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Basque PAU Business Model Design study materials
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Basque PAU Business Model Design practice questions

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Question 1Strategy, entrepreneurship and business models

Which fundamental principle governs voting rights and decision-making in a Worker Cooperative (Sociedad Cooperativa)?

  1. Proportional voting based strictly on the percentage of share capital owned.
  2. Weighted voting based on the total annual salary earned by each worker.
  3. Exclusive voting power assigned to the external board of directors.
  4. Democratic management based on 'one member, one vote', regardless of capital contributed. Correct answer.

Explanation

Sociedades Cooperativas operate under social economy principles where democratic control is paramount. Each cooperative member has one vote in the General Assembly ('un persona, un voto'), independent of their financial capital contribution.

Question 2Strategy, entrepreneurship and business models

What key ownership condition must be satisfied for a company to be officially registered as a Sociedad Laboral in Spain?

  1. At least 50% of share capital must be owned by permanent employees who work directly for the firm. Correct answer.
  2. 100% of share capital must be held by state or local municipal entities.
  3. No single non-worker partner may hold more than 10% of total share capital under any circumstance.
  4. All employees must hold equal equity stakes and receive identical compensation.

Explanation

A Sociedad Laboral (S.A.L. or S.L.L.) is a worker-owned company where at least 50% plus one share (the majority of capital) is held by permanent workers who provide direct personal labor services.

Question 3Strategy, entrepreneurship and business models

In a PESTEL macroenvironment analysis, under which category are national inflation rates, central bank interest rates, and GDP growth classified?

  1. Technological factors.
  2. Economic factors. Correct answer.
  3. Sociocultural factors.
  4. Political factors.

Explanation

Macroeconomic variables such as GDP expansion, inflation trends, interest rates, currency exchange rates, and unemployment rates directly constitute the Economic environment dimension of PESTEL.

Question 4Strategy, entrepreneurship and business models

In Porter's Five Forces framework, when switching costs for buyers are zero and alternative products offer superior price-performance ratios, which competitive force is highest?

  1. Bargaining power of suppliers.
  2. Bargaining power of buyers in monopoly markets.
  3. Threat of new entrants due to high economies of scale.
  4. Threat of substitute products or services. Correct answer.

Explanation

The threat of substitutes rises significantly when alternative products perform similar functions, buyer switching costs are negligible, and substitute items deliver a superior price-to-performance trade-off.

Question 5Strategy, entrepreneurship and business models

Which condition increases the bargaining power of suppliers within an industry according to Michael Porter?

  1. High concentration of suppliers relative to buyers and unavailability of substitute raw materials. Correct answer.
  2. Presence of numerous competing suppliers offering standardized commodity inputs.
  3. Low switching costs for buyers when changing component vendors.
  4. Credible threat of buyers integrating backward into the supplier's industry.

Explanation

Suppliers hold strong bargaining power when the supply sector is concentrated among a few key producers, inputs are highly differentiated or specialized, substitutes are unavailable, and buyers face high switching costs.

Question 6Strategy, entrepreneurship and business models

In a mature industry with high fixed costs, low product differentiation, and slow market growth rate, how is industry rivalry characterized?

  1. Dominance of supplier bargaining power over retail distributors.
  2. Intense competitive rivalry with frequent price wars and margin compression. Correct answer.
  3. Total elimination of new entrant threats due to statutory price floors.
  4. Low competitive rivalry with high industry profit margins across all incumbents.

Explanation

Slow growth forces competitors to steal market share to grow, while high fixed costs compel firms to maximize output. Combined with low differentiation, firms resort to aggressive price cutting, resulting in intense industry rivalry.

Question 7Strategy, entrepreneurship and business models

When conducting a SWOT (DAFO) analysis, how are internal organization factors distinguished from external environment factors?

  1. Opportunities and Weaknesses belong to short-term strategy; Strengths and Threats belong to long-term corporate governance.
  2. Strengths and Opportunities represent internal assets; Weaknesses and Threats represent external market risks.
  3. Strengths and Weaknesses reflect internal controllable attributes; Opportunities and Threats arise from the external uncontrollable environment. Correct answer.
  4. Strengths and Threats are quantifiable financial metrics; Weaknesses and Opportunities are qualitative subjective opinions.

Explanation

SWOT separates internal analysis (Strengths and Weaknesses derived from company resources, capabilities, and culture) from external analysis (Opportunities and Threats generated by macroeconomic, industry, and competitive trends).

