Praxis 5101

Explanation

Economies of scale refer to the cost advantages a business obtains due to expansion, where the cost per unit of output decreases as the scale of production increases. Fixed costs are spread over more units, and efficiencies in labor and processes develop. A is incorrect because diseconomies of scale describe the opposite situation, where per-unit costs rise as a firm grows too large and becomes inefficient. C is incorrect because diminishing marginal returns refers to the point at which adding more of one input yields progressively smaller increases in output, not a reduction in per-unit cost from spreading fixed costs. D is incorrect because 'variable cost reduction' is too generic a term and does not specifically capture the concept of cost advantages gained through increased scale of production.

Explanation

Unity of command is Fayol's principle specifying that each employee should have only one direct supervisor to prevent conflicting instructions and maintain clear accountability. A is incorrect because unity of direction refers to the idea that all activities with the same objective should be directed by one manager using one plan — it addresses group activities rather than individual reporting relationships. B is incorrect because scalar chain refers to the clear line of authority from top management down to the lowest level of the organization, resembling a chain of command structure. D is incorrect because authority and responsibility is Fayol's principle that managers must have the authority to give orders but must also accept responsibility for their decisions — it does not address the number of supervisors an employee reports to.

Explanation

Return on assets (ROA) measures how efficiently a company uses its total assets to generate net income. It is calculated as net income divided by total assets and expressed as a percentage. A higher ROA indicates more efficient asset utilization. A is incorrect because the current ratio measures short-term liquidity — the ability to cover current liabilities with current assets — not asset efficiency in generating profit. C is incorrect because the debt-to-equity ratio measures financial leverage and capital structure, not the efficiency with which assets generate profit. D is incorrect because gross profit margin is calculated by dividing gross profit by revenue (net sales), not by total assets, and it measures the profitability of production after direct costs, not overall asset efficiency.

Explanation

When NPV and IRR conflict in mutually exclusive project decisions, NPV is the preferred criterion because it measures the absolute increase in firm value in dollar terms. Project A's NPV of $45,000 exceeds Project B's $38,000, meaning Project A adds more value to the firm. A is incorrect because while IRR is a valid metric, it can be misleading when comparing mutually exclusive projects of different scales or with different cash flow timing; NPV is the superior decision rule in such cases. C is incorrect because a higher alignment with the required rate of return is not a valid selection criterion, and the reasoning is flawed. D is incorrect because a higher IRR does not always correspond to a higher NPV; this conflict is precisely why NPV is used as the tiebreaker in capital budgeting.

Explanation

According to Herzberg's Two-Factor Theory, motivator factors — such as achievement, recognition, the work itself, responsibility, and advancement — are intrinsic to the job and drive long-term satisfaction and motivation. Since the developers report repetitive work, lack of growth, and no sense of ownership, these are deficiencies in motivator factors, which should be addressed through job enrichment strategies. A is incorrect because salary and workplace safety are hygiene factors — their improvement prevents dissatisfaction but does not create lasting motivation or address the intrinsic concerns raised in exit interviews. C is incorrect because interpersonal relationships are also a hygiene factor and do not address the core issues of growth and ownership described by the employees. D is incorrect because health benefits and flexible schedules are hygiene factors, not motivators; while they may reduce dissatisfaction, they will not resolve the intrinsic motivational issues identified in the exit interviews.