19

29. C 3.68%. When investors purchase load mutual funds, they are charged a commission. To determine the rate of commission, first subtract the net asset value from the offer price ($39.14 - $37.70 = $1.44). Then, divide that answer, which is the amount of commission per share of the mutual fund, by the offer price of the fund ($1.44 / $39.14 = 0.036791). Finally, convert this answer to a percentage, and round to the nearest hundredth of a percent (0.036791 = 3.68%). SOURCE: FI:076 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 308-311]. Mason, OH: South-Western Cengage Learning. 30. A 2.1%. The current yield of a stock indicates how much dividend a stockholder would earn as a percentage of the current selling price of the stock. To find the current yield of MetLife stock, divide the annual dividend per share for the stock by the current price of the stock ($0.74 / $34.53 = 0.02143060). Finally, convert this answer to a percentage and round it to the nearest tenth of a percent (0.02143060 = 2.143060% = 2.1%). SOURCE: FI:275 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 737-740]. Mason, OH: South-Western Cengage Learning. 31. D 137.7 shares of stock. To determine the number of shares of stock that Shane purchased, divide the total amount of money invested by the purchase price of the stock ($2,575 / $18.70 = 137.7 shares of stock). SOURCE: FI:077 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 733-743]. Mason, OH: South-Western Cengage Learning. 32. B $25,000. Speculative risks are chances of loss that may result in loss, no change, or gain. Investing in a new business is a speculative risk because the business might fail. If an entrepreneur invests $25,000 in a new business venture and the business fails, the entrepreneur could lose the $25,000 that was invested. Entrepreneurs lose the amount they invest rather than the total amount that others invest. The other investors also might lose the amounts that they invested if the business fails. Investors take the risk of investing in a business because they hope to realize a financial gain, although they might lose their investment. SOURCE: FI:080 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2000). Small business management: An entrepreneurial emphasis (11th ed.) [pp. 543-544]. Cincinnati: South-Western College. 33. D $624. In order to calculate the monthly premium, first determine the number of increments of $30,000 by dividing that figure into the total value of the property ($390,000 $30,000 = 13). Then, multiply the monthly rate by the number of increments to determine the monthly premium ($48 X 13 = $624). SOURCE: FI:082 SOURCE: CCH Inc. (n.d.). How much insurance do you need? Business Owner's Toolkit. Retrieved August 27, 2009, from http://www.toolkit.cch.com/text/P04_8185.asp 34. C $125,000. A business may insure a building for any amount, but an insurance settlement will only reimburse the business for the amount of the actual loss. If the building is valued at $125,000, that is what the business will receive in an insurance settlement in the event the building is completely destroyed by fire. The purpose of insurance is to cover loss, not to generate profit for the business. Therefore, it is pointless for a business to insure a building for more than it is worth. SOURCE: FI:083 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2000). Small business management: An th entrepreneurial emphasis (11 ed.) [p. 554]. Cincinnati: South-Western College.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

20

35. B $4,000. Liabilities are debts owed by the business. In this case, the business owes the $4,000 it borrowed from the Fifth National Bank. The $7,000 worth of inventory is an asset because it's owned by the business. The $24,000 is the business's equity or net assets. SOURCE: FI:085 SOURCE: FI LAP 5Show Me the Money (Nature of Accounting) 36. D $605. Ending cash balance refers to the amount of cash a business has left at the end of the month. This figure is calculated by subtracting the total cash paid out from the total cash available. First, add together all the expenses ($4,125 + $950 + $2,570 = $7,645). Then, subtract that figure from the total cash available to determine the ending cash balance ($8,250 - $7,645 = $605). SOURCE: FI:091 SOURCE: FI LAP 6Count the Cash (Cash Flow) 37. C $8,555. Businesspeople prepare cash flow statements to estimate when, where, and how much money will flow into and out of a business during a certain period of time. The information in the cash flow statement can help the business plan financially. To determine the amount of cash that is available to operate the business, subtract the expenses from the total amount of cash ($36,200 - $27,645 = $8,555). SOURCE: FI:092 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 773-775). New York: Glencoe/McGraw-Hill. 38. B $83,553.30. A balance sheet is a financial statement that captures the financial condition of the business at a particular moment. One component of a balance sheet is owner's equity, which is the amount an owner has invested in the business plus or minus profits and losses. To determine owner's equity, subtract the total liabilities from the total assets ($94,841.20 - $11,287.90 = $83,553.30). SOURCE: FI:093 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2000). Small business management: An entrepreneurial emphasis (11th ed.) [p. 211]. Cincinnati: South-Western College. 39. C $184,000 net income. To calculate the net income or net loss, subtract the cost of goods sold from the revenue to get the gross profit. In this case, $295,000 - $80,000 = $215,000. Subtract the total operating expenses from the gross profit to get the net income or net loss for the surf shop ($215,000 - $31,000 = $184,000). Net income occurs when total revenue is greater than total expenses. A net loss occurs when total expenses are greater than total revenue. SOURCE: FI:094 SOURCE: FI LAP 4Watch Your Bottom Line (Income Statements) 40. B 305. To determine the total number of sales transactions that the business anticipates will take place each day, assign the variable x to the total number of sales transactions (x = Total sales transactions). Since three-fifths of the total sales are expected to be credit card transactions, multiply the total sales transactions by three-fifths to express the number of credit card purchases (3/5x = Credit card transactions = 183). Next, multiply both sides of the equation by 5/3 (3/5x X 5/3 = 183 X 5/3). By doing so, we can calculate the total number of sales transactions that the business anticipates will take place each day (x = 305). SOURCE: FI:040 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 144-155]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

21

41. D $3,750. Although the business has cash on hand and accounts receivable that exceed its monthly operating expenses, it will need financing because only half of the accounts receivable will be paid that month. In order to determine the financing needs, first calculate half of the accounts receivable and add that figure to the cash on hand ($25,000 / 2 = $12,500 + $15,000 = $27,500). The business actually will have $27,500 to cover monthly operating expenses of $31,250, which gives it a shortfall of $3,750 ($31,250 - $27,500 = $3,750). Therefore, the business will need financing of $3,750 for the month. SOURCE: FI:043 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2000). Small business management: An entrepreneurial emphasis (11th ed.) [pp. 226-229]. Cincinnati: South-Western College. 42. B $20,380. Owners have many options to finance their new business ventures. They may use their savings, borrow from family and friends, obtain loans from government agencies or financial institutions, or use a combination of methods. Pedro is obtaining funds from many sources, including money from family members and his savings account. To calculate the balance that Pedro will need to start his business, first calculate the total percentage of the start-up money that he will obtain from his uncle and his sister (8% + 9% = 17%). Then, calculate the percentage amount into a dollar amount by multiplying the estimated start-up costs by the percentage amount he will receive from family members ($36,000 x .017 or 17% = $6,120). Then, add together his savings and his family members' contributions and loans ($9,500 + $6,120 = $15,620). Finally, subtract the funds that he has secured from the estimated start-up costs to show the amount of money that he still needs to obtain ($36,000 - $15,620 = $20,380). SOURCE: FI:031 SOURCE: Greene, C. L. (2006). Entrepreneurship: Ideas in action (3rd ed.) [pp. 168-170]. Mason, OH: Thomson/South-Western. 43. B 41.8%. A business's debt ratio, also known as a debt-to-income ratio, is a measurement of the percentage of total business dollars that have been provided by creditors. Banks and other creditors often calculate a potential borrower's debt ratio when determining the creditworthiness of the applicant. An applicant with a low debt ratio (typically lower than 40%) is typically considered to be more creditworthy and therefore gets a lower interest rate. To calculate Fly Right Flight Training's debt ratio, divide its total liabilities by its total assets ($93,581 / $223,714 = 0.4183064). Then convert the answer to a percentage and round to the nearest tenth (0.4183064 = 41.8%). SOURCE: FI:034 SOURCE: Meyer, E.C., & Allen, K.R. (2006 ). Entrepreneurship and small business management (p. 454). New York: Glencoe/McGraw-Hill. 44. C $1,875. Businesses budget for special events and promotional coupons because they affect sales and reduce income. If a business plans to distribute cents-off coupons, it needs to budget for the amount of money that will be lost due to customers' redeeming the coupons. In this example, the business plans to distribute 10,000 25-cents-off coupons that have a total value of $2,500 (10,000 X $ .25 = $2,500). The business estimates that only 75% of the coupons will be redeemed. To determine that amount, multiply the total value by 75% ($2,500 X 75% or .75 = $1,875). SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks (Nature of Budgets)

Sample A

MATH APPLICATIONS IN BUSINESS KEY

22

45. B $495,750. Some businesses develop operating budgets by estimating expenses and the amount they want to earn in income in order to determine the amount to budget for sales. This method provides the business with the minimum amount of sales it must generate in order to pay expenses and earn the desired income. In this example, the business has total expenses of $365,250 ($275,000 + $32,000 + $58,250 = $365,250). To determine the amount it should budget for sales, add total expenses to the desired amount of income ($365,250 + $130,500 = $495,750). The business must have sales of at least $495,750 in order to cover budgeted expenses and income. SOURCE: FI:098 SOURCE: Kuratko, D.F., & Hodgetts, R.M. (2001). Entrepreneurship: A contemporary approach (5th ed.) [pp. 257-261]. Mason, OH: South-Western. 46. D $3,400. Businesses develop a cash flow budget, which is a forecast of expected cash receipts and necessary cash payments, in order to determine if they will have sufficient cash available for other purchases such as new equipment. In this situation, the business is forecasting cash receipts of $30,000 and income from investments of $1,150 for total cash of $31,150. The business must pay salaries of $15,500 and other operating expenses of $12,250 for total payments of $27,750. The difference between the expected cash and the necessary payments is the amount the business will be able to budget for other purchases ($31,150 - $27,750 = $3,400). SOURCE: FI:099 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 396-397]. Cincinnati: South-Western. 47. B 76%. Forecasting the percent of sales is important for many businesses. For example, hotels often forecast sales based on the percent of occupancy. To determine the percentage, divide the number of rooms that will be sold by the total number of rooms available (65 85 = .76 or 76%). SOURCE: FI:096 SOURCE: Answers.com. (n.d.). Sales forecasts. Retrieved August 27, 2009, from http://www.answers.com/topic/sales-forecast 48. B 38%. Debt ratio is one type of financial ratio that businesses calculate and analyze in order to determine the relationship between debt and assets. The formula for calculating debt ratio is total debt divided by total assets ($325,000 $850,000 = .382 or 38%). After calculating their debt ratio, businesses usually compare it to the industry average in order to determine if they have more or less debt than the average business in their industry. A business with a lower than average debt ratio has less financial risk than a business with a high debt ratio. SOURCE: FI:097 SOURCE: Longenecker, J.G., Moore, C.W., & Petty, J.W. (2000). Small business management: An entrepreneurial emphasis (11th ed.) [p. 497]. Cincinnati: South-Western College. 49. B $20,000. In a profit-and-loss statement, gross profit is equal to net sales less cost of goods sold ($50,000 - $30,000 = $20,000). Net profit is equal to gross profit minus total operating expenses. SOURCE: FI:102 SOURCE: Ebert, R. J., & Griffin, R. W. (2007). Business essentials (6th ed.) [p. 438]. Upper Saddle River, NJ: Pearson Prentice Hall. 50. C $62.95. Many businesses keep petty cash on hand to handle unexpected situations or to pay for discretionary items that do not require a check to be issued or a large amount of cash. To calculate the balance of petty cash available at the end of Tuesday, simply subtract the cash used from the beginning cash fund ($100 - $24.65 = $75.35; $75.35 - $12.40 = $62.95). SOURCE: FI:310 SOURCE: Business Owner's Toolkit. (1995-2009). Petty cash fund. Retrieved August 18, 2009, from http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_1428

Sample A

MATH APPLICATIONS IN BUSINESS KEY

23

51. B 187. The estimated yearly turnover rate is an important factor that businesses consider when determining future hiring needs. Businesses usually monitor possible turnover in order to be prepared to hire replacements. As a rule, businesses know in advance the number of employees who will probably retire each year. They also factor in the number who will leave for other reasons based on the turnover rate for previous years. In this example, 82 employees will be eligible to retire. Also, 7% are expected to leave for other reasons (1,500 X 7% or .07 = 105). Add the two figures to determine the number of new employees that the business may need to hire during the year (105 + 82 = 187). SOURCE: HR:353 SOURCE: Dessler, G. (2000). Human resource management (8th ed.) [pp. 124-125]. Upper Saddle River, NJ: Prentice Hall. 52. B 16 hours. Interviewing candidates for positions can take a lot of time. To calculate the total amount of time that Audrey will spend interviewing for the sales position, first multiply the number of interviews by the allocated minutes for each round of interviews (9 X 30 minutes = 270 minutes for telephone interviews; 5 X 90 minutes = 450 minutes for personal interviews; 2 X 120 minutes = 240 minutes for lunch interviews). Add together all the interviewing minutes to obtain the total number of minutes that Audrey will spend interviewing (270 + 450 + 240 = 960 minutes). Then, divide the total number of minutes Audrey will spend interviewing by 60 minutes (60 minutes/hour) to obtain the total number of hours that Audrey will spend interviewing the job candidates (960 minutes 60 minutes = 16 hours). SOURCE: HR:355 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [pp. 255-256]. Cincinnati: Thomson/South-Western. 53. B 4. Union representatives negotiate with employers to obtain favorable contracts for union members. One aspect of negotiating contracts includes salaries. Tom's union was able to obtain a salary increase for next year. To calculate the percentage amount of the increase, first subtract Tom's current salary from his new salary to obtain the dollar amount of the increase ($42,640 - $41,000 = $1,640). Then divide the dollar amount increase by the current salary to obtain the percentage of the salary increase ($1,640 41,000 = .04 or 4%). SOURCE: HR:390 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [pp. 544-545]. Cincinnati: Thomson/South-Western. 54. D $965. To determine the total cost of hiring the new administrative assistant, first calculate how many hours Leigh spent selecting and hiring the new employee. Multiply the number of interviewees by the amount of time spent with each candidate to determine how many minutes Leigh spent interviewing the job candidates (6 X 40 = 240 minutes). Next, divide the number of minutes by 60 to determine the number of hours Leigh was interviewing people (240 / 60 = 4 hours). Add the time Leigh spent reviewing applications, selecting the top candidates, interviewing these candidates, and checking references (12 + 3 + 4 + 2 = 21 hours). Multiply Leigh's hours by her cost per hour (21 X $36 = $756). Next, multiply the manager's cost per hour by the number of hours that s/he met with Leigh's top choice ($48 X 0.5 = $24). Finally, add together the cost of the time Leigh devoted to the hiring process, the cost of her manager's time spent meeting with the final candidate, and the overhead costs for the hiring process ($756 + $24 + $185 = $965). SOURCE: HR:356 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 472-475]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

