2 | Due part: 6th semester

Due part: 6th semester | 1

2. Differentiate between NPV and IRR. Which method is the best? Why?
BBA THIRD YEAR SIXTH SEMESTER EXAMINATION, 2020
Different between NPV and IRR: The difference between NPV and IRR given below
FINANCIAL MANAGEMENT
NPV IRR
Subject Code: 530149
1. NPV refers to netting the present value of 1. IRR is defined as that discount rate that
Time-3 hours
the initial investment. equates the PV of projects expected cash
Full marks-70
inflows with its initial cost or the present value
[N.B. The figures in the right margin indicate full marks]
of the outflow.
Part A-Short Questions
(Answer any six questions) 2. Here cash inflows are conventional. 2. Here cash inflows are unconventional.
Marks-5x6=30 3. The cost of capital is considered discount 3. The discount rate is calculated by trial and
1. (a) Define financial management. rate at the NPV method. error method.
Finance Management: Financial management refers to the process of planning, organizing, 4. In this method if the net present value of a 4. In this method if the IRR is greater than
directing, and controlling the financial activities of an organization. It involves the strategic use of project is positive that is accepted. discount rate that is accepted.
financial resources to achieve the goals and objectives of the organization while minimizing risk 5. It is easy than IRR. 5. It is difficult than NPV.
and maximizing returns. Both methods have their advantages and disadvantages. NPV considers the time value of money
Here are a few additional definitions of financial management: and provides a direct measure of the increase or decrease in shareholder wealth. It also allows for
The Chartered Institute of Management Accountants (CIMA) defines financial management as "the easy comparison between different investment projects. However, it requires the assumption of a
identification, measurement, analysis, and interpretation of financial information that helps specific rate of return, which can be difficult to estimate accurately.
managers make informed decisions to maximize value for shareholders." IRR, on the other hand, takes into account the time value of money and provides a single number
The American Management Association (AMA) defines financial management as "the planning, that summarizes the profitability of an investment. It is useful when comparing two or more
directing, monitoring, organizing, and controlling of the monetary resources of an organization." projects of similar size and duration. However, it assumes that all cash flows will be reinvested at
the same rate as the IRR, which may not always be realistic.
(b) “Wealth maximization is the ultimate goal of financial management."-Justify the In general, NPV is considered a more reliable method for evaluating investment projects because
statement. it is based on a more realistic assumption about the cost of capital. However, IRR is still useful as a
The statement "Wealth maximization is the ultimate goal of financial management" is a widely complementary tool, especially when comparing projects of similar size and duration. Ultimately,
accepted principle in the field of finance. This means that the primary objective of financial the best method depends on the specific situation and the information available to the decision-
management is to maximize the wealth of the shareholders or owners of an organization. maker.
There are several reasons why this statement is justified:
1. Shareholders are the owners of the company and they have invested their money with the 3. (a) What is APT and CAPM?
expectation of earning a return. Therefore, maximizing shareholder wealth ensures that the APT (Arbitrage Pricing Theory) and CAPM (Capital Asset Pricing Model) are both financial models
owners are compensated for their investment. used to estimate the expected return on an investment.
2. Maximizing shareholder wealth helps to attract new investors and retain existing ones. When CAPM is a model that helps investors determine what return they should expect for taking on a
investors see that a company is focused on increasing its profits and share value, they are more certain amount of risk. It assumes that the only risk that matters in determining an asset's
likely to invest in the company. expected return is its market risk, which is captured by the beta coefficient. The formula used in
3. Wealth maximization encourages efficient use of resources. When managers make decisions that CAPM is:
maximize shareholder wealth, they are incentivized to use resources in the most productive Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate)
way possible. APT also estimates expected returns, but it takes into account multiple factors or sources of risk,
4. Maximal wealth creates opportunities for growth and expansion of the company. Companies with rather than just market risk. APT assumes that an asset's expected return is a function of various
high levels of wealth can use those resources to invest in research and development, expand macroeconomic factors, such as changes in inflation rates or shifts in interest rates. APT does not
product lines, open new locations, and pursue other growth opportunities. require the assumption of a specific market portfolio or risk-free rate, and it uses linear
regression analysis to estimate the relationship between an asset's expected return and the
relevant factors.
 Due part: 6th semester | 3 4 | Due part: 6th semester
(b) What are the assumptions of CAPM? Discuss. (b) What are the differences between business risk and financial risk?
The Capital Asset Pricing Model (CAPM) is a financial model that helps investors determine the Difference Between Business Risk And Financial Risk in Tabular Form
expected return on an investment. The model is based on several key assumptions, including: Basis of Business risk Financial risk
1. Perfect Markets: CAPM assumes that markets are perfectly efficient and all investors have distinction
access to the same information at the same time. This means that prices accurately reflect the Meaning This risk includes never being able It is the danger of not being
true value of securities. to produce enough money to keep capable of paying one's debts,
2. Risk-Free Rate: CAPM assumes that there is a risk-free asset with a constant rate of return. the business running smoothly. which might lead to a company's
This risk-free rate represents the opportunity cost of investing in a risky asset. insolvency.
3. Portfolio Diversification: CAPM assumes that investors hold well-diversified portfolios, Concern It is concerned with the company's It is concerned with the company's
where each investor holds a small fraction of the total market portfolio. This means that continued operation. ability to repay its creditors.
unsystematic or idiosyncratic risks can be eliminated by holding a diversified portfolio. Minimization Risk cannot be minimized in It is possible to reduce the risk to
4. Homogeneous Expectations: CAPM assumes that all investors have the same expectations techniques business risk. almost zero by not employing
about future returns, risks, and correlations between assets. This means that investors have borrowed capital.
the same view of the world and make rational decisions based on that view. Period Because business risk cannot be There will be no financial risk
5. Linear Relationship between Risk and Return: CAPM assumes that there is a linear eliminated, it will always exist. because the firm will attain a
relationship between the expected return on an asset and its beta coefficient. Beta measures particular level of equity funding.
the volatility of an asset relative to the market portfolio. According to CAPM, only systematic Function The business risk must exist for a It is said to yield superior results.
or market risk affects expected returns, and this risk is captured by beta. firm to develop. As a result, the corporation is
It is important to note that these assumptions are simplifications of the real world and may not forced to take on the debts.
always hold true. For example, markets may not always be perfectly efficient, and investors may Classification Risks like compliance, operational Risks Like the risk of credit,
not always have the same view of the world or hold well-diversified portfolios. Nonetheless, CAPM risk, reputation risk, financial risk, market, liquidity, exchange rate
remains a popular tool for estimating expected returns because it is simple to use and provides a and strategic risk are all risk, etc.
benchmark for evaluating investment opportunities. considered.
Revealed by Net operating income and net cash Differences in equity stockholders'
4. (a)“All risks are uncertainties but all uncertainties are not risk"-Agree or disagree? flows differ. returns.
Explain your reasoning. Risk factor There is no way to reduce the risk. There will be no risk if the
I agree with the statement, "All risks are uncertainties but all uncertainties are not risk." company does not employ loan
Risk refers to the potential for loss or harm, while uncertainty refers to a lack of information or capital.
knowledge about future events. All risks involve some level of uncertainty because they are based Risk evaluation The company's earnings might be On the other hand, the financial
on future events that cannot be predicted with 100% accuracy. used to assess business risk. risk may be assessed using the
However, not all uncertainties represent risks. Some uncertainties may have no impact on an debt-to-asset ratio.
individual or organization, while others may even have a positive outcome. For example, the
uncertainty of winning a lottery is not a risk for someone who has not bought a ticket, but it could
5. “Capital structure is irrelevant"-Explain.
represent a risk for someone who has invested their savings in purchasing tickets.
The statement "capital structure is irrelevant" is a controversial topic in finance, and there are
In other words, risk involves the possibility of both positive and negative outcomes, whereas
different perspectives and arguments for and against it.
uncertainty does not necessarily involve any potential losses or gains. Risk involves an element of
One argument supporting the statement is the Modigliani-Miller theorem, which suggests that
decision making, where individuals or organizations evaluate the potential consequences of
under certain assumptions, the value of a firm is independent of its capital structure. The theory
different actions or outcomes.
assumes perfect markets, no taxes, no bankruptcy costs, and homogeneous expectations, among
Therefore, while all risks involve some degree of uncertainty, not all uncertainties can be
other assumptions. However, in the real world, these assumptions do not hold, and capital
categorized as risks. It is important to distinguish between the two concepts when assessing
structure decisions can affect a firm's value.
potential outcomes and making decisions.
On the other hand, many finance scholars and practitioners believe that capital structure does
matter and that it can impact a firm's cost of capital, financial flexibility, and risk profile. For
instance, issuing more debt can increase a company's financial leverage and its interest expenses,
 Due part: 6th semester | 5 6 | Due part: 6th semester
making it more vulnerable to default and bankruptcy. Alternatively, issuing more equity can dilute 7. TCS has outstanding shares of 5 million with current price of Tk.100 each. The company
existing shareholders and lower the company's earnings per share. wants to raise fund by Tk. 70 million and the subscription price is Tk. 70 each. Find out :
(a) Number of shares needed to required fund.
6. Distinguish between Walter Model and Gordon Model of Dividend policy and share (b) How many right will take to buy one share?
price. Explain with example. (c) What is the ex-right price?
The Walter Model and Gordon Model are two different approaches to analyzing the relationship
between a company's dividend policy and its share price. a) To raise Tk. 70 million, TCS needs to issue new shares worth Tk. 70 million at a subscription
The Walter Model is a dividend policy model that suggests that the dividend payout ratio affects price of Tk. 70 each. So, the number of shares needed to raise this fund can be calculated as:
the market value of a company. The model assumes that a company's value depends on the
earnings of the company and the return on investment expected by shareholders. The model Number of shares = = = 1,00,000
argues that the optimal dividend payout ratio is the one that maximizes the value of the firm, and
Therefore, TCS needs to issue 100,000 new shares to raise Tk. 70 million.
this ratio is determined by the cost of equity and the return on investment. In other words, the
higher the return on investment, the higher the optimal payout ratio, and vice versa.
b) The number of rights required to buy one share can be calculated as:
For example, let's consider a company that has an expected return on investment of 12%, and its
cost of equity is 10%. According to the Walter Model, the optimal dividend payout ratio for this Number of rights required = = = 5 So, it will take 5 rights to buy one
company is calculated as follows: share.
Optimal Payout Ratio = = 16.67%
The Gordon Model, on the other hand, is a dividend valuation model that uses the dividend c) The ex-right price is the current market price of a share after the rights issue has been
discount model to estimate the intrinsic value of a company's stock based on its expected future announced but before the ex-date, when the stock trades without the right to the new shares.
dividends. The model assumes that the present value of a stock is equal to the sum of its future The theoretical ex-right price can be calculated as:
dividends discounted by the required rate of return. The required rate of return is equal to the Ex-right price =
cost of equity, and the dividend growth rate is assumed to be constant. =
For example, suppose a company is expected to pay a dividend of $2 per share next year, and the
dividend is expected to grow at a constant rate of 5% per year. The required rate of return for the = = Tk. 0.90
company's stock is 10%. According to the Gordon Model, the intrinsic value of the company's
stock can be calculated as follows: Therefore, the ex-right price for TCS would be Tk. 0.90 per share.
Intrinsic Value = = $40 per share
8. (a) What is Acid-Test ratio?
In summary, the Walter Model and Gordon Model are two different approaches to analyzing the
The Acid-Test ratio, also known as the Quick ratio, is a financial ratio used to measure a
relationship between dividend policy and share price. The Walter Model focuses on the impact of
company's short-term liquidity or ability to pay off its current liabilities with quick assets that can
dividend payout ratios on the market value of a company, while the Gordon Model estimates the
be readily converted into cash. It is considered a more conservative measure of liquidity than the
intrinsic value of a company's stock based on its expected future dividends.
Current ratio because it excludes inventories and other current assets that may be difficult to turn
into cash quickly.
The formula for calculating the Acid-Test ratio is:
Acid-Test ratio =
In this formula, current assets are those that can be converted into cash within one year, such as
cash, marketable securities, and accounts receivable. Inventories and prepaid expenses are
excluded because they may take longer to convert into cash. Current liabilities are those due
within one year, such as accounts payable, accrued expenses, and short-term debt.
A higher Acid-Test ratio indicates a more liquid company with a better ability to meet its short-
term obligations. However, the ratio varies by industry and should be compared to competitors or
industry benchmarks to determine if a company's ratio is strong or weak.
 Due part: 6th semester | 7 8 | Due part: 6th semester
(b) Who are the users of ratio analysis? 3. Flexibility: Leasing provides more flexibility as you can upgrade to a newer model at the end
Ratio analysis is used by a wide range of stakeholders to evaluate the financial performance and of the lease term, whereas purchasing ties you to the asset until you decide to sell it or trade it
health of a company. The main users of ratio analysis include: in.
1. Management: Ratio analysis is an essential tool for management as it helps them analyze the 4. Mileage or Usage: If you're buying a vehicle or equipment that you expect to use heavily,
company's financial performance, identify strengths and weaknesses, and make informed purchasing may be a better option, as leases often have mileage limits and charges for
decisions about the company's operations, investments and financing. excessive wear and tear.
2. Investors: Investors use ratio analysis to assess a company's financial health and growth 5. Taxes: Tax implications can differ between purchasing and leasing. For example, if you
prospects before making investment decisions. They look at ratios such as return on purchase, you may be able to deduct depreciation and interest payments, whereas leasing
investment (ROI), earnings per share (EPS), price-to-earnings (P/E) ratio, and dividend yield payments are typically fully deductible as business expenses.
to determine whether a company's stock is undervalued or overvalued. Ultimately, whether purchasing or leasing is better depends on your individual circumstances,
3. Creditors: Creditors use ratio analysis to assess a company's ability to pay back its debts on such as your budget, how long you plan to use the asset, your tax situation, and your goals for
time. They focus on ratios such as debt-to-equity ratio, interest coverage ratio, and current ownership or flexibility. Consider weighing the pros and cons of each option and consult with a
ratio to determine the level of risk associated with lending money to the company. financial advisor or accountant to determine what's best for you.
4. Financial Analysts: Financial analysts use ratio analysis to evaluate a company's financial
performance relative to its peers and industry benchmarks. They also use ratios to forecast 10. You are supplied with the following information: Inventory turnover 9 times. Alcs
future performance and make recommendations to investors. receivable collection period 45 days, Alcs payable payment period 30 days, operating
5. Regulators: Regulators use ratio analysis to monitor the financial health of companies in cycle of investment 20,00,000.A year in 360 days.
regulated industries to ensure compliance with regulatory requirements and to protect the Calculate :(a)Operating cycle (b)Cash conversion cycle (c)Maximum operating cash.
interests of consumers and other stakeholders. Solution:
Given information:
9. (a) What do you mean by sale and lease back?   Inventory turnover = 9 times
Sale and leaseback is a financial transaction in which a company sells its property or equipment to   Accounts receivable collection period = 45 days
a buyer and then immediately leases it back from the buyer. In this transaction, the company   Accounts payable payment period = 30 days
becomes the tenant and the buyer becomes the landlord of the property.   Operating cycle of investment = 20,00,000
The purpose of a sale and leaseback transaction is to raise capital while allowing the company to   Year = 360 days
continue using the property or equipment for its operations. The company sells the asset to the (a) Operating cycle: The operating cycle is the time required by a company to convert its
buyer at an agreed-upon price, typically at fair market value, and then enters into a long-term inventory into cash. It is calculated as the sum of the inventory holding period and the accounts
lease agreement with the buyer to rent the asset back. receivable collection period.
Sale and leaseback transactions are commonly used by companies that need to raise cash but Inventory holding period = = = 0.111 (rounded to three decimal places) Accounts
want to retain the use of their property or equipment. For example, a manufacturing company receivable collection period = 45 days
may sell its factory building to raise cash for expansion or debt repayment and then lease it back
Operating cycle = Inventory holding period + Accounts receivable collection period
to continue producing goods. Similarly, a transportation company may sell its fleet of trucks to
= 0.111 + 45 = 45.111 days
raise capital and then lease them back to continue providing services.
Therefore, the operating cycle is 45.111 days.
(b) In between purchase and lease, which one is better and why?
(b) Cash conversion cycle: The cash conversion cycle is the time required by a company to convert
The decision to purchase or lease depends on various factors and ultimately depends on
its investments into cash. It is calculated as the operating cycle minus the accounts payable
individual circumstances and preferences. Here are some general considerations:
payment period.
1. Ownership: If you want to own the asset outright and have the freedom to modify or sell it,
Cash conversion cycle = Operating cycle - Accounts payable payment period
then purchasing is the better option. Leasing is like renting, where you have the right to use
= 45.111 - 30 = 15.111 days
the asset for a specific period but do not own it.
Therefore, the cash conversion cycle is 15.111 days.
2. Cost: Leasing typically requires lower upfront costs and monthly payments than purchasing.
However, over the long term, purchasing is usually more cost-effective because you'll own the
asset after you've paid off the loan.
 Due part: 6th semester | 9 10 | Due part: 6th semester
(c) Maximum operating cash: The maximum operating cash is the amount of cash needed to The cost of equity capital can be estimated using various methods, such as the Capital Asset
finance the operating cycle of the company. Pricing Model (CAPM) or dividend discount model. These models consider factors like the risk-
Maximum operating cash = Operating cycle of investment x Daily cost of operations free rate, market risk premium, and the company's beta to determine the expected return on
= 20,00,000 x ( ) = 5,556.11 (rounded to two decimal places) equity.
In summary, while equity capital does not involve fixed interest or principal payments, it does
Therefore, the maximum operating cash is Tk. 5,556.11.
have a cost associated with it in the form of an expected rate of return. This return represents the
compensation that investors require for providing equity capital and bearing the risks associated
Part B Broad Questions
with ownership in the company.
(Answer any four questions)
Marks-10x4=40
12. You are trying to determine whether or not to expand your business by building a new
11. (a) Why is capital budgeting decision so important to the success of a firm?
manufacturing plant. The plant has an installment cost of Tk.12 million, which will be
Capital budgeting is the process of making long-term investment decisions in a business, such as
depreciated on straight line to zero over it 4 years life. If the plant has projected income
investing in property, plant, and equipment or developing new products. Capital budgeting
of Tk. 8, 9, 15 and 13 million over these 4 years, discount rate is 5% and corporate tax
decisions are important to the success of a firm for several reasons:
rate is 40%,then what is the project's
1. Large Investment: Capital budgeting involves significant investments that can have a
i) Net Present Value (NPV)?
substantial impact on the future performance of the company. These investments require
ii) (Internal Rate of Return (IRR)?
careful consideration and analysis to ensure that they align with the company's strategic goals
iii) (iii)Should the project be accepted? Why?
and provide a positive return.
N.B. Present value factor at 5%
2. Long-term Commitment: Capital investments typically involve long-term commitments,
sometimes stretching over many years. Once an investment is made, it may not be easy to Year: 1 2 3 4 5
reverse the decision without incurring significant costs. Therefore, companies need to assess PVIF: 0-9524 0.9070 0·8638 0.8227 0.7835
the long-term viability of their investments before making a final decision.
3. Risk and Uncertainty: Capital budgeting decisions involve significant risk and uncertainty. Solution:
The outcome of an investment may depend on various factors like economic conditions, To determine whether the new manufacturing plant project should be accepted, we need to
technological advancements, and market trends. Thus, companies must conduct extensive calculate its Net Present Value (NPV) and Internal Rate of Return (IRR): The given information:
analysis and risk assessment to determine the feasibility of a project and its potential risks.
4. Resource Allocation: Capital budgeting decisions require companies to allocate their 
 Installment cost of the plant = Tk. 12 million
resources wisely. By investing in one project, a company may have to sacrifice another project. 
 Depreciation period = 4 years
Hence, companies need to assess the potential benefits and risks of each project carefully and 
 Projected income for each year = Tk. 8 million, Tk. 9 million, Tk. 15 million, Tk. 13 million
prioritize those projects that best align with their strategic objectives. 
 Discount rate = 5%
5. Impact on Growth and Profitability: Capital budgeting decisions have a direct impact on a 
 Corporate tax rate = 40%
company's growth and profitability. Making sound investment decisions can help companies  Present value factor at 5%: 0.9524, 0.9070, 0.8638, 0.8227, 0.7835
expand their operations, increase their revenue, and improve their profitability. Conversely, (i) Net Present Value (NPV): To calculate the NPV of the project, we need to discount the projected
poor investment decisions can lead to financial losses, reduced profitability, and even income of each year using the discount rate and then subtract the present value of the installment
bankruptcy. cost.
Year 1: Projected Income = Tk. 8 million PV of Year 1 Cash Flow = Tk. 8 million x 0.9524
(b) "Equity capital is free of cost."-Explain. = Tk. 7.62 million
The statement "Equity capital is free of cost" is not entirely accurate. Equity capital refers to the Year 2: Projected Income = Tk. 9 million PV of Year 2 Cash Flow = Tk. 9 million x 0.9070
funds that a company raises by issuing shares of its common stock to investors in exchange for = Tk. 8.14 million
ownership in the company. While equity capital does not require any fixed interest or principal Year 3: Projected Income = Tk. 15 million PV of Year 3 Cash Flow = Tk. 15 million x 0.8638
payments, it does have a cost associated with it in the form of an expected rate of return. = Tk. 12.97 million
Investors who provide equity capital expect to receive a return on their investment in the form of Year 4: Projected Income = Tk. 13 million PV of Year 4 Cash Flow= Tk. 13 million x 0.8227
dividends and/or capital appreciation. This expected return represents the cost of equity capital = Tk. 10.69 million
for the company. The cost of equity capital is typically higher than the cost of debt capital because NPV = PV of Cash Inflows - Initial Investment = (7.62 + 8.14 + 12.97 + 10.69) - 12 million =
equity investors bear more risk and do not have a guaranteed return like bondholders. Tk. 23.42 lakhs
 Due part: 6th semester | 11 12 | Due part: 6th semester
(ii) Internal Rate of Return (IRR): The IRR is the discount rate that makes the NPV of the project Solution:
equal to zero. We can use the trial-and-error method or Excel's built-in function to calculate the To calculate the overall cost of capital and specific costs of capital for BD Food Ltd., we need to
IRR. determine the cost associated with each source of financing in its capital structure. The given
Using Excel's built-in function, the IRR is calculated as 17.08%. information:
(iii) Should the project be accepted? Why? Based on the calculations, the project's NPV is positive  Common stock capital: Tk. 40,00,000

and its IRR exceeds the required rate of return (discount rate). Therefore, the project should be  Market price of common stock: Tk. 150 per share

accepted. The NPV indicates that the project will generate a positive return over its lifetime, and  Current year dividend on common stock: Tk. 15 per share

the IRR shows that the project's expected rate of return exceeds the cost of capital. Additionally,  Expected growth rate: 10%

the project's tax benefits resulting from depreciation expense also enhance its profitability.  Preferred stock: Tk. 20,00,000, redeemable after 5 years at a 10% premium

