NEW

Business Studies Advanced Level Question and Answer

Paper 1
Revision Handbook (Short answer questions) Practical and relevent
Zimbabwean examples

Detailed answers 31 Question papers

372 Questions

Business studies medicine

MUBWANDARIKWA SHEPHERD
BACHELOR OF BUSINESS STUDIES HONOURS
MAJORING IN FINANCE AND BANKING (UZ)

+263 733 839 491

ACKNOWLEDGEMENTS
The Grace of God The Grace of God gave me the
enabling power, intellect and
commitment to write this book. I
worked hard to write this book, yet
not I, but the Grace that was with me
– 1 Corinthians 15:10
The Zimbabwe School Examination Without the Zimsec Past Examination
Council(Zimsec) Papers this book was not going to be
a success. Let me take this
opportunity to thank the Board,
Management and Staff of our Local
Examination Council
Commercial Clinic Students and Staff These stakeholders ignited the zeal
and enthusiasm in me to write this
book. some offered hands on support
and advised me on the correct
format to use for this book to be a
success
My family Behind every author, there is a
supportive wife and encouraging
children. Let me take this
opportunity to thank my family for
the emotional support which made
this book to be a success
Corporate world I want to thank the management and
staff of organisations I worked for
and gained hands- on industrial
experience. Organisations such as
NicozDiamond, Zimbabwe Revenue
Authority and Total Zimbabwe gave
me the practical attributes needed
for this book to conform with the
requirements of the new Curriculum
Shepherd Mubwandarikwa was born on 09 February 1981 at Mutero Clinic in Gutu. He is the
sixth born of Mr Patrick Mubwandarikwa and Mrs Evelyn Mubwandarikwa who live in Gutu.
The Author grew up in Zengeza 3 Chitungwiza and, at the time of writing this book, is still
based in this high density suburb.

ABOUT THE AUTHOR

EDUCATIONAL
CREDENTIALS
QUALIFICATION/AWARD INSTITUTION YEAR
13 UNITS(GRADE SEVEN) ZENGEZA 8 PRIMARY 1994
SCHOOL
8 O LEVEL SUBJECTS ZENGEZA HIGH 1998
SCHOOL
BEST MANAGEMENT OF ZENGEZA HIGH 2000
BUSINESS STUDENT SCHOOL
SECOND BEST OVERRAL ZENGEZA HIGH 2000
COMMERCIAL STUDENT SCHOOL
13 POINTS(A LEVEL) ZENGEZA HIGH 2000
SCHOOL
BACHELOR OF BUSINESS UNIVERSITY OF 2005
STUDIES HONOURS ZIMBABWE
MAJORING IN FINANCE AND
BANKING
INCOME TAX ,VAT,CGT ACT ZIMRA 2007
CUSTOMS COURSE ZIMRA 2007
ADVANCED MICROSOFT UNIVERSITY OF 2009
COURSE ZIMBABWE
(WORD,EXCELL,POWER
POINT)
E-LEARNING COURSE FOR TOTAL ZIMBAWE 2011
PREVENTING CORRUPTION
VAT COURSE INSTITUTE OF 2011
CERTIFIED TAX
ACCOUNTANTS
EFFECTIVE SUPERVISION MANDEL TRAINING 2012
AND MAN MANAGEMENT CENTRE
COURSE
BEST RESEARCHWORK CHRIST MINISTRIES 2016
AWARD
DIPLOMA IN THEOLOGY CHRIST MINISTRIES 2016
 At the time of writing this book, the author had managed to acquire seven years hands on
industrial experience, seven years teaching experience, the relevant Business Studies
Degree, various business related courses. Therefore the author is rightly positioned to write
detailed answers that will add value both to the above average and below average student.

ABOUT THE AUTHOR

WORK
EXPERIENCE
ORGANISATION POSITION(S) YEAR
NICOZDIAMOND INDUSTRIAL 2003
INSURANCE ATTARCHMENT
ZENGEZA HIGH SCHOOL BUSINESS STUDIES AND 2006
ACCOUNTING TEACHER
ZIMBABWE REVENUE REVENUE TRAINEE 2007-2008
AUTHORITY
TOTAL ZIMBABWE  CREDITORS 2008-2012
ASSISTANT
 FIXED ASSETS
ACCOUNTANT
 AVIATION
ACCOUNTANT
 ASSISTANT
BUDGETING
 CREDITORS
SUPERVISOR

BUOYANCY COLLEGE  SENIOR TEACHER 2013-2015

 VICE PRINCIPAL
 BUSINESS
STUDIES
TEACHER
 ACCOUNTING
TEACHER
ADVANCED LEVEL  BUSINESS 2015-2019……
COMMERCIAL CLINIC STUDIES DOCTOR
 ACCOUNTING
DOCTOR

GOSPEL HAVEN  PASTOR 2015-2019……

MINISTRY  BIBLE SCHOOL
PRINCIPAL
Business studies medicine is a question and answer book which helps students to meet the
practical application demands of the new curriculum. The book is loaded with practical and
known local examples which will significantly help the A level Zimsec business studies
student.

ABOUT THE BOOK

Skills to be developed Knowledge
Relevent
content
Developing a chain
Analysis
of arguement
Linking with the
Application
context

Evaluation Giving Judgement

 The book helps the student to

KNOWLEDGE provide correct and relevant points
on the questions. The basic points
on each question are from the
Business Studies A level syllabus
and are therefore found in relevant
books written by authors such as
Peter Stimpson, Bruce Jewel and
Judith Zuvarashe Mushipe
 This book develops the analysis
Analysis skill of the student that is ability to
develop a chain of argument.
Grade A students are able to
develop their points using the
following criteria: X may lead to Y
because of Z therefore Q
 This book helps the student to fully
Application answer the question by linking the
answer to the relevant context
outlined by the question. A level
business studies questions now
require good application skill from
the student and this book is the
right medicine which conforms
with the new curriculum
 This book helps the student to
Evaluation provide the position statement on
relevant questions
 November 2001 Paper 1

1. How can small businesses effectively compete with large businesses selling the same
goods? [4]
 Opening for longer hours that is small firms like kiosks and mini markets may open
earlier and close later than large firms
 The small firms may target markets which are neglected by large firms
 Small firms may offer personalised customer service since they are located closer to
their customers for example General dealer shops in remote areas of Zimbabwe.
Therefore they are aware of the important details of their targeted
customers(consumer profile)
 The small firms may utilize joint ventures in procurement of supplies so as to enjoy
purchasing economies of scale, just like the large firms
2. Explain the meaning of the following terms commonly found in the accounts of a
business
(a) Gross Profit [2]
(b) Retained Profit [2]
(c) Return on Capital Employed [3]
(d) Work In Progress [2]
(a) It is the difference between the sales value of goods sold and the purchase price of the
goods sold (cost of sales)
(b) It is an internal source of equity finance created from ploughing back profits
(c) It is a profitability ratio which compares the firm’s operating profit with the long term
capital injected into the business. It is calculated using the following formula
ROCE= Operating profit x 100
Capital Employed
(d) It is a form of inventory consisting of partially complete units

3(a) Explain what is meant by contribution cost pricing [2]

 It is a cost based pricing technique which considers variable cost in the
determination of price
(b) Explain the circumstances in which a business might want to use a contribution cost
pricing approach [5]
 When launching new products. This pricing technique attracts customers and
prevents new product failure
 When the firm is targeting price elastic market segments
 It can be used by large firms as part of a predatory pricing technique since it is
characterised by low prices
 This pricing technique can be used by businesses operating in economies which are
experiencing recessions since it enable the firm to retain customers
 Market followers may charge this pricing method with an attempt of attaining a
market leadership position
4. What evidence would you seek to determine whether motivation is low in a
workforce?[4]
 High labour turnover
 High rates of absenteeism
 High frequency of conflicts within the organisation
 Low levels of productivity
5(a) Job production is one method of production. State two others [2]
 Batch production
 Line production

(b) Under what circumstances do you think job production would be the best method [5]

 When customers want customised products for example wedding cake

manufacturing business
 When the business is operating on a small scale for example key manufacturing
business such as KB Locksmith
 When workers are multi skilled for example a tailor producing made to measure suits
 When production is labour intensive for example shoe repair
 When the business has insufficient working capital
6(a) What do you understand by customer service in retailing? [2]

It is a competitive way involving favourable handling of customers for example the provision
of trolleys and parking space for customers by retailers such as TM.
(b) Why is customer service becoming increasingly important in retailing?[4]
 To ensure repeated purchases since competition is stiff in the retailing business for
example retailers like TM compete with firms like Spar, OK , Afro foods and Food
World
 To increase the loyalty of the customers which is important since the retailers aim to
increase volume of sales since their portfolios are usually wide
 To increase their reputation and this in turn may create opportunities for more
revenue through techniques such as franchising
 Customer service is a non-pricing competition tool which is used by retailers to
overcome threats that come from price competition.

7 State and explain two reasons why delegation might be considered essential in an
expanding firm [4]
 Increased motivation-delegation satisfies the subordinate’s need for belonging and
this will boost the productivity such that the expanding firm will successfully and cost
effectively increase its scope of operations
 Increased worker co-operation- delegation is a participative approach and therefore
eliminates worker resistance such that the firm will successfully change its
operations. Change is inevitable/unavoidable when the firm is expanding
8 A business is considering investment in a new factory
(a) State what is meant by the term payback period[2]
 This is the duration taken by an investment to generate enough cash inflows that will
cover the initial outlay
(b) Calculate the payback period from the following evidence

$000

Initial investment 2 000

Net return Year 1 400
Year 2 400
Year 3 400
Year 4 500
Year 5 600
Year 6 1 300
Year 7 1 700
 Year Cash flow($) Balance($)

0 (2000 000) (2000 000)

1 400 000 (1 600 000)
2 400 000 (1 200 000)
3 400 000 (800 000)
4 500 000 (300 000)
5 600 000

Payback period =4 years 6months [(300 000/600 000) x12]

(c) Explain why payback period may not be a good way of deciding whether to invest
in this factory
 It does not consider cash flows after the payback for example in years 5-7 cash flows
were ignored yet they were substantial
 It ignores time value of money for example the $400 000 to be received in year 1 has
a higher value than $400 000 to be received in year 2 yet the payback period does
not take account for this difference
 It does not consider the size of the investment project that is the years and months
do not indicate the size of the project
 Timing of cash flows is not taken into account for example in this case much of the
cash flows is expected to be received in later years

9What is meant by?

(a) Quota sampling [2]
This is a non-random or non-profitability sampling technique in which the population frame
is divided into groups and respondents within each group is selected on a non-random basis
(b) Random sampling [2]
This is a probability sampling technique in which every member of the population frame has
an equal chance of being selected
10. Explain why a fall in external value of the currency might
(a) Lead to inflation [3]
(a) Depreciation or devaluation may cause cost push inflation if the country is heavily reliant
on imports that is a fall in the value of the currency will make imports to become expensive
and in turn may be inflationary.
(b)Make exporting easier [3]
(b) Depreciation or devaluation causes exports to become cheaper to foreign customers
Therefore they will have the ability of purchasing more goods from Zimbabwe. As a result
Exports will increase.

11Explain why a producer of televisions might be worried by the possibility of an increase

in the rate of interest [5]

 Increased cost of borrowing- A television manufacturer such as WRS require a lot of

working capital in the manufacturing processes since the goods being manufactured
are high valued (shopping goods). Therefore increased cost of borrowing may in turn
result in the manufacturer not accessing sufficient working capital thus capacity
utilisation may be reduced
 Reduced market size-televisions are high valued electronic gadgets hence the
targeted customers may also rely on personal loans to acquire such products.
Therefore an increase in the rate of interest may make it difficult for the targeted
customers to borrow from financial institutions hence the market size will be
reduced.

12. The profits a company makes have been low for several years. Explain why
shareholders might be concerned at the decision to borrow more capital? [3]

 Reduced dividends-If the company borrows more it will have increased obligation to
pay interest and this will deplete the profits available to pay dividends(earnings)
 Reduced share price-increased gearing worsens the company’s financial position
considering that the company has been making some losses. This in turn may reduce
the demand for the company’s shares on the capital market such that the share price
will decrease
 Lack of business continuity-Increased borrowing exposes the company to the risk of
liquidation and this affects the investments of the shareholders.
 November 2002 Paper 1

1(a) What is meant by the term privatisation? [2]

 This is the transfer of ownership of state owned organisations into the private sector
in which they will be individually owned.

1(b) Do you consider privatisation to be important in your country? Give reasons [4]

Privatisation is important since encourages economic growth through investments for

example deregulation of the telecommunications act led to the emergence of companies
such as Econet and Telecel.
In addition, privatisation increases efficiency in the service provision for example the
contracting out method used by Chitungwiza Hospital contributed towards improvements in
the service delivery.
However the privatisation may result in the exploitation of customers for example the
contracting out of Chitungwiza Hospital’s X-ray division to Baines Avenues led to the
charging of prohibitively expensive charges.
Privatisation is beneficial to a large extend since it offers opportunity for the government to
focus more on the formulation and implementation of macro-economic policies such as the
Zimasset

2(a) What other objectives other than profit maximisation are pursued by private
businesses?[2].
 Growth
 Survival
2(b) Why might the government intervene in the contract of employment between
workers and their employers?[4]

 To ensure that there is fair remuneration-the government will set the minimum
wage
 To prevent unfair dismissal of employees- the government offers some arbitration
services through the labour court
 To ensure safe working conditions-the government monitors safety standards
through the National Social Security Authority(NSSA)
 To prevent the exploitation of workers through the ministry of labour which puts
maximum working hours
3. A Cinema hall has a sitting capacity of 150 people and contacts one session per day. The
daily costs of maintaining the hall amount to $600 and an extra $30 in costs is required for
each cinema goer. Given that the admission fee is $60 calculate
(a) The break-even number of cinema goers per day [3]

Break-even point= Fixed costs

Contribution per unit
= $600
$30
= 20 cinema goers

(b) The number of cinema goers required to make a 60% profit on cost [5]

Let the number be x

 Profit=sales –Total costs
 Sales=60x
 Total costs=600+30x
 Profit=60x-(600+30x)
 = 30x-600
 30x-600=0.6(600+30x)
 30x-600=360+18x
 12x=960
 X=80 cinema goers

4(a) State three reasons why communication may fail in a business [3]
 Different backgrounds
 Use of jargon
 Language difference
4(b) Explain how McGregor’s Theory X and Theory Y might influence leadership style [5]
 McGregor’s theory X outlines that managers assume that workers are naturally lazy,
avoid responsibility and lack initiative. Therefore managers implement an autocratic
leadership `style. This is because autocracy is characterised by micro supervision so
as to prevent the dodging of work by workers. This style of leadership is also non-
participative which is ideal considering that theory x workers lack initiative.
 Under theory Y managers assume that workers are motivated by work itself, seek
responsibility and are full of initiative. Therefore a democratic leadership style is the
most appropriate since it allows the workers to work autonomously. In addition
democracy is participative in nature therefore initiative of the workers will be
utilised.
5. Explain the difference between the level of production and the productivity of a
manufacturing firm [2]
 Level of production refers to the output produced whereas productivity is the output
per given input for example output per worker.
6(a) Define the term budgeting and explain its limitations [4]
 Budgeting is the formalisation of management plans, expressing them into monetary
terms. In most cases this process is not accurate since it is based on estimates, it is
also affected by inflation and tend to overlook qualitative information which cannot
expressed into monetary terms.
6(b)”Profitability ensures enough cash for the business”. Do you agree with this
statement? Give reasons [5]
Profitability may ensure a healthy liquidity position for the firm. This is because profitable
firms generate revenue more than expenses they incur. Revenue will in turn bring cash
inflows. Therefore, in the case of a profitable firm the cash inflows are likely to exceed the
cash outflows and a health liquidity position will be experienced.
However, a profitable firm may experience some liquidity challenges. This is because the
firm may undertake some capital expenditures which reduce the cash position but does not
affect the profit position. Similarly, if a profitable firm repays a long term loan the liquidity
position will be worsened despite the fact that the profitability position is not affected.
A profitable firm does not enjoy a good liquidity position to a greater extent since some of
the revenue which increase the profits may be made on credit and the cash may not be
received thus the liquidity position will be adversely affected.
7(a) Describe the term critical path in network analysis [2]
 Critical path is a sequence of activities with the longest duration which determine
the project completion time.
7(b) Using examples, distinguish between the mode and the mean of any given statistical
data [4]
Example 2; 3; 3; 4; 5
The mode is the frequently appearing number within a set of numerical figures for example
the number 3 is the mode since it is appearing more than any other number. On the other
hand the mean is the average and in this instance it can be calculated as follows:
Mean = 2+3+3+4+5
5

=3,4
8. State and explain three ways in which the government could encourage investments in
their respective countries [6]
 Lower interest rates-The government under the monetary policy through the central
bank can charge low interest rates so as to encourage borrowing for investment
purposes
 Provision of grants-The government can provide loans through the ministry of small
and medium enterprises so as to boost investments within the country
 Reduction of taxes-the government may also offer tax incentives such as capital
allowances to firms that undertake capital expenditures so as to promote
investments within the economy.
9. Evaluate the usefulness of ratio analysis in financial analysis and control [4]
Ratio analysis is a quite useful quantitative tool since they facilitate the interpretation of
financial accounts therefore they provide basis for decision making. In addition ratios can be
used to measure risks for example the gearing ratio highlight to firm exposure to the risk of
liquidation and liquidity ratios show the extent to which the firm is exposed to the risk of
overtrading.
However, ratios may not necessarily be useful since their usefulness depend on the level of
accuracy of the company’s financial statements. Financial errors and window-dressing
affects the representativeness of financial statements as well as the usefulness of ratios.
Despite the limitations of ratios, they are useful to a great extend since they help to
establish the trend of the company’s financial performance when they are calculated for
many financial years.

10. Explain any two pricing methods which a manufacturer of school desks can use [4]

 Market penetration-The manufacturer may charge low prices when targeting price
elastic market segments for example a government school such as Mabvuku High
School
 Market skimming-High prices may be charged to price inelastic segments such as
private schools for example The Heritage and Harare International School
  11(a) Draw a typical functional organisational chart with three level of activity [3]

Managing
Director

Production Marketing H.R Finance

Manager Manager Manager Manager

Quality Factory Budgeting

Accountant
Controller Supervisor Manager

11(b) Use you diagram to explain the difference between span of control and chain of
command [2]
 Span of control is the number of subordinates directly reporting to a superior for
example the managing director has a span of control of 4 and the finance manager
has a span of control of 2.
 On the other hand the chain of command refers to the formal reporting relationships
that is who reports to whom. On the diagram the budgeting manager is reporting to
the finance manager and the finance manager in turn is reporting to the managing
director.
12. A firm has a choice between two projects, A and B
The initial investments are as follows:
Project A $40 000, PROJECT B $60 000
The probability of success for project A is 0.5 with a cash inflow of $80 000. If it fails the
inflow will be $40 000
The probability of success for project B is 0.6 with a cash inflow of $100 000. If it fails the
inflow will be $40 000
(a) Represent the above information on a probability tree diagram[2]

EMV (A) = (80 000X0.5) + (40 000X0.5)-40 000

=$20 000
EMV (B) = (100 000X0.6) + (40 000X0.4)-60 000
=$16 000
 November 2003 Paper 1

1. Explain what Maslow meant by self-actualisation and why he placed it at the top of his
pyramid of needs [3]

 These are needs that relate to the realisation of workers’ full potential. They are
placed at the top of the hierarchy since they are the last to be satisfied that is they
can only be fulfilled when the other needs have been satisfied. In addition, these
needs are difficult to satisfy.
2. Why do businesses want to control quality of their products? [6]
 To increase customer loyalty-this is because the degree of customer satisfaction will
be high when high quality products are produced for example customers are loyal to
Astra paints products
 To boost the morale of workers since production of high quality satisfies the
employee’s need for achievement.
 To increase the image of the company-firms gain reputation if they provide high
quality products for example Leather World which produce high quality leather
products
 To increase prices-provision of high quality gives an opportunity for firms to adopt
marketing skimming strategies
 To safeguard the profit margins-if quality products are produced unnecessary
downgrading is prevented
 To prevent unnecessary delays since the need for reworking is prevented
3. Why are some managers reluctant to delegate? [3]
 Fear of losing expert power if the subordinates execute the task better
 Mistrust of subordinates especially if subordinates are theory x type
 Wrong management philosophy that is if the manager does not acknowledge that
management is the art of getting things done through other people

4(a) Distinguish between merger and takeover [2]

 A merger refers to the integration of two or more firms, guided by mutual consent
for example Nicoz Insurance combined with Diamond Insurance to form
NicozDiamond Insurance. On the other hand a takeover is when one company gains
a controlling stake in another company for example Dairyboard holdings gained a
controlling stake in Lyons
4(b) What possible reasons could be put forward to justify a merger [5]
 To gain purchasing economies of scale as a result of increasing scale of operations
for example horizontal integration
 To manage risks since mergers results in the widening of the product portfolio for
example lateral integration provides the room for the enjoyment of risk bearing
economies of scale
 To increase the market share for example in horizontal integration
 To combine and integrate different expertise
 To ensure a reliable market for example in the case of vertical forward integration
between Caps Holdings and QV pharmacy
5(a) What is market research? [2]
 It is a systematic gathering of information from the market pertaining to the needs
of the customers, consumer buying behaviour, competitors and other various
market information.
5(b) Why is market research of importance to a business organisation? [6]
 To identify market gaps in the market
 To identify the needs of the targeted customers
 To identify any changes in the needs and buying behaviour of customers
 To establish the strengths and weaknesses of competitors in the market(competitor
analysis)
 To gather information that will be used in the formulation of marketing strategies
 In order to gather information that will guide the segmentation process
6(a) State and explain any three barriers to communication [6]
 Language difference- Large corporations such MNCs experience this problem since
the language spoken in the parent country may be different with that spoken in the
host country
 Use of jargon-Workers in different departments utilise different technical terms
  Different backgrounds-Large firms employ different people with different values and
this may hinder the communication process
6(b) Explain how these barriers affect a business organisation [6]
 Language difference-This barrier negatively affects the organisation in that the
subordinates may fail to execute the assigned tasks properly and this will result in
the organisation failing to achieve its goals
 Use of jargon-This barrier hinder interdivisional communication which in turn
negatively affects the coordination process
 Different backgrounds-Differences in the values may cause unnecessary delays as
well as conflict in the organisation
7. Explain the problems likely to be faced by a new farmer in coming up with a project
proposal [5]
The new farmer is likely to face problems that emanate from lack of adequate credentials
that are needed to convince the financiers. The new farmer lacks adequate farming
experience, proven farming track record and farming equipment such as combine
harvesters that may be needed as collateral security.
Ina addition the new farmer is less likely going to be aware of the proper formats of the
project proposals therefore a longer time may be spent in the drafting of the proposals.
There are less chances for the new farmer to write a proposal that will convince the
financiers.

8. The following information was extracted from the company’s accounts for the year
ended 31 December 2002
$000
Sales 1 000
Purchases 800
Opening Stock 100

The value of closing stock under three different methods of valuation was
$000
FIFO 140
LIFO 110
Weighted average 114
(a) Calculate the gross profit for the year using each of the following the methods of
stock valuation[3]
 FIFO LIFO AVCO
$000 $000 $000 $000 $000 $000
Sales 1 000 1 000 1 000
Less Cost Of Sales 100 100 100
Opening Inventory 800 800 800
900 900 900
Less closing 140 760 110 790 114 786
inventory
Gross Profit 240 210 214

8(b) Under what circumstances would you advice your organisation to use LIFO as a
method of Inventory valuation? Give reasons for your answer [3]
 When the business is selling perishables such as bread, the use of LIFO
becomes realistic since it matches the manner in which the product is
purchased from the business
 When prices are rising , this will enable the business to understate profits in
order to evade tax
 When prices are decreasing the use of LIFO will overstate profits which will
boost investor confidence. This will be part of window-dressing technique

9. A business is investing in three alternative investment projects. Each has an initial

outlay of $5million. The following calculations have been made

NPV Pay Back Period ARR

Project A ($2m) 4 years 30%

Project B $1m 3 years 40%
Project C ($3m) 2 years 60%

Which project should the business choose, and why, when using the following appraisal
techniques
(a) Net present value[2]
(b) Payback period [2]
(c) Accounting rate of return[2]
(a) Using NPV-the company should choose project B because the NPV is positive and
highest therefore the net cash inflow returns are high
(b) Payback period-The company should opt for project C because the payback period of 2
years is the shortest therefore project C is less risky.
(c) Accounting Rate of Return-Project C will be used because it has the highest return of
profits on capital invested.

10(a) What do you understand by the term performance appraisal? [2]

 It is the systematic assessment of an individual worker performance against pre-set
objectives
10(b) Explain the importance of performance appraisal [3]
 It guides the training process since it identifies the training needs of the workers
 It is also a motivational tool since it satisfies the employee’s need for achievement
 It identifies workers who deserve promotion in the organisation that is those who
surpass their objectives by substantial margin
11. What is the difference between penetration pricing and price skimming? [4]

Penetration pricing Price skimming

 Characterised by low prices
 Suitable on price elastic segment
 Charged to increase market share
 Ideal when the product is at
introduction stage
 Adopted when competition is stiff in
the market
 Characterised by high prices
 Suitable on price inelastic segment
 Charged to maximise profits
 Suitable when the product is at
maturity stage
 Suitable when competition is low in
the market

12. Explain any three effects an ageing population could have on a manufacturer of
consumer goods [5]
 Reduced market size-since an ageing population does not earn substantial amounts
of income that is many customers rely on pensions
 Increased frequency of new product failure-since the market is dominated by an
aged customers, it is likely to stick to old consumer products
 Reduced promotional elasticity of demand-this is because literacy level may be low
and this may in turn compromise on the growth objective
 June 2004 Paper
1

1(a) Explain the concept of legal personality as it relates to businesses [3]

 It is a characteristic feature for incorporated businesses that is they stand on their
own separate from the owners(shareholders) and those who run them(Directors)
1(b) What is the importance of this status in the growth of the business [3]
 This is important in the easy sourcing of equity finance since it is not risky for the
shareholders to buy the company’s shares. Equity finance is suitable for the growth
objective to be attained
 Directors will not be reluctant to take risk and as a result growth will be attained
through risk decisions such as new product development and market development
 If a business is incorporated it becomes more reputable and hence it gains the
support of different stakeholders which in turn will result in the attainment of the
growth objective
2. Outline the benefits of Just In Time technique of inventory management [4]
 Working capital is not tied up in inventory
 There is room for customisation so as to meet the needs of the customers
 Less warehousing costs
 Less room for inventory spoilage and pilferage(theft)

3. How might some knowledge of statistical probability enable managers to perform their
functions more effectively?

 Effective planning-statistical probability is important for managers when decision

trees are in use because the probability of success and failure is used in the
determination of expected monetary value. As a result statistical probability allows
effective planning
  Effective control-Statistical probability is quite useful in quality control. Under this
technique results from a sample of products are used to make conclusions about the
whole batch of products. This is important since 100% quality inspection is
prohibitively expensive

4(a) What do you understand by the term job evaluation? [2]

 It is a systematic assessment of the worthiness of a particular job in relation to the
overall objectives of the organisation
4(b) Explain the importance of job evaluation programme to a firm [3]
 It facilitate the ranking of jobs which is quite useful in the creation or amendments
of organisational structures(organisational design)
 Fair remuneration is guaranteed since workers are paid what is proportionate to the
demands of their jobs(job ranks)
 Job evaluation identifies jobs that will be lacking significance and in need of job
design processes such as enrichment, rotation and enlargement
5. What are the advantages of listing a company on the stock exchange [5]
 Easy sourcing of equity finance through the selling of shares
 Free publicity since the share price movements is communicated through both the
print and electronic media
 Practice of good corporate governance since the stock exchange constantly monitors
the financial performance and management practices of listed companies
 The listed company is more reputable to different stakeholders
 Useful investor information can be obtained by the listed companies from the
stockbrokers
6. Discuss the contribution that informal groups might make towards the overall
performance of a business [5]
Informal groups help in the satisfaction of the social needs of the workers therefore the
morale of the workers is improved. In addition the managers are also able to easily identify
the needs of the workers through the informal groups. These groups help in guiding the
formation of the formal groups.
However, informal groups mainly rely on the grapevine and hence they are a source of
conflict. Employee soldering (dodging of work) can be promoted through the informal
groups
7. Should managers always use the payback period in appraising projects? Explain [5]
Payback period is quite useful for managers to use since it is user-friendly and hence less
prone to errors. Investments require huge sums of money hence errors should be avoided
at all cost. In addition the payback period is objective since it uses cash flows which involve
less estimations. It also takes risk into account.
However, the payback period does not consider all the net returns of an investment that is
the whole life of the project is not considered. Similarly the timing of cash flows is
overlooked by the payback period.
The payback period is useful to a lesser extent since it does not take the size of the project
into account hence managers should rely on technically superior techniques such as Net
Present Value.

