Jawaharlal Nehru Technological University Hyderabad
Jawaharlal Nehru Technological University Hyderabad B.Tech III Year MANAGERIAL ECONOMICS AND FINANCIAL ANALYSIS Previous Question Paper (February - 2022 - R13)
Answer any Five Questions. All Questions Carry Equal Marks.
Main
Explain why managerial economics is important for decision making with a real life example.
Answer
Managerial economics bridges the gap between abstract economic theory and practical business decision-making. It provides a logical framework for analyzing problems related to resource allocation, pricing, production, and investment. By applying tools such as demand forecasting, cost analysis, and break-even analysis, managers can minimize uncertainty and optimize the use of scarce resources to achieve organizational goals.
For example, consider a smartphone manufacturer deciding on the production volume for a new model. The manager uses demand forecasting based on historical data and market trends to estimate potential sales. Simultaneously, they perform cost-volume-profit analysis to determine the price point that covers production costs while remaining competitive. This economic analysis allows the firm to avoid overproduction (which ties up capital in inventory) or underproduction (which leads to lost market share), directly impacting the firm's profitability.
What is Demand? Differentiate between demand for a durable and perishable product.
Answer
Demand refers to the quantity of a good or service that consumers are willing and able to purchase at various price levels during a specific period, given their income and preferences. It is not merely a desire, but a desire backed by purchasing power.
| Feature | Durable Products | Perishable Products |
|---|---|---|
| Longevity | Used repeatedly over an extended period (e.g., cars, furniture). | Consumed quickly or expire within a short timeframe (e.g., milk, vegetables). |
| Purchase Frequency | Infrequent, high-involvement purchases. | Frequent, routine purchases. |
| Demand Drivers | Highly sensitive to interest rates, income levels, and replacement cycles. | Driven primarily by price, immediate necessity, and shelf life. |
| Inventory | Can be stored for long periods; demand is subject to stock-outs or surplus. | Cannot be stored; demand must be met immediately to avoid wastage. |
Enlist determinants of demand and discuss the methods of demand forecasting.
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Examine the role of managerial economics in decision making and brief on scope of managerial economics.
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What do you understand by internal and external economies of scale for a large firm?
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Elucidate on any five cost concepts.
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Explain the Law of Increasing Returns with a suitable diagram.
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A firm has a fixed cost of Rs.500000/-, selling price per unit is Rs.500/- and variable cost per unit is Rs.250/- present level of production is 40000 units. Calculate BEP in terms of volume and sales value.
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Explain price output determination under Perfect Competition, monopoly.
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State the features Partnership form of business organization.
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What are the objectives of pricing strategy and what is price discrimination? Is it a beneficial process to society?
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Define a joint stock company, public enterprises and brief on the types of public enterprises.
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Explain the term Working Capital. What are the sources used for financing temporary requirement of working capital?
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Explain NPV method. Why is the NPV method considered a better capital budgeting method than payback and ARR methods?
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Following are the balances extracted from the books of XYZ on 31st March, 2018:
| Particulars | Amount | Particulars | Amount |
| Capital | 1,90,000 | Cash at Bank | 26,000 |
| Drawing | 7,000 | Salaries | 8,000 |
| Plant and Machinery | 1,20,000 | Repairs | 1,900 |
| Delivery Vehicle | 26,000 | Stock on 1st April, 2017 | 16,000 |
| Sundry Debtors | 36,000 | Rent | 4,500 |
| Sundry Creditors | 26,000 | Manufacturing Expenses | 1,500 |
| Purchases | 20,000 | Bills Payable | 23,500 |
| Sales | 42,000 | Bad Debts | 5,000 |
| Wages | 8,000 | Carriage | 1,600 |
Prepare Trading and Profit and Loss Account and Balance Sheet as at 31st March, 2018 after following adjustments are made:
- a) Closing Stock was 16,000.
- b) Depreciate Plant and Machinery @ 10% and Delivery Vehicle @ 15%.
- c) Unpaid Rent amounted to 500.
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