 Flotation cost of preferred stock: 2%

13. (a)What is weighted average cost of capital?  Current market price of preferred stock: Tk. 1200 per share

The Weighted Average Cost of Capital (WACC) is a financial metric that represents the average  Debenture: Tk. 30,00,000, maturing in 10 years and redeemable after 10 years at a 12%
cost of a company's capital, taking into account its various sources of funding like equity, debt, and  premium
preferred stock. It is used as a discount rate to evaluate an investment opportunity or project.  Discount on current market price of debenture: 5%

The WACC is calculated based on the proportion of each source of funding in the company's  Flotation cost of debenture: 1.5%

capital structure and the cost associated with each source. The formula for calculating WACC is:  Corporate tax rate: 40%

WACC = (E/V x Re) + (D/V x Rd x (1 - Tc))  Personal tax rate: 25%
Where:
  E = market value of the company's equity (i) Cost of Equity (Re): Cost of equity represents the return required by the shareholders on their
  D = market value of the company's debt investment.
  V = total market value of the company (E + D) Dividend per share = Tk. 15 Expected growth rate = 10%
  Re = cost of equity So, Re = (D1 / P0) + g = (15/150) + 0.1 = 0.20 or 20%
  Rd = cost of debt
 Tc = corporate tax rate (ii) Cost of Preferred Stock (Rp): Cost of preferred stock represents the return required by the
preferred shareholders on their investment.
(b)The BD Food Ltd. has the following capital structure: Market price of preferred stock = Tk. 1,200 Redemption value of preferred stock = Tk. 1,100 (Tk.
Common stock capital (Tk.100 each) Tk.40,00,000 1,000 face value + 10% premium) Flotation cost = 2%
14%Preferred stock (Tk.1000 per share) 20,00,000 So, Rp = ( )+(
12% Debenture (Tk.2500 per debenture) 30,00,000
Retained earnings 10,00,000 =( )+( ) = 0.1057 or 10.57%
Total capital= Tk.1,00,00,00
Other information: (iii) Cost of Debt (Rd): Cost of debt represents the return required by the debtholders on their
(i) Current market price of common stock is Tk. 150,current year dividend of Tk.15 per share, investment.
expected growth rate is 10% forever. Market value of debenture = Tk. 28,50,000 (Tk. 30,00,000 - 5% discount)
(ii) The company's preferred stock is redeemable after 5 years at 10% premium. Flotation cost in Flotation cost = 1.5%
2%.Currently preferred stock sales at Tk. 1200. Corporate tax rate = 40%
(iii)The maturity period of debenture is 10 years, after 10 years the debenture is redeemable at Personal tax rate = 25%
12% premium. But currently sales at 5% discount. The flotation cost is 1.5% of its face value. So, Rd = Yield to maturity * (1 - Corporate tax rate) * (1 - Personal tax rate) * (1 - Flotation cost)
Corporate tax rate 40%,personal tax rate 25%. = 12% * (1 - 0.4) * (1 - 0.25) * (1 - 0.015) = 5.22%
You are required to calculate overall cost of capital as well as specific cost of capital of the firm.
(iv) Weight of each source of financing: Weight of equity = = = 0.4

Weight of preferred stock = = = 0.2

Weight of debt = = = 0.3

 Due part: 6th semester | 13 14 | Due part: 6th semester
Weight of retained earnings = = = 0.1 Solution:
To calculate the working capital requirement, we need to determine the different components of
working capital.
(v) Overall Cost of Capital (WACC): Now we can calculate the overall cost of capital using the
1. Raw materials:
weighted average of the cost of each source of financing.
Raw materials required for production of 70,000 units
WACC = (Weight of equity x Cost of equity) + (Weight of preferred stock x Cost of preferred stock)
= 70,000 x 1.5 (average raw materials in stock and in process)
+ (Weight of debt x Cost of debt) + (Weight of retained earnings x Expected rate of return on
= 105,000 units
retained earnings)
Raw material cost per unit = Tk. 50
= (0.4 x 0.20) + (0.2 x 0.1057) + (0.3 x 0.0522) + (0.1 x 0.20) = 0.117 or 11.7%
Total raw materials cost = 105,000 x 50 = Tk. 52,50,000
Therefore, the overall cost of capital for BD Food Ltd. is 11.7%.
2. Finished goods:

(vi) Specific Costs of Capital: The specific costs of capital are the costs associated with each Finished goods stock = = 5,753 units
specific source of financing. We have already calculated the specific costs of equity, preferred Cost of finished goods = 5,753 x 140 = Tk. 8,04,220
stock, and debt earlier in this solution. 3. Accounts receivable:
Specific cost of equity = 20% Credit allowed to accounts receivable = 2 months Sales per
Specific cost of preferred stock = 10.57% month = 70,000 units x 140 = Tk. 98,00,000 Accounts
Specific cost of debt = 5.22% Receivable = 98,00,000 x 2/12 = Tk. 16,33,333
Therefore, the specific costs of capital for BD Food Ltd. are 20% for equity, 10.57% for preferred 4. Cash balance:
stock, Expected cash balance = Tk. 1,00,000
5. Accounts payable:
14. Following is the cost statement of a company: Credit allowed to accounts payable = 45 days
Particulars Cost and profit per unit (Tk.) Monthly overhead cost = 70,000 units x 40 = Tk. 28,00,000
Raw materials cost 50 per unit Accounts Payable = (28,00,000 x 1/12) x 45/30 = Tk. 7,00,000
Direct labour cost 20 per unit 6. Wages:
Overhead cost 40 per unit Time lag in payment of wages = 15 days
Total cost 110 per unit Monthly direct labor cost = 70,000 units x 20 = Tk. 14,00,000
Profit 30 per unit Wages payable = (14,00,000 x 15)/30 = Tk. 7,00,000
Selling price 140 per unit
You are also given the following additional information: Working Capital Requirement = Total current assets - Total current liabilities
1. Average raw materials in stock: One month = (Raw materials + Finished goods + Accounts receivable + Cash balance) - (Accounts payable +
2. Average raw material in process: Half month Wages payable)
3. Stock of Finished Goods: 30 days = (52,50,000 + 8,04,220 + 16,33,333 + 1,00,000) - (7,00,000 + 7,00,000)
4. 20% of sales are in cash. = Tk. 69,87,553
5. Expected cash balance is :Tk. 1,00,000
6. Credit allowed to Accounts Receivable: Two months Therefore, the working capital requirement for a production level of 70,000 units is Tk. 69,87,553.
7. Credit allowed to Accounts Payable: 45 days.
8. Time lag in payment of wages : 15 days
9. Time lag in payment of overhead:1 month.
You are required to prepare statement showing the working capital requirement if level of activity
of the company is 70,000 units.
 Due part: 6th semester | 15 16 | Due part: 6th semester
15. (a) State the contents of lease contract. Solution:
Solution: i. Taking lease from the 'ULC' for 8 years at 14% an equal installment to be paid in the beginning
A lease contract, also known as a rental agreement, is a legal document that outlines the terms and of each year. How much should be paid in each installment?
conditions of leasing a property. The contents of a lease contract may vary depending on the We can use the formula for present value of an annuity to calculate the annual installment:
specific nature of the lease, but typically includes the following key elements: PV = C x [ ]
1. Parties: The names of the landlord (owner/lessor) and tenant (renter/lessee) involved in the
Where PV is the present value, C is the annual installment, r is the interest rate per year, and n is
lease.
the number of years.
2. Property: A description of the property being leased, including its address, size, and any other
Plugging in the given values, we get:
relevant details.
PV = Tk.15,00,000
3. Term: The duration of the lease, including the start date and end date.
r = 14% = 0.14
4. Rent: The amount of rent to be paid by the tenant, how frequently it is to be paid, and the due
n=8
date(s).
5. Security Deposit: The amount of security deposit required, and the terms under which the Tk.15,00,000 = C x [(1 - ]
security deposit can be used or refunded. Tk.15,00,000 = C x 5.2163
6. Maintenance: The responsibilities of both the landlord and tenant for maintaining the C=
property, including repairs and upkeep.
C = Tk.2,87,784.49
7. Utilities: Which party is responsible for paying utilities, such as electricity, gas, water, and
Therefore, the annual installment to be paid at the beginning of each year is Tk.2,87,784.49.
sewer.
ii. If the payment is made at the end of each year, how much should be paid in each installment?
8. Subleasing: Whether subleasing is allowed or not, and if so, what procedures must be
If the payments are made at the end of each year, we need to adjust the formula by multiplying it
followed.
with (1+r):
9. Termination: Conditions under which the lease can be terminated, including notice periods
and any associated penalties. PV = C x [(1 - ] x (1+r)
10. Renewal: Whether the lease can be renewed, and if so, what terms and conditions will apply. Plugging in the given values, we get:
11. Right of entry: Under what circumstances the landlord can enter the property, and with how PV = Tk.15,00,000
much notice. r = 14% = 0.14
12. Legal fees: Who will be responsible for paying any legal fees associated with the lease. n=8
13. Governing law: The state laws that govern the lease. Tk.15,00,000 = C x [(1 - ] x (1+0.14)
14. Signatures: Signatures of both parties, indicating their agreement to the terms and conditions
Tk.15,00,000 = C x 5.2163 x 1.14
of the lease.
It is important to carefully read and understand all of the terms and conditions of a lease contract C=
before signing it, and to seek legal advice if necessary. C = Tk.2,53,194.01
Therefore, the annual installment to be paid at the end of each year is Tk.2,53,194.01.
(b) XYZ Ltd. wants to acquire an equipment costing Tk.15,00,000. The company has got the
following offer: iii. If the interest is not given but the amount of installment is Tk.3,00,000 to be paid at the
i. Taking lease from the 'ULC' for 8 years at 14% an equal installment to be paid in the beginning of the period, what will be the interest rate?
beginning of each year. How much should be paid in each installment? To find the interest rate, we can rearrange the formula for present value of an annuity:
ii. If the payment is made at the end of each year, how much should be paid in each r=[ ] x [(1 - ]
installment?
iii. lf the interest is not given but the amount of installment is Tk.3,00,000 to be paid the Plugging in the given values, we get:
beginning of the period, what will be the interest rate? C = Tk.3,00,000
n=8
PV = Tk.15,00,000
Tk.3,00,000 x 8 = PV x [(1 - ) ] x (1+r)

Tk.24,00,000 = PV x [(1 - )] x (1+r)

 Due part: 6th semester | 17 18 | Due part: 6th semester
We can solve for r using trial and error or by using numerical methods such as a financial (b) From the following information determine the theoretical market value of equity
calculator or spreadsheet software. Using trial and error, we find that the interest rate r is shares of a company as per Walter's model:
approximately 9.70%. Earnings of the company: Tk.5, 00,000
Therefore, the interest rate is approximately 9.70%. Dividend paid: Tk.3, 00,000
Number of shares outstanding: 1, 00,000
16. a) Discuss the factors affecting Dividend policy. Price earnings ratio: 8
Dividend policy is the decision-making process of a company regarding the distribution of profits Rate of return on investment: 15%
to its shareholders. The factors affecting dividend policy can be broadly classified into internal Are you satisfied with the current policy of the firm? If not, what should be the optimal
and external factors. dividend payout ratio in this case?
Internal Factors: Solution:
1. Earnings: The level of earnings of a company is a significant factor that affects the dividend According to Walter's model, the theoretical market value of equity shares of a company is given
policy. If the earnings are high, the company can distribute more dividends, and if the earnings by:
are low, the company may choose to retain the profits for future investments. V = Earnings per share (EPS) x
2. Liquidity: A company's liquidity position also influences the dividend policy. If the company is
Where,
facing cash flow problems, it may choose to reduce or skip dividends to preserve cash for
EPS = Earnings / Number of shares outstanding
operational expenses.
3. Growth prospects: The growth prospects of a company also affect the dividend payout ratio. b = Retention ratio =
If the company has good growth prospects and requires funds for investment, it may choose to r = Rate of return on investment
retain earnings and reinvest them in the business instead of paying out dividends.
4. Financial leverage: The level of financial leverage also affects the dividend policy. If the Using the above formula, we can calculate the EPS as:
company has high debt, it may be prudent to reduce the dividend payout ratio to pay off its EPS = = = Tk.5 per share
debts.
External Factors:
The retention ratio can be calculated as:
1. Legal requirements: The legal requirements of the country in which the company operates
may also affect the dividend policy. For example, some countries require companies to
distribute a minimum percentage of their profits as dividends. b= = = 0.4 or 40%
2. Investor preferences: The preference of investors for either current income or capital gains
also affects the dividend policy. If investors prefer current income, the company may choose Given that the price earnings ratio is 8 and the rate of return on investment is 15%, we can
to distribute more dividends, whereas if they prefer capital gains, the company may choose to calculate the theoretical market value of equity shares as:
retain earnings and reinvest them.
V = EPS x x P/E Ratio
3. Market conditions: The prevailing market conditions, such as interest rates and inflation,
also affect the dividend policy. In times of economic downturns, companies may choose to = Tk.5 x x8
reduce dividends to conserve cash and maintain their financial stability. = Tk.13.33 per share
4. Competition: The competitive environment in which the company operates also affects the
dividend policy. If competitors are paying high dividends, the company may choose to Therefore, the theoretical market value of equity shares of the company according to Walter's
increase its own dividend payout ratio to remain competitive. model is Tk.13.33 per share.
In conclusion, the factors affecting dividend policy are complex and interdependent. Companies
need to carefully consider these factors before making decisions on dividend payouts to maintain
financial stability, growth, and investor satisfaction.
 Due part: 6th semester | 19 20 | Due part: 6th semester
17. Faiza Ltd. has the following capital structure: 2. Calculation of EPS for different financing alternatives:
Equity (Tk. 100 per share) Tk. 10, 00,000. Alternative 1: 100% Equity
12% Debt Tk.5, 00,000. Total Equity = Tk.10,00,000 + Tk.5,00,000 (raised) = Tk.15,00,000
The company wishes to raise Tk. 5,00,000 for expansion program.
The following alternatives are available: Number of shares = = = 15,000
1. 100% equity;
2. 50% equity and 50% debt@12%;
Earnings Before Interest and Taxes (EBIT) = Tk.20,00,000
3. 100% debt.
Interest on Debt = 0
The expected EBIT is Tk.20,00,000, the tax rate is 40%.Calculate the EPS and which one would you
prefer?
Net Earnings = EBIT * (1 - Tax Rate) = Tk.20,00,000 * (1 - 0.4) = Tk.12,00,000
1. Calculation of Theoretical Market Value of Equity Shares using Walter's Model: Walter's
model states that the market value of equity shares is equal to the expected dividend per share EPS = = = Tk.80 per share
divided by the required rate of return on investment, minus the growth rate in earnings.
Expected dividend per share = = = Tk.3 per share Alternative 2: 50% Equity and 50% Debt
Total Equity = 0.5 * Tk.10,00,000 + 0.5 * Tk.5,00,000 (raised) = Tk.7,50,000
Required rate of return = Rate of Return on Investment = 15%
Number of shares = = = 7,500
Growth rate in earnings = = = 0.4 or 40%
Earnings Before Interest and Taxes (EBIT) = Tk.20,00,000
Using the Walter's formula, we can calculate the theoretical market value of equity shares as:
Interest on Debt = Tk.5,00,000 * 0.12
= Tk.60,000
Market Value of Equity Shares = =
= Tk.20 per share Net Earnings = EBIT - Interest on Debt * (1 - Tax Rate)
Therefore, the theoretical market value of equity shares of the company as per Walter's model is = Tk.20,00,000 - Tk.60,000 * (1 - 0.4)
Tk.20 per share. = Tk.19,44,000

