MH SET Paper 2 Mock Test - 3 (Commerce) - MAHA TET MCQ

The correct answer is By enterprise function.

Key Points

• By enterprise function, departmentation facilitates tight control on top.
• Departmentation by enterprise function is to group the activities being performed by different units along the lines of the function of the organisation.
  • Every enterprises aim at creating or producing something that is desirable by others.
  • It follows the principles of occupational specialization.
  • It also simplifies training.
• The basic enterprise functions are-
  • Production
  • Selling
  • Financing

Additional Information

• Departmentation refers to the formal structure of the organisation, composed of various departments and managerial positions and their relationships to each other.
  • It refers to the horizontal differentiation in an organization.
  • It refers to the grouping of operating duties into jobs, the combining of jobs and mixing of companies into divisions called 'Departments'. 
  • This way, it becomes easier and efficient for the top management to have control on various units.

A transferable letter of credit is a type of financial guarantee, known as a letter of credit, that additionally allows the first beneficiary to transfer some or all of the credit to another party, which creates a secondary beneficiary. The party that initially accepts the transferable letter of credit from the bank is referred to as the first, or primary beneficiary.

Pure or perfect competition is a theoretical market structure in which all firms sell an identical product (the product is a "commodity" or "homogeneous"). All firms are price takers (they cannot influence the market price of their products). Market share has no influence on prices.

In Monopolistic Competition, a buyer can get a specific type of product only from one producer. In other words, there is product differentiation. The firms have to incur selling expenses since there is product differentiation. The firm can improve or deteriorate the quality of its products too.

Oligopoly is a market structure in which there are a few firms producing a product. When there are few firms in the market, they may collude to set a price or output level for the market in order to maximize industry profits.

In a monopoly, there is a practice of charging different prices for an identical product is called price discrimination. According to Robinson, “Price discrimination is charging different prices for the same product or the same price for the differentiated product.”s a single seller of a product called a monopolist.

Gross Annual Value:

• Gross annual value (GAV) is a term used to describe the potential revenue from immovable property.
• Whether or not the property is rented out for business or residential uses, GAV will still apply.
• In Income Tax, the word immovable property comprises buildings such as residential houses, factories, commercial buildings, godowns and land on which bonded warehouses have been established.
• Net Annual Value: In accordance with the Income Tax Act, the municipality taxes are subtracted from the property's gross annual value to determine the Net Annual Value (NAV). NAV is the difference between GAV and the municipal tax that the owner has paid.

Important PointsCalculation of Net Annual Value

Note: Municipality Tax (due not paid) is not be deducted from GAV because it is not yet paid by the owner, so the GAV itself will be the value of NAV.

Hence, the correct answer is 6,00,000.

The correct option is both uninsurable risk and due to uncertainty.

• The Knight’s Theory of Profit was proposed by Frank. H. Knight believed profit was a reward for uncertainty-bearing, not risk-bearing.
• Simply, profit is the residual return to the entrepreneur for bearing the uncertainty in business.
• Knight made his reputation with his book Risk, Uncertainty, and Profit

Important Points

•  Knight regards profit as the reward for bearing non-insurable risks and uncertainties.
• He distinguishes between insurable and non-insurable risks. Certain risks are measurable, and the probability of their occurrence can be statistically calculated.
• The risks of fire, theft, flood, and death by accidents are insurable

Hence, Knight's principle of profit is based on uninsurable risk, and due to uncertainty.

The correct answer is Geographical indication.

Key Points

•  Mysore silk can be included under the Geographical Indication (GI) tag. A GI tag is a sign used on products that have a specific geographical origin and possess qualities or a reputation that are due to that origin.
• Mysore silk is a type of silk that is produced in the Mysore region of Karnataka, India. It is known for its fine quality and soft texture. The silkworms that are used to produce Mysore silk are fed on mulberry leaves that are grown in the region. The climate and soil conditions in the Mysore region are also ideal for the production of silk.
• The GI tag for Mysore silk was granted by the Government of India in 2004. The tag protects the name "Mysore silk" from being used by other producers. It also helps to promote the sale of Mysore silk and to ensure that consumers get the genuine product

A breach of contract can happen in both a written and an oral contract. The parties involved in a breach of contract may resolve the issue among themselves, or in a court of law. There are different types of contract breaches, including a minor or material breach and an actual or anticipatory breach.

The correct answer is (ii), (iii) and (iv).

