2014 Midterm MCQs

Question 1

When a business manufactures “low quality” products, it hurts the business’ productivity because:

a) products that don’t work as they should need to be repaired or replaced
b) Canadian consumers prefer high value, high technology items
c) products that don’t have elaborate features do not generate high sales values
d) low quality products tend to be imported from emerging economies

Answer 1

a) products that don’t work as they should need to be repaired or replaced

Question 2

__________ consists of money originally invested by owners and profits earned and reinvested in the company.

a) Inventory
b) Owners’ equity
c) Remaining liabilities d) Debits
e) Assets

Answer 2

b) Owners’ equity

Question 3

On a rainy Tuesday night in February, only 12 people are sitting inside the “Ragtime Jazz Club”, a popular bar and restaurant, near a large university. On a sunny Friday night in July, there are 120 people inside the club, and a line-up of 18 more people, standing on the sidewalk, waiting to get in. This illustrates one of the key characteristics of a service. That is, a service is _________.

a) customized
b) intangible
c) leveraged
d) flexible
e) unstorable

Answer 3

e) unstorable

Question 4

Which of the following is the best description of quality?

a) a measurement of how much is produced b) the additional output in the current year compared to the output for the previous year
c) a measurement of how much is produced relative to the resources used to produce the product or service
d) how closely a product adheres to quality standards
e) the ability of a product or service to meet customers’ expectations and satisfy their needs

Answer 4

e) the ability of a product or service to meet customers’ expectations and satisfy their needs

Question 5

A fixed asset is

a) an expense, such as rent, that is paid before the upcoming period in which it is due.
b) a nonphysical asset, such as a patent or trademark, that has economic value in the form of expected benefit.
c) an asset with long-term use or value, such as land, buildings, and equipment.
d) an amount due from a customer who has purchased goods on credit.
e) an asset that can or will be converted to cash within the following year.

Answer 5

c) an asset with long-term use or value, such as land, buildings, and equipment.

Question 6

As a market analyst consultant for Loblaw’s, Ravi Singh often views and monitors consumers to determine the frequency and value of their grocery purchases. This research method is known as:

a) observation
b) consumer behaviour analysis
c) focus group research d) surveying
e) experimentation

Answer 6

a) observation

Question 7

One of the key differences between service and manufacturing operations is:

a) services focus on the outcome of the production process
b) manufacturing operations feature a unique link between process and outcome
c) services are performed, and goods are produced
d) manufacturing products are characterized by intangibility, and customization
e) manufacturing operations are less storable

Answer 7

c) services are performed, and goods are produced

Question 8

From 1984 to 1991, Pepsi Cola’s marketing slogan was “The choice of a new generation”. This is an example of:

a) social segmentation b) demographic segmentation
c) socio-economic segmentation
d) semiotic segmentation
e) product use segmentation

Answer 8

b) demographic segmentation

Question 9

Which of the following is an advantage to a firm with increasing productivity?

a) the firm can afford to pay workers higher wages without raising prices
b) workers will not want to unionize
c) raw materials will decline in price
d) machine breakdowns will be less likely
e) the standard of living of its employees will fall

Answer 9

a) the firm can afford to pay workers higher wages without raising prices

Question 10

A banker is most likely to review the balance sheet of a potential customer for the following reason:

a) to determine whether the business has been profitable
b) to determine whether the business’ sales have been growing
c) to determine how much money the business has already borrowed, and what it has spent its money buying
d) all of the above

Answer 10

c) to determine how much money the business has already borrowed, and what it has spent its money buying

Question 11

An important aspect of operations is location planning. When location planning for a service, there are different things to consider for high-contact versus low-contact services. A key difference would be:

a) high contact service must locate in a place that maximizes profits, but a low contact service must locate in a place that minimizes costs.
b) low contact service can be located anywhere that is close to inputs (labour, raw materials), but a high contact service must balance the need to be close to inputs with the need to be close to customers.
c) a low contact service must locate in a place that maximizes profits, but a high contact service must locate in a place that minimizes costs.
d) a high contact service must locate in a place that maximizes revenues, but a low contact service must locate in order to minimize costs

Answer 11

b) low contact service can be located anywhere that is close to inputs (labour, raw materials), but a high contact service must balance the need to be close to inputs with the need to be close to customers.

Question 12

A manager would like to make quality improvements. Where should she begin?

a) knowledge of current cost levels
b) competitive product analysis
c) statistical process control
d) attention to customer needs
e) total productivity ratios and quality/cost studies

Answer 12

d) attention to customer needs

Question 13

As the operations manager for XYZ company your job includes helping to decide the capacity of the company’s new manufacturing facilty in Calgary, Alberta. You must make the factory large enough to satisfy forecast demand in Western Canada, but you want to be careful not to build too large a factory, What is one reason why it is a bad idea for a company to have excess capacity?

a) excess capacity wastes raw materials
b) a factory that is too large decreases form utility
c) excess capacity ties up in money in under-utilised, or unused, machinery and equipment
d) the additional investment will increase customer dissatisfaction Management,

Answer 13

c) excess capacity ties up in money in under-utilised, or unused, machinery and equipment