To determine if the current policy of the firm is optimal, we need to compare the actual dividend EPS = = = Tk.259.2 per share
payout ratio with the optimal dividend payout ratio. The optimal dividend payout ratio is the one
that maximizes the market value of the equity shares.
Alternative 3: 100% Debt
The optimal dividend payout ratio can be calculated using the Gordon growth model as follows:
Total Debt = Tk.5,00,000 + Tk.5,00,000 (raised) = Tk.10,00,000
EBIT = Tk.20,00,000
Optimal dividend payout ratio = = Interest on Debt = Tk.10,00,000 * 0.12 = Tk.1,20,000
= 0.6 or 60%
The actual dividend payout ratio of the company is: Net Earnings = EBIT - Interest on Debt * (1 - Tax Rate)
= Tk.20,00,000 - Tk.1,20,000 * (1 - 0.4)
Actual dividend payout ratio = = = 0.6 or 60% = Tk.14,72,000
EPS =
Since the actual and optimal dividend payout ratios are the same, we can conclude that the
current policy of the firm is optimal.
 Due part: 6th semester | 21 22 | Due part: 6th semester
BBA THIRD YEAR, SIXTH SEMESTER EXAMINATION, 2020 (b) What is the importance of strategic planning in a competitive
MARKETING MANAGEMENT market? Solution:
Subject Code: 530151 Strategic planning is essential in a competitive market for several reasons:
Time-3 hours 1. Helps to define the organization's direction: Strategic planning allows an organization to
Full marks-70 focus its efforts and resources on achieving specific goals. In a competitive market, having
[N.B. The figures in the right margin indicate full marks] clear goals and a well-defined direction can help distinguish an organization from its
Part A-Short Questions competitors and give it a competitive advantage.
(Answer any six questions) 2. Provides a roadmap for success: A carefully crafted strategic plan provides a roadmap that
Marks-5x6=30 guides decision-making and resource allocation. This ensures that the organization is aligned
1. "Marketing management is demand management."-Explain the statement. towards achieving its goals and can make informed decisions in a fast-paced and constantly
The statement "Marketing management is demand management" means that the primary goal of changing market.
marketing is to understand and influence consumer demand for a company's products or services. 3. Enables effective resource allocation: Strategic planning helps organizations identify their
Marketing management includes a range of activities aimed at achieving this objective, such as strengths and weaknesses, as well as opportunities and threats in the market. By
market research, product development, pricing strategy, distribution planning, and advertising understanding these factors, the organization can allocate its resources effectively to
and promotion. capitalize on strengths and minimize the impact of weaknesses.
Market research helps companies understand customer needs and preferences, while product 4. Increases adaptability and agility: The competitive market is dynamic and constantly
development involves creating offerings that meet those needs. Pricing strategy aims to maximize evolving, and organizations need to be agile and adaptable to remain relevant. Strategic
revenue by setting prices that reflect the value customers place on a product or service. planning provides a framework for anticipating changes in the market and adjusting strategies
Distribution planning ensures that products are available where and when customers need them. accordingly to keep pace with competitors.
Advertising and promotion help to create awareness and generate interest in products, which can 5. Enhances communication and collaboration: Strategic planning brings together
drive demand. stakeholders from across the organization to develop a shared vision and goals. This fosters
By managing demand effectively, companies can increase sales and profitability, build brand communication and collaboration among team members, resulting in a more cohesive and
awareness and loyalty, and gain a competitive advantage in the marketplace. This is achieved by efficient team that is better equipped to compete in the market.
understanding how consumers make purchasing decisions, what factors influence their choices, Overall, strategic planning is critical in a competitive market, where organizations need to be
and how to create offerings that meet their needs and desires. nimble, responsive, and focused on achieving their goals to stay ahead of the competition. Without
In summary, marketing management is about understanding and influencing demand for a a sound strategic plan, organizations may struggle to navigate the complexities of the market and
company's products or services. It involves a range of activities aimed at creating value for fall behind their competitors.
customers and driving sales, making it a critical component of business success.
3. (a)Define service from the viewpoint of marketing. State the marketing characterizes of
2. a) Define strategic planning. services.
Strategic planning is the process of defining an organization's goals, developing strategies to Answer:
achieve those goals, and allocating resources to implement the strategies. It is a systematic From a marketing perspective, a service is an intangible product that is provided to customers to
approach to identifying where an organization wants to go and how it will get there. fulfill a particular need or desire. Unlike physical products, services cannot be touched, tasted, or
Strategic planning involves analyzing the internal and external factors that affect an organization's seen before they are consumed, and their value is often dependent on the quality of the
performance, including its strengths, weaknesses, opportunities, and threats (SWOT analysis). interaction between the customer and the service provider.
Based on this analysis, the organization can define its mission, vision, and values, as well as set Marketing characterizes of services include:
specific, measurable, achievable, relevant, and time-bound (SMART) goals. 1. Intangibility: Services are intangible and cannot be touched, tasted or seen before they are
Here are a few definitions of strategic planning from notable authors: consumed. This makes it difficult for customers to assess the quality of the service beforehand.
According to Michael Porter, a leading authority on competitive strategy, "The essence of 2. Inseparability: Services are produced and consumed simultaneously, which means that the
strategy is choosing what not to do." Strategic planning involves making choices about where to customer is often involved in the production process. Because of this, the quality of the service
focus resources and energy in order to achieve specific objectives. often depends on the quality of the interaction between the customer and the service
Strategic planning is the art of creating specific business strategies, implementing them, and provider.
evaluating their effectiveness over time. To be successful, strategic planning must be at the core of 3. Variability: Services are highly variable in terms of quality because they are often delivered
the business culture, embraced by every employee, and reinforced by reward systems that by different people in different contexts. This makes it challenging to maintain consistent
recognize results. (Forbes) quality across all interactions.
 Due part: 6th semester | 23 24 | Due part: 6th semester
4. Perishability: Services cannot be stored or inventoried, and any capacity that is not used at a (b)What are the reasons for new product failure?
given time cannot be recovered. Therefore, services have a limited shelf life and must be New product failure can occur for a variety of reasons, including:
consumed when they are available. 1. Poor market research: If a company does not conduct adequate market research to
5. Heterogeneity: Services are often customized to meet the unique needs of each customer. As understand customer needs and preferences, it may develop a product that does not meet
a result, there is often a high degree of heterogeneity in service delivery. their needs or is not priced appropriately.
2. Lack of innovation: A new product may fail if it does not offer any significant improvements
(b) What lessons marketers can get out of all those marketing characteristics of services? over existing products in the market, making it difficult to differentiate and gain market share.
Solution: 3. Ineffective marketing: Even if a product is innovative and meets customer needs, it may fail
Marketers can derive several valuable lessons from the marketing characteristics of services: if it is not marketed effectively. This includes ineffective messaging, targeting the wrong
1. Focus on customer experience: Since the quality of service delivery often depends on the audience, or using the wrong channels to reach customers.
interaction between customers and service providers, marketers should focus on creating a 4. Poor timing: Timing is critical for new product launches, and a product may fail if it is
positive customer experience. This includes training service providers to be friendly, introduced at the wrong time or in the wrong season. For example, launching a new sunscreen
knowledgeable, and attentive to customer needs. product in the winter may not be effective.
2. Manage customer expectations: Because services are highly variable in terms of quality, 5. Manufacturing issues: If a product cannot be manufactured efficiently or at a reasonable
marketers need to manage customer expectations by clearly communicating what customers cost, it may fail due to production problems. Similarly, if a product has quality issues, it may
can expect from the service. This includes setting realistic expectations for delivery times, fail to gain customer trust and loyalty.
quality, and customization. 6. Lack of support from stakeholders: New product development requires support from
3. Develop effective communication strategies: Communicating the value of a service is various stakeholders within the organization, including management, marketing, and
challenging because it is intangible. Marketers must develop effective communication engineering teams. If there is a lack of alignment or poor communication between these
strategies that emphasize the benefits of the service and demonstrate how it meets customer stakeholders, the product may not be developed and launched effectively.
needs.
4. Develop consistency in service delivery: Even though services are highly variable, 5. “Marketing mix is a set of marketing tools that the firm uses to purse its marketing
developing consistency in service delivery is critical to building customer loyalty. Marketers objectives in the target market."-Explain the statement.
should establish service standards and train service providers to meet those standards Solution:
consistently. The marketing mix refers to a set of tools and strategies that a company uses to promote its
5. Price services appropriately: Since services cannot be inventoried or stored, pricing services products or services in the marketplace. It is a combination of tactics that are designed to achieve
appropriately is critical to ensuring profitability. Marketers should consider the cost of service the company's marketing objectives and reach its target audience.
delivery when setting prices and ensure that prices reflect the value customers place on the The marketing mix comprises four key elements, known as the "4 Ps":
service. 1. Product: This refers to the goods or services that a company offers to its customers.
Companies must ensure their product meets the needs and wants of their target market and
4. (a) Define new product. stands out from competitors.
A new product is a product that has not been previously offered by a company or has undergone 2. Price: This refers to the cost of the product and how it is priced in the market. Companies
significant modifications to its features, design, packaging, or pricing. A new product can be must determine the optimal pricing strategy to attract customers while also achieving
completely original or an improvement on an existing product. New products can be developed as profitability.
a result of changes in customer needs, technology advancements, or market trends. 3. Place: This refers to the distribution channels used to make the product available to
New products can take several forms, such as physical goods, services, software, or even ideas. customers. Companies must ensure the product reaches the right customers at the right time
They may be developed for a specific target market or to appeal to a broader audience. Developing and place.
new products often requires extensive research and development, testing, and marketing efforts 4. Promotion: This refers to the marketing communication and tactics used to create awareness
to ensure success. and generate demand for the product. Companies must develop effective advertising, sales
promotion, public relations, and personal selling strategies to promote the product to
potential customers.
By effectively managing each element of the marketing mix, companies can achieve their
marketing objectives and reach their target market. The marketing mix must be tailored to suit
the specific needs and characteristics of the target market. As such, it is essential for companies to
 Due part: 6th semester | 25 26 | Due part: 6th semester
conduct research and analysis to understand customer needs and preferences and adjust their In a value network, each member of the network contributes unique value to the final product or
marketing mix accordingly to maximize success in the marketplace. service. This can include innovation, quality control, design, marketing, and customer service. By
collaborating and sharing information, value networks can create more efficient and effective
6. Describe different types of promotional pricing. processes that result in higher-quality products and services.
Solution: Overall, both marketing channel systems and value networks are critical components of the
Promotional pricing is a marketing strategy in which the price of a product is temporarily reduced supply chain for products and services. While marketing channel systems focus on moving
to stimulate demand and increase sales. products through the distribution process, value networks focus on creating value at every stage
There are several different types of promotional pricing strategies, including: of the process. Both are essential for delivering high-quality products and services to customers in
1. Discount pricing: This involves reducing the regular price of a product by a fixed amount or a timely, efficient, and cost-effective manner.
percentage. For example, offering 10% off the regular price of a product.
2. Bundle pricing: This involves offering two or more related products together at a reduced (b) What types of works are performed by a marketing channel that overcomes the time,
price. For example, offering a discount on a camera and lens kit when purchased together. place and possession gaps?
3. Seasonal pricing: This involves offering discounts during specific seasons or holidays. For Solution:
example, offering discounts on winter clothing during the summer months. Marketing channels perform several functions that help to overcome the time, place, and
4. Clearance pricing: This involves reducing the price of products that are no longer selling well possession gaps between producers and consumers. These functions include:
or are being phased out. For example, discounting winter coats at the end of the season to 1. Physical distribution: This involves transporting and storing products from the manufacturer
make room for spring inventory. to the end customer. Marketing channels ensure that products are delivered to the right
5. Loss leader pricing: This involves selling a product at a loss to attract customers and location at the right time to meet customer demand.
encourage them to purchase other products. For example, selling a popular item at a steep 2. Financing: Marketing channels provide financing options such as credit terms or leasing
discount to bring customers into the store with the hope that they will purchase other items at programs to customers, which helps to overcome the possession gap by making it easier for
full price. customers to acquire and own the product.
6. Price skimming: This involves setting a high price for a new product and gradually lowering 3. Risk taking: Marketing channels assume risks associated with storing and transporting
the price over time as demand decreases. This strategy is commonly used for new technology products, ensuring that products are available when and where customers need them.
products, where early adopters are willing to pay a premium price. 4. Information gathering and dissemination: Marketing channels gather information about
7. Penetration pricing: This involves setting a low price for a new product to gain market share customer needs and preferences, as well as market trends, and communicate this information
and attract customers. This strategy is often used when entering a new market or competing back to manufacturers. This helps to ensure that products are developed and marketed to
against established competitors. meet customer demand.
5. Promotion: Marketing channels promote products through advertising, sales promotion,
7. (a) What is a marketing channel system and value network? personal selling, and other marketing tactics to create demand and increase sales.
Solution: 6. Negotiation: Marketing channels negotiate prices, terms, and conditions of sale between
A marketing channel system, also known as a distribution channel, refers to the network of manufacturers and intermediaries, as well as intermediaries and end customers.
businesses and intermediaries through which a product or service passes before reaching the end
consumer. The primary goal of a marketing channel system is to create efficiencies in the 8. (a)Define product in
distribution of goods and services while providing value to both producers and consumers. marketing. Solution:
Marketing channel systems typically include manufacturers, wholesalers, retailers, and various In marketing, a product is a tangible or intangible item that satisfies a customer's need or want. It
intermediaries such as brokers, agents, and distributors. Each member of the channel system can be a physical object, such as a car, smartphone, or clothing, or it can be an intangible service,
performs a specific function that helps to move the product or service from the producer to the such as consulting, education, or healthcare.
end consumer. For example, a manufacturer may sell products to a wholesaler, who then sells to Products are typically created to offer a solution to a problem or to fulfill a specific need or desire
retailers, who ultimately sell to consumers. of the customer. Companies develop products by identifying customer needs and preferences,
A value network, on the other hand, refers to the network of businesses and individuals that researching market trends, and assessing technological advancements.
collaborate to create and deliver products and services to customers. It includes suppliers, In addition to the core product itself, a product may have packaging, branding, and a range of
manufacturers, distributors, retailers, service providers, and customers, among others. Unlike a features and benefits that differentiate it from competing products in the marketplace. Effective
marketing channel system, a value network focuses on creating value for all members of the product development involves creating a product that meets the needs and wants of the target
network, rather than simply moving products through the system. market, is priced appropriately, has effective distribution channels, and is promoted effectively to
reach potential customers.
 Due part: 6th semester | 27 28 | Due part: 6th semester
Overall, a product is a critical component of a company's marketing mix, and its development and Direct marketing can take several forms, including:
management play a key role in achieving business objectives such as revenue growth, market 1. Direct mail: Companies can send physical mail, such as letters, postcards, or brochures, to
share, and profitability. potential customers.
2. Email marketing: Companies can send promotional emails to customers who have opted in to
(b) What are the levels of a product? Clarify your answer by putting a specific example for receive marketing communications.
each level. 3. Telemarketing: Companies can contact customers by phone to offer products or services.
Solution: 4. Text message marketing: Companies can send promotional messages to customers via text
The levels of a product refer to its different layers of value that customers perceive and experience message.
when they purchase and use the product. The five levels of a product are: 5. Social media marketing: Companies can use social media platforms, such as Facebook or
1. Core benefit: This refers to the fundamental need or want that a customer is seeking to fulfill Instagram, to target customers with personalized offers and promotions.
by purchasing the product. For example, a customer who buys a car is looking for Overall, direct marketing allows companies to reach customers where they are and deliver
transportation. personalized messages that are more likely to result in a sale or conversion. However, it is
2. Basic product: This refers to the physical product itself, including its features, design, quality, essential to follow best practices and regulations, such as obtaining consent for marketing
and packaging. For example, a car has four wheels, an engine, and a body with seats and communications and providing an opt-out option, to ensure that customers are not overwhelmed
controls. or annoyed by the messages.
3. Expected product: This refers to the set of attributes that customers expect from the product,
such as reliability, performance, and durability. For example, a car is expected to be safe, (b) What are the stages that are involved in the adoption process?
reliable, and have good fuel efficiency. The adoption process refers to the series of stages that a consumer goes through when deciding
4. Augmented product: This refers to additional features and services that enhance the value of whether or not to adopt a new product or service. The five stages of the adoption process are:
the product and exceed customer expectations. For example, a car may come with a warranty, 1. Awareness: In this stage, the consumer becomes aware of the new product or service through
roadside assistance, or free maintenance services. advertising, word-of-mouth, or other marketing efforts.
5. Potential product: This refers to the future possibilities and innovations that can be added to 2. Interest: During this stage, the consumer becomes interested in the product and begins to
the product to further enhance its value. For example, a car manufacturer may develop new seek out more information about its features, benefits, and pricing.
technology for self-driving cars, which would be a potential addition to the product. 3. Evaluation: In this stage, the consumer evaluates the product against their needs and
Example: Let's consider the example of an iPhone: preferences, comparing it to similar products in the market and considering factors such as
1. Core benefit: Communication and connectivity on-the-go quality, price, and brand reputation.
2. Basic product: The physical device itself, with a screen, buttons, camera, etc. 4. Trial: During this stage, the consumer tries the product for the first time, either through a free
3. Expected product: Durability, reliability, speed, ease of use, and superior quality. sample, a trial period, or by making a small purchase.
4. Augmented product: Apple offers a range of complementary services, such as iCloud storage, 5. Adoption: In the final stage, the consumer decides to adopt the product and make it a regular
Apple Music, and the App Store, which enhances the value of the product. part of their purchasing behavior.
5. Potential product: Future innovation in areas such as artificial intelligence, augmented reality, It is important to note that not all consumers will move through each stage of the adoption
and biometric identification could be potential additions to the iPhone. process. Some may become aware of the product but never develop an interest, while others may
evaluate the product but ultimately decide not to adopt it.
9. (a) Define direct marketing.
Direct marketing is a form of advertising that allows companies to communicate directly with 10. Suppose that you just launched beauty care bath soap in the market targeted mainly to
potential customers through various channels, including mail, email, social media, telemarketing, the middle-end consumers of Bangladesh. You wish to price your market offer. What
and text messaging. The primary goal of direct marketing is to encourage customers to take a are the strategies of setting price of your newly introduced market offer?
specific action, such as making a purchase or signing up for a service. Solution:
Direct marketing allows companies to personalize their message to individual customers, making As you wish to price your newly introduced beauty care bath soap in the market targeted mainly
it more relevant and engaging. This can be achieved by collecting data on customer preferences to the middle-end consumers of Bangladesh, there are several pricing strategies that you can
and behavior, such as purchasing history, demographics, and geographic location. consider. These include:
1. Cost-plus pricing: This pricing strategy involves adding a markup to the cost of producing the
product to determine its selling price. For example, if it costs Tk. 20 per unit to produce the
soap, and you add a 50% markup, the selling price would be Tk. 30.
 Due part: 6th semester | 29 30 | Due part: 6th semester
2. Value-based pricing: This pricing strategy involves setting the price based on the perceived (b) Discuss the scope of marketing management.
value that the product offers to customers. For example, if your soap is positioned as a Solution:
premium product with unique features and benefits, you can set a higher price point to reflect The scope of marketing management is broad and encompasses various activities that enable
its value proposition. organizations to deliver value to customers and achieve their business objectives. The key areas of
3. Competitor-based pricing: This pricing strategy involves setting the price based on the scope in marketing management include:
prices charged by competing products in the market. For example, if similar soap products are 1. Product development: This involves identifying customer needs and preferences, researching
priced at Tk. 25, you may choose to price your soap slightly lower or higher based on its market trends, and developing products and services that meet these needs.
unique features and benefits. 2. Pricing strategy: This involves setting prices for products and services based on cost,
4. Promotional pricing: This pricing strategy involves offering discounts or other promotions competition, and market demand, while also considering the organization's profit objectives.
to stimulate demand for the product. For example, you could offer a discount to customers 3. Promotion: This includes advertising, personal selling, sales promotion, public relations, and
who purchase multiple units of the soap or offer free samples to encourage trial. other communication tactics to create awareness, interest, and desire for products and
5. Psychological pricing: This pricing strategy involves setting the price based on psychological services among target customers.
factors such as perception, emotions, and behavior. For example, setting the price at Tk. 29.99 4. Distribution: This involves determining the most efficient and effective channels for delivering
instead of Tk. 30 may make the product feel more affordable to customers. products and services to customers, such as direct sales, retail stores, e-commerce, or
When determining which pricing strategy to use for your newly introduced beauty care bath soap wholesalers.
in the market targeted mainly to the middle-end consumers of Bangladesh, it is important to 5. Market research and analysis: This includes collecting data on customer behavior,
consider factors such as production costs, customer preferences, competitive landscape, and preferences, and trends, as well as analyzing market conditions and competition to inform
marketing objectives. By carefully evaluating these factors, you can set a price that is attractive to marketing decisions.
customers while also achieving your business goals. 6. Brand management: This involves creating and maintaining a strong brand identity through
Part B Broad Questions consistent messaging, imagery, and customer experience across all marketing channels.
(Answer any four questions) 7. Customer relationship management: This involves building and maintaining relationships
Marks-10x4=40 with customers through personalized communication, customer service, loyalty programs,
11. (a) Define marketing and other tactics to increase customer satisfaction and lifetime value.
management. Solution: Overall, the scope of marketing management is vast, and the success of any marketing program
Marketing management is the process of planning, implementing, and controlling marketing depends on a deep understanding of customer needs and preferences, as well as the ability to
activities to achieve organizational goals and objectives. It involves analyzing consumer needs, develop and execute effective strategies across all areas of marketing.
developing products and services that meet those needs, pricing them appropriately, promoting
them effectively, and distributing them through efficient channels to reach the target market. (c) State the importance of marketing management in a competitive market.
Here are some definitions of marketing management: Solution:
1. According to Kotler, "Marketing management is the art and science of choosing target Marketing management is crucial in a competitive market for various reasons:
markets and building profitable relationships with them. The aim of marketing is to create 1. Helps to identify and target the right audience: Marketing management helps companies to
value for customers and capture value from customers in return." identify their target audience, understand their needs, preferences, and behavior, and create
2. According to American Marketing Association (AMA), "Marketing management is the marketing strategies that resonate with them. In a competitive market, identifying and
process of planning, organizing, directing, and controlling activities which facilitate the targeting the right audience can make all the difference between success and failure.
exchange of goods and services between producers and consumers." 2. Creates brand awareness and loyalty: Effective marketing management helps to create
3. According to Philip Kotler, "Marketing management is the analysis, planning, brand awareness by promoting the company's products and services across different
implementation, and control of programs designed to bring about desired exchanges with channels. Building a strong brand identity creates customer loyalty and trust, which can help
target markets for the purpose of achieving organizational objectives." companies stay ahead of their competitors in a crowded market.
Overall, marketing management involves making strategic decisions about product development, 3. Enables companies to differentiate themselves: A competitive market often means that
pricing, promotion, and distribution, while also monitoring customer needs and preferences, there are many similar products and services available to customers. Marketing management
adjusting marketing strategies as needed, and measuring the effectiveness of marketing efforts to helps companies to differentiate themselves from their competitors through unique value
ensure that they align with organizational goals and objectives. propositions, such as product features, pricing, promotions, and customer service.
4. Provides valuable insights about the market: Marketing management involves collecting
data on customer behavior, preferences, and trends, as well as analyzing market conditions
and competition. This information provides valuable insights that can inform marketing
 Due part: 6th semester | 31 32 | Due part: 6th semester
decisions, help companies to stay ahead of changing market dynamics, and adapt to new 2. Cash cows: SBUs that have low market growth rates but high relative market share are
challenges or opportunities. considered cash cows. These SBUs generate significant cash flow for the company and require
5. Increases sales and revenue: Effective marketing management can lead to increased sales minimal investment to maintain their position in the market.
and revenue by creating demand for products and services, encouraging repeat purchases, 3. Question marks: SBUs that have high market growth rates but low relative market share are
and increasing customer lifetime value. In a competitive market, this can be critical to considered question marks. These SBUs require significant investment to increase their
achieving sustainable growth and profitability. market share and become stars or may be discontinued if they cannot be developed further.
Overall, marketing management plays a crucial role in helping companies to remain competitive 4. Dogs: SBUs that have low market growth rates and low relative market share are considered
in a dynamic and rapidly evolving market. By developing effective marketing strategies, building dogs. These SBUs generate little profit or revenue and may be divested or discontinued.
strong brands, and staying attuned to customer needs and preferences, companies can gain an The BCG approach is useful for evaluating the performance of each SBU and determining the
edge over their competitors and achieve long-term success. appropriate level of investment required to achieve strategic objectives. By categorizing each SBU
into one of the four quadrants, companies can formulate appropriate strategies to manage their
12. (a)What do you mean by SBU (Strategic Business Unit)? portfolio of businesses.
Solution: For example, the BCG approach suggests that companies should invest heavily in stars to maintain
A Strategic Business Unit (SBU) is a division or unit of a larger company that operates as a their strong market position and achieve further growth, while minimizing investment in dogs
separate entity with its own defined business strategy and objectives. An SBU typically has its own and focusing on generating cash flow from cash cows.
management structure, resources, products or services, customers, competitors, and marketing
strategies. 13. (a)Who is a market leader?
The purpose of creating an SBU is to allow a large company to focus on specific product markets Solution:
or customer segments and develop tailored strategies to meet the unique needs of those markets A market leader is a company or brand that has the highest sales or market share in a particular
or segments. The SBU concept allows companies to be more agile and responsive to changes in the industry or market segment. A market leader is typically recognized for its strong reputation,
market, while also optimizing performance and profitability. extensive distribution network, and ability to innovate and adapt to changing market conditions.
Each SBU is responsible for developing and implementing its own business plan, which includes Being a market leader provides several advantages, such as economies of scale, pricing power, and
setting objectives, developing marketing strategies, budgeting, and controlling resources. SBUs brand recognition. Companies that are market leaders often have higher profit margins and are
are often assessed based on their financial and strategic performance, such as revenue growth, better positioned to withstand competition and market volatility.
market share, return on investment, and customer satisfaction. Market leadership can be achieved through various strategies, including:
For example, a company like Procter & Gamble may have several SBUs, each focused on a 1. Product innovation: Developing new and unique products that offer superior value to
particular product category such as beauty care, household cleaning, or baby care. Each SBU customers.
would have its own management team, product portfolio, marketing campaigns, and sales 2. Pricing strategy: Offering competitive prices that help to attract and retain customers.
channels, but would still be part of the larger Procter & Gamble organization. 3. Branding: Building a strong brand identity and reputation through effective marketing and
Overall, the SBU concept allows companies to optimize their operations and achieve greater communication campaigns.
success by focusing on specific markets or segments and developing tailored strategies to meet 4. Distribution: Developing an extensive distribution network that makes it easy for customers
their unique needs. to access products and services.
5. Customer service: Providing excellent customer service and support that creates a positive
(b)Discuss the Boston Consulting Group(BCG)approach for evaluating strategic business customer experience and helps to build loyalty and repeat business.
unit. Overall, being a market leader is a significant achievement that requires sustained effort and
Solution: strategic planning. It provides companies with a competitive advantage and enables them to build
The Boston Consulting Group (BCG) approach is a popular framework used to evaluate and long-term success in their industry or market segment.
analyze the strategic business units (SBUs) of a company. The BCG approach is also known as the
growth-share matrix, and it involves plotting each SBU on a two-dimensional grid based on its
market growth rate and relative market share.
The BCG grid consists of four quadrants:
1. Stars: SBUs that have high market growth rates and high relative market share are considered
stars. These SBUs require continuous investment to maintain their market leadership position
and achieve further growth.
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(b) In the cell-phone service market of Bangladesh Grameen Phone and Banglalink are 4. Company resources: The company's financial and human resources available can impact the
thought to be the market leader and the market challenger respectively as their choice of distribution channels. For example, a small company with limited resources may
competitive market positions. As a market leader, how can Grameen Phone defend its focus on online sales rather than opening brick-and-mortar stores.
market position among this stiff competition? 5. Geographic location: The geographic location of the target market can also influence the
Solution: choice of distribution channels. For example, in rural areas where access to physical stores
As a market leader in the cell-phone service market of Bangladesh, Grameen Phone can defend its may be limited, e-commerce channels may be more effective.
position among stiff competition from Banglalink by implementing the following strategies: 6. Channel partners: Building relationships with channel partners can impact the effectiveness
1. Continuous innovation: Grameen Phone can continue to innovate and offer new and improved of distribution channels. Companies must choose reliable and trustworthy partners that share
products and services that meet the changing needs and preferences of customers. This can their values and objectives.
include introducing new features or technology, expanding coverage areas, and improving 7. Regulations: Certain products may be subject to regulations that restrict the use of certain
customer service. distribution channels, such as alcohol or tobacco products.
2. Brand building: Grameen Phone can focus on building a strong brand identity and reputation
through effective marketing and communication campaigns. By emphasizing the quality and (b) What is channel conflict? Discuss about the causes and remedies of channel conflict.
reliability of its products and services, Grameen Phone can differentiate itself from Solution:
competitors and maintain customer loyalty. Channel conflict can arise when there is a disagreement or dispute between different members of
3. Pricing strategy: Grameen Phone can consider adjusting its pricing strategy to remain a distribution channel, such as manufacturers, wholesalers, and retailers. Channel conflict can
competitive with Banglalink while also maintaining profitability. This can include offering occur for various reasons and can have negative consequences on the overall performance of the
promotions or discounts, bundling services, and developing pricing plans that cater to distribution channel.
different customer segments. Causes of Channel Conflict:
4. Distribution network: Grameen Phone can focus on expanding its distribution network to 1. Competition: When members of a distribution channel compete with each other to sell the
make it easier for customers to access its products and services. This can include partnering same products or services, channel conflict can arise. This can lead to price wars and other
with retailers, leveraging online channels, and investing in infrastructure to improve network disputes that hurt the profitability of all parties involved.
coverage and quality. 2. Limited resources: When there are limited resources available within the distribution channel,
5. Strategic partnerships: Grameen Phone can form strategic partnerships with other companies such as shelf space or advertising funds, members may compete with each other to secure
or organizations to expand its reach and offer new value propositions to customers. For those resources, which can lead to conflicts.
example, it can partner with content providers or mobile device manufacturers to offer 3. Communication breakdown: Poor communication between members of the distribution
exclusive content or devices to customers. channel can lead to misunderstandings and disagreements about goals, objectives, and
Overall, as a market leader in a competitive market, Grameen Phone must continuously assess the expectations.
market landscape, stay attuned to customer needs and preferences, and adapt its strategies 4. Different objectives: When members of the distribution channel have different objectives,
accordingly to maintain its position and achieve long-term success. such as maximizing profits, increasing market share, or expanding into new markets, conflicts
can arise.
14. (a)As a marketing manager of a company, what factor do you consider in designing Remedies for Channel Conflict:
channel decision for your product? 1. Improved communication: Improving communication between members of the distribution
Solution: channel can help prevent misunderstandings and improve collaboration. Regular meetings
As a marketing manager of a company, there are several factors to consider when designing and open discussions can help clarify goals, objectives, and expectations.
channel decisions for a product. These include: 2. Clear roles and responsibilities: Clearly defining roles and responsibilities for each member
1. Customer preferences: Understanding customer preferences is essential in deciding which of the distribution channel can help prevent conflicts related to competition for resources and
channel(s) will be most effective in reaching the target audience. For example, if customers unclear boundaries.
prefer to shop online, e-commerce channels may be more effective than retail stores. 3. Incentives alignment: Aligning incentives across the distribution channel can help create a
2. Product characteristics: The type of product being sold can influence the choice of shared vision and common goals among members. For example, offering bonuses or rewards
distribution channels. For example, perishable or fragile products may require specialized based on sales performance can encourage cooperation rather than competition.
handling and transportation, which can affect the choice of distribution channels. 4. Mediation: When conflicts arise, mediation by a neutral third party can help resolve disputes
3. Competitive landscape: Analyzing the competition can help determine which distribution and find mutually beneficial solutions.
channels will be most effective in reaching customers and differentiating the product from 5. Diversification of channels: Diversifying distribution channels can reduce dependence on a
competitors. single channel and minimize conflicts. Offering products through multiple channels, such as
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online and retail stores, can help reach a wider audience while reducing competition between such as quality, features, customer service, or price. This strategy is effective when the market
members of the distribution channel. leader's product or service has shortcomings that can be addressed by the follower.
3. Focus strategy: The focus strategy involves targeting a specific customer segment that is not
15. (a)Briefly state the challenges of on-line marketing. being adequately served by the market leader. By offering specialized products or services to
Solution: this niche, the follower can carve out a profitable market position.
Online marketing, also known as digital or internet marketing, has become increasingly popular as 4. Hybrid strategy: The hybrid strategy combines elements of the above strategies to create a
more businesses move their operations online. However, there are several challenges associated unique approach that fits the follower's strengths and the market conditions. This approach
with online marketing that businesses must navigate to achieve success. These challenges include: can be effective when there is no clear path to success through any single strategy.
1. Increasing competition: The popularity of online marketing means that competition is high, In education business, a market follower can use a combination of these strategies to effectively
and businesses must find ways to stand out from the crowd and differentiate themselves from compete against established players. For example:
competitors. 1. Imitation: The follower can closely copy the educational programs offered by established
2. Constantly evolving technology: Technology and platforms used for online marketing are players but offer them at a lower price point or with additional features.
constantly changing, and businesses must stay up-to-date on the latest trends and 2. Differentiation: The follower can differentiate its educational programs by incorporating
developments to remain competitive. new technologies or innovative teaching methods that are not being used by the market
3. Privacy concerns: Online marketing often involves collecting and using consumer data, which leader.
raises privacy concerns. Businesses must ensure they are in compliance with relevant laws 3. Focus: The follower can focus on a specific niche within the education market, such as adult
and regulations regarding data protection and privacy. learners or vocational training, and tailor its programs to meet the unique needs of this
4. Cybersecurity threats: Online marketing exposes businesses to cybersecurity threats such as segment.
hacking, phishing, and social engineering attacks. Companies must take measures to protect 4. Hybrid: The follower can combine elements of these strategies to create a unique value
their data and systems against cyber threats. proposition that appeals to a specific customer segment or fills a gap in the market.
5. Ad-blocking: Many consumers use ad-blocking software to prevent ads from appearing on Overall, the key to success as a market follower in the education industry is to understand the
websites, making it difficult for businesses to reach their target audience through traditional target audience's needs and preferences, identify gaps in the market, and develop a focused,
advertising methods. differentiated approach to serving those needs effectively.
6. Measuring ROI: Measuring return on investment (ROI) for online marketing campaigns can
be challenging due to the complex nature of online advertising and the difficulty in tracking 16. (a)What factors does a cosmetics company need to consider when designing its
customer behavior across multiple devices and touchpoints. marketing channel for a new low-priced line of cosmetics? Discuss.
7. Lack of personalization: While online marketing allows businesses to reach a large audience,
it can be challenging to provide a personalized experience to each individual customer. When designing a marketing channel for a new low-priced line of cosmetics, a cosmetics company
Overall, while online marketing is a powerful tool for businesses to build their brand and reach needs to consider several factors. These include:
customers, it is not without its challenges. By understanding these challenges and developing 1. Customer demographics: Understanding the target customer's demographics, such as age,
effective strategies to address them, businesses can successfully navigate the landscape of online income, and lifestyle, can help determine the most effective distribution channels. For
marketing and achieve their objectives. example, if the target customers are young and tech-savvy, e-commerce channels may be more
effective than brick-and-mortar stores.
(b) Explain different market follower strategies. How can you put these strategies in 2. Pricing strategy: A low-priced line of cosmetics requires a pricing strategy that is consistent
education business? with the product's value proposition. The company must decide whether to use a discount
Solution: strategy, penetration strategy or both to reach its target market.
Market follower strategies are business strategies that companies use to compete in a market 3. Brand image: The brand image and reputation of the company can impact the design of the
where one or more dominant players already exist. These strategies aim to capitalize on the marketing channel. For example, if the company already has a strong retail presence, it may
strengths and weaknesses of established competitors, while still carving out a profitable niche for choose to leverage that channel to launch the new line, but an online-only brand may choose
the follower company. Here are four common market follower strategies: to focus on e-commerce channels.
1. Imitation strategy: The imitation strategy involves closely copying the products, services, and 4. Competition: Analyzing the competition and their marketing channels can provide insights
marketing strategies of established competitors. This approach can be effective if the market into potential gaps in the market and how best to position the new products. Competitors'
leader has a strong brand or reputation that can be leveraged to attract customers. strengths and weaknesses can also guide the development of the marketing channel.
2. Differentiation strategy: The differentiation strategy aims to differentiate the follower's
product or service from those of the market leader. The differentiation can be based on factors
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5. Geographic location: The geographic location of the target market can influence the choice of 17. (a)What is meant by product life cycle?
distribution channels. For example, online sales may be more effective in rural areas where Solution:
access to physical stores is limited. Product life cycle (PLC) refers to the stages that a product goes through from its introduction to
6. Relationship with distributors: Developing relationships with distributors or retailers is the market until it is eventually phased out. The concept of PLC is based on the idea that products
critical to successful distribution. Companies must identify potential partners who share their have a limited lifespan and go through predictable stages of growth, maturity, decline, and
values and objectives. ultimately, obsolescence.
7. Logistics and infrastructure: Effective distribution requires reliable logistics and There are four primary stages of the product life cycle:
infrastructure. Companies must evaluate the required supply chain, transportation, and 1. Introduction: In this stage, a new product is introduced to the market, and sales are typically
warehousing capabilities. low as consumers become aware of the product's existence. The company invests heavily in
research and development, marketing, and advertising activities to build brand awareness and
(b)How does a company analyze its competitors? attract customers.
Solution: 2. Growth: Once the product gains traction in the market, sales begin to increase rapidly, and
Analyzing competitors is a critical component of developing a successful business strategy. Here profits start to rise. The focus during this stage is on building market share, expanding
are the steps a company can take to analyze its competitors: distribution channels, and increasing production capacity to meet demand.
1. Identify competitors: The first step in analyzing competitors is to identify who they are. 3. Maturity: In this stage, sales growth begins to slow down as the product reaches widespread
Companies can research their industry and market segment or use online tools to identify adoption. Competitors enter the market with similar products, and price competition
competitors. intensifies. Companies must focus on differentiating their product and maintaining market
2. Gather information on competitors: Once identified, companies can gather information on share.
competitors such as their product offerings, pricing strategies, marketing tactics, target 4. Decline: During this stage, sales begin to decline as the product becomes outdated or replaced
markets, and customer reviews. Information can be obtained through public sources such as by newer, more innovative products. The company may choose to discontinue the product or
websites, reports, and social media. continue selling it at reduced prices to maintain some sales volume.
3. Conduct SWOT analysis: Companies can conduct a SWOT analysis to evaluate the strengths, Understanding the product life cycle is essential for companies to develop effective product
weaknesses, opportunities, and threats (SWOT) of each competitor. This analysis can help strategies, manage resources effectively, and maximize profits. By identifying which stage a
identify areas where the company can differentiate itself from competitors and capitalize on product is in, companies can determine the appropriate investments in research and
gaps in the market. development, marketing and advertising, production, and distribution to optimize revenue and
4. Assess market share: Companies can assess the market share of each competitor by profitability throughout the PLC.
examining sales data, market research reports, and other sources of information.
Understanding the market share of competitors can help companies develop an effective (b)Discuss the different stages of product life cycle with relevant marketing strategies.
competitive strategy. Solution:
5. Monitor trends and changes: Companies must monitor trends and changes in the market The product life cycle (PLC) consists of four stages: introduction, growth, maturity, and decline.
and among competitors constantly. This includes tracking changes in pricing, new product Each stage requires a different marketing strategy to meet the needs of the product and maximize
launches, and shifts in consumer preferences. revenue and profitability.
6. Analyze marketing strategies: Companies can analyze the marketing strategies of 1. Introduction Stage: The introduction stage is characterized by low sales volume as the
competitors to determine which tactics are most effective. This includes evaluating their product is new to the market. Marketing strategies at this stage should focus on creating
advertising campaigns, social media presence, and other marketing efforts. awareness and generating interest in the product. The key objectives are to gain market share
7. Evaluate competitive advantages: Companies can evaluate the competitive advantages of and establish the product's brand identity. Key strategies that can be used include:
each competitor, such as brand recognition, unique features, or specialized expertise. This  Heavy advertising to create awareness and generate interest

