Copyright Reserved Serial No. Institute of Certified Management Accountants of Sri Lanka. Foundation Level Pilot Paper

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1 Copyright Reserved Serial No Foundation Level Pilot Paper Instructions to Candidates 1. Time allowed is two (2) hours. 2. Total 100 Marks. 3. Answer all questions. 4. Encircle the number of your choice in relation to Multiple Choice Questions. 5. The answers should be given in English Language. Subject Subject Code Fundamentals of Management & Economics (FME / FL 3) Fundamentals of Management (50%) (1) Management is the process of. the efforts of organizational members towards achieving common goals and objectives. (a) Planning, organizing, leading and controlling. (b) Leading, directing, motivation and planning. (c) Planning, organizing, motivation and controlling. (d) Planning, organizing, leading and directing. (2) Managers are categorized as top, middle and operations levels based on, (a) Area of specialization (b) Managerial skills (c) Level of authority (d) Line and staff relationship (3) This is not an essential element of defining an organization: (a) A group of people (b) An economic activity (c) Working together (d) Oriented to achieve common objective(s) 1

2 (4) Organizations are categorized as private, public, and cooperatives based on: (a) Nature of objectives. (b) Size of the organization. (c) Nature of the main function of the organization. (d) Ownership. (5) What is the correct statement below? (a) Efficiency means doing the right thing. (b) Effectiveness means doing things right. (c) Productivity means doing the right thing in right way. (d) Effectiveness links with the inputs used in the organizational system. (6) If an organization owns a dedicated and committed workforce though it faces a severe competition from others, such organization should address: (a) The ways of using its strengths to face environmental threats. (b) How to gain the advantages of opportunities to face the threats before it. (c) The strategies for capitalizing opportunities to overcome the weaknesses. (d) How to overcome its weaknesses through strengths. (7) The idea of a the true science of working was introduced by: (a) Elton Mayo (b) F.W. Taylor (c) Henry Fayol (d) Douglas McGregor (8) Man is considered as a social creature in this management approach; (a) Scientific Management. (b) Administrative management. (c) Behavioral approach. (d) Contingency approach. (9) Which of the followings is not one of the 14 principles of management introduced by Henry Fayol? (a) Equity (b) Decentralization (c) Discipline (d) Initiative (10) Hawthorne study suggested that: (a) There is a direct relationship between lighting and efficiency. (b) Mathematical methods can be used to solve managerial problems. (c) Economic incentives are very effective in motivating people. (d) Social aspect of work were paramount important to individuals. 2

3 (11) Planning is usually interpreted as; (a) A process of deciding a framework for organizations to explain the way of work, resources and authority divided among the members. (b) A process of ensuring that the expected results of an organizations are achieved or not. (c) A process of setting goals & objectives and developing strategies to achieve set goals & objectives. (d) A technique to measure the performance of an organization. (12) What is the acronym SMART used in setting goals and objectives? (a) Specific, Measurable, Attainable, Relevant, Time-bound (b) Speed, Medium, Attainable, Restrict, Total (c) Self, Measure, Applied, Resume, Technique (d) None of the above (13) What is the hierarchy of plans in an organization? (a) Market Plan, Outsource Plan, Company Plan, Operating Plan (b) Operating Plan, Strategic Plan, Human resource Plan (c) Budget Plan, Employee Plan, Tactical Plan (d) Operational Plan,Tactical Plan, Strategic Plan (14) Dividing the total workload into tasks that can logically and comfortably be performed by individuals or group is known as (a) Departmentalization (b) Division of work (c) Organizing (d) Delegation (15) What is the outcome of the organizing process of management? (a) An organizational structure. (b) An organizational chart. (c) An organizational hierarchy. (d) all of the above. (16) This is not an element of process of organizing. (a) Motivation (b) Delegating authority (c) Coordination (d) Specialization (17) This power source is clearly based on the position not on the person. (a) Expert power (b) Referent power 3