Key PointsGTI or Gross Total Income is the sum of all revenue sources, whereas TI or Total Income is GTI minus deductions. To compute TI, subtract the following deductions from GTI as per Section 80 in Chapter VI of the Income Tax Act.

Important PointsDeduction from Gross Total Income [Section 80A to 80U] (Chapter VIA)
These deductions are of two types:—

• Deductions on account of certain payments and investments covered under sections 80C to 80GGC.
• Deductions on account of certain incomes which are already included under Gross Total Income covered under sections 80-IA to 80U.
• The income arrived at, after claiming the above deductions from Gross Total Income, is known as Total Income. It may also be called Taxable Income. The Total Income, thus calculated, should be rounded off to the nearest Rs. 10.
• The aggregate of income computed under each head, after giving effect to the provisions for clubbing of income and set off of losses, is known as "Gross Total Income". In computing the total income of an assessee, certain deductions are permissible under sections 80C to 80U from Gross Total Income.

These deductions are however not allowed from the following incomes although these incomes are part of Gross Total Income

1. Long-term capital gains.
2. Short-term capital gain on transfer of equity shares and units of equity oriented fund through a recognised stock exchange i.e. short-term capital gain covered under section 111A.
3. Winnings of lotteries, races, etc.
4. Incomes referred to in sections 115A, 115AB, 115AC, 115ACA, 115AD and 115D.

​Hence, it can be concluded that the deductions under Chapter VI-A of the Income Tax Act, 1961 are allowed after excluding Long-term capital gains, Short-term capital gains under Section 111A and Income from lotteries.

The correct answer is 2021.

​Key Points

• WTO(World Trade Organisation) members agreed to hold a workshop in spring 2021 on the Information Technology Agreement(ITA).
• In the workshop, WTO members will engage with the private sector on the latest developments in information and communications technology (ICT) and to review the implementation of the ITA.
• The workshop will examine how ICT can lead to economic benefits, create opportunities and pose challenges, particularly in terms of the digitalization of the global economy.

​Important Points

• The Information Technology Agreement (ITA) was concluded by 14 participants at the Singapore Ministerial Conference in December 1996.
• Since 1996, the number of participants has grown to 53, representing 82 WTO members which account for 97% of world trade in IT products
• The participants are committed to eliminating tariffs on IT products covered by the Agreement.
• The ITA covers a large number of high-technology products, including computers, telecommunication equipment, semiconductors, semiconductor manufacturing and testing equipment, software and scientific instruments as well as most of the parts and accessories of these products.

Additional Information

• The present membership of the WTO is 164.
• The last member to join was Afghanistan(March 2016).
• Ministerial Conferences are the highest decision-making body of the WTO which meet at least every two years.
• WTO headquarters is in Geneva(Switzerland).

The correct answer is Explicit

Key Points

• Explicit costs are normal business costs that appear in the general business and directly affect a company's profitability.
• Explicit costs have clearly defined amounts, which flow through to the income statement.
• Examples of explicit costs include wages, lease payments, utilities, raw materials, and other direct costs.
• Explicit costs are also known as accounting costs.
• They are easy to identify and link to a company's business activities to which the expenses are attributed.

The Regression Coefficient is the constant ‘b’ in the regression equation that tells about the change in the value of the dependent variable corresponding to the unit change in the independent variable.

The Regression Coefficient is also called a slope coefficient because it determines the slope of the line i.e. the change in the independent variable for the unit change in the independent variable.

Key Points

Properties Of Regression Coefficient: 

1. The correlation coefficient is the geometric mean of two regression coefficients. Symbolically, it can be expressed as:
   Coefficient of correlation  = √(byx × bxy)r=(byx×bxy)−−−−−−−−−√
2. The value of the coefficient of correlation cannot exceed unity i.e. 1. Therefore, if one of the regression coefficients is greater than unity, the other must be less than unity.
3. The sign of both the regression coefficients will be the same, i.e. they will be either positive or negative. Thus, it is not possible that one regression coefficient is negative while the other is positive.
4. The coefficient of correlation will have the same sign as that of the regression coefficients, such as if the regression coefficients have a positive sign, then “r” will be positive and vice-versa.
5. The regression coefficients are independent of the change of origin, but not of the scale. By origin, we mean that there will be no effect on the regression coefficients if any constant is subtracted from the value of X and Y. By scale, we mean that if the value of X and Y is either multiplied or divided by some constant, then the regression coefficients will also change.

