CUSTOMER_CODE
SMUDE
DIVISION_CODE
SMUDE
EVENT_CODE
JAN2016
ASSESSMENT_CODE ET0004_JAN2016
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123208
QUESTION_TEXT Discuss the different methods of Pricing
Different methods of pricings are as follows:
∙
Cost – Plus Pricing: this is perhaps the most commonly used
pricing method. To establish a selling price, a company works out the
cost of producing the product and add a profit percentage to the price.
Cost plus pricing can take two forms a) full cost pricing – take into fixed
and variable costs and adds a % mark-up b) direct cost pricing – which
are variable costs plus a % mark up (2 Marks)
∙
Limit Pricing: the limit price is the price that a new entrant will
encounter as long as the existing firms do not lessen output. This price is
generally lower than the average cost of production or is at point where
market entering is not profitable. Monopolists set limit price to
discourage economic entry into a Market.
(2
Marks)
SCHEME OF
EVALUATION
∙
Contribution Margin – Based pricing: this method of pricing looks
at maximizing the profit produced from an individual product owning to
the difference between the product’s price and variable costs. The
variable cost is also known as the product’s contribution margin per unit
(2 Marks)
Formula:Contribution margin per unit X Number of units sold
∙
Target Pricing: in this method, the product’s selling price is
calculated to generate a specific rate of return on investment for a
particular volume of production. This method is mostly used by public
utilities, and companies with high capital investments. (2 Marks)
∙
Absorption pricing: in this method, all costs are recovered. The
products price would include variable cost of each item and
proportionate amount of the fixed costs. (2 Marks)
∙
Marginal – cost Pricing: in this method, for each product unit sold,
the producer would charge the additional to total cost which result from
materials and direct labour. The objective to this pricing method is to
establish the price of a product in such a way as to equal the extra cost of
making an extra unit of output.(2 Marks)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123209
QUESTION_TEXT
What is cost management? Explain 4 stages of cost management:
cost management is the management of cost related activities of a
business. Cost management is the responsibility of the organisation and a
vital element of general management. Cost management typically
includes a policy that is either full cost recovery or partial cost recovery,
or none at all. (2 Marks)
There are four separate stages of cost management. The four stages are
∙
Cost Planning: included activates like cost estimating, forecasting
and budgeting.(2 Marks)
SCHEME OF
EVALUATION
∙
Cost Tracking: includes separate coding of activities and their
connected costs, such as expenses accretion and use of financial systems,
among others (2 Marks)
∙
Cost Analysis: includes reporting on costs incurred and evaluation
of the same. (2 Marks)
∙
Evaluation and Decision: includes assessment of costs with Process
changes applied as required, consideration of shifting funding sources,
evaluation of current asset management and resources deployment, and
decision making with regard to cost recovery. (2 Marks)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123210
QUESTION_TEXT
Define International Tax System; Explain the 2 common principles of
international taxation? Describe 3 kinds of taxes in the context of
international events:
SCHEME OF
EVALUATION
Two common principle of international taxation are Residence Principles
and Source Principle. Residence principle calculate the tax liability by
considering the place where the tax payer residues. Whereas source
principles considers the source of income of the tax payer as a basis of
evaluating tax liabilities.
Residence principle: Residents of the country are taxed uniformly on
their overall income, irrespective of whether it is of domestic or foreign
origin. Non residents who earn in the home country are not taxed by the
home country on their income originating in that country (2 Marks)
Source Principle: income originating in the home country is uniformly
taxed, regardless of the residency of the service of the income. Residents
of the home country are not taxed by the home country on the foreign
source of income. (2 Marks)
When event is organised internationally, there will be 3 kinds of taxes:
∙
Income Tax: A substantial part of the tax revenue in a country
accrues from tax on personal and corporate income. Tax is imposed on
income arising out of a firm’s operations. (2 Marks)
∙
Withholding tax: This is tax charged on passive income that a
corporate body or an individual earns. Passive income refers to income
that arises in some other country. Tax on passive income is called the
withholding tax as the MNC that receive the dividend withholds the tax
borne by the shareholder and passes the tax amount to the concerned tax
authorities. (2 Marks)
∙
Value Added Tax: This tax is charged on the value added at
various stages of production of a commodity. Vat is indirect tax and
preferred over direct income tax. (2 Marks)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123211
QUESTION_TEXT
Explain the various styles of Negotiation
SCHEME OF
EVALUATION
Negotiation is a dynamic communication process in which two or more
parties attempt to resolve differences and defend interests through
dialogue in order to achieve a solution or a satisfactory
agreement.Negotiation styles vary with the person, their beliefs and
skills, as well as the general context in which they occur. The styles have
been outlined below:
∙
Accommodating: This individual is unassertive and cooperative.
Accommodators often neglect their own concerns in order to satisfy the
concerns of others.Accommodators may be self-sacrificing.
Accommodating may take the form of selfless generosity or charity,
obeying another person's order even when they would prefer not to, or
yielding to another's point of view. (2 Marks)
∙
Avoiding: Avoiders are unassertive and uncooperative. They do
not immediately pursue their own concerns or those of others.Their
avoiding may take the form of diplomatically sidestepping an issue,
postponing the issue until a later or better time, or, ostrich-like,
completely withdrawing from the threatening situation. (2 Marks)
∙
Collaborating: This personality is both assertive and cooperativethe opposite of the avoider. Collaborators attempt to work with the other
person to find some solution which fully satisfies the concerns of both
persons. They dig into an issue to identify the underlying concerns of the
two conflicting individuals and try to find an alternative which meets
both sets of concerns.Collaborators are "win-win" negotiators who
believe that "two heads are better than one."(2 Marks)
∙
Competing: This personality is assertive and uncooperative.
Computers pursue their own concerns at the other person's expense.
They use whatever powers seem appropriate to win their positionincluding their ability to argue or their rank. (2 Marks)
∙
Compromising: this personality lies somewhere between
assertiveness and cooperativeness. The goal of the compromiser is to
find an expedient, mutually acceptable solution which partially satisfies
both parties. The compromiser is in the middle ground between the
computer and the avoider. (2 Marks)
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123212
QUESTION_TEXT
What is CVP analysis? Explain the elements and objectives of CVP
analysis.
SCHEME OF
EVALUATION
CIMA has defined CVP Analysis as the study of the effects on the
future profit of changes in fixed cost, variable cost, sale cost,
quantity and mix.
Elements of CVP Analysis:
1.
Marginal Cost equation
2.
Contribution
3.
Profit–Volume Ratio
4.
Break–even Point
5.
Margin of safety
Objectives of CVP Analysis:
1.
It helps to forecast the profitability of the business.
2.
It acts as an effective tool of profit planning to the
management.
3.
It helps in finding the break–even point of the event held.
4.
It is very useful in the setting up of a flexible budget so as to
find the profit and sales at different levels of activity.
5.
It aids management in the process of performance evaluation
for the purpose of control.
6.
It aids in determining the amount of the overhead cost to be
charged to the event.
7.
It aids in determining the optimum product mix in case of
multiple activities.
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
123214
QUESTION_TEXT
What do you mean by responsibility centre? Briefly explain the different
responsibility centres.
SCHEME OF
EVALUATION
A decentralized environment results in highly scattered decision–
making. This makes it important to measure and constantly monitor the
output of each manager. However, it is not possible to evaluate
different departments or units on the same basis. There might be some
departments that generate only revenue, while others may only incur
costs. Therefore, to generalize, the part of an organization under the
control of a manager is called a ‘responsibility centre’.
1.
Cost centre
2.
Profit centre
3.
Investment centre