Q: Which formula correctly calculates the contribution margin percentage?

$\text{Contribution margin} = \frac{\text{Contribution}}{\text{Sales}} \times 100$

Question 1

According to the Ansoff Matrix, which strategy involves selling existing products in new markets, and what is a key advantage of this approach?

Accepted Answer

Market development; it enables the ability to sell in international markets

Question 2

A business is considering launching a new product to its existing customer base. According to the Ansoff Matrix, which strategy is this and what is a potential risk?

Accepted Answer

Product development; might lose out on available customer base

Question 3

Which of the following is a disadvantage of the SWOT analysis?

Accepted Answer

It does not provide solutions or alternatives

Question 4

In Portfolio Analysis, which product type is characterized by high market share and low market growth, and what is its typical financial implication?

Accepted Answer

Cash cows; has a good return on investment and generates a lot of cash

Question 5

A company wants to achieve cost leadership. Which of the following is NOT an advantage of cost leadership?

Accepted Answer

High cost of research and development

Question 6

Which of the following best describes the bargaining power of buyers in Porter’s 5 Forces framework?

Accepted Answer

How much power customers hold to influence the price of the finished product

Question 7

A business is considering a project with the following cash flows: Initial investment $100,000, Year 1: $40,000, Year 2: $40,000, Year 3: $40,000. What is the payback period?

Accepted Answer

$2.5$ years

Question 8

Which formula correctly calculates the contribution margin percentage?

Accepted Answer

$	ext{Contribution margin} = \frac{	ext{Contribution}}{	ext{Sales}} 	imes 100$

Question 9

Which of the following is a disadvantage of organic growth?

Accepted Answer

Slow growth

Question 10

A business is evaluating two projects using Net Present Value (NPV). Project A has a higher NPV but requires a higher initial investment. What is a key advantage of using NPV for decision-making?

Accepted Answer

It takes into account the time value of money

Question 11

Which of the following is an internal economy of scale?

Accepted Answer

Technical

Question 12

A company is considering vertical integration. What is a key advantage of this strategy?

Accepted Answer

Greater control over supplies

Question 13

Which of the following is a disadvantage of differentiation as a business strategy?

Accepted Answer

High cost of research and development

Question 14

A business is using the payback period method for investment appraisal. Which of the following is a limitation of this method?

Accepted Answer

Ignores cash flow after payback is reached

Question 15

Which of the following is a key factor in the PESTLE analysis that relates to changes in law and legislation?

Accepted Answer

Legal factors

Question 16

A company is experiencing high labour turnover. Which of the following is NOT a disadvantage of high labour turnover?

Accepted Answer

Lower labour turnover

Question 17

Which formula is used to calculate the breakeven point in units?

Accepted Answer

$	ext{Breakeven (units)} = \frac{	ext{Fixed costs}}{	ext{Contribution per unit}}$

Question 18

Which of the following is a limitation of critical path analysis?

Accepted Answer

Resources may be inflexible

Question 19

A business is considering conglomerate integration. What is a potential disadvantage of this strategy?

Accepted Answer

Culture clashes

Business Strategy and Organizational Analysis: Key Models and Concepts

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