analysis can help identify ways for a company to differentiate itself and provide more value to  Public relations efforts to generate media coverage and buzz around the product

customers.  Sales promotions to encourage customers to try the product, such as free samples or discounts
Overall, analyzing competitors requires ongoing monitoring and evaluation of market conditions 
and trends. By understanding their competition's strengths and weaknesses, companies can  Pricing strategies such as penetration pricing, which involves setting a lower price initially to
develop more targeted and effective strategies that lead to long-term success. gain market share.
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2. Growth Stage: During the growth stage, sales volume increases rapidly as the product gains BBA THIRD YEAR SIXTH SEMESTER EXAMINATION, 2020
acceptance in the market. Marketing strategies at this stage should focus on maintaining MANAGEMENT ACCOUNTING
market share and increasing revenue. Key strategies that can be used include: (According to the new syllabus)
  Expanding distribution channels to reach more customers Subject Code: 530153
  Increasing production capacity to meet demand Time-3 hours
  Focusing on differentiation to maintain competitive advantage and build customer loyalty Full marks-70
  Product line extensions to offer more variety and appeal to new customers [N.B.-The figures in the right margin indicate full marks]
3. Maturity Stage: During the maturity stage, sales growth slows down, and competition Part A-Short Questions
intensifies. Marketing strategies at this stage should focus on maintaining market share, (Answer any six questions)
defending against competitors, and maximizing profits. Key strategies that can be used Marks-5x6=30
include: 1. (a) Define Management
  Price adjustments to maintain competitiveness while protecting margins Accounting. Solution:
  Cost-cutting measures to improve profitability Management accounting is a branch of accounting that focuses on the preparation and
  Marketing campaigns that focus on product differentiation and value-added features presentation of financial information in such a way as to assist management in the formulation of
  Targeting new customer segments with specialized products or services policies, plans, and decisions. It involves the use of accounting information to support and guide
4. Decline Stage: During the decline stage, sales volume declines as the product becomes management in making informed business decisions.
outdated or replaced by newer products. Marketing strategies at this stage should focus on Some definitions of management accounting include:
maintaining sales volume and maximizing profits. Key strategies that can be used include:  According to the Institute of Management Accountants (IMA), management accounting is "a
  Reducing product lines or discontinuing the product altogether profession that involves partnering in management decision making, devising planning and
  Cost-cutting measures to streamline operations and improve profitability performance management systems, and providing expertise in financial reporting and control
  Offering discounts or promotions to clear out inventory to assist management in the formulation and implementation of an organization's strategy."
 Focusing on loyal customers and niche markets with specialized products or services  The Chartered Institute of Management Accountants (CIMA) defines management accounting as
Overall, effective marketing strategies throughout the product life cycle require a thorough "the process of identification, measurement, accumulation, analysis, preparation,
understanding of the product, market, and customer needs at each stage. By adapting marketing interpretation, and communication of information used by management to plan, evaluate, and
strategies to meet the challenges and opportunities of each stage, companies can optimize control within an entity and to ensure appropriate use of and accountability for its resources."
revenue and profitability while meeting the evolving needs of their customers.  According to the American Accounting Association (AAA), management accounting
encompasses "those concepts and techniques which provide information for use within an
organization in developing and executing its strategy."
Overall, management accounting provides crucial financial data and analysis to help businesses
make informed decisions and achieve their objectives.