24

55. B $9,671.20. Many companies offer severance packages to employees who lose their jobs due to downsizing. The purpose of the severance package is to help cover the employees' expenses until they are able to find new jobs. To calculate the marketing employee's severance package, first determine his/her weekly income by dividing the annual salary by 52 ($42,016 52 = $808). Then, calculate the dollar amount to be paid per week by multiplying the weekly pay amount by the designated percentage of the payout ($808 X .80 or 80% = $646.40). Then, multiply the weekly severance pay by 8 weeks to obtain the total salary payout ($646.40 X 8 = $5,171.20). The next step is to calculate the total amount the business will pay for the years of employment with the company. To do this, multiply payout amount per year of employment by the employee's length of employment ($500 X 9 = $4,500). Finally, add that figure to the salary payout amount to obtain the severance package total ($5,171.20 + $4,500 = $9,671.20). SOURCE: HR:358 SOURCE: Mathis, R.L., & Jackson, J.H. (2003). Human resource management (10th ed.) [pp. 445-446]. Cincinnati: Thomson/South-Western. 56. D $1,440. Some businesses provide their employees with financial rewards for work that exceeds the company's expectations. These rewards help motivate the employees to continue their excellent performance. To calculate Kate's bonus, first subtract her actual sales from her sales goal to obtain the amount by which she exceeded her sales goal ($274,000 - $250,000 = $24,000). Then, multiply the dollar amount by which Kate exceeded her goal by the bonus percentage amount to obtain the dollar amount of Kate's bonus ($24,000 x .06 or 6% = $1,440). SOURCE: HR:365 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 16-17]. Mason, OH: South-Western Cengage Learning. 57. C No, Frank made 5% less than his quota. Businesses often evaluate their production-line employees' performance levels by using quantitative measures. To determine if Frank has performed efficiently last week, first multiply the number of widgets he should be able to make in a minute by the number of minutes in an hour to obtain the number of widgets he should be able to make in an hour (5 X 60 = 300). Then, multiply the number of widgets he should be able to make in an hour by the number of hours Frank works to obtain Frank's weekly widget quota (300 X 40 = 12,000). Because Frank made fewer than 12,000 widgets, he did not make his quota. To determine the percentage amount by which Frank missed his quota, first subtract his quota amount from his actual production amount to obtain the number of widgets he was short of his quota (12,000 - 11,400 = 600). Then, divide the shortage amount by the quota amount to obtain the percentage of the shortage (600 12,000 = .05 or 5%). SOURCE: HR:368 SOURCE: Hair, J.F., Anderson, R.E., Mehta, R., & Babin, B.J. (2009). Sales management: Building customer relationships and partnerships (pp. 429-430). Boston: Houghton Mifflin Company. 58. B $330. Employers are often legally required to hold garnishments (i.e., child support, alimony) from their employees' wages. The employers must submit the garnishments to the appropriate government agency or organization. To calculate Mr. Henry's child support obligation on a weekly basis, first multiply his annual salary by the garnishment percentage to obtain the annual amount of money garnished for child support ($78,000 X .220 or 22% = $17,160). Then, divide the annual garnishment by 52 (52 weeks/year) to obtain the weekly child support payment ($17,160 52 = $330). SOURCE: HR:394 SOURCE: JudgementRecoveryResources.com. (n.d.). The wage garnishment. Retrieved August 17, 2009, from http://www.judgmentrecoveryresources.com/articles/wage-garnishment/

Sample A

MATH APPLICATIONS IN BUSINESS KEY

25

59. B 32,666. Because it isn't feasible to survey a large target market, marketing researchers often survey a representative group, or sample, of the target market. The marketing researchers outline the sample criteria in a sample plan. In the example, the sporting-goods business wants to survey one of every four or 25% of the 18- to-34 year-old-males in a specific geographic area. To determine the total number of people who will be included in the sample, multiply the total number of members of the target market by 25% (130,664 X .25 or 25% = 32,666). SOURCE: IM:285 SOURCE: Hair, J.F., Bush, R.P., & Ortinau, D.J. (2009). Marketing research in a digital information th environment (4 ed.) [pp. 327-328]. New York: McGraw-Hill Irwin. 60. B 38.3%. To determine the response rate to Hailey's survey, first subtract the incomplete surveys from the total number of replies (314 - 27 = 287). This is the number of valid surveys returned. Then, divide the total number of surveys mailed to customers into the number of valid surveys returned, and round to the nearest tenth to determine the survey's response rate (287 / 750 = 38.3%). SOURCE: IM:289 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 444-446]. Mason, OH: South-Western Cengage Learning. 61. D 64. Mode is the response given by the most respondents. In this example, 64 respondents said that they went out to dinner two times (twice) a week, which is the response (value or number) that appears the most often out of all of the responses given. SOURCE: IM:416 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 799-800]. Mason, OH: South-Western Cengage Learning. 62. C 28,780. A marketing-research brief is a summary that outlines the nature of the firm's problem, the firm's background, and its current situation. In the brief, the Kendall Company acknowledges that it has a problem in relation to customer complaints about a defective product. The information provided in the marketing research brief will help researchers determine the best way to obtain additional information from customers about the complaints, so the business can take steps to fix the defective product and rebuild the customers' confidence in the business and its products. The first step to determine the number of customers complaints during the first two quarters of the year is to add together the percentage of customer complaints during the first quarter and the percentage of customer complaints during the second quarter (2% + 3% = 5%). Then, multiply the total percentage of complaints by the number of customers who purchased the product to determine the total number of customer complaints about the model XN2 (575,600 X .05 or 5% = 28,780). SOURCE: IM:291 SOURCE: B2B International. (n.d.). The art of the brief. Retrieved August 26, 2009, from http://www.b2international.com/article17.html 63. D 72,500. Businesses often present research data in a graphic format such as a pie chart. The graphic presentation of research data supports and reinforces the information that is presented in a written format. Also, the use of charts makes the information more interesting and easier to understand. In this example, a total of 71% of the households surveyed own three or fewer televisions (32% + 39% = 71%). Therefore, 29% of the households surveyed own more than three televisions (100% - 71% = 29%). To calculate the number of households, multiply the number of households surveyed by 29% (250,000 X 29% or .29 = 72,500). SOURCE: IM:347 SOURCE: Churchill, G., & Iacobucci, D. (2002). Marketing research: Methodological foundations (8th ed.) [pp. 948-950]. Orlando, FL: Harcourt.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

26

64. A 12%. A market analysis is a systematic study of a market. An important aspect of a market analysis is analyzing the market share, which is a business's portion of the total industry sales in a specific market. To determine the business's market-share percentage amount, divide the number of market members to whom the business sells by the total market (57,060 475,500 = .12 or 12%). SOURCE: MP:009 SOURCE: Berman, B., & Evans, J.R. (2004). Retail management: A strategic approach (9th ed.) [pp. 162-163]. Upper Saddle River, NJ: Prentice Hall. 65. D $880,470. If the business expects an 8% increase in sales, the total forecast for the coming year is $880,470. In order to determine the total, multiply last year's sales by 8% to find the increase ($815,250 X 8% or .08 = $65,220). Then, add the amount of increase to last year's sales to calculate the forecast ($815,250 + $65,220 = $880,470). The amount of money the business will spend to remodel its offices does not have an effect on next year's sales forecast. SOURCE: MP:013 SOURCE: Ingram, T.N., LaForge, R.W., Avila, R.A., Schwepker, C.H., & Williams, M.R. (2001). Professional selling: A trust-based approach (pp. 135-139). Mason, OH: South-Western. 66. A $.44. A marketing metric is a tool that businesses use to measure the success of a marketing activity. Businesses use different metrics to measure different activities including promotion, profitability, productivity, and sales. To determine the marketing costs associated with selling a single unit during a certain time frame, divide the total marketing expenses by the total number of units sold during the period ($625,500 1,425,850 = $.438 = $.44). The cost to market one unit during a certain time frame was $.44. SOURCE: MP:016 SOURCE: Davis, J. (2007). Measuring marketing: 103 key metrics every marketer needs (pp. 43-44). Hoboken, NJ: John Wiley & Sons. 67. C $650,000. Businesses often develop marketing plans that are intended to attract more customers and lead to an increase in revenue. When preparing its marketing plan, a business develops specific objectives to follow that should be clear and measurable, such as increasing the number of customers by 8%. If a business attracts more customers, it probably will earn more income. To determine the amount of increase in this example, first determine the current level of sales by multiplying the amount each customer spends by the number of customers ($25,000 X 325 = $8,125,000). Then, multiply the number of current customers by the proposed increase and add that number to the current number (325 X 8% or .08 = 26; 325 + 26 = 351). Next, multiply the increased number of customers by the amount each spends ($25,000 X 351 = $8,775,000). Subtract the current amount of income from the projected amount of income to determine the amount of increase ($8,775,000 - $8,125,000 = $650,000). SOURCE: MP:018 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 745-748). New York: Glencoe/McGraw-Hill. 68. A $2,578.70. Spreadsheet software programs are designed to organize, calculate, and analyze mathematical or numerical information. Businesses often use spreadsheet software to calculate commissions or to analyze the effect that raising the commission rate would have on operating expenses. In this example, the business is considering raising the rate by 1%. Calculating how much more the business will owe the salespeople is a simple process using spreadsheet programs because all the business needs to do is change the commission rate and the program will automatically calculate the new amount of commission due. To calculate the difference, first add the total sales and multiply by 1% to determine the increase ($62,500 + $66,350 + $65,100 + $63,920 = $257,870; $257,870 X 1% or .01 = $2,578.70). SOURCE: NF:010 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 163-164]. Woodland Hills, CA: Glencoe/McGraw-Hill.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

27

69. A $106,600. Specialty businesses often maintain databases that contain valuable information about regular customers, such as how often they buy and how much they spend. The businesses use this information to provide those customers with special offers and also to stock the types of products these customers prefer. In addition, they may use the data to determine the financial impact these customers have on the business. To calculate the total amount the group in this example spends each week, first convert 82% of the 1,000 regular customers to a number by multiplying 1,000 by the percentage (1,000 X 82% or .82 = 820). Then, determine the amount each of the 820 customers spends per week by multiplying $65 by 2 ($65 X 2 = $130). Finally, multiply the weekly amount by the number of customers to calculate the amount this group spends each week ($130 X 820 = $106,600). SOURCE: NF:185 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 509-510]. Woodland Hills, CA: Glencoe/McGraw-Hill. 70. B 12. During the project planning process, businesses usually estimate the time it will take to complete projects. This is an important step because businesses must assign employees to work on the project. Major projects usually require a significant amount of time to complete, which means that several employees need to work on the project. In this example, the business assigns three part-time employees who each work 25 hours a week and one full-time employee. To calculate how many weeks it will take to complete a 1,380-hour project, first determine the total number of hours the employees work each week (25 hours a week X 3 employees = 75 hours a week, plus one full-time employee at 40 hours a week = 115). Then, divide the number of hours needed to complete the project by the total weekly hours (1,380 115 = 12). SOURCE: OP:001 SOURCE: Campbell, G.M., & Baker, S. (2007). The complete idiot's guide to project management (4th ed.) [p. 282]. New York: Penguin Group. 71. D $3,255.75. An invoice is the formal, printed record of a sale that includes all necessary information as to the buyer, the seller, items purchased, amounts, prices, delivery date, credit or discount terms, etc. To determine the total amount due on Yvonne's invoice, first calculate her discount by multiplying the gross amount due by the percentage that is normally deducted from her bill ($3,764.00 X 15% = $564.60). Next, subtract the discount from the gross amount due ($3,764.00 - $564.60 = $3,199.40). Finally, add the shipping charges to the amount due after the discount ($3,199.40 + $56.35 = $3,255.75). SOURCE: OP:015 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 427-429]. Mason, OH: South-Western Cengage Learning. 72. B 13 bicycles. The reorder point is the level of inventory at which an order for new stock should be placed. To determine the reorder point, first calculate the store's daily usage of the bicycles. This can be done by dividing the number of bikes sold by the number of days (84 / 28 = 3 bicycles per day). Then, multiply the daily usage by the lead time (3 X 3 = 9 bikes). Finally, add this number of bicycles to the safety stock to find the reorder point for the bikes (9 + 4 = 13 bicycles). SOURCE: OP:016 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 488-491]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

28

73. A $375.09. 3/10 net 30 means that the buyer will receive a 3% discount if the buyer pays within ten days of the invoice date and the entire invoice must be paid within 30 days. To calculate how much SSL will owe if it pays within 10 days of the invoice date, first determine the discount amount in dollars. To obtain the discount amount in dollars, multiply the order amount by the discount percentage ($386.69 X .03 or 3% = $11.60). Then, subtract the discount amount in dollars from the original order amount ($386.69 - $11.60 = $375.09). SOURCE: OP:337 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (p. 350). Woodland Hills, CA: Glencoe/McGraw-Hill. 74. A 4,579. The mean of a set of data is equal to the average of the set of data. To determine the mean of this set of production data, first add together the production totals for the five days listed (4,898 + 4,234 + 5,221 + 3,794 + 4,746 = 22,893). Next, divide the sum of the production totals by the number of values given, which is also the number of days listed (22,893 / 5 = 4578.6). Finally, round the mean to the nearest whole number (4578.6 = 4579). SOURCE: OP:017 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 797-803]. Mason, OH: South-Western Cengage Learning. 75. A 110.4 defective products. To determine the average number of defective products that each quality control associate found, first multiply the total number of products produced last quarter by the percentage of products that were defective to find the total number of defective products (110,400 X 0.5% = 552). Then, to calculate the average number of defective products that each quality control associate found, divide the total number of defective products by the number of quality control associates (552 / 5 = 110.4 defective products). SOURCE: OP:164 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 172-183]. Mason, OH: South-Western Cengage Learning. 76. D $760. Net profit is the difference between gross profit and total expenses, which includes the cost of goods sold and the operating expenses. To determine the amount of operating expenses in this situation, subtract the net profit from the total income ($2,750 - $1,150 = $1,600). Then, subtract the cost of goods sold from that figure to determine the amount of operating expenses ($1,600 - $840 = $760). Another way is to subtract cost of goods sold from total income ($2,750 - $840 = $1,910), and then subtract net profit from that figure ($1,910 - $1,150 = $760). SOURCE: OP:024 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 770-771). Woodland Hills, CA: Glencoe/McGraw-Hill. 77. B $35. Employees who have responsibility for buying office supplies and paying invoices are in a good position to help the business control expenses. If an employee receives an invoice offering a discount for paying within a certain period of time and takes advantage of the discount, the business will save money. In this situation, the business will save $35 because 2% of $1,750 is $35. Calculate the savings by multiplying the amount of the invoice by the percentage of discount ($1,750 X 2% or .02 = $35). SOURCE: OP:025 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials: Teacher wraparound edition (pp. 555-556). Woodland Hills, CA: Glencoe/McGraw-Hill.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