8(a) State any two pricing strategies which can be used for a new product [2]
 Market penetration
 Market skimming
8(b) What important issues should be considered when deciding on the price of a new
product [4]
 Competition-The level of competition determines the price for new products for
example when competition is stiff the firm is forced to charge low prices
 Costs incurred- Firms consider the amount the amount incurred in the research,
development and production of the product so as to prevent losses
 Elasticity of demand-Firms take account of this factor in the formulation of prices for
new products for example low prices are charged when the price elasticity of
demand is elastic and high prices are charged when the elasticity of demand is
inelastic
 Government policy-Price controls by the government should also be considered
when a firm is setting prices
9(a) Explain the term price elasticity of demand [3]
 This is the responsiveness of quantity demanded to changes in price. It can be
calculated using the following formula
PED=% change in quantity demanded x 100
% change in price
9(b) Why might the marketing manager try to influence the price elasticity of demand for
products?[3]
 To maximise profits-marketing managers through superior customer service and
provision of high quality can transform the PED from elastic to inelastic so as to
adopt profit maximising pricing strategies such as market skimming
  To overcome competition-If the market is dominated by a lot of price competition
the marketing manager may try to reduce the PED so that the firm will be able to
utilise other competition strategies other than price
 To increase the market share-Sometimes the marketing managers may increase the
PED through intensive advertising so as to increase market share through the
adoption of a penetrative pricing strategy

10(a) Give two reasons why firms use budgets [2]

 They help to formalise management plans
 They are used to measure performance
10(b) Explain one situation in which a budget may need to be flexed [4]
 When the actual level of activity is different from the budgeted level of activity-In
this instance the firm will need to flex its budget so that the costs and revenues
budgeted are comparable with the actual revenue and costs. This will allow the
calculation of variances for corrective action to be recommended

11. A firm has the capacity to sell and produce 10 000 units of a certain product per
month. Current output is only 9 000units. The following data is available:
Selling price $500 per unit
Variable Costs $300 per unit
Fixed costs $1 000 000

Calculate
(a) Contribution per unit [2]
(b) Break even output [2]
(c) Margin of safety [2]
(d) Net profit at current output [2]

(a) Contribution per unit=SP-VC/Unit

=$500-$300
=$200
(b) Break-even output =Fixed costs
Contribution per unit
=$1 000 000
$200
=5 000 units
(c) Margin of safety =Actual output-Break even output
=9 000-5 000
=4 000 Units
(d) Net profit:

Sales(9 000x$500) 4 500 000

Less Variable costs($300x9 2 700 000
000)
Contribution 1 800 000
Less Fixed Costs 1 000 000
Net Profit 800 000

12(a) A carefully designed questionnaire should contain properly designed questions.

What are the characteristics of a good question in a questionnaire? [3]
 The question should not be leading
 The question should not be too demanding
 The question should not be provoking
 12(b) A small contractor provides the following information about project x
Activity A is followed by B, C
Activity B is followed by D
Activity C is followed by E, F
Activity D is followed by G
A (5 days) B (4 days) C (6 days) D (3 days) E (3 days) F (2 days)
G (2 days)
(i) Represent this information on a network diagram [3]
(ii) Identify the critical path from the diagram you have drawn [3]
(iii) What is a dummy activity? [2]

(i)

9 6 12
3 22
9 12

14
7
0
1 5
2 14
0
5

11
4
13
11
5
14
(II) ABDG and ACE
(III) a Dummy activity is an imaginary activity that neither consume time nor resources
 November 2004 Paper 1

1. Define the term lean production [2]

 These are various production techniques that are meant to minimise
wastages in the production process
2. Explain any two possible sources of resistance to change in the organisation [4]
 Fear of losing the job- If the workers are afraid of losing their jobs they will
not support changes such as a merger
 Informal groups- These groups may have interest which are against those of
the organisation. The spread of gossip within those groups may cause
resistance to change within the organisation
3. What are the merits and limitations of a functional organisational structure? [4]
Merits
 There is order since the chain of command is not complicated
 Unit of direction is promoted since different functional departments do not have
significantly different interest that is they all aim to achieve organisational objectives
Limitations
 This organisational structure is only suitable in a small organisation
 Business organisations can only successfully adopt this structure when operating in a
stable environment
4. Explain the importance of communication within an organisation [4]
 Managers, through communication, are able to convey orders and policies to their
subordinates
 Employees are able to convey their grievances to their superiors through
communication
 The co-ordination process is enabled by the communication process
 Decision making is made possible by the communication process
5(a) What is job designing? [2]
 This is the application of motivational theories on jobs to make them more
interesting to the job holder
5(b) Why is it important to have a well-designed job?[4]
 It boosts the motivation of the workers which will make them more productive
 It eliminates alienation at the workplace thereby reducing chances of accident
occurrence
 It develops workers and they will be able to occupy higher level job post in the future
 It facilitates multiskilling of the workers and this creates flexibility in the organisation
as well as mutual support
6. From a survey a shoe manufacturer came up with the following data:
Mode size 6
Range size 3-8
(a)Comment on the meaning of these findings [2]
 The frequently worn shoe size by the respondents interviewed is size 6 and the sizes
being worn by those respondents are size 3 up to size 8
(b)Evaluate the usefulness of the mode in making stockholding decisions [4]
The mode is useful in making stock holding decisions in that it identifies the frequently
demanded product within the firm’s product portfolio. As a result the working capital of the
firm will be prioritised in the purchasing /production of that product so as to manage the
risk of stock outs.
However since the mode cannot be further processed it is of little use unlike the mean
which can be used in the calculation of standard deviation hence useful in determining the
maximum and minimum inventory levels.
The mode is useful to a lesser extent in making of inventory decisions since it does not
provide useful information when the firm has a balanced product portfolio. In that instance
there will be need to give attention to many products and not only the frequently
demanded product.

7(a) Why is conflict inevitable in the organisation?[3]

 Resources are difficult to fairly distribute in a large organisation and this may trigger
conflicts
 Workers and managers have different backgrounds and values for example in a
Multinational Company
 The chain of command is usually too long such that the shop floor workers may feel
out of touch with the top management and this will create demotivation
7(b) ‘Conflict is not always detrimental’. What might be the possible benefits of
workgroup conflict? [4]
 They alert sleeping managers
 Brilliant ideas are generated when conflicts is being resolved
 The managers will identify workers with a negative attitude towards work as well as
those who have interest in the organisation
 The conflicting members will respect each other more in the future
8(a) What is market segmentation? [3]
 It is the subdivision of a heterogeneous whole market into homogeneous
submarkets using basis such as age, income, gender and benefits sought.
8(b) Explain why the concept of segmentation may be of value to a marketing manager of
a large business [4]
 It guides the targeting process- after the segmentation process the large firm is able
to identify substantial markets that ought to be targeted as a means of safeguarding
its competitive advantage
 Facilitates easy market research-After segmentation process the large firm will be in
a position of easily identifying the needs of the customers. This is important since
the large firm serve customers with different needs

9(a) What problems are likely to be faced by small firms in your country? [4]

 Small firms such as kiosks face stiff competition from large firms
 Lack of adequate finance since their credit worthiness is low for example General
dealer shops in remote parts of Zimbabwe do not have a lot of non-current assets
 Poor corporate governance since small firms like sole traders are not able to attract
competent managers
 Reduced profitability due to non-enjoyment of economies of scale for example small
firms at Guzha township home industry in Chitungwiza do not operate on a large
scale
9(b) Suggest possible solutions to the problems you have identified in 9(a) [4]
 Small firms can open for longer hours so as to manage the constraint of competition
 They can apply for government grants that are offered through the Ministry Of Small
And Medium Enterprises
 The entrepreneurs can attend training workshops as well as trade exhibitions such as
ZITF so as to boost their business skills
 The small firms can utilize joint ventures in procurement so as to enjoy purchasing
economies of scale
10(a) What is meant by a budget? [2]
 It is a formalised management plan which is expressed in monetary terms
10(b) Assess the usefulness of budgets to an organisation [5]
Budgets help the organisation to effectively coordinate its activities that is they have a
harmonising effect. In addition, budgets allow the organisation to effectively utilise its
financial resources, preventing unnecessary wastages.

However, the quantitative technique of budgeting overlooks qualitative factors which

cannot be expressed into monetary terms. In addition budgets become less useful if they
are prepared at different level of activity with the actual level of activity.
Budgets are useful to a greater extent since they can still be flexed to cater for any changes
in the activity levels. They can also be complimented by techniques such as SWOT analysis
which take account of qualitative factors
11. The following information was extracted from ABC Ltd.’s Balance sheet at as 31
December 2003

Stock 40 000
Overdraft 10 400
Cash 5 500
Mortgage Loan 110 000
Debtors 14 500
Furniture 60 000
Creditors 14 600

(a) From the above data calculate the firm’s

i) Current ratio [2]
ii) Acid test ratio [2]
Current ratio =Current assets: Current Liabilities
= (40 000+5 500+ 14 500): (10 400+14 600)
=60 000: 25 000
=2, 4:1
Acid test ratio =60 000-40 000:25 000
=20 000:25 000
=0.8:1
(b) Comment on the liquidity position of ABC Ltd [4]
 The liquidity position of the company is satisfactory since there is $2.4 of current
assets available to cover every dollar of current liability. However the liquid current
assets are not sufficient to cover every dollar of current liability and this is mainly
because 66.67% of the current assets are in the form of inventory (stock) which is
less liquid.
12(a) In capital budgeting, what is meant by the term leasing? [2]
 Leasing is a medium term source of debt finance which involves a contractual
agreement between the owner of the asset(lessor) and one who will be using the
asset whilst paying some fixed instalments(lessee)
12(b) Explain the benefits and drawbacks of leasing as a source of finance [5]
Benefits
 No huge capital outlay is required
 Repair and maintenance costs are covered by the lessor
 Monthly instalments are fixed which simplifies financial planning
Drawbacks
 It is expensive in the long run
 Ownership is never passed to the lessee
 Restriction on the use of the asset may be imposed by the lessor
 June 2005 Paper
1

1(a) Define the term price elasticity of demand [2]

 This is the responsiveness of quantity demanded to changes in price and it can be
calculated by the following formula
Ped =% change in quantity demanded
% change in price
1(b) When bus fare went up by 10%, revenue collection by Bus Company fell by 5%.
Calculate the price elasticity of demand for buses [2]
Ped =% change in quantity demanded
% change in price
=5%
10%
=0.5
2(a) Identify any three problems that can cause communication failure between two
people [3]
 Use of jargon
 Power difference
 Language difference

2(b) Suggest how the problems you have identified in (a) can be overcome [3]
  The problem of jargon can be solved when the business contacts job rotation
technique so that workers will become familiar with different terms used in different
departments
 To solve the problem of power difference the business can conduct team building
exercises, for example social games during weekends. Organisations with sports
clubs such as ZB bank utilize this approach.
 The business organisation may train the workers so that they will become familiar
with the language which is regarded as formal in the organisation. Total Zimbabwe
conducts French lessons for its employees
3. Why do some businesses prefer to remain small? [3]
 The owners may be content with the returns from the business
 Fear of experiencing some diseconomies of scale
 Lack of adequate management skills to run the complex organisation
4(a) What is the tertiary sector of an economy [2]
 This is a sector within the economy which is responsible for service provision that is
direct and commercial services

4(b) Is the tertiary sector of any significance in your country? Give reasons for your answer
[5]

The tertiary sector is important since it contributes towards increasing the gross domestic
product for example the telecommunications in Zimbabwe is among the major contributors
to the GDP in Zimbabwe. In addition the tertiary sector also contributes towards reducing
the unemployment level for example a lot of the working population is employed in this
sector providing some direct services for example the civil servants –teachers, nurses and
the uniformed forces.
However this sector does not contribute much to the economy of Zimbabwe since the
country has an agro economy. Therefore the primary sector (especially agriculture)
dominate the economic activities unlike the tertiary sector.
Despite the limitations the tertiary sector can still be viewed as significant since it completes
the economy that is both the primary and secondary sector require the services that are
offered by the tertiary sector such as banking and insurance. Therefore companies in the
tertiary sector such as NicozDiamond and CBZ are playing a crucial role.
5(a) What is meant by legal personality in business? [2]
 Legal personality is a distinctive feature for incorporated businesses in which the
business will stand on its own separate from the owners(shareholders) and those
who run it(directors)
5(b) What is the importance of legal personality status in the growth of the business?[4]
 This is important in the easy sourcing of finance since it is not risky for shareholders
to buy the company’s shares. Equity finance is suitable for the growth objective to be
attained
 Directors will not be reluctant to take risks and as a result growth will be attained
through techniques such as new product development
 If the business in incorporated it becomes more reputable and hence it gains the
support of different stakeholders which in turn will result in the attainment of the
growth objective
 If the business stand on its own it promotes the practice of good corporate
governance that is the directors are able to safeguard the interests of the business
6(a) Distinguish between a brand and a trademark [2]
 A brand is a mark, name or a symbol used to differentiate the firm’s product from
those of those of rival firms. On the other hand a trademark is a legally protected
brand name
6(b) Why do firms brand their products? [4]
 Branding provides a unique selling point for a product since it differentiates the
product for example a brand like coke in the beverage market
 Branding provides the basis of advertising
 Branding attracts customers since it convey the positive attributes of the product for
example Gloria Self Raising Flour
 Branding allows the customers to easily identify the product on the shelf
7(a) Briefly explain what is meant by job production [3]
 This is a customised small scale production in which the production process is tailor
made to suit the needs of the customers for example key cutting business
7(b) Justify the usage of job production in some firms [4]
 Those firms might be operating on a small scale for example hairdressing businesses
therefore there will be no need for mass production
 The targeted customers might be requiring customised products for example the
customers of KB Locksmith- key cutting is made according to customer specifications
 If the production process is labour intensive for example wedding cake
manufacturing business
 If the workers of the firm are multi-skilled. Multi skilling is a precondition for the
successful adoption of job production
8(a) State and explain any two reasons why shop floor workers might resist change [2]
 Fear of losing the job-shop floor workers may be against change processes such as a
merger since there is high risk for them to be made redundant
 Non-involvement in the change process-The workers will not feel part and parcel of
the change hence are likely to resist
8(b) How might managers increase the likelihood that workers will co-operate with a
proposed change?[4]
 Adopting a participative approach in which the shop floor workers will be involved in
the change process
 Training the workers, equipping them with job related skills so as to help them
manage the change process
 The managers may outline the benefits of the change process to the workers
 Provision of incentives for example overtime allowances to smoothen the change
process
9. A public limited company needs to raise $40m to finance the takeover of another firm
(a) Explain how the knowledge of the gearing ratio could help the finance manager choose
between using equity capital or loan capital [4]
If the gearing of the company is more than 50% the finance manager is likely to opt for
equity finance since additional borrowing may expose the highly geared company to the risk
of liquidation.
Contrary, if the company is lowly geared(with a gearing of less than 50%) the manager is
likely to opt for debt finance since the use of equity finance such as shares may cause
unnecessary dilution of ownership which exposes the company to the risk of takeover.
(b) Outline any two other factors which could influence the finance manager’s decision [4]
 Cost of finance- If loan and debenture interest are cheap, the firm may opt for debt
sources of finance. However if the rate of dividend is lower the company may
consider sourcing equity finance such as issuing of shares
 The purpose of finance-if the company want to undertake capital expenditures, long
term sources of finance will be ideal. On the other if the firm wants to finance
operational activities short term sources such as bank overdraft may be opted for.
10. Why would managers whose attitude to workers is explained by McGregor’s theory X
have difficulty in motivating workforce [5]
 Theory X managers perceive workers as being lazy, lacking initiative and shunning
responsibility. As a result the manager is likely to adopt an autocratic leadership style
which is characterised by micro supervision hence due to lack of autonomy, workers
will be demotivated.
 The managers are less likely to implement a participative style of leadership
therefore their sense of belonging will not be satisfied which in turn will demotivate
the workers
 The negative attitude of the manager towards workers may result less interactions
with them hence the manager will not be able to identify the needs of the workers
thus making it difficult to motivate the workers
 Furthermore, the manager is likely to rely on extrinsic motivating factors overlooking
the intrinsic factors. As a result motivation will be difficult since extrinsic factors are
hygiene factors which do not bring motivation.
11. Explain why a company manufacturing television sets may attempt to segment the
market for its products [5]
 To easily identify the needs of the customers and any changes in those needs since
customers for technological products such as televisions have dynamic needs
 In addition market segmentation allows the television manufacturer to tailor make
its marketing mix so as to suit the different needs of the customers in different
segments for example ultra slim sets are targeted at the middle income earners
segments and plasma television sets are targeted towards high income earners
segment
 Segmentation is therefore useful to a television manufacturer such as WRS since it
allows effective target marketing and thus unnecessary wastages will be prevented
12.’In stock management, the minimum or maximum stock levels will depend on number
of factors’. Comment on any three of these factors [6]
 The rate of stock turnover- products that have high turnover such as consumer
convenience goods are likely to be kept in large quantities since the risk of stock outs
is high. On the other hand slow moving items such as shopping goods are likely to be
kept in low quantities
 Size of the firm-Large businesses have enough storage space and therefore are likely
to keep inventory in large quantities unlike small firms
 Perishability of the product-Perishable products such as fruits and vegetables are
usually kept in low quantities since their shelf life is short unlike non-perishable
products
 November 2005 Paper 1

1. Giving examples, show what you understand by intangible assets [4]

 Intangible assets are business possessions that do not have a physical form such as
goodwill, patents, software and trademarks
2(a) State any two objectives of businesses in your country [2]
 Growth
 Profit Maximisation
2(b) Giving examples distinguish between stakeholders and shareholders in an
organisation [4]

Stakeholders Shareholders

 Are people or organisations that  Shareholders are part of the

have direct or indirect interest in
the business organisation
 Examples include customers,
suppliers, government and
shareholders
business stakeholders that own the
business
 Examples include ordinary
shareholders and preference
shareholders

3(a) What is a decentralised organisational structure [2]

 This is an approach to management in which the authority is widely distributed in
the organisation
3(b) Explain 2 disadvantages of a decentralised organisational structure [4]
 Slow strategic decision making- since the low level employees have to be consulted
before major decision are made
  Lack of consistency and uniformity-since the low levels are given discretion in the
execution of tasks.
4(a) Many businesses use integration as a method of growth. Explain any other methods
of growth [4]
 Organic growth- This occurs when the organisation grows on its own for example
establishing a new branch
 Franchising-In this case the business will get into a contractual agreement with other
business and permit it to use its trading name
4(b) Explain any two disadvantages that a business enjoy by being large [4]
 Enjoyment of economies of scale-If a business increases its scope of operation it is
likely to be granted bulk buying discounts thus its cost per unit may fall
 Increased reputation-If a business grows it will be able to attract and retain more
customers since customers are more loyal to a large business
5. Define the term market share [2]
 This is a proportion of the firm’s sales in relation to the total industrial sales. It is
calculated using the following formula
Firm’s sales X100
Industrial sales 1
5(b) Explain any two factors that influence pricing decisions [4]
 Cost incurred-when determining the price level cost incurred are considered as a
way of preventing losses
 Competition-when the market is characterised by stiff competition low prices are
likely to be charged. On the other hand if the firm is enjoying a monopoly position it
will have an opportunity of charging high prices
6. Explain any two methods used to monitor and ensure quality of products [4]
 Quality circles-these are small groups of workers who autonomously discuss quality
related problems recommending solutions to management
 Total quality management-this is an integrative approach to quality control in which
everyone is deemed a quality controller and all the time will be earmarked for
quality control purposes
7(a) What is difference between the money market and capital market [2]
 The money market is a financial market where short term financial securities such as
treasury bills are traded. On the other hand a capital market is a financial market
where long term financial securities such as shares are traded
7(b) State any three functions of the stock exchange in your country [3]
 A source of equity finance for the listed companies
  Offers investment opportunities to the public as well as companies
 Ensures the publicity of share price movements for the listed companies

8(a) Why does the government of your country intervene in the relationship between
employees and employers [4]

 To ensure fair remuneration through the setting of minimum wage

 To prevent discrimination of workers through the labour act
 To protect the workers from unfair remuneration through labour court
 To ensure safe working conditions through NSSA

8(b) How is the employer expected to protect the lives of employees at the workplace [4]

 Provision of safety clothing such as safety shoes, helmet and harnesses

 Ensuring that machinery is regularly serviced
 Conducting some wellness campaigns for example commemorating World Safety
Day
 Conducting fire drills
9. Explain the term cooperate culture [4]
 These are customary and traditional ways of thinking and doing things in the
organisation which is shared to a greater extent by organisational members and
which new members must fully or partially accept for them fit in the organisation
10(a) Define the term gearing [3]
 Gearing is the proportion of fixed cost capital within the firm’s capital structure and
it is measured by the following formula: Fixed cost capital X 100
Capital employed
10(b) What is the importance of gearing to any two stakeholders of the firm?[4]
 Managers- the use of gearing ratio determine the appropriate sources of finance for
example when the firm is highly geared the managers will avoid debt sources of
finance and opt for equity sources
 Creditors-They use of gearing to determine the credit worthiness status of a
company for example lowly geared companies tend to have a high credit rating
11(a) Define the term investment appraisal [2]
 This is a management accounting technique which involves assessing the financial
viability of projects before undertaking them
11(b) What are the advantages of net present value over the payback period as a method
of investment appraisal? [4]
 It takes time value of money into account
 It considers the whole life of the project
 The size of the project is taken into account
 The timing of cash flows is taken into consideration

12. Explain non-financial factors managers can use to motivate employees [6]
 Team working-If employees work in groups their social needs are satisfied and this
will ultimately motivate them
 Training-equipping the workers with job related skills will result in them being
motivated by the job itself
 Employee involvement- techniques such as MBO boost the morale of the workers
since they will have a sense of achievement
 Job design techniques-such approaches increase the level of job significance to the
workers and therefore the morale will be boosted
 November 2006 Paper 1

1. What is meant by the following terms used in business?

(a) Efficiency [1]
 Efficiency is the ability of the business to undertake its activities cost
effectively(doing things right)
(b) Effectiveness [1]
 Effectiveness is the ability of the business to achieve its objectives(doing the right
things)

2. Comment on the role played by the primary sector in the economy of your country [5]

The primary sector creates a lot of employment opportunities for example the majority of
the working population is employed in the agricultural sector in Zimbabwe. In addition the
primary sector increases the country’s gross domestic product for example the mining
sector. Companies such as Zimplats and Ashanti operate on a large scale. Furthermore the
primary sector also supply raw materials to the secondary sector for example industries
companies such as Delta acquire raw materials such as millet and sorghum from the primary
sector.

However, since the primary sector is concerned with the extraction process there is
minimum value addition on the output from this sector therefore the degree to which this
sector contributes to the national output is limited. The majority of the jobs created in the
primary sector are low level jobs.
3(a) State three reasons why small firms are of great importance in an economy [3]
 They compete with large firms thus reducing their monopoly tendencies in the
economy
 They create a lot of employment opportunities
 They contribute to the country’s gross domestic product
3(b) Discuss the difficulties which are common to most small business firms [5]
Small firms do not enjoy economies of scale since they operate on a small scale; their unit
costs are high which in turn compromises on their profitability. They also suffer from
intense competition which is imposed on them by large firms. This is mainly because small
firms have a narrow product portfolio have they are not in a position to effectively compete
with large firms
Small firms are not run professionally since they do not enjoy managerial economies of scale
and hence they are not able to attract competent personnel. Their lack of good corporate
governance is also attributable to the legal form which dominate the small firms (sole
trader) Small firms find it difficult to raise adequate capital since they lack collateral security
hence their credit worthiness status is relatively low.
4. Comment on Herzberg’s ideas on motivation [6]
Frederick Herzberg came up with the two factor theory which is a content theory of
motivation. Under this theory he cited that there are hygiene factors such as remuneration,
organisational climate, organisational policies and work environment. Such factors do not
motivate when they are satisfied but their lack of satisfaction causes demotivation at the
workplace.
He also outlined that there are motivating factors such as employee recognition, employee
involvement, praise and implementation of job design techniques. Satisfaction of such
factors guarantees motivation at the workplace.
This theory is quite useful in guiding the motivation process, however its usefulness is
limited by the fact that needs of workers differ from one employee to the other.