Question 8Strategy, entrepreneurship and business models

A Basque technology startup has proprietary patented software but suffers from high staff turnover and limited working capital. Simultaneously, new government R&D grants are announced. How are these factors correctly classified in SWOT?

  1. Opportunity: patented software; Threat: high turnover; Strength: government R&D grants.
  2. Weakness: patented software; Strength: capital shortage; Threat: government R&D grants.
  3. Strength: patented software and R&D grants; Weakness: government grants.
  4. Strength: patented software; Weaknesses: high turnover and capital shortage; Opportunity: government R&D grants. Correct answer.

Explanation

Patented software is an internal competitive asset (Strength). Staff turnover and capital deficiency are internal operational limitations (Weaknesses). Government grants represent favorable external environmental developments (Opportunity).

Question 9Strategy, entrepreneurship and business models

According to the Ansoff Matrix, which growth strategy involves selling existing products into existing customer markets to gain market share?

  1. Market Penetration. Correct answer.
  2. Product Development.
  3. Market Development.
  4. Unrelated Diversification.

Explanation

Market Penetration focuses on increasing sales volume of existing products within current markets through aggressive promotion, competitive pricing, or enhanced distribution channels.

Question 10Strategy, entrepreneurship and business models

A Basque dairy producer introduces a brand-new line of lactose-free organic yogurts to its existing Spanish supermarket client base. Which Ansoff growth strategy does this represent?

  1. Market Penetration.
  2. Product Development. Correct answer.
  3. Conglomerate Diversification.
  4. Market Development.

Explanation

Developing and offering a new product line (lactose-free organic yogurt) to serve existing customer channels (current Spanish supermarket clients) is a textbook example of Product Development.

Question 11Strategy, entrepreneurship and business models

When a Bilbao-based industrial tool manufacturer opens new export channels to sell its standard machinery range in Latin America, which strategy is it executing?

  1. Horizontal Integration.
  2. Market Penetration.
  3. Market Development. Correct answer.
  4. Product Development.

Explanation

Taking existing products (standard machinery range) into new geographic regions or untapped target segments (Latin American export markets) constitutes Market Development.

Question 12Strategy, entrepreneurship and business models

Why is Conglomerate (Unrelated) Diversification considered the highest-risk strategic quadrant in the Ansoff Matrix?

  1. Because it relies exclusively on external government subsidies that are subject to revocation.
  2. Because Spanish tax law penalizes conglomerates with double corporate income tax rates.
  3. Because it requires selling products below marginal cost to attract price-sensitive buyers.
  4. Because the firm simultaneously enters unfamiliar product markets and operates without leveraging core existing competencies. Correct answer.

Explanation

Unrelated Diversification carries the highest risk because the company operates in unfamiliar product domains while simultaneously targetting unfamiliar customer markets, offering zero synergy with core technical or commercial operations.

Question 13Strategy, entrepreneurship and business models

How does internal (organic) growth differ fundamentally from external (inorganic) growth?

  1. Internal growth relies on expanding existing production capacity and internal investments, whereas external growth occurs through mergers, acquisitions, or alliances. Correct answer.
  2. Internal growth is funded by equity capital, whereas external growth is funded exclusively by short-term bank credit.
  3. Internal growth increases market share without capital expenditures, whereas external growth requires selling off assets.
  4. Internal growth is illegal for S.A. corporations under European competition law.

Explanation

Internal (organic) growth achieves expansion by building new facilities, expanding headcount, and investing internal resources over time. External (inorganic) growth speeds expansion by combining with or acquiring existing business entities.

Question 14Strategy, entrepreneurship and business models

What distinguishes a Cartel from a corporate Holding company?

  1. A Cartel merges two companies into one legal entity, whereas a Holding company operates as a worker cooperative.
  2. A Cartel is an agreement between independent firms to collude on prices or market shares, whereas a Holding company owns controlling equity stakes in subsidiary firms. Correct answer.
  3. A Cartel is regulated by trade unions, whereas a Holding company is managed by municipal governments.
  4. A Cartel is a single parent entity owning real estate, whereas a Holding company is an illegal price-fixing oligopoly.

Explanation

A Cartel consists of legally independent companies in the same industry that secretly or openly collude to set prices or production quotas (generally illegal under antitrust law). A Holding company is a legal financial structure holding controlling stock interest in separate subsidiary enterprises.

