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Listening. Learning. Leading.e

M a}or
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Tests

MAJOR FIELD TEST IN BUSINESS

SAMPLE QUESTIONS
The following questions il lustrate the range of the test in terms of the abilities measured , the di sci plines covered, and the
difficu lty of the questions posed. They should not, however, be considered representative of th e entire scope of the test
in either content or difficulty. An answer key follows the questions.
I.

In marketing research, a firm might cons ider using

secondary data over primary data because
~

secondary data usually cost less

(B) secondary data are usually more accurate
(C) primaty data are usually non specifi c
(D) primary data are Iikely to be outdated

2.

4.

In organizational decision maki ng, managers are

ab le to exercise the greatest degree of di scretion in
the
)
(B)
(C)
(D)

3.

direct production labor is paid $4 per hour. Fixed

supervisory costs are $2,000 per month and Dreamland
rents its factory on a fi ve-year lease for $4,000 per
month . All costs are considered costs of produ ction.

enforcement of internal policies

settlement of legal di sputes
restru cturing of outstanding loans
compliance with federal regulation s

The term "net working capital " refers to

(A) inventories, receivables, and current notes and
investments
(B) assets divided by liabi liti es
~ ) current assets less short-term li abiliti es
(D) net assets left over after subtracting cost of
goods so ld

How many pillows must Dream land produce and

se ll each month to earn a monthly gross profit of
$1 ,000?
(A) 300
(B) 350
(C) 600

(p) 700
5.

Another firm has offered to produce "Old Softy"

pillows and sell them to Dream land for $ 12 each.
Dreaml and cannot avo id the factory lease
payments, but can avo id all labor costs if it does
not produce these pillows. Under these conditions,
how many "Old Softy" pillows must Dreamland
se ll to earn monthly gross profi ts of $ 1,000?
(A) 4 17
(B) 500

(
625
(D) 875

Questions 4-5 are based on the following information.

Dream land Pillow Company sell s the "Old Softy"

model for $20 each . One pillow requires two pounds of
raw material and one hou r of di rect labor to
manufacture. Raw materi al costs $3 per pound and

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write to the Permi ssions Admini strator at Educational Testing Service, Princeton , New Jersey 0854 1

6.

Which of the following statements abo ut the tort of

negligence is true?
(A) It cannot be used as a basis fo r li ability for

defective products.
(B) It is a strict liability tort with no defenses.
(C) It requires proof of some intentional
conduct.
It req uires proof of breach of a statutory or
com mon-l aw duty.
7.

Which of the following statements about a systems

flowchart is true?
(A) It is used in systems design to define and

describe each piece of data.

(B) It is a method of writing programs using
only three basic constructs: sequence,
selection, and repetition.
t It documents the sequence of processing
steps that take pl ace in an information
system.
(D) It documents the logical design of an
information system .
8.

On May 3 1, Company O' s general ledger shows a

cash balance of $S, 123 . The May 3 1 bank
statement shows a balance of$4,90S. Other
information is availab le as fo ll ows :
I.

2.

3.

A May 3 1 deposit of$300 does not

ap pear on the bank statement; but a
$3 service charge does.
A customer 's $40 insufficient funds
check has been returned with th e
bank statement.
Outstanding checks of $10, $ IS , and
$ 100 are identified on May 3 1.

What is the correct cash balance on May 3 1?

9.

Within the context of the cap ital asset pricing

model (CAPM), the risk measure known as beta is
often com puted by regressing the return of the
company' s stock again st the
(A) return on the company's bonds
i) return on the market portfolio

(C) change in the gross domestic product

(D) change in the consumer price index
I0. A project consists of ISO jobs. The expected
completion tim e for each job is given in days. The
project has three critical paths with two jobs in
common , J and K. In order to finish the project
one day earl y, th e co mpl et ion time should be
reduced one day for
(A) each of the ISO jobs
(B) each of the jobs on the three criti cal paths
) either Job J or Job K
(D) both Job J and Job K

II. The Organization of the Petro leu m Exporting

Countri es (OPEC) reduces production by
I 0 percent, and the growth rate of the world
economy begins to escalate. How will the
si multaneous occurrence of these events affect the
equi librium price and quanti ty in the world
petroleum market?
(A) Price will increase, but quantity will remain
un changed.
Price wi ll increase, but quantity is
indeterminate.
(C) Quantity wi ll increase, but price is
indeterminate.
(D) Both pri ce and quantity wi ll increase.
12. Which of the following would most likely occur as
a resu lt of the United States government's
imposing tariffs on foreign stee l imports?

