MN4001 Management II

Model Question Paper

Answer any five out of the following seven questions

1. (a). The following equations depict the market demand and supply curves for a good, where Q is

the quantity and P is the price:

Market Demand: Qd = 5300 - 400P

Market Supply: Qs = -100 + 50P
i. Compute the equilibrium price and equilibrium quantity when the supply matches the
demand. Show the point of equilibrium on a graph depicting the Demand and the
Supply curves.

ii. If the government imposes an excise tax of t per unit, express the new equilibrium price
P in terms of t.

(b). Explain using suitable demand and supply curves, whether it is the consumer or the supplier that

will bear the larger part of the tax burden, when a tax is imposed on a good,

i. If the good in question has a relatively steeper demand curve and a relatively flatter
supply curve, and
ii. If the good in question has a relatively flatter demand curve and a relatively steeper
supply curve.

2. (a) Explain the terms price elasticity of demand and income elasticity of demand.

(b) Explain the terms total utility, marginal utility, and the phenomenon of diminishing marginal
utility.

(c). Briefly explain how the fiscal policy and monetary policy are used as tools by the government in
controlling the macro-economic environment of a country.

3. (a). Explain the terms consumer price index (CPI), inflation rate, and unemployment rate.

(b). What conclusions would you draw about a country’s economy,

i. If there exists a substantial difference between the GDP and the GNP

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 ii. If the ratio GNP/GDP has been increasing year on year.

(c). Sri Lanka’s nominal GDP in the years 2012 and 2013 stood respectively at US $ billion 59.3 and 67.2
in terms of the market prices that existed during the respective years. If the GDP price index of year
2013 relative to year 2012 is estimated to be 106.71%, calculate the Real GDP growth rate of year 2013
relative to 2012.

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

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

Compute the standard manufacturing cost of one automatic pencil.

5. (a). Explain the term ‘contribution margin’ as applied to cost-volume-profit (C-V-P) analysis.

(b). Using the equation,

Sales revenue = variable costs + fixed costs + profit (net income),

and using symbols of your own choice, show the relationships between,

i. Break-Even quantity (number of units), Fixed Cost, and ‘Contribution Margin per unit’

ii. Target Sales (number of units), Fixed Cost, Profit, and ‘Contribution Margin per unit’

(c). A company manufacturing steel cabinets incurs a variable cost of Rs 5000 per unit, and the fixed
costs average to Rs 4 million per year. Each steel cabinet sells at Rs 9000.

Compute,

i. The number of units that the company should sell in order to achieve ‘break-even’

ii. The number of units that the company should sell in order to have a profit of Rs 2 million for the year.

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6. (a) Compare the ‘4Ps’ model against the ‘4Cs’ model used to describe the marketing mix.

(b) Briefly describe the typical marketing approach of a company whose marketing orientation is
predominantly based on each of the following concepts

i. Product Concept

ii. Production Concept

iii. Selling Concept

iv. Marketing Concept
v. Societal Concept

7. (a). Briefly explain the generally important considerations in ‘Product Design and Process Selection’,
from an operations management perspective.

(b). Define and explain each of the following process performance metrics,

i. Throughput time

ii. Process velocity

iii. Productivity
iv. Utilization
v. Efficiency