(b) What are the various techniques of Management

Accounting? Solution:
There are several techniques and tools that are commonly used in management accounting. Here
are some of the most common ones:
 Cost accounting: This involves tracking and analyzing the costs associated with producing
goods or services. It can include techniques such as job costing, process costing, activity-based
costing, and standard costing.
 Budgeting and forecasting: This involves preparing budgets and financial forecasts to help
management plan and control operations. Techniques used here include variance analysis and
sensitivity analysis.
 Performance measurement: This involves measuring and evaluating the performance of
various departments, products, or processes using key performance indicators (KPIs) and
other metrics.
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 Decision analysis: This involves using mathematical models and other analytical tools to  Evaluates pricing policy: By analyzing the break-even point at different price levels,
 evaluate different courses of action and make informed decisions. businesses can evaluate the impact of their pricing policies on profitability. This can help them
 Strategic planning: This involves developing long-term plans for achieving organizational  optimize their prices to maximize profits.
 goals by considering factors such as market trends, competition, and internal capabilities.  Assists cost management: The break-even analysis helps businesses identify their fixed and
 Risk management: This involves identifying and managing risks that could impact the variable costs and their contribution margins. With this information, they can focus on
 organization's financial performance.  managing their costs more effectively and reducing their breakeven point.
 Capital budgeting: This involves evaluating investment opportunities and determining which  Facilitates capital budgeting decisions: Businesses can use the break-even analysis to
projects should be funded based on their expected return on investment (ROI).  evaluate the feasibility of investment opportunities and decide which projects to undertake.
These are just a few of the many techniques used in management accounting. The specific  Provides a basis for sensitivity analysis: Sensitivity analysis involves assessing the impact
techniques used will depend on the needs and objectives of the organization. of changes in various assumptions or factors on the break-even point. This can help
businesses identify risks and uncertainties in their operations and develop contingency plans.
2. (a) What is Break Even Point?
Solution: 3. What is the basic difference between Absorption costing method and direct costing
Break-even point (BEP) is a financial term that refers to the level of sales at which a business method income statement format?
neither earns a profit nor incurs a loss. At this point, the total revenue earned by the business is Solution:
equal to its total costs, both fixed and variable. Absorption costing and direct costing are two different methods of calculating the costs of
In other words, the break-even point is the point at which the amount of money generated from production and determining the cost of goods sold in a business. The main difference between
sales is enough to cover all of the business's expenses. Any sales beyond the break-even point these two methods lies in how they treat fixed manufacturing overhead costs.
result in profits for the business. The income statement format for absorption costing and direct costing differ as follows:
Here are some definitions of the break-even point from various authors and experts: Absorption costing income statement: This method includes all of the manufacturing costs, both
 According to Charles T. Horngren, a noted accounting scholar, "The break-even point is the level fixed and variable, in the cost of goods sold. Therefore, the income statement under absorption
of activity where total revenues equal total costs (both fixed and variable costs). At this costing includes all costs incurred in the production of goods, including direct materials, direct
activity level, the company neither earns a profit nor incurs a loss." labor, variable manufacturing overhead, and fixed manufacturing overhead. As such, it provides a
 In the book Financial Accounting by Walter T. Harrison Jr., Charles T. Horngren, and C. William more complete picture of the total cost of producing goods.
Thomas, the break-even point is defined as "the level of sales at which total revenues equal Direct costing income statement: Also known as variable costing, this method only includes
total expenses (fixed and variable). Below the break-even point, the company incurs a loss; variable costs, such as direct materials, direct labor, and variable manufacturing overhead, in the
above it, the company earns a profit." cost of goods sold. Fixed manufacturing overhead is treated as a period expense and is not
 The Harvard Business Review defines the break-even point as "the point at which total revenue included in the calculation of cost of goods sold. Therefore, the income statement under direct
equals total cost, or the amount of sales required to cover all costs. It is the minimum level of costing only includes those costs that vary with production volume.
business activity needed to avoid losses."
 According to Management Accounting: Principles and Applications by Edward J. Vanderbeck, 4. What is manufacturing cost? Why is it called product cost?
"The break-even point is the level of sales activity that results in zero profit or loss. It is the Solution:
point at which total revenue equals total cost, and can be used to determine how much of a Manufacturing cost is the total cost incurred by a business in the production of goods or services.
product must be sold in order to recover all costs associated with producing it." It includes all costs associated with the manufacturing process, such as direct materials, direct
Overall, the break-even point is a critical concept in financial management and accounting, as it labor, and manufacturing overhead.
helps businesses determine the minimum amount of sales they need to generate in order to cover The term "product cost" is often used interchangeably with manufacturing cost because it refers
their costs and make a profit. specifically to the cost of producing a product. Product cost includes all of the costs associated
with manufacturing a product, including direct materials, direct labor, and manufacturing
(b) The break even analysis is a good technique for managerial decision making Explain. overhead. This cost is assigned to each unit produced and is used in calculating the cost of goods
The break-even analysis is a useful technique for managerial decision-making because it provides sold.
valuable insights into the financial performance of a business. Here are some reasons why: Product cost is important because it determines the minimum price that a business must charge
 Helps in setting sales targets: The break-even analysis can help businesses determine how for a product in order to cover its costs and make a profit. By calculating product cost accurately,
much they need to sell to cover their costs and make a profit. This information can be used to businesses can ensure that they are pricing their products appropriately and making informed
set realistic sales targets and develop strategies to achieve those targets. decisions about production levels, pricing, and other aspects of their operations.
 Due part: 6th semester | 43 44 | Due part: 6th semester
Overall, manufacturing cost or product cost is a critical concept in accounting and financial Sales at Breakeven Point = Breakeven Point x Selling Price = 102 x ( )= Tk 165,882.35
management, as it helps businesses track and manage their costs and make informed decisions
about their operations.
6. Distinguish between budget and budgetary control.
Solution:
5. The following particulars were obtained from the books of a company:
Budget and budgetary control are both important concepts in financial management, but they
Period Sales(Tk) Profit/Loss(Tk)
serve different purposes. Here are the key differences between budget and budgetary control:
1 90,000 10,000(loss)
Definition: A budget is a financial plan that outlines an organization's expected income and
2 1,30,000 10,000(profit)
expenses for a specific period of time. Budgetary control, on the other hand, is the process of
Find out: monitoring actual financial results against budgeted amounts to identify and correct any
(a) Profit Volume Ratio. deviations from the plan.
(b) Fixed overhead 1. Time Frame: A budget covers a specific period of time, usually a fiscal year or a quarter,
(c) Sales at breakeven point whereas budgetary control is an ongoing process that occurs throughout the budget period.
Solution: 2. Nature: A budget is a static plan that outlines the expected income and expenses for the future
To find out the Profit Volume Ratio (P/V Ratio): period, while budgetary control is a dynamic process that involves monitoring and adjusting
P/V Ratio = ( ) x 100 the budget based on actual results.
We first need to calculate the contribution. Contribution is calculated as sales minus variable 3. Purpose: The purpose of a budget is to provide a roadmap for achieving financial goals and
costs. targets, while the purpose of budgetary control is to ensure that the organization stays on
Total sales for the two periods = Tk 90,000 + Tk 130,000 = Tk 2,20,000 track and achieves its financial objectives by comparing actual results to the budget.
Total variable costs for the two periods = ( x 70) + ( x 60) = Tk 87,000 Therefore, the total 4. Control Mechanism: A budget serves as a benchmark against which actual financial results
can be compared for the purpose of evaluating performance, while budgetary control is a set
contribution for the two periods = Tk 2,20,000 - Tk 87,000 = Tk 1,33,000
of procedures and processes designed to keep the organization within the limits of the budget.
(a) P/V Ratio = ( ) x 100 = ( ) x 100 = 60.45%
(b) To determine the fixed overheads, we can use the contribution formula: 7. (a) What is flexible budget?
Contribution = Sales - Variable Costs - Fixed Costs A flexible budget is a budgeting tool that adjusts for changes in activity levels or other variables.
At the breakeven point, there is no profit or loss, which means that the contribution is equal to the Unlike a static budget, which is based on a fixed set of assumptions and does not change
fixed costs. From the given information, we know that in period 1, the company made a loss of Tk regardless of actual performance, a flexible budget can be adjusted to reflect changes in sales
10,000. This means that the contribution was less than the fixed costs by Tk 10,000. In period 2, volume, production levels, or other factors that affect financial performance.
the company made a profit of Tk 10,000. This means that the contribution exceeded the fixed A flexible budget helps businesses and organizations to better understand their costs and
costs by Tk 10,000. revenues at different levels of activity. It can be used to assess the impact of changes in production
Therefore, we can calculate the fixed overheads as follows: levels, variable costs, and fixed costs on overall profitability. The flexibility of the budget allows
Fixed overheads = = managers to make more informed decisions about resource allocation, pricing strategies,
production planning, and other matters of financial importance.
= Tk 10,000
According to Investopedia, a flexible budget is "a budget that adjusts or flexes with changes in
(c) The breakeven point is the level of sales at which the total costs (fixed and variable) are equal
volume or activity level. A flexible budget allows businesses to adjust their budgets based on sales
to the total revenue. To calculate the breakeven point, we can use the following formula: volume or other variables, which makes it easier to plan for different levels of production and
Breakeven Point = activity."
To calculate the contribution per unit, we need to divide the contribution by the total number of Accounting Tools defines a flexible budget as "a budget that is designed to change in response to
units sold over the two periods. changes in business activity. The flexible budget adjusts to reflect the variable costs that increase
Total units sold over the two periods = ( )+( ) = 1,360 or decrease with changes in business activity, enabling managers to more accurately plan for
different levels of production and sales."
Contribution per unit = = Tk 97.79 In Financial Management: Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt,
Using the above formula, we can calculate the breakeven point as follows: flexible budget is defined as "a budget that adjusts for changes in the level of activity. It shows the
Breakeven Point = = 102 units expected revenues, costs, and operating income at various levels of activity, making it easier to
plan for different volumes of output or sales."
Therefore, the sales at the breakeven point would be:
 Due part: 6th semester | 45 46 | Due part: 6th semester
According to Managerial Accounting: Tools for Business Decision Making by Jerry J. Weygandt, 8. Show the differences between cash budget and cash flow
Paul D. Kimmel, and Donald E. Kieso, "A flexible budget is a budget that projects budget data for statement. Solution:
various levels of activity within a range. This type of budget helps managers prepare for different
Table of Difference between Funds Flow Statement and Cash Flow Statement
levels of operations and helps them identify the fixed and variable components of their costs."
Basis of Funds Flow Statement Cash Flow Statement
(b) State the preparation procedure of Flexible Difference
Budget. Solution:
1. Basis of Funds flow statement is based Cash flow statement is based on
The preparation procedure for a flexible budget involves the following steps:
Analysis on broader concept i.e. working narrow concept i.e. cash, which is
 Identify the activity levels: The first step in preparing a flexible budget is to identify the capital. only one of the elements of working
activity levels that will be used to create the budget. For example, in manufacturing, the capital.
activity level might be the number of units produced, while in retail, it might be the number of
2. Source Funds flow statement tells Cash flow statement stars with the
 customers or sales volume.
 Determine the variable costs: Next, you need to determine the variable costs associated about the various sources from opening balance of cash and
where the funds generated with reaches to the closing balance of
with each activity level. Variable costs are expenses that change based on the level of activity,
various uses to which they are cash by proceeding through sources
such as direct materials, direct labor, and variable overhead costs. These costs are typically
put. and uses.
 expressed on a per-unit basis.
 Determine the fixed costs: Fixed costs are expenses that remain constant regardless of the 3. Usage Funds flow statement is more Cash flow statement is useful in
level of activity, such as rent, salaries, and property taxes. To prepare a flexible budget, you useful in assessing the long- understanding the short-term
need to determine the fixed costs associated with each activity level. range financial strategy. phenomena affecting the liquidity of
 Calculate the total costs: Once you have determined the variable and fixed costs for each the business.
activity level, you can calculate the total costs. This involves adding together the variable and 4. Schedule of In funds flow statement In cash flow statement changes in
 fixed costs for each activity level. Changes in changes in current assets and current assets and current liabilities
 Prepare the budget: With the total costs calculated, you can now prepare the flexible budget. Working current liabilities are shown are shown in the cash flow
This involves creating a table or spreadsheet that shows the expected revenues, costs, and Capital through the schedule of statement itself.
operating income at various levels of activity. The flexible budget should include all relevant changes in working capital.
 data, such as the number of units produced, the sales volume, and the price per unit. 5. End Result Funds flow statement shows Cash flow statement shows the
 Compare actual results to the flexible budget: Finally, you can compare your actual the causes of changes in net causes the changes in cash.
financial results to the flexible budget to assess performance. If there are significant working capital.
differences between the actual results and the budgeted amounts, you may need to revise the
flexible budget to reflect the new information or adjust your business operations to improve 6. Principal of Funds flow statement is in In cash flow statement data
Accounting alignment with the accrual obtained on accrual basis are
performance.
basis of accounting. converted into cash basis.

9. Management accounting deals with future and financial accounting deals with past-Explain.
Solution:
Management accounting and financial accounting are two different branches of accounting that
serve different purposes. The key difference between them is that management accounting
focuses on the future, while financial accounting focuses on the past.
Management accounting is concerned with providing information to help managers make
informed decisions about the future of the business. It involves analyzing past and present data to
develop forecasts and projections for future performance. This includes creating budgets,
preparing cost analyses, and developing strategies to improve profitability and efficiency.
Management accounting also involves identifying trends and patterns in the data that can be used
to guide decision-making.
 Due part: 6th semester | 47 48 | Due part: 6th semester
On the other hand, financial accounting is concerned with reporting the financial results of the (b) Break even sales if P/V ratio is increased to 30%:
business to stakeholders, such as shareholders, investors, and creditors. It involves preparing New Profit Volume Ratio = 30%
financial statements, such as the balance sheet, income statement, and cash flow statement, which Using the formula for profit volume ratio, we can calculate the new contribution margin as
provide a historical record of the business's financial performance over a specific period of time. follows:
These financial statements are prepared in accordance with generally accepted accounting
principles (GAAP) and are used to assess the financial health and stability of the business. 30% = x 100

10. You are given the following information of XYZ Co.:

Contribution Margin = Tk.42,000
Sales Tk.1,40,000
Using the formula for break even sales, we can calculate the new break even sales as follows:

(a) Break even sales. Break Even Sales =

(b) Break even sales if P/V ratio is increased to 30%.
(c) M/S if P/V ratio is 25%. Break Even Sales =
Solution:
To solve for the required values, we will use the following formulas:
To solve for Fixed Costs, we need to use the profit volume ratio formula again:
20%=( ) x 100
Margin of Safety Ratio = x 100

Contribution Margin = Tk.28,000

Break Even Sales =

Fixed Costs = ( - Tk.28,000

Contribution Margin = Sales - Variable Costs

Fixed Costs = Tk.14,000

Profit Volume Ratio = x 100
Now we have all the required information to calculate the new break even sales:
(a) Break even sales: Margin
Break Even Sales =
of Safety Ratio = 40% Actual

Break Even Sales = Tk.33,333.33

Sales = Tk.1,40,000

Using the formula for margin of safety ratio, we can calculate the break even sales as follows: Therefore, the break even sales for XYZ Co. is Tk.33,333.33 at a P/V ratio of 30%.

(c) M/S if P/V ratio is 25%: New

40% = x 100 Profit Volume Ratio = 25%
Using the formula for profit volume ratio, we can calculate the new contribution margin as
Solving for Break Even Sales, we get: follows:
25% = ) x 100
Break Even Sales = Tk.84,000
Contribution Margin = Tk.35,000
Therefore, the break even sales for XYZ Co. is Tk.84,000.
 Due part: 6th semester | 49 50 | Due part: 6th semester
Using the formula for break even sales, we can calculate the break even sales as follows: Part B Broad Questions
(Answer any four questions)
Break Even Sales = Marks-10x4=40
11. A factory produces and sells 1000 units of a product in July 2020. For which the following
particulars are available:
To solve for Fixed Costs, we need to use the profit volume ratio formula again:
Details Taka
Stock of direct materials on 01.07.20 6,000
20% = x 100 Purchase of direct material in July 2020 1,44,000
Direct wages paid cash in July 2020(Which includes Tk. 3000 on account of June 55,000
Contribution Margin = Tk.28,000 2020 and an advance of Tk.2000)
Works overhead charges for the month 60,000
Fixed Costs = - Tk.28,000 Stock of direct materials on 31.07.20 10,000
Administration and selling overheads(per unit) 25
Sales price(per unit) 300

Now we have all the required information to calculate the margin of safety ratio: From the above particulars you are required to-
(a) Prepare a cost statement for July 2020
(b)Estimate the sales price of a unit of the same product in August 2020, assuming-
Margin of Safety Ratio = x 100
(i) 20% increase in direct material cost.
(ii) 10% increase in direct wages.
(iii) 5% increase in works overhead charges.
Margin of Safety Ratio = x 100 (iv) 20% increase in administration and selling overhead charges.
(v) Same percentages of profit on sales price as in July 2020.
Solution:
Margin of Safety Ratio = (Tk.1,40,000 - ) (a) Cost Statement for July 2020:

Margin of Safety Ratio = 50% Particulars Taka

Direct Materials:
Therefore, the margin of safety for XYZ Co. is 50% when the P/V ratio is 25%. Stock on 01.07.20 6,000
Add: Purchases during July 2020 1,44,000
Less: Stock on 31.07.20 (10,000)
Direct Materials Consumed 1,40,000
Direct Wages 55,000
Works Overhead 60,000
Prime Cost 2,55,000
Add: Administration and Selling Overhead (1000 units x Tk. 25 per unit) 25,000
Total Cost 2,80,000
 Due part: 6th semester | 51 52 | Due part: 6th semester
(b) Sales Price for August 2020: Solution:
Given the following increases in costs: (a) The high-low method involves using the highest and lowest activity levels to determine the
(i) 20% increase in direct material cost variable cost per unit and fixed cost. Using the data provided, we can find the highest and lowest
New Direct Material Cost per unit = x = Tk. 1.4
activity levels:
(ii) 10% increase in direct wages
 Highest activity level: June with 8,000 patient days
New Direct Wages per unit = x = Tk. 6.05 
(iii) 5% increase in works overhead charges  Lowest activity level: March with 5,000 patient days

New Works Overhead per unit = x = Tk. 63 Using these two points, we can calculate the variable cost per unit:
(iv) 20% increase in administration and selling overhead charges Variable cost per unit =
New Administration and Selling Overhead per unit = x = Tk. 0.03
(v) Same percentages of profit on sales price as in July 2020. Variable cost per unit =
Let the new sales price be Tk. x.
Variable cost per unit =
Contribution per unit = New Sales Price New Variable Cost per unit
Contribution per unit = x - (1.4 + 6.05 + 63 + 0.03) Variable cost per unit = 266.67
Contribution per unit = x 70.48
To find the fixed cost, we can use either of the two points and substitute the variable cost per unit:
Contribution Margin Ratio =
Fixed cost = Total cost Variable cost per unit Activity level
Given that the percentage of profit on sales price is the same as in July 2020:
Fixed cost = 7,900 266.67 5,600
Contribution Margin Ratio = =
x = 334.56 Fixed cost = $1,480
Therefore, the estimated sales price of a unit of the same product in August 2020 is Tk. 334.56. Therefore, the variable cost per patient day is $266.67 and the fixed cost is $1,480.
(b) To estimate the variable cost per patient using the least-squares regression method, we need
12. The maintenance cost and patient days for the first seven months of X hospital are as
follows: to plot the activity level (patient days) on the x-axis and the total maintenance cost on the y-axis.
Month Activity Level patient days Maintenance Cost Incurred Then, we can use a regression analysis tool to find the slope of the line, which represents the
January 5,600 7,900 variable cost per patient.
February 7,100 8,500
March 5,000 7,400 Using the data provided, we get the following table:
April 6,500 8,200 Month Patient Days Maintenance Cost
May 7,300 9,100
January 5,600 7,900
June 8,000 9,800
July 6,200 7,800 February 7,100 8,500
Required: March 5,000 7,400
(a) Using the high-low method, find out variable cost and fixed cost.
April 6,500 8,200
(b) Using the least-squares regression method, estimate the variable cost per patient.
(c) From the data in (a) above, express the cost formula in linear equation form Y=a+bX. May 7,300 9,100
(d) Using the derived cost formula, determines the expense expected to be incurred for 9,000 June 8,000 9,800
patients.
July 6,200 7,800
Using a regression analysis tool, we get the following equation:
Total maintenance cost = Fixed cost (Variable cost per patient day Patient days)
Total maintenance cost = -649.72 + (1.238 Patient days)
 Due part: 6th semester | 53 54 | Due part: 6th semester
Therefore, the variable cost per patient day is $1.238. September Cash Budget:
(c) Using the data from part (a), we can express the cost formula in linear equation form Y=a+bX Cash collections from credit sales:
Cash collection for September credit sales:
as follows: = 50% of September credit sales + 40% of October credit sales + 10% of September credit sales in
Total maintenance cost = Fixed cost + (Variable cost per patient day Patient days) Y August
= (0.5 x 145,000) + (0.4 x 190,000) + (0.1 x 145,000) = 72,500 + 76,000 + 14,500
= 1,480 + 266.67X
= Tk. 1,63,000
(d) Using the derived cost formula from part (c), we can determine the expense expected to be
incurred for 9,000 patients:
= Credit purchases in September - Purchase discount in September
Total maintenance cost = Fixed cost + (Variable cost per patient day * Patient days)
= 2,00,000 - 10,000 = Tk. 1,90,000
Total maintenance cost = 1,480 + (266.67 * 9,000) Cash payments for expenses:
Total maintenance cost = $4,814.30 Assuming expenses to be 20% of sales,
Expenses in September = 20% of (80,000+1,45,000)
Therefore, the expense expected to be incurred for 9,000 patients is $4,814.30. = 20% of 2,25,000
= Tk. 45,000
13. X Ltd. has the following forecast data available: Cash receipts from other sources:
September October No information is provided about other sources of cash receipts, so it is assumed to be zero.
Taka Taka Expected cash balance:
Cash sales 80,000 1,20,000 Expected cash balance at the end of September: = Cash balance at the beginning of September
Credit sales 1,45,000 1,90,000 + Cash inflows - Cash outflows = 25,000 + 1,63,000 - (1,90,000 + 45,000) = Tk. 53,000
Cash purchases 40,000 40,000
Cash collections from credit sales:
Credit purchase 2,00,000 1,60,000 Cash collection for October credit sales:
Purchase discount 10,000 5,000 = 50% of October credit sales + 40% of November credit sales + 10% of October credit sales
in September
Accounts payable beginning 20,000 25,000 = (0.5 x 190,000) + (0.4 x x) + (0.1 x 190,000) = 95,000 + 0.4x + 19,000 = 1,14,000 + 0.4x
Accounts payable ending 25,000 20,000 Cash payments for credit purchases:
Cash payment for October credit purchases:
Net sales on credit are collected 50% in the month of sale, 40% in the following month and 10% in
= Credit purchases in October - Purchase discount in October
the second following month. Such sales in July and August were Tk. 2,00,000 and Tk.2,40,000
= 1,60,000 - 5,000 = Tk. 1,55,000
respectively. The estimated cash balance in September is Tk. 25,000. Prepare a cash budget for
September and October.
Solution:
To prepare the cash budget for September and October, we need to calculate the following:
= 20% of 3,10,000
  Cash collections from credit sales = Tk. 62,000
  Cash payments for credit purchases Cash receipts from other sources:
  Cash payments for expenses No information is provided about other sources of cash receipts, so it is assumed to be zero.
  Cash receipts from other sources Expected cash balance:
 Expected cash balance
Expected cash balance at the end of October:
= Cash balance at the beginning of October + Cash inflows - Cash outflows
= 53,000 + (1,14,000 + 0.4x) - (1,55,000 + 62,000)
= -48,000 + 0.4x
 Due part: 6th semester | 55 56 | Due part: 6th semester
Therefore, the cash budget for September and October is as follows: Income Statement for 2020 under Direct Costing Method:
September October Sales revenue: 75,000 units x Tk.10 = Tk.7,50,000
Cash inflows Variable cost of goods sold: 75,000 units x Tk.4 = Tk.3,00,000
Cash sales 80,000 1,20,000 Contribution margin: Tk.4,50,000
Cash collections 1,63,000 1,14,000 + 0.4x
Total cash inflows 2 Operating expenses:
14. The following particulars are available from the books of Tahsan Ltd. for the year 2020: Variable operating expenses: 75,000 units x Tk.1 = Tk.75,000
Fixed marketing and administrative expenses: Tk.1,50,000
Sales 75,000 Units Finished Goods Inventory (Jan 1, 2020) 12,000 Units Net income: Tk.2,25,000
Finished Goods Inventory (Dec 31, 2020) 17,000 Units Sales price per
units Tk.10 (ii)
Difference in net income under absorption costing and direct costing method:
Net income under absorption costing method: Tk.55,000
Manufacturing cost: Net income under direct costing method: Tk.2,25,000
Variable cost unit of production Tk.4 Difference in net income: Tk.1,70,000
Fixed factory overhead (Normal capacity 85000 units) Tk.1,70,000
The difference in net income is due to the treatment of fixed factory overhead costs. Under
Marketing and Administrative expenses Tk.1 absorption costing method, fixed factory overhead costs are included in the cost of goods sold and
Fixed marketing and administrative exp. Tk.1,50,000 inventory valuation, while under direct costing method, only variable manufacturing costs are
Required: included in the cost of goods sold. This results in a higher net income under direct costing method
(i)Income statement for 2020 under the absorption costing method and direct costing method. when production levels exceed normal capacity.
(ii) An account showing the difference in net income under above two methods.
15. ABC Company manufactures 30,000 parts of a specialized product. At this level of activity the
Solution: cost per parts is as follows:
(i) Taka
Income Statement for 2020 under Absorption Costing Method:
Sales revenue: 75,000 units x Tk.10 = Tk.7,50,000 Direct materials 40.00
Cost of goods sold: Direct labor 22.00
Beginning finished goods inventory: 12,000 units x Tk.4 = Tk.48,000 Variable overhead 18.00
Cost of goods manufactured: (75,000 units - 12,000 units + 17,000 units) x Tk.4 Fixed overhead 20.00
= Tk.320,000 Total 100
Total cost of goods available for sale: Tk.368,000 An outside supplier offers to sell 30,000 parts each year to ABC Company at Tk. 86.00 per unit. If
Ending finished goods inventory: 17,000 units x Tk.4 = Tk.68,000 ABC Company accepts this offer, the released facilities from manufacturing process could be
Cost of goods sold: Tk.300,000 rented to another company at an annual rental of Tk. 96,000 and present fixed overhead will
Gross profit: Tk.450,000 reduce by Tk.4,14,000.
Required: Should the parts be purchased from outside or continue to produce in the factory?
Operating expenses: Solution:
Variable operating expenses: 75,000 units x Tk.1 = Tk.75,000 To determine whether ABC Company should purchase the parts from the outside supplier or
Fixed marketing and administrative expenses: Tk.1,50,000 continue to produce them in-house, we need to compare the relevant costs of each option.
Fixed factory overhead: Tk.1,70,000
Total operating expenses: Tk.3,95,000 If ABC Company continues to produce the parts in-house, the total cost per unit is Tk. 100. This
Net income: Tk.55,000 includes direct materials (Tk. 40), direct labor (Tk. 22), variable overhead (Tk. 18), and fixed
overhead (Tk. 20). Since ABC Company manufactures 30,000 units, its total cost would be:
 Due part: 6th semester | 57 58 | Due part: 6th semester
Total cost = Tk. 100 x 30,000 units To prepare a flexible budget for 70%, 80% and 90% activity levels, we need to first calculate the
Total cost = Tk. 30,00,000 total manufacturing overhead cost at 60% and 100% capacity levels.