29

78. D $3,150. A breakeven point is the level of sales at which revenues equal total costs. Breakeven analysis is a financial analysis whose purpose is to identify the level of sales needed to reach the break-even point at various prices. To determine the difference in breakeven points using the two different prices, first calculate the breakeven point at each sales price. To determine the breakeven point at $59 per pair, subtract the variable costs for each pair of shoes from the sales price for the shoes ($59 - $9 = $50). Then, divide the fixed costs by the difference between the sales price and the variable costs to find the breakeven point in units ($80,000 / $50 = 1,600 pairs of shoes). Then, to calculate the breakeven point in dollars, multiply the breakeven point in units by the sales price per pair of shoes (1,600 X $59 = $94,400). Next, repeat these steps to calculate the breakeven point at $73 per pair ($73 - $9 = $64; $80,000 / $64 = 1,250 pairs of shoes; 1,250 X $73 = $91,250). Finally, determine the difference in breakeven points by subtracting the breakeven point in dollars at $73 per pair from the breakeven point in dollars at $59 per pair ($94,400 - $91,250 = $3,150). SOURCE: OP:192 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 387-389]. Mason, OH: South-Western Cengage Learning. 79. D $600. Long-term service contracts are usually less expensive than short -term contracts. In this example, a one-year contract that costs $1,200 per year and can be renewed each year for a $100 increase will cost a business $3,900 over a three-year period ($1,200 + $1,300 + $1,400 = $3,900). On the other hand, a three-year contract costs a total of $3,300, which will save the business $600 ($3,900 - $3,300 = $600). However, before purchasing a long-term contract, a business should be sure that it intends to keep the equipment for that length of time. SOURCE: OP:027 SOURCE: CCH Inc. (n.d.). Service contracts. Business Owner's Toolkit. Retrieved August 27, 2009, from http://www.toolkit.cch.com/text/P06_4488.asp 80. A $11,025. The rent for space often increases every year unless the business negotiates a long-term lease for a specific price. In this example, the rent will increase by 5%. To calculate the increase per square foot, first multiply the current rent by the percent of increase ($2.80 X 5% or .05 = $.14). Then, add that amount to the current square foot rate to determine the next year's rate ($2.80 + $.14 = $2.94). Multiply the square footage by next year's rate to determine the monthly rent (3,750 X $2.94 = $11,025). SOURCE: OP:028 SOURCE: CCH Inc. (n.d.). Leasing office space. Business Owner's Toolkit. Retrieved August 27, 2009, from http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P01_5300 81. D $3,150. Many small businesses control expenses by hiring part-time employees at an hourly rate rather than salaried, full-time employees. The advantage to the business is the same number of employees working during a given time period but for less wages. To calculate the savings in this situation, first determine the payroll expense for one part-time employee by multiplying the number of hours worked each day by five days to find the number of hours worked each week (5 X 5 = 25). Then, multiply that number by the hourly rate to determine the weekly pay ($9.25 X 25 = $231.25). Multiply the weekly pay by 12 weeks ($231.25 X 12 = $2,775), and the 12-week total by the six part-time employees ($2,775 X 6 = $16,650). Calculate the full-time payroll by multiplying the weekly rate by 12 weeks ($550 X 12 = $6,600), and the 12-week total by three full-time employees ($6,600 X 3 = $19,800). Determine the savings by subtracting the part-time payroll from the full-time payroll ($19,800 - $16,650 = $3,150). SOURCE: OP:029 SOURCE: BizMove.com. (n.d.). How to reduce costs. Retrieved August 27, 2009, from http://www.bizmove.com/finance/m3k.htm

Sample A

MATH APPLICATIONS IN BUSINESS KEY

30

82. A $40,661.60. Businesses use budget information to monitor sales and expenses and predict future income and costs. In this example, the business's actual sales are expected to increase but so will the amount budgeted for expenses. To determine the amount the business will spend on expenses next month, first calculate the increase in sales by multiplying current sales by the estimated increase ($68,500 X 6% or .06 = $4,110), and add that figure to current sales ($68,500 + $4,110 = $72,610). The business expects $72,610 in sales next month. The business usually spends 52% of sales on expenses but expects a 4% increase next month for a total of 56%. To determine the amount the business will spend on expenses next month, multiply next month's sales by 56% ($72,610 X 56% or .56 = $40,661.60). SOURCE: OP:030 SOURCE: Louderback, J.G., Holmen, J.S., & Dominiak, G.F. (2000). Managerial accounting (9th ed.) [pp. 228-232, 235-238, 284]. Mason, OH: South-Western. 83. B $341.32. To find the total cost of cleaning the carpet, first calculate the area of each room by multiplying the length of each room by its width (35 X 28 = 980 square feet; 18 X 14 = 252 square feet). Since the two executive offices are the same size, multiply the square footage of one office by two to find the square footage of both offices (252 X 2 = 504 square feet). Next, add together the areas of all three rooms (980 + 504 = 1,484 square feet). Finally, multiply the total square footage by the cost of carpet cleaning per square foot (1,484 X $0.23 = $341.32). SOURCE: OP:032 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 564-566]. Mason, OH: South-Western Cengage Learning. 84. A $1,440. To calculate how much Kayla will spend on her continuing education, first determine the total cost (4 X $600 = $2,400). Then, determine the cost of the classes by multiplying the number credit hours by the cost per hour of class (2 X 4 = 8; 8 x $150 = $1,200). Add together the total costs of the workshops and the classes to obtain the total cost of her continuing education for the year ($2,400 + $1,200 = $3,600). Then, calculate the amount of money that Kayla's employer will pay for her continuing education by multiplying the total costs by the percentage rate that her employer will pay ($3,600 X .60 or 60% = $2,160). Finally, subtract the dollar amount Kayla's employer will pay from the total costs to determine the amount of money Kayla will pay for her continuing education ($3,600 - $2,160 = $1,440). SOURCE: PD:033 SOURCE: AGC of America. (2009). State-by-state listing of continuing education license requirements. Retrieved August 20, 2009, from http://www.agc.org/cs/continuing_education_license_requirements 85. B $13.00 per hour. An entry-level employee such as a line worker may be promoted to the position of team leader, otherwise known as a supervisor. A promotion often involves a raise in pay. To determine Britni's new hourly wage, first divide Britni's gross pay per pay period by the number of weeks per pay period ($1040 / 2 = $520.00). Then, divide this weekly pay by the number of hours worked per week to find Britni's new hourly wage ($520.00 / 40 = $13.00). SOURCE: PD:034 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [pp. 183-186]. Mason, OH: South-Western Cengage Learning. 86. D $170.40. The cost of raw materials and the desired profit margin affect the selling price of a product. Because the manufacturer experienced a price increase for the raw materials it uses to produce its goods, and it wanted to maintain the same profit margin, it passed along the increase to the end user. To determine the new selling price, multiply the current selling price by 120% ($142 X 120% = $170.40). SOURCE: PI:002 SOURCE: Etzel, M.J., Walker, B.J., & Stanton, W.J. (2007). Marketing (14th ed.) [pp. 325-330]. Boston: McGraw-Hill/Irwin.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

31

87. D $38.84. Product-bundling strategies encourage consumers to try a product they normally wouldn't purchase. To determine the selling price of the bundled package, first add together the selling prices of the three individual items to get the total price the customer would pay if each item were purchased individually ($9.25 + $11.50 + $24.95 = $45.70). Then, multiply the total price of the items if they were sold individually by the discount percentage to obtain the discount amount in dollars ($45.70 X .15 or 15% = $6.855 or $6.86). To obtain the bundled price, subtract the discount amount in dollars from the total price of the items if they were purchased individually ($45.70 - $6.86 = $38.84). SOURCE: PM:041 SOURCE: Boone, L.E., & Kurtz, D.L. (2004). Contemporary marketing (11th ed.) [pp. 425-426]. Mason, OH: Thomson/South-Western. 88. B $655.47. Businesses usually include the unit prices on their purchase orders. To determine the subtotal of the purchase order, first calculate the extension prices for each item (12 X $19.85 = $238.20; 4 X $26.95 = $107.80; 3 X $71.50 = $214.50; 2 X $21.25 = $42.50; 3 X $17.49 = $52.47). Then, add together the price extensions to obtain the subtotal ($238.20 + $107.80 + $214.50 + $42.50 + $52.47 = $655.47). Sales tax is not included in the subtotal amount. SOURCE: PM:258 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (p. 341). Tinley Park, IL: Goodheart-Willcox. 89. C 5. To determine the number of times stock turns for an item in a set time period, divide the total number of units sold by the average number of items in stock (6,225 1,245 = 5). SOURCE: PM:224 SOURCE: Townsley, M. (2002). Retail: Business 2000 (p. 69). Mason, OH: South-Western. 90. D 636,977. When determining the number of product X to buy for next year, a business considers the increase in sales over the past several years as well as the expected increase for the coming year. If past sales records indicate 6% increases each year, and the business expects that trend to continue, it should plan to purchase 6% more of product X for next year than it expects to sell this year. To determine the additional quantity of product X to buy next year, multiply last year's sales by the anticipated increase percentage (600,921 x .06 or 6% = 36,055.26 or 36,056). Then, add the additional quantity needed to the number of items sold last year to determine the total number of product X to buy next year (600,921 + 36,056 = 636,977). SOURCE: PM:261 SOURCE: Berman, B., & Evans, J.R. (2004). Retail management: A strategic approach (9th ed.) [pp. 398-399]. Upper Saddle River, NJ: Prentice Hall. 91. C $1,160. To determine the cost of the print ad, multiply the column inches of the ad by the cost per inch for a one-column width ad (4 X $145 = $580). Then, multiply that answer by the number of columns width of the ad ($580 X 2 = $1,160). SOURCE: PR:007 SOURCE: Hanson, M. (2010). Business math (17th ed.) [pp. 456-459]. Mason, OH: South-Western Cengage Learning.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

32

92. D The coupon. By using the coupon, the customer will pay $679.15, and by using the rebate, the customer will pay $689. Businesses determine the types of promotions they use by considering many factors, including the business's goals, the target market, the type of product, and the product's life cycle stage. To determine which promotional option is the better value for the customer, first calculate the discount dollar amount of the coupon by multiplying the selling price by the coupon's discount percentage ($799 X .15 or 15% = $119.85). To determine the product's price after the rebate, subtract the rebate amount from the original selling price ($799 - $110 = $689). The coupon provides the customer with a better discount by $9.85. SOURCE: PR:249 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 370-372). Woodland Hills, CA: Glencoe/McGraw-Hill. 93. C 294. Word-of-mouth marketing is promotion and publicity for a business provided by customers who tell others of their satisfaction with the business. Positive word-of-mouth marketing can increase a business's exposure in the marketplace as well as potential sales. To determine how many people had heard about IMK by Thursday evening, first consider how many people Kyle told on Tuesdayfive coworkers. On Wednesday, six people (Kyle and his 5 coworkers) each told six family members about the business, bringing the total to 36 (6 X 6 = 36). Then, on Thursday, those 36 people, Kyle, and Kyle's five coworkers (36 + 1 + 5 = 42) each told seven of their friends about the business, so 42 people each told 7 friends, bringing the total number of people who have heard about IMK to 294 (42 X 7 = 294). SOURCE: PR:319 SOURCE: Word of Mouth Marketing Association. (2009). WOM 101: Organic vs. amplified word of mouth. Retrieved August 18, 2009, from http://womma.org/wom101/4/ 94. A $206. Businesses establish selling policies to guide their employees' sales activities and to ensure the fair treatment of customers. In the example, the store's policies outline the amount of money that Tim can pay the customers for used video games, which is based on the video games' age. To determine how much money Tim can offer the customer for the used video games, first calculate the amount of money Tim can offer for each video by the number of videos in the established age groupings (4 X $14 = $56; 8 + 2 = 10 X $9 = $90; 12 X $5 = $60). Then, add together the extension prices ($56 + $90 + $60 = $206). SOURCE: SE:932 SOURCE: Greene, C. (2003). Selling: Business 2000 (p. 150). Mason, OH: South-Western. 95. A $120.81. To calculate the total of the sales transaction, first calculate the extension prices for each item (4 X $6.00 = $24.00; 3 X $4.75 = $14.25; 6 X $8.29 = $49.74; 2 X $12.59 = $25.18). Then, add together the extension prices to obtain the sales transaction subtotal ($24.00 + $14.25 + $49.74 + $25.18 = $113.17). To calculate the sales tax dollar amount, multiply the subtotal dollar amount by the tax percentage rate ($113.17 x .0675 or 6.75 % = $7.6389 or $7.64). Finally, add together the subtotal dollar amount and the sales tax to obtain the total amount of the sales transaction ($113.17 + $7.64 = $120.81). SOURCE: SE:329 SOURCE: Brechner, R. (2009). Contemporary mathematics for business and consumers: Annotated instructor's edition (5th ed.) [650]. Mason, OH: South-Western Cengage Learning. 96. A $114.75. To get rid of excess inventory, businesses often accept coupons for items that have already been marked down. In the example, the item that was originally selling for $180 is marked down by 15%. To calculate the marked-down price, Leslie must first multiply the original selling price by the discount percentage to determine the mark down in dollars ($180.00 X .15 or 15% = $27.00). Then, Leslie needs to calculate the discounted price by subtracting the mark down amount from the original price ($180.00 $27.00 = $153). Then, Leslie needs to deduct 25% from the discounted price to determine the amount to charge the customer ($153 X .25 or 25% = $38.25; $153 - $38.25 = $114.75). SOURCE: SE:149 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 436-437). Tinley Park, IL: Goodheart-Willcox.