5. Distinguish between the democratic and autocratic forms of leadership in an

organisation [4]

Democratic Autocratic
 It is a participative  It is a non-participative style
leadership style of leadership
 Subordinates work  A micro supervision system
autonomously is implemented
 There is two way  There is one way
communication communication
 Suitable on theory Y type of  Suitable on theory X type of
workers workers
6(a) State any three methods of production [3]
 Job production
 Batch production
 Flow production

6(b) Explain why a firm might be prepared to sell its product at a price below the total cost
of producing it? [4]
 This can act as a way of capturing customers so as to increase the firm’s market
share
 This could be a pricing strategy on a new product which is meant to reduce chances
of new product failure
 In the case pf a large firm such a pricing method can be adopted as part of a
destroyer pricing policy
 This can be done under a loss leading pricing strategy meant to boost the overall
sales of the company

7. Under what circumstances is it appropriate to use absorption costing technique? [3]

 When the firm is undertaking long term planning(both fixed and variable costs need
to be taken into account in the long run)
 When preparing the financial statements-absorption costing moves in line with the
international accounting standards
 When making some pricing decisions that are meant to maximise the profits of the
firm(full cost plus mark-up pricing)
8(a) What are the advantages of delegation in a firm? [3]
 It reduces the burden on top level management hence are able to focus on more
crucial tasks
 It develops lower levels and the firm will be able to utilize internal recruitment on
any strategic positions
 It motivates the subordinates since it is a form of recognition and, according to Elton
Mayo’s Hawthorne effect, there is a positive relationship that exists between the
attention paid to workers and the subsequent rise in productivity
8(b) Explain the reasons why managers sometimes find it difficult to effectively delegate
work to their subordinates [5]
 Mistrust of subordinates especially when the subordinates are theory X type of
workers
 Wrong management philosophy that is the manager will fail to acknowledge that
management is the art of getting things done through other people
 Fear of losing expert power if the subordinate do the assigned work better than the
manager
 Too much interest in doing the work
 The fact that accountability remains with the manager that is even when authority
and responsibility are passed down, the manager will remain answerable for results
9(a) State any three groups of people who might be interested in the accounts of a firm [3]
 Government
 Shareholders
 Managers

9(b) Explain why it is good for a business to make provisions for

(i) Bad debts
 Bad debts-This will understate the firm’s profits such that the business will not be
greatly exposed when the credit customers fail to pay what they owe.
(ii)Depreciation
 this also understates the firm’s profits which will create sufficient internal sources of
finance such that the business will be able to replace any worn out no current assets
10(a) Why is it necessary for businesses to advertise their goods [3]
 To inform customers about the firm’s products which will increase the sales of the
firm especially when the firm’s products are at the introduction stage
 To remind the customers about the firm’s products thereby enabling the business to
retain its existing customers
 To fight competition so as to safeguard the survival objective of the firm

10(b) Show the importance of packaging in the successful marketing of a product [4]

 It protects the core product thus lengthening the shelf life of the product for
example tinned products such as pilchard fish
 It attracts customers for example attractive packaging used on impulse products like
chocolates
  It also promotes customer convenience that is the customers are able to use the
product easily for example sunlight liquid is used easily because of its package
 Product augmentation is also facilitated for example the package for vanilla ice
cream can later be improvised as a lunch box
11. What do you understand by the following terms used in network analysis?
(a) Dummy [2]
(b)Free float [2]
(c)Critical path [2]
 Dummy is an imaginary activity which neither consumes time nor resources
 Free float is the amount of time an activity can be delayed without affecting
the commencement of the next activity at its earliest starting time
 Critical path is the sequence of activities with the longest duration which
determines the project completion time
12(a) What is inflation? [2]
 This is the persistent increase in the general price level in the economy

12(b) Discuss the problems that are associated with a rise in inflation in an economy [5]
Inflation affects negatively the purchasing power of customers therefore the market size is
reduced which in turn adversely affects the business organisation. In addition, inflation
negatively affects the industrial relations at the work place since the workers will be
continually bargaining for wage increments.
Business organisations find it difficult to effectively plan since the business environment
becomes unstable under an inflationary environment. Furthermore the cost of production
increases under an inflationary environment therefore businesses will be forced to downsize
which will negatively affect their capacity utilization
 June 2007 Paper
1

1(a) The free market enterprise is one of the three basic economic system. State the other
two [2]
 Command
 Mixed

1(b) Which economic structure best describes the economy of your country? Support your
answer [2]

 Zimbabwe has a mixed economy. This is because it consists of government owned

organisations which are in the Public sector such as Zinwa, Zesa and Municipalities as
well as organisations that are in the private sector such as Delta, Econet and Telecel

2(a) Using examples, distinguish between vertical and lateral integration [4]

 Vertical integration is the fusion of two or more businesses in the same line of
business but at different levels of production. On the other hand lateral integration
is the fusion of two or more businesses which are not in the same line and which are
at different levels of production
 Examples of vertical integration include the fusion of Caps Holdings with QV
Pharmacy. On the other hand an example of lateral integration is the fusion of
Battery Express with Motor City Ford
2(b) Justify the need for growth of firms in your country [4]
 Growth of firms create employment opportunities and reduce the extremely high
unemployment level in Zimbabwe
 If firms grow there will be more profits that will be ploughed back to the society
under the corporate social responsibility initiative
  Growth of firms in Zimbabwe will increase the Gross Domestic Product and will
create room for economic growth
 Exports will be boosted if there is growth of firms in Zimbabwe and this will improve
the balance of payment position
3. The following data shows incomes of nine employees in a food outlet.
Monthly Income in ‘000 dollars
120, 128, 122, 120, 135, 126,
128, 120, 130
(a)Calculate the arithmetic mean [2]
(b) Determine the mode and the value of the median [2]
(a) Mean = (120+128+122+120+135+126+128+120+130)
9
=125.44
(b)Mode=120
Median= 120 120 120 122 126 128
128 130 135

=126

4 ‘Workers are solely motivated by financial rewards.” Assess this statement [6]

Financial rewards such as pay, commission and bonus are quite important in the motivation
of workers. This is because, according to Frederick Winslow Taylor, workers are rational
economic beings solely motivated by money. As such remuneration schemes such as the
pierce rate system can result in high levels of output since workers will be motivated to
produce more.
However, financial incentives such as remuneration may not necessarily motivate workers
since, according to Herzberg’s two factor theory, financial incentives are hygiene factors
which merely remove demotivation by does not bring about motivation at the workplace.
Therefore both financial incentives such as remuneration and non-financial incentives such
as employee recognition, job design, praise and training should be utilized by the
management to guarantee motivation at the workplace. This is because they complement
each and are both important in the motivation process
5(a) What do you understand by the term gearing? [2]
Gearing is the proportion of fixed cost capital within a firm’s capital structure. It is calculated
by the following formula:
Gearing =Fixed cost capital X 1000
Capital employed

5(b) Comment on how debtors can be managed by a firm [3]

 Carrying out proper credit analysis before granting the debts. This will reduce the
possible risk of bad debts
 Debt factoring –this involves the selling of long outstanding debts to a factoring
house and this enables early recovery of cash
 Offering discounts for prompt payment so as to encourage the debtors to settle their
accounts early
6(a) Identify and explain two communication problems that lie with the receiver [4]
 Selective listening-this occurs when the receiver chooses what they want to hear and
hence communication breakdown will occur
 Emotional state of the receiver- If the receiver is angry or too excited the
concentration level is reduced which may result in communication failure
6(b) Comment on the ways management can use to overcome these problems [4]
 Selective listening- management may provide room for feedback in which the
receiver will have room to participate. This will increase the concentration level of
the receiver.
 Emotional state of the receiver-Correct timing of the formal meetings is important to
overcome this constraint. In addition managers may increase the knowledge of their
own emotions as well as emotions of workers(emotional intelligence)
7(a) Explain the meaning of market segmentation [2]
 This is the subdivision of a heterogeneous market into homogeneous submarkets
using basis such as income, gender and benefits sought
7(b) Why may businesses wish to segment markets for their products? [4]
 In order to adopt appropriate marketing mix strategies that are suitable for each
market segment for example market penetration on price elastic segments and
market skimming on price inelastic segments
 To effectively target the segments to serve which will increase the position of the
product
 Market segmentation is a precondition for effective market research that is after
segmenting the markets the firm is able to see any changes in the needs of
customers
  To avoid wastage of resources that is the firm will not distribute products to
segments were they are not demanded
8(a) How do fixed costs differ from variable costs? [2]

Fixed Variable
 They remain constant with  They proportionately change
output with output
 For example Rent  For example raw materials

8(b) Comment on the limitations of contribution costing [4]

 Assumes that there are two classes of costs that is fixed and variable yet a firm may
have semi variable costs in its cost structure
 Useful in the short run since it does not take account of fixed costs
 Assumes everything produced is sold yet sometimes firms may fail to sell everything
produced because of competition
 Assumes that fixed costs remain constant with output yet, in reality, they may follow
a stepped pattern
9(a) What do you understand by worker productivity?
This is the rate at which output is produced by the workers and is a measure of operational
efficiency level for example output per worker
9(b) How can management increase the productivity of the workforce? [4]
 Training the workers-equipping them with job related skills
 Team working-this is a non-financial motivating factor which boosts the performance
of the workers
 Pierce rate system- paying workers according to their output increases their level of
productivity
 Management by objectives- A participative style of management will have a
Hawthorne effect on the workers since there is a positive relationship that exists
between the attention paid to workers and the subsequent rise in productivity
10(a) Distinguish between short-term and long term sources of finance for a business [4]

Short term Long term

 Repayable after a short period of  Repayable after a long
time period of time

 Used for operational expenditures  Used for strategic

expenditures

 Sourced from the money market  Sourced from the capital

market
 Involve less procedures  Involve a lot of procedures

 For example debt factoring and  For example shares and

bank overdraft debentures

10(b) Explain any two factors considered when selecting appropriate source of finance [4]
 Purpose of finance- If finance is needed for long term purposes for example funding
constructing works, long term sources such as mortgages are used. On the hand if
finance is needed for operational purposes, short term sources are used such as
bank overdraft
 Current gearing-If the company is highly geared equity sources of finance are
appropriate since the company will not want to increase its exposure to the risk of
liquidation. On the other hand if the company is lowly geared debt sources of
finance may be utilized
11(a) What is meant by the term quota?
 This is a component of the protectionist policy which relate to the physical
restriction in the quantity of imports
11(b) Why may the government of your country be worried about increased import
expenditure? [4]
 It results in a negative balance of payment
 It causes the depreciation of the local currency
 It promotes capital flight that is the country may lose both local and foreign currency
 More expenditure on imports results in the influx of foreign products which may
impose unfair competition on locally produced products
12 Evaluate the usefulness of price elasticity of demand when making pricing decisions [4]
Price elasticity of demand is important when making pricing decisions. When the price
elasticity of demand is elastic the firm will charge low prices such as market penetration. On
the other hand when the price elasticity of demand is inelastic high prices such as market
skimming will be utilized.
However, the pricing decisions also consider factors such as cost, competition, and
government policy. Therefore price elasticity of demand is not the only factor to consider to
consider in the determination of prices.
The price elasticity of demand is only useful in the determination of prices when other
factors are taken into consideration. This is because effective pricing decisions consider
many factors into account.
 November 2007 Paper 1

1. What do you understand by the following terms?

(i)Demerger [2]
(ii)Divestment [2]

 Demerger is a de-integration technique which involves the separation of previously

merged firms for example the separation of Kingdom Bank and Mickles Africa
 Divestment is a de-integration technique which involves a complete sell of the
business or the disposal of a major part of the business for example BP Shell
disposed its Zimbabwean subsidiary

2. How are businesses affected by an increase in taxation? [4]

 Increase in taxation may hinder the growth objective for example an increase in
corporation tax depletes the internal sources of finance
 Increase in taxation may also worsen industrial relations for example an increase in
pay as you earn reduces the net income of the workers
 Reduced market size for example an increase in VAT is passed down to customers
and the demand for goods is reduced
 Reduced capital returns for example an increase in capital gains tax depletes the
amount of cash inflow from disposal of non-current assets
3(a) Outline any three drawbacks of import controls [3]
 They may cause an increase in the price of imported components for example
imposition of tariffs
 They may reduce the level of competition in the country which will affect the level of
innovation
 Trade relations with major trading partners may be negatively affected
3(b) Why may governments keen to promote exports? [4]
 Exports boost the foreign currency reserves of the country
 Through an increase in exports the balance of payment position may be improved
 Exports also encourage industrial growth since they widen the market for local
products
 The growth of local industries as a result of exports will also help to reduce the
unemployment level
4(a) How might workers actively resist change? [3]
 Sabotage
 Go slow
 High rates of absenteeism
4(b) Explain any two consequences of a poor organisational structure [4]
 Communication delays may occur especially when the organisation structure has a
long chain of command. The delays will be caused by long lines of communication
 Ineffective supervision that is managers may not be in a position to identify the
needs of all workers for example when the span of control is extremely wide
5.The purchase price of an asset is $60 000 and annual depreciation using the straight line
method is $80 000
Calculate
(a) The net book value after four years[2]
(b) The expected life of the asset using residual value of $200 000
(a) Net book value after 4 years=Cost-Accumulated depreciation
=$600 000-(80 000X4)
=$600 000-$320 000
=$280 000
(b) Depreciation per year =Cost-Residual value
Useful life
$80 000 =$600 00-$200 000
X
$80 000X =$600 00-$200 000
$80 000X =$600 000-$200 000
 $80 000X =$400 000
X =5 years

6(a) Why might a firm employ part-time workers? [3]

 They demand low salaries and they have less statutory rights
 They cover up for the permanent employees on leave
 They help to clear back logs(long outstanding work)
6(b) What practices may be used in job enrichment?[3]
 Autonomous workgroups
 Delegation
 Decentralisation
7(a) Give any three reasons why informational communication channels are important in
the organisation [3]
 They satisfy the social needs of the workers
 Managers are able to identify the needs of the workers through informal
communication
 The managers are able to see the reactions of workers before major policy change
7(b) Explain what you understand by the ‘exploitative authoritative system’ in leadership
study [3]
This is a non-participative leadership style characterised by one way communication and use
of coercive power by the manager such as threats.

8(a) What is forecasting? [2]

 This is an attempt to predict a future variable using past and existing information
8(b) State three situations in which forecasting can be used [3]
 Budgeting
 Investment appraisal
 Manpower planning
9. How useful is ratio analysis to a firm’s management? [5]
Ratio analysis facilitates the interpretation of accounts which is quite useful in strategic
decision making. Ratios such as the return on capital employed are key performance
indicators which are utilized in Annual General Meetings. Ratios are also useful in the
establishment of the trend of the company’s financial performance over a long period of
time. This is because ratios can be calculated for many financial periods.
However, the usefulness of ratio analysis depend on the accuracy of financial statements. If
financial accounts are affected by errors and window-dressing ratios will cease to be useful.
Ratios are useful to a lesser extent since they merely indicate financial problems affecting
the company that is they do not recommend the appropriate action which need to be
undertaken. In addition, ratios overlook qualitative factors which affect the business which
cannot be expressed in numerical terms such as motivation of the workforce.

10(a) State any three factors a firm has to consider when choosing a supplier [3]
 Prices charged
 Location of the supplier
 Terms of payment
11(a) How might branding help in the successful marketing of a product?[3]
 Branding provides the basis for advertisement that is it is difficult to advertise non-
branded products
 Branding differentiates the firm’s products from those of rival products thus
providing a unique selling point
 Branding also communicates positive attributes of a product therefore help to
attract the customers
11(b) Assess the usefulness of desk research [4]
Desk research is cost effective since it involves the retrieval of already existing information.
The information is also retrieved within a reasonable period of time.
However the information gathered may fail to precisely meet the information requirements
of the organisation. In addition the information may be outdated or incomplete.
Desk research is useful to a lesser extend since the information gathered may be out of
date.

12(a) Explain two factors which influence the choice of finance [4]
 Cost of capital- sources of finance that have a higher cost of capital are avoided by
the organisation that is firms opt for sources of finance that are cost effective for
example internal sources of finance
 Purpose of the finance-Short term sources of finance are often utilised for
operational purposes while long term sources of finance are ideal for strategic
purposes
12(b) What are the advantages and disadvantages of high gearing [4]
Advantages

 The firm will enjoy much of the incremental profits

 Less exposure to the risk of takeover due to less dilution of ownership
Disadvantages

 Reduced credit worthiness status

 Increased exposure to the risk of liquidation
 June 2008 Paper
1

1. What are the reasons for public ownership of businesses?[4]

 Certain organisations require a lot of start-up capital for example NRZ. Huge sums
for money will be required to construct railway lines and to acquire the station
wagons and such finance can be provided by the state through revenue collected
from taxes
 Certain organisations are strategic to the economy for example ZESA and they have
to be state owned to ensure stability of the economy
 To preserve state security for example public ownership of the organisation such as
ZBC
 At times organisations are state owned to ensure fair distribution of vital services
for example organisations such as ZINWA and ZESA which provide essential utilities
2(a) Distinguish between internal and external constraints [4]

Internal External

 Found within the organisation  Found outside the business

 They are controllable
 They are regarded as the
weaknesses of the organisation
 Examples include demotivation of
workers and lack of skills
 The business can only adapt
 They are regarded as the threats of
the business
 Examples include competition and
inflation

2(b) Explain the effects of inflation on businesses [4]

 Inflation increases the cost of production which may force businesses to downsize or
to cease their operation
  The purchasing power of customers is negatively affected hence the market size is
reduced
 The operating environment becomes unstable which will make the planning to
become difficult
 Inflationary periods causes a lot of labour unrest since the workers will constantly
bargain for wage increments
3(a) Show how any two elements of the marketing mix might help in achieving the
marketing objectives of a firm [4]
 Promotion-activities such as advertising, sales promotion and publicity enable the
firm to communicate with its targeted customers. Customers are attracted and
market share is increased
 Product-goods and services provided by the firm are meant to satisfy the needs of
the customers and this customer satisfaction will guarantee customer loyalty
3(b) List 4 ways in which the business may attempt to extend the maturity stage of the
product life cycle [4]
 Reminding form of advertising
 Repackaging
 Rebranding
 Market development
4. Explain any two advantages of sale of an equity [4]
 The firm will be able to raise long term equity finance which can be used for strategic
purposes
 The gearing of the company(extent of borrowing) is reduced and this improves the
credit worthiness status of the firm
5. Is a matrix structure always a good organisational structure? [6]
A matrix structure improves the co-ordination within the organisation since interdivisional
communication is improved. In addition, this project based structure allows the workers to
utilize their initiative which will benefit the organisation.
However a matrix structure may confuse the workers since it is characterised by a dual
reporting system that is one worker may be reporting to two superiors (the project manager
and divisional/functional manager). Employee soldering (dodging of work) may be
promoted by the adoption of a matrix structure since interactions of the project teams may
include a lot of socialisation.
The matrix structure is useful to a greater extend since it can be adopted by large
organisations and also instils some flexibility thereby allowing the firms to easily adapt to
changes in the operating environment.
6(a) Explain the following terms
(i)Lead time [2]
 (ii)Buffer stock [2]
(iii)Economic order quantity [2]
 Lead time is the delay in stock arrival, from the time the time an order is placed by
the business until the inventory arrives in the business
 Buffer stock is the minimum quantity of inventory kept in the business to prevent
the risk of stock outs
 Economic order quantity is an optimum inventory purchased which is meant to
reduce the overall stock related costs since it strikes a balance between stock
holding costs and stock ordering costs
6(b) Why would a manufacturer move from job to batch production?[5]
 In order to meet the increase in demand of the firm’s products
 To allow the firm to attain the growth objective
 In order for the firm to enjoy some economies of scale due to increased scope of
operation
 To cut labour costs since batch production is characterised by a lot of automation
 To manage risk of stock outs since batch production has higher production levels
7. Distinguish between pierce rate and time rate methods of payment [4]

Pierce Rate Time rate

 Workers are paid according to
output produced
 It is suitable for operational workers
in manufacturing industries
 It promotes high level of production
 Compromises the quality level
 Workers are paid according to
duration worked
 Suitable for workers in service
industries
 It prevents the dodging of work
 No effect on quality level

8. How might a Theory x manager’s beliefs be portrayed in his style of leadership?[4]

A theory x manager assumes that workers are naturally lazy, avoid responsibility, lack
initiative and are motivated by extrinsic rewards. As a result Theory X managers are likely to
adopt a non-participative style of leadership style such as autocracy. This is because such
style of leadership enforces micro supervision of workers so as to prevent the dodging of
work. In addition this style of leadership has one way communication which is important
since the workers are assumed to be lacking initiative.
9. State and explain any three groups of accounting ratios [6]
 Profitability-Such ratios measure the profit generation ability of the business for
example Gross Profit Margin highlights the gross profit per every dollar of sales
 Liquidity-This group of ratios outlines the ability of the firm to meet its short term
debts with its short term assets for example the current ratio
  Efficiency-This category of ratios measures the operational efficiency of the firm that
is the ability to sell inventory, recover cash and clear debts. The debtors collection
period is an example of an efficiency ratio

10. A firm has four departments whose profits/losses are shown

Dept. A Dept. B Dept. C Dept. D Total

$000 $000 $000 $000 $000
Sales 300 400 150 100 950
Total costs 250 450 110 80 890
Profit/(loss) 50 (50) 40 20 60

Fixed costs amounted to $300 000 and are distributed equally among the four
departments
(a) Show the difference between profit and contribution [2]
 Profit is the difference between sales and total costs whilst contribution is the
difference between sales and variable costs
(b) Calculate the contribution for any of the two departments [4]

Dept. Dept.
A B
$000 $000
Sales 300 400
Less Variable Costs (175) (375)
Contribution 125 25

11. Should managers always use quantitative techniques only in decision making? [5]

Quantitative techniques contribute significantly in the decision making process since they
allow logical thinking in managers for example techniques like decision trees and investment
appraisal. In addition optimum solutions are also identified through these techniques for
example the decision trees identifies the project with the highest expected monetary value
and the investment appraisal techniques identifies the project with the highest net present
value, shortest payback period or highest accounting rate of return. Therefore the financial
resources are effectively utilized through the quantitative techniques.
However quantitative techniques may be inaccurate since they are based on estimates for
example budgeting and investment appraisal depend on the accuracy of the forecasted
costs and revenue. In addition quantitative techniques tend to overlook qualitative factors.
Therefore managers should complement quantitative techniques with qualitative
techniques such as SWOT analysis so as to enhance the decision making process.
12. How might management satisfy the esteem needs of a worker? [4]
 Adopting job enrichment
 Setting challenging goals
 Utilizing employee appraisal process
 Providing room for autonomy
 Adopting a participative approach in leadership
 November 2008 Paper 1

1. The free market enterprise is one basic economic system. State any two others. [2]
 Command economy
 Mixed economy
2(a) What is a multinational company? [2]
 It is a huge business corporation which originates in one country known as the
parent country and establishes subsidiaries in various host countries
2(b) Why may the government of your country limit the entry of multinational companies
in your country? [4]
 Because they impose stiff competition on local infant firms
 They also exploit the local workers and sometimes practise discrimination in their
employment for example top post are reserved for the expatriates
 They may also externalise funds to their parent country since they repatriate much
of their profits to their country of origin thereby causing capital flight
 MNCs usually interfere with local politics hence they may cause political instability

3. Explain the influence of any two elements of the macro environment to a business of
your choice [4]

 Legal constraints on consumption-On Delta’s alcoholic beverages this constraint

affects the market size that is the alcoholic beverages are not supposed to be
consumed by people under the age of 18
 Ethical constraints- The alcoholic beverages are perceived to be unethical by many
people in the Zimbabwean market since they move in contrast with the Christian
values which are common in Zimbabwe
4. Why may fear lead to resistance to change in an organisation? [4]
 Change may create fear of losing power for example delayering may result in some
middle level managers being demoted to low levels
 Change may also create fear of the unknown if the workers are not certain about the
consequences of the change for example relocation to another branch
 Change may also instil fear of failure for example change of an accounting system
 Fear of losing the job may also characterise change in the organisation for example a
merger has a high possibility of redundancy on some workers
5. Explain any three communication problems that lie with the receiver [6]
 Failure to take the message- This can affect the communication process for example
when the receiver is absent minded
 Emotional state of the receiver- If the receiver is angry or too excited the
concentration level is negatively affected and communication failure occurs
 Selective listening- This occurs when the receiver chooses what he/she wants to hear
6(a) Distinguish between authority and responsibility [4]

Authority Responsibility
 Is the right or legitimacy to exercise  Is the duty to perform a task
power
 It decrease as we move down the  Changes from strategic to
chain of command operational as we move down the
chain of command

6(b) Explain any two kinds of power which a manager may possess [4]
 Reward power-This is the ability of influencing subordinates by a manager through
the use of incentives such as bonuses and praise
 Coercive power-It is the ability of influencing subordinates by a manager through the
use of punitive measures such as demotion and withdrawal of emotional support
7(a) What do you understand by the following terms?
(i)Recruitment [2]
(ii)Selection [2]
 Recruitment is the creation of a pool of potential job holders which can be done
internally or externally
 Selection is the shortlisting of successful candidates from the pool of recruited
workforce
7(b) Justify the need for induction training in an organisation [4]
 It reduces chances of costly mistakes by the new worker
 Allows the new worker to easily fit in the informal groups
 Familiarizes the new worker to the workstation
 Familiarizes the new worker to the culture and vision of the organisation

8. Explain any two factors leading to the relocation of an industry [4]

 Depletion of resources-This mainly affects the mining industry for example BHP(an
Australian based company moved from the Zimbabwean market when platinum
reserves were depleted
 Political instability-This can threaten the survival of the businesses since political
instability may cause losses of property and other non-current assets. Shell
Zimbabwe lost a lot of valuable property during the political war and this was among
the reasons why this company abandoned the Zimbabwean market
9. Pardon Electronics Limited is a multinational company planning to introduce a new
brand of mobile phones in Zimbabwe. Advise the firm on any two possible pricing
strategies to adopt [6]
 Market skimming-this pricing approach enables the firm to quickly recover the new
product development costs and other costs associated with launching the new
product in the Zimbabwean market. In addition skimming allows the firm to
maximise profits considering the cell phone customers are price inelastic
 Premium pricing-this enables the firm to communicate the superior attributes of the
cell phone brand. High price communicates high value which is important
considering that the targeted customers are quality conscious
10. Comment on the usefulness of any two long term sources of finance [6]
 Debentures- This source of finance has fixed cost of capital which makes financial
planning easy and allows the firm to enjoy any incremental profits. In addition this
source of finance does not result in the dilution of ownership
 However, payment of debenture interest is obligatory as well as the repayment of
the principal amount. Therefore a firm that utilizes this source of finance is always
exposed to the risk of liquidation
 Ordinary shares-payment of dividends is not an obligation and the company is not
exposed much to the risk of liquidation when this source of finance is made use of.
 However if the company’s profits increases the amount of dividends is likely to
increase. In addition the use of shares causes dilution of ownership
11(a) Distinguish between fixed and variable costs [4]

Fixed Costs Variable Costs

 They remain constant as output  They proportionately increase with
increase output
 Excluded when calculating  Considered when calculating
contribution contribution

 Taken into account in long term  Taken into account in both short
planning term and long term planning
 Mainly considered in absorption  considered in marginal costing as
costing well as absorption costing
 Included in full cost plus mark-up  Included in contribution cost price
price determination determination
 For example rent  For example raw materials
11(b) Graphically illustrate the following
(i) Break-even point[3]
(ii) Margin of safety[3]
Revenue/Costs ($)