If ABC Company purchases the parts from the outside supplier, it will cost Tk. 86 per unit. Total manufacturing overhead cost at 60% capacity level
Therefore, the total cost would be: = Tk. (1,20,000 + 90,000 + 1,10,000 + 1,60,000 + 6,00,000)
Total cost = Tk. 86 x 30,000 units = Tk. 11,80,000
Total cost = Tk. 25,80,000
Total manufacturing overhead cost at 100% capacity level
If ABC Company purchases the parts from the outside supplier, it will be able to rent out the = Tk. (2,00,000 + 1,50,000 + 1,50,000 + 2,00,000 + 6,00,000)
released facilities for Tk. 96,000 per year and reduce the fixed overhead by Tk. 4,14,000 per year. = Tk. 13,50,000
Therefore, the total cost savings from purchasing the parts from the outside supplier would be:
Now, using the high-low method, we can determine the variable cost per unit of activity:
Total cost savings = Total fixed cost savings + Rental income
Total fixed cost savings = Tk. 4,14,000 Variable cost per unit =
Rental income = Tk. 96,000
Total cost savings = Tk. 4,14,000 + Tk. 96,000
Total cost savings = Tk. 5,10,000 Variable cost per unit =
Since purchasing the parts from the outside supplier results in lower overall costs (Tk. 25,80,000
+ Tk. 5,10,000 = Tk. 31,90,000) compared to producing them in-house (Tk. 30,00,000), it is more Variable cost per unit = Tk. 42,500
beneficial for ABC Company to purchase the parts from the outside supplier. Using the variable cost per unit, we can calculate the total variable manufacturing overhead cost
for each level of activity:
16. The following are the monthly budget for the manufacturing overhead of a concern for two
levels of activity: Flexible budget at 70% capacity level:
Capacity 60% 100% Variable manufacturing overhead cost = Tk. 42,500 x 7,000 units = Tk. 2,97,500
Budgeted production(units) 6,000 10,000 Total manufacturing overhead cost = Fixed manufacturing overhead cost + Variable
Taka Taka manufacturing overhead cost
Indirect wages 1,20,000 2,00,000 Total manufacturing overhead cost = Tk. 6,00,000 + Tk. 2,97,500 = Tk. 8,97,500

Consumable stores 90,000 1,50,000

Flexible budget at 80% capacity level:
Maintenance 1,10,000 1,50,000 Variable manufacturing overhead cost = Tk. 42,500 x 8,000 units = Tk. 3,40,000
Power and fuel 1,60,000 2,00,000 Total manufacturing overhead cost = Fixed manufacturing overhead cost + Variable
manufacturing overhead cost
Depreciation 6,00,000 6,00,000
Total manufacturing overhead cost = Tk. 6,00,000 + Tk. 3,40,000 = Tk. 9,40,000
Required:
(a) Indicate which of the items are fixed, variable and semi-variable.
Flexible budget at 90% capacity level:
(b) Prepare a flexible budget for 70%,80% and 90% activity levels.
Variable manufacturing overhead cost = Tk. 42,500 x 9,000 units = Tk. 3,82,500
Solution:
(a) Total manufacturing overhead cost = Fixed manufacturing overhead cost + Variable
manufacturing overhead cost
  Fixed: Depreciation
Total manufacturing overhead cost = Tk. 6,00,000 + Tk. 3,82,500 = Tk. 9,82,500
  Variable: Indirect wages, Consumable stores, Maintenance, Power and fuel
 Semi-variable: None
(b)
 Due part: 6th semester | 59 60 | Due part: 6th semester
Therefore, the flexible budgets at 70%, 80% and 90% capacity levels are Tk. 8,97,500, Tk. The allocation of joint product costs is important for determining the profitability of each joint
9,40,000 and Tk. 9,82,500 respectively. product and for making pricing and production decisions. It also helps in evaluating the efficiency
and effectiveness of the production process and identifying any areas of waste or inefficiency.
17. Write short notes (any five):
i)Master budget (iv) Variance
A master budget is a comprehensive financial plan that projects a company's expected sales, In accounting, a variance refers to the difference between an actual amount and an expected or
operating expenses, capital expenditures, and cash flows for a specific period, typically one year. budgeted amount. Variances can be either favorable or unfavorable, depending on whether the
The master budget is usually broken down into smaller budgets, such as the sales budget, actual amount is higher or lower than the expected or budgeted amount. There are several types
production budget, marketing budget, and cash budget. of variances including:
The purpose of a master budget is to provide management with a clear overview of the company's 1. Sales variance: the difference between actual sales revenue and budgeted sales revenue.
financial position and performance, and to guide decision-making throughout the budget period. 2. Cost variance: the difference between actual expenses and budgeted expenses.
It also serves as a benchmark against which actual results can be compared and measured, 3. Material variance: the difference between actual cost of raw materials used and expected cost
helping management identify areas where adjustments need to be made. of raw materials used based on budgeted production.
A typical master budget includes both financial and operational components, such as revenue 4. Labor variance: the difference between actual labor costs and expected labor costs based on
projections, cost of goods sold, operating expenses, capital expenditures, and financing activities. budgeted production.
The master budget provides a framework for managing resources, setting goals and objectives, 5. Overhead variance: the difference between actual overhead costs and expected overhead costs
and tracking progress towards achieving them. based on budgeted production.

(ii) Margin of safety (v) Sensitivity Analysis

Margin of safety is a financial term that refers to the difference between actual sales and the Sensitivity analysis is a technique used in financial modeling to examine how changes in
break-even point (the amount of sales required to cover all fixed and variable costs) of a business. assumptions or variables affect the outcome of a model. It involves testing different scenarios by
It measures the amount by which sales can decrease before a business starts incurring losses. adjusting one or more variables, and observing the impact on the overall result.
The margin of safety is usually expressed as a percentage of total sales, and it provides an Sensitivity analysis helps decision-makers to identify the key drivers of a particular outcome, and
indication of a company's financial strength and ability to weather unexpected changes in market to assess the level of risk associated with those drivers. It can be used to test the robustness of a
conditions or operating costs. A higher margin of safety means that a company has more financial model, to evaluate the potential impact of changes in market conditions, or to determine
breathing room and is less vulnerable to downturns in sales. the most critical factors affecting an investment decision.
To calculate the margin of safety, you need to subtract the break-even point from the actual or For example, a company may use sensitivity analysis to evaluate the impact of changes in interest
projected sales, and then divide the result by the actual or projected sales. For example, if a rates on its cash flow projections. By varying the interest rate assumption within a certain range,
company's break-even point is $100,000 and its actual sales are $150,000, the margin of safety the company can assess how its cash flows and profitability would be affected under different
would be 33.3% (($150,000 - $100,000) / $150,000). This means that the company's sales could scenarios.
drop by up to 33.3% before it starts incurring losses. Sensitivity analysis can also be used to evaluate the impact of different strategic decisions, such as
launching a new product line or expanding into a new market. By testing different assumptions
(iii) Joint product cost regarding sales volumes, pricing, and other variables, decision-makers can gain insights into the
Joint product cost is the total production cost incurred in the process of producing two or more risks and potential rewards of each option.
joint products that are produced together from a common input. Joint products are two or more Overall, sensitivity analysis is a valuable tool for evaluating the potential outcomes of a particular
products that are produced simultaneously in a single production process and have significant scenario or decision, and for identifying the most important drivers of those outcomes.
value independently.
The joint product cost includes all costs related to producing the joint products up to the point of (vii) Sunk Cost.
separation, when the products become identifiable and can be sold or further processed A sunk cost is an expense that has already been incurred and cannot be recovered. Sunk costs are
separately. These costs include direct materials, direct labor, and manufacturing overhead, as well typically the result of a past decision, investment or commitment, and cannot be changed or
as any other costs incurred during the joint production process. reversed.
Joint product costs are usually allocated to the joint products based on their relative sales value or Sunk costs should not be considered in making current or future decisions, as they have no
net realizable value (NRV) at the point of separation. The NRV method allocates the joint costs relevance to the incremental costs and benefits of a new decision. The only relevant costs and
based on the expected revenue each product will generate when sold, while the sales value benefits are those that will be incurred or gained as a result of the new decision.
method allocates the joint costs based on the actual sales value of each product.
 Due part: 6th semester | 61 62 | Due part: 6th semester
For instance, if a company has invested $1 million in developing a new product, but then discovers BBA THIRD YEAR, SIXTH SEMESTER EXAMINATION, 2020
that the market demand for the product is lower than expected, the $1 million investment is ENTERPRISE RESOURCE PLANNING
considered a sunk cost. The company cannot recover the $1 million investment, and any further Subject Code: 530155
investment in the product should be based solely on the expected incremental costs and benefits Time-3 hours
of continuing development and marketing. Full marks-70
Ignoring sunk costs can be difficult for individuals and organizations because it can feel like [N.B.-The figures in the right margin indicate full marks]
wasting money or resources. However, recognizing sunk costs and focusing on future costs and Part A-Short Questions
benefits can help prevent irrational decision-making based on past investments which have no (Answer any six questions)
bearing on future outcomes. Marks-5x6=30
1. (a) What do you mean by Enterprise Resource Planning (ERP)?
Enterprise Resource Planning (ERP) is a software system that integrates business processes
across various functional departments, such as finance, human resources, sales, procurement,
inventory management, and customer relationship management. The goal of ERP is to provide a
centralized view of an organization's data and streamline its business processes by automating
tasks and improving communication between departments. With an ERP system, businesses can
improve their operational efficiency, reduce costs, and better manage their resources.
 According to Joseph Brady and Ellen Monk, "ERP is a business management system that
 integrates all facets of the business, including planning, manufacturing, sales, and marketing."
 In the words of Umakanta Mishra, "ERP is a software package designed to integrate and
optimize the business processes such as production, logistics, procurement, distribution, and
 sales of an organization."
 According to Ross and Vitale, "ERP is a packaged business software system that allows a
company to automate and integrate the majority of its business processes, share common data
and practices across the entire organization, and produce and access information in a real-
time environment."
 In the words of Davenport, "ERP systems are software packages that enable organizations to
integrate their transactional data from different business functions into a single,
comprehensive database."

(b) Write down the business benefits of Enterprise Resource Planning (ERP)?
Here are some of the key business benefits of implementing an Enterprise Resource Planning
(ERP) system:
1. Improved operational efficiency: ERP systems automate repetitive tasks, eliminate manual
data entry, and provide real-time data, which improves decision-making and reduces errors.
2. Streamlined business processes: By integrating various business functions, such as finance,
sales, procurement, and inventory management, ERP systems help streamline business
processes and reduce redundancies.
3. Better collaboration: ERP systems allow different departments to share common datasets,
which improves communication and collaboration across the organization.
4. Enhanced customer service: With access to accurate and up-to-date customer information,
companies can provide better customer service and respond to inquiries more quickly.
5. Increased agility: ERP systems provide businesses with the flexibility to adapt to changing
market conditions, industry trends, and customer demands.
6. Cost savings: ERP systems can help reduce costs by streamlining operations, eliminating
redundancies, and providing better visibility into financial performance.
 Due part: 6th semester | 63 64 | Due part: 6th semester
2. Describe various types of data migration. 4. (a) What are the areas of performance improvements through ERP?
Here are some of the different types of data migration that organizations may undertake: Enterprise Resource Planning (ERP) systems are software solutions that integrate all aspects of an
1. Storage Migration: This involves moving data from one storage system to another, such as organization's business processes, including finance, human resources, supply chain management,
migrating from an on-premises storage solution to a cloud-based storage solution. customer relationship management, and more. ERP systems provide numerous benefits and can
2. Database Migration: This involves transferring data from one database to another, either lead to significant improvements in performance across various areas of an organization. Some of
within the same database management system (DBMS) or between different DBMSs. the areas of performance improvements through ERP include:
3. Application Migration: This involves moving data from one application to another, usually 1. Improved Operational Efficiency: ERP systems provide a centralized database that
when replacing legacy systems with newer ones. consolidates all business data into one platform. This enables the automation of many manual
4. Operating System Migration: This involves migrating data from one operating system to processes, reducing errors and improving operational efficiency.
another, usually when upgrading to a new version of an operating system. 2. Enhanced Financial Management: ERP systems provide tools for financial management,
5. Cloud Migration: This involves moving data and applications from on-premises such as budgeting, forecasting, and reporting. This enables organizations to gain better
infrastructure to a cloud-based environment, such as moving from an on-premises ERP insights into their financial performance and make informed decisions about investments and
system to a cloud-based ERP solution. resource allocation.
6. Business Process Migration: This involves changing how business processes are executed by 3. Streamlined Supply Chain Management: ERP systems provide tools for managing the entire
migrating data from one system to another that supports different workflows, rules, or supply chain process, including inventory management, procurement, and logistics. This helps
automation capabilities. organizations to optimize their supply chain processes, reduce costs, and improve delivery
times.
3. Discuss the key benefits and capabilities of IT service desk. 4. Improved Customer Relationship Management: ERP systems provide tools for managing
Here are some of the key benefits and capabilities of an IT Service Desk: customer data, sales, and marketing campaigns. This helps organizations to better understand
1. Improved customer satisfaction: An effective IT service desk can improve customer their customers, personalize interactions, and improve customer satisfaction.
satisfaction by providing timely resolution of issues, clear communication, and personalized 5. Increased Collaboration and Communication: ERP systems provide a centralized platform
support. for collaboration and communication across departments, improving cross-functional
2. Reduced downtime: IT service desks can help reduce downtime by identifying and resolving teamwork and reducing communication silos.
issues quickly, minimizing the impact on business operations. 6. Enhanced Decision Making: ERP systems provide real-time data and analytics, enabling
3. Efficient ticket management: With a centralized ticketing system, IT service desks can organizations to make informed decisions based on accurate information. This helps
efficiently manage and track all requests and issues, ensuring that nothing falls through the organizations to make better strategic decisions, improve business outcomes, and stay
cracks. competitive.
4. Knowledge base management: IT service desks can create and maintain a knowledge base
of common issues and solutions, which helps agents resolve problems more quickly and (b) Why is it important to measure ERP performance?
reduces redundant work. Measuring Enterprise Resource Planning (ERP) performance is important for several reasons:
5. Service level agreement (SLA) management: IT service desks can monitor SLAs, ensure 1. To identify areas of improvement: Measuring ERP performance enables organizations to
compliance, and identify areas for improvement to meet or exceed customer expectations. identify areas that need improvement, such as slow response times, high error rates, or low
6. Reporting and analytics: IT service desks can provide real-time reporting and analytics to user satisfaction. This information can then be used to make changes that increase efficiency
help organizations understand key performance metrics, identify trends, and make data- and productivity.
driven decisions. 2. To optimize system performance: Measuring ERP performance allows organizations to
7. Self-service capabilities: IT service desks can offer self-service options, such as an online monitor system performance and identify potential bottlenecks or areas where system
portal or chatbot, which allows users to access information and initiate requests without the resources are being underutilized. This information can be used to optimize the system
need to contact an agent. configuration and improve overall performance.
3. To evaluate ROI: Measuring ERP performance enables organizations to evaluate the return
on investment (ROI) of their ERP implementation by assessing how well the system is meeting
business objectives and delivering value.
4. To ensure compliance: Measuring ERP performance is essential for ensuring compliance
with regulatory requirements, such as data privacy laws or financial reporting standards.
 Due part: 6th semester | 65 66 | Due part: 6th semester
5. To support decision-making: Measuring ERP performance provides organizations with real-
time data and insights that can be used to inform decision-making, such as identifying trends, 7. What is training? Explain the objectives of training.
forecasting demand, or optimizing resource allocation. Training is the process of providing employees with the knowledge, skills, and tools they need to
perform their jobs effectively. It can take many forms, including classroom instruction, on-the-job
5. "Train the trainer approach is one of the tested& successful training methodology in training, online courses, mentoring, coaching, and more. The objectives of training typically
most of the ERP implementation."-Do you agree? Why? include:
Yes, I agree that the "train the trainer" approach is one of the tested and successful training 1. Improving job performance: One of the primary objectives of training is to improve job
methodologies in most Enterprise Resource Planning (ERP) implementations. performance by providing employees with the knowledge and skills they need to perform
In this approach, a group of internal trainers are trained on how to use the ERP system and then their duties effectively.
they go on to train other employees within the organization. This approach has several 2. Enhancing productivity: By improving job performance, training can also help increase
advantages: productivity, enabling employees to work more efficiently and effectively.
1. Cost-effective: Training a small group of internal trainers is often more cost-effective than 3. Promoting employee development: Training can help employees develop new skills, gain
hiring external trainers to train all employees. new knowledge, and advance their careers within the organization.
2. Scalability: Once the internal trainers are trained, they can continue to train new employees 4. Encouraging innovation: By introducing employees to new ideas and approaches, training
as the organization grows or as new modules of the ERP system are implemented. can encourage innovative thinking and problem-solving.
3. Tailored training: Internal trainers have a better understanding of the organization's culture, 5. Ensuring compliance: Training is essential for ensuring that employees understand and
processes, and goals. This makes it easier for them to tailor the training to meet the specific comply with laws, regulations, and organizational policies.
needs of the organization. 6. Improving morale: Providing employees with opportunities for growth and development
4. Knowledge retention: When employees are trained by their colleagues, they are more likely through training can improve job satisfaction and morale.
to retain the knowledge and skills they need to use the ERP system effectively over time. 7. Facilitating change management: Training can help employees adapt to changes in the
5. Improved user adoption: When employees are trained by their colleagues, they are more organization, such as new technology, processes, or procedures.
likely to feel comfortable asking questions, seeking help, and using the ERP system on a
regular basis. 8. How do you conduct cost benefit analysis for an ERP system?
Conducting a cost-benefit analysis for an Enterprise Resource Planning (ERP) system involves
6. Mention the business process reengineering steps. analyzing the costs and benefits associated with implementing the system. Here are the general
Here are the general steps involved in Business Process Reengineering (BPR): steps involved:
1. Identify the processes to be reengineered: The first step is to determine which business 1. Identify the costs: The first step is to identify all the costs associated with implementing the
processes need to be reengineered. This can be done by analyzing key performance indicators ERP system, including software licenses, hardware and infrastructure costs, implementation
and identifying areas where the organization is underperforming or inefficient. fees, customization costs, training costs, support and maintenance costs, and any other
2. Map out the existing processes: The next step is to map out the existing processes, including associated expenses.
all the tasks, inputs, outputs, and decision points involved. 2. Estimate the benefits: The next step is to estimate the benefits of implementing the ERP
3. Analyze the existing processes: Once the existing processes have been mapped out, the next system, such as improved operational efficiency, reduced costs, increased productivity, better
step is to analyze them to identify bottlenecks, inefficiencies, and opportunities for data accuracy, enhanced reporting and analytics, and improved customer service.
improvement. 3. Assign values to costs and benefits: Once the costs and benefits have been identified and
4. Design the new processes: Based on the analysis of the existing processes, the next step is to estimated, assign a dollar value to each item.
design new processes that address the identified issues and take advantage of opportunities 4. Calculate the net present value (NPV): Using the cost and benefit values, calculate the NPV
for improvement. of the ERP system. This involves subtracting the total costs from the total benefits and then
5. Develop a plan for implementation: Once the new processes have been designed, the next adjusting for inflation and the time value of money.
step is to develop a plan for implementing them, including timelines, resource requirements, 5. Analyze the results: Once the NPV has been calculated, analyze the results to determine
and communication plans. whether the benefits outweigh the costs. If the NPV is positive, then the benefits of
6. Implement the new processes: The next step is to implement the new processes according implementing the ERP system are expected to exceed the costs over time.
to the plan developed in the previous step. 6. Consider alternative scenarios: In addition to the base case scenario, consider alternative
7. Monitor and continually improve the new processes: After the new processes have been scenarios that may impact the costs and benefits of the ERP system, such as changes in staffing
implemented, it's important to monitor their performance and continually look for levels, market conditions, or technology developments.
opportunities to improve them further.
 Due part: 6th semester | 67 68 | Due part: 6th semester
9. Describe the various security issues that must be ensured during ERP implementation 6. Update records: Finally, update relevant records in the ERP software to reflect the new
with a view to managing risk. purchase or sales order. This includes updating inventory levels, financial records, and
During an Enterprise Resource Planning (ERP) implementation, a number of security issues must supplier or customer databases.
be addressed to manage risk effectively. Here are some of the key areas that organizations should
focus on: Part B Broad Questions
1. Access control: ERP systems contain sensitive data and business processes that need to be (Answer any four questions)
protected from unauthorized access. This can be achieved through strong password policies, Marks-10x4=40
two-factor authentication, role-based access controls, and other measures. 11. (a)Discuss the evolution of ERP in brief.
2. Data protection: ERP systems often contain confidential or proprietary information that The evolution of Enterprise Resource Planning (ERP) can be traced back to the 1960s and 70s,
needs to be protected from theft, loss, or corruption. This can be achieved through data when Material Requirement Planning (MRP) systems were first developed. These systems were
encryption, regular backups, and disaster recovery planning. used to manage inventory levels and production schedules in manufacturing environments.
3. Segregation of duties: To prevent fraud and errors, it is important to ensure that no one In the 1980s, MRP systems evolved into Manufacturing Resource Planning (MRP II) systems,
individual has too much control over a particular process. Segregation of duties can help which included additional functionality such as capacity planning, production scheduling, and
ensure that critical tasks are performed by different individuals. financial management. These systems were still primarily focused on manufacturing operations.
4. Audit trails: ERP systems should maintain audit trails that track who accessed what data, In the 1990s, ERP systems were introduced, which expanded the scope of MRP II systems to
when, and from where. This information can help detect and investigate suspicious activity. include a wider range of business functions, such as supply chain management, customer
5. Compliance: ERP systems should comply with relevant regulations, such as data privacy laws, relationship management, and human resources management. ERP systems provided a
financial reporting standards, and industry-specific guidelines. centralized view of data across different departments and functions, enabling organizations to
6. Vendor management: Organizations should work closely with ERP vendors to identify and improve collaboration and decision-making.
mitigate potential security risks associated with the system. This includes conducting due In the 2000s, ERP systems continued to evolve to meet the changing needs of businesses. Cloud
diligence on the vendor's security posture, negotiating appropriate security terms in the computing and Software-as-a-Service (SaaS) models emerged, providing organizations with more
contract, and monitoring vendor performance. flexible and cost-effective options for implementing ERP systems. Mobile technologies and
analytics capabilities also became increasingly important, enabling organizations to access real-
10. How can organizations prepare purchase order(PO)and sales order (SO) in ERP time data and insights from anywhere, at any time.
software? Today, ERP systems continue to evolve with new technologies such as artificial intelligence,
In an ERP software, organizations can prepare purchase orders (PO) and sales orders (SO) by machine learning, and blockchain being integrated to provide even greater levels of automation,
following these general steps: data analysis, and security. As businesses become more interconnected and global, ERP systems
1. Create a supplier/vendor database: The first step is to create a database of suppliers or will continue to play a critical role in helping organizations manage their operations and stay
vendors who will be used to fulfil purchase orders. This typically includes information such as competitive in the fast-paced digital economy.
contact details, delivery locations, and pricing.
2. Create an item or product database: The next step is to create a database of items or (b) Describe the significance of ERP in business organization.
products that will be used in purchase and sales orders. This typically includes information Enterprise Resource Planning (ERP) systems are significant to business organizations in several
such as description, price, and inventory levels. ways:
3. Create a purchase order: To create a purchase order, select the desired supplier/vendor 1. Streamlined processes: ERP systems integrate various business functions such as finance,
from the database and choose the items or products needed for the order. Enter relevant human resources, inventory management, procurement, and customer relationship
details such as quantity, delivery date, and payment terms, and then submit the order. management into one centralized system. This leads to streamlined processes and greater
4. Create a sales order: To create a sales order, select the customer from the database and efficiency across the organization.
choose the items or products needed for the order. Enter relevant details such as quantity, 2. Better decision-making: ERP systems provide real-time visibility into business operations,
delivery date, and payment terms, and then submit the order. enabling managers to make more informed decisions. Dashboards and reporting tools provide
5. Monitor order status: After the purchase or sales order has been created, monitor its status easy access to key performance indicators, allowing managers to identify issues and
using the ERP software. This includes tracking the order through the procurement and/or opportunities quickly.
fulfillment process, confirming delivery or receipt of goods, and processing any necessary 3. Improved collaboration: With all departments operating on the same system,
payments or invoices. communication and collaboration are improved. Employees can share data and work together
more effectively, leading to better outcomes for the organization.
 Due part: 6th semester | 69 70 | Due part: 6th semester
4. Enhanced productivity: By automating routine tasks and reducing manual processes, ERP 4. Testing and validation: After a potential solution has been identified, it is tested to ensure
systems enable employees to focus on higher value activities. This leads to increased that it resolves the issue and does not cause any unintended consequences. This may involve
productivity and a more engaged workforce. testing in a sandbox environment or using automated testing tools.
5. Competitive advantage: ERP systems can help organizations gain a competitive advantage 5. Closure and follow-up: The final phase of the support cycle involves closing out the inquiry
by improving operational efficiency, reducing costs, and enhancing customer satisfaction. and following up with the customer to ensure that they are satisfied with the resolution. This
6. Scalability: As organizations grow and expand, ERP systems can scale to meet their changing includes updating documentation, closing out tickets, and communicating the resolution to
needs. New modules can be added to the system, or customized solutions can be developed to stakeholders.
support specific business processes.
13. (a) What are the different types of business process modeling standards? Explain.
12. (a) What is SLA? Write down the main components of SLA. Business Process Modeling Standards are frameworks that provide guidelines to model business
SLA stands for Service Level Agreement. It is a contract between a service provider and its processes consistently. There are several types of business process modeling standards, including:
customer that defines the level of service to be provided, as well as the metrics and standards 1. Business Process Modeling Notation (BPMN): BPMN is a widely-used graphical modeling
used to measure performance. language for designing and documenting business processes. It provides standardized
The main components of an SLA typically include: symbols and notation to represent different types of activities, events, flows, and other
1. Service description: This section describes the services to be provided, including the scope, elements in a process.
purpose, and expected outcomes. 2. Unified Modeling Language (UML): UML is a general-purpose modeling language that can be
2. Performance metrics: This section defines the specific metrics and standards used to used to model a wide range of systems, including business processes. It includes a set of visual
measure performance, such as availability, response time, and resolution time. diagrams and symbols to represent different aspects of a system, including processes, objects,
3. Roles and responsibilities: This section outlines the roles and responsibilities of both the actors, and interactions.
service provider and the customer, including who will provide what resources, tools, and 3. Event-Driven Process Chain (EPC): EPC is a type of flowchart used to model business
support. processes. It focuses on events that trigger actions and decisions within a process, and
4. Service level targets: This section specifies the targets for each performance metric, such as includes symbols to represent events, functions, and connectors.
uptime percentage, response time targets, or number of incidents per month. 4. Business Process Execution Language (BPEL): BPEL is an XML-based language used to
5. Reporting and communication: This section defines the reporting and communication model business processes for web services. It provides a way to describe the sequence of
channels to be used by both parties, including how often reports will be generated and shared, tasks, their inputs and outputs, and the conditions under which they should be executed.
and who will have access to them. 5. Decision Model and Notation (DMN): DMN is a modeling standard focused on decision-
6. Escalation procedures: This section outlines the procedures to be followed if service levels making within a business process. It provides a way to model decision logic using a
are not met, including the steps for escalating issues and resolving disputes. standardized notation, making it easier to understand and communicate how decisions are
7. Terms and conditions: This section includes any additional terms and conditions related to made within a process.
the agreement, such as pricing, payment terms, and termination clauses.
(b) Write down the five phases of support cycle in detail.
(b)Explain the typical five phases of support cycle in details. The five phases of a support cycle are:
The typical five phases of a support cycle are: 1. Intake: The intake phase is the first stage of the support cycle, where an organization receives
1. Intake: This phase involves receiving customer requests for support, typically through a help customer requests for support. These requests can come in through various channels such as
desk or ticketing system. During the intake phase, customer inquiries are logged and emails, phone calls, or ticketing systems. During the intake phase, customer inquiries are
prioritized based on their urgency and impact on business operations. logged and prioritized based on their urgency and impact on business operations.
2. Triage: The triage phase involves reviewing customer inquiries to determine the appropriate 2. Triage: After receiving customer inquiries, the next step is to triage them. In this phase, the
level of response. Inquiries may be assigned to different teams or specialists, depending on support team reviews each inquiry to determine the appropriate level of response. Inquiries
their complexity and the expertise required. may be assigned to different teams or specialists, depending on their complexity and the
3. Investigation and resolution: Once an inquiry has been triaged, the investigation and expertise required.
resolution phase begins. This involves researching the issue, gathering information, and 3. Investigation and resolution: Once an inquiry has been triaged, the investigation and
identifying potential solutions. Depending on the nature of the inquiry, this may involve resolution phase begins. This involves researching the issue, gathering information, and
collaboration with other teams or vendors. identifying potential solutions. Depending on the nature of the inquiry, this may involve
collaboration with other teams or vendors.
 Due part: 6th semester | 71 72 | Due part: 6th semester
4. Testing and validation: After a potential solution has been identified, it is tested to ensure Receipt of cash advance from R. Welk for design of a new home
that it resolves the issue and does not cause any unintended consequences. This may involve
testing in a sandbox environment or using automated testing tools. April 20 | Cash | 1,500
5. Closure and follow-up: The final phase of the support cycle involves closing out the inquiry --- | Service Revenue | 1,500
and following up with the customer to ensure that they are satisfied with the resolution. This Receipt of cash for services completed and delivered to P.Donahue
includes updating documentation, closing out tickets, and communicating the resolution to April 30 | Salaries and Wages Expense | 2,000
stakeholders. --- | Cash | 2,000
Payment of monthly salary to secretary receptionist
14. Rosa Perez is a licensed architect. During the first month of the operation of her business, the April 30 | Accounts Payable - Halo Company | 600
following events and transactions occurred: --- | Cash | 600
April l. Invested Tk. 30000 cash. Payment to Halo Company on account
1. Hired a secretary receptionist at a salary of Tk.300 per week payable monthly.
2. Paid office rent for the month Tk.800. (b) Posting to the ledger accounts:
3. Purchased architectural supplies on account from Halo Company Tk.1500. Cash
10. Completed services and billed client Tk. 1200. Date Description Debit Credit Balance
11. Received Tk.500 cash advance from R. Welk for the design of a new home. April 1 Investment of cash in the business 30,000 0 30,000
20. Received Tk.1500 cash for services completed and delivered to P.Donahue. April 1 Payment of weekly salary to secretary receptionist 0 300 29,700
30. Paid secretary receptionist for the month Tk.2000. April 2 Payment of office rent for the month 0 800 28,900
30. Paid Tk.600 to Halo Company on account. April 11 Receipt of cash advance from R. Welk for design of 500 0 29,400
Requirements: new home
(a) Journalize the transaction. April 20 Receipt of cash for services completed and delivered 1,500 0 30,900
(b) Post to the ledger accounts. to P. Donahue
(c) Prepare a trial balance on April 30,2022. April 30 Payment of monthly salary to secretary receptionist 0 2,000 28,900
Solution: April 30 Payment to Halo Company on account 0 600 28,300
(a) Journalizing the transactions: Capital
April 1 Cash 30,000 Date Description Debit Credit Balance
--- Capital 30,000 April 1 Investment of cash in the business 30,000 0 30,000
Investment of cash in the business Salaries and Wages Expense
April 1 | Salaries and Wages Expense | 300 Date Description Debit Credit Balance
--- | Cash | 300 April 1 Payment of weekly salary to secretary receptionist 300 0 300
Payment of weekly salary to secretary receptionist
April 30 Payment of monthly salary to secretary receptionist 2,000 0 2,300
Rent Expense
April 2 | Rent Expense | 800
Date Description Debit Credit Balance
--- | Cash | 800
April 2 Payment of office rent for the month 800 0 800
Payment of office rent for the month
Architectural Supplies
Date Description Debit Credit Balance
April 3 | Architectural Supplies | 1,500
--- | Accounts Payable - Halo Company | 1,500 April 3 Purchase of architectural supplies on account from 1,500 0 1,500
Purchase of architectural supplies on account from Halo Company Halo Company