4 (c) Legitimate power (d) Reward power (18) In which theory (or theories) argue(s) that leaders are born, they cannot be made? (a) Behavioral leadership approaches (b) Contingency theories of leadership (c) Trait approaches to leadership (d) Both of trait and situational approaches for leadership (19) What is the correct statement about managerial grid? (a) There are prominent five managerial styles. (b) This is a matrix to measure the capacity of a manager. (c) There are only two kinds of managers called task-oriented and people oriented. (d) All managers can be clearly categorized to the five groups. (20) The motivational theory formulated by Abraham Maslow recognized that, there are five needs common to mankind and they can be arranged in a hierarchy. According to Maslow s theory, which one of the following need set is arranged in the correct order: (a) Physiological, social, safety, esteem, self-actualization (b) Physiological, safety, esteem, social self-actualization (c) Physiological, safety, social, esteem, self-actualization (d) Physiological, esteem, social, safety, self-actualization (21) Which one of the following motivational theories ignores the lower level basic needs of the people? (a) Two factor theory. (b) Expectancy theory. (c) ERG theory. (d) Three needs theory (22) These are the sequential steps of an effective communication process. (a) Sender, encoding, message, medium, decoding, receiver, feedback (b) Sender, encoding, message, medium, decoding, feedback, receiver (c) Sender, decoding, message, medium, encoding, receiver, feedback (d) Sender, decoding, medium, message, encoding, receiver, feedback (23) What is the correct statement about verbal communication? (a) Verbal communication should be written always. (b) Symbols are used in verbal communication too. (c) Verbal communication can be oral or written, however only words are used. (d) It is compulsory using verbal communication in informal communication. 4

5 (24) Management controlling requires: (a) Comparing advantages and disadvantages of managerial decisions (b) Comparing income and expenditure of the organization (c) Comparing expected/planned performance with actual performance of an organization (d) Comparing expected/planned performance with actual performance of an organization and take corrective actions when required. (25). is a non-financial controlling technique. (a) Financial Audits (b) Quality controlling (c) Variance analysis (d) Ratio Analysis (Marks 02 X 25 = 50) Fundamentals of Economics (50%) (1) Which statement is true with respect to Microeconomics? (a) It studies the economic behaviour of all economic actors (b) It is a unit of study on the nature and relationships of economic aggregates (c) It deals with the individual economic actors in the economy (d) It deals with concepts such as national income and aggregate demand (2) The statement ; The government should enforce minimum prices for paddy cultivated in Sri Lanka to encourage local farmers to produce more paddy is a; (a) Positive statement (b) Normative statement (c) Mix of positive and normative statements (d) None of the above (3) The law of demand postulates that ; (a) When price of a good increases its demand moves in the same direction (b) Price and quantity of a given good are positively related (c) Higher the demand higher the prices of a particular good (d) Greater quantity of a good is demanded at lower prices (4) The demand curve may shift to the right due to ; (a) An increase in consumer income (b) An unfavourable perception for the good (c) A decrease in the price of a substitute good (d) An increase in the price of a complementary good 5

6 (5) Select the option which is not a determinant of supply (a) Tastes and preferences (b) Technology (c) Cost of factors of production (d) Weather conditions (6) If Qd = 10 4p and Qs = p, the equilibrium price and quantity would be; (a) Quantity = 6 and Price = 12 (b) Quantity = 1 and Price = 6 (c) Quantity = 6 and Price = 1 (d) Quantity = 12 and Price = 6 (7) One of the consequences of imposing a unit tax by the government on a particular commodity is; (a) Supply curve shifts to the left (b) Demand curve shifts to the right (c) Supply curve and demand curve shift to the left at the same time (d) Supply curve shifts to the right (8) When the price of good X falls, the quantity demanded of that good increases at a greater proportion than the price change. This indicates that; (a) Good X faces a unitary elastic demand (b) Good X faces an elastic demand (c) Good X faces a perfectly inelastic demand (d) Good X faces an inelastic demand (9) You are given the following information with respect to demand of tea in Sri Lanka. The Point Price Elasticity of demand (PED) would be; Price of a kilogram of Quantity Demanded of Tea Tea in kilograms , ,000 (a) -1.36, Elastic demand (b) 1.36, Inelastic demand (c) 0.76, Inelastic demand (d) , Elastic demand (10) Under the theory of production the key differentiating factor between the long run and the short run is; (a) All inputs are variable in the long run 6