Fixed Costs

0 Output
12. Discuss the value and limitations of the payback period [6]
The payback period uses cash flows which involve less estimations and takes risk into
account. Risk is taken into account since priority is always given to investments that have a
shorter payback period. This method is also user-friendly and hence less prone to errors.
However, the payback period does not consider the whole life of the project that is net cash
inflows after the payback are ignored. Time value of money is also not taken into account as
well as the timing of cash flows.
 June 2009 Paper
1

1. What is meant by the term labour turnover? [2]

 It’s the rate at which employees leave the organisation and it is calculated as follows:
Number of employees who leave the organisation in a year X 100
Average number of employees
2(a) What are the disadvantages of a narrow span of control?[2]
 It is demotivates because of the of micro supervision and limited interaction
 Little room for creating autonomous workgroups
2(b) Explain any two possible sources of conflict in an organisation [4]
 Informal groups-these groups are characterised by interests which may be against
those of the organisation
 Unfair remuneration-this will cause worker demotivation since remuneration is
among the hygiene factors under Herzberg’s two factor content theory of motivation
3(a) State any two reasons why decision trees are useful tools to managers [2]
 They are useful decision making tools since they encourage logical thinking in
managers
 They promote rational decisions to be made since they take into account both risk
and return
3(b) The following is an extract from the balance sheet of D and R Ltd

$ $

Intangible assets 3 200

Current assets
Inventory 28 000
Trade receivables 22 000
Cash 6 000 56 000
Less Current
Liabilities
Trade payables 8 000
Dividends 22 000 30 000

Comment on the liquidity position [4]

Current ratio =Current assets: Current Liabilities
=$56 000 :$30 000
=1.867 :1
Acid ratio =Current assets-Inventory: Current Liabilities
=$56 000-28 000 :$30 000
=0.933 :1
 The liquidity position of the company is satisfactory since there is $1.8 of current
assets available to cover every $1 of current liability. There is also $0.9 of liquid
current assets that is available to cover every $1 of current liabilities. However, 50%
of current assets are in the form of inventory which is less liquid.
4. Explain the following terms:
(i) Undercapitalisation [2]
(ii)Overtrading [2]
(iii)Working capital [2]
 Undercapitalisation is a situation in which the business has less long term capital
injections as compared to its requirements, as measured by its strategic objectives
 Overtrading is a problem caused by sudden growth of the business which often
results in cash flow problems
 Working capital is the money that is available for day to day activities(operational
activities)
5. Explain the benefits to an organisation of having a motivated workforce [4]
 Reduction in labour turnover rate since the workers will be satisfied with the
organisation
 High quality products are produced which will give the firm a competitive advantage
 Less occurrence of conflicts that is good industrial relations will prevail
 High productivity which in turn may allow the organisation to accomplish the growth
objective
6. Explain the importance of limited liability to shareholders [4]
 The personal property of the shareholders is protected in the case of liquidation of
the company
 Limited liability enables the managers to take risk and pursue the growth objective
which will result in increased dividends for the shareholders
 The limited liability clause enables the business to easily source finance since the
shareholders will be protected and this will boost the performance of the business
which in turn may result in an increase in the share price-the shareholders will then
benefit from capital gains
 Limited liability improves the image of the business and, through the support of
different stakeholders, the dividends to be paid to shareholders will be sustained in
the future
7(a) State any three features of public limited companies [3]
 There is limited liability
 They are incorporated
 Listed on the stock exchange
 They are externally audited

7(b) Giving examples explain the reasons for public ownership of a company [4]

 Certain organisations require a lot of start-up capital for example NRZ. Huge sums
for money will be required to construct railway lines and to acquire the station
wagons and such finance can be provided by the state through revenue collected
from taxes
 Certain organisations are strategic to the economy for example ZESA and they have
to be state owned to ensure stability of the economy
 To preserve state security for example public ownership of an organisation such as
ZBC
 At times organisations are state owned to ensure fair distribution of vital services
for example organisations such as ZINWA and ZESA which provide essential utilities
8. How may macroeconomic policies of government affect business objectives and
strategies? [4]
 Fiscal policy-taxes deplete the retained profits of the firm making the
accomplishment of the growth objective difficult therefore businesses will rely on
debt sources of finance since internal sources would have been depleted
 Monetary policy-an increase in interest rates will make borrowing to become
expensive which may affect the operations of the business. As a result business
organisations will rely on internal sources of finance
 Monetary policy (OMO)-the government sells treasury bills in the money market
which will provide investment opportunities for businesses. Therefore businesses
will increase their revenue base through the purchase and disposal of these gilt
edged securities
 Protectionist policy-tariffs, embargos and quotas limit the level of competition on
locally produced products. Therefore local businesses will maximise their profit and
hence are able to increase their reputation through ploughing back their profits to
the society

9. Describe any three different types of non-probability sampling techniques [6]

 Quota sampling-the organisation will divide the population frame into groups and
respondents within each group are accessed on a non-random basis
 Cluster sampling-Occurs when respondents within the population frame are
concentrated in one geographical area. It is possible for all of them to be interviewed
 Convenience sampling-this non-probability sampling technique involves selection of
interviewees who are easy to access
10(a) What is the difference between desk and field research? [2]
 Desk research involves the retrieval of already existing information whereas field
research is the gathering of first-hand information from the market

10(b) What can a firm do to extend the life cycle of a product? [6]
 Product repositioning in which the firm will seek to rebuild the positive image of the
product in the minds of the customers
 Reminding form of advertising which will facilitate the successful defending of the
market share
 Repackaging so as to manage threats posed by imitator products
 Rebranding is important so that the firm is able to rejuvenate the product
 Product development that is modifying the features of the product so as to improve
its functionality
 Market development that is targeting new markets with existing products
11(a) Stock normally takes three forms. Which are they? [3]
 Raw materials
 Work in progress
 Finished goods
11(b) Explain the role of inventory control [4]
To prevent overstocking which will help to reduce warehousing costs, pilferage, insurance
and guarding costs. Prevention of overstocking will also reduce chances of stock write offs
and obsolescence.
Stock control also prevents understocking therefore the chances of stock outs will be
reduced which will preserve the image of the firm and also sustain its revenue.

12. Show the purpose of the following forms of communication:

(a) downward communication [2]
(b) upward communication [2]
(c) horizontal communication [2]
(a) downward communication
 The managers are able to convey instructions and orders to the workers
 Managers are able to communicate the goals and objectives of the organisation
(b) upward communication
 Workers are able to give feedback on the instructions and orders
 Workers are able to convey grievances to their managers
(c) horizontal communication
 Workers are able to share work related information
 The workers are able to socialise
 November 2009 Paper 1

1 What is de-industrialisation? [2]

 This is the decrease in importance of the secondary sector mainly due to the growth
of the tertiary sector
2(a) list three stakeholders that might wish to compare the size of one business to another
[3]
 Government
 Managers
 Shareholders
2(b) State and explain any two factors that are taken into consideration when measuring
the size of the business [4]
 Market share –large companies usually have larger market share than small
companies and market share relate to the proportion of a particular firm’s sales in
relation to total industrial sales
 Number of employees-the number of workers employed by a firm are indicative of
the size of the business that is large corporations such as MNCs employ more
workers than small firms such as sole trader business

3(a) What are the importance of small business operations in your country? [4]

 They contribute to the tax revenue of the government for example payment of
presumption tax by small scale miners and commuter omnibus operators
 They impose stiff competition to large firms and reduce their monopoly tendencies
for example corner shops in Zengeza 5, Zengeza 4 and Unit F effectively compete
with large firms in Chitungwiza such as TM and OK
  They help to close the market gaps for example targeting markets that are neglected
by large firms such as hairdressing business
 They create employment for example many people are employed in Glenview area 8
Home industry and Guzha township Home Industry in Chitungwiza (Chikwanha)

3(b) Explain the difficulties faced by small firms in their operations [4]
 Lack of finance due to low credit worthiness status since they possess less non-
current assets therefore they do not have sufficient collateral security
 Stiff competition from large firms since their product portfolio is narrow compared
to large firms
 Non-enjoyment of economies of scale since they operate on a small scale therefore
their unit costs are high which compromises on profitability
 Failure to attract competent personnel since they lack managerial economies of
scale
4. Murape Pvt Ltd sells computers to small businesses around the country. It is suffering
cash flow problems at the moment. How might the firm improve its cash flow? [4]
 Debt factoring-the firm may sell its long outstanding debts to a factoring house
 Sale of excess non-current assets-this will result in the immediate cash injections in
the business
 Market development-the firm can target new markets consisting of large firms. Large
firms have less default risk
 Trade credit-Murape Pvt Ltd may negotiate with its creditors so that payments to
creditors may be delayed considering that customers are taking long to pay
5(a) Distinguish between marketing and selling [4]

Marketing Selling
 It is the anticipation, identification  It is the mere dispatch of goods and
and satisfaction of customers’ needs services to customers
at a profit
 It is customer oriented  It is product oriented

 It is proactive  It is reactive

 Relies on strategies such as market  Heavily relies on intense advertising

research and personal selling

5(b) Explain any two factors that influence the demand for a product [4]
 Population size-this determine the market size that is the higher the population the
more the demand
  Levels of income-it determines the purchasing power of customers that is high
income levels are associated high demand as compared to low income levels

6. Explain two ways in which a football club might reduce its break-even level [4]

 Reduction in fixed costs- the football club such as Highlanders Football Club may
build its own stadium so as to eliminate rental costs and reduce the breakeven level
 Increase the contribution per unit-this can be done if the club hires a competent
coach who will produce good results so as to attract many fans. This in turn may give
the Club an opportunity of hiking the ticket fares thereby increasing the contribution
per unit and reduce the break-even level
7. Mr B. Banda is an old experienced tailor who uses job production in making suits for his
customers. Outline the possible advantages and disadvantages he is likely to encounter in
his business [6]
Advantages
 Customers satisfaction since the production is customised that is the suits are made
as per the specifications of the customers
 Less cash is tied up in inventory that is as soon as a suit is produced, it will be
collected by the customer
 Less work monotony since production is not repetitive
Disadvantages
 Non-enjoyment of economies of scale since clothing materials are not purchased in
bulk
 Requires multi skilled workforce
 If there is sudden increase in demand the business may fail to cope up
8(a) State two sources of internal and two sources of external finance for a firm [4]

Internal External
 Retained profits  Debentures

 Sale of excess non-current assets  Ordinary shares

8(b) Outline the factors considered by the firm when sourcing finance [4]
 Purpose of the finance
 Cost of capital
 Current gearing
 Risk involved
9. To what extent are published accounts useful to a potential investor [6]
Published accounts are useful to a potential investor since they outline the profitability,
liquidity, solvency and the general financial position of the company which all determine the
amount of dividends to be received.
However the published accounts may not be useful since they can be window dressed and
affected by accounting errors. Therefore they may not provide meaningful information for
investor decision making.
Published accounts are useful to a greater extent since they are audited therefore the
degree of window-dressing is reduced.
10(a) What is a training programme? [2]
 It is a series of activities that are meant to equip workers with job related skills
10(b) State and explain any two reasons for high labour turnover in the organisation [4]
 Low remuneration-this causes demotivation of workers since remuneration is a
hygiene factor according to the two factor content theory of motivation by Herzberg
 Poor working conditions-such conditions threaten the health and safety of the
workers and may trigger high labour turnover for example non-provision of safety
clothing in hard hat areas such as the work stations for mining workers
11(a) What is an autocratic leadership style?[2]
 It is a non-participative leadership style characterised by one way communication
11(b) Explain the circumstances in which an autocratic leadership style may be
appropriate [4]
 When the task is highly complicated-complicated jobs provide less room for
participation
 When danger is common for example firefighting organizations such as the Fire
Brigade
 When managing theory X workers- the negative attitude of the workers requires the
adoption of a non-participative style of leadership such as autocracy
 When managing new employees-these employees do not have the capacity to
participate hence democratic leadership style may not be easily adopted
 June 2010 Paper
1

1(a) What is meant by the term privatisation? [2]

 This is the transfer of state owned enterprises into the private sector in which they
will be individually owned

1(b) Does privatisation necessarily benefit consumers in the economy of your country? [4]

Privatisation results in increased competition therefore efficiency will be improved such that
consumers will benefit from superior service. The deregulation of the Telecommunication
Act in Zimbabwe led to the emergence of efficient companies such as Econet, Telecel and
Netone and this has benefited the clients in this sector.
However privatisation may result in consumer exploitation through the charging of high
prices. This is because firms in the private sector are driven by the profit motive. Patients
are now being charged prohibitively expensive fees at Chitungwiza General Hospital after it
contracted out its X-ray division to Baines Avenues Clinic.
Despite the drawbacks privatisation is useful to a greater extent since consumers will
benefit from increased variety of products since firms in the private sector are more
innovative.
2(a) State any two main features involved in the design of any new product [2]
 Functionality
 Appearance of the product
2(b) Explain one method associated with work study [4]
 Method study-it involves analysing the methods/procedures of doing work followed
by improvements of procedures that are more efficient and user friendly. Method
 study produces the standard method and motion studies are quite useful in the
development of the standard method.

3(a) What are the main features of a free market system? [3]
 Limited role of the state
 Freedom of entry and exit
 Private ownership of property
3(b) Explain any two advantages of this economic system?[4]
 Provision of quality goods and services due to intense competition in the market
 The use of price mechanism allows efficient allocation of resources
4(a) State two examples of direct taxes [4]
 Corporation tax
 Pay as you earn

4(b) How might businesses be affected by taxation? [4]

 Corporation tax depletes the retained earnings which negatively affects the growth
objective
 Pay as you earn reduces the employees disposable income which in turn affects the
industrial relations at the work place
 Value added tax increases the prices of products and hence reduces the market size
 Capital gains tax reduces the returns of the business from disposal of excess current
assets
5(a) Define the term delayering [2]
 This is the removal of excess hierarchical levels on the organisational chart which
results in the shortening of the chain of command
5(b) How might a firm benefit from the process of delayering? [3]
 Improved communication since the lines of communication are shortened thus less
delays and filtration
 Improved motivation of shop floor workers since they will no longer be out of touch
with the top level management
 Reduced supervision costs since some of the management levels are removed
 Room for the creation of autonomous workgroups through the widening of the span
of control
6(a) Show the importance of downward communication in an organisation [3]
 The superiors are able to assign tasks
  Policies and procedures are communicated to employees
 The objectives of the organisation are clarified to the employees
6(b) How useful is oral communication within the business?[4]
Oral communication is direct and efficient. It also supports effective communication since it
is backed by gestures and also provides room for quick feedback.
However, oral communication lacks sense of permanency that is it cannot be easily referred
to in the future.
Oral communication is useful to a lesser extent since it is affected by many communication
barriers such as emotions of the receiver or the sender.

7(a) What are the benefits of internal recruitment?[2]

 It is cost effective
 The culture of the organisation is maintained
 Less induction is required
7(b) Outline any three factors which determine the number of staff required in the future
by a firm[3]
 Size of the organisation
 Objectives of the organisation
 Skills of the current workforce
 Labour turnover rate
8(a) Explain what you understand by a cash cow in product portfolio analysis? [3]
 This is a product with a relatively high market share and low growth rate. Products
such as Castle Lager and Lion Lager are cash cows within Delta’s alcoholic beverage
product portfolio.
8(b) What strategy might be used to boost a problem child product?[3]
 Informative advertising
 Market penetration pricing
 Sales promotional activities such as free samples
9(a) State any three methods of improving cash flows in a business [3]
 Rights issue of shares
 Disposal of excess non-current assets
 Debt factoring
9(b) Explain any two advantages of using debt finance [4]
 Fixed cost of capital therefore the firm will be able to fully enjoy the incremental
profits
  There is no dilution of ownership therefore reduced exposure to the risk of takeover

10(a) Why might the government be interested in a firm’s accounting information? [2]
 To compile national statistics for example calculation of the GDP
 To verify compliance of the business with regards to pensions obligations
 To establish whether the business may need to be supported by grands
 To assess the tax liability of the firm

10(b) Distinguish between a shareholder and a debenture holder [4]

Shareholder Debenture holder

 They own the company  They are the creditors of the

company

 They have voting rights  They do not have voting rights

 They attend the Annual General  They do not attend the Annual
Meeting General Meeting

 They receive dividends  They receive debenture interest

11(a) Define the following terms

(i)Mode [2]
(ii)Mean [2]
 Mode is the frequently appearing number within a given statistical data

 Mean is the average number within a given statistical data

11(b) How useful is the mode in making stockholding decisions?[4]

The mode identifies the frequently purchased product therefore the firm will be guided in
preventing stock outs on such a product. In addition, overstocking of products that are not
frequently demanded is also prevented.
However the mode may not be useful if the company has a balanced product portfolio that
is many products will have the same relative importance in terms of sales revenue with the
frequently demanded product therefore they also deserve close monitoring to prevent stock
outs.
The mode is useful to a lesser extent since it cannot be further processed that is it cannot be
used to calculate measures of dispersion such as the standard deviation. Such measures are
needed to determine the maximum and minimum levels of inventory.
12. Explain simultaneous engineering and explain its benefits [4]
This is a lean production technique in which various departments will be involved in a
particular project such as new product development. This technique is beneficial since it
speeds up the development process and also fosters teamwork spirit. The initiative of the
employees is effectively utilized
 November 2010 Paper 1

1(a) State any three forms of de-integration [3]

 Management buy out
 Contracting out
 Demerger
1(b) Distinguish between public sector and the private sector of an economy [4]

Public Sector Private Sector

 Consist of state owned  Consist of organisations that are

organisations owned by individuals

 Driven by social objectives  Driven by profit maximisation

 Organisations are run by money  Funded by capital contributed by

collected from taxes individuals

 Examples of organisations in this  Examples of organisations in this

sector include municipalities sector include sole traders,
partnerships and limited companies

2(a) What are the main causes of business failure?[3]

 Inappropriate leadership style
 Competition
 Unstable economic environment
2(b) Explain any two features of an effective management by objectives programme [4]
 Democracy-an effective management by objective system is participative in nature
that is workers contribute in the decision making process
 Autonomy-workers work freely that is a micro supervision system is not utilized
3. Explain any three benefits of formal meetings in an organisation [6]
 The degree of preparedness of the participants is high since an agenda is circulated
before the meeting
 It is useful in future decision making since minutes are taken(written records will be
available)
 Quality decisions will be made since they are organised that is there is a chairperson
who will be controlling the proceedings
4(a) What is an organisation chart? [2]
 It is a pictorial view which shows the formal reporting relationships in the
organisation that is who reports to whom.
4(b) Outline any three essential organisational elements that can be identified on the
organisation chart [3]
 Span of control
 Chain of command
 Lines of communication
5. Comment on the importance of training to an organisation [5]
If the workers are equipped with work related skills defects are reduced and the general
level of productivity is improved. The workers will be less prone to accidents therefore their
welfare will be taken account of. After the training process workers will be motivated by
work itself since training is a non-financial motivating tool.
However, training is costly to the organisation that is it depletes the financial resources of
the organisation. It also consumes a lot of time.
6(a) What are the physical attributes of a product? [3]
 These are distinctive features of a product such as size, colour, shape and texture
6(b) Evaluate the usefulness of desk research [4]
The use of desk research allows easy collection of information that is information is
retrieved from existing sources. In addition, desk research is cost effective.
However, desk research may result in the collection of outdated information and there is
greater room for such information to be incomplete.
Desk research is useful to a greater extent since it avoids duplication of effort and also
guides pure/field/primary research process.
7(a) What is quality control?[2]
 These are various techniques that are meant to minimise defects
7(b) Explain any two benefits of quality control [4]
 Minimisation of defects which eliminates the need for reworking and downgrading
of products
 Increased business reputation since the degree of customer satisfaction is high
8(a) Define the term lean production [4]
 These are various production techniques that are meant to minimize various wastes
in the production process
8(b) Explain any two practices used in lean production [4]
 Quality circles-these are small groups of workers who work autonomously,
voluntarily and regularly in discussing quality related problems, recommending
solutions to management
 Total quality management-everyone in the organisation is deemed to be a quality
controller and all the time is earmarked for controlling quality
9(a) What application does marginal costing have in decision making in an organisation [4]
 Pricing decisions in which the contribution cost pricing is adopted
 Establishing the break-even level
 Determining the margin of safety
 When deciding whether to make or to buy products

9(b) Show the difference between debt and equity financing [4]

Debt Finance Equity Finance

 It is borrowed finance  Non-borrowed finance

 Sourced outside the organisation  Sourced within and outside the

organisation
 Exposes the company to the risk of  Exposes the company to the risk of
liquidation takeover

 Increases the gearing of the  Decreases the gearing of the

company company

 The cost of capital is fixed  The cost of capital varies

10(a) What is a budget?[2]

 This is a formalised management plan expressed in monetary terms
10(b) How useful is budgeting in the management of a business? [4]
Budgeting allows managers to undertake the planning function. In addition, budgeting
prevents unnecessary wastages of financial resources. They are also motivational in nature
since targets are naturally inspiring to the workers.
However, budgets may instil a sense of rigidity and they also tend to overlook qualitative
information which cannot be expressed in monetary terms.
Budgets are useful to a greater extent since they provide a basis of performance
measurement.
11. Outline the benefits and drawbacks of mode as a measure of central tendency [4]
Benefits
 It is a typical value
 It is not affected by extremes
Drawbacks
 It cannot be further processed
 When there is large quantity of information it is difficult to identify
12. To what extent are probability tree diagrams useful in decision making?[4]
They allow the firm to effectively utilise financial resources since the project with the
highest expected monetary value is identified. In addition, decision trees allows logical
thinking in managers.
However, decision trees are based on estimates for example the probability of success and
failure, the expected returns and the expected costs.
Decision trees are useful to a greater extent since they take both risk and return into
account.
 June 2011 Paper
1

1(a) State any two factors of production [2]

 Land
 Labour
1(b) What factors should be considered by an entrepreneur when choosing the location of
his business?[3]
 Availability of market
 Availability of labour
 Availability of raw materials or inputs
2(a) Distinguish between direct and commercial services [4]

Direct Commercial

 Offered by experts  Those in touch with the customers

do not need to be experts
 They are customised  They are standardised

 Usually offered on a small scale  Usually offered on a large scale

 For example teaching, medical  For example Banking and Insurance

services and legal services

2(b) How can the government assist small businesses in your country [4]

 Offering grands through the ministry of small and medium enterprises

 Reducing the level of competition through the protectionist policy and the anti-
monopoly Act
 Constructing ready built factory shells such as the Glenview area 8 Home Industry
 Educating the entrepreneurs of small businesses through conducting trade
exhibitions such as Harare Agricultural Show and The Zimbabwe International Trade
Fair
3. To what extent is job evaluation useful to an organisation? [4]
Job evaluation is important in the creation or amendment of the organisational chart
(organisational design) since it allows the ranking of jobs. Job ranking, a result of job
evaluation, is also important in safeguarding fair remuneration since workers are paid
according to the demands of the jobs.

However job evaluation comes at a cost because business organisations usually consult
human resource experts and these experts charge prohibitively expensive charges.
Job evaluation is important to a great extent since it identifies jobs that no longer have
significance and hence in need of job design techniques such as enlargement and
enrichment to be adopted
4(a) What is the difference between span of control and chain of command [2]
Span of control refers to the number of subordinates directly reporting to a superior
whereas chain of command is a pictorial view of who reports to whom.
4(b) Briefly explain why some people prefer to work for a business with a wide span of
control [4]
 Wide span of control allows workers to socialise and satisfy their social needs. Some
workers may prefer such an organisation since their motivation will be boosted
 Some workers may want job enrichment on their jobs since a wide span of control
allows them to work autonomously and this is a form of enrichment
 Theory X type of workers may prefer a wide span of control because they will have
room to dodge work since a micro supervision system will be difficult to enforce
 Certain workers may prefer a wide span of control because there is room for team
working which will in turn allow mutual support and cross functionality
5(a) State any two communication methods [2]
 Oral communication
 Written communication

5(b) Explain how McGregor’s Theory X and Theory Y might influence the leadership styles
of managers [4]
 McGregor’s theory X assumes that workers are naturally lazy, lack initiative and
avoid responsibility. Therefore such workers promote the implementation of an
autocratic style of leadership which is characterised by one way communication and
a micro supervision system. Workers who lack initiative do not require two way
communication and workers with a negative attitude towards work require close
supervision since they have high room of dodging work.
 McGregor’s theory Y assumes that workers are motivated by work itself, seek
responsibility and are full of initiative. Such workers are able to work autonomously
and hence require the adoption of a democratic leadership style which is
characterised by two way communication so as to utilise their initiative
6(a) What is price?[3]
 This is a marketing mix element which refers to the fare or charge placed on a
product which is paid by the customers for them to satisfy their needs

6(b) Explain the importance of price in business [4]

 Price attracts the customers which will result in increased market share for example
penetration pricing
 Price communicates value of the product for example premium pricing which
communicates the high quality of products for example on technological products
such as cell phones
 Price enable the firm to recover costs incurred such as full cost plus mark-up pricing
therefore the survival objective will be safeguarded
 Price also allows the firm to maximise its profits for example skimming pricing which
increases the profit margins of the firm

7(a) Distinguish between market share and market size [2]

 Market share refers to the proportion of the firm’s sales in relation to total industrial
sales. On the other hand market size refers to the total industrial sales
7(b) The following information relates to a firm in a shoe manufacturing industry:

2004 2005
Units Value Units Value
$(000) $(000)
Total industry 36 000 48 000
sales
Firm’s sales 3 600 5 000
Total industry 5 000 6 500
Sales
Firm’s sales 500 600

(i) Calculate the growth rate of total industrial sales over the two years [4]
 Growth rate = Change in sales
Initial sales
 = $1 500 X 100
$5 000
=30%
(ii) This firm’s market share dropped from 10% to 9.23% over the two years. Explain the
meaning of this decrease [2]
 This is because the growth in the firm’s sales of 20% is lower than the growth in the
total industrial sales of 30%. This could be because of the entry of new firms in the
shoe industry
8(a) Define the term productivity [2]
 The is the rate at which output is produced by a firm that is output per given input
for example output per worker
8(b) How might a company improve its productivity? [4]
 Training the workers-equipping them with job related skills to increase their
operational efficiency
 Job enrichment- This is a non-financial motivating factor that can improve the
productivity of workers
 Pierce rate system-If workers are paid according to output their productivity will
improve since workers were viewed as rational economic beings by Frederick
Winslow Taylor
 Employee appraisal- This controlling tool will ensure that workers are accountable
for their results and will also improve performance through the Hawthorne effect
since there is a positive relationship that exists between the attention paid to
workers and the subsequent rise in productivity
9. Explain why shareholders might be concerned about a decision to borrow more capital
if profits of the company have continued to fall several years [4]
 Debt capital will reduced the profits that are available to pay dividends(earnings)
since the firm will need to pay interest on the debt capital
 Debt finance will increase the gearing of the company and this may reduce investor
confidence which in turn may result in a fall in the share price , thus the shareholders
will not benefit from capital gains
 Debt finance within the firm’s capital structure exposes the company to the risk of
liquidation and the shareholders may fear that they may lose what they have
invested
 Borrowing may worsen the profitability of the firm since, through interest, the
expenses of the company will be increased
10. Explain the problems that may arise from having a low level of working capital in the
business [4]
 Poor industrial relations since the firm may fail to pay workers’ salaries on time
 Bottlenecks in the production process since the firm may fail to purchase raw
materials on time
 Reduced shareholder confidence since the firm will not be able to pay dividends to
shareholders
 The firm may be charged interest and penalties by the tax authorities since they may
not be in a good financial position to remit taxes that are due
11(a) Name any two types of ratios that are used in business [2]
 Gearing
 Trade receivables turnover
11(b) An analysis of a small firm’s accounts discloses an acid test ratio of 0.4:1 and a
current ratio of 1:1. Comment on the financial position of this firm [4]
 The firm has an adverse liquidity position since there is only $1 of current assets
available to cover every $1 of current liability. This is lower than the minimum
current ratio of 1.5:1 which an average firm should have. In addition there is only
$0.4 of the liquid current assets that are available to cover every $1 of current
liability. Therefore 60% of the firm‘s current assets are not in a liquid form.