Thus, option 2 is the correct answer.

In terms of Section 22 of the Act, Reserve Bank has the sole right to issue banknotes in India.

• The Reserve Bank, in consultation with the Central Government and other stakeholders, estimates the number of banknotes that are likely to be needed denomination-wise in a year and places indents with the various currency printing presses for the supply of banknotes.
• The Reserve Bank in terms of its clean note policy provides good quality banknotes to the members of the public.
• In respect of coins, the role of RBI is limited to the distribution of coins that are supplied by the Government of India.
• The Government of India is responsible for the designing and minting of coins in various denominations as per the Coinage Act, 2011.

Important Points

• Under Section 22 of the Reserve Bank of India Act, RBI has sole right to issue currency notes of various denominations except one rupee note.
• The One Rupee note is issued by the Ministry of Finance and it bears the signatures of the Finance Secretary, while other notes bear the signature of Governor RBI. 

Thus, option 1 is the correct answer.

Key Points

• Rules regarding gratuities are specified in the Payments Gratuity Act of 1972.
• It was approved by the Parliament on August 21, 1972, and it went into effect on September 16, 1972.

Important Points
Gratuity Received by a Non-Government Employee covered by the Payment of Gratuity Act, 1972 [Section 10(10)(ii)].
As per section 10(10)(ii), exemption in respect of gratuity in case of employees covered by the Payment of Gratuity Act, 1972 will be lower of following:

• Actual gratuity received, or
• 15 days salary for every completed year, or part thereof exceeding six months 7 days salary for each season in case of employee in seasonal establishment; or ₹ 20,00,000

Any other employees:
Minimum of the following:

• Actual gratuity received
• Half months average salary of each completed year of service.
• ₹ 20,00,000.​​

Additional Information

• Meaning of Gratuity:It's a one-time payment given for an employee's services. The employee may use it following retirement or after five years of continuous employment with the company.
• The Payment of Gratuity Act, 1972, which established the standards for gratuity payments, was first passed in 1972. People who work for an organisation, whether it is a public or private one, are subject to the rules governing gratuities.
• The first cap on gratuity payments was set at Rs. 10 lakhs. If an employee received a gratuity that was higher, they were responsible for paying tax on the excess.
• The gratuity threshold increased to 20 lakhs with the implementation of the 2020 gratuity regulations.

The correct answer is bearish.

Key Points

• The primary trend lasts from one to three years.
• Over this period, the markets exhibit definite upward or downward movement which is punctuated by shorter spans of a trend reversal in the opposite directions.
• The trend reversal is called the secondary trend.
• The primary trend is indicative of the overall pattern of movement.
• In Dow Theory, the primary trend is the major trend of the market, which makes it the most important one to determine.
• This is because the overriding trend is the one that affects the movements in stock prices.
• The primary trend will also impact the secondary and minor trends within the market.
• If the primary trend is upward, it is called a bullish phase of the market.
• If the primary trend is downwards, it is called a bearish phase.
• In a bullish phase, after each peak, there is a fall but the subsequent rise is higher than the previous one. The prices reach a higher level with each rise. After the peak has been reached, the primary trend now turns to a bearish phase.
• In a bearish phase, the overall trend is that of a decline in share values. After each fall, there is a slight rise but the subsequent fall is even sharper.

The correct answer is programmed. 

Key Points

• Programmed decisions tend to be well structured, routine and repetitive, occurring on a regular basis.
• They are usually made at lower levels in the organisation, have short-term consequences and are based on readily available information.
• Due to the fact that the organisation is frequently presented with the decision, a decision rule can be developed that tells the organisation or decision maker which alternative to choose once the information is available.
• The decision rule ensures that a definite method for obtaining a solution can be found and that the decision does not have to be treated as something new each time it occurs. Frequently simple formulae can be applied to the situation.
• Examples of programmed decisions include ordering raw materials or office supplies and calculating holiday pay, sick pay or redundancy payments. 
• Non-programmed decisions, in contrast, are new and unstructured and consequently a previously established decision rule cannot be applied.
• In other words, the organisation has no established procedures or records for dealing with the decision, which can therefore appear to be highly complex.
• Non-programmed decisions tend to occur at higher levels in the organisation, have long-term consequences and require a degree of judgement and creativity.
•  Examples of non-programmed decisions include the decision to try an unproven technology or to expand into a previously unknown market. 