(A) $4,90S

(A) The pri ce of steel produced in the United

B) $S,080
(C) $S, I66
(D) $S,204

States wou ld decrease.

(B) The pri ce of imported steel in th e United
States wo uld decrease.
) Employment in the Uni ted States steel
industry would increase.
(D) Government tax revenue would fall.

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13. In an economy the unemployment rate is 10

percent and the inflation rate is I percent. An
app ropriate fi scal policy in thi s phase of the
bus iness cycle woul d be to

18. Ln the statement of cash flows, the section for cash

fl ows from o perating acti vities wi ll inc lude w hich
of the fo llowing?
(A)
(B
)
(D)

increase govern ment spend ing

(B) increase income taxes
(C) decrease transfe r pay ments
(D) decrease the mo ney sup ply
14. Whi ch of the fo ll owi ng is an appro priate Federal
Reserve actio n to stimul ate th e United States
economy?
(A) Se lling governm ent bonds on the open
market
(B Increas ing the di scount rate
) Red ucing the reserve req uirement
(D) Cutti ng taxes
I 5. If th e spread betwee n the spot and fo rward
exchange rates of two currencies eq ual s the
interest rate di ffere nce between the two coun tries,
this phenomenon is referred to as
(A) pu rchas ing-power equality
(B) co mmodi ty arbitrage
(C currency hedgi ng
interest-rate pari ty

e)

16. A fi rm that wo uld like to know whether it has

enough cash to meet its bills wo uld be most likely
to use w hi ch category of fi nancial ratio?
( )
(B)
(C)
(D)

Liquidi ty
Leverage
Effic iency
Profitabili ty

17 . In a period of ri sing pri ces, which in ventory

valuation method wo uld genera ll y yield both th e
lowest ending inve nto ry va lue and the lowest net
income fig ure?
(A)
)
(C)
(D)

First in , fi rst out (FIFO)

Last in, firs t o ut (LIFO)
Weighted average
Standard cost

Di vidends paid
Iss uance of commo n stock
A dec rease in acco unts payable
Purchase of a building fin anced entire ly by a
mortgage

19
et income
Deprec iation expense

$ 100,000
$1 0,000

et increase in acco unts

receivabl e

$5 ,000

Net increase in acco unts

payable

$3 ,000

O n the bas is of the informati on provided in the

table above for a corporation, the corporat ion ' s net
cash fl ow fro m operatin g activities for the current
yea r is

(A) $98,000
(B) $ 102,000
$ 108,000
(D) $ 118 ,000
20 . All of the fo llowi ng are tru e regardin g a se ller's
rights to redu ce lega l li ability in the sa le of no nconsumer goods EXCEPT:
(A) The se ll er can di sc laim consequentia l
damages if it is done clearl y and
conspi cuous ly.
(B) The sell er can limit the remedy available to
the buyer if he or she does so clearl y and
fa irly.
(C) The se ller can place reaso nable conditions
on the warranty coverage and a shorter time
limit of warranty coverage .
(D) The se ller can di sclai m all impli ed
warranties by simply stati ng th at there are
no implied wa rranties .

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only. No commercial or furt her distribution is permitted. Other persons or agencies wishing to obtain permiss ion to reprod uce this material may
write to the Perm issions Adm ini strator at Educational Testing Servi ce, Princeton, New Jersey 0854 1