Sample A

MATH APPLICATIONS IN BUSINESS KEY

33

97. D 56. Directing is the management function of providing guidance to workers and work projects. The amount of time that a manager spends directing activities depends on many factors, including the type of work, the number of employees s/he supervises, and the manager's management style. To calculate the number of hours per month that Josephine usually spends directing employees, first multiply the number of hours Josephine works per week by the percentage of time she spends directing activities (50 hours X .28 or 28% = 14 hours). Then, multiply the number of hours per week she directs employees by 4 weeks (the average length of one month) to obtain the number of hours per month that Josephine spends directing employees (14 hours X 4 weeks = 56 hours). SOURCE: SM:066 SOURCE: Management Study Guide. (1998-2009). Directing function of management. Retrieved August 18, 2009, from http://www.managementstudyguide.com/directing_function.htm 98. A Each salesperson sells 85% of quota. One of the purposes of developing a business plan that includes quarterly sales quotas is to provide the company with a tool for tracking its progress. An effective business plan includes a way to measure performance on a regular basis rather than waiting until the end of the year to find out if the goals have been met. Many plans contain quarterly sales quotas that can be compared to actual sales to determine if the business is on track or needs to make adjustments. If each salesperson sells only 85% of the quarterly quota, the business will want to make changes to improve its performance. A business plan might set the same sales quotas for several consecutive quarters. Business plans usually take into consideration seasonal fluctuations in sales. Each salesperson may have a specific territory, but that is not a way that businesses track their progress. SOURCE: SM:007 SOURCE: CCH Inc. (n.d.). Tracking your progress. Business Owner's Toolkit. Retrieved August 27, 2009, from http://www.toolkit.cch.com/text/P02_2401. asp 99. A $35,000. The financial section of a business plan enables an entrepreneur to determine the amount of capital needed to operate the business until it starts to earn a profit. When preparing this section of the business plan, an entrepreneur determines the total amount needed to operate the business for a period of time as well as the amount that will be invested in the business. If expected investments are less than operating costs, the entrepreneur will need to obtain additional capital from other sources. In this example, the entrepreneur needs $150,000 and family members will invest 60% of that amount ($150,000 X 60% or .60 = $90,000). Subtract the investment from the total amount ($150,000 - $90,000 = $60,000). Then, subtract the amount that the entrepreneur will invest ($60,000 - $25,000 = $35,000). To operate the business for a period of three months, the entrepreneur will need to obtain $35,000 from outside sources. SOURCE: SM:013 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 748-751). New York: Glencoe/McGraw-Hill. 100. B 1.5 less. Calculate the inventory turnover rate by dividing the number of widgets sold by the number in stock (550,000 / 220,000 = 2.5). The 2.5 figure indicates that the business turns its inventory two-and-ahalf times a year. If the industry average is four times a year, the business's turnover rate is 1.5 less than the average (4.0 - 2.5 = 1.5). A business whose inventory turnover rate is lower than the industry average probably would take steps to increase its turnover rate. SOURCE: SM:005 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 513-514). New York: Glencoe/McGraw-Hill.

Competency-Based Competitive Events *Written Exam* Test: ST-MKTG-10A Booklet Number _____

Marketing Cluster Exam


INSTRUCTIONS: This is a timed, comprehensive exam for the occupational area identified above. Do not open this booklet until instructed to do so by the testing monitor. You will have _____ minutes to complete all questions.

Copyright is strictly enforced to ensure equitable pricing for all buyers. Copyright 2010 by Marketing & Business Administration Research and Curriculum Center, Columbus, Ohio: Posting these materials on a website is a copyright violation. Copyright violations cause financial damage to the copyright holder. Each individual test item contained herein is the exclusive property of MBAResearch. Items are licensed only for use as configured within this exam, in its entirety. (Exam may not be dissembled or reconfigured.) Use of individual items for any purpose other than as specifically authorized in writing by MBAResearch is prohibited. This exam, without modification, is licensed for use only by the purchasing institution and may not be duplicated, posted, nor shared in any fashion except as specifically authorized. Possession of this exam, without written authorization, under any other circumstances is a copyright violation. Purchasers are authorized to duplicate copies for students enrolled in the purchasing school (only). Any other use, including web postings, intranet postings, or other applications that could result in access by anyone other than the original purchasing institution, is prohibited. Report violations to MBAResearch at 800.448.0398. Punitive financial awards will be shared.

For special permissions, including all inter- and intranet postings, email Service@MBAResearch.org

ST-MKTG-10A

MARKETING CLUSTER EXAM

1. What type of property is a business protecting when it registers its trademark? A. Administrative C. Statutory B. Tangible D. Intellectual 2. Quantex is organized as a partnership with eight equal partners. The partners would like to expand their business but limit the amount of money they could personally lose if the business were to fail. What form of ownership should Quantex consider? A. Corporation C. Monopoly B. Sole proprietorship D. Partnership 3. Which A. B. C. D. of the following is NOT a condition that must exist for channels to be effective: They must be properly managed. They must have at least five members. Channel members must share common goals. Channel members must share tasks appropriately.

4. When farmers sell their own crops at roadside stands on their farms, they are using a(n) __________ channel of distribution. A. direct C. long B. indirect D. intermediary 5. Technology has helped improve the distribution process by utilizing __________ among channel members. A. automated scheduling C. integrated information sharing B. electronic receiving D. audiovisual programming 6. Which of the following is an example of a business coordinating distribution with the marketing function of promotion: A. Making sure products are in stock before advertising a sale B. Writing a news release to announce a new product line C. Organizing a contest to attract customers to the business D. Placing an advance order to obtain a seasonal discount 7. Which of the following techniques would help the salesperson to understand and follow the manager's instructions about operating the cash register: A. Watching other employees C. Looking interested B. Interrupting whenever necessary D. Asking appropriate questions 8. A message which is as short and to the point as possible is referred to as A. correct. C. concise. B. courteous. D. complete. 9. Which of the following is the primary reason that employees who answer a business's telephone should try to connect each call correctly: A. To demonstrate their telephone skills C. To handle the minimum number of calls B. To keep from putting callers on hold D. To give good customer service 10. Why do businesses often make it possible for employees to meet during work time and participate in group discussions? A. To plan extracurricular activities C. To share many different opinions B. To discuss personal issues D. To have casual conversations 11. To help her remember the most important points of her business presentations, Isabella likes to use A. storyboards. C. note cards. B. flash cards. D. memo boards.

Copyright 2010 by MBA Research and Curriculum Center, Columbus, Ohio

ST-MKTG-10A

MARKETING CLUSTER EXAM

12. Written communications in business should A. use long, informative sentences. B. be clear and easy to understand.

C. use technical language. D. be totally impersonal.

13. What is a technique that often helps businesspeople to write effective business letters? A. Preparing outlines C. Developing charts B. Consulting references D. Asking questions 14. Which of the following is an example of a simple written report that a business might prepare on a regular basis: A. Findings of a major investigation C. Minutes of a staff meeting B. Results of a research study D. Analysis of a publicity campaign 15. One way that employees can provide efficient, quick service to customers is by being A. aggressive. C. detached. B. forceful. D. organized. 16. Businesses that interpret their policies to customers in an effective manner are better able to A. control expenses. C. eliminate questions. B. build a clientele. D. understand customers. 17. Which A. B. C. D. of the following is the best way to handle dishonest customers: Mirror their behavior. Explain and demonstrate good service as many times as you need to. Never press for sales or decisions. Don't jump to quick conclusions.

18. Contact lenses purchased by an individual are an example of a(n) __________ good. A. scarce C. consumer B. intangible D. capital 19. Which of the following has inelastic demand: A. Bread B. Ice cream 20. John, a price of A. B.

C. Movie tickets D. Television sets

farmer, learned prior to the planting season that the price of wheat had increased relative to the corn. To gain the greatest profit, John should plant more corn than wheat. C. more wheat than corn. all corn and no wheat. D. an equal amount of corn and wheat.

21. Operations management is demonstrated in which of the following phrases: A. Producing goods and services C. Planning for future success B. Keeping accurate financial records D. Hiring qualified employees 22. Obsolescence, a change in local conditions, and government spending policies are examples of business risks that are classified as A. transferable. C. natural. B. human. D. economic. 23. A store manager decides that employees' job duties will be broken down in the following manner salespeople, cashiers, display workers, and stockpeopleeach with specific duties. This is an example of specialization by A. trade or profession. C. use of resources. B. stage of production. D. task.

ST-MKTG-10A

MARKETING CLUSTER EXAM

24. A group of workers who have joined together for a common purpose is called a(n) A. federation. C. labor union. B. union shop. D. agency shop. 25. When meeting with businesspeople from other countries, it is important to understand social differences, such as bowing, handshaking, and spatial comfort, which are often called A. mixed messages. C. language barriers. B. non-verbal cues. D. human behaviors. 26. Visualizing yourself as you would like to be is a technique that A. is seldom rewarding. C. takes time and practice. B. does not work well. D. is quick and easy to learn. 27. How does exploring different kinds of activities help to define your own personality? A. It helps you to determine what you prefer. B. It helps you to motivate others. C. It helps you to keep friends. D. It helps you to accomplish more than other employees. 28. Which A. B. C. D. of the following would be an instruction that promotes responsible behavior by employees: Try to hide your serious mistakes. You can ignore the company's unwritten rules. Know your job tasks, and perform them well. Try to avoid asking questions.

29. Getting a good recommendation as an honest employee is most likely to help a worker to A. learn technical skills. C. select career goals. B. make a job change. D. work without supervision. 30. Which of the following is the best approach to solving most problem situations: A. Take plenty of time to handle the problem. C. Act as quickly as possible. B. Wait until the problem solves itself. D. Get as much advice from others as you can. 31. Admitting that you made a mistake can be difficult because making a mistake is so A. predictable. C. ordinary. B. common. D. embarrassing. 32. Your ability to empathize with someone else is limited by the number/nature of your experiences and by your A. physical traits. C. self-understanding. B. job training. D. job skills. 33. Which of the following techniques helps to build trust in negotiations: A. Share information that may be threatening C. Always have an answer ready B. Provide a lot of documentation D. Show respect by actively listening 34. One of the most important ingredients for improving your human relations skills is A. external factors. C. aggression. B. determination. D. defensiveness. 35. One of the reasons that businesses and consumers use credit is because it provides A. convenience. C. interest. B. reassurance. D. collateral.

ST-MKTG-10A

MARKETING CLUSTER EXAM

36. Of the following investments, which can bring roller-coaster ups and downs: A. Savings accounts C. Money market accounts B. Bonds D. Stocks 37. Businesses often gather the information they need quickly by A. accessing the Internet. C. preparing research reports. B. using a data-processing system. D. hiring qualified librarians. 38. A business is planning a sale and needs to know what sales were for a particular weekend in the previous year. Which of the following accounting records would provide this information: A. Income statement C. Bank statement B. Disbursement journal D. Sales journal 39. A business's balance sheet lists $4,150 in cash, $12,560 in accounts payable, $2,200 in taxes, $18,475 in machinery and equipment, and $3,025 in interest payable. Calculate the business's total liabilities. A. $24,535 C. $21,500 B. $15,150 D. $17,785 40. What a business earns from the sale of goods and services is A. net income. C. capital. B. profit. D. revenue. 41. Why is it important for businesses to understand the legal considerations for finance? A. To avoid penalties C. To reduce expenses B. To manage budgets D. To compensate employees 42. In business, budgets are prepared for a specific time period, usually a A. calendar year. C. quarter at a time. B. fiscal year. D. month at a time. 43. One way that the use of computer technology benefits human resources management is by A. developing valuable feedback. C. quickly organizing the work load. B. speeding up the interviewing process. D. electronically processing information. 44. What is one way that a business might use marketing information? A. To calculate statistics C. To develop new products B. To interpret findings D. To identify new vendors 45. Your company wants to find out why sales are declining at one of its three locations. As a marketing specialist, you think the reason may be that some customers have moved out of the area. To support your idea, a popular source of information you use is A. primary data from a survey. C. secondary data from company records. B. secondary data maintained in libraries. D. primary data from a marketing-research firm. 46. A major credit-card company has hired a marketing-research firm to conduct a survey regarding the use of consumer credit. Would it be considered ethical to use the database information collected in a direct marketing campaign? A. Yes, the consumers know surveys are just a way to get information for advertising. B. No, businesses should not undertake any nonresearch activities involving data collected. C. No, the database is probably not a reliable source of marketing information. D. Yes, the credit-card company paid for the research and should be able to use it any way it wants. 47. What is a company's private computer network that allows authorized users to share information? A. Internet C. E-mail B. Intranet D. Extranet

ST-MKTG-10A

MARKETING CLUSTER EXAM

48. Which of the following affects the amount of data that will be collected in a marketing-research project: A. The reliability of the available data B. The preferences of the researcher C. The method of data analysis to be used D. The amount of objectivity desired by the business 49. One reason why marketing-information managers often monitor their competitors' web sites is to A. obtain data about new products. C. review current sales records. B. identify inventory turnover rates. D. analyze regional economic factors. 50. During which of the following steps do researchers transfer coded questionnaire data to the computer: A. Discarding C. Reviewing B. Analyzing D. Transcribing 51. A business that conducts research and finds that most of its customers visit the business four times a week has identified the A. range. C. mean. B. median. D. mode. 52. A written explanation of a proposed research project is an example of a A. report outline. C. research brief. B. study guide. D. learning tool. 53. Researchers assess the timeliness of marketing information to make sure that the information is A. unbiased. C. reliable. B. complete. D. credible. 54. Which of the following research methods is appropriate when a business wants to obtain in-depth, qualitative information from a few customers: A. Unsolicited e-mail C. Fax surveys B. Personal interview D. Structured observation 55. If a business lowers the price of a product for the purpose of taking business away from competitors, the result of this action often is a(n) A. increase in profit. C. decrease in cost. B. gain in market share. D. reduction in staff. 56. The owner of a real estate firm wants to increase housing sales next year by 15% over the current year. What element of marketing would be involved in attaining this goal? A. Place C. Price B. Promotion D. Product 57. A large discount chain announced plans to open a business in a new city whose businesses adjusted their sales forecasts because of the __________ change. A. market C. economic B. population D. competitive 58. The capability of combining graphics, text, animation, and sound is a unique characteristic of __________ software programs. A. numeric C. presentation B. communication D. electronic 59. Businesses often use spreadsheet software programs to analyze their A. personnel records. C. technical reports. B. operating expenses. D. advertising plans.