Dumping in economics is a kind of predatory pricing, especially in the context of international trade. It occurs when manufacturers export a product to another country at a price below the price charged in its home market or below its cost of production. Therefore, when goods in the domestic market are sold at a high price and in the foreign market at a low price, it is a situation of dumping.

The correct answer is A-2, B-3, C-4, D-1.

Key Points

Important Points A - Realized Yield Method: This method is used to calculate the cost of equity capital. It takes into account the actual returns earned by investors who have invested in the company's shares, rather than using estimates or assumptions about future returns.

B - Taxation: Taxation is an important consideration in calculating the cost of debt capital. The after-tax cost of debt is used to determine the weighted average cost of capital (WACC) of a company, which takes into account the cost of both equity and debt capital.

C - Cost of total capital employed: The cost of total capital employed is the overall cost of financing a company's operations, which includes both debt and equity capital. This cost is used to determine the company's WACC.

D - Dividend Growth is a consideration: The growth rate of dividends is an important consideration in calculating the cost of equity capital. The cost of equity is the return required by investors to invest in the company's shares, and it is based on the expected future dividends and the growth rate of those dividends.

In summary, the matching is as follows:

A matches with 2 because the Realized Yield Method is used to calculate the cost of equity capital.
B matches with 3 because taxation is an important consideration in calculating the cost of debt capital.
C matches with 4 because the cost of total capital employed is used to determine the company's WACC.
D matches with 1 because the growth rate of dividends is an important consideration in calculating the cost of equity share capital.

Responsibility accounting is a system of dividing an organization into units like divisions, departments, branches etc and facilitating the control process of an organization through planning and auditing. Thus, responsibility accounting can be applied to investment centre, cost centre and profit centres of the organization. 

The correct answer is, Both (A) and (R) are correct and (R) is the correct explanation of (A).

Key Points

 Price Consumption Curve shows that how consumption of consumer changes with regard to change in its price. Basically Price Effect shows the effect on quantity demanded when the price of same commodity changes.

Important Points 

Assertion: The price consumption curve is backward sloping in case of Giffen goods.

• Impact of price on different goods are as follows:
  • Substitute Goods are those goods which can be replaced with each other. For Example: Tea and Coffee. In this case, if the price of one commodity increases then the demand for other commodity will also increases and vice versa. In this type of relation, the PCC curve slopes downward which shows positive relation between price and quantity demanded.
  • Complementary Goods are those that need to be consume together, which means goods cannot be consumed/ used in isolated form. For Example: Pen and Ink/ Car and Petrol etc. In this type of relation, the PCC curve is upward sloping because there is inverse relation between price of one commodity and its quantity demanded.
  • Giffen Goods falls under the category of inferior and low income group goods. When demand for a commodity decreases with decrease in its price and vice versa, then it means that these goods are giffen goods. In this type of relation, the PPC curve shows backward bending which means that the change in price and quantity demanded of giffen goods has positive relation with each other.

Reason: A fall in price of a good leads to a smaller quantity of the good demanded.

• A good's  backward sloping price consumption curve shows that after a certain point of time, less of it (product) is bought when its price drops.

​Hence, the correct answer is Both (A) and (R) are correct and (R) is the correct explanation of (A).

The correct option is the Poisson distribution

Key Points Queuing Theory

Queuing theory is a branch of operation research that studies the movement of people, objects, or information through a line.

Important Points

• The analytical modeling of a queue would involve providing an input specification describing the queue
• The arrival describes the way the customer enter the system
• Poisson distribution is a discrete probability distribution that expresses the probability of the given number of an event occurring in fixed intervals.
• The arrival pattern can be expressed as

P ( X ) = λ x e − λ X ! μ

• The inter-arrival follows the exponential distribution

The correct answer is Stereotyping.

Key Points

• The type of bias being followed in this case is gender stereotyping.
• Gender stereotyping is a type of bias that occurs when an individual or a group of people hold stereotypes or prejudices about one gender or another.
• It can manifest in different ways, including making assumptions or judgments based on gender, attributing certain qualities or characteristics to one gender, or treating individuals differently based on their gender.
• In this case, the manager is making a biased assumption that men perform better than women in oral presentations.
• This assumption is not based on any objective evidence or data, but rather on a biased belief or stereotype about gender.
• This type of bias can have negative consequences, including limiting opportunities for women to excel in certain areas and perpetuating gender inequality.
• To overcome gender bias, it is important to challenge and question assumptions about gender, promote diversity and inclusion, and provide equal opportunities and resources for individuals of all genders to succeed.