12. Comment on the usefulness of the blending technique as a decision making tool [6]
The blending technique is useful in finding optimum solutions therefore will guide a
business organisation so that it effectively utilises its financial resources. In addition it is
useful for both strategic and operational decision making.
However the blending technique cannot be used if the constraints at hand do not follow a
linear function. This technique is also based on estimates therefore room for inaccuracy will
always exist.
The blending technique is useful to a greater extent since a lot of constraints are taken into
account. Therefore it promotes objective decision making. Logical thing in managers is also
promoted.
 November 2011 Paper 1

1(a) State any two legal constraints that affect businesses [2]
 Price controls
 Operating licences

1(b) Outline the ways in which the government might provide employee protection in
your country [4]

 Setting maximum working hours through the ministry of Labour

 Setting minimum wage through the Labour Act
 Monitoring the safety conditions through NSSA
 Offering some arbitration services through the Labour Court to prevent unfair
dismissal of workers
2. How do the following non-financial factors motivate staff?
(a) Team working
(b) Training
 Team working- since the workers will be working in groups their social needs are
satisfied and this will boost their morale
 Training-equipping the workers with work related skills allows them to satisfy their
need for achievement since their operational efficiency will be high
3(a) Explain the importance of effective communication in an organisation [4]
 Effective communication allows the managers to easily identify the grievances of the
workers so that high morale within the organisation is maintained
 Instils flexibility within the organisation such that the organisation can easily adapt
to any changes in the organisation
  It allows effective co-ordination such that the goals of the organisation can be easily
achieved
 Improves industrial relations at the workplace since workers will feel part and parcel
of the organisation.
3(b) Show the advantages and disadvantages of oral communication [4]

Advantages Disadvantages

 Quick and direct  Lacks a sense of permanency

 It is backed by gestures therefore  Not suitable where large volumes of

can be easily understood information is being communicated

4(a) What are the main causes of high labour turnover?[4]

 Inappropriate leadership style
 Unfair remuneration
 Unsafe working conditions
 Ineffective communication
4(b) How might management reduce high labour turnover? [4]
 Adopting an appropriate leadership style in line with the attitude and qualities of the
workers for example adopting a democratic leadership style on theory Y type of
workers
 Fair remuneration as guided by the results of job evaluation, employees appraisal
and salary surveys
 Adopting a mutual goal setting process through the implementation of a
management by objectives system
 Adhering to the standards set by institutions such as NSSA so as to ensure safe
working conditions

5. How might a marketing manager segment a market for shoes?[4]

 According to Age- Firms such as Bata manufacture shoes for infants and shoes for
adults
 According to gender – Firms like Walktall manufacture shoes for males and for
females
 According to income-this is done through the provision for shoes for low income
earners and shoes for high income earners
 According to benefits sought-providing shoes for different purposes for example
school shoes, sports shoes and industrial shoes
6. Explain the benefits of competition to consumers [4]
 High customer service since the firms will be seeking to defend their market share
 Provision of quality products that are fit for their purpose
 Wide variety of products will be produced
 Low prices will be charged on products

7(a) Define batch production [2]

 This is the production of same basic product in large quantities in different versions
for example the manufacture of Evarshap Pens in different colours by Croxley
7(b) Explain one advantage and one disadvantage of batch production [4]
Advantage
 Less risk of stock outs since production levels are high for example shoe
manufacturing firms such as Bata
Disadvantage
 Large capital outlay is required since production is automated
8. Explain the costs associated with
(a) Holding stocks
(b)Holding inadequate stocks
(a) Holding stocks
 High risk of pilferage that is theft of inventory. The more the inventory the greater
the risk of pilferage
 High storage costs for example warehousing costs
 The stock might become absolute due to changes in the tastes and preferences of
customers
(b)Holding inadequate
 High risk of stock outs which will result in lost revenue
 Bottlenecks in the production process which may result in the underutilisation of
machinery
 High procurement costs due to emergency purchases
9. Explain any two advantages of debt finance [4]
 Enjoyment of financial leverage since the cost of capital is tax deductible
 There is fixed cost of capital which makes financial planning easier and the firm will
also enjoy any incremental profits
10. Comment on any three limitations of ratio analysis [6]
 They do not take account of qualitative information therefore they may
misrepresent the performance of the business
 Ratio analysis depend on the representativeness of financial statements. The
financial statements may be affected by window-dressing, errors and inflation
 Ratio analysis merely identify the problems of the company without recommending
the solutions
11. Evaluate any two methods of improving cash flows in an organisation [6]
 Trade credit- in this instance the firm negotiates with suppliers and will be granted
permission to delay payment. The firm will benefit since cash outflows will be
delayed which is vital when the firm is experiencing some liquidity challenges.
However, the firm will forgo discounts for prompt payment
 Alternatively, the firm may use debt factoring and recover money from its long
outstanding debts through the factoring house. However the firm will not recover
everything that was owed by the customers
 These sources of finance are useful to a greater extent since the firm will benefit
because of the loss in value of money due to time through paying creditors later and
receiving money from debtors earlier
12 ABC Ltd accepts investments with a payback of three years

$000

Initial investment 4 000

Net return Year 1 800
Year 2 1 000
Year 3 1 500
Year 4 1 400
Year 5 1 650
Year 6 1 700
Year 7 1 750

(a) Using the payback method should ABC accept this project? [2]

Year Cash flow($) Balance($)

0 (4 000 000) (4 000 000)
1 800 000 (3 200 000)
2 1 000 000 (2 200 000)
3 1 500 000 (700 000)
4 1 400 000
PBP= 3 Years 700 X12
1 400
= 3 Years 6 months
(b) Explain why the payback method may not be a good way of deciding whether to invest
in this project [4]
 It does not take the whole life of the project into account for example cash flows in
year 4-7 were ignored
 Time value of money is not taken into account. The project has a total duration of 7
years hence time value of money need to be taken account of
 The size of the project is not taken into account that is PBP of 3 years 6 months is not
indicative of the size of the project
 The timing of cash flows is also not taken into consideration
 June 2012 Paper
1

1. Identify any two methods of privatisation [2]

 Deregulation
 Complete sale
2(a) List any three types of businesses found in the private sector [3]
 Sole trader
 Partnership
 Limited Company

2(b) Explain why government may be interested in controlling an organisation which

supplies electricity in your country [4]

 An organisation that supplies electricity is strategic to the economy therefore it has

to be state owned to ensure economic stability
 To ensure continuous supply of the important utility so as to safeguard the standard
of living
 To ensure fair distribution of electricity for example ZESA embarked on the rural
electrification programme
 To ensure that affordable prices are charged
3(a) Identify any two factors which may influence the location of a firm [2]
 Availability of raw materials
 Availability of transport networks
3(b) Explain the effect of import duty on foreign trade [4]
 The quantity of imports will be reduced because of restrictions such as tariffs
 Import duty may trigger retaliation by foreign countries which in turn may reduce
the amount of exports
 It protects local firms such that they are likely to grow and increase the amount of
exports in the long run
 It may negatively affects trade relations of the country and its trading partners
4(a) What is meant by the following terms?
(a) Grapevine [2]
(b) Leadership [2]
 Grapevine refers to informal channels of communication which promote the spread
of gossip in the organisation
 Leadership is the directing and influencing of task related activities of subordinates
4(b) Outline the advantages of an ‘all channel network’ [3]
 Limited room for filtration of information
 Members communicate freely therefore it is fast
 There is room for feedback
5. Explain the merits and demerits of a geographically based organisation structure [4]

Merits Demerits

 It creates interdivisional  Co-ordination process is difficult

competition since different divisions see
themselves as stand-alone entities

 Develops the conceptual skills of the  Duplication of tasks by functional

divisional managers managers within each division

6. Evaluate the significance of internal recruitment to a firm [4]

Internal recruitment is cost effective since there is no need for the organisation to advertise
the job in the print media. In addition internal recruitment maintains the culture of the
organisation since the recruited worker is already familiar with the values and norms of the
organisation.
However internal recruitment has limited pool of potential job candidates. In addition, it is
characterised by the problem of inbreeding.
Internal recruitment is useful to a greater extent since it motivates the workers through the
satisfaction of the self-actualisation need needs. It also highlights that opportunities for
career growth exists in the organisation
7(a) Show how the government might influence the demand of a product [2]
 Through the price controls the government may increase the quantity demanded for
a particular product since the prices to be charged are usually low
 The government may also influence the demand through subsidies, which also help
to lower the price and increase the quantity demanded
7(b) How might introduction of information technology affect an organisation [4]
 Facilitates huge storage of information that is better record keeping
 Widens desk research through the use of internet and the intranet
 Labour costs may be reduced since a lot of activities will no longer be done manually
 Improved production through computer aided manufacturing
8(a) Why may a company temporarily sell one of its products at a loss? [4]
 It may be part of a loss leading strategy
 To allow penetration of the market to prevent product failure
 In order to facilitate divesture of the product that has reached the decline stage
 In order to increase the overall profits of the company through acceptance of an
additional order below normal selling price. That additional order will have a positive
contribution
8(b) A business has decided to increase the price of its product from $1 to $1.20. As a
result sales fell form 1 200 to 900 per week
PED = % Change in quantity demanded
% Change in price
=25%
20%
=1.25
9(a) Analyse the possible problems to a firm of introducing a ‘just in time’ manufacturing
[4]
 Increased risk of stock outs since inventory is only procured when required. This may
negatively affect the reputation of the firm
 Increased room for bottlenecks that is the firm may lack sufficient raw materials
needed in the production process
 Non-enjoyment of economies of scale since supplies are purchased in small and
numerous lots
 Inefficient procurement since inventory will be required urgently therefore the
business will not have sufficient time to carry out supplier audit
9(b) How does work study affect the motivation of workers? [4]
 Development of user-friendly methods through method study satisfies the safety
needs of workers since they will be less prone to accidents and hence motivation is
safeguarded
 Efficient methods developed from method study also help to satisfy the workers’
need for achievement
 Standard time, a result of work measurement, may help to ensure fair remuneration
which will boost the morale of the workers
 The standard time will also help to set achievable goals for the workers thereby
motivating them. This is because, according to the expectancy theory, the effort
expended by workers depend on the perceived likelihood that high performance will
be achieved.
10(a) Give any two examples of internal users of financial information [2]
 Managers
 Workers

10(b) A firm buys a machine worth $20 000. Its expected useful life is 5 years and has a
residual value of $1 000.
Calculate the charge for this machine in year four using
(i) Straight line method
(ii) Reducing balance [3]
Straight line method
Depreciation per year=Cost-Residual value
Estimated useful life
=$20 000-$1 000
5
=$3 800
Charge year 4 =$3 800
Reducing Balance

Year NBV at start Charge for the NBV at end

$ year $
$
1 20 000 4 000 16 000
2 16 000 3 200 12 800
3 12 800 2 560 10 240
4 10 240 2 048

11(a) Suggest any two appropriate sources of internal finance available to a firm [2]
 Selling of excess non-current assets
 Retained profits
11(b) How useful is the method of Average rate of return in appraising investments? [4]
The Average rate of return is user friendly and less prone to errors. In addition, it takes the
whole life of the project into account therefore it is exhaustive.
However it does not take time value of money into account and also uses profits which are
less objective as they involve a lot of estimations.
The accounting rate of return does not take into account the size of the project therefore is
it useful to a lesser extent

12. The following are monthly quantities of chairs manufactured by Chille Private Limited
in 2008

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Number 200 150 100 200 160 110 100 300 200 134 240 350
of
Chairs
Giving examples derived from the above information, identify and explain any two
measures of central tendency [6]
 Mode is the frequently appearing number within a set of numerical figures for
example 200 chairs
 Mean is the average number within a set of numerical information for example 187
 November 2012 Paper 1

1(a) State any three different ways in which the size of a business might be measured [3]
 Number of employees
 Market capitalisation
 Market share
1(b) Outline any three legal controls which might affect the way in which a business
operate [3]
 Operating licence
 Taxes
 Age restrictions on consumption of products
2(a) Show the difference between public sector and private sector of an economy [2]
 In the public sector there is state ownership of organisations whereas organisations
are individually owned in the private sector

2(b) Why might some goods and services provided by the public sector of your country?[2]

 Certain organisations require a lot of start-up capital for example NRZ. Huge sums
for money will be required to construct railway lines and to acquire the station
wagons and such finance can be provided by the state through revenue collected
from taxes
 Certain organisations are strategic to the economy for example ZESA and they have
to be state owned to ensure stability of the economy
 To preserve state security for example public ownership of the organisation such as
ZBC
  At times organisations are state owned to ensure fair distribution of vital services
for example organisations such as ZINWA and ZESA which provide essential utilities

3(a) What is an organisation chart? [2]

 It is a pictorial view of which shows the formal reporting relationships in the
organisation that is who reports to whom
3(b) Explain one reason why an organisation chart will be useful to employees in a
business [2]
 The organisation chart highlights the formal lines of communication therefore the
employees will know where to convey their grievances
4(a) How useful is oral communication in an organisation? [4]
Oral communication is quick and flexible that is feedback can be easily provided. This
method of communication is direct and backed by gestures.
However, oral communication has a shorter life span as compared to written
communication. It can be easily affected by emotions.
Oral communication can only be useful when complimented by written communication for
example formal meetings
4(b) Comment on the importance of trade Unions in employer/employee relations [4]
Trade unions may help to improve the employer/employee relations since they bargain for
fair remuneration for employees. They also bargain for the general improvement in the
working conditions at the workplace. This will eliminate demotivation which in turn will
improve the industrial relations at the workplace.
However, trade unions may negatively affect the relations between the internal
stakeholders of the business since they tend to overlook the interests of the employer. In
addition, trade unions may not fully represent the interests of the employees since they are
tempted to purse some political interests.

5(a) Distinguish between Douglas McGregor’s theory X and Y [4]

 Theory X assumes workers to be naturally lazy that is they avoid responsibility. In
addition Theory X workers lack initiative and they are motivated by financial
incentives. On the other hand theory Y type of workers accept and seek
responsibility, they are full of initiative and are motivated by work itself.
5(b) How might the differences in the two theories be reflected in the leadership styles of
managers? [4]
 Theory x workers require the implementation of an autocratic leadership style since
it guarantees micro supervision system which prevents the dodging of work. In
addition, an autocratic leadership style is non-participative which is important since
workers lack initiative.
 On the other hand theory y type of workers require the implementation of a
democratic leadership style. Democracy provides room for autonomy which is crucial
since workers have a positive attitude towards work. The participative nature of a
democratic leadership style allow the initiative of the employees to be fully utilised

6. State the reasons why the market for a product might decline in size [2]
 Change in the tastes of the customers
 Technological advancement
7(a) Other than price, which factors will cause an increase in the demand for mobile
phones [2]
 Increase in income
 Technological advancements
7(b) A business sells a product whose demand is relatively price inelastic. Explain the
effect on sales and revenue of a price increase [3]
 The sales will decrease
 However the total revenue will increase because the fall in the physical quantity sold
will be outweighed by the effect of the price increase.
8(a) Define the term product portfolio [2]
 This the range of products offered by a firm for example product portfolio for TM
consists of products such as groceries, butchery, liquor, hardware and
confectionaries.
8(b) Explain the importance of product life cycle in planning a product portfolio [4]
 The product life cycle highlights that products have limited lives therefore firms are
constantly reminded of the need to introduce new products in order to keep a
balanced product portfolio
 In addition the product life cycle highlights that a product will pass through different
phases that require different marketing mix strategies. As a result the firm will be in
a position to adopt appropriate strategies for all the products that will be in the
portfolio
9 A company manufactures product X and the following data is shown

Direct costs per unit $70

Overheads $50 000
Current output 120 000
Selling price $140
Full capacity output 150 000

(a) From the above information, calculate the company’s capacity utilisation [2]
Capacity utilisation =Current output X 100
Maximum output
=120 000 X 100
150 000
=80%

9(b) State two ways in which a business may achieve added value [2]
 Packaging
 Branding

10(a) Distinguish between assets and liabilities of a business [4]

Assets Liabilities

 They are business possessions  They are what the business owe

 They generate future cash inflows  They result in future cash outflows

 They increase the net worth of the  They reduce the net worth of the
business business

 They increase the credit worthiness  They decrease the credit worthiness
of the business of the business

 Examples include buildings, cash  Examples include bank loan and

and furniture trade payables
10(b) Explain why businesses depreciate their fixed assets [3]
 Non-current assets are depreciated so as to take account for the fall in value of these
non-current assets during their use in the business
 Depreciation results in reduced reported profits such that the business will prevent
unnecessary cash outflows thereby increasing the internal sources of finance. The
business will be in a position to replace any worn out non-current assets
11. Briefly explain ways in which a manufacturer of toys might find break-even analysis
useful [4]
 Breakeven analysis identifies the break-even point that is the point where the firm
neither makes profit nor loss. This is important in guiding the firm in avoiding loss
making production levels
 Break- even analysis is also useful in the formulation of various strategies that are
meant to increase the profits. This is important since toy manufacturing is
characterised by a lot of competition therefore it is difficult to earn profits
 Break- even analysis is also important in the general decision making since it is
backed by the break-even chart which has a lot of visual impact therefore the toy
manufacturer will find break- even analysis useful in the planning of production
schedules
 Break- even analysis identifies the margin of safety which is indicative of the
exposure of the toy manufacturer to the risk of incurring losses

12. The following information is provided for project Venus

Activity Proceeding Duration (days)

activity
A - 5
B A 6
C A 3
D A 3
E B 2
F D 2
G B,C,F 9
H E 4
 (a) Define the term critical path [2]
 It is the sequence of activities with the longest duration which determines the
project completion time
(b) Draw a network diagram for project Venus [3]

11 13
6
3 22
11 16

20
7
0
1 5
2 20
0
5

8
4
11
9
5
11
 June2013 Paper
1

1(a) What do you understand by the term free market enterprise? [2]
 It is an economic system in which basic economic questions of what to produce, how
to produce and for whom to produce are answered by market forces
1(b) Give reasons why a free market enterprise might be the most appropriate system to
the economy of your country [4]
 Standard of living of the general public is improved due to a variety of products
 Quality products and services are also produced due to intense competition
 Economic growth is encouraged that is the GDP is likely to increase
 Unemployment level may be reduced due to massive creation of employment within
this economic system
2(a) Define the term profit maximisation [2]
 This is a strategic objective mainly pursued by businesses in the private sector which
is attained through high sales volume, high prices and low cost
2(b) Why might profit maximisation be considered inappropriate by a firm’s stakeholders
other than shareholders? [4]
 The customers may be against profit maximisation since it may be attained by a
firmed through high prices
 The workers may be against profit maximisation since it may be attained through
cutting the wage bill
 The suppliers may also be against profit maximisation since the firm may try to
bargain for low prices on purchase
  The society may be against profit maximisation because it may attained through
reduction of expenses that relate to social responsibility activities
3. Suggest why a shoe manufacturing firm might expand through
(a)Vertical integration [2]
(b) Horizontal integration [2]

Vertical integration
 The shoe manufacturer such as Bata may want to ensure reliable supply of raw
materials such a leather through vertical backward integration
 To ensure that there is guaranteed demand for shoes through vertical forward
integration
Horizontal integration
 The shoe manufacturer may want to increase its market share
 To increase the scope of operation so as to attain economies of scale in purchases
materials such as glue and rubber
4(a) State two factors indicate falling morale in a firm [2]
 High rates of absenteeism
 Occurrence of industrial actions such as strikes
4(b) Explain why management of a firm would wish to maintain high levels of morale
among its workers [4]
 To safeguard high rate of productivity
 To improve the industrial relations since conflict will be low in a motivated
workforce
 To safeguard the quality of production and quality of services
 To reduce labour turnover so as to retain experienced personnel
5(a) Give two components of job analysis [2]
 Job description
 Person specification
5(b) Explain two factors which influence span of control within an organisation [4]
 Nature of production- labour intensive firms have many employees and are likely to
have a wider span of control that organisations which are capital intensive
 Size of the organisation- Small firms for example sole traders are likely to have a
narrow span of control as compared to firms such as MNCs
6(a) What is price elasticity of demand [2]
 This is the responsiveness of quantity demanded due to changes in price and it is
measured by the following formula:
PED =% Change in quantity demanded
% Change in price

6(b) Why might a firm wish to reduce its price elasticity of demand [4]
 The firm may intent to reduce the P.E.D to make sure that it becomes inelastic so as
to maximise profits through the adoption of market skimming
 The P.E.D may also be reduced to become inelastic so as to manage price
competition strategies that might be dominating the market. The firm will therefore
have an opportunity of utilizing non-price competition strategies such as customer
service when the price elasticity of demand has been changed to inelastic
7. Assess the contribution of market segmentation to the overall success of the
organisation [4]
Market segmentation facilitates effective target marketing which in turn may help to
improve the position of the products in the minds of the customers. Through market
segmentation the firm will avoid unnecessary wastages such as distribution products where
they are not demanded.
However, the process of market segmentation may be difficult to implement since it is not
easy to find the most appropriate basis of segmenting the market. In addition, prior to
segmenting the market the firm should research the information pertaining to consumer
buying behaviour.
Market segmentation is useful to a greater extent since it allows the firm to tailor make its
marketing mix strategies to suit the different needs of customers in targeted market
segments.

8(a) The main feature of any production process is added value. Define the term added
value. [2]
 This is the difference between the worthiness of raw materials and the worthiness of
finished goods after the production process
8(b) Explain the term lean production [3]
 These are various production techniques which are meant to minimise wastages in
the production process such as simultaneous engineering and the Kaizen approach
9. You are provided with the following costs for a product:

Fixed Costs $50 000

Total variable costs $65 000
(output at 1 000
Units)
Selling price $90
(a) Calculate the contribution per unit for this product[3]
(b) The break-even level output[2]
(a)Contribution per unit= Selling price –Variable cost per unit
=$90-$65
=$25

(b) Break-even output =Fixed costs

Contribution per unit
=$50 000
$25
=2 000Units

10 What part might gearing ratio play in

(a) a company’s decision to seek further finance[3]
(b) a potential shareholder’s decision on whether to buy shares or not[3]
(a) Before sourcing finance, a company will consider its gearing. If the company is highly
geared (more than 50% gearing) it usually opts for equity sources of finance since further
increase in the gearing ratio will result in increased exposure to the risk of liquidation.
However if the gearing is low the company will have an opportunity of utilizing debt sources
of finance such as issuing debentures
(b)Shareholders usually buy shares in companies that are lowly geared since the interest
obligations of the firm will be low. This in turn increases the earnings of the company such
that the dividends to be paid will be high. If gearing ratio high there will be high chances of
not receiving dividends by the shareholders therefore the potential shareholders are less
likely to buy shares in such a company
11. The financial director of a firm states that there is an urgent need to increase the
working capital
(a) Why might there be need to increase the firm’s working capital? [4]
 So as to purchase sufficient raw materials to eliminate bottlenecks in the production
process
 To pay outstanding salaries so as to maintain good industrial relations
 To promote the firm’s products so as to increase sales and ultimately market share
 To meet tax obligations so as to avoid interests and penalties
(b)Evaluate two ways of increasing the working capital [4]
Rights issue-this source of finance is characterised by a quick and huge cash injection in the
business. It does not expose the company to the risk of liquidation since it reduces the
gearing of the company
However, rights issue further dilutes the ownership of the company which increases the
exposure to the risk of takeover.
Rights issue is useful to a greater extent since it is characterised by less share issue expenses
since the company will only contact its existing shareholders
Debt factoring-The firm will receive the money owed earlier which is important since money
loses value with time. In addition the risk of bad debts is transferred to the factoring house.
However the company will not receive everything owed by its customers since the debtors
are sold at a discount to the factoring house.
Debt factoring is useful to a lesser extent since the firm is likely to lose its reputation. This is
because the factoring house is likely to be too aggressive in recovering what was owed by
the customers

12(a)(i)Distinguish between mode and median[2]

 Mode is the frequently appearing number within a set of statistical data. On the
other hand median is a measure of central tendency which splits an arranged set of
statistical information into two equal parts
12(a)(ii) Under what circumstances might a retail outlet find the mode a useful concept[2]
 The mode identifies the frequently purchased product within the product portfolio
for a company such as OK Zimbabwe. As a result the retailer will give the frequently
demanded product adequate attention in terms of allocation of working capital to
reduce the risk of stock outs.
12(b) Comment on the usefulness of keeping right levels of stock [4]
 Keeping right quantities of stock prevents stock outs therefore the firm will not lose
revenue. In addition prevention of stock outs protects the reputation of the firm. The
firm will also have sufficient time to carry out supplier audit so as to procure supplies
in an efficient manner since there will be no need to urgently replenish stock
 Keeping the right inventory also eliminates chances of overstocking. Therefore the
firm will not tie up working capital in inventory. Warehousing costs will also be
reduced when overstocking is prevented
 November 2013 Paper 1

1. Identify any two factors that may cause a firm to relocate [2]
 Depletion of raw materials
 Dying markets

2(a) Outline any three problems associated with joint ventures [3]

 Conflict of objectives for example the firms involved may be direct competitors for
example Delta and Schweppes( have a joint venture agreement in the production
and marketing of minute maid)
 Slow decision making since the companies involved in a joint venture will be
operating in different areas for example Harare Aviation Fuelling Services( A Joint
Venture between Total and Zuva Petroleum)
 High chances of conflict occurrence since profits are shared

2(b) Explain two reasons for divestment [4]

 Economic instability-This causes negative returns to businesses. Companies such as

Corn Textiles divested from the Zimbabwean market because of the economic
downturn experienced in Zimbabwe
 Depletion of raw materials- this physical constraint reduces the viability of
businesses for example BHP(an Australian based mining company) divested its
Zimbabwean Subsidiary when Platinum reserves were depleted
3(a) Give three reasons why the owner of a small business might decide to remain small in
size [3]
 The owner of a small business such as a mini market may be satisfied with the profits
or other business returns that are being generated from the business
  The owner may be lack adequate knowledge to run a big organisation for example
owners of General Dealer shops in remote areas of Zimbabwe
 Fear of incurring diseconomies of scale that accompany the growth of the firm