Question 15Strategy, entrepreneurship and business models

In a commercial franchise agreement, what are the primary obligations of the franchisee toward the franchisor?

  1. Provide personal financial guarantees for all franchisor corporate debt obligations.
  2. Transfer 51% of share capital to the franchisor and manage product manufacturing independently.
  3. Pay an upfront entrance fee and ongoing royalties while operating strictly under the franchisor's standardized business model and brand guidelines. Correct answer.
  4. Supply raw materials to the franchisor at discounted wholesale prices.

Explanation

The franchisee acquires the right to commercialize products/services using the franchisor's trade name, technical know-how, and operating system, in exchange for paying initial entrance fees, ongoing royalties, and adhering to strict brand standards.

Question 16Strategy, entrepreneurship and business models

According to Michael Porter, how does a firm achieve a Cost Leadership competitive strategy?

  1. By charging premium prices based on unique product design and luxury brand image.
  2. By targeting small niche markets with highly customized artisanal hand-crafted products.
  3. By offering free products financed entirely by government innovation subsidies.
  4. By aggressively pursuing economies of scale, strict cost controls, and operational efficiencies to achieve the lowest cost of production in the industry. Correct answer.

Explanation

Cost Leadership requires achieving the absolute lowest unit cost of production within an industry through economies of scale, proprietary technology, low-cost raw materials, overhead minimization, and operational efficiency.

Question 17Strategy, entrepreneurship and business models

What is the primary operational objective of a Differentiation strategy?

  1. To create products or services perceived as unique industry-wide, allowing the firm to command premium pricing and foster customer brand loyalty. Correct answer.
  2. To minimize unit production costs below all industry competitors.
  3. To copy competitor product designs quickly and sell them at discount wholesale prices.
  4. To limit sales exclusively to public sector government procurement tenders.

Explanation

Differentiation seeks to deliver superior customer value through unique product attributes, superior customer service, advanced technology, or brand prestige, insulating the firm from price competition and allowing premium margins.

Question 18Strategy, entrepreneurship and business models

What strategic risk does a company face if it fails to commit clearly to either Cost Leadership or Differentiation, according to Michael Porter?

  1. It is legally forced to convert into a public benefit corporation.
  2. It becomes 'Stuck in the Middle', suffering from below-average performance and lack of sustainable competitive advantage. Correct answer.
  3. It earns maximum monopoly rents due to strategy flexibility.
  4. It triggers automatic antitrust investigation by European competition commissions.

Explanation

Porter warned that firms trying to pursue all strategies simultaneously without dedicated focus end up 'Stuck in the Middle'. They lack the scale for cost leadership and the uniqueness for differentiation, leading to poor profitability.

Question 19Strategy, entrepreneurship and business models

Under European Union enterprise classification standards, what are the headcounts and financial thresholds defining a Small Enterprise?

  1. Fewer than 500 employees, with an annual turnover not exceeding €100 million.
  2. Fewer than 10 employees, with an annual turnover not exceeding €2 million.
  3. Fewer than 50 employees, with an annual turnover or balance sheet total not exceeding €10 million. Correct answer.
  4. Fewer than 250 employees, with an annual turnover not exceeding €50 million.

Explanation

The European Commission (Recommendation 2003/361/EC) defines a Small Enterprise as a business employing fewer than 50 persons, with an annual turnover or total balance sheet not exceeding €10 million.

Question 20Strategy, entrepreneurship and business models

In Michael Porter's Value Chain model, which activity is categorized as a Support Activity rather than a Primary Activity?

  1. Inbound Logistics.
  2. Outbound Logistics.
  3. Marketing and Sales.
  4. Human Resource Management. Correct answer.

Explanation

Porter's Value Chain classifies activities into Primary (Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, Service) and Support (Firm Infrastructure, HR Management, Technology Development, Procurement).

Question 21Strategy, entrepreneurship and business models

When formulating corporate strategic goals, what does the SMART acronym require objectives to be?

  1. Specific, Measurable, Achievable, Relevant, and Time-bound. Correct answer.
  2. Systematic, Monetary, Automated, Rational, and Tactical.
  3. Simple, Marketing-driven, Aggressive, Regional, and Temporary.
  4. Standardized, Multilateral, Approved, Rigid, and Total.

Explanation

SMART objectives are essential for effective management control, ensuring goals are Specific (clear scope), Measurable (quantifiable metrics), Achievable (realistic), Relevant (aligned with mission), and Time-bound (defined target deadline).