Question 14

What is the purpose of computing the current ratio?

a) to measure the returns that investors can expect from their investments
b) to measure how much cash the firm has
c) to measure the firm’s ability to meet its current obligations out of its current assets
d) to measure the extent to which a firm is financed through borrowed money

Answer 14

c) to measure the firm’s ability to meet its current obligations out of its current assets

Question 15

Location planning is best explained as

a) the managerial decision as to where best to locate one’s facilities in order to maximize profits
b) the managerial decision as to where best to locate one’s facilities in order to maximize revenues
c) the managerial decision as to where best to locate one’s facilities in order to minimise costs
d) the managerial decision as to where best to locate one’s facilities in order to minimise delivery times

Answer 15

a) the managerial decision as to where best to locate one’s facilities in order to maximize profits

Question 16

Sofia Cotton is the purchasing manager for Federated Fridges. As the business moves into Western Canada, Sofia is planning the construction of the new warehouse and distribution centre. Although the company has historically ordered its inventory twice a year (in November and then again in May) Sofia has informed the company’s VP of Finance that, in order to help the company improve its profitability, she will be placing smaller, more frequent orders with suppliers than she has in the past. This is expected to improve profitability by:

a) improving the relationship with the company’s suppliers
b) increasing the quality of the supplied products
c) reducing ordering costs
d) reducing holding costs

Answer 16

d) reducing holding costs

Question 17

Alice Tse has recently joined Brood Manufacturing to work in “operations control”. Which of the following best described Alice’s responsibilities at Brood?

a) monitoring production performance by comparing results with plans and schedules
b) purchasing the right raw materials, in the right quantity, at the right price, and at the right time
c) stocking items needed for production that are themselves produced within the firm
d) planning and organizing the flow of materials
e) checking to ensure that production decisions are being implemented Management,

Answer 17

a) monitoring production performance by comparing results with plans and schedules

Question 18

Over the course of a day, a baker converts 10 lbs. of flour bought at $4.50/lb. and 1 lb. of yeast bought at $5/lb. into 100 loafs of bread, which he sells for $2 per loaf. What is the productivity for that baker over the period of one day?

a) 2:1
b) 2.5:1
c) 4:1
d) 5:1
e) 10:1

Answer 18

c) 4:1

Question 19

Tuff gang clothing makes leather jackets for men and women. Their advertising campaign shows people wearing Tuff Gang leather jackets, with various quantities of studs and chains on each jacket. In one add three people are shown standing in a dark, dirty alley. A black man, in his mid-30s is holding a chain. A white woman, who appears to be in her late teens is holding a knife. An Asian man, in his 20s is holding a broken bottle. Beneath the photograph is Tuff gang’s slogan “Break the rules”. What kind of segmentation would best help you define this group of individuals?

a) demographic segmentation
b) psychographic segmentation
c) product-use variables segmentation
d) geographic segmentation
e) intrinsic segmentation

Answer 19

b) psychographic segmentation

Question 20

Which of the following is the most common reason for increases in labour productivity?

a) the dollar value of output is increased by raising prices
b) inflation increases the value of the output c) the number of workers is increased
d) non-labour resources are added so that fewer workers can accomplish more e) wages for workers are reduced

Answer 20

d) non-labour resources are added so that fewer workers can accomplish more

Question 21

Why would it be considered especially risky for a corporation (“ACo”) to have a high debt/equity ratio?

a) the owners of Aco have invested some of their own money in Aco
b) Aco may not generate profits sufficient to pay the interest on the debt when due
c) Aco might become the subject of a leveraged buyout
d) The creditors of Aco will be able to outvote the shareholders

Answer 21

b) Aco may not generate profits sufficient to pay the interest on the debt when due

Question 22

Cole Reynolds has recently been asked by his employer Nirvana Cosmetics, to improve the business’ reputation for quality. How should Cole begin to raise Nirvana’s product and service quality?

a) he should do primary research into competitive product offerings
b) he should set quality standards
d) he should survey both existing and potential customers as to what their needs are.
e) he should compare quality standards to empirical evidence of recent production runs

Answer 22

d) he should survey both existing and potential customers as to what their needs are.

Question 23

The ____________ philosophy says that the entire firm is coordinated to serve its present and potential customers at a profit.

a) marketing concept
b) product mix
c) marketing mix
d) marketing research
e) marketing functions

Answer 23

a) marketing concept

Question 24

In south Florida, an area hard hit by the US property bust of 2008, a man owns a home for which he paid $400,000 in 2006. When he bought the house, he put up $50,000 in equity, and took a $350,000 mortgage from his bank. Today, his house has a market value of $320,000. It is true to say:

a) his assets are greater than his liabilities.
b) his debts exceed his credits.
c) his owner’s equity is positive.
d) his owner’s equity is negative.
e) his owners equity is zero.

Answer 24

d) his owner’s equity is negative.

Question 25

Jason Wong has just started working for Rogers Communications, in the division which provides cell phone packages to Rogers’ customers. Jason’s boss has asked him to provide a “complete analysis of our customer base by segmented by demography”. Jason’s report will therefore address Rogers’ customers segmented by

a) place of residence
b) gender
c) life cycle
d) political affiliation
e) none of the above.