3(b) Explain how the Government can intervene to assist businesses [4]

 Tax incentives- the Government may offer tax incentives such as Special Initial
Allowance(SIA) on businesses that undertake capital expenditures
 Trade Exhibitions- These help to promote businesses(both small and large) for
example Zimbabwe International Trade Fair(ZITF) and the Harare Agricultural Show

4. Analyse the possible impact of a rise in interest rates on a firm manufacturing technical
equipment [4]

 Increased cost of borrowing- A technical equipment manufacturer such as

Powerspeed require a lot of working capital in the manufacturing processes since the
goods being manufactured are high valued (Industrial goods). Therefore increased
cost of borrowing may in turn result in the manufacturer not accessing sufficient
working capital thus capacity utilisation may be reduced
 Reduced market size- technical equipment such as generators and compressors are
high valued industrial goods hence the targeted clients may also rely on loans to
acquire such products. Therefore an increase in the rate of interest may make it
difficult for the targeted customers to borrow from financial institutions hence the
market size will be reduced.
5(a) Define a line relationship [2]
 This is the relationship between a functional manager and subordinates within the
functional manager’s department for example the relationship between the Finance
Manager with subordinates such as the Budgeting manager, Treasury manager and
Accountant
5(b) Evaluate the relationship between line managers and staff managers [4]
The relationship between line managers and staff managers may be viewed as positive. This
is because staff managers such as Research and Development manager provide useful
advice to line managers and this may improve the operations of line managers.
However the relationship between staff managers and line managers may become negative
if the line managers resist some of the advice from the staff managers. In addition, conflict
of authority may also occur for example these two types of managers (staff and line) may
both see themselves as superior to the other type of manager.
The relationship may be viewed as positive to a greater extent since the staff managers and
line managers may socialise in informal groups and this may help to strengthen their bond.
6. Does job rotation really motivate workers? [4]
Job rotation is a job design technique which promotes multi skilling in workers therefore the
workers will have a chance of being promoted thereby leading to the satisfaction of self-
actualisation needs. In addition, job rotation eliminates boredom caused by alienation since
workers will undertake a variety of tasks.
However job rotation is a non-financial motivating factor therefore it is difficult to use when
motivating theory x type of workers. Theory x workers are mainly motivated by financial
incentives since they have a negative attitude towards work.
Job rotation is motivational to a greater extent especially if it is complimented by financial
incentives such as salaries, commission and bonuses
7. What are the effects of poor communication of industrial relations? [4]
 The workers will not have room to convey their grievances since room for feedback
may not exist. Therefore industrial relations will be negatively affected
 The managers will not be in a position to establish the needs of the workers thus
demotivation may occur and worsen the industrial relations
 Poor communication promote the spread of gossip in the organisation and this
causes conflicts to occur( bad industrial relations)
 Poor communication makes it difficult for the organisation to achieve its goals which
may create resentment within the organisation thereby worsening the industrial
relations
8(a) Identify the strategies that a firm can adopt given the following situations according
to the Ansoff Matrix:
(i) Selling the present product in the present market
(ii) Selling the existing product in a new market
(iii) Selling a new product in the existing market
(iv) Selling a new product to a new market

 Selling the present product in the present market-market penetration

 Selling the existing product in a new market-market development
 Selling a new product in the existing market-product development
 Selling a new product to a new market-diversification
8(b) Distinguish between marginal pricing and perceived value pricing [4]

Marginal pricing Perceived value pricing

 It is a cost based pricing method  It is a demand based pricing method

 It considers variable costs in the  Considers the worthiness attached

determination of price to the product by the targeted
customers

 Used when the business want to  Used when the customers have a
penetrate the market strong bargaining power

 Results in charging of low prices  The price level depends on the

worthiness attached by the
customers

9(a) Define work study [2]

 Work study is a generic term for a series of analytical techniques which are used to
efficiently and effectively utilize the human resources in the production process in
relation to other inputs

9(b) Comment upon the appropriateness of using a work study programme by a timber
manufacturing firm which is facing a high labour turnover problem [5]

Method study, a component of work study, produces standard method which is more
efficient. The standard method is likely to be user friendly therefore workers will be less
prone to accidents. There is high chance for accident occurrence in a timber manufacturing
business since they use advanced sewing machines. Therefore improvements in methods of
doing work will satisfy the security needs of workers and increase the motivation level such
that labour turnover may be reduced.
Work measurement produces standard time which can be used to measure performance by
a company such as Border Timbers. This may be used as a basis of performance
measurement such that fair remuneration may occur. As a result workers will be satisfied
which is quite essential in safeguarding stability of tenure.
However if the labour turnover is caused by other factors which are not work related such
as high levels of brain drain in the country due to economic instability then the results of
work study may not play a crucial role in reducing the labour turnover.

10 What are the advantages of line production to a company that manufactures soft
drinks [4]
 Line production ensures high levels of production which is important considering
that soft drinks are highly demanded for example products such as Coke and Fanta
within Delta’s product portfolio
 Line production allows a soft drink manufacturer such as Pepsi Zimbabwe to enjoy
economies of scale thereby reducing their unit costs
 Line production is highly automated therefore chances of defective products will be
low. This is important considering that soft drink manufacturing business is
characterised by intense competition therefore quality is important
 Line production allows the soft drink manufacturer to make huge profits because of
high output. As a result companies such as Delta will be able to increase their
reputation through ploughing back some of the profits to the society for example
sponsoring Zimbabwe Premier Soccer League
11(a) Name any two sources of short term external finance [2]
 Bank overdraft
 Trade credit
11(b) A local bakery is planning to purchase latest model of machinery which costs $48
000. It’s gearing stands at 60%
(i)To what extent is the payback period useful as an investment appraisal technique? [4]
Payback period uses cash flows which are objective since they involve less estimations. In
addition, the payback period takes risk into account since it gives priority to investments
which recoup the initial outlay early.
However time value of money is not taken into account. In this instance the latest
machinery may have a useful life of many years hence there is need to take account for the
loss of value of money.
The payback period is useful to a lesser extent since timing of cash flows is not taken into
account. In addition, the size of the project is not considered by the payback period hence it
is ideal for firms to use other technically superior appraisal methods such as the Net Present
Value

(ii) Discuss the significance of the firm’s gearing [4]

The gearing ratio is important since it guides the firm in using the most appropriate sources
of finance. In this instance the gearing ratio stands at 60% and such a high level of gearing
entails the firm to opt for equity sources of finance. If debt finance is used to fund the
purchase of equipment the firm will be greatly exposed to the risk of liquidation.
However the gearing ratio is not the only factor considered when choosing the appropriate
source of finance for the acquisition of latest bakery machinery. The cost of capital and
available factors of finance should not be overlooked by the bakery.

12(a)

In the decision tree above, what is the significance of

(i) The square[1]
(ii) The circles[1]
 the square- this is the decision node, a point where alternative investment decisions
are generated
 the circles-this is the chance node, a point where alternative outcomes to various
investment decisions are identified

12(b) To what extent can break even analysis be used to aid decision-making by a
manufacturing firm? [5]
Break-even analysis identifies the break-even point, a point where the firm neither makes
profit nor loss. Therefore the manufacturing firm will be guided in avoiding loss making
production levels that is levels below the break-even point.
However the breakeven analysis only assumes that there are two classes of costs (variable
and fixed) yet the firm may also have semi variable costs in its cost structure. In addition,
break-even analysis assumes that fixed costs are constant, yet in reality they may have a
stepped trend.
Break-even analysis is useful to a greater extent since, through the margin of safety, it can
be used to measure risk of incurring losses to a particular firm.
 June 2014 Paper
1

1(a) List two drawbacks of secondary research[2]

 Information gathered may be outdated
 Information may be incomplete

1(b) State and explain any two Ansoff Matrix marketing strategies that a tractor
manufacturer can use[4]

 Market penetration-A tractor manufacturer such as John Deere may increase the
sales of the existing model of tractors in the existing targeted market segments
 Product development- The tractor manufacturer such as Appropriate Technology
Africa(ATA) may develop new model of tractors, targeting the existing marketing
segments
2(a) What is meant by the public sector of the economy?[2]
This is a sector of the economy constisting Government owned organisations such as Public
Corperations and municipalities

2(b) What are the advantages of a company that might choose to go multinational?[4]

 Multinational companies such as Uniliver benefit since they will be close to their
markets for example the Zimbabwean market is loyal to uniliver brands such as
Vaseline Blue Seal,Colgate and Geisha
 Going multinational brings the multinational close to sources of raw materials for
example Bata benefited from establishing a subsidiary in Zimbabwe since there are a
lot of commercial cattle ranches hence ready supply of raw materials such as leather
and glue
  Going multinational benefits the multinational company from cheap labour for
example Total benefits a lot from cheap labour in Zimbabwe since Zimbabwe is has
high unemployment level
 There may be less competition in host countries targeted by multinational
companies
3(a) Define span of control[2]
 Span of control is the number of surbodinates directly reporting to a superior

3(b) Discuss the benefits of a wide span of control to a furniture manufaturing company[4]

 Wide span of control creates room for a furnitute manufacturing company such as
Teecherz Furnitures to utilize teamworking which will increase the efficiency level of
workers
 Wide span of control creates more autonomy and is not characterised by micro
supervision therefore it is motivational such that quality of products such as chairs
and tables is improved
 Workers for the furniture company such as TN are able to share work related
information hence utilize mutual support and cross functionality
 There will be greater room for delegation which also motivates and improves the
motivation level such that wastages of materials such as timber, glue and vanish is
prevented

4(a) Make a distinction between one-way and two way communication[2]

One way communication Two way communication

 No room for feedback  Has room for feedback

 May result in communication failure  Promotes effective communication

 Used under autocratic leadership  Used under democratic leadership

style style

 Appropriate on theory X type of  Appropriate on theory Y type of

workers workers
4(b) Give the advantages of circle network over chain network in communication[4]
 Less filtration of information
 It is more flexible
 Greater interaction therefore promotes effective communication
 It is quick therefore less room for communication delays
5(a) What is meant by the term price elasticity of demand?[2]
 It is the responsiveness of quantity demanded to changes in price and it is measured
by the following formular
 PED =% change in quantity demanded
% change in price

5(b) To what extent is the knowledge of price elasticity of demand of use to a bakery?[4]

Price elasticity of demand is of use to a firm which produces bread such as Lobels when
making pricing decisions. When the price elasticity of demand is elastic low price will be
charged and when price elasticity of demand is inelastic high prices are charged.
However price elasticity of demand is not the only factor when making pricing decisions
since competition and price controls are other factors to consider when establishing the
price of bread. Bread is a basic product and chances of price control is high
The know ledge of price elasticity of demand is very crucial to a bakery since pricing
decisions are important that is because bread normally earns marginal prfits thus pricing is
important

6. Why is packaging an important factor in successful marketing of soft drinks?[4]

 Packaging is important to firms such as Pepsi since it promotes impulse buying of

products. Soft drinks such as 7up and Green Apple are impulse products
 Packaging promotes convinience handling of the products for example the package
for kingsize coke has inward rippled section for easy grip
 Packaging protects the core product and increases the shelf life of the products
which is important considering the long distributin channel used on soft drinks
 Packaging differentiate the firm’s products which help to fight competition which is
stiff in soft drink industry
7 Explain the following terms:
(a)job rotation[2]
(b)job enrichment[2]
 Job rotation is a job design technique which involves a systematic movement of
workers from one job position to the other
 Job enrichment is a vertical work loading process in which workers are given high
level tasks and more authority
8.Distinguish between :
(a) economies and diseconomies of scale[2]

Economies of scale Diseconomies of scale

 These are advantages that accrue to  These are disadvantages that are
a firm as a result of business growth experienced by the business
because of growth
 Reduces unit costs  Increases the unit costs

 Increases profitability  Reduces profitability

 They are a business strength  They are a weakness of the business

(b) capital intensity and labour intensity[2]

Capital intensity Labour intensity

 Automated production  Manual production

 High capital outlay needed  Less capital outlay required

 Workers are greatly exposed to risk  Less exposure to the risk of

of accidents accidents

 For example batch, line and flow

production  For example job production
9(a) What is meant by the term economic order quantity?[2]
 It is an optimum quantity of inventory purchased which minimises inventory related
costs . It is calculated using the following formula:

EOQ = 2CD
H
Where:
C Cost of placing an order
D Annual demand for an item of
stock
H Annual holding cost for an item of
stock

9(b) Determine three factors a retail outlet will take into account when considering the
level of stock it can hold[6]
 Demand of the product-highly demanded products such as sugar are kept in large
quantities by retailers such as OK Zimbabwe since their demand is high and hence
they have high risk of stockouts. Products with low demand such as hardware
products are kept in low quantities to reduce risk of overstocking
 Perishability of the product-Perishable products such as fruits and vegetables are
kept in low quantities since they have high risk of being written off as bad. On the
other hand non perishable products such as tinned foods are kept in large quantities
because they have a low chance of being written off
 Bulkiness of products- less bulk products such as stationary do not require huge
storage space therefore they can be kept in large quantities. On the other hand bulk
products such as furniture are kept in low quantities by retailers such as OK
Machipisa since they require huge storage space
10(a) Contrast the terms liquidity and profitability [2]

Liquidity Profitability
 Is a measure of the cash position of  Is a measure of how income
the business compares with the expenses
 Measured by the cash flow  Measured by the income statement
statement
10(b) Comment on the idea that a business declaring profits must have a positive cash
flow[4]
If a firm declares profits its revenue exceeds the expenses. Revenue results in cash inflow
for the business while expenses results in cash outflows. Therefore a profitable firm is less
likely to experience liquidity challenges since the inflows are likely to exceed the outflows
However a profitable firm may not necessarily enjoy a healthy liquidity position. This is
because much of the sales might have been made on credit. If customers take long to pay
the business will be profitable yetexperiencing a liquidity challenge. In addition the
profitable firm may undertake capital expenditures which causes liquidity challenges.
Repayment of loans also causes a profitable firm to experience liquidity challenges.
10(c) Evaluate the importance of marginal cost pricing[4]
Marginal cost pricing may benefit a firm since it helps to attract customers. This is mainly
because this pricing approach results in low prices since only variable costs are taken into
account.
However , marginal cost pricing moves in contrast with the profit maximisation concept. It
reduces the profit margins of the firm hence overral profitability is reduced.
Marginal cost pricing is useful to a lesser extent since it can only be successfully adopted
when the price elasticity of demand of the firm is elastic.
11. Show how a firm can use the concept of cost benefit analysis when considering to buy
more machines for its operations[5]
When making investment decisions, the firm may consider the advantages of aquiring the
machines such as improvement in the productivity of the firm, positive impact on the
motivation of the workers and improved business image.
The drawbacks of acquiring the machines are also considered. Such drawbacks include the
need to train workers, laying off of staff and change in the operations of the firm.
Through the cost benefit analysis, the firm will weigh the advantages with the
disadvantages. If the advantages outweigh the disadvantages it may proceed to buy the
machines. However if the drawbacks are more the firm will not proceed to buy the
machines
12. To what extent are computers useful to a mobile network provider?[4]
Computers are quite useful to a mobile network provider such as Econet Wireless. This is
because computers store huge volumes of information hence the company will be able to
maintain the consumers profiles for its millions of subscribers.
However computers may expose the network provider to the risk of hacking. Important
information may be lost and this may compromise on the competitiveness of the mobile
network provider.
Computers are useful to a greater extent since they allow the network provider to
communicate with its clients through techniques such as bulk sms. This inturn enables the
network provider to utilise the direct marketing approach.
 November 2014 Paper 1

1(a) Define the following terms

(i)Management buy out
(ii)Contracting out
 Management buyout is a de-integration technique in which the company sells shares
are sold to outgoing managers
 Contracting out is a de-integration technique in which a firm may outsource or
subcontract another company to carry out certain activities for example Chitungwiza
General Hospital subcontracted Baines Avenues to man the X-ray division
1(b) Distinguish between a public limited and a public corporation?

Public Limited company Public corporation

 Found in the private sector  Found in the public sector

 It has a profit motive  They have social objectives

 Financed buy money contributed by  Financed by money collected from

shareholders taxes

 Significantly contribute to the tax  Do not significantly contribute to

revenue of the government the tax revenue of the government

 For example Delta Corporation  For example NRZ

2(a) List any two types of production methods [2]
 Job production
 Batch production

2(b) How can a manufacturer of cell phones improve the productivity of his workers? [4]

 Training-Cell phone manufacturers such as G Tel may equip the operation workers
with sufficient work related skills so that they are able to quickly assemble the cell
phones
 Division of labour-This can facilitate improved efficiency due to specialisation for
example one worker may specialise in the production of LCDs, another in the
production of touch screens and another worker in the production of keypads
3. Explain any two communication problems that are beyond the receiver’s control [4]
 Jargon-this is the use of highly technical language which is common in a particular
department
 Noise-This may emanate from the channel for example unavailability of network
4(a) State and explain any two non-financial methods of motivation [4]
 Team working- this approach satisfies the social needs of workers as they will be
interacting of workers
 Training-when workers are equipped with job related skills their need for
achievement can be easily satisfied
4(b) Comment on Herzberg’s ideas on motivation [5]
Frederick Herzberg came up with the two factor theory which is a content theory of
motivation. Under this theory he cited that there are hygiene factors such as remuneration,
organisational climate, organisational policies and work environment. Such factors do not
motivate when they are satisfied but their lack of satisfaction causes demotivation at the
workplace.
He also outlined that there are motivating factors such as employee recognition, employee
involvement, praise and implementation of job design techniques. Satisfaction of such
factors guarantees motivation at the workplace.
This theory is quite useful in guiding the motivation process, however its usefulness is
limited by the fact that needs of workers differ from one employee to the other.
5. Is democratic leadership necessarily a good management style? [4]
A democratic leadership style is an appropriate style since it promotes utilisation of the
initiative of workers. This is because a democratic leadership style is characterised by a lot
of worker involvement.
However, this leadership style may consume a lot of time and therefore slowdown the
decision making process. This is due to the fact that before decisions are made workers have
to be consulted.
A democratic leadership style is useful to a greater extent since it positively impacts on the
motivation level of the workers. The workers are motivated through the Hawthorne effect
since attention is paid on them. There is a positive relationship that exists between the
attention paid to workers and the subsequent rise in productivity.

6(a) What is niche marketing? [2]

 This is a target marketing approach in which a firm will identify and exploit a small
market segment for example when a clothing firm specialises in the manufacture of
infant clothing
6(b) Evaluate the usefulness of market skimming [4]
Market skimming increases the profits margins of the firm since it is characterised by the
charging of high prices. The profits earned by the company may be increased.
However, the adoption of such a pricing policy may prevent the capturing of more
customers especially when the price elasticity of demand is elastic. As a result the market
share of the company may be affected negatively.
Market skimming is useful to a greater extent since it allows the firm to cover all production
costs incurred. In addition it may be used to convey the superior attributes of the product.
7. A firm has to decide between two alternative projects. The costs and expected
profitability of each of these is given below

PROJECT COST($) IF IF
SUCCESSFUL($) UNSUCCESSFUL($)
X 20 000 60 000 3 000
Y 35 000 85 000 (20 000)
7(a) Draw a decision tree of the options above [3]

$60 000

$3 000

$85 000

$(60 000)

7(b) Justifying your answer, which project should the firm choose? [4]
EMV(x) = ($60 000x0.6) + ($3 000x0.4)-$20 000
=$17 200
EMV(y) = ($85 000x 0.5) + (-$20 000x0.5)-$35 000
=-$2 500
 The firm should choose project X since it has a higher and positive expected
monetary value of $17 200 compared with a negative EMV for project Y of $2 500

8(a) What is benchmarking? [2]

 It is a quality control method in which a firm will try to match its operations with
those of a leading firm in the industry
8(b) Assess the significance of maintaining quality in a business organisation [5]
Quality satisfies the needs of customers which in turn will create loyalty. In addition quality
helps the organisation to fight competition therefore through provision of superior quality a
firm is able to defend its market share.
However quality comes at a cost for example through quality inspections which need to be
regularly contacted. The workers also need to be trained for quality products to be
produced.
Quality is useful to a greater extent since it increases the overall reputation of the business
which in turn may result in promotional costs being reduced

9(a). Outline two advantages of the payback method? [3]

 It is user friendly and hence less prone to errors
 It uses cash flows which are more objective as they involve less estimations
 Considers risk since it prioritises projects which will quickly recover the initial outlay
9(b) (i) What is investment appraisal? [2]
 It is a management accounting technique which involves assessing the financial
viability of projects before they are done
9(b) (ii) Analyse the importance of Net Present Value as a method of evaluating projects?
[4]
 Through the Net Present Value time value of money is taken account of. This is done
through the discounting of future cash flows which in turn will enable rational
decisions to be made.
 The size of the projects is taken into account unlike other three investment appraisal
methods. As a result the Net Present Value does not deceive the management
accountants

10. Show how a producer of flour can benefit from bulk buying economies of scale? [4]

 Through discounts the unit cost of the producer will fall for example raw materials
such as wheat are purchased in bulk and discounts will be enjoyed
 Through bulk buying the flour manufacturer such as Blue Ribbon may hedge against
price increments for example during the winter season when wheat reserves are low
11(a) Identify any two stakeholders who are interested in the accounts of a firm [2]
 Managers
 Government
11(b) Define the following terms:
(i)Zero budgeting [1]
(ii)Cost centre [1]
 Zero budgeting is an approach in which functional managers will argue their case and
justify the inclusion of certain expenditures in the budgets. This approach does not
anticipate losses
 Cost centre is an organisational division with clear evidence for cost occurrence for
example the production department

12 Distinguish between money market and capital market [4]

Money Market Capital Market

 A financial market where short term
financial securities are traded
 Securities such as treasury bills,
Negotiable certificate of deposit,
unit trusts and commercial paper
are traded
 Money raised from this financial
market is used for operational
purposes
 National Discount House is an
example of a money market in
Zimbabwe
 A financial market where long term
financial securities are traded
 Securities such as shares and
debentures are traded
 Money raised from this financial
market is used for investment
purposes
 The Zimbabwe Stock Exchange is an
example of a capital market in
Zimbabwe
 June 2015 Paper
1

1. What is meant by the term corporate culture? [2]

 This is a customary and traditional ways of thinking and doing things in the
organisation which is shared to a greater extent by organisational members which
new members must fully or partially accept for them to fit in the organisation

2. Discuss the role played by the primary sector in the economy of your country [4]

The primary sector creates a lot of employment opportunities for example the majority of
the working population is employed in the agricultural sector in Zimbabwe. In addition the
primary sector increases the country’s gross domestic product for example the mining
sector. Companies such as Zimplats and Ashanti operate on a large scale. Furthermore the
primary sector also supply raw materials to the secondary sector for example industries
companies such as Delta acquire raw materials such as millet and sorghum from the primary
sector.

However, since the primary sector is concerned with the extraction process there is
minimum value addition on the output from this sector therefore the degree to which this
sector contributes to the national output is limited. The majority of the jobs created in the
primary sector are low level jobs.
3(a) Distinguish between economic and political constraints [4]

Economic constraints Political constraints

 Caused by movements in the macro  Caused by governance of the

economic factors country

 Reduces the viability of businesses  Threatens survival or may result in

loss of property or ownership
 Examples include inflation,  Examples include elections, political
Unemployment, High interest rates war, indigenisation policy, stay
away, food riots and sanctions

3(b) To what extent should the government be concerned by the activities of

multinational companies [5]

The government should not be much concerned about the operations of multinationals such
as Bata and Nestle since they positively contribute to the economy. They create
employment opportunities since they operate of a large scale, they pay huge amounts of tax
to the tax authorities and they also contribute towards the GDP of the country.
However the government should intervene through the labour act to prevent the
exploitation of workers by the Multinational companies. In addition the government may
also intervene through price controls to prevent the exploitation of customers by the
multinational companies.
The government should be concerned about the activities of the multinational companies to
a greater extent since they impose stiff competition on local infant firms thereby inhibiting
their growth. Multinational companies such as Total have a negative impact on the growth
of local fuel firms such as Downtown petroleum. Therefore the government intervenes
through the anti-monopoly act.
4(a) State any two methods of stock control [2]
 Just in time
 Economic order quantity
4(b) How might the production manager of a detergent company find benchmarking
useful? [4]
 Cut costs-benchmarking reduces the defects in the production process therefore
production costs incurred are reduced
  Improved relations-benchmarking improves the quality of products produced such
that the production manager will have better working relations with other
departments such the marketing
 Benchmarks such as method of production used by the leading firm may act as a
basis in which the Production manager train the production workers
 Improved quality level will also satisfy the production workers’ need for achievement
such that, due to improved morale, productivity and capacity utilisation may be
improved

5. How might a saw milling firm benefit from training? [4]

 A saw milling company such as Border Timbers increases the efficiency of the
operational workers if the workers are equipped with job related skills
 Training reduces the chances of work related accidents that is if the workers are
trained they will be able to accurately operate the saw milling machines
 Training is a non-financial motivating factor therefore the saw milling firm will be
able to retained experienced operational personnel
 Training improves the quality level of the timber produced and the saw milling firm
will be able to fight competition in an industry characterised by intense competition
6(a) What is the difference between leadership and management? [2]

Leadership Management

 Involves the directing and  It is the art of getting things done

influencing of task related activities through other people
of subordinates
 Involves advancing operations  Involves protecting operations

 Involves setting of challenging goals  Involves setting achievable goaIs

 Involves risk taking  Involves being risk averse

6(b) Evaluate the effectiveness of autocratic leadership [4]

Autocratic leadership is fast since the subordinates are not involved in the decision making
process. Therefore autocracy creates more implementation time since discussions are
limited.
However autocratic leadership style may cause communication failure since it is
characterised by one way communication. In addition it is only suitable for theory X type of
workers.
Autocratic leadership style is ineffective to a greater extent since it causes resentment in
workers due to less worker involvement

7(a) State any two communication barriers that lie with the sender [2]
 Use of jargon
 Lack of planning
7(b) Explain the limitations of vertical communication in a tall structure [4]
 Communication delays-information will have to pass through many hierarchical
levels and hence delays will inevitably occur
 Filtration of information-Information will be twisted as it pass through many
hierarchical levels therefore communication failure will occur

8(a) Explain how a manufacturer of soft drinks might find price elasticity of demand useful
[3]

 Price elasticity of demand is useful to a soft drink manufacturer such as Delta

Corporation when making pricing decisions. If the price elasticity of demand is elastic
low prices will be charged and this will enable the manufacturer to capture a lot of
customers which is important since soft drinks are produced on a large scale using
line production. On the other hand if the price elasticity of demand is inelastic the
manufacturer will utilize the opportunity of adopting market skimming strategy so as
to recover huge amounts invested in acquiring manufacturing and bottling plants
8(b) The following information shows the effect of price change, from $10 to $15, to a
product produced by Nyakunika Ltd.