Question 22Strategy, entrepreneurship and business models

In Alexander Osterwalder's Business Model Canvas, what does the Value Proposition block represent?

  1. The network of suppliers and strategic partners that make the business model work.
  2. The bundle of products and services that create value for a specific customer segment by solving a problem or satisfying a need. Correct answer.
  3. The physical and human assets required to manufacture products.
  4. The total monetary cash flows collected from customer transactions.

Explanation

The Value Proposition is the central block of the Canvas. It details why customers turn to one company over another, describing the unique mix of benefits, features, design, price, or performance solving customer pain points.

Question 23Strategy, entrepreneurship and business models

Which Canvas block describes how a company communicates with and reaches its Customer Segments to deliver its Value Proposition?

  1. Cost Structure.
  2. Key Activities.
  3. Channels. Correct answer.
  4. Customer Relationships.

Explanation

The Channels block touches customer touchpoints (communication, distribution, and sales channels), explaining how a firm raises awareness, delivers value, and provides post-purchase support.

Question 24Strategy, entrepreneurship and business models

A SaaS business uses self-service onboarding alongside an automated AI chatbot for tier-1 support. In the Business Model Canvas, where is this strategy detailed?

  1. Key Resources.
  2. Revenue Streams.
  3. Value Proposition.
  4. Customer Relationships. Correct answer.

Explanation

Customer Relationships defines how a business interacts with customers across acquisition, retention, and upsell. Self-service and automated support are specific relationship categories.

Question 25Strategy, entrepreneurship and business models

How are patents, proprietary algorithms, and brand trademarks classified within the Business Model Canvas?

  1. Intellectual Key Resources. Correct answer.
  2. Physical Key Resources.
  3. Financial Key Resources.
  4. Key Activities.

Explanation

Key Resources are categorized into Physical (buildings, machinery), Intellectual (brands, patents, copyrights, data), Human (specialized staff), and Financial (credit lines, cash balances). Patents and algorithms are Intellectual assets.

Question 26Strategy, entrepreneurship and business models

What is the primary operational distinction between Key Activities and Key Partnerships in the Canvas framework?

  1. Key Activities focus on legal incorporation; Key Partnerships handle customer advertising campaigns.
  2. Key Activities are critical internal actions performed by the firm; Key Partnerships are external relationships with suppliers or allies that outsource non-core tasks or mitigate risk. Correct answer.
  3. Key Activities are managed by equity shareholders; Key Partnerships are managed by trade unions.
  4. Key Activities generate cash inflows; Key Partnerships generate tax write-offs.

Explanation

Key Activities encompass internal execution (e.g. software development, manufacturing). Key Partnerships leverage third parties to optimize business models, reduce risk, or acquire specialized resources outside the firm.

Question 27Strategy, entrepreneurship and business models

How does a Cost-driven business model differ from a Value-driven business model in the Canvas Cost Structure block?

  1. Cost-driven models rely on equity financing; Value-driven models rely on venture debt.
  2. Cost-driven models operate without fixed costs; Value-driven models operate without variable costs.
  3. Cost-driven models focus on minimizing costs through low price propositions and automation; Value-driven models focus on premium value creation and customized high-end service regardless of cost. Correct answer.
  4. Cost-driven models apply exclusively to non-profit entities; Value-driven models apply exclusively to public sector bodies.

Explanation

Cost-driven models (e.g. budget airlines) aim to minimize operational costs wherever possible through lean structures and low prices. Value-driven models (e.g. luxury hotels) focus on premium quality, exclusivity, and personalized service.

Question 28Strategy, entrepreneurship and business models

Which revenue stream model charges customers a recurring fee at fixed intervals (monthly or annually) for continuous access to a product or service?

  1. Razor and Blade Model.
  2. Pay-per-view / Usage Fee Model.
  3. Asset Sale Model.
  4. Subscription Model. Correct answer.

Explanation

A Subscription revenue model charges customers a recurring fee (e.g. monthly or annual subscription) for ongoing access to software, media, or physical delivery services.

Question 29Strategy, entrepreneurship and business models

A digital media platform provides basic services free of charge to all users while charging a monthly fee for advanced features and ad-free streaming. What business model pattern is this?

  1. Freemium Model. Correct answer.
  2. Long Tail Model.
  3. Bait and Switch Model.
  4. Direct Wholesale Model.

Explanation

The Freemium pattern combines 'Free' basic tiers with 'Premium' paid upgrades. A large base of non-paying users is supported by a smaller percentage of converting premium subscribers.