Additional Information Halo Effect- The Halo Effect is a cognitive bias that occurs when our overall impression of a person, product, or company influences our judgment of their specific traits or characteristics. In other words, it is the tendency to let our positive or negative general impression of something or someone influence our evaluations or judgments of specific attributes or aspects.

Projection Effect- Projection effect is a cognitive bias that occurs when people unconsciously project their own personality traits, beliefs, or attitudes onto others. In other words, people may assume that others share their own values, beliefs, and attitudes, even when this is not the case.

Contrast effect- The Contrast Effect is a cognitive bias that occurs when the perception of an object or individual is influenced by the presence or characteristics of other objects or individuals encountered before it. In other words, our judgment of something can be distorted by the context in which it is presented.

Hence, the correct answer is Stereotyping.

The first Indian to suggest a model for human resource valuation and accounting is S. K. Chakraborty.

S. K. Chakraborty who was connected with the "Indian Institute of Management" in Calcutta was the first Indian to suggest a model for human resource valuation and accounting.

He believed that there are a number of factors to be considered for every employee in regards to their recruitment process.

It involved the cost of recruiting them, their selection, learning process, and training and developing them in the future. These evaluations of cost should be used as another form of income expenditure.

The correct answer is- Print.

Key Points

Print media:

This was once the only means of spreading information to the general people.

1. For a huge number of people, newspapers are an important source of information. 
2. Magazines are specialized advertising publications published weekly, monthly, quarterly, or annually. They provide educational information.
3. Print media is very effective at delivering messages to target audiences, as it allows for explanation in a way that most other media cannot.
4. They may be in the form of picture or photograph demonstrating how an offer should be used

 Additional Information​ 

   Other types of media:

  Broadcast Media:

• Traditional media such as television and radio are referred to as broadcast media.
• Television is one of the most important sources of information. It is one of the most authoritative and important forms of media because it has the ability to reach millions of people. 
• Radio broadcasts entertainment, information, and instructional programming to the general public via radio waves. Because of its large viewership, this medium is frequently utilized to market products and services.

  Digital  Media:

• Digital marketing, also known as online marketing, is the promotion of brands through the internet and other forms of digital communication in order to connect with potential customers. As a marketing channel, this includes not only email, social media, and web-based advertising, but also text and multimedia messages.

   Out of Home (OOH) Media: Outdoor advertising, often known as out-of-home (OOH) media, is advertising that appears outside your home.

• Mall advertising, fitness clubs, cinemas, gas stations/convenience stores, stores, trackside advertising, salon advertising, laundromat advertising, pizza boxes, coffee cups, pharmacy bags, and so on are examples of non-traditional OOH.
• Billboards, Posters, Buses, Commuter Rail & Subway, Transit Shelters & Street Furniture, Taxis, Airport Media

Hence, the correct answer is- Print is very effective at delivering messages to target audiences, as it allows for explanation in a way that most other media cannot.

A manager is someone who coordinates and supervises the work of others in order to achieve organisational goals. Even when a good answer has been identified to an issue, creative problem solving fosters a willingness to keep seeking alternative methods.

Key PointsConceptual blocks and divergent thinking are creative problem-solving characteristics of effective managers.

Conceptual blocks are either pre-established techniques or customary human behaviours that might provide dull or inadequate solutions. The four major conceptual blocks are:

• Constancy
• Commitment
• Compression
• Complacency

Divergent thinking, also known as lateral thinking, is the act of coming up with several, original ideas or solutions that are connected to an issue the organisation is attempting to address. In that sense, it entails generating numerous ideas to address a single issue. Divergent thinking is comparable to brainstorming.

Important Points

B. Conceptual blocks: Effective managers are aware of conceptual blocks, which are mental barriers that can hinder creativity and problem-solving. They actively work to overcome these blocks by challenging assumptions, thinking outside the box, and embracing diverse perspectives.

C. Divergent thinking: Effective managers demonstrate divergent thinking, which involves generating multiple ideas, exploring different possibilities, and considering various perspectives. They encourage creativity and innovation in problem-solving by exploring unconventional approaches and encouraging team members to think creatively.

Thus, the correct answers are B and C only.