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Answers to supplementary objective test

questions

CHAPTER 1 – MICROECONOMICS I – THE GOALS AND DECISIONS
OF ORGANISATIONS

1.1 D

According to this definition, someone working alone cannot be classified as an
organisation as they lack any social interactions or structure. The business has
controlled performance thanks to Mr F’s budgets, as well as goals related to
profitability.

Note that shared skills and knowledge is not part of Buchanan and Huczynski’s
definition.

1.2 C

Controlling costs (A) is a measure of economy, efficient resource utilisation (B)
reflects efficiency as does achieving maximum output per unit of input (D).
These are all secondary objectives of an NFP organisation and relate to how
well it performs rather than why it exists.

1.3 A

Response (A) is the correct answer as a mutual society does not have
shareholders but is owned collectively by its customers, for example a mutual
building society is owned by its depositors.

1.4 C

While governance would ensure compliance with relevant legislation concerning
employee working conditions, the primary focus is not employees per se.

1.5 $0.23

Ordinary dividends are not deducted from profit to calculate earnings for an
EPS calculation as these dividends are part of the earnings that are available to
ordinary shareholders (whether paid out or not).

Earnings = $1.1m – $0.15m – $0.285m – $0.2m = $0.465m
Number of shares = $1m/$0.5 = 2m

EPS = $0.465m/2m = $0.23 per share.

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