Question 30Strategy, entrepreneurship and business models

An espresso machine maker sells its coffee machines at cost price but charges high profit margins on proprietary coffee capsules. Which business model pattern does this demonstrate?

  1. Peer-to-Peer Rental Model.
  2. Razor and Blade (Captive Pricing) Model. Correct answer.
  3. Franchise License Model.
  4. Reverse Razor and Blade Model.

Explanation

The Razor and Blade (captive pricing) model sells an initial base product at a low price (or loss leader) to lock in customers, generating high-margin recurring revenue from essential high-priced consumables.

Question 31Strategy, entrepreneurship and business models

How do Multi-Sided Platforms (Two-Sided Markets) like ride-hailing apps or payment card networks generate economic value?

  1. By charging fixed annual interest rates on corporate cash deposits.
  2. By manufacturing physical components internally and selling them exclusively through direct mail.
  3. By bringing together two or more distinct but interdependent customer groups, creating value through network effects. Correct answer.
  4. By purchasing bankrupt retail stores and converting them into automated warehouses.

Explanation

Multi-Sided Platforms bring together interdependent groups (e.g. drivers and riders, or merchants and cardholders). The value of the platform increases for one group as the number of users on the other side grows (direct/indirect network effects).

Question 32Strategy, entrepreneurship and business models

What is the core strategy of Chris Anderson's Long Tail business model pattern?

  1. Focusing exclusively on selling three top-volume mass market products.
  2. Limiting inventory sales to a single geographic postal code.
  3. Extending employee work shifts to reduce overtime wage expenditures.
  4. Selling a broad array of niche products in low individual volumes, which cumulatively equal or exceed revenues from a few blockbuster items. Correct answer.

Explanation

The Long Tail model leverages low storage and distribution costs (especially digitally) to sell a vast selection of niche items. Summing small sales across thousands of niche titles rivals or surpasses blockbuster revenue.

Question 33Strategy, entrepreneurship and business models

What is the central purpose of Eric Ries' Build-Measure-Learn feedback loop in the Lean Startup methodology?

  1. To minimize total time through the loop, enabling rapid testing of business hypotheses and validated learning. Correct answer.
  2. To maximize initial engineering perfection before showing products to potential buyers.
  3. To eliminate the need for product marketing and customer feedback.
  4. To secure long-term bank loans before designing product prototypes.

Explanation

The Build-Measure-Learn feedback loop aims to turn ideas into Minimum Viable Products (Build), test customer response (Measure), and decide whether to pivot or persevere (Learn) as fast as possible to minimize wasted resources.

Question 34Strategy, entrepreneurship and business models

How is a Minimum Viable Product (MVP) defined within the Lean Startup framework?

  1. A low-quality discarded prototype intended solely for internal lab testing.
  2. The version of a new product that allows a team to collect the maximum amount of validated learning about customers with the least effort. Correct answer.
  3. A promotional video without any functioning underlying technology or customer sign-ups.
  4. A fully finished, bug-free product launched after two years of silent internal R&D.

Explanation

An MVP is designed to test fundamental business hypotheses. It is not necessarily a full product, but rather the simplest functional version that enables real user interactions and empirical data collection.

Question 35Strategy, entrepreneurship and business models

In Lean Startup, what is 'Validated Learning'?

  1. Calculating projected profits using 5-year financial forecast spreadsheets.
  2. Obtaining an official university degree in business administration.
  3. Demonstrating empirically through customer metrics that a startup has discovered valuable truths about its business prospects. Correct answer.
  4. Receiving approval from local government tax inspectors.

Explanation

Validated learning is a rigorous method for demonstrating progress when operating under extreme uncertainty. It relies on empirical metrics gathered from real customer behavior to confirm or refute key hypotheses.

Question 36Strategy, entrepreneurship and business models

When a startup decides to 'Pivot' in the Lean Startup framework, what action is it taking?

  1. Filing for immediate legal liquidation and asset bankruptcy.
  2. Firing the entire software development team and hiring external management consultants.
  3. Doubling the marketing budget while maintaining the exact same product features.
  4. Making a structured course correction to test a new fundamental hypothesis about the product, strategy, or engine of growth. Correct answer.

Explanation

A Pivot is a structured strategic change designed to test a new hypothesis about the product, customer segment, or revenue model, while keeping one foot rooted in what was learned from past experiments.