April 10 | Accounts Receivable | 1,200

--- | Service Revenue | 1,200
Completion of services and billing to client
April 11 | Cash | 500
--- | Unearned Revenue | 500
 Due part: 6th semester | 73 74 | Due part: 6th semester
Accounts Payable - Halo Company retailer might use a big bang approach to implement an ERP system across all of its stores
Date Description Debit Credit Balance simultaneously.
April 3 Purchase of architectural supplies on account 0 1,500 1,500 2. Phased Implementation - This strategy involves implementing the new ERP system in
from Halo Company stages, starting with one or a few modules and gradually adding more over time. This
April 30 Payment to Halo Company on account 600 0 900 approach is less risky than a big bang approach because any issues that arise can be addressed
Accounts Receivable before the next phase of implementation. However, it can also be slower and more expensive
Date Description Debit Credit Balance than a big bang approach. For example, a manufacturing company might use a phased
April 10 Completion of services and billing to client 1,200 0 1,200 implementation approach, starting with the financial module before moving on to production,
Unearned Revenue inventory, and shipping.
Date Description Debit Credit Balance 3. Parallel Adoption - This strategy involves running the new ERP system alongside the old
April 11 Receipt of cash advance from R. Welk for design of 0 500 500 system for a period of time to ensure that the new system is working properly before fully
new home transitioning to it. This approach can be time-consuming and expensive because it requires
Service Revenue maintaining two systems simultaneously, but it can also minimize disruption to business
operations. For example, a healthcare provider might use a parallel adoption approach to
Date Description Debit Credit Balance
ensure that patient records are correctly transferred from the old system to the new system.
April 10 Completion of services and billing to client 0 1,200 1,200
4. Modular Implementation - This strategy involves implementing the new ERP system one
April 20 Receipt of cash for services
module at a time, focusing on specific business functions rather than trying to implement the
entire system at once. This approach can be more flexible than other strategies because it
15. (a) Briefly illustrate the different types of ERP projects.
allows organizations to choose which modules to implement based on their specific needs. For
There are generally three different types of ERP projects:
example, a service-based company might use a modular implementation approach, starting
1. Greenfield Implementation - This type of project involves implementing a brand new ERP
with customer relationship management before moving on to project management and billing.
system into an organization, where there was no previous system in place. This project can be
Each strategy has its own benefits and drawbacks, so it's important for organizations to carefully
time-consuming and requires significant planning, but allows for the organization to
consider their options and choose the approach that best fits their needs and resources.
customize the system to their specific needs.
2. Upgrade or Migration - This type of project involves upgrading or migrating an existing ERP
16. (a)Differentiate between Business Process Reengineering (BPR) & Business Process
system to a newer version or entirely different system. This project is typically less complex
Improvement (BPI).
than a greenfield implementation, but still requires careful planning to ensure that data is
Difference between BPR and BPM :
migrated correctly and that users are trained on any changes to the system.
BPR BPM
3. Enhancement - This type of project involves adding new functionality to an existing ERP
Stands for Business Process Re-engineering. Stands for Business Process Management.
system, such as custom reports or new modules. This type of project is often quicker and less
Implementation is radical and one-step Implementation is evolutionary and
complex than a full implementation or upgrade, but may require specialized expertise to
change. continuous.
develop the new functionality.
Time taken for implementation is long. Time taken for implementation is short and
Each of these types of ERP projects presents its own set of challenges and requirements, so it's
smooth takeover.
important for organizations to carefully consider their needs and resources before embarking on
any ERP project. One major process at a time. It is flexible.
It’s involvement is in business and process It’s involvement has process experts and all
(b) Describe the various strategies or approaches for ERP implementation with pertinent expert. related people.
example. Risk is High. Risk is Low.
There are several strategies or approaches that organizations can use for ERP implementation. Outcome sometimes comes out to be drastic. Outcome is improved.
Here are a few examples: Cultural issues are major concern. Cultural issues are not much concern.
1. Big Bang Implementation - This strategy involves implementing the new ERP system across Implementation stress and concern is high. Implementation stress and concern is low.
the entire organization at once. This approach can be risky because if there are any problems
with the system during implementation, they may affect the entire organization. However, this
approach can also be faster and more efficient than other strategies. For example, a large
 Due part: 6th semester | 75 76 | Due part: 6th semester
(b) Explain the different phases of business process redesign by maintaining right BBA THIRD YEAR SIXTH SEMESTER EXAMINATION,2020
sequence. RESEARCH METHODOLOGY
Business process redesign is a structured approach to improving business processes in order to Subject Code: 530157
increase efficiency, reduce costs, and improve customer satisfaction. The process typically Time-3 hours
involves several phases, which should be followed in the right sequence to ensure success. Here Full marks-70
are the different phases of business process redesign: [N.B. The figures in the right margin indicate full marks. All parts (a,b,c)of a question must
1. Identify the Business Process - This phase involves identifying the business process that be answered sequentially]
needs to be improved. This could be a process that is causing delays, errors, or inefficiencies, Part A-Short Questions
or a process that is not meeting customer expectations. (Answer any six questions)
2. Define the Scope of the Project - This phase involves defining the scope of the project by Marks-5x6=30
setting clear boundaries around what will be included in the redesign effort. This may involve
defining the inputs, outputs, stakeholders, and other key parameters of the process. 1. Define research. What are the criteria of a good research? Explain.
3. Map the Current Process - This phase involves documenting the current process by mapping Research is a systematic and scientific investigation that aims to discover new knowledge, answer
out each step in detail. This may involve interviewing stakeholders, observing the process in questions or solve problems. In general, research involves the collection of data, analysis of
action, and reviewing any existing documentation or data. information and interpretation of findings. The ultimate goal of research is to contribute to the
4. Analyze the Current Process - This phase involves analyzing the current process to identify advancement of knowledge in a particular field.
areas for improvement. This may involve identifying bottlenecks, redundancies, unnecessary There are several criteria that are commonly used to evaluate the quality of a research study.
steps, and other issues that are causing problems. These include:
5. Design the New Process - This phase involves designing the new process by developing a plan 1. Validity: The extent to which a research study measures what it claims to measure. A good
for how the process will be reengineered. This may involve simplifying the process, research study should have high levels of validity to ensure that the conclusions drawn are
eliminating unnecessary steps, automating certain tasks, and introducing new tools or accurate and reliable.
technologies. 2. Reliability: The degree to which the results obtained from a research study can be replicated.
6. Implement the New Process - This phase involves implementing the new process by putting A good research study should be reliable so that other researchers can reproduce the same
the plan into action. This may involve training employees, updating documentation, results using the same methods.
configuring new systems, and testing the new process in a controlled environment. 3. Generalizability: The ability to apply the findings of a research study to other settings or
7. Monitor and Improve the New Process - This final phase involves monitoring the new populations. A good research study should be generalizable so that the findings can be applied
process to ensure that it is working as intended and making improvements as necessary. This in real-world situations.
may involve collecting data on performance metrics, soliciting feedback from stakeholders, 4. Objectivity: The absence of bias or personal opinions in the research study. A good research
and making adjustments to the process as needed. study should be objective to ensure that the findings are not influenced by the researcher's
personal biases or opinions.
5. Ethical considerations: The adherence to ethical standards in conducting research. A good
research study should consider the welfare of participants and ensure that their rights and
privacy are protected.
Overall, a good research study should be rigorous, transparent, and well-designed to ensure that
the results obtained are meaningful and useful for advancing knowledge in the respective field.

2. (a) What is research problem?

