Which of the following are most likely to be fixed costs of an airline? Select TWO that apply.
Correct Answer: A,D
Explanation Fixed costs (FC) are costs that do not vary with volume. To an airline once aircraft are purchased, flight crews trained and departures scheduled, costs are disproportionately fixed. Variable costs (VC) arethose which vary with the amount produced. Fuel, catering services and marketing are examples of variable. LO 2, AC 2.1
Question 2
An experienced procurement professional is developing strategies for forthcoming negotiations with her key supplier. To avoid negotiation deadlocks, she identifies the reasons whynegotiations could fail. Which of the following are most likely to be reasons for negotiation failures? Select TWO that apply.
Correct Answer: A,E
It has been said that most negotiations are won (or lost) at the preparation stage. Success in a negotiation cannot be claimed unless you can refer back to your objectives and show how you have achieve them. In broad terms, negotiation plans/strategies involve 4 key activities: 1. Developing and prioritising your objectives and limits 2. Seeking to understand TOP's objectives 3. Developing concession plans 4. Planning the resources and logistics required and agreeing team roles. Questions to gain an understanding of why a negotiation failed Did we collect and make effective use of all information available when preparing for the negotiation? Did we set objectives for the negotiation that were stretching and achievable and established MIL objectives? Did we determine a strategy for the negotiation? Did the other party understand our needs correctly? Were we aware of the underlying interests of the other party? Were our proposals convincing enough for acceptance by the other party? Did we explore different variables in the negotiation? Did we fully understand all proposals? Did we give any unplanned concessions and did we check the importance of these? Did we focus on common interests? Did we ask a range of questions? Did we get answers to all our questions? Could we answer all the questions addressed to us in a proper and positive way? Did we summarise effectively? Did we use different methods of persuasion in the negotiations? Which tactics did we use and what effect did they have? Did our negotiating team work well as a team? Did we help to create a co-operative atmosphere
Question 3
Which of the following are typical characteristics of activity-based costing (ABC) method? Select TWO that apply.
Correct Answer: A,E
Activity-based costing is an alternative approach to traditional absorption costing. The characteristics of these two methods are illustrated in the graph below: Graphical user interface, text, chat or text message, website Description automatically generated
Question 4
When is the best time in procurement process in which procurement should get involved so that the cost-saving opportunities are the greatest?
Correct Answer: C
Explanation The earlier procurement get involved in the procurement processes, the better. If procurement are involved in design at the specification stage they can feed in prices and costs to designer so they know the likely budget implication of choices made. Sending in a procurement team to negotiate at or close to the end ofthe procurement process effectively ties their hands and limits their negotiation leverage. This is illustrated in the graph below: Chart Description automatically generated LO 2, AC 2.1
Question 5
Which of the following is NOT a barrier to entry in amonopolized market?
Correct Answer: B
Monopolies exist in many markets in real life for very different reasons: Ownership of a Key Resource: When one company exerts sole control over a resource that is necessary for the production of a specific product,the market may become a monopoly. For example, the only medication deemed acceptable to treat a disease comes from a particular ingredient X, and knowledge of this ingredient X is owned by a single family owned company. The company can, therefore, be saidto have a monopoly over ingredient X that is needed to cure the disease because it is the only company that can produce a product deemed acceptable. Government Franchise: In certain instances, a monopoly may be explicitly created by the government if it grants a single company, whether private or government-owned, the right to conduct business in a particular market. For example, when a national railways transportation service is created by the government, in most cases they are granted a monopoly on the operation of passenger trains in the country. As a result, other firms are only able to offer passenger train services with the cooperation and/or permission of the government-owned provider. Intellectual Property Protection: Extending intellectual propertyprotection to a company in the form of patents and copyrights is yet another way in which monopolies are created. When a government does this, it is in fact giving a single company an exclusive right to provide a particular product / service to the market. Patents and copyrights work in providing owners of intellectual property with the right to act as an exclusive provider of a new product for a specific length of time. This creates a temporary monopoly in the market with regards to new products and services. Natural Monopoly: A market may also become a monopoly simply because it may be more cost-effective for one company to serve the whole market than to have several smaller firms in competition with one another. A company with virtually unlimited economies of scale is referred to as a natural monopoly. Such firms become monopolies due to their position and size, which makes it impossible for new entrants in the market to compete price-wise. Natural monopolies are common in industries with high fixed costsand low marginal costs of operation such as providers of television, telephone, and internet services. In this question, 'A single firm is very large' is not enough to tell whether this market is monopolistic.