2 1. Green des ires to form a new co mpany to

manufac tu re lawn mowers. Green is concerned
about having his personal assets exposed to
liab ility fo r the new company's contracts and torts.
Furthermore, he wants to retain control over the
company's operations and growth fo r th e next few
years. He will need an infusion of equity capital to
begin operations. He hopes to take the company
public in about fi ve years if it is advantageous to
do so at the time. Whi ch of the fo ll ow ing types of
business assoc iations would be best for Green 's
new company?
Corporation
B) General partnership
(C) Limited partnership
(D) Member-managed limited- li abili ty
company
22. Human reso urce staff spec iali sts should attempt to
(A) prov ide adv ice, but not service, to line
managers
) faci litate the fun ctioning of line managers
(C) se lect all superv isors and middle managers
(D) relieve line managers of fi nal
responsibility in personnel matters
23 . A de partment manager te lephoned two managers
in other departments to di scuss a cost savings idea
that would benefi t their departments as well as her
own. Whi ch of the follow ing most accurately
defin es th e communicati on channe l that the
manager was using?
(A
(
(C)
(D)

Upward
Lateral
Downward
Hierarchical

25. When a domestic firm permits a fo reign company

to manufac ture and sell its prod uct in exchange fo r
a fee or royalty, the process is termed
(A)
(B)
( ~
(D)

importing
ex porting
li censing
countertrading

26 . An information system that enabl es all busin ess

departm ents in the same fi rm to share relevant
in fo rm ation and data is called
~ an enterpri se resource pl ann ing (ERP) system
B) a materi al requirements planning (MRP)
system
(C) a decision support system (DSS)
(D) a point-of-sa le (POS) system

27. The central process ing unit (C PU) in a personal

computer contains the
(A)
B)
(C)
(D)

control unit and memory

control unit and arithmeti c/log ic unit
arithmetic/logic unit and bus
arithm etic/log ic unit only

28. Which of the fo llow ing is OT a component of

time series data?
(A)
(B)
(C)
(D)

Sec ular trend

Centered mov ing average
Seasonal variation
Mi sce ll aneous or irregul ar vari ation

29. Family branding refers to a group of

24. Based on his scientifi c management th eory,

Frederick Tay lor developed what pay principl e?
(A

Hourly pay
Incentive pay
(C) Profi t sharing
(D) Monthly salary with bonus

Confi dentia l and Prop rietary. Copyri ght

(A) si mil ar brands of products from di fferent

makers
(B) different brand s of products from differe nt
makers within the same in dustry
( ) di ffe rent products marketed under a si ngle
brand name
(D) simil ar products so ld by small , family-owned
fi rms

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Permission to reproduce this document is hereby granted to institutions (colleges and universities) administeri ng the Major Field Tests for internal use
only. No commercial or further di stribution is permi tted . Other pe rsons or agencies wishing to obtain permission to reproduce this material may
write to the Permissions Administrator at Educational Testing Service. Princeton. New Jersey 0854 1

30. Sai nt Martin Hospital boasts o ne of the world 's

lead ing medical imaging programs. Its radi o logy
department specializes in th e early detection of
particularly serious f01ms of stomach, intesti na l,
and colon cancer. The hospita l plans to invest in a
new system of digital medica l imagi ng and im age
transmissio n technologies th at w ill enabl e its
radio logists to v iew and evaluate intestinal scan
results from anywhere in the world.
With this investment, the hospital is atte mpting to
overcome whi ch ofthe constra ints of servi ces
marketing?
(A) Inventory
(B) Intang ibility
(C) Inconsistency
(
Inseparability
3 1. Ln a large firm , the pool of applicants for the
positions of sales manager and sales associate
consists of three men and three wo men. If each
cand idate has an eq ual chance of being se lected ,
what is the probability th at both positions will be
fi ll ed by men?
) 0.20
(B) 0.25
(C) 0.33
(D) 0.50

Question s 32 - 34 refer to the information below.

Priceless Treasures sells antique jewelry from two
retai l locations in Baltimore, Maryland. About 40% of
Priceless Treasures' sales are from its two retail outlets.
Another 35% of sa les are business-to-business
transactions wit h other retai I j ewelers, and 25% of sales
are fro m the firm's cata log that it sends to over 4,000
households across the Un ited States.
The firm ' s catalog business is especiall y difficult to
support for a number of reasons:

New items are often he ld in inve ntory for

two to three months before appearin g in
the quarterly catalog .