ST-MKTG-10A

MARKETING CLUSTER EXAM

60. Copyrights and trademarks are examples of a business's __________ records. A. private C. legal B. government D. political 61. Businesses usually maintain customer sales records that contain information about the A. types of products being purchased. C. cost of paying commissioned salespeople. B. discounts offered by manufacturers. D. suppliers that provide the goods. 62. The growth of e-commerce is changing the way companies do business by allowing them to A. place high prices on their products. C. be accessible to customers at all times. B. communicate with similar organizations. D. reduce the services they provide customers. 63. Businesses often maintain records about vendors' pricing, delivery terms, and credit policies and use the information in the records to A. negotiate higher discounts. C. monitor inventory levels. B. award purchasing contracts. D. follow safe shipping procedures. 64. When conducting an environmental scan, which of the following is an economic factor that a business should consider: A. Global trade regulations C. Local demographics B. Consumer spending habits D. Restricted sales territories 65. Which of the following is a true statement about safety hazards in the workplace: A. Trial and error is a good way to learn use of tools and equipment. B. Good housekeeping increases safety hazards. C. Employees decide which protective clothing they should wear. D. Personal habits can create safety hazards. 66. Which of the following is an activity that will help businesses keep the working environment safe for employees: A. Do preventive maintenance C. Offer medical training B. Hire a cleaning company D. Purchase liability insurance 67. If a business considers possible future problems during the process of developing a project plan, the business might be able to A. negotiate contracts. C. control costs. B. schedule employees. D. eliminate resources. 68. Why is it important for management to evaluate project results? A. To identify and solve problems C. To plan goals and objectives B. To organize materials and supplies D. To schedule time and employees 69. Purchasing can help manufacturing businesses to sharpen their competitive edge by A. promoting products to customers. C. limiting shipment of goods. B. maximizing inventory investment. D. keeping their prices down. 70. Which of the following is an example of production: A. Purchasing food items B. Providing home security

C. Reading a new novel D. Answering your home telephone

71. Businesses try to maintain their operating equipment in good condition because major breakdowns could cause a business to A. close. C. expand. B. relocate. D. remodel.

ST-MKTG-10A

MARKETING CLUSTER EXAM

72. Which of the following activities would normally be classified as "routine": A. Throwing a party C. Brushing teeth B. Paying rent D. Visiting relatives 73. What do coworkers who are involved in a dispute need to do before they can find a possible solution? A. Ignore the situation C. Contact an arbitrator B. Identify the problem D. Negotiate a settlement 74. Which of the following is an example of an employee making good use of free time during the business day, while on a flight to a sales meeting: A. Reading business reports C. Watching an in-flight movie B. Taking a short nap D. Listening to recorded music 75. Austin has discovered that he has the ability and aptitude for communications and public relations. Since he enjoys talking in front of people and is very at ease when doing so, he has decided that he wants to go into public speaking. Austin has demonstrated A. establishing a value system. C. obtaining feedback from others. B. helping to understand other people. D. choosing an appropriate career. 76. Determine the meaning of the following want ad: F/T Mgr. needed Immed. Two Yrs. Exp. Req. EOE A. For trade. Manager needed immediately. Two-years' experience requested. Experience on equipment. B. Full-time manager needed immediately. Two-years' experience required. Equal opportunity employer. C. Fast-track manager needed immediately. Two-years' experience requested. Enlist only extras. D. Fully talented manager needed immediately. Two-years' experience required. Educated only eligible. 77. Which of the following skills will most likely help a person to obtain a better job in the field of marketing and advertising: A. Good interpersonal skills C. Management skills B. Ability to use technology D. Ability to negotiate 78. A business that sells inexpensive goods probably would use which of the following promotional media: A. Television C. DVDs B. Radio D. Magazines 79. Computers have given marketers the ability to calculate pricing functions such as break-even points and elasticity of demand by using __________ programs. A. communication C. presentation B. word-processing D. spreadsheet 80. Many food products carry labels that show the U.S. Recommended Daily Allowances, or RDAs. RDAs help consumers to A. plan healthy meals. C. reduce cholesterol. B. be better cooks. D. lose weight. 81. What technological advancement has had the greatest impact on the travel, hospitality, recreation, and insurance industries? A. Electronic key card C. Internet B. Fax machine D. Interactive television 82. Marketable goods and services are often developed because an existing problem needs to be A. created. C. solved. B. provoked. D. protected.

ST-MKTG-10A

MARKETING CLUSTER EXAM

83. Lakeview Manufacturing produces canned tuna fish for consumers and pets. After the company decided to expand its market to three additional states, it discovered that the pet products were labeled incorrectly. They had been packaged and distributed as consumer products. To correct this problem, which of the following actions should the company take: A. Product liability C. Guarantee B. Product recall D. Warranty 84. A business might use product bundling strategies when it wants to A. deplete slow-moving items from its inventory. B. lower its advertising expenses and publicity efforts. C. build ongoing relationships with its customers. D. substitute brand products with generic items. 85. One reason why manufacturers of retail products use brand names is to A. explain preparation methods. C. develop trade characters. B. describe positive benefits. D. create favorable impressions. 86. Corporate brands are built on all the associations and experiences A. businesses have about and with each other. B. consumers have toward a business or product. C. companies have about other industries. D. consumers have about things they want to buy. 87. A company sponsors an advertisement on local television, highlighting the importance of parents reading to their children. This is an example of what type of institutional promotion? A. Public-service C. Primary B. Patronage D. Public-relations 88. Businesses often encounter ethical problems when deciding how to promote A. controversial products. C. staple goods. B. legitimate services. D. social causes. 89. What do advertising regulations usually require businesses to disclose about the products they advertise? A. Endorsements C. Limitations B. Personal benefits D. Hidden features 90. Which of the following is likely to happen when a business doesn't have an adequate supply of the products it selects to promote: A. Customers will think they have been cheated. C. The business will enhance its image. B. The business may increase its profits. D. Customers may ignore future promotions. 91. What is the type of copy used in the following print ad: Clearance SaleOver 50% Off! Come On In And Shop Today At Mr. B's Warehouse. Where The Whole Family Can Enjoy Brand Names For Less. A. Action C. Comparisons B. Claims D. Endorsement 92. One reason why it is important to coordinate the headline and illustrations in an advertisement is to make the reader A. want to read the message. C. understand the company name. B. appreciate the style of layout. D. aware of the cost involved. 93. One reason why it is important for businesses to use public-relations activities to reach external audiences is to A. sell useful products. C. measure the community response. B. pass on positive information. D. compile customer databases.

ST-MKTG-10A

MARKETING CLUSTER EXAM

94. Many businesses that have a small sales staff and a limited advertising budget often consider it worthwhile to A. develop television commercials. C. sponsor major sporting events. B. participate in trade shows. D. buy space on billboards. 95. One of the disadvantages of word-of-mouth advertising is that businesses usually have A. low risks. C. extensive input. B. high costs. D. limited control. 96. Which of the following is a customer-relations factor that often keeps customers coming back to a business: A. Low prices C. Goodwill B. Location D. Credit terms 97. Which of the following is an example of price discrimination: A. Offering substantial discounts to buyers of large quantities of a certain product B. Selling the same quantity of the same product to different customers for different prices C. Asking a company for a price break on products at the end of the regular season D. Buying products from one company that are available for a lower price from another company 98. Salespeople are often better able to answer customers' questions about the business's products if they regularly read A. economic reports. C. company promotions. B. consumer magazines. D. marketing textbooks. 99. What could a salesperson for a convention hotel use to sell the features and benefits of the hotel's meeting facilities? A. Vendor specifications C. Customer testimonials B. Employee evaluations D. Management objectives 100. Which of the following types of products usually require the least effort for salespeople to sell: A. Tangible C. Optional B. Expensive D. Intangible

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

10

1. D Intellectual. Many businesses own both tangible and intangible property. Intellectual is a type of intangible property because it is not capable of being detected through the senses. Examples of intellectual property include trademarks and trade names such as Xerox and M&M's. Businesses usually register their trademarks in order to legally protect them from being used or copied by other businesses. Tangible property is capable of being touched, smelled, tasted, seen, or heard, such as office equipment. Statutory and administrative are not types of property. SOURCE: BL:001 rd SOURCE: Beatty, J. F., & Samuelson, S. S. (2008). Essentials of business law (3 ed.) [pp. 797-800]. Mason, OH: Thomson/South-Western. 2. A Corporation. A corporation would benefit the partners by allowing them to have limited liability and greater financial power by issuing stock. A partnership is a form of business ownership in which the business is owned by two or more persons who combine the capital, but the partners have unlimited financial liability. A sole proprietorship is a form of business ownership in which the business is owned by one person who has limited capital and unlimited liability. A monopoly is a condition in which a market is controlled by one supplier, and there are no substitute goods or services readily available. SOURCE: BL:003 SOURCE: BA LAP 7Own It Your Way 3. B They must have at least five members. To be effective, channels must be properly managed, channel members must share common goals, and channel members must share tasks appropriately. Channels can be effective no matter how many members they have. SOURCE: CM:001 SOURCE: CM LAP 2Chart Your Channels (Channel Management) 4. A Direct. Any time a manufacturer or producer markets his/her goods directly to the final user or consumer, a direct channel of distribution is being used. An indirect channel is longer than a direct channel because products move to one or more intermediaries before moving on to the consumer. Intermediaries include sales agents, brokers, wholesalers, and retailers who perform specific functions in the movement of products. SOURCE: CM:003 SOURCE: CM LAP 1Channel It (Channels of Distribution) 5. C Integrated information sharing. Integrated information sharing allows near-instantaneous computer decisions related to market information, customer information, supply and inventory information, etc. The combination of all available information allows for more efficient supply-chain management. Electronic receiving, automated scheduling, and audiovisual programming do not improve the distribution process. In fact, the receiving process involves having employees check deliveries, and deciding when deliveries are scheduled. SOURCE: CM:004 SOURCE: Zikmund, W., & d'Amico, M. (2001). Marketing: Creating and keeping customers in an e-commerce world (7th ed.) [pp. 436-438]. Mason, OH: South-Western.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

11

6. A Making sure products are in stock before advertising a sale. It is important for businesses to coordinate distribution with the marketing function of promotion because products must be in stock and available to sell when they are advertised. Businesses that are planning to advertise a sale must first make sure the products are in stock. If customers visit a business to buy products that are not available, they may become irritated with the business and go elsewhere to buy. Promotion includes writing a news release to announce a new product line, and organizing a contest to attract customers to the business. However, these activities do not involve distribution. Placing an advance order to obtain a seasonal discount is a distribution function, but it does not involve promotion. SOURCE: CM:007 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (p. 367). New York: Glencoe/McGraw-Hill. 7. D Asking appropriate questions. A technique for effective listening that helps employees to follow directions is asking questions to clarify instructions. Asking questions helps keep the listener involved and lets the speaker know if the listener understands the message. Interrupting is a barrier to effective listening. Watching other employees during the instructions and looking interested would not help the employee to learn. SOURCE: CO:119 SOURCE: Cheesebro, T., O'Connor, L., & Rios, F. (2007). Communication skills: Preparing for career rd success (3 ed.) [p. 53]. Upper Saddle River, NJ: Pearson Prentice Hall. 8. C Concise. Concise messages are clear and short. A courteous message addresses others with respect. Completeness in communication means giving all the information required. Carefully checking all facts and figures for accuracy before delivering a message should ensure correctness. SOURCE: CO:147 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 117-118]. Mason, OH: Thomson South-Western. 9. D To give good customer service. Customers who call businesses often become irritated if they are not connected to the correct person or office the first time. Being transferred several times in order to do business with the company may cause customers to hang up and not contact the business again. In some situations, it is necessary to put callers on hold before they can be connected to the appropriate individual or department. Demonstrating telephone skills and keeping the number of calls handled to a minimum are not valid reasons for connecting calls correctly. SOURCE: CO:114 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 85-88]. Mason, OH: Thomson South-Western. 10. C To share many different opinions. Many businesses encourage employees to participate in group discussions to analyze problems and find solutions. The advantage is that when employees share many different opinions, there is an increase in the chance of developing useful recommendations. However, for the group discussions to be useful, all members must feel comfortable and be willing to express their opinions. Businesses do not make it possible for employees to participate in group discussions to discuss personal issues, to plan extracurricular activities, or to have casual conversations. SOURCE: CO:053 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [p. 554]. Mason, OH: Thomson South-Western.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

12

11. C Note cards. Speakers often write brief notes on small cards to help them remember to discuss important points they want to present to the audience. Flash cards contain important information; however, they are most often used to help someone study or retain information for a test or exam. Storyboards are pieces of paper with frames containing script information for television or radio commercials. People place important information that they need to remember on memo boards. Memo boards are often placed near workstations or telephones, and are not tools that speakers use during a presentation. SOURCE: CO:025 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 91-92]. Mason, OH: Thomson South-Western. 12. B Be clear and easy to understand. The receiver cannot always ask the writer questions; therefore, written communications should be concise and clearly stated. They should get quickly to the point by using short and simple sentences. The written copy should only contain technical language when it is appropriate and will be understood by the receiver. Most business writing tends to be impersonal, but it is not necessary to be totally impersonal. SOURCE: CO:016 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp. 293-294]. Mason, OH: Thomson South-Western. 13. A Preparing outlines. Businesspeople often are expected to write business letters on a regular basis. One technique that helps them to write effective business letters is to first prepare an outline. An outline is a general plan giving only the main points to be covered. Preparing an outline helps businesspeople to decide exactly what they want to say in the letter and to organize their thoughts. Businesspeople then can use the outlines to write effective letters. Businesspeople usually do not ask questions, consult references, or develop charts in order to write effective business letters. SOURCE: CO:133 SOURCE: Bove, C. L., & Thill, J. V. (2008). Business communication today (9th ed.) [pp. 108-111]. Upper Saddle River, NJ: Pearson Prentice Hall. 14. C Minutes of a staff meeting. Simple written reports are often intended to provide information to the business's employees. An example of a simple written report that a business might prepare on a regular basis is the minutes of a staff meeting. Businesses often have routine staff meetings and prepare a brief summary to distribute to all employees. This serves to remind employees of the topics discussed and provide that information to employees who may have been unable to attend. Results of a research study, findings of a major investigation, and analysis of a publicity campaign are examples of complex written reports. SOURCE: CO:094 SOURCE: Lesikar, R.V., & Flatley, M.E. (2005). Basic business communication: Skills for empowering the Internet generation (10th ed.) [pp. 319-321]. Boston: McGraw-Hill/Irwin. 15. D Organized. Employees should always be well organized and prepared to provide customer service in a quick, convenient manner. Customers don't have a lot of time to waste. They expect employees to be knowledgeable about company goods and services, organized, and ready to work. Being organized will help employees to focus on serving customers. Employees should not be forceful or aggressive when dealing with customers. Employees who are detached give the impression of not caring about customers. SOURCE: CR:004 SOURCE: Hyden, J. S., Jordan, A. K., Steinauer, M. H., & Jones, M. J. (2006). Communicating for rd success (3 ed.) [pp.141, 226-228]. Mason, OH: Thomson South-Western.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

