Exam Practice

Question 1

What is the formula for Asset Turnover?

Answer 1

Revenue / Capital Employed

Question 1

What is the formula for Return on capital employed?

Answer 1

Net Profit / Total Assets - Total Liabilities

Question 2

What is the formula for Overhead Absorption Rate?

Answer 2

Budgeted Overhead / Budgeted Basis of Absorption (total units of allocation eg hours to make all the units)

Question 3

Command Verb - Identify / State

Answer 3

List the points mentioned in the question and move on, should be short and sweet

Question 4

Command Verb - Explain / Describe

Answer 4

Provide reasoning for something (describe how/why and provide evidence of your points)

Question 5

Command Verb - Compare / Analyse

Answer 5

Find similarities and differences - and show them with stats and figures

Question 6

Command Verb - Recommend

Answer 6

Suggest or recomend a preferred option or course of action and provide evidence for this and why it is beneficial

Question 7

Command Verb - Evaluate / Discuss

Answer 7

make a fair judgement based on a range of factors - make sure to consider advantages and disadvantages and summarise points if needed but always remain neutral

Question 8

Define the component costs of the Introduction stage of the product life cycle

Answer 8

Marketing/advertising, productions and distribution

Question 9

Define the component costs of the Growth stage of the product life cycle

Answer 9

Heavy advertising to drive market share, inventory costs, unit costs should start to fall due to economies of scale and customer support costs will increase

Question 10

Define the component costs of the Maturity stage of the product life cycle

Answer 10

Advertising and marketing to maintain brand awareness, some discounts/promotions, units costs should now be low and good profits generated but will still have high customers service costs to stay competitive

Question 11

Define the component costs of the Decline stage of the product life cycle

Answer 11

Decommissioning costs and product retirement costs (equipment scrapping) and possibility of final sales promotion costs

Question 12

What is the formula for Return on Investment (ROI)?

Answer 12

Divisional Profit (controllable costs) /Capital Employed x 100 (to show as percentage)

Question 13

What is the formula for Residual Income (RI)?

Answer 13

Divisional Profit (controllable costs) - (Divisional Investment x Cost of Capital)

Question 14

What are the four characteristics of Value Analysis?

Answer 14

Cost, exchange, use and esteemed value

Question 15

What are the four elements of a balanced scorecard?

Answer 15

Financial perspective, Customer perspective, Innovation and learning perspective, Internal perspective.

Question 16

What is the formula for Receivable collection days?

Answer 16

Trade receivables / Credit sales revenue x 365

Question 17

What is the formula for payable payment days?

Answer 17

Trade payable / credit purchases (or COS) X 365

Question 18

What is the formula for Inventory holding days?

Answer 18

Inventory / COS x 365