7 (b) All inputs are variable in the short run (c) Some inputs are fixed while some are variable in the long run (d) Most inputs are variable while few are fixed in the long run (11) Marginal Product of Labour (MPL) can be calculated as; (a) MPL = total output / total labour inputs (b) MPL = change in total output / total labour inputs (c) MPL = change in output / change in labour input (d) MPL = change in labour input / change in output (12) The law of diminishing marginal returns sets in when; (a) Average product starts to decline (b) Marginal product starts to decline (c) Marginal product approaches zero (d) Total product starts to decline (13) An iso-quant is a ; (a) Curve that shows all possible combinations of inputs that yield the same level of output (b) Curve that shows all possible combinations of two goods that is produced using same level of input (c) Curve that shows all possible input combinations (d) Curve that shows all possible output combinations of two goods that has the same input cost (14) Which statement is correct with regards to iso-cost curve; (a) It shows all possible combinations of output of one good and another for a given total cost (b) It shows all possible combinations of labour and capital at a given total cost (c) It shows all possible cost combinations of labour and capital at a given output (d) It shows all possible combinations of labour and capital at a given output (15) Long run average cost declines when ; (a) Constant returns to scale exists (b) Economies of scale exists (c) Diseconomies of scale exists (d) When a mix of economies and diseconomies of scale exist (16) The total cost function and the demand equation for an automobile manufacturer is given below. The profit maximizing level of output is; TC = Q 2 P = Q 7

8 (a) 8.5 units (b) 1.5 units (c) 5 units (d) 50 units (17) Out of the features stated below, which is relevant to perfect competition? (a) Product heterogeneity (b) Product differentiation (c) Free entry and exit to the market (d) Few number of sellers (18) Which of the following is not considered as a source of monopoly power? (a) Ownership of a patent or a copyright for the firm s product (b) Ownership of the entire supply of raw material needed for production (c) Firm enjoying economies of scale in production (d) Firm s product having many substitutes in the market (19) One of the macroeconomic objectives of the government is; (a) Maintain a stable level of general prices (b) Increase government tax revenue (c) Achieve a BOP surplus (d) Increase government expenditure (20) In the case of a four sector economy, leakages are ; (a) Savings, Government Expenditure and Exports (b) Tax, Imports and Savings (c) Tax, Investments and Imports (d) Government Expenditure, Exports and Investment (21) One of the limitations of the national income accounting framework is; (a) It considers all the informal and formal sector economic activities (b) The leisure time of the workforce is also accounted in the system (c) It considers the negative impact on the environment (d) It fails to account for all the productive activities in the economy (22) In the case of a managed floating exchange rate system; (a) Central bank fixes the exchange rate on behalf of the government (b) Market demand and supply forces determine the exchange rate (c) Market forces determine the exchange rate and the Central Bank regulates it (d) Government or the Central Bank ties the exchange rate to another foreign currency (23) Inflation is ; (a) An increment in the factor costs and the wholesale prices 8

9 (b) An increment in the prices of factors of production (c) A continuous increment in the general price level (d) A continuous increment in the retail prices of goods and services (24) Which statement best explains the unemployment and inflation relationship in the short run? (a) When unemployment rate is high inflation rate is usually low (b) When inflation rate is high unemployment rate too is high (c) They have a positive relationship (d) There is no distinct relationship between the two variables (25) An increment of government expenditure is an example of a; (a) Contractionary monetary policy (b) Expansionary monetary policy (c) Contractionary fiscal policy (d) Expansionary fiscal policy (Marks 02 X 25 = 50) End of Question Paper 9

(AA13) ECONOMICS FOR BUSINESS AND ACCOUNTING

All Rights Reserved ASSOCIATION OF ACCOUNTING TECHNICIANS OF SRI LANKA AA1 EXAMINATION - JULY 2018 (AA13) ECONOMICS FOR BUSINESS AND ACCOUNTING Instructions to candidates (Please Read Carefully): (1) Time