13

16. B Build a clientele. A main reason to interpret policies is to have satisfied customers. Satisfied customers are more likely to become loyal customers and to tell their friends and family about the business. Businesses often encourage their customers to ask questions. Interpreting policies effectively is not related to controlling expenses or understanding customers. SOURCE: CR:007 SOURCE: Rue, L. W., & Byars, L. L. (2006). Business management: Real-world applications and connections (pp. 241-242). Woodland Hills, CA: Glencoe/McGraw Hill. 17. D Don't jump to quick conclusions. Don't jump to conclusions when dealing with dishonest customers. Remember that compromising and negotiating are part of normal procedure in serving customers. Explaining and demonstrating good service as many times as you need to is the best way to deal with suspicious customers. Never pressing for sales or decisions is the best way to deal with leave-me-alone customers. Mirroring behavior is the best way to deal with slow/methodical customers. SOURCE: CR:009 SOURCE: EI LAP 1Making Mad Glad 18. C Consumer. These are products that are purchased and used by consumers. Capital goods are manufactured or constructed items that are used to produce goods and services. Contact lenses are not really in limited supply; therefore, they would not be classified as scarce. Contact lenses are tangible rather than intangible items. SOURCE: EC:002 SOURCE: EC LAP 10Get the Goods on Goods and Services (Goods and Services) 19. A Bread. A product has inelastic demand when the demand for it remains the same regardless of increased prices. Products with inelastic demand will be purchased even when their prices are increased. Movie tickets, television sets, and ice cream are considered luxury products and are said to have elastic demand. The demand for these products will go down as their prices are increased. SOURCE: EC:005 SOURCE: EC LAP 11It's the Law (Supply and Demand) 20. C More wheat than corn. Because John can sell wheat at a higher price relative to corn, it would be a greater incentive for him to plant more wheat than corn because he will earn more profit. Planting an equal or lesser amount of wheat than corn will generate less profit if John can sell wheat at a higher price. SOURCE: EC:006 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 526-530). Woodland Hills, CA: Glencoe/McGraw-Hill. 21. A Producing goods and services. Producing goods and services is a primary aim of operations management. Keeping accurate financial records is part of financial analysis. Planning for future success is part of strategic management. And, hiring qualified employees is part of human resources management. SOURCE: EC:071 SOURCE: EC LAP 19Strictly Business (Business Activities)

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

14

22. D Economic. Obsolescence, a change in local conditions, and government spending policies are types of economic risks. These risks can force a lowering of prices, change of products, or even failure of businesses. Human risks are those risks caused by human weakness and unpredictability. Natural risks result from natural causes such as floods, tornadoes, fires, lightning, earthquakes, or perishability. Risks are considered transferable when the business can protect itself by buying insurance. SOURCE: EC:011 SOURCE: EC LAP 3Lose, Win, or Draw (Business Risk) 23. D Task. Specialization by task occurs when workers perform only one small part of the total job. Specialization by stage of production occurs when more than one stage of production is needed to change a raw material into a finished product. Specialization by trade or profession refers to the type of work performed in order to earn a living. Specialization by use of resources refers to natural resources, capital goods, and human resources. SOURCE: EC:014 SOURCE: Jackson, S., & Schuler, R. (2003). Managing human resources through strategic th partnerships (8 ed.) [p. 382]. Cincinnati: Thomson/South-Western. 24. C Labor union. A labor union is made up of workers who want to improve the terms and conditions under which they work. A union shop and an agency shop are types of union security agreements. A federation is made up of many national unions. SOURCE: EC:015 SOURCE: Jackson, S., & Schuler, R. (2003). Managing human resources through strategic th partnerships (8 ed.) [pp. 629-630]. Cincinnati: Thomson/South-Western. 25. B Non-verbal cues. Non-verbal communication (body language) involves gestures or facial expressions rather than the use of words. Because different countries have unique cultural and social behaviors, it is important for businesspeople to understand these differences when doing business in other nations. For example, a hand gesture may mean a sign of friendship in one country, but may be a sign of disrespect in another country. One country might bow as a greeting while another country uses a short handshake. In some countries, people tend to stand several feet away from each other when they are speaking, but in other countries they stand very close together when speaking with one another. By not understanding these non-verbal cues, a businessperson can send mixed messages to the person with whom s/he is meeting. Language barriers are problems related to word usage. Non-verbal cues are one element of many human behaviors. Human behaviors also encompass the use of language. SOURCE: EC:045 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 256-257]. Cincinnati: South-Western. 26. C Takes time and practice. Visualization is the practice of imagining yourself in possession of a present or desired strength. It is not always learned quickly or easily, but it does work well and can be very rewarding. SOURCE: EI:016 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 197). New York: Glencoe/McGraw-Hill.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

15

27. A It helps you to determine what you prefer. Taking an interest in different kinds of things and exploring those interests helps people to discover which ones they prefer. People won't become enthusiastic about everything they check out, but the things that do hold their interest will define who they are. Being interested and enthusiastic help people to motivate others, to keep friends, and to accomplish more than other employees. SOURCE: EI:020 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 198). New York: Glencoe/McGraw-Hill. 28. C Know your job tasks, and perform them well. Employees should make every effort to find out exactly what their job responsibilities are and then carry them out to the best of their ability. In order to accomplish this, employees must ask questions and admit their mistakes. Unwritten company rules, as well as written rules, should be followed in order to foster good relations with coworkers and customers. SOURCE: EI:021 SOURCE: PD LAP 7Make the Honor Role (Acting Responsibly) 29. B Make a job change. When an employee can include a letter from a previous employer saying that s/he is an honest worker, it is usually easier for the worker to obtain a job at a new company. A recommendation would not help workers to select career goals and learn technical skills. Being recommended as an honest worker would not mean that a worker could work without supervision in all circumstances. SOURCE: EI:022 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (p. 69). Tinley Park, IL: Goodheart-Willcox. 30. A Take plenty of time to handle the problem. In most cases, it is best to be patient and to take plenty of time to resolve difficult situations, rather than acting too quickly. Some problems do eventually solve themselves, but waiting for that to happen is not recommended. Getting too much advice may just complicate matters. SOURCE: EI:025 SOURCE: EI LAP 14Control Yourself! (Demonstrating Self-Control) 31. D Embarrassing. Mistakes are common, everyday occurrences, and everyone makes them. Even so, we are all embarrassed by them. That makes it hard to admit your mistakes, but learning to do so is very important to personal growth. While we can predict that mistakes will occur, we cannot predict what mistakes will happen. SOURCE: EI:003 SOURCE: EI LAP 15Grin and Bear It (Using Feedback for Personal Growth) 32. C Self-understanding. You must be able to comprehend your own thoughts, attitudes, and actions before you can identify similar qualities in others and empathize with them. The alternatives would not necessarily limit self-understanding or perception of others. SOURCE: EI:030 SOURCE: EI LAP 12Have a Heart (Empathy) 33. D Show respect by actively listening. When negotiating, you often earn the other party's trust by actively listening to their point of view. This shows that you are interested in what is being said and that you want to reach agreement. It is not possible to have an answer for all questions. Documentation will not be convincing if you have not shown yourself to be trustworthy. Threatening people is not an effective negotiation technique. SOURCE: EI:062 SOURCE: EI LAP 8Make It a Win-Win (Negotiation in Business)

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

16

34. B Determination. Improving human relations skills requires daily practice. It is an ongoing process. The most important ingredients for success are a positive attitude and personal determination to improve. While external factors may be of concern, intrinsic motivation and attitudes are most significant. Aggression and defensiveness are negative qualities that would hinder effective human relations. SOURCE: EI:037 SOURCE: EI LAP 5Can You Relate? 35. A Convenience. Credit allows businesses and consumers to pay for several different purchases at one time with a single payment. It reduces the need to carry cash and provides the convenience of ordering by telephone. Collateral is anything of value belonging to the borrower which is pledged to the lender to guarantee that the loan will be repaid. Interest is the fee which lenders charge borrowers for the use of credit. Credit does not provide reassurance, or comfort. SOURCE: FI:002 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 607-608). Tinley Park, IL: Goodheart-Willcox. 36. D Stocks. Savings accounts, money market accounts, and bonds are stable investments that do not go up and down frequently. However, stocks can go up and down often. Stocks can fluctuate dramatically in the short term, and they can also increase (or decrease) significantly in the long term. SOURCE: FI:077 SOURCE: Kapoor, J.R., Dlabay, L.R., & Hughes, R.J. (2005). Personal finance (pp. 251-252). New York: Glencoe/McGraw-Hill. 37. A Accessing the Internet. The Internet, also sometimes referred to as the Information Superhighway, allows businesses to have access to a tremendous amount of information all at the click of a mouse button. The advantage of accessing the Internet is that businesses can obtain information quickly. However, the virtual glut of information available on the Internet makes it necessary to differentiate between what information is useful and what is not. Hiring qualified librarians to prepare research reports is a timeconsuming way of gathering information. Businesses use data-processing systems to interpret and organize information rather than to gather it. SOURCE: FI:084 SOURCE: BA LAP 2Risk Management 38. D Sales journal. The sales journaleither a special book or computer softwarerecords daily receipts and would provide the daily sales figures the business needs. A disbursement journal records daily expenditures. Income statements and bank statements would show total revenues but not accurate figures for specific days. SOURCE: FI:085 SOURCE: FI LAP 5Show Me the Money (Nature of Accounting) 39. D $17,785. A business's balance sheet shows the business's financial condition at a certain point in time. It includes all assets, liabilities, and the owner's equity. Total liabilities, the debts the business owes, include items such as accounts payable, interest payable, taxes, and long-term notes, such as mortgages. Total liabilities do not include cash or machinery and equipment, which are considered assets. To calculate the business's total liabilities, add the figures for accounts payable, taxes, and interest payable ($12,560 + $2,200 + $3,025 = $17,785). SOURCE: FI:093 th SOURCE: Hanson, M. (2010). Business math (17 ed.) [pp. 257-259]. Mason, OH: South-Western Cengage Learning.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

17

40. D Revenue. Other sources of revenue might include income from investments, interest on bank accounts, or royalties. Profit and net income are synonymous terms referring to what is left over after operating expenses and cost of goods sold are subtracted from revenue. Capital is how much a business is worth. SOURCE: FI:094 SOURCE: FI LAP 4Watch Your Bottom Line (Income Statements) 41. A To avoid penalties. There are laws and regulations governing the finance process that businesses should understand in order to operate legally. These laws and regulations involve credit, reporting and paying taxes, issuing stock, etc. By understanding the legal considerations, businesses can avoid violating the law which also enables them to avoid incurring penalties. Some penalties are significant and can include large fines, restrictions on future operations, or even force the company out of business. Businesses do not need to understand the legal considerations for finance to manage budgets, reduce expenses, or compensate employees. SOURCE: FI:356 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 178-183, 469, 489]. Cincinnati: South-Western. 42. B Fiscal year. Budgets are prepared for a specific time period, usually a fiscal year. A fiscal year may or may not coincide with a calendar year. Budgets then are broken down into smaller time periods, such as quarters and months, so that managers can more easily monitor activity. Although quarters and months are monitored one at a time, the budget is prepared for the entire upcoming year. SOURCE: FI:106 SOURCE: FI LAP 3Money Tracks 43. D Electronically processing information. Human resources management involves gathering and maintaining an enormous amount of information related to employees and their jobs. One way that the use of computer technology benefits human resources management is by electronically processing information. Computer systems are able to store vast amounts of information in databases, allow managers to access and update information when necessary, and organize information according to specific criteria. As a result, fewer employees are needed to process the information and the amount of paperwork is reduced, which saves money for the business. The use of computer technology does not speed up the interview process, quickly organize the work load, or develop valuable feedback. SOURCE: HR:412 SOURCE: Everard, K.E., & Burrow, J.L. (2001). Business principles and management (11th ed.) [pp. 647-650]. Cincinnati: South-Western. 44. C To develop new products. Businesses often use marketing information to analyze what customers want and need in order to develop new products. Many businesses maintain internal records that indicate the types of products that currently are selling well and to which customers are attracted. Businesses can use this information to develop similar products that will appeal to specific markets. In order to use marketing information, businesses often need to calculate statistics and interpret findings. Businesses do not use marketing information to identify new vendors, although vendors are often a source of marketing information. SOURCE: IM:012 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (p. 237). Tinley Park, IL: Goodheart-Willcox.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