Answer 25

b) gender

Question 26

Which of the following statements best summarizes the purpose behind the marketing process? The purpose of marketing is to:

a) attain the largest possible share of the overall market.
b) convince customers to buy whatever a firm is trying to sell.
c) ensure a profit for the firm so that the organization can satisfy its stakeholders.
d) do whatever it takes to satisfy the customer, even if the welfare of other stakeholders is adversely affected.

Answer 26

c) ensure a profit for the firm so that the organization can satisfy its stakeholders.

Question 27

Economic output per hour worked differs from nation to nation. This is due to all of the following factors EXCEPT:

a) government policies b) the level of education and training within the workforces
c) the level of unemployment
d) the availability of natural resources

Answer 27

c) the level of unemployment

Question 28

Primary data are:

a) data gathered for primary areas of the firm, like marketing and production
b) gathered by consulting Statistics Canada publications
c) facts gathered from library research
d) data newly collected for a specific research purpose
e) any of the above, depending upon why the marketer is doing the research

Answer 28

d) data newly collected for a specific research purpose

Question 29

Marketing research is

a) a marketing strategy that emphasizes long-lasting relationships with customers.
b) the process of collecting, storing, and retrieving data in electronic files.
c) the process of fixing, adapting, and communicating the nature of the product itself.
d) the study of consumer needs and wants, and the ways in which sellers can best meet them.
e) the process of dividing a market into categories of customer types.

Answer 29

d) the study of consumer needs and wants, and the ways in which sellers can best meet them.

Question 30

When a business collects ” primary data” in its marketing research:

a) It is collecting data on a new, or “primary” product.
b) It is collecting basic, macro-economic data on broad patterns and trends.
c) It is collecting data on “primary” variables such as demand for sales, and price.
d) It is performing new research, directly for its own use.

Answer 30

d) It is performing new research, directly for its own use.

Question 31

Why would a business not want to have too big an “accounts receivable” account?

a) The longer it takes to collect money that it is owed, the lower the price it is able to charge
b) The longer it takes to collect money that it is owed, the less that can be borrowed against accounts payable
c) Not collecting what is owed to it makes your business’ debtors believe it to be inefficient
d) By not collecting the money that is owed to it, the business must borrow more money to finance its activities.

Answer 31

d) By not collecting the money that is owed to it, the business must borrow more money to finance its activities.

Question 32

Four friends decide to make some investments. They don’t all have the same amount of money to
Invest ( “equity”) and each has a different idea as to what type of asset would generate the best
return.
o Ann has $100,000 in equity. She borrows $300,000 from her bank and pays $400,000 to buy a house. One year later, she sells her house for $500,000.
o Bob has $150,000 in equity. He buys a painting by a famous modern artist. Two years later he sells the painting for $300,000.
o Chuck as $50,000 in equity. He buys a piece of antique furniture and one year later sells it for $150,000.
o Dave has $200,000 in equity. Borrows $200,000 from his bank, and invests all of the money in shares in a small Australian gold mining company. Two years later he sells his shares for $600,000.
Which investor has made the best return on investment?
a) Ann
b) Bob
c) Chuck
d) Dave

Answer 32

c) Chuck

Question 33

Demographics can include:

a) education, life cycle, and gender.
b) race, education, life cycle, and gender.
c) gender.
d) life cycle and gender. e) None of the above.

Answer 33

c) gender.

Question 34

Psychographics can include:

a) age and gender.
b) income and address
c) motivations and attitudes
d) life cycle and gender. e) None of the above.

Answer 34

c) motivations and attitudes

Question 35

Shown below is the balance sheet for Bunny’s Bakery on January 1, 2013.
Bunny’s Bakery
Balance Sheet as at January 1, 2013 (in $’000)
Assets Liabilities

Current Assets Current Liabilities
Cash 15 Accounts Payable 20
Inventory 5 Line of Credit 5
Accounts Receivable 10

Fixed Assets Long Term Liabilities
Furniture 10 Bank Loan 10
Machinery 45 Mortgage on Building 85
Building 110
Equity
Common Shares 50
Retained Earnings 25

Total Assets 195 Total Liabs. + Equity 195

Two weeks later (that is, on January 15, 2013, the Bunny’s owner, Dave Shempster, completed a number of financial transactions on behalf of the company. Specifically, he:

1. Raised $20,000 by selling shares to his aunt Eunice.
2. Used 1/2 of the proceeds of the share sale to purchase a new piece of equipment.
3. Used $5,000 to buy more raw materials
4. Put the rest of the proceeds into the bank.

36) On January 16 (i.e. the day after these transactions took place), the company’s working capital was:
a) $25,000
b) $15,000
c) $10,000
d) $5,000
e) we don’t have enough information to calculate the working capital

37) As a result of these transactions, does the company have more or less liquidity?
a) more liquidity
b) less liquidity
c) the liquidity is unchanged
d) we don’t have enough information to calculate the organisation’s liquidity

Answer 35

36. b) $15,000

37. a) more liquidity