at the end of each question or part question.
You are advised to spend no longer than 2 hours on Section A.
The business described in this paper is entirely fictitious.
You are reminded of the need for good English and clear presentation in your answers.
Calculators may be used.
Section A [70 Marks]
Answer all questions.
1 a) The free market enterprise is one of the three basic economic systems. State the other two. 
b) Which economic structure best describes the economy of your country?
Support your answer. 
2 a) Using examples, distinguish between vertical and lateral integration. 
b) Justify the need for growth of firms in your country. 
3 The following data shows shows incomes of nine employees in a food outlet.
Monthly Income in ‘000 dollars
120, 128, 122, 120, 135,
126, 128, 120, 130.
a) Calculate the arithmetic mean. 
b) Determine the value of the mode and the value of the median 
4 “Workers are solely motivated by financial rewards.” Assess this statement. 
5 a) What do you understand by the term gearing? 
b) Comment on how debtors can be managed by a firm. 
6 a) Identify and explain any two communication problems that lie with the receiver. 
b) Comment on the ways management can use to overcome these problems. 
7 a) Explain the meaning of market segmentation. 
b) Why may a business wish to segment to markets for the products? 
8 a) How do fixed costs differ from variable costs? 
b) Comment on the limitations of contribution costing. 
9 a) What you understand by worker productivity? 
b) How can management raise the productivity of its workforce? 
10 a) Distinguish between short-term and long-term sources of finance for a business 
b) Explain any two factors considered when selecting the appropriate source of finance. 
11 a) What is meant by the term quota? 
b) Why may the government of your country be worried about increased import expenditure? 
12 Evaluate the usefulness of price elasticity of demand when making pricing decisions. 
Section B [30 Marks]
Read the following case study and answer all the questions that follow.
Tumbare Clothing Limited
Tumbare Clothing Limited was established in 1995. It is a small enterprise employing six tailors, with a fixed capital outlay of fifteen million six hundred thousand Zimbabwean dollars. Profits generated per annum range from 20% to 28% of the fixed capital base.
The clothing firm falls in an industry characterized by many large firms and a large number of small firms in the competitive fringe. The firms produce a wide range of cloth products ranging from school uniforms,casual wear, sportswear, towels and bed linen. Products in this industry are differentiated and there is prevalence of non-price competition. Tumbare Clothing Limited is placed on the competitive edge.
Gweme Isaac, the Managing Director of Tumbare Clothing Limited, conducted research financed from meager profits generated by the firm. The findings of the research led to recommendations to improve the operation efficiency and competitiveness of the business. These include:
a) A move from specialization and division of labor towards vertical work-loading.
b) the need to purchase more capital equipment and reduce the number of works per machine, and
c) targeting the needs of school children in formal schools rather than producing clothes of all age-groups.
The magement of Tumbare Clothing Limited is not sure on whether or not to implement the recommendations.
13 a) Using information in the case study, explain three different criteria used to measure the size of the firm. 
a) What additional information would your require to determine with confidence whether the firm is small or big? 
14 Advise the management of Tumbare Clothing Limited on the benefits and limitations of vertical work-loading.
15 Is targeting schools necessarily a good option for Tumbare Clothing Limited to gain competitiveness in the clothing industry? 
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