18

45. C Secondary data from company records. Secondary data are facts that have been collected for purposes other than the project at hand. Your company would have already gathered information about population trends before opening its three locations. The company's routine sales reports also would contain information about decreased sales. This data may provide useful information to support your idea that sales are declining at one location because some customers have moved out of the area. A survey is time consuming, costly, and may not give relevant information. Secondary information maintained in libraries is not timely and may not be relevant. Primary data from a marketing firm is expensive and time consuming. SOURCE: IM:001 SOURCE: IM LAP 2Marketing-Information Management 46. B No, businesses should not undertake any nonresearch activities involving data collected. Researchers must not undertake any nonresearch activities such as database marketing involving data about individuals that will be used for direct marketing or promotional activities. Such activities must be organized and carried out in a manner clearly differentiated from research activities. Databases contain reliable information. Consumers expect such information to be used for research rather than advertising. The company should use the information only as intended. SOURCE: IM:025 th SOURCE: Zikmund, W.G., & Babin, B.J. (2010). Exploring marketing research (10 ed.) [pp. 99-100]. Mason, OH: South-Western Cengage Learning. 47. B Intranet. An intranet is an organization's private, secure network that allows authorized users to share information while reducing waste of materials, time, and effort. The Internet is a worldwide network of linked computers that allows the transfer of data from one computer to another anywhere in the world. E-mail (electronic mail) is the basic Internet tool for sending messages to other computer users. An extranet is a private network that companies use to share information with selected people outside the organization. SOURCE: IM:183 SOURCE: Everard, K.E. & Burrow, J.L. (2001). Business principles and management (11th ed.) [p. 204]. Cincinnati: South-Western. 48. C The method of data analysis to be used. If the data will be analyzed by hand, the amount of data must be limited. If the data will be analyzed by computer, the business can collect much more data because computers can analyze large amounts of data very quickly. The data should be collected objectively, whatever the amount. The reliability of the data is determined by whether they give the same results each time, and that cannot be determined until the data have been analyzed. The preferences of the business are a factor, but the preferences of the researcher are not. SOURCE: IM:010 th SOURCE: Zikmund, W.G., & Babin, B.J. (2010). Exploring marketing research (10 ed.) [p. 21]. Mason, OH: South-Western Cengage Learning. 49. A Obtain data about new products. A business's web site contains volumes of information designed to attract customers and encourage them to buy. However, this information is also available to competitors. Consequently, marketing-information managers often monitor their competitors' web sites to obtain data about new products that competitors might be selling. This data might indicate the characteristics and features of the products as well as pricing information. Businesses might use this information to develop similar products or to update existing products. Although businesses post a lot of information on their web sites, they usually do not include information about inventory turnover rates, current sales records, or regional economic factors. SOURCE: IM:184 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 594, 597-598, 612). Woodland Hills, CA: Glencoe/McGraw-Hill.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

19

50. D Transcribing. Transcribing involves taking the coded information and entering it into the appropriate computer fields so that businesspeople can analyze and review information. Researchers discard incomplete information before entering it into the computer. SOURCE: IM:062 th SOURCE: Zikmund, W.G., & Babin, B.J. (2010). Exploring marketing research (10 ed.) [pp. 505-510]. Mason, OH: South-Western Cengage Learning. 51. D Mode. The mode represents the number that occurs the most often. In this example, the mode is four because most of the business's customers visit the business four times a week. The mean is the average number of times customers visit the business. The median is the middle number which indicates that half of the customers visit more often and half of the customers visit less often. Range is the distance between the fewest number of visits and the most number of visits. SOURCE: IM:191 th SOURCE: Zikmund, W.G., & Babin, B.J. (2010). Exploring marketing research (10 ed.) [p. 445]. Mason, OH: South-Western Cengage Learning. 52. C Research brief. This written report is intended to explain the purpose of a proposed research project and why it is important. The brief includes a statement of the problem or issue that needs to be addressed or studied. The goal is to persuade management that the business should spend the necessary time and money to complete the proposed research project. A written explanation of a proposed research project is not an example of a study guide, a report outline, or a learning tool. SOURCE: IM:290 SOURCE: Shao, A. (2002). Marketing research: An aid to decision making (2nd ed.) [pp. 53-54, 554-559]. Mason, OH: South-Western. 53. D Credible. Marketing research that is timely is credible because it is current. Researchers want the information they collect to be credible or believable because that increases the validity of the research. Valid research is based on collecting the most appropriate and up-to-date information available to use in solving a problem or addressing an issue. Researchers also want the information to be complete, reliable, and unbiased. However, that is not the reason for assessing the timeliness of marketing information. SOURCE: IM:295 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 614-618). New York: Glencoe/McGraw-Hill. 54. B Personal interview. An advantage of conducting personal interviews is that the business can obtain indepth information from its customers that it may not be able to obtain from other research methods. A personal interview often reveals a customer's opinions, ideas, and problems, which might not be revealed by using other research methods. Unsolicited e-mail, fax surveys, and structured observation are research methods that might not provide the in-depth information the business desires. SOURCE: IM:296 SOURCE: Shao, A. (2002). Marketing research: An aid to decision making (2nd ed.) [p. 185]. Mason, OH: South-Western.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

20

55. B Gain in market share. Businesses take action for the purpose of achieving certain results. One of the results that a business might want to achieve is a gain in market share, which is a business's portion of the total industry sales in a specific market. An action that a business might take to obtain this result is to lower the price of a product for the purpose of taking business away from competitors. If the price is lower, the business has an opportunity to gain market share. If the price is significantly lower, the business might lose money in the short-term, while increasing market share. Lowering the price of a product will not result in a decrease in cost or a reduction in staff. SOURCE: MK:019 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 529-530). New York: Glencoe/McGraw-Hill. 56. C Price. The price element of marketing involves determining and adjusting prices to maximize return and meet customers' perceptions of value. It often involves determining the amount of money that customers will be asked to pay in exchange for products. Sales will likely increase if customers are willing to pay the price. Place involves inventory control which is concerned with getting products in the right place at the right time. Promotion refers to communicating information about goods, services, images, and/or ideas to achieve a desired outcome. Product refers to what goods, services, or ideas will be offered to customers. SOURCE: MP:001 SOURCE: IM LAP 7Pick the Mix 57. D Competitive. Sales forecasts need to be adjusted when competitors enter or leave the market. Businesses expect their sales to decrease with the arrival of new competitors. Population changes involve the increase or decrease of population in a business's market area. Economic changes involve increases or decreases in consumers' disposable income. Market changes involve increases or decreases in the demand for a particular good or service. SOURCE: MP:013 SOURCE: Fastlinksolutions. (n.d.). Sales forcasting: Factors that influence sales. Retrieved August 10, 2009, from http://www.fastlinksolutions.co.uk/calculat.htm#factors 58. C Presentation. Presentation software programs give the user the capability of presenting information by combining graphics, text, animation, photographs, and sound. Presentation software can be used to create slide programs, overhead transparencies, multimedia presentations, etc. This software enables users to develop visual presentations that are lively, colorful, and appealing to viewers. Communication software programs establish connections between computers. Numeric and electronic are not types of software programs, although some programs analyze numerical data. SOURCE: NF:008 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [p. 165]. Woodland Hills, CA: Glencoe/McGraw-Hill. 59. B Operating expenses. Spreadsheet software programs are designed to organize, calculate, and analyze mathematical or numerical information. Businesses often use spreadsheet software to analyze operating expenses on a monthly or yearly basis. Businesses are able to enter figures for each category of expense for each month, and the software calculates the percentage of increase or decrease. This enables businesses to regularly monitor their expenses and determine if they are spending more than budgeted and make the necessary adjustments. Businesses use database software to manage personnel records and word-processing software to prepare technical reports and advertising plans. SOURCE: NF:010 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 163-164]. Woodland Hills, CA: Glencoe/McGraw-Hill.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

21

60. C Legal. Legal records contain information relating to or concerned with the law. Businesses need to maintain all legal documents such as copyrights and trademarks. (Copyrights are granted by the government, and trademarks are registered with the government.) Most businesses expect their records to remain private. Political refers to politics or matters relating to the government. SOURCE: NF:001 SOURCE: NF LAP 1Record It (Business Records) 61. A Types of products being purchased. Businesses maintain a variety of records about the quantities and types of products that customers are purchasing. These records are usually known as sales records. By analyzing past sales records, businesses can determine what customers are buying, when they are buying, and how much they are buying. This helps a business forecast future sales so it can be prepared to offer the products that customers want. Businesses do not maintain customer sales records that contain information about the discounts offered by manufacturers, the cost of paying commissioned salespeople, or the suppliers that provide the goods. SOURCE: NF:002 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western. 62. C Be accessible to customers at all times. E-commerce is a business trend that is expanding rapidly because of the Internet and the World Wide Web. E-commerce is changing the way companies do business because it allows them to be accessible to customers at all times. Customers who have access to a computer and the Internet can visit a business's web site and obtain information or shop online at any time of the day or night. As a result, more and more businesses are adding web sites to make their services and products available to customers at all times. The benefit to a business is often increased sales. The growth of e-commerce is increasing competition, which means that businesses often reduce prices and offer additional services to attract customers. Businesses do not use e-commerce to communicate with similar organizations. SOURCE: NF:013 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 207-208). Woodland Hills, CA: Glencoe/McGraw-Hill. 63. B Award purchasing contracts. Businesses maintain records about their vendors and use the information in the records to award contracts to the most appropriate vendor. When selecting a vendor, a business usually wants to buy from the vendor that offers the best price for the value, has reasonable delivery terms, and favorable credit policies. By comparing the information about each vendor, a business can make an informed decision about the best vendor. This type of information does not help a business to negotiate higher discounts, monitor inventory levels, or follow safe shipping procedures. SOURCE: NF:014 SOURCE: Burrow, J.L. (2006). Marketing (2nd ed.) [pp. 120-121]. Mason, OH: South-Western. 64. B Consumer spending habits. An environmental scan is an analysis of external forces that influence a business's success. By examining economic, political, socio-cultural, and technological factors that affect the business, the business can take steps to ward off the threats and to take advantage of the opportunities based on the information that the scan provides. Consumer spending habits are an economic factor that might be a threat or an opportunity. If spending is increasing because the economy is healthy, businesses will be able to increase production and sell more. Global trade regulations are a political factor. Local demographics and restricted sales territories are not economic factors. SOURCE: NF:015 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (pp. 30-32, 84-86). New York: Glencoe/McGraw-Hill.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

22

65. D Personal habits can create safety hazards. Personal or family problems, stress, anger, fatigue, and alcohol and drug abuse can cause behavior problems that can lead to unsafe situations. Keeping work areas clean and putting things away reduces the risk of injuries. Tools and equipment should not be used without prior training. They can be hazardous to workers who don't know how to use them properly. For their own safety, employees should wear the appropriate clothing their employers designate. SOURCE: OP:007 SOURCE: Clark, B., Sobel, J., & Basteri, C.G. (2006). Marketing dynamics (pp. 406-410). Tinley Park, IL: Goodheart-Willcox. 66. A Do preventive maintenance. Many potentially dangerous or harmful situations can be avoided if businesses routinely do preventive maintenance on equipment and machinery. If businesses check electrical equipment, examine outlets, and inspect wiring on a regular basis, they will identify potential problems and be able to make repairs before dangerous situations exist. As a result, the working environment will be safe for employees. Hiring a cleaning company, offering medical training, and purchasing liability insurance are not activities that will help businesses keep the working environment safe for employees. SOURCE: OP:008 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 406-409). Tinley Park, IL: Goodheart-Willcox. 67. C Control costs. An effective project plan helps to control costs by considering potential problems that may arise. By addressing problems in the planning stage, a business is able to develop a method of dealing with potential problems, which often eliminates the need to make costly changes while completing the project. Scheduling employees is a routine part of developing a project plan, but does not involve considering future problems. Considering future problems does not help a business to negotiate contracts or eliminate resources. SOURCE: OP:001 SOURCE: DuBrin, A.J. (2003). Essentials of management (6th ed.) [pp. 114-115]. Mason, OH: SouthWestern. 68. A To identify and solve problems. Once a project has been completed, it's important to evaluate the results to determine if the project was successful. Part of the evaluation process involves identifying problems that may have occurred during the project and taking steps to solve those problems so they will not affect future projects. For example, management may find that the project could have been completed faster and for less money if different employees were involved. Management plans goals and objectives, organizes materials and supplies, and schedules time and employees before the project begins. SOURCE: OP:159 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (p. 242). New York: Glencoe/McGraw-Hill. 69. D Keeping their prices down. Purchased items, such as supplies, services, or raw materials, add to the final cost of a manufactured product. Purchasing can help to keep prices down by keeping costs down. Purchasing is not responsible for product promotion. Limiting shipment of goods would cause customer complaints. Maximizing inventory investment would increase expenses and make the company less competitive. SOURCE: OP:015 SOURCE: OP LAP 2Buy Right (Nature of Purchasing)

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

23

70. B Providing home security. Production is the process or activity of producing goods and services. Providing home security creates a service for consumers and is, therefore, considered a form of production. Reading for pleasure, answering a telephone that is not a business phone, and purchasing food items are not production activities because they do not create a good or service. SOURCE: OP:017 SOURCE: BA LAP 1Nature of Production 71. A Close. Most business equipment is expensive to purchase and costly to repair or replace. Businesses try to maintain their operating equipment in good condition because if it breaks down, the business might be forced to close until the equipment can be repaired or replaced. A major equipment breakdown would not normally cause a business to relocate, remodel, or expand. SOURCE: OP:032 SOURCE: ReliaSoft Corporation. (1999-2007). Preventative maintenance. Retrieved August 10, 2009, from http://www.weibull.com/SystemRelWeb/preventive_maintenance.htm 72. C Brushing teeth. Brushing teeth is a routine activity because it is done every day. Paying rent is a regular activity because it is done frequently but not daily. Visiting relatives and throwing a party are occasional activities. SOURCE: PD:009 SOURCE: Clark, B., Sobel, J., & Basteri C.G. (2006). Marketing dynamics (pp. 722-723). Tinley Park, IL: Goodheart-Willcox. 73. B Identify the problem. The first step in resolving conflict involves identifying the problem. If coworkers are involved in a dispute, they need to identify exactly what the problem is before they can find a possible solution. Determining the conflict is often difficult because the parties involved may have different opinions about the problem. Once coworkers take the time to discuss the conflict and identify the exact problem, they will be in a better position to agree on a possible solution. Ignoring the situation usually makes the dispute worse and does not solve the problem. Arbitrators usually negotiate problems between management and labor. Negotiating a settlement is the last step in resolving conflict. SOURCE: PD:077 SOURCE: IS LAP 2No Problem (Problem-solving) 74. A Reading business reports. Free time is the time that is left over after employees have completed their tasks or when a planned activity is canceled. When free time occurs, employees should be prepared to use it effectively. Reading business reports during a flight to a sales meeting is an example of good use of free time. Watching an in-flight movie, listening to recorded music, and taking a short nap are examples of leisure-time activities. SOURCE: PD:019 SOURCE: OP LAP 1About Time (Time Management in Business) 75. D Choosing an appropriate career. Each of us has a unique combination of abilities and aptitudes for particular skills. Choosing a career is done by deciding which career matches one's abilities and aptitudes. Establishing a value system is developing your values, identifying which are most important to you, and creating a personal value system. Helping to understand people refers to being able to understand yourself in order to help understand and get along with others. Obtaining feedback from others refers to getting the thoughts and reactions from others about you and your behavior. SOURCE: PD:013 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 258-260). New York: Glencoe/McGraw-Hill.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