Priceless Treasures ' owner, Sall y Thornton, wishes to

replace the catalog with a Web-based catalog through
w hi ch custo mers can order on line or through a toll-free
tele phone call. However, she is concerned that her
customers might not adapt quick ly to We b-based
transactions, and, therefore, sa les will fall.
Ms . T hornto n wishes to conduct a market research
project to explore these issues . She defines the research
problem to be determining how Priceless Treasures'
target custo mers wo uld respo nd to a Web-based
cata log approach .
32 . From data co llected by the retail jewelers' trade
assoc iatio n, Ms. Thornton learns that sales of
antique jewelry are rising and that the most
common purchasers are o lder, upper-income
coupl es . Though initi ally reluctant to purchase
on line, th ese customers are beginning to overcome
their concerns . From United States Census Bureau
data, she learns that this pop ulatio n segment is
growi ng in number and w ill contin ue to do so
throughout the next two decades. At thi s point
what shou ld Ms . T hornton do?
(A) Summarize the research fi ndings and
recommend implementing the Web-based
catalog as the firm ' s market is clearly
grow ing.
Collect primary data to determine whether
these trends and preferences are reflected in
Priceless Treasures ' customer base .
(C) Co llect primary data on competitors to
determine whether the electroni c market for
antique jewelry is saturated.
(D) End the study and retain the current system
as the major customer segment is clearly
skeptica l of onlin e retailers .

Each item must be presented acc urate ly

and tastefu ll y in the cata log, increasing
production time and expense.
When an item se ll s, there is no
rep lacement, thus many catalog o rd ers
must be returned or refused whe n ord ered
items have a lready been sold .
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only. No commerc ial or further di stribution is permitted . Other persons or agencies w ishing to obtain permission to reproduce thi s mate rial may
write to the Perm issions Administrator at Educati ona l Testing Service, Princeton, New Jersey 0854 1

33. In order to collect relevant primary data, Ms.

Thornton wishes to conduct a survey of her current
customers. To save time and money, she wishes to
conduct the survey via a Web-based form that
saves responses to a database. ln this situation,
what is the most significant problem with using
this method of administering the survey rath er than
a traditional mail approach?
(A) Respondent bias: respondents may not
answer the survey truthfully, hence data
may be inaccurate .
Nonprobability sampling: customers who
do not use the Internet will not be in the
sample, hence correct inferences may not be
possible.
(C) Survey length: respondents will not be ab le
to see the entire survey and thus may
answer only part of it, hence data will be
incomp lete.
(D) Question complexity: Web-based surveys
can not prevent multiple or inappropriate
responses to complex questions, hence
some data may be co rrupted.

34. Because pictures of products, either in print or on

the Internet, can differ from the actual appearance
of a pi ece of jewe lry, Priceless Treasures'
customers are sometimes surpri sed by items they
have purchased. To reduce customer
dissatisfaction, the firm 's customer service
representatives call customers to answer any
questions they have, confirm their sati sfaction with
the purch ase, and communicate the firm 's
refund/return policies. With this effort, the firm is
seek ing to influence the consumers ' purchase
dec ision process by
(A) stimulating customers to recognize a need of
which they were previou sly unaware
(B) fac ilitating an information search by provi ding
new inform ation
(C) influencing alternative assessment by
emphas izing the value of the purchased item
(D) reduci ng cognitive di ssonance through the
reassurance of personal contact

Answer Key
I.

2.
3.
4.
5.
6.
7.
8.
9.
10 .
II.

12.
13.
14.
15.
16 .
17 .

A
A

c
0

c
0

c
8
8

c
8

c
A

0
A
8

18 .
19.
20.
2 1.
22.
23.
24.
25 .
26.
27.
28 .
29.
30.
31.
32.
33 .
34.

c
c
0
A
8
B
B

A
8
8

0
A
B
B
0

Co nfidenti al and Proprietary . Copyri ght 20 I 0 Education a l Testing Service

Permission to reproduce this document is hereby granted to institutions (colleges and universities) adm ini stering the Major Field Tests for internal use
only. o commercial or further di stri bution is permitted. Other persons or agencies wishing to obtain permission to reproduce thi s material may
write to the Permiss ions Admi ni strator at Educati onal Testing Serv ice, Princeton, New Jersey 0854 1