Price Expenditure on Sales (units)

($) advertising
($)
10 5 000 20 000

15 6 000 22 000

Calculate the promotional elasticity of demand for this product [2]

 Promotional elasticity of demand =% change in quantity demanded
% change in promotional expenditure
=10%
20%
 =0.5
9(a) Explain the two classes under which products are grouped [4]
 Goods-these are tangible products for example consumer goods such as sugar and
industrial goods such as welding machine
 Services –these are products which do not have a physical form for example
commercial services such as hotel and catering and direct services such as legal
services

9(b) Why might a clothes manufacturing firm be prepared to sell its products at a price
below the total costs of producing it? [4]

 The strategy may be part of a winter clearance sale promotion usually adopted by
clothing firms as Edgars
 The clothes might be defective and hence downgraded to allow the sale of such
products
 It may be a contribution costing pricing approach adopted on new clothes launched
in the market so as to attract customers
 A clothing manufacturing firm may be operating in an economy experiencing a
recession. Low prices facilitate the retaining of customers
10(a) List any two factors which might influence the location of a shoe manufacturer [2]
 Availability of raw materials such as leather
 Availability of market

10(b) Evaluate the usefulness of flow production method [4]

Flow production supports the growth objective since it is characterised by high levels of
production. In addition it allows the firm to enjoy economies of scale because of the high
levels of production.
However, this method of production requires huge capital outlay since it has a lot of
automation. It also moves in contrast with the marketing principles since it does not
acknowledge that the needs of customers differ due to the standardisation of products.
11(a) What are the functions of the stock exchange [3]
 A source of equity finance for the listed companies
 Offers investment opportunities to the public as well as companies
 Ensures the publicity of share price movements for the listed companies
11(b) For what reason might a business make provision for
(i) Bad debts[2]
(ii) Depreciation[2]
  Bad debts-This will understate the firm’s profits such that the business will not be
greatly exposed when the customers fail to pay what they owe.

 this also understates the firm’s profits which will create sufficient internal sources of
finance such that the business will be able to replace any worn out no current assets

12(a) The following are marks obtained by business studies students in a given test:
60 50 70 60 80 40 30 10 60 90 20 40 60
80 90
From the given set of marks, distinguish between the mode and mean [4]
 Mode is the frequently appearing number within a set of statistical data for example
60. On the other hand mean is the average number within a set of statistical data for
example 56
12(b) What are the benefits of linear programming?[3]
 It enables effective resource allocation since optimum solutions are identified
 It can be used on both operational and strategic decision making
 Many constraints are considered therefore this quantitative tool allows strategic
decision making
 November 2015 Paper 1

1(a) Identify any two forms of promotion [2]

 Advertising
 Sales promotion
1(b) What is
(i) a unique selling point [2]
(ii) a consumer profile [2]
 A unique selling point is a special feature of a product that differentiates it from rival
products for example the special feature of Schweppes’ Mazoe Orange crush is 50%
real orange juice
 A consumer profile is a quantified picture of consumers of a firm’s products, showing
proportions of age groups, income levels, location, gender and social class
2 Distinguish between competitive pricing and marginal cost pricing [4]

Competitive pricing Marginal cost pricing

 A firm will base its price upon the
price charged by rival firms
 Charged with the aim of managing
price wars
 Leads to defending of market share
 Common in oligopoly markets
 The firm will consider variable costs
incurred in the determination of
price
 Charged with the aim of capturing
more customers
 Increases the market share of the
company
 Common in perfect competition
3(a) Why are human needs difficult to satisfy? [2]
 They are difficult to identify
 They are ever-changing
3(b) Explain why some mergers may fail to realise long lasting gains [4]
 Cultural clashes may be experienced since the workers and management from the
merged entity may have different values and norms
 Different management philosophies may occur and this causes conflict to occur
which may eventually lead to demerger for example the demerger of Kingdom Bank
and Mickles Africa
 Merger may lead to the growth of the merged entity above the optimum level and
therefore may result in diseconomies of scale being experienced
 Unit of direction is difficult to enforce within the merged entity and this may result in
the failure of the merger

4 Analyse the conflict between owners’ objectives and government’s objectives [4]

 The owners of the business may want to plough back profits in the business but the
Government may reduce this retained profit through charging Corporation tax which
is done through the fiscal policy
 During periods of economic recessions the owners of the business may seek to made
some workers redundant as a survival method but the government may be against
that since it seeks to reduce the level of unemployment in the country
 The owners of the business may want to cut operational costs through cutting the
wage bill but this moves in contrast with the objectives of the Government. The
Labour Act and the minimum wage set by the Government are meant to prevent
such practices
 The owners of the business may aim to increase their profit margins through the
charging of high prices but the Government seeks to protect the consumers through
prices controls and the Consumer Council Of Zimbabwe
5 Give two examples of
(a) Direct costs of a manufacturing firm [2]
 Raw materials
 Manufacturing wages
(b) Indirect costs of a supermarket [2]
 Warehouse rent
 Depreciation of shop building
6(a) What is the difference between capital and revenue expenditure? [4]

Capital expenditure Revenue Expenditure

 Increases the value of non-current
assets
 No effect on profits
 Need to be funded by long term
finance
 For example purchase of building
 No effect on the value of non-
current assets
 Reduces the profits of the firm
 Funded by short term finance
 For example purchase of inventory

6(b) Express Motors (Pvt) Ltd, a firm which offers transport services, need to buy new
vehicle worth $30 000 to meet increasing demand for its services. Evaluate one
appropriate source of finance that Express Motors (Pvt) Ltd can use to raise the funding of
the new vehicle [3]
The firm may use a bank loan which is a long term debt finance sourced from commercial
banks. This source of finance is repayable after a long period of time therefore will give the
firm sufficient time for the new vehicle to recover the initial outlay.
However failure to pay any loan interest or the principal amount borrowed may result in the
firm losing attached assets for example the new vehicle. This may disturb the operations of
the business.
Bank loan is useful to a greater extent since the loan interest is tax deductible that is it
reduces the taxable profits. Therefore payment of less tax will boost the internal sources of
finance for the business such that the business will be well positioned to cover operational
costs such as purchase of fuel or repairs of the vehicles
7 How useful is the internet in the distribution of the firm’s products? [4]
The internet is quite useful in the distribution of products since the firm is able to reach a
wide range of customers across the world. This increases the sales of the business and
prospects of business growth will be high.
However, certain products are difficult to distribute using the internet for example goods.
Goods require physical distribution which cannot be easily done through the use of the
internet.
The internet is useful to a great extent since it reduces the unit costs of distribution. This is
because the internet allow mass distribution of products
8(a) Explain the importance of contribution costing in decision making [4]
 It enables the identification of the break-even point therefore the firm will be able to
decide on the production levels to produce in which the firm will not incur loses
 Helps to establish the margin of safety therefore management is in a position to
measure and manage the risk of loss making
 Management is able to undertake make or buy decisions through a comparison of
the variable cost of production with the outsourcing price
 Contribution costing facilitates optimum use of scarce resources that is the firm will
always give priority to products that have the highest contribution per limiting factor

8(b) K. Flow Miners Ltd is bound to make an investment decision, choosing between two
projects: Project A and Project B
Under which circumstances would K Flow miners choose to invest in Project B whose
internal rate of return is 12%?[4]

 The cost of capital should be lower than 12% such that project B will have a positive
net present value. For a project to be acceptable it should have a positive net
present value
 Project B‘s internal rate of return of 12% should be higher than that of project A such
that project B will have a higher net present value than project A.
9(a) Outline any two advantages of internal recruitment [2]
 It is cost effective
 The culture of the organisation will be maintained
9(b) Identify any two human problems that may arise by using computers for business
communication [2]
 Failure to take the message for example when an employee does not open an email
message in the inbox
 Computer illiteracy, this is a barrier to effective communication when computers are
being used
9(c) Give two factors which influence the extent of decentralisation [2]
 Size of the organisation
 Attitude of workers
10(a) Explain any two ways of minimising conflict between management and the
workforce of a cement manufacturing firm [4]
 Effective communication- This will enable the management of a cement
manufacturing firm such as Lafarge to identify the needs and grievances of workers.
Therefore the needs of the workers will be satisfied which will improve the industrial
relations
 Fair remuneration- a proper job evaluation, employee appraisal and salary survey
may help to guide a cement manufacturing firm such as PPC to reduce chances of
conflict occurrence

10(b) Mr Tinokohwa is a large scale tobacco farmer. Advise Mr Tinokohwa on the

importance of workforce planning [5]

 Through workforce planning the farmer will not have shortage of operational
workers during busy periods such as the harvesting period since the high demand of
the labour would have been anticipated
 Workforce planning guarantees that the farmer will have workers with right skills for
example for curing the tobacco which will help to improve the farmer’s produce
 Workforce planning allows the farmer to employ part time workers who are easy to
lay off during the off season. The farmer will avoid having excess labour in such
period
 Workforce planning allows the farmer to effective manage the wage bill such that
working capital to buy agricultural inputs such as herbicides will be available
 Manpower planning allows the farmer to maintain an optimum quantity of workers
such that the workers will not be overworked and goods industrial relations will
prevail at the farm
11(a) Outline
(i) Two benefits of quality assurance [2]
 The firm will be able to retain existing customers and attract new ones
 The firm will be able to fight competition in the market
(ii) Two limitations of quality control [2]
 It consumes a lot of time
 It is costly since at times quality inspectors may need to be hired
11(b) Mouse ‘n’ Kit (Pvt) Ltd, a computer manufacturing firm, is struggling to match an
increasing demand for its product. How may the firm benefit from a work study
programme? [4]
 Method study produces standard method which will help to improve the production
process that is time to assemble the computer parts may be reduced
 Improved methods may also help the workers of the computer manufacturing firm
to satisfy their need for achievement which will motivate them and increase their
operational efficiency
 Work measurement produces standard time which can be used as a basis of
measuring performance of the workers. Fair remuneration will be guaranteed which
will increase the efficiency level of the workers
 Standard time will also be used to set achievable targets for the operational workers
and this will motivate them since the effort expended by the operational workers is a
function of the perceived likelihood that high performance will be achieved
12 Evaluate subcontracting as a means of solving capacity shortage [4]
Subcontracting is quite important since it allows the firm to meet the customer orders
without the need of increasing its capacity. The firm will not need to undertake capital
expenditure so as to increase its capacity as this might lead to overtrading problems.
However, the effectiveness of subcontracting depends on the quality level of the
outsourced firm. If the outsourced firm is offering inferior quality then the customers may
be dissatisfied.
Subcontracting is useful to greater extent since it instils some sense of flexibility to the firm
especially when demand of the product fluctuates
 November 2016 Paper 1

1(a) State how economic activities are classified [3]

 Primary
 Secondary
 Tertiary
1(b) Explain how the state might intervene and constrain businesses in your country [4]
 Charging corporation tax reduces the internal sources of finance and this reduces
chances of growth
 Setting of minimum wage through the ministry of labour may increase the wage bill
of the company and reduce profitability
 Price controls may reduce the profit margins of the firms thus they will not be able
to realise some of the strategic objectives
 Charging high interest rates increases the cost of borrowing such that businesses will
not have access to external debt finance
2(a) Distinguish between Fiscal Policy and Monetary Policy [2]

Fiscal Policy Monetary Policy

 Major components are tax and
government expenditure
 Implemented through the ministry
of Finance
 Major components are interest
rates, money supply and open
market operations
 Implemented through the central
bank
2(b) State any two examples of external stakeholders of a business [2]
 Customers
 Government
3. How might management increase the willingness of employees to accept change in the
organisation? [4]
 Adopting a participative approach in which the shop floor workers will be involved in
the change process
 Training the workers, equipping them with job related skills so as to help them
manage the change process
 The managers may outline the benefits of the change process to the workers
 Provision of incentives for example overtime allowances to smoothen the change
process
4. Evaluate the relationship between line and staff managers [4]

The relationship between line managers and staff managers may be viewed as positive. This
is because staff managers such as Research and Development manager provide useful
advice to line managers and this may improve the operations of line managers.
However the relationship between staff managers and line managers may become negative
if the line managers resist some of the advice from the staff managers. In addition, conflict
of authority may also occur for example these two types of managers (staff and line) may
see themselves as superior to the other type of manager.
The relationship may be viewed as positive to a greater extent since the staff managers and
line managers may socialise in informal groups and this may help to strengthen their bond.

5. Distinguish between vertical and horizontal communication [4]

Vertical communication Horizontal communication

 Communication which follows the
chain of command that is between
people at different levels but in the
same department
 For example communication
between Finance manager and the
Accountant
 Allows work and policies to be
passed to subordinates and also
allow subordinates to convey their
grievances
 Affected by communication barriers
such as power difference and
filtration of information
 Communication between people at
the same level of the hierarchy
 For example the communication
between the Finance Manager and
the Marketing Manager
 Allows the smooth co-ordination to
take place in the organisation
 May be affected by barriers like
jargon if the people involved are in
different departments
6. Assess the relevance of Elton Mayo’s ideas on motivating workers [5]

Elton Mayo’s Social Management theory outlined the importance of employee recognition
and involvement. This is quite important in the satisfaction of the social needs of the
workers. Companies such as ZB Bank and Barclays have sports clubs for their employees and
this moves in line with the contributions of Elton Mayo since they help to satisfy the social
needs of workers.
However methods that are meant to satisfy social needs of workers such as worker
involvement and team working may cause delays within the organisation. In addition for
motivation to be guaranteed at the work place satisfaction of social needs should be
complimented by financial incentives.
The contributions of Elton Mayo are relevant to a greater extent since involvement of
workers will increase the productivity of the workers which in turn may result in
organisational growth (Hawthorne effect). According to Elton Mayo there is a positive
relationship between the attention paid to workers and the subsequent rise in productivity.
7(a) What is the difference between niche marketing and mass marketing? [4]

Niche marketing Mass marketing

 Identifying and exploiting a small
segment within the market suiting
its needs
 The firm will easily see any changes
in the needs of the customers
 Providing the same product in all
the segments without
acknowledging the difference in the
needs of the customers
 Difficult to identify the changes in
the needs of the customers

 Characterised by great customer  High customer satisfaction difficult

satisfaction to maintain

 Economies of scale cannot be easily  Promotes the enjoyment of

enjoyed economies of scale

7(b) To what extent is the knowledge of price elasticity of demand useful to a

manufacturer of shoes?
Price elasticity of demand is of use to a firm which produces shoes such as Bata when
making pricing decisions. When the price elasticity of demand is elastic low price will be
charged and when price elasticity of demand is inelastic high prices are charged.
However price elasticity of demand is not the only factor when making pricing decisions
since competition and price controls are other factors to consider when establishing the
price of shoes.
The know ledge of price elasticity of demand is important but need to be completmented by
the use raw materials(like leather) and high skills of operational workers for quality shoes to
be produced and high sales to be guaranteed
8. Explain the limitations of value analysis to a car manufacturer[4]
 Value analysis comes at a cost that is a car manufacturer such as Zimoco may need
to undertake research to get the information required
 There may be need to change the machines needed in the car manufacturing
process if some of the components are replaced
 Workers may need to be retrained if some of the components parts have been
replaced
 Replacement of some components with more economic ones may negatively affect
the appearance of the cars
9. Define the following terms:
(a) capacity utilisation[1]
 This is a comparison of the current output with the maximum possible output using
the current resources
(b) benchmarking[1]
 This is when a firm compares its operations with those of the leading firm in the industry

10.(a) Discuss the usefulness of a work study programme to a large business[4]

Through method study, standard method is produced . The standard method is more
efficient and this is importantant in reducing wastes and cutting costs such tat the large firm
will be able to maintain its competitive advantage. In addition, standard time is an objective
way of measuring employee perfomance. Fair remuneration will then be guaranteed which
will help towards mantaining good industrial relations in the large firm. There is high chance
of conflict occurance in the large firm thus mantaining goood industrial relations is
important.
However, the production of standard method may result in rigidity within the organisation
that is workers may stick to the standard method even when circumstances change. Large
businesses need to be flexible and adaptable to the everchanging environment for them to
maintain their competitive advantage over small firms.
10(b)(i) How do producers classify costs of production?[2]
 Variable costs
 Fixed costs

10(b)(ii) Explain the importance of break-even analysis to a cement manufacturer[4]

 It identifies the break-even point therefore a cement manufacturer such as Lafarge

will avoid loss making production levels(which are below the break-even point)
 Through break even analysis the cement manufacturer such as PPC will also
measure the risk of incurring losses through the margin of safety
 The visual impact of the break-even chart will help the cement producer to identify
the class of costs which need to be managed for the firm to increase its profits
  Break-even analysis is useful to a cement producer since it outlines, through the
margin of safety, the extent to which the firm is maximising profits. Large cement
manufacturers such as Lafarge need to maximise profits so as to maintain high
investor confidence on capital markets like the Zimbabwe Stock Exchange

11(a) Explain the role of merchant banks to exporting businesses [4]

 Merchant banks such as NMB may offer loans to exporting businesses which may be
used to research about the targeted foreign markets
 Merchant banks undertake corporate banking therefore they are able to offer
bridging finance such as overdraft to exporting businesses since foreign customers
may take long to pay
 Merchant banks may help exporting businesses to sell shares through the offer for
sale technique which will widen the finance base of the exporting businesses. A lot of
finance is needed for a business to export goods
 Offer investment advice to the exporting businesses so as to increase their viability
on the export market
11(b)(i) Define the term depreciation when applied to final accounts[2]
 Depreciation refers to the fall in value of non-current assets during their use in the
business
11(b)(ii) Why may a profitable business have liquidity problems?[4]
 A lot of sales might have been made on credit. This will increase the profits but have
a negative effect on the liquidity
 Acquisition of non- current assets. It does not reduce the profits but decreases the
liquidity of the business
 Repayment of a loan does not affect the profitability of the firm but it reduces the
cash position of the business
 Redemption of shares by a company may worsen the liquidity position but does not
affect the profitability of the business
12(a) State two decision making tools [2]
 Decision trees
 Blending technique
12(b) Explain one measure of central tendency [2]
 Mean – This is the average within a set of statistical data

12(c) What is the importance of Information Technology to a marketing department [4]

 Through the social media viral marketing is facilitated

 Through the internet desk research is made more effective
 E-Commerce is reinforced that is the firm is able to sell products through electronic
means
 The firm is able to maintain a close communication with the customers through the
use of the email(Direct Marketing)
 June 2017 Paper
1

1. Define the term ‘globalisation’ [2]

 This is the increasing freedom of movement of goods, capital and people around the
world

2(a) To what extent is the number of workers employed useful in measuring the size of
the business? [4]

Number of employees may be indicative of the size of the organisation. Smalls firms such as
mini markets and kiosks employ few workers as compared to large business corporations
such as multinational companies.
However number of employees may not be indicative of the size of the business. Certain
small businesses that are labour intensive for example clothing manufacturing firms like
Step in Style employ a lot of workers and the number of employees may not be
representative of their small size. Similarly, large businesses that are capital intensive may
for example Barco Chemicals employ few workers and this is not representative of their
huge size.
When measuring the size of the business, the firm should not only consider the number of
employees but should also take account of the capital employed, sales turnover and market
capitalisation.
2(b)(i) Explain why the government of your country may be concerned about the number
of manufacturing firms that are closing down [4]
 Closure of manufacturing firms may result in high unemployment levels within the
economy
 Decline of manufacturing firms may also reduce the gross domestic product which
has a negative impact on the growth of the economy
  Closure of manufacturing firms may result in an increase in imports and reduced
exports. This will worsen the balance of payment position
 The quantity of goods in the market will be reduced and this may cause demand pull
inflation

2(b)(ii) Evaluate the benefits of exchange rate devaluation to businesses in your

country[4]

Devaluation of the currency may be beneficial to businesses such as Delta Corporation

which export products such as Zambezi Larger. The price of exports on the foreign market
will become competitive and hence such businesses may experience an increase in the
quantity of goods they exports such that their profitability will be improved.
However, Zimbabwean companies that rely on imports such as Petrochemical Companies
such as Total and Zuva Petroleum are negatively affected by devaluation. This is because
devaluation increases the price of imports. Therefore the capacity utilisation of such
businesses may be reduced.
Devaluation is beneficial to a lesser extent to Zimbabwean companies since many
businesses rely on imports for example in the retailing sector. Companies such as TM, OK
and Spar import much of their supplies from South Africa.
3(a) Analyse the importance of a functional structure to a business [4]
 A functional structure is less confusing to the workers since it conforms to the unit of
command principle that is a particular subordinate reports to an individual leader.
Therefore such a structure results in subordinates having a clear sense of direction
 Unit of direction will also be encouraged by the functional structure. This is because
the organisational departments they do not see themselves as stand-alone entities
unlike structures such as the divisional
3(b) What is the difference between a leader and a manager? [4]

Leader Manager
 They direct and influence activities  They achieve goals through other
of followers people
 They are risk takers  They are risk averse

 They advance operations  They protect their operations

 Set challenging goals  Set achievable goals

4(a) Give any three examples of financial motivators [3]
 Salary
 Bonus
 Commission
4(b) Outline the importance of induction training to a manufacturing firm [4]
 Workers are familiarised to manufacturing procedures
 New workers are familiarised to the safety precautions
 New employees are familiarised to the code of conduct
 Workers are familiarised to the vision of the organisation
5(a) What are the benefits of price discrimination to a marketing manager? [4]
 It moves in line with the marketing principles that is it acknowledges that the needs
of customers in different targeted market segments are different. Customers with
elastic price elasticity of demand require low prices whilst customers with inelastic
price elasticity of demand require high prices
 Price discrimination allows the firm to maximise profits through high sales volume.
The charging of low prices in segments with customers with elastic price elasticity of
demand attracts a lot of customers whilst the charging of high prices in market
segments that have an inelastic price elasticity of demand will not turn away a lot of
customers

5(b) How useful is niche marketing to a restaurant in your country? [4]

Niche marketing allows the restaurant to fully satisfy the needs of the customers since it will
be specialising in a particular segment therefore any changes in the needs of the customers
are easily identified and the meals served will be in line with the preferences of the targeted
customers.
However, niche marketing may lead to non-enjoyment of purchasing economies of scale
since the restaurant is likely to be operating on a small scale for example Chines
Restaurants.
Niche marketing is useful to a greater extent since it increases the degree of customer
loyalty which increases the survival chances of the restaurant. There is a lot of stiff
competition in the catering business hence loyalty of customers is vital.
6. The demand for hotel accommodation has increased by 20% after a 10% increase in
income. Calculate the income elasticity of demand for hotel accommodation. Comment on
your answer. [5]
Income elasticity of demand =% change in demand
% change in income level

=20%
10%
=2
 The positive income elasticity of demand highlights that hotel accommodation is a
normal service. In addition the income elasticity of demand of more than one shows
that it is relatively elastic

7(a) Assess the role played by the tertiary sector to the economy of your country [4]

The tertiary sector is important since it contributes towards increasing the gross domestic
product for example the telecommunications in Zimbabwe is among the major contributors
to the GDP in Zimbabwe. In addition the tertiary sector also contributes towards reducing
the unemployment level for example a lot of the working population is employed in this
sector providing some direct services for example the civil servants –teachers, nurses and
the uniformed forces.
However this sector does not contribute much to the economy of Zimbabwe since the
country has an agro economy. Therefore the primary sector (especially agriculture)
dominate the economic activities unlike the tertiary sector.
Despite the limitations the tertiary sector can still be viewed as significant since it completes
the economy that is both the primary and secondary sector require the services that are
offered by the tertiary sector such as banking and insurance. Therefore companies in the
tertiary sector such as NicozDiamond and CBZ are playing a crucial role.
7(b) Explain why increased labour productivity is important to a business [4]
 It allows the firm to achieve the growth objective
 Improves the capacity utilisation for the business
 Satisfies the employee’s need for achievement which will boost the overall morale
 There will be less need for the organisation to recruit externally
8. What is the impact of introducing Just in Time method of production to a car
manufacturing firm? [4]

Positive
 There is room for a car
manufacturer such as Ford to
customise the cars to suit the needs
of the customers
 Working capital will not be tied up
in inventory. Cars are high valued
products hence the adoption of J.I.T
helps to prevent the unnecessary
working capital shortages
Negative
 The car manufacturer will not have
much room to enjoy economies of
scale since the cars will be produced
as per customer order
 The firm may experience delays in
meeting the orders of the
customers. It may take a longer time
to assemble the car while the
customer will be waiting

9. A bakery can produce 50 000 loaves of bread per week. Calculate the bakery’s capacity
utilisation if it is currently producing 35 000 loaves per week [2]
Capacity utilisation = current output x 100
Maximum output
= 35 000 x 100
50 000
=70%
10. Briefly explain the objectives of the following organisations to governments:
(a) The World Bank [2]
 To offer loans mainly for infrastructure projects such as road systems, electric plants,
railways, irrigation and water supply
 To offer advice to member countries from its teams of experts who research into
problems of economic development
(b) The International Monetary Fund [2]
 Encouragement of growth of world trade and provision of assistance to countries in
balance of payment difficulties
 Offering financial assistance including rescheduling of debts to developing countries
when they got into trade problems
11. The following information is for company A.