Question 37Strategy, entrepreneurship and business models

Which type of Lean Startup pivot occurs when a single feature of an existing product is expanded to become the entire standalone product?

  1. Zoom-in Pivot. Correct answer.
  2. Zoom-out Pivot.
  3. Customer Segment Pivot.
  4. Value Capture Pivot.

Explanation

In a Zoom-in Pivot, what was previously considered a single feature of a product becomes the entire focus of the new product, reflecting customer feedback that this single feature provides the core value.

Question 38Strategy, entrepreneurship and business models

What three performance dimensions comprise John Elkington's 'Triple Bottom Line' framework?

  1. Payables, Receivables, and Revenue (Accounting Balance).
  2. Price, Product, and Promotion (Marketing Mix).
  3. People, Planet, and Profit (Social, Environmental, and Economic performance). Correct answer.
  4. Patents, Plant, and Property (Fixed Assets).

Explanation

The Triple Bottom Line (TBL) framework argues that companies should measure success across three pillars: People (social equity and employee welfare), Planet (environmental stewardship), and Profit (economic prosperity).

Question 39Strategy, entrepreneurship and business models

What distinguishes a certified Benefit Corporation (B-Corp) from a traditional commercial corporation?

  1. B-Corps are non-profit charities exempt from corporate income taxes.
  2. B-Corps are state-owned state enterprises funded by government treasury bonds.
  3. B-Corps are prohibited from distributing profits to private equity founders.
  4. B-Corps are legally obligated to consider the impact of their decisions on all stakeholders (workers, community, environment) alongside financial profit. Correct answer.

Explanation

Certified B Corporations amend their corporate bylaws to balance purpose and profit. They are legally mandated to consider stakeholder impact (employees, suppliers, environment) alongside shareholder financial returns.

Question 40Strategy, entrepreneurship and business models

How does Milton Friedman's traditional shareholder view contrast with Freeman's Stakeholder Theory of business ethics?

  1. Friedman argued that the sole social responsibility of business is to maximize profit within the law; Freeman asserts management must create value for all stakeholders (customers, employees, suppliers, society). Correct answer.
  2. Friedman advocated for total state control of business; Freeman advocated for unregulated monopolies.
  3. Friedman argued that businesses should operate as non-profits; Freeman advocated for maximizing executive compensation.
  4. Friedman prohibited foreign trade; Freeman prohibited domestic retail distribution.

Explanation

Friedman's shareholder primacy model asserts that management's duty is exclusively to equity owners (maximizing profit within legal rules). Freeman's Stakeholder Theory holds that long-term corporate success requires balancing the interests of all interconnected stakeholders.

Question 41Operations and supply

In production management, how are Fixed Costs defined relative to changes in output volume over a short-term period?

  1. Costs that vary inversely with unit retail selling prices.
  2. Costs that increase linearly with every additional unit manufactured.
  3. Costs that remain constant in total amount regardless of the volume of goods produced. Correct answer.
  4. Costs that fluctuate depending on monthly energy price index movements.

Explanation

Fixed Costs (e.g. factory lease rent, executive administrative salaries, equipment depreciation) remain constant in total sum over a given relevant capacity range regardless of production volume fluctuations.

Question 42Operations and supply

Which cost component is classified as a Direct Cost when manufacturing industrial furniture?

  1. General electricity used to light the entire manufacturing factory building.
  2. Salary of the head corporate security officer overseeing factory premises.
  3. Annual accounting software license fee paid by corporate headquarters.
  4. Oak timber wood used directly in constructing a specific dining table model. Correct answer.

Explanation

Direct Costs can be easily and economically traced to a specific cost object (e.g. raw oak timber used in a specific table). Indirect Costs (factory lighting, security, corporate licenses) benefit multiple operations and require allocation.

Question 43Operations and supply

A manufacturing plant has fixed costs of €20,000 per month and unit variable costs of €15 per item. If the plant produces 2,000 items in a month, what are the Total Cost and the Average Unit Cost?

  1. Total Cost = €50,000; Average Unit Cost = €25. Correct answer.
  2. Total Cost = €30,000; Average Unit Cost = €15.
  3. Total Cost = €50,000; Average Unit Cost = €15.
  4. Total Cost = €35,000; Average Unit Cost = €17.50.