24

76. B Full-time manager needed immediately. Two-years' experience required. Equal opportunity employer. Businesses frequently use abbreviations in their want ads. In this example, F/T Mgr. is an abbreviation for full-time manager; immed. is an abbreviation for immediately; yrs. exp. req. is an abbreviation for years' experience required; and EOE is an abbreviation for equal opportunity employer. Applicants should learn the language of classified ads to understand the nature of the position, its requirements, and the employer. SOURCE: PD:026 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (p. 115). New York: Glencoe/McGraw-Hill. 77. A Good interpersonal skills. An employee who wants to be promoted or be given more challenging assignments in the field of marketing and advertising should have good skills in dealing with people. Most jobs in marketing and advertising involve extensive contact with people; therefore, the skill to effectively work with people is critical. Not all jobs in the field of marketing and advertising require the ability to use technology or to negotiate, although those skills might be useful in some positions. Management skills would help a person become a manager, although most employees are not at that level. SOURCE: PD:035 SOURCE: Kimbrell, G., & Vineyard, B.S. (2006). Succeeding in the world of work (pp. 266-270). New York: Glencoe/McGraw-Hill. 78. B Radio. Lower priced goods usually are promoted in lower priced media. Radio, which is relatively inexpensive compared to other media, is used quite often by companies selling inexpensive goods that do not have large promotion budgets. Television is one of the more expensive types of promotional media. DVDs are most often used when sending direct mail, which is an expensive form of promotion that businesses use when targeting specific audiences. Magazines are more expensive than radio and require a long lead time. SOURCE: PI:001 SOURCE: PI LAP 2The Price is Right (Pricing) 79. D Spreadsheet. Spreadsheet software programs are designed to calculate and analyze numerical data. Spreadsheets are very useful for business owners as they evaluate numerical data that relates to pricing issues. Presentation software is used to create visual aids that are commonly used in sales or other types of presentations. Word-processing programs are used to create written documents. Communication software programs (e.g., e-mail) are used to facilitate the distribution of messages. SOURCE: PI:016 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [pp. 162-167]. Woodland Hills, CA: Glencoe/McGraw-Hill. 80. A Plan healthy meals. RDAs show how much of each nutrient an individual should consume each day in order to be in good health. This information helps consumers to be more knowledgeable about nutrition and to plan healthy meals based on the RDAs. Healthy meals may also help consumers to lose weight or to reduce cholesterol, but that is not the basic purpose of RDAs. RDAs are not related to cooking skills. SOURCE: PM:001 SOURCE: PM LAP 17Rapping Up Products (Nature of Product/Service Management)

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

25

81. C Internet. The Internet allows businesses in the travel, hospitality, recreation, and insurance industries to bypass intermediaries (agents and brokers). Consumers can easily go directly to the service business to make the purchase. This enables the businesses to reach more customers and sell at any time of the day or night. Fax machines are widely used as a means of sending information quickly rather than as a selling tool. Key card entry systems are used mainly in the hospitality industry. Interactive television is not as widely used by consumers as the Internet. SOURCE: PM:039 SOURCE: Etzel, M.J., Walker, B.J., & Stanton, W.J. (2001). Marketing (12th ed.) [pp. 309-310]. New York: Irwin/McGraw-Hill. 82. C Solved. Problems are any obstacles affecting a desired outcome. When developing marketable products, there are often situations that require innovative thinking to solve or alleviate the obstacles. For example, ready-made cookie dough was developed to address a problem regarding the time it takes to prepare a dessert. Problems do not need to be provoked, created, or protected. SOURCE: PM:127 SOURCE: PM LAP 11Unleash Your Oh! Zone 83. B Product recall. Lakeview Manufacturing should alert the public and recall all the consumer tuna-fish products that were improperly labeled. Product recall is the removal from the marketplace of a product that is defective or hazardous to consumers. Product liability refers to the producer's responsibility for any injury that the business's product may cause. Guarantee is a promise to the consumer that a product's purchase price will be refunded if the product is not satisfactory. It is often called a money-back guarantee. Warranty is a promise to the purchaser that a product will be repaired or replaced if it proves to be defective. SOURCE: PM:017 SOURCE: BNET. (2009). Product recall. Retrieved August 11, 2009, from http://dictionary.bnet.com/definition/product+recall.html 84. A Deplete slow-moving items from its inventory. Mixed product bundling is the practice of packaging different products together. Businesses price the packages so that customers pay less for bundled items than they do if they purchase each item separately. A business that wants to deplete slow-moving stock might package the items with items that sell well, in order to eliminate the slow-moving items from its inventory. Businesses generally want to deplete slow-moving inventory because it costs them money to store the products for long periods of time. Bundling strategies do not necessarily lower advertising expenses and publicity efforts, nor do bundling strategies necessarily build ongoing customer relationships. Product substitution occurs when a salesperson suggests a product other than the original request when the business does not have the item requested. Product bundling practices do not always involve product substitution activities. SOURCE: PM:041 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2002). Marketing essentials (3rd ed.) [p. 604]. Woodland Hills, CA: Glencoe/McGraw-Hill. 85. D Create favorable impressions. The primary reasons that brands are used are for identification and differentiation. Successful brands help create and reinforce a favorable image that encourages customers to buy. Being descriptive of the product's benefits and uses is a characteristic of a good brand name rather than a reason to use a brand name. Trade characters are brand marks that have been personified or made to seem lifelike. Brand names do not explain preparation methods. SOURCE: PM:021 SOURCE: PM LAP 6It's a Brand, Brand, Brand World! (The Nature of Branding)

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

26

86. B Consumers have toward a business or product. The current meaning of "brand" is completely consumer focused and combines the consumers' experiences, images, and associations regarding a company, good, or service. A brand is the relationship a company or product has with its customers. A brand is not built on how businesses view each other or other industries, nor is brand about consumers' views of things they want to buy. SOURCE: PM:206 th SOURCE: Kotler, P., & Armstrong, G. (2008). Principles of marketing (12 ed.) [pp. 230-232]. Upper Saddle River, NJ: Prentice-Hall. 87. A Public-service. The company's sponsorship of an advertisement highlighting the importance of parents reading to their children is an example of a public-service promotion. Public-service promotions inform consumers about noncontroversial issues that are in the public's best interest. They build goodwill for the company, especially when they depict the company as a friend of the community. Patronage promotions are designed to promote a firm's prestige or its features. Primary product promotion aims to stimulate demand, or consumer desire, for an entire class of goods or services. Public-relations promotions are created to deal with issues that are in the public's interest but are also related to the company or its products. SOURCE: PR:002 SOURCE: PR LAP 4Know Your Options (Types of Promotion) 88. A Controversial products. Over time, products that once were considered inappropriate to advertise have moved into the mainstream; however, certain products remain controversial. Businesses often encounter ethical problems when deciding how to promote these products. For example, gambling is legal in some areas but illegal in others. Businesses involved in legal gambling face the ethical dilemma of how to promote that activity to consumers who live in areas where it is illegal. Businesses that promote social causes, legitimate services, and staple goods usually do not encounter ethical problems. SOURCE: PR:099 SOURCE: Serrano, G. (2009, March 10). Socially controversial products. Retrieved August 11, 2009, from http://trendsupdates.com/socially-controversial-products/ 89. C Limitations. Certain products have limitations, such as producing side effects in some people or being potentially hazardous. When businesses advertise these products, they are usually required to disclose the limitations so consumers can make an informed decision about whether to buy. Businesses that violate these regulations run the risk of being sued by consumers who were harmed by the products. Advertisements usually describe the benefits of the products and often contain endorsements. Advertisements often point out important features especially if they are hidden. SOURCE: PR:101 th SOURCE: Arens, W.F. (2004). Contemporary advertising (9 ed.) [pp. 62-65]. New York: McGraw-Hill Irwin. 90. D Customers may ignore future promotions. Customers who cannot buy products that are being promoted because the business did not make sure it had adequate stock to back up the promotion may lose faith in the business. The next time customers see one of the company's promotions, they may not bother to respond. Customers should not think they have been cheated under these circumstances. The business's image will be damaged rather than enhanced, and its profits could decrease. SOURCE: PR:076 th SOURCE: Kotler, P., & Armstrong, G. (2008). Principles of marketing (12 ed.) [pp. 10-11, 12-17, 44-45]. Upper Saddle River, NJ: Prentice-Hall.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

27

91. A Action. Advertisers encourage action by including phrases in their copy such as "clearance sale" and "come on in." Claims make a claim for a product. Comparisons are features that are compared with a competitive product. An endorsement cites a reputable outside source to strengthen the sales message. SOURCE: PR:014 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 425-433). Woodland Hills, CA: Glencoe/McGraw-Hill. 92. A Want to read the message. The headline and the illustrations are two of the main elements in an advertisement. They should be coordinated to make the reader want to read the message in the copy, which is the third element in the ad. For example, the headline should attract attention and lead the reader to the illustration, which supports the headline. The coordinated headline and illustration create a desire in the reader to want to know more about the subject of the ad and, therefore, to read the message. It is not important to coordinate the headline and illustrations to make the reader appreciate the style of layout, understand the company name, or be aware of the cost involved. SOURCE: PR:251 SOURCE: Farese, L.S., Kimbrell, G., & Woloszyk, C.A. (2006). Marketing essentials (p. 425). New York: Glencoe/McGraw-Hill. 93. B Pass on positive information. One of the main functions of a business's public-relations activities is to reach external audiences, those groups that are outside of the company. These groups include the local community, government officials, customers, suppliers, creditors, etc. The external audience has a significant impact on the business because customers buy products, government officials enact rules and regulations, and creditors loan money. If the business does not maintain good relations with the external audience by providing positive information, it may have difficulty operating or even fail. Public-relations activities are not intended to sell useful products, measure the community response, or compile customer databases. SOURCE: PR:253 SOURCE: Semenik, R.J. (2002). Promotion and integrated marketing communications (pp. 457-458). Mason, OH: South-Western. 94. B Participate in trade shows. When evaluating whether to participate in trade shows, businesses often take into consideration the size of their sales staff and the amount of their advertising budget. For businesses that have a small sales staff and a limited advertising budget, it is often worthwhile to participate in trade shows because this provides the opportunity to contact a large audience of potential customers. The trade show provides access to more contacts than the small sales staff can reach, and for less cost than extensive advertising. A business with a limited advertising budget probably would not develop television commercials or sponsor major sporting events because of the high cost associated with those activities. Buying space on billboards usually is not effective for businesses that sell to other businesses. SOURCE: PR:255 SOURCE: Semenik, R.J. (2002). Promotion and integrated marketing communications (p. 404). Mason, OH: South-Western. 95. D Limited control. Because word-of-mouth advertising involves customers telling others about the business, the business has very little control over what these customers might say. The hope is that satisfied customers will make positive comments about the business and encourage others to become customers. However, there is the chance that dissatisfied customers will make negative comments that harm the business. Businesses do not have high costs or extensive input as a result of word-of-mouth advertising. Low risk would be an advantage. SOURCE: PR:247 SOURCE: Semenik, R.J. (2002). Promotion and integrated marketing communications (pp. 441-443). Mason, OH: South-Western.

ST-MKTG-10A

MARKETING CLUSTER EXAM KEY

28

96. C Goodwill. Goodwill is the positive feelings that customers have toward a business. It is an advantage that a business acquires beyond the value of its goods and services and is created and maintained by good relations with customers. The location of the business, its prices, and its credit terms are factors that often attract customers initially; but people will not become loyal customers if the business doesn't create goodwill. SOURCE: SE:828 SOURCE: SE LAP 115Keep Them Loyal (Building Clientele) 97. B Selling the same quantity of the same product to different customers for different prices. This is an example of price discrimination and is often considered an illegal selling activity. If a business charges different customers different prices for similar amounts and types of products, it is involved in price discrimination, which is a violation of certain selling regulations. Customers often ask companies for price breaks on products at the end of the regular season. It is legal to offer substantial discounts to buyers of large quantities of certain products and to buy products from one company that are available for a lower price from another company. SOURCE: SE:108 SOURCE: Futrell, C.M. (2001). Sales management: Teamwork, leadership, and technology (6th ed.) [pp. 38-39]. Mason, OH: South-Western. 98. C Company promotions. Company promotions contain product information that helps salespeople to answer customers' questions about the advertised products. Ads often contain product descriptions that are useful in making sales. Consumer magazines may or may not contain the company's ads. Economic reports would address the state of the economy. Marketing textbooks would not be likely to contain specific product information. SOURCE: SE:062 SOURCE: Anderson, R.E., & Dubinsky, A.J. (2004). Personal selling: Achieving customer satisfaction and loyalty (p. 144). Boston: Houghton Mifflin. 99. C Customer testimonials. A testimonial is a statement by an identified user of a product proclaiming the benefits received from the use of the product. Hotel sales departments often solicit testimonials from satisfied customers to use to sell the features and benefits of the hotel's meeting facilities. Positive statements from previous customers is a good source of selling information because it comes from people who are not associated with the property. Salespeople do not use employee evaluations, vendor specifications, or management objectives to sell the features and benefits of a hotel's meeting facilities. SOURCE: SE:109 SOURCE: SE LAP 113Find Features, Boost Benefits (Feature-Benefit Selling) 100. A Tangible. Tangible products are those items capable of being touched, smelled, tasted, seen, or heard. Salespeople usually exert less effort in selling tangible products because customers can see and touch them. Also, it is easier for salespeople to demonstrate the features of tangible products and explain their benefits to customers. Customers may raise more objections when buying expensive products and require additional follow-up time from the salesperson. Salespeople selling intangible products often spend more time establishing relationships with customers. Optional products require more selling effort on the part of salespeople because the items usually are nonessential or luxury goods. SOURCE: SE:048 SOURCE: Farese, L. S., Kimbrell, G., & Woloszyk, C. A. (2009). Marketing essentials (pp. 321-323). Woodland Hills, CA: Glencoe/McGraw-Hill.