Year Dividend per share Market Share Price

2012 20c $2.00

2013 20c $4.00

(a) Calculate the dividend yield ratio for each year [2]
Dividend yield =Dividend per share x100
Market price
2012 =$0.2 x100
$2
=10%

2013 =$0.2 x 100

$4
=5%

(b) Comment on your findings [2]

 The return to the shareholders has been reduced due to the increase on the share
price on the capital market. It will be financially prudent for the shareholders to sell
the shares
12. Outline the merits and demerits of using computers in business [6]

Merits
 Store huge volumes of information
 Easy desk research through the
internet and the intranet
 Helps in the manufacturing
process(computer aided
manufacture)
Demerits
 Expensive to acquire and maintain
 Confidential information may be
lost through hacking
 Expensive training is required for
the workers to use them with
efficiency
 November 2017 Paper 1

1(a) List any two stakeholders of a business [2]

 Customers
 Suppliers
1(b) Outline any three objectives of your country [3]
 Ensuring low levels of unemployment
 Ensuring low levels of inflation
 Ensuring political stability

1(c) What is the difference between fiscal policy and monetary policy? [2]

Fiscal Policy Monetary Policy

 Major components are tax and
government expenditure
 Implemented through the ministry
of Finance
 Major components are interest
rates, money supply and open
market operations
 Implemented through the central
bank
2. Two large supermarkets are planning to merge. Explain how consumers might be
affected by this merger if it becomes successful [4]

Positive
 Low prices may be charged on
groceries since the merged
supermarket will now be enjoying
economies of scale
 Greater satisfaction since the two
supermarkets’ strengths will
complement each other for example
one of the supermarkets may be
strong in high customer service and
the other may be strong in effective
inventory management
Demerits
 High prices may be charged since
the merged supermarket may now
be enjoying a monopoly position in
the market
 There may be deterioration in the
service level since the supermarkets
may have different management
philosophies

3(a) Draw a functional organisational structure. Using your diagram explain ‘span of
control’ [4]

Managing
Director

Production Marketing H.R Finance

Manager Manager Manager Manager

Quality Factory Budgeting

Accountant
Controller Supervisor Manager

 Span of control refers to the number of subordinates directly reporting to a

superior. In the diagram above both the Production Manager and the Finance
Manager have a span of control of 2 and the Managing Director has a span of
control of 4
3(b) Explain any two disadvantages of reducing managerial levels [4]
 This wides the span of control which makes effective supervision difficult. Theory X
type of workers will have the room to dodge work.
 The operational workers will now be closer to the top level. They will no longer be in
a position to freely convey their grievances since they are affected by power
difference communication barrier
4(a) Give any two leadership roles in a business [2]
 Disturbance handler
 Resource Allocator

4(b) Evaluate Frederick W. Taylor’s contribution on how motivation can be achieved in

today’s business [4]

Frederick Taylor viewed workers as rational economic beings motivated by money. As such
he developed the pierce rate system of pay in which workers are paid according to what
they have produced. This is still being used in some business such as Dairyboard Holdings
that is the salesmen are paid according to the quantity of ice creams sold. This conforms to
the Pierce rate system.
However this approach to motivation tend to overlook other needs of workers. In addition
to financial incentives, modern businesses are using job design techniques such as job
rotation to motivate employees for example Zimbabwe Revenue Authority constantly shifts
workers from one port of entry to the other (Border posts).
Taylor’s motivation ideas are useful to a lesser extent to modern day businesses. The pierce
rate system is difficult to use in service industry since work cannot be easily quantified.
Firms such as the CBZ cannot effectively utilize the pierce rate suggested by Tylor to
motivate back office staff since their work is difficult to quantify.
5(a) Identify two stages of production [2]
 Primary
 Secondary

5(b) (i) What is capital intensity? [2]

 This is the use of automated machinery in the production process for example
through production methods such as line production and flow production
5(b) (ii) Explain one way in which a firm can raise its productivity levels [2]
 Training-the firm will equip its workers with job related skills and this will have an
overall impact on the operational efficiency of the workers
6(a) Below is the financial information for a hotel that offers three products:
Product X; Product Y and Product Z

Product X Product Y Product Z Total

($m) ($m) ($m) ($m)

Sales 100 80 120 300

Variable costs 60 45 80 185

Total costs 88 85 90 263

Profit/Loss 12 (5) ? 37

(i) Calculate the profit/loss for product Z [1]

Profit = Contribution-Fixed Costs
=$40m-$10m
=$30m
(ii) Calculate the contribution for product X and product Y [2]
Contribution =Sales-Variable costs
Product X =$100m-$60m
=$40m
Product Y =$80-$45
=$35

(iii) Why should the firm not drop product Y? [2]

 This is because product Y is yielding a positive contribution of $35m. Therefore

dropping product Y will reduce the overall profits by $35m from $37m to $2m
6(b) How appropriate is the Jus-In-Time stock control system to a furniture manufacturing
firm? [4]

Just in time does not tie up working capital of a furniture manufacturer such as TN
Furniture. Furniture products such as Tables and Wardrobes are high valued shopping goods
therefore if they are produced for stocking purposes, much of the manufacturer’s working
capital will be tied up in inventory.
However, J.I.T may compromise on the quality level of the furniture produced since the
manufacturer may produce some of the furniture in a haste to meet the orders of the
customers. This may negatively affect the reputation of the furniture manufacturer since
furniture customers are relatively quality conscious.
J.I.T is useful to a lesser extent since it leads to the non-enjoyment of purchasing economies
of scale. When the J.I.T approach is in place the furniture manufacture will not buy inputs
such as wood, nails, glue and varnish in bulk thus the unit costs may be high

7(a) Distinguish between Management Accounting and Financial Accounting [2]

Management Accounting Financial Accounting

 For internal use  For internal and external use
 Detailed  Summarised
 Not affected by international  Affected by international
accounting standards accounting standards
 Prepared frequently  Prepared infrequently

7(b) State the main sections of a statement of Financial Position (Balance Sheet) [3]
 Non- Current Assets
 Current Assets
 Share capital and reserves
8(a) What is the purpose of budgetary control? [3]
 It formalises management plans
 Bases of performance measurement
 Promotes effective utilisation of financial resources
8(b) Mhofu enterprises is battling a liquidity crises. Evaluate any two ways which can
enable Mhofu Enterprises to reduce cash outflows [4]
Trade credit-The firm may negotiate with its suppliers to delay some of the amounts it owe.
This method will help to reduce cash outflows and prevent the worsening of the firm’s
liquidity position.
However the credit worthiness of Mhofu Limited will deteriorate in the eyes of the
suppliers. The suppliers may be reluctant to offer credit terms to Mhofu enterprises in
future.
Trade credit is useful to a lesser extent since the firm will lose discounts for prompt
payment, therefore profitability may be compromised.
Delaying capital expenditures- Capital expenditures require a lot of working capital
therefore if a firm postpones some of the capital expenditures, cash outflows will be
reduced.
However, postponement of capital expenditures may negatively affect the operational
efficiency of Mhofu enterprises for example may experience some bottlenecks in the
manufacturing processes if it continues to use worn out manufacturing equipment.
Delaying capital expenditures is useful to a lesser extent since it threatens the survival of the
business. It is difficult for any business to survive without possessing sufficient non-current
assets that are in good condition
9(a) Identify any two methods of information gathering that a firm can use when
conducting market research [2]
 Observations
 Questionnaires
9(b) How can a firm extent the maturity stage of its product? [3]
 Reminding form of advertising
 Road shows
 Repackaging
10(a) With reference to the Boston Matrix, which product has
(i) high market growth and low market share?
 Question mark/Problem Child
(ii) low market growth and high market share?
 Cash cow

10(b) To what extent is the Boston Matrix useful in managing a firm’s product portfolio?
[4]
The Boston Matrix highlights that products have limited lives therefore firms are constantly
reminded of the need to introduce new products in order to keep a balanced product
portfolio.
However the Boston Matrix may be viewed as self-fulfilling for example if a product is
perceived to have reached the Dog stage the firm may internationally reduce its
promotional expenditures on such product. This may contribute towards the
underperformance of that product in the market.
The Boston Matrix is useful to a greater extent since it highlights that a product will pass
through different phases that require different marketing mix strategies. As a result the firm
will be in a position to adopt appropriate strategies for all the products that will be in the
portfolio

11(a) State any two methods that can be used to visually present data [2]
 Bar graph
 Pie chart
11(b) Explain one advantage of internal rate of return (IRR) [2]
 Internal rate of return takes time value of money into account that is future cash
flows are discounted and brought back to their present value

12. Assess the usefulness of computers to a construction company [4]

Computers are quite useful in enabling effective planning in a construction company such as
Willdale. Programming software allows the manufacturing company to utilize planning
techniques such as network analysis therefore manufacturing materials such as bricks and
cement will not be wasted.
However, computers are risky electronic devices. Through viruses and Trojan horses’
important information may be lost and this negatively affects the construction company.
Computers are useful to a greater extent since computer aided design is also facilitated. The
construction company will use computers to design building plans and this will generally
improve the performance of the business.
 June 2018 Paper
1

1(a) List any two methods of measuring size of a firm [2]

 Market capitalisation
 Number of employees
1(b) How might the state intervene to control the activities of monopolies in your
country? [3]
 Through the anti-monopoly act the government reduces the monopoly tendencies of
large firms
 Supporting the growth of small firms- through the ministry of small and medium
enterprises the government offers loans to small firms so that they impose
competition to monopolies that may be existing in the country
 Price control-this prevents the exploitation of customers by monopolies. If not
monitored the monopolies may charge prohibitively high prices

2(a) Define vertical integration [2]

 This is the fusion of two or more companies in the same line of business but at
different levels of production for example the merger between Caps Holdings, QV
Pharmacy and St Ainnes Hospital
2(b) Explain the impact of a merger between two bakeries [5]

Positive
 Enjoyment of economies of scale
that is the merged entity will by
inputs such as floor in bulk
 The firms may have complimentary
skills that is one bakery may be
strong in the bread manufacturing
while the other may be strong in the
delivery of bread
Negative
 Different management philosophies
may affect the production and
ultimately the quality of the bread
 It is difficult for the harmony
principle to prevail and this affect
the production levels of bread
 Cultural clashes may also occur and
this may cause conflicts to occur
which may cause delays in the
production process

3. What factors may be considered when introducing a new product in the market [4]
 Price elasticity of demand of targeted customers-this is important in determining the
price of the new product
 Competition in the market-this will determine the level of promotional expenditure
needed to support the new product. Stiff competition requires a lot of promotion
 Functionality of the product-Before full launch of the product the firm should make
sure that the product has quality of design so as to satisfy the needs of the
customers
 Timing of launch-For a firm to successfully launch a product it considers the timing of
launch. The firms usually aim to launch their new products in season

4. What are the advantages of niche marketing to a furniture firm? [4]

 High customer satisfaction- furniture products such as tables and chairs are going to
be made according to customer specifications since the needs are easy to identify
 After sales service- when adopting niche marketing it is practical to offer services
such as delivery of products. This increases the customer satisfaction since furniture
products such as beds and wardrobes are bulky in nature
 Competitive edge-Adoption of niche marketing allows the furniture company to
manage competition since it is easy to carry out competitor analysis within the niche
market. A niche market is small in size therefore competitor analysis can be easily
carried out
 Less wastages-Market research can be easily carried out when the firm is using niche
marketing. Therefore the firm cannot produce furniture products that are no longer
required by the customers. Wastages of wood, glue and nails is prevented
5(a) State any two determinants of demand for Japanese cars in a developing country [2]
 Amount of import duty
  Income level

5(b) How useful is price discrimination to a manufacturer of mobile handsets? [4]

Price discrimination is useful to a manufacturer of handsets such as G-Tel since it helps to

maximise revenue. Market skimming is adopted on price inelastic market segments and
market penetration on price elastic segments.
However the price elasticity of demand for technological products such as Mobile phone is
not static. This is because technological breakthroughs are common in this sector. Therefore
the adoption of price discrimination may need to be continually updated.
The successfulness of price discrimination depends on the absence of arbitrage in which
customers in the segment where low prices may resale the handsets they have purchased at
higher prices in the price inelastic market segment.
6. Distinguish between training and development [4]

Training
 Equipping of workers with job
related skills
 Increases the operational efficiency
of workers on their current jobs
 Done for the organisation to achieve
current and short term objectives
 Satisfies the workers’ need for
achievement
Development
 Equipping of workers with higher
level skills
 Allows the workers to occupy higher
level job positions
 Done to allow the organisation to
achieve long term objectives
 Allows the workers to satisfy their
self-actualisation needs

7. Explain why you would recommend a centralised organisational structure to a firm

involved in the mining of Diamonds in your country[4]

 A centralised structure is appropriate for a company like Mbada Diamonds since it

utilises the skills of the top level management
 Centralisation allows quick strategic decision making hence the firm will not be
severely affected by threats such as movements in the Diamond world prices
 Centralisation promote consistency in the decision making as well as on the quality
of Diamonds hence the mining company will remain competitive on the foreign
market targeted
 Centralisation reduces chances of pilferage of the inventory by the employees.
Diamond is a valuable mineral which is quite prone to theft therefore centralisation
is crucial since it reduces chances of theft
8. Evaluate the conflict which exists between staff and line managers [5]
The relationship between line managers and staff managers may be viewed as positive. This
is because staff managers such as Research and Development manager provide useful
advice to line managers and this may improve the operations of line managers.
However the relationship between staff managers and line managers may become negative
if the line managers resist some of the advice from the staff managers. In addition, conflict
of authority may also occur for example these two types of managers (staff and line) may
see themselves as superior to the other type of manager.
The relationship may be viewed as positive to a greater extent since the staff managers and
line managers may socialise in informal groups and this may help to strengthen their bond.
9(a) Outline two advantages of absorption costing [2]
 Takes both fixed and variable costs into account therefore useful for long term
decision making
 Moves in line with the international accounting standards
9(b)(i) Draw a well labelled break even chart [3]
Revenue/Costs ($)

Fixed Costs

0 Output

9(b)(ii) Explain one advantage of break-even analysis[2]

 Allows the firm to identify the break-even point. Therefore the firm will avoid loss
making production levels that is output below the break-even point
10. Discuss the appropriateness of capital intensive production process to a
wheat farmer [4]

The use of capital intensive production such as tractors and combine harvesters increases
the quantity and quality of wheat produced. This is important for the wheat farmer to be
able to meet high levels of demand from bakeries since wheat is used to produce highly
demanded products (confectionaries).
However the use of machinery in the production of wheat increases the expenses of the
wheat farmer such as fuel and repair and maintenance cost. This will have a negative impact
on the profits of the wheat farmer considering that products from the primary sector have
less value addition and fetch low prices on the market.
Capital intensive production is useful to a greater extent since it increases the capacity
utilisation of the farmer. Capital equipment such as irrigation equipment enable the
production of winter wheat and this has a positive impact on the capacity utilisation.
11(a) How may finance managers benefit from the knowledge of decision trees in decision
making? [4]
 Finance managers are able to effective utilise the financial resources since through
the decision trees the project with the highest expected monetary value is identified
 Decision trees allows the finance managers to make objective decisions since risk,
return and costs are all taken into account
 Effective decision making is facilitated in finance managers since logical thinking will
accompany the use of decision trees
 The use of decision trees will also be beneficial to the finance managers since they
have a strong visual impact

11(b) Discuss the usefulness of quantitative data in making investment decision [4]

The use of quantitative techniques such as investment appraisal and decision trees allows
the financial resources of the firm to be effectively utilised. Through these methods
investments with the highest expected monetary value, shorter payback period, and higher
Accounting rate of return or higher Net present value are selected.
However, quantitative techniques may involve a lot of estimations such as future returns,
costs to be incurred and probability of success and failure. These estimations have room for
inaccuracy which reduces the usefulness of the quantitative techniques.
Quantitative techniques are useful to a greater extent but they need to be complimented by
qualitative approaches such as swot analysis since qualitative factors such as skills of
workers do not need to be overlooked when making investment decisions.
12(a) (i) Contrast between financial accounting and management accounting [4]

Management Accounting Financial Accounting

 For internal use  For internal and external use
 Detailed  Summarised
 Not affected by international  Affected by international
accounting standards accounting standards
 Prepared frequently  Prepared infrequently

12(a) (ii) How can the government of your country benefit from the International
Monetary Fund (IMF) as a source of finance? [4]

 The Government of Zimbabwe may benefit from the financial assistance from IMF
since the money may be used to develop the industrial sector so as to reduce the
country’s dependency on imports which will improve the balance of payments
 Financial assistance offered by IMF is accompanied by financial advice that is the
country will be advised on the macro -economic policies that needs to be adopted to
boost the economic activity
 The IMF may also reschedule debts if Zimbabwe is experiencing some trading
difficulties
 Financial assistance from the IMF boosts the foreign currency reserves of the country
and this will allow the country to easily import vital commodities that needs foreign
currency such as fuel. Fuel is important in sustaining economic development in
Zimbabwe

12(b) To what extent is budgetary control beneficial to business involved in the

production of flowers?

Florists firms may find budgeting essential since it allows effective working capital
management. Working capital management should be effective for such firms to allow
efficient transportation of flowers to customers considering that the products are
perishable.
However, budgeting consumes a lot of time and production time may be wasted. This may
compromise on the quality of flowers thereby leading to the downgrading of flowers which
in turn reduces the profitability.
Budgeting is useful to a greater extent since it formalises the management plans. As a result
the florist will become competitive. Competition is stiff in flower business and it needs to be
managed by participative schemes such as budgeting
 November 2018 Paper 1

1(a) Name any two types of businesses found in the private sector [2]
 Sole trader
 Partnership
1(b) Explain the effect of corporate culture to a business [4]
 Corporate culture determines the leadership style used by the business for example
businesses that have a culture of open door policy use a democratic leadership style
 Culture affects the organisational climate that is the general atmosphere that
prevails in the organisation
 The corporate values are also determined by the culture of the organisation that is
strongly held beliefs
 Employee behaviour is also influenced by the organisational culture that is how
employees interact in the organisation
2. Two giant shoe manufacturing firms are considering a merger. Analyse the likely impact
of this decision to consumers [5]

Positive Demerits
 Low prices may be charged since  High prices may be charged since
raw materials such as leather will the merged entity may be now be
now be purchased in bulk hence enjoying a monopoly position in the
purchasing economies of scale shoe industry
enjoyed  Quality of shoes manufactures may
 Greater satisfaction since the two be compromised because of high
firms may have complimentary skills rate of conflicts due to cultural
for example one firm may be strong clashes
in the shoe manufacturing process
while the other may have strong
customer service
 The customers will have wide
variety of shoes to buy since the
portfolio of the merged entity will
now be wide

3(a) Draw a typical example of a matrix structure [3]

Managing Director

Head
Corporate Service

Project
Unit
3(b) Explain one advantage and one disadvantage of a matrix organisational structure [4]
Advantage
 Initiative of the workers is fully utilized in the different project units created
Disadvantage
 The dual reporting system may confuse the workers that is it violets the unit of
command principle

4 .Assess the effectiveness of induction training to a car manufacturing firm [4]

Induction training is quite crucial to a car manufacturing firm such as Ford since it
familiarises the new worker to the culture and vision of the organisation.
However induction training may consume a lot of time considering the complexity of the car
manufacturing processes and procedures. In addition it may result in communication
problems such as information overload.
Induction training is useful to a greater extent since it reduces the new employees’ exposure
to the risk of accidents. There is a lot of automation in the assembly of cars hence there is
greater need to induct the new motor mechanics so as to reduce their exposure to the risk
of accidents.
5(a) Give two advantages of desk research [2]
 It is cost effect
 Does not consume a lot of time

5(b) How important is research and development to an airline firm? [5]

Research is important to an airline firm such as Air Zimbabwe since it enables the firm to
identify the needs of the targeted customers. Through research the airline will be able to
identify the type of food demanded by various clients that demand airline services.
However research and development will come at a cost and the airline may not be in a
position to meet other operational costs such as salaries of the pilots and acquiring enough
jet fuel.
Research is useful to a greater extent since it enables an airliner like Air Zimbabwe to fight
completion from companies such as Kenya Airways and South African Airways. Competitor
analysis is made possible by market research.
6(a) Explain the importance of promotional budget [4]
 A promotional budget allows the firm to carry out adequate financial activities that
are paid for such as advertising since financial resources are set aside
 The firm is also in a position to assess the effectiveness of its promotional activities
that it the benefits of promotional activities are weighed against the promotional
budget
  Wastages of financial resources is avoided since unplanned promotional activities
that are not in the budget are avoided
 A promotional budget is important in guiding the promotional activities of the
company such as sales promotion , advertising , direct marketing, personal selling
and publicity

6(b) Evaluate the usefulness of the Boston Matrix to a firm which offers a wide range of
products [4]

The Boston Matrix is a product portfolio analysis technique which is meant to analyse the
performance of the products in terms of relative growth rate and relative market share. As a
result companies such as Delta are able to maintain a balanced product portfolio
considering that they have a wide variety of products (alcoholic and non-alcoholic
beverages)
However the BCG matrix may be of less use considering that it is self-fulfilling in nature that
is the firm may intentionally lower its promotional activities on a product it perceives to be
at the dog stage of the BCG matrix.
Despite the limitations the BCG matrix is useful to a greater extent since it reminds
marketing managers that products have a limited life span as a result new products are
developed to replace declining products. Delta replaced Fanta Tropical punch with Fanta
Grape.
7(a) A firm bought a vehicle costing $20 000 with an estimated life span of five years and a
scrap value of $5 000. Calculate the net book value of the vehicle at the end of year two,
using the following methods:
(i) The straight line method [2]
(ii) The reducing balance method at 20% per annum [3]

(i)(Straight line) NBV after 2 years=Cost- Accumulated depreciation

=$20 000-(3000x2)

=$20 000-6 000

=$14 000

(ii) Reducing Balance

YEAR NBV AT START($) DEPRECIATION NBV AT END($)

CHARGE($)
1 20 000 4 000 16 000
2 16 000 3 200 12 800
7(b) Outline any two causes of depreciation [2]

 Wear and tear

 Obsolescence

8(a) What are the advantages of using average rate of return in making investment decision? [4]

 It is user-friendly therefore less prone to errors

 The whole life of the project is taken into account
 It is comparable with the return on capital employed therefore effective investment
decisions are encouraged
 All expenses are taken into account including non-cash items such as depreciation

8(b) How useful is sale and lease back to a carpentry firm that is struggling to improve cash flows?
[4]

Sale and lease back facilitate quick injection of cash since the firm will sale its non-current assets.
Therefore the firm will have sufficient liquidity to acquire materials such as timber, nails, vanish and
glue.

However, the carpentry firm may no longer have full control over the use of the asset since some
restrictions may be imposed by the lessor. If the asset that is leased back is a lathe machine,
restrictions on the asset may reduce the production level produced by the timber manufacturing
firm.

Sale and lease back is useful to a lesser extent since ownership is transferred from the carpentry
firm. The asset base of the firm is reduced which will negatively affect the credit worthiness status of
the firm. The firm will find it difficult to access debt sources of finance that may be needed to solve
the prevailing cash flow problems.

9(a) Why is it important for a firm to benchmark its products against those of competitors? [3]

 The firm will be able to defend its market share

 Customer satisfaction will be improved
 Wastages in the production process will be minimised

9(b) Explain one advantage and one disadvantage of quality assurance [4]

Advantage

 The firm will be able to capture and retain its customers since they know that the systems
that are in place are able to guarantee that high quality standards will be met

Disadvantage

 It may be expense to put in place systems that are meant to guarantee customers that
quality standards will be met such as training of staff. Profitability of the firm may be
compromised
10. Comment on the effectiveness of just in time as a stock control method to a timber
manufacturing firm [4]

Just in time minimises the stock holding costs since inventories are kept at minimum. Inventories
such as timber as high valued and bulky products that need to be kept in small quantities so as to
prevent high storage costs and the liquidity of the firm.

However adoption of just in time by a firm such as Boarder Timbers may expose the firm to the high
risk stock outs. If the firm receives a huge order they may not be in a position to meet the order
since a lot of time is needed to process the timber. Just in time also gives the firm an opportunity to
customise its products according to the needs of the customers. Some customers may prefer treated
timber while other may prefer untreated timber.

11 What is the importance of time series in sales forecasting, to a firm that manufactures
umbrellas? [4]

 Time series allows a firm such as James North to anticipate periods of high demands such as
the rain season. Stock outs of umbrellas are prevented during such periods.
 Time series also identifies seasonal fluctuations such that periods of low demand such as the
winter season. Overstocking will also be prevented during such period
 Time series may also be use by manufacturers such as William Smith And Garrick to establish
the growth in the sales of the firm therefore they will plan on the acquisition of equipment
used in the manufacture of umbrellas
 Time series is also useful in providing information for budgeting purposes. That is the trend
established through the moving average is quite useful in providing information for
budgeting

12 Assess the role of computers to a clothing manufacturing firm [4]

Computer aided design may help a cloth manufacturer such as Edgars to design new clothes that are
needed by customers in the market. The cloth market is very dynamic hence new products need to
be constantly developed and the use of computers will make that possible.

However computers are expensive to acquire and maintain hence the cloth manufacturing firm may
find it difficult to pay tailors sufficient salaries since the liquidity position of the firm might have been
depleted.

Computers are useful to a greater extent since e commerce is facilitated through the use of
computers. Therefore the clothing manufacturer will be able to fight competition through the use of
internet advertising and viral marketing. Intense competition always characterise the clothing
market hence the use of computers will provide a promotional edge.
 PRACTICAL
EXAMPLES
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Business studies
medicine
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BACHELOR OF BUSINESS STUDIES HONOURS
MAJORING IN FINANCE AND BANKING (UZ)

+263 733 839 491

 COMPANY INDUSTRIAL COMPETITORS RAW METHOD OF
SECTOR MATERIALS PRODUCTION
Lafarge Cement PPC Water Flow
manufacturing Soapstone
Proton Confectionary Lobels Flour , sugar, Batch
manufacturing Bakers Inn yeast and
water
Bata Shoe Leather World Leather Batch
manufacturing Walk Tall ,Rubber, Glue
Uniliver Cosmetic and Avon Petrolatum Batch
detergent
manufacturing
Nestle Cereal and Dairyboard Milk, wheat, Line
dairy corn
production
Delta Beverage Pepsi and Sorghum, Line
manufacturing Schweppes water and
barley
Croxley Stationary First pack Ink, Plastic and Line and Batch
production paper
Zimphos Fertilizer Sable chemicals Ammonia, Flow
production nitric acid
Samsung Electronic G Tel , Apple , Electronic Mass
gadgets Nokia accessories Customisation
manufacturing
Surface Wilmer Cooking oil Olivine Sunflower, Flow
production Soya beans and
cotton seed
Powerspeed Technical Yamaha and Steel Project and
Equipment Appropriate Batch
manufacturing Technology
Africa(ATA)
British America Tobacco Cut Rug Tobacco Line
Tobacco(BAT) processing
Nash Paints Paint Astra Paints and Water Thinners Batch
manufacturing Durex
Powerland Bag Puma and Leather, plastic Batch
manufacturing Monarch and wool
TN Furniture Pelhams and Timber, glue Job
manufacturing Teerchaz ,nails and
furnishers vanish
Willdale Construction Constain Cement, River Project
construction Industry sand and Pit
sand
Zimplats Mining Industry Platinum ore Acturus Extraction
 PRACTICAL
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SERVICE SECTOR
Business studies
medicine
MUBWANDARIKWA SHEPHERD
BACHELOR OF BUSINESS STUDIES HONOURS
MAJORING IN FINANCE AND BANKING (UZ)

+263 733 839 491

ORGANISATION SERVICE SECTOR COMPETITORS TYPE OF SERVICE
SERVICE OFFERED

Chitungwiza Health Citi med, Baines Direct Medical treatment

General Hospital Avenues Clinic

The Heritage Education Futures Academy Direct Education

Nyaradzo Funeral Services Doves and Direct Burial Services

Moonlight

Mickles Hotel Hotel Cresta Lodge and Commercial Hotel and

Rainbow Towers Accommodation

Cimas Medical Aid Psmas Commercial Medical Aid

Facilities

NicozDiamond Insurance Zimnat, Old Commercial Short term

Mutual and insurance
Eagle

Econet Telecommunications Netone, Telecel Commercial Telecommunication

service

Steward Banking ZB, FBC and Commercial Banking

Stanchart
 PRACTICAL
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MNCs and Small Firms
Business studies
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MAJORING IN FINANCE AND BANKING (UZ)

+263 733 839 491

MULTINATIONAL SMALL FIRMS
COMPANIES

Coca Cola Glenview 8 Home industry

Total Guzha Township Home

Industry

Bata Mini Markets and Kiosks

Nestle Barbershops

Uniliver General Dealer Shops

DSTV(Multichoice) Corner shops