A research problem is a statement or question that identifies an issue or concern in a particular
area of study, which requires investigation and resolution through a systematic inquiry. It serves
as the foundation for a research project, guiding the selection of a research design, methodology,
data collection, analysis, and interpretation.
A research problem can arise from various sources such as gaps in existing knowledge,
unresolved controversies, inconsistencies in findings, practical issues, societal concerns, or
theoretical debates. The research problem should be clearly defined and specific, so that it is
feasible to study and can lead to meaningful findings.
 Due part: 6th semester | 77 78 | Due part: 6th semester
Identifying a research problem typically involves a review of the relevant literature, examining 4. Ordinal Variable: A type of categorical variable where the categories have a natural order or
previous studies, and evaluating the current state of knowledge in the field. This helps researchers ranking. Examples include education level (elementary, high school, college), income level
to identify gaps, limitations, inconsistencies, or uncertainties that need further investigation. (low, middle, high), and military rank.
Overall, a well-formulated research problem sets the stage for a focused, original, and significant 5. Discrete Variable: A variable that can only take on a finite number of values within a given
research study that contributes to the advancement of knowledge in the respective field. range. Examples include number of children, number of pets, and number of siblings.
Understanding the different types of variables is important for researchers as it helps them to
(b) “A problem well defined is a problem half-solved."”-Explain. properly design and analyze their studies, and to draw meaningful conclusions from their
The quote "a problem well defined is a problem half-solved" suggests that properly identifying findings.
and defining a problem is a critical step towards finding a solution. When a problem is clearly
defined, the focus shifts from trying to understand the nature of the problem to finding possible 4. Distinguish between qualitative research and quantitative research.
solutions. Difference between Qualitative and Quantitative Research
Defining a problem can help in several ways: Qualitative Research Quantitative Research
1. Identify the root cause: A well-defined problem helps to identify the underlying cause(s) of A method for developing a better understanding It is the method used to generate numerical
the problem. Once the cause is understood, it becomes easier to find a solution. of human and social sciences, in understanding data by using a lot of techniques such as
2. Focus on relevant information: Defining the problem helps to narrow down what human behaviour and personalities better logical, statistical and mathematical
information is needed to solve the problem. This saves time and resources by preventing techniques
unnecessary data collection or analysis. It employs a subjective approach It employs an objective approach
3. Develop a roadmap: A clear definition of the problem provides direction for developing a It is generally expressed using words It is expressed using graphs and numbers
systematic approach to solving the problem. It allows researchers to establish a set of criteria It has open-ended questions It has multiple choice questions
for evaluating potential solutions. Qualitative research needs only a few Quantitative research requires many
4. Enhance communication: A well-defined problem enables effective communication among respondents respondents
stakeholders. Everyone involved in the process can understand the problem and contribute The data collection methods involved are The data collection methods involved are
their ideas towards finding a solution. interviews, focus groups, literature review, experiments, surveys, and observations
ethnography expressed in numbers
Qualitative research is holistic in nature Quantitative Research is particularistic in
3. What is variable? Discuss the different types of variables. nature
In research, a variable is any characteristic or attribute that can take on different values or levels. The reasoning used to synthesise data in this The reasoning used to synthesise data in
Variables are used to measure and describe a phenomenon or to test hypotheses about research is inductive this research is deductive
relationships between variables.
This method involves a process-oriented inquiry This method does not involve a process-
There are two main types of variables:
oriented inquiry
1. Independent Variable: This is the variable that is manipulated or changed by the researcher
It develops the initial understanding of data It recommends a final course of action
in order to observe its effect on another variable (the dependent variable). For example, if a
The data taken in the Qualitative research The data taken in this method is pretty
researcher wanted to study the effect of caffeine on memory, caffeine would be the
method is pretty verbal measurable
independent variable.
The objective of this research method is to The main objective of Quantitative research
2. Dependent Variable: This is the variable that is affected by the independent variable. It is
engage and discover various ideas is to examine the cause and effect between
often the outcome or result that the researcher is interested in measuring. In the example
the variables
above, memory would be the dependent variable.
It is one of the exploratory research methods It is a conclusive research method
In addition to these two main types of variables, there are other types of variables that are
important in research. These include:
1. Continuous Variable: A variable that has an infinite number of possible values within a given
range. Examples include height, weight, and time.
2. Categorical Variable: A variable that can be divided into categories or groups based on some
characteristic or attribute. Examples include gender, race, and hair color.
3. Nominal Variable: A type of categorical variable where the categories have no natural order
or ranking. Examples include religion, marital status, and political affiliation.
 Due part: 6th semester | 79 80 | Due part: 6th semester
5. Define literature review. Discuss the functions of literature review. 5. Appropriate response options: Response options should be appropriate to the question
A literature review is a critical analysis and evaluation of existing research studies, articles, books, being asked. For example, for a yes/no question, the options should be "yes" and "no". For
and other sources on a particular topic. It involves searching, reading, and synthesizing multiple-choice questions, all possible answers should be included as options.
information from various sources to identify gaps in the current knowledge and to provide a 6. Testing and piloting: Before distributing the questionnaire, it should be tested and piloted to
comprehensive understanding of the topic under investigation. The functions of a literature ensure that the questions are effective and that the respondents understand them properly.
review include: 7. Ethical considerations: When preparing a questionnaire, ethical considerations must be
1. Establishing the context: A literature review helps to establish the context for the research taken into account. This includes ensuring that the confidentiality and anonymity of
by providing an overview of the existing knowledge on the topic. This allows the researcher to respondents are maintained, and obtaining informed consent before collecting data.
understand the current state of research and to identify the gaps that need to be addressed.
2. Identifying research questions or hypotheses: By reviewing the literature, researchers can 7. Discuss the different approaches of research.
identify potential research questions or hypotheses that have not been adequately addressed There are several different approaches to research, each with its own strengths and weaknesses.
in the existing literature. Some of the main approaches are:
3. Identifying appropriate research methods: A literature review can help to identify 1. Quantitative Research: This approach involves collecting numerical data through structured
appropriate research methods and techniques that have been used in previous studies on the methods such as surveys, experiments, or statistical analyses. The goal is to identify patterns,
topic. trends, and relationships between variables using statistical analysis. Advantages of
4. Synthesizing findings: Literature reviews involve analyzing and synthesizing data from quantitative research include the ability to generalize findings to a larger population and to
multiple sources to identify trends, patterns, and inconsistencies in the research findings. test hypotheses using objective measures. However, this approach may not capture the
5. Evaluating the quality of research: Literature reviews allow researchers to critically complexity and richness of human experiences and behaviors.
evaluate the quality of the research that has been done on the topic. This can help to identify 2. Qualitative Research: This approach involves collecting non-numerical data through
weaknesses and limitations in the existing research, as well as areas where further research is methods such as interviews, observation, or case studies. The goal is to understand the
needed. meaning and context of social phenomena from the perspective of the individuals involved.
6. Informing practice: Literature reviews can inform professional practice by identifying best Advantages of qualitative research include the ability to explore complex and subjective
practices and evidence-based interventions that have been successful in previous research experiences, generate new theories or hypotheses, and understand social processes in depth.
studies. However, this approach may not produce generalizable findings and may be influenced by the
researcher's bias or subjectivity.
6. What is questionnaire? Write down the main characteristics of a questionnaire 3. Mixed Methods Research: This approach combines both quantitative and qualitative
preparation. methods to address research questions from multiple angles. The goal is to triangulate
A questionnaire is a research tool that consists of a set of questions designed to elicit information findings from different sources and to provide a more comprehensive understanding of the
from respondents. It is a common method used in surveys and other forms of research to collect phenomenon under investigation. Advantages of mixed methods research include the ability
data from a large number of individuals. to overcome the limitations of each approach and to provide a more holistic view of the
The main characteristics of a well-prepared questionnaire include: research topic. However, this approach can be time-consuming and resource-intensive.
1. Clear and concise language: The questions should be written in clear and concise language 4. Action Research: This approach focuses on addressing practical problems and improving
that is easy to understand for the respondent. Avoid using technical or jargon-heavy language organizational or community practices through collaboration between researchers and
that may be confusing. practitioners. The goal is to promote change and improvement in real-world settings.
2. Relevant and specific questions: Each question should be relevant to the research objectives Advantages of action research include the ability to create knowledge that is directly
and provide specific information. Open-ended questions can be used to allow respondents to applicable to practice, to involve stakeholders in the research process, and to promote
elaborate on their answers, but closed-ended questions are more appropriate when seeking empowerment and social justice. However, this approach may face challenges in terms of
specific information. balancing the priorities of different stakeholders and ensuring the rigor of the research
3. Logical order: The questions should be arranged in a logical order that makes sense to the process.
respondent. Start with general questions and move towards more specific ones.
4. Unbiased questions: The questions should be unbiased and free from any influence that
might affect the responses. Avoid leading or loaded questions that suggest a particular answer.
 Due part: 6th semester | 81 82 | Due part: 6th semester
8. Distinguish between primary data and secondary data. 7. Data analysis: The data collected from FGDs is analyzed using qualitative data analysis
Primary Data Secondary Data techniques such as coding, categorization and theme identification.
Definition
Primary data are those that are collected for the Secondary data refer to those data that have 10. (a) What are the reasons to use referencing?
first time. already been collected by some other person. Referencing is an important part of academic writing, and it serves several purposes. Some of the
Originality key reasons to use referencing include:
These are original because these are collected These are not original because someone else 1. Giving credit: Referencing allows you to give credit to the original author or source of the
by the investigator for the first time. has collected these for his own purpose. information you have used in your work, whether it is a direct quote or paraphrase. This is
Nature of Data important to acknowledge the intellectual property of others and to avoid plagiarism.
These are in the form of raw materials. These are in the finished form. 2. Demonstrating credibility: Referencing shows that you have researched your topic
Reliability and Suitability thoroughly and have used credible and reliable sources to support your arguments. This
These are more reliable and suitable for the These are less reliable and less suitable as enhances the credibility and validity of your work.
enquiry because these are collected for a someone else has collected the data which may 3. Allowing verification: Referencing enables readers to verify the information you have used
particular purpose. not perfectly match our purpose. and to locate the original sources if they want to read them. This adds transparency to your
Time and Money work and helps readers to evaluate the validity and reliability of your arguments.
4. Providing context: Referencing also provides context for your work by situating it within a
Collecting primary data is quite expensive both Secondary data requires less time and money;
wider body of literature on the topic. This demonstrates your knowledge of the previous
in the terms of time and money. hence it is economical.
research in the field and how your work contributes to it.
Precaution and Editing
5. Meeting requirements: Referencing is often a requirement for academic assignments, such
No particular precaution or editing is required Both precaution and editing are essential as
as essays, research papers, and dissertations. It is important to follow the specific referencing
while using the primary data as these were secondary data were collected by someone else
style required by your institution or instructor to ensure consistency and accuracy in your
collected with a definite purpose. for his own purpose.
citations.
9. What is Focus Group Discussion (FGD)? What are the characteristics of a Focus Group
(b) Difference between reference and bibliography.
Discussion (FGD)?
BASIS FOR REFERENCE BIBLIOGRAPHY
A Focus Group Discussion (FGD) is a qualitative research technique that involves the use of a
COMPARISON
small group of individuals to discuss a particular topic or issue. FGDs are commonly used in
Meaning Reference implies the list of Bibliography is about listing out all the
marketing research, social science research, and product development to gather insights about
sources, that has been referred materials which has been consulted
consumers' attitudes, perceptions, and behavior.
in the research work. during the research work.
The characteristics of a typical FGD include:
Based on Primary Sources Both Primary and Secondary Sources
1. Small group size: FGDs are typically conducted with a small group of 6-10 participants, which
Arrangement Alphabetically and numerically Numerically
allows for more in-depth discussion and interaction among participants.
2. Moderator-led discussion: The discussion is led by a trained moderator who asks open- Includes Only in-text citations, that have Both in-text citations and other sources,
ended questions and encourages participants to share their opinions and experiences related been used in the assignment or that are used to generate the idea.
to the topic being discussed. project.
3. Structured topic guide: The discussion is guided by a structured topic guide that outlines the Supporting A reference can be used to A bibliography cannot be used to
main topics and questions to be covered during the session. argument support an argument. support an argument.
4. Audio or video recording: FGDs are usually audio or video recorded so that the moderator Used for Thesis and Dissertation Journal Papers and Research work
can review the discussion and analyze the data later on.
5. Non-judgmental environment: Participants are encouraged to express their opinions freely
without fear of judgment or criticism from others.
6. Homogeneous groups: Participants are often selected based on specific criteria such as age,
gender, or occupation to ensure homogeneity within the group and to encourage a more
comfortable and open discussion.
 Due part: 6th semester | 83 84 | Due part: 6th semester
Part B Broad Questions comprehensive picture of a particular phenomenon, such as a market segment or customer
(Answer any four questions) behavior. Descriptive research is often quantitative in nature, with data collected through
Marks-10x4=40 surveys or other standardized instruments. It is usually more structured than exploratory
11. (a) Define research process. Discuss the steps of research process. research and may involve a larger sample size.
The research process is a systematic approach to investigating a particular topic or question in 3. Causal Research: Causal research is used to determine whether there is a cause-and-effect
order to gather new knowledge or insights. It involves a series of steps that are designed to help relationship between two variables. The main goal of causal research is to test hypotheses and
researchers organize and carry out their investigations in a methodical way. The steps of the determine whether one variable (the independent variable) causes changes in another
research process typically include: variable (the dependent variable). Causal research is often quantitative in nature, with data
1. Identify the Research Question: The first step in any research process is to identify a clear collected through experiments or quasi-experiments. It is the most structured type of research
and specific research question or problem. This will help guide the rest of the research and requires a well-defined research design to isolate the effects of the independent variable
process and ensure that the study stays focused and relevant. on the dependent variable.
2. Conduct a Literature Review: Before starting the research, it is important to review the
existing literature on the topic. This can help researchers understand what is already known 12. (a) Differentiate between measurement and scaling.
about the topic, identify gaps in the current knowledge, and refine their research question. Measurement and scaling are two related but distinct concepts in research methodology. Here are
3. Develop a Hypothesis: Based on the research question and literature review, researchers the key differences between measurement and scaling:
develop a hypothesis or set of hypotheses that they will test through their research. 1. Measurement: Measurement refers to the process of assigning numerical values to
4. Design the Study: Once the research question and hypothesis have been identified, observations or variables in order to quantify them. This can involve measuring physical
researchers must design a study that will allow them to test their hypothesis. This includes characteristics (such as weight or height) or abstract concepts (such as attitudes or beliefs).
selecting an appropriate sample population, choosing the appropriate data collection Measurement typically involves using a measuring instrument, such as a ruler or survey
methods, and developing a plan for analyzing the data. questionnaire, that provides standardized units of measurement.
5. Collect Data: With the study design in place, researchers can begin collecting data from their 2. Scaling: Scaling, on the other hand, involves placing observations or variables on a continuum
selected sample population. This may involve conducting surveys, interviews, experiments, or or scale in order to compare them. Scaling is often used to measure subjective concepts, such
other data collection methods. as opinions or preferences, that cannot be directly measured with a physical instrument.
6. Analyze Data: After collecting the data, researchers must analyze it to test their hypothesis There are several types of scaling methods, including nominal scaling (where variables are
and answer their research question. This may involve statistical analysis, qualitative analysis, categorized into discrete categories), ordinal scaling (where variables are ranked in order),
or a combination of both. interval scaling (where variables have equal intervals between each point on the scale), and
7. Draw Conclusions: Based on the results of the data analysis, researchers can draw ratio scaling (where variables have a true zero point).
conclusions about their hypothesis and research question. They may also identify new
questions or areas for future research. (b) Briefly describe the four primary scales of measurement with suitable example.
8. Communicate Findings: Finally, researchers must communicate their findings to their The four primary scales of measurement are nominal, ordinal, interval, and ratio. Each scale is
intended audience. This may involve writing a research report or paper, making a associated with different properties and assumptions that affect the types of statistical analyses
presentation at a conference, or publishing their findings in a scholarly journal. that can be used with the data. Here is a brief description of each of these scales of measurement
along with an example:
(b) Compare and contrast among exploratory, descriptive and causal research. Exploratory, 1. Nominal Scale: The nominal scale is the simplest level of measurement and involves
descriptive, and causal research are all types of research methods that can be used to investigate categorizing data into discrete categories or groups. Nominal data have no inherent order or
different aspects of a research question or problem. Here are some key differences between these hierarchy. Examples of nominal variables include gender (male/female), race
three types of research: (white/black/Asian/Hispanic), and type of car (sedan/SUV/coupe).
1. Exploratory Research: This type of research is typically conducted when a researcher is 2. Ordinal Scale: The ordinal scale involves assigning data to categories that have a natural
looking to gain a better understanding of a topic or problem. The main goal of exploratory order or hierarchy. This scale allows us to compare variables in terms of their relative position
research is to generate hypotheses and ideas that can be further investigated in future but does not provide information about the magnitude of differences between variables.
research. Exploratory research is often qualitative in nature, with data collected through Examples of ordinal variables include educational level (elementary/middle/high
interviews, focus groups, or observations. It is typically less structured than other types of school/college), rank in a competition (first/second/third place), and satisfaction level (very
research and may involve a smaller sample size. satisfied/somewhat satisfied/not satisfied).
2. Descriptive Research: Descriptive research is used to describe the characteristics, behaviors, 3. Interval Scale: The interval scale involves assigning data to categories that have a natural
or attitudes of a specific population. The goal of descriptive research is to provide a order and a fixed unit of measurement. This scale allows us to compare variables in terms of
 Due part: 6th semester | 85 86 | Due part: 6th semester
their position and the magnitude of differences between them, but it does not have a true zero  Sampling: Sampling is the process of selecting a representative subset of the population for
point. Examples of interval variables include temperature (measured in degrees Celsius or study. Different sampling techniques can be used depending on the research question and
Fahrenheit) and time (measured in minutes or seconds). available resources. These techniques include random sampling, stratified sampling, cluster
4. Ratio Scale: The ratio scale is the highest level of measurement and includes all the properties sampling, convenience sampling, and purposive sampling. The goal of sampling is to ensure
of the other three scales. It has a natural order, a fixed unit of measurement, and a true zero that the sample accurately represents the population, so that results can be generalized to the
point (indicating the absence of the variable being measured). This scale allows us to compare entire population.
variables in terms of their position, the magnitude of differences between them, and the
proportionality of those differences. Examples of ratio variables include height (measured in (b) Discuss the different types of probability sampling techniques.
centimeters or inches), weight (measured in kilograms or pounds), and income (measured in Probability sampling techniques are a set of statistical methods used to randomly select a
dollars). representative sample from a population. The following are the different types of probability
sampling techniques:
(c) Discuss the possible sources of measurement error.  Simple Random Sampling: This technique involves selecting individuals from the population
Measurement error can arise from a variety of sources, including:  at random, giving each individual an equal chance of selection.
1. Instrumentation: The instruments used to measure a particular variable may be faulty or  Stratified Random Sampling: This technique involves dividing the population into strata or
imprecise, leading to errors in the measurements. subgroups based on predefined criteria and then selecting random samples from each stratum
2. Observer bias: Sometimes, observers may have preconceived notions or expectations that  in proportion to its size.
influence their interpretation of the measurements.  Systematic Sampling: This technique involves selecting every kth element from the
3. Human error: Data collection mistakes can occur if the data collector makes an error when  population after a random start is selected.
recording or entering the data.  Cluster Sampling: This technique involves dividing the population into clusters or groups
4. Sampling error: Samples may not be representative of the population being studied, leading to based on geographic location or other characteristics, and then randomly selecting entire
errors in generalizing the results.  clusters for inclusion in the sample.
5. Environmental factors: Factors such as temperature, humidity, or lighting can affect the  Multi-Stage Sampling: This technique involves selecting samples from different stages in a
accuracy of measurements. hierarchical manner. For example, one could first randomly select cities, then neighborhoods
6. Time-related changes: Changes over time can also impact the accuracy of measurements, within those cities, and finally households within those neighborhoods.
particularly if the measurements are taken over long periods.
7. Response bias: Respondents may answer questions in a way they believe to be socially 14. (a)What is correlation? Cite some examples of positive and negative correlation.
desirable or expected, rather than their true beliefs. Correlation is a statistical measure that describes the degree of relationship between two
It's important to consider these sources of measurement error when designing research studies variables. It indicates how strong the linear association between two variables is, and the
and interpreting the results. By minimizing sources of error, researchers can improve the validity direction of the association.
and reliability of their findings. The correlation coefficient, denoted by "r", can range from -1 to +1. A value of -1 indicates a
perfect negative correlation, a value of +1 indicates a perfect positive correlation, and a value of 0
13. (a) Define census, population, sample and sampling. indicates no correlation.
 Census: A census is a complete enumeration of a population or a specific group or area. In a Examples of positive correlation:
census, data is collected from every individual or unit in the population of interest. For  Height and weight: Taller people tend to weigh more than shorter people.
 example, a national census collects data on every person living in a country.  Education level and income: People with higher levels of education tend to have higher
 Population: A population is the entire group of individuals, objects, or events that we want to incomes.
study and draw conclusions about. It refers to all the elements that meet a certain set of  Hours of study and exam scores: Students who study more tend to get higher scores on
criteria for inclusion in the study. For example, the population of a study could be all adults exams. Examples of negative correlation:
living in a particular city.  Amount of exercise and body fat: As the amount of exercise increases, body fat tends to
 Sample: A sample is a subset of the population selected for analysis or research. It is a smaller decrease.
group of individuals or units that are chosen from the population and studied to make  Age and reaction time: As people get older, their reaction times tend to slow down.
inferences about the larger population. The sample should be representative of the population  Temperature and heating bill: As temperatures rise, heating bills tend to decrease.
so that the findings can be generalized. For example, a researcher might choose a sample of
500 adults randomly selected from the population of a city.
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(b) The following data give the ages and blood pressure of 10 women: 7 15. (a) What is hypothesis? Mention the characteristics of a hypothesis.
Age(x) 56 42 36 47 49 42 60 72 63 55 A hypothesis is a proposed explanation or prediction for a phenomenon that can be tested
Blood through scientific investigation. It is a tentative statement that is based on limited evidence and is
Pressure(y) 147 125 118 128 145 140 155 160 149 150 subject to further testing and refinement.
The characteristics of a hypothesis include:
(i) Find the correlation coefficient between x and y.  Testability: A hypothesis must be testable through observation or experimentation. It should
(ii) Determine the least square regression equation of y on x.  be possible to collect data that can either support or refute the hypothesis.
(iii) Estimate the blood pressure of a woman whose age is 45 years.  Falsifiability: A hypothesis must be falsifiable, meaning that there must be a way to disprove
Solution: it if it is not true. It should be possible to design experiments or observations that could
To find the correlation coefficient between x (age) and y (blood pressure), we need to calculate potentially demonstrate that the hypothesis is false.
the mean, standard deviation, and covariance of the two variables:  Clarity: A hypothesis should be clear and unambiguous, so that it is easily understood by
x: 56 42 36 47 49 42 60 72 63 55  others and can be tested reliably.
y: 147 125 118 128 145 140 155 160 149 150  Specificity: A hypothesis should be specific in its predictions, so that it can be tested with
Mean o )= = 52.2 precision. It should make clear, specific predictions about what should be observed if the

Mean o )= = 139.7  hypothesis is true.

 Relevance: A hypothesis should be relevant to the phenomenon being studied, and it should
 be supported by existing evidence or theory.
Standard deviation of x (s_x) = sqrt(( = 11.22  Parsimony: A hypothesis should be as simple as possible, while still accounting for the
available evidence. A more complex hypothesis should only be proposed if it is necessary to
Standard deviation of y (s_y) = sqrt(( ) = 13.22 explain observations that cannot be explained by simpler hypotheses.
Covariance of x and y (s_xy) = ( ) Overall, a hypothesis is a tentative explanation that guides scientific investigation and must meet
certain criteria to be useful in guiding scientific research.
= 153.4
Using the formula for correlation coefficient:
(b) Discuss the process of hypothesis testing.
r=
Hypothesis testing is a statistical method for determining the validity of a hypothesis or claim
r= = 0.833 (rounded to three decimal places) about a population based on sample data. The process of hypothesis testing typically involves the
following steps:
Therefore, the correlation coefficient between age and blood pressure is 0.833, indicating a strong
1. State the null and alternative hypotheses: The null hypothesis (H0) is the statement that
positive correlation.
the researcher wants to test, and the alternative hypothesis (Ha) is the statement that the
To determine the least square regression equation of y on x, we need to calculate the slope and
researcher is trying to prove. The null hypothesis usually represents the status quo or
intercept of the regression line:
conventional wisdom, while the alternative hypothesis represents a new or alternative
Slope (b) = = = 1.24 (rounded to two decimal places)
explanation.
2. Determine the level of significance: The level of significance (alpha) is the probability of
Intercept a - b = 139.7 - 1.2452.2 = 75.56 (rounded to two decimal places) rejecting the null hypothesis when it is actually true. Typically, alpha is set to 0.05, which
means that there is a 5% chance of rejecting the null hypothesis even when it is true.
The least square regression equation of y on x is: 3. Choose an appropriate test statistic: The choice of test statistic depends on the type of data
y = 1.24x + 75.56 and the hypothesis being tested. Common test statistics include t-tests, z-tests, and chi-square
tests.
To estimate the blood pressure of a woman whose age is 45 years, we can substitute x = 45 into 4. Collect sample data: The sample data must be collected in a way that is random and
the regression equation: representative of the population being studied. The sample size must also be sufficient to
y = 1.24 45 + 75.56 = 132.96 (rounded to two decimal places) provide a reliable estimate of the population parameter.
5. Calculate the test statistic and p-value: The test statistic is calculated using the sample data
Therefore, we estimate that the blood pressure of a woman whose age is 45 years is and the chosen test statistic. The p-value is the probability of obtaining a test statistic as
approximately 132.96. extreme as the observed value, assuming the null hypothesis is true.
 Due part: 6th semester | 89 90 | Due part: 6th semester
6. Make a decision: If the p-value is less than alpha, then the null hypothesis is rejected in favor
of the alternative hypothesis. If the p-value is greater than alpha, then the null hypothesis
cannot be rejected.
7. Draw conclusions: The results of the hypothesis test should be interpreted in the context of
the research question and the study design. If the null hypothesis is rejected, then the
alternative hypothesis is supported. If the null hypothesis cannot be rejected, then the study
does not provide enough evidence to support the alternative hypothesis.