COMMUNITY DEVELOPMENT AND TRAINING CENTRE/

TONGA INSTITUTE OF HIGHER EDUCATION

MINISTRY OF EDUCATION

Semester 2 Examination - 2005

Course / AGC 021: BUSINESS MANAGEMENT
Duration / THREE (3) Hours plus 10 minutes Reading Time.
Date of Exam / Wednesday 2 November, 2005
Total Marks / 100 (weighting of 50%)
ID Number
Program : Agriculture / Diploma
Did you use extra pages? /
No or Yes Write the number of extra pages………....

INSTRUCTIONS:

  1. This paper consists of FOUR (4) Questions.
  2. Answer ALL questions.
  3. Write in black or blue pen in the spaces provided in this booklet.
  1. Write your ID number on the space provided.

QUESTION 1(10 marks)

In most retail operations the largest cost is merchandise purchased for resale to customers. Not only do you need to control this cost, you need to maximize sales (and profit) through clever purchasing.

Explain how you make sure that you buy the right merchandise, of the right quality, in the right quantity, at the right price and at the right time.

QUESTION 2(10 marks)

A job description is a concise outline of the dimensions of a job based on the information obtained from the task analysis. You have been asked by TM Fifita Co. Ltd to write a simple job description of a sales assistant (Faifakatau) to be used in recruitment of some new employee for their built up for the X-mas sales.

QUESTION 3(10 marks)

Computer technology has become an indispensable tool in small businesses of all kinds.

You, as a small business operator, have decided to buy a simple accounting software that will assist you in producing financial reports. There are varieties of accounting software in the market like QuickBooks, PeachTree, MYOBI etc. Explain how you make sure that you buy a system that will suit your needs and affordable to maintain.

QUESTION 4

Rainbow Store sales are $1,000,000 and its variable costs are $750,000.

(a)Calculate the contribution margin using the formula:(3 marks)

Contribution margin = (Sales – Variable cost) / Sales

(b)Fixed costs for Rainbow Store is $160,000, Calculate the Break-even point using the formula: (3 marks)

Break-even point = Fixed costs / contribution margin

(c) Suppose Rainbow Store wants to cut its average price by 10% in an effort to stimulate sales. What level of sales must Rainbow Store achieve to break-even at the lower price? (5 marks)

[Remember you must first calculate the 10% reduction in sales then calculate the new contribution margin before you work out your new break-even point]

(d)Rainbow Store wants to invest in new equipment that will add $40,000 in fixed costs per year. What increase in sales is necessary to provide sufficient contribution to cover the extra fixed costs? (2 marks)

[Use the formula: Sales increase = Increase in fixed costs / contribution margin. (use the contribution margin that you calculate in (a) above]

(e)Rainbow Store wants to place advertisements in a magazine that will cost $500 per month. What increase in sales must the advertisements generate every month in order to pay for themselves? (2 marks)

[Follow the formula in (d) above]

(f) Rainbow Store wants to make a profit of $150,000. What sales objective is necessary to achieve the desired level of profit? (5 marks)

[Use the formula: Sales objective = (Fixed costs + Profit) / contribution margin (remember to use the fixed costs amount in (b) above)]

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