Explanation

Total Cost $CT = CF + (CVu \times Q) = 20,000 + (15 \times 2,000) = 20,000 + 30,000 = €50,000$. Average Unit Cost $= CT / Q = 50,000 / 2,000 = €25$ per unit.

Question 44Operations and supply

What is Marginal Cost in production economics?

  1. The historical cost of purchasing factory real estate.
  2. The incremental cost incurred by producing one additional unit of output. Correct answer.
  3. The selling price required to achieve zero net profit.
  4. The average cost per unit calculated by dividing total fixed costs by output.

Explanation

Marginal Cost ($MC = Δ CT / Δ Q$) represents the change in total production cost resulting from producing one additional unit of output.

Question 45Operations and supply

What is the standard formula for calculating Labour Productivity?

  1. Labour Productivity = Total Working Capital / Total Number of Employees.
  2. Labour Productivity = Total Sales Revenue / Total Raw Material Cost.
  3. Labour Productivity = Total Physical Output / Total Quantity of Labour Input (hours or workers). Correct answer.
  4. Labour Productivity = Total Fixed Costs / Net Annual Income.

Explanation

Labour Productivity measures operational efficiency by dividing total volume of output produced by the total units of labor input used (such as labor hours or total workers employed).

Question 46Operations and supply

A Basque components workshop employs 4 technicians who each work 1,500 hours per year. Together, they manufacture 12,000 precision valves per year. What is the workshop's annual labor productivity per technician-hour?

  1. 3 valves per technician-hour.
  2. 0.5 valves per technician-hour.
  3. 8 valves per technician-hour.
  4. 2 valves per technician-hour. Correct answer.

Explanation

Total labor input hours $= 4 \text{ technicians} \times 1,500 \text{ hours} = 6,000 \text{ technician-hours}$. Labor Productivity $= 12,000 \text{ valves} / 6,000 \text{ hours} = 2 \text{ valves per technician-hour}$.

Question 47Operations and supply

In Year 1, a firm produces 10,000 units selling at €5 each using 500 labor hours at €20/hour. In Year 2, it produces 12,000 units selling at €5 using 600 labor hours at €20/hour. How did global labor productivity change?

  1. Labor productivity remained constant at 5.0 monetary units of output per monetary unit of labor input (0% growth). Correct answer.
  2. Labor productivity increased by 20%.
  3. Labor productivity decreased by 10%.
  4. Labor productivity increased by 50%.

Explanation

Year 1 Value Productivity $= (10,000 \times 5) / (500 \times 20) = 50,000 / 10,000 = 5.0$. Year 2 Value Productivity $= (12,000 \times 5) / (600 \times 20) = 60,000 / 12,000 = 5.0$. Productivity per labor unit remained exactly identical (0% change).

Question 48Operations and supply

What is the primary operational objective of maintaining a Safety Stock (Stock de Seguridad) in warehouse management?

  1. To eliminate the need for warehouse security personnel.
  2. To buffer against unexpected spikes in customer demand or supplier delivery delays, preventing stockouts. Correct answer.
  3. To comply with legal maximum storage space regulations.
  4. To maximize inventory holding costs and inflate reported asset valuations.

Explanation

Safety Stock acts as a reserve buffer protecting operations from unexpected demand surges or supply chain delivery delays, ensuring customer order fulfillment without experiencing stockouts.

Question 49Operations and supply

A retail distributor faces a constant daily demand of 50 units. Supplier lead time is 4 days, and the company maintains a safety stock of 100 units. At what inventory level should the Reorder Point (Punto de Pedido) be set?

  1. 400 units.
  2. 200 units.
  3. 300 units. Correct answer.
  4. 150 units.

Explanation

Reorder Point $\text{PP} = (\text{Daily Demand} \times \text{Lead Time}) + \text{Safety Stock} = (50 \times 4) + 100 = 200 + 100 = 300 \text{ units}$.

Question 50Operations and supply

Under the Wilson (EOQ) inventory model, annual demand D = 9,000 units, fixed order setup cost s = €50, and annual holding cost per unit g = €1. What is the Economic Order Quantity (Q*)?

  1. 600 units.
  2. 300 units.
  3. 1,200 units.
  4. 900 units. Correct answer.

Explanation

$Q^* = sqrt{\frac{2 cdot D cdot s}{g}} = sqrt{\frac{2 \times 9,000 \times 50}{1}} = sqrt{\frac{900,000}{1}} = sqrt{900,000} = 900 \text{ units}$.