10. Finance and accounting (A Level)
A section of Business Studies, 9609
Listing 10 of 23 questions
Prestige Jewellery (PJ) PJ is a partnership operating in a small niche market. It was set up by Tariq and Tanbir five years ago. PJ manufactures and sells a range of jewellery. PJ specialises in using high quality diamonds in its product range. PJ has a manufacturing workshop at the back of its business premises. PJ also has a shop at the front of the premises where it sells directly to customers. PJ’s product portfolio includes bracelets, necklaces, rings and earrings. PJ’s unit cost is high as each product is handmade using job production. PJ employs four full-time production workers. PJ has an excellent reputation for quality. Customers visit PJ and have a ‘design consultation’ with either Tariq or Tanbir. During the consultation, customers choose the design, diamonds and gold for their product and agree a price. Customers pay a 25% deposit when they place an order. The lead time from design to delivery is typically four weeks. Tariq has extracted the following financial data from the latest income statement. Table 3: Summary financial data for PJ (year ended 30 June 2015) Revenue $400 000 Cost of sales $300 000 Tariq and Tanbir are planning to open a new jewellery shop in a neighbouring town. Tanbir understands the importance of selecting the right person to manage this new shop. This will be an important human resource management decision as they cannot risk any damage to the reputation of PJ. The new manager will need to recruit three employees for the new shop and be responsible for marketing of this shop. Tariq and Tanbir cannot agree on the best methods of selecting a new shop manager. Define the term ‘income statement’ (line 13). Briefly explain the term ‘human resource management’ (line 19). Refer to Table 3. Calculate PJ’s gross profit margin. Explain one benefit to PJ of accurate cost data. Analyse the advantages to PJ of using job production. Discuss the methods of selection that PJ could use to select a manager for the new shop.
9609_s16_qp_21
THEORY
2016
Paper 2, Variant 1
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Veg Cans (VC) VC is a public limited company which produces canned vegetables. VC is supplied with fresh vegetables by 20 farms. VC processes and packages the vegetables in cans. These are then sold to food retailers. VC sells over 50 varieties of canned vegetables. Each year the Board of Directors analyses sales figures and decides where each variety is on the product life cycle. The directors then base their marketing decisions on this information. VC has recently published its statement of financial position (Table 3). Table 3: Extract from VC’s statement of financial position $m Non-current assets Current assets Current liabilities Non-current liabilities Equity The Board of Directors of VC want to use retained earnings to pay for a new factory that can package and freeze vegetables. These frozen vegetables will be sold through the same channel of distribution as VC’s current products. Market research has suggested that VC’s customers want a range of frozen vegetables that are convenient for consumers to use at home. The new factory will require a manager. A job advertisement has been created (see Fig. 1). Fig. 1: Job advertisement for manager of the new factory Manager required An experienced manager is required for a new factory producing frozen vegetables. The successful applicant will have: • a good degree from a university in a business subject • the ability to motivate employees • the ability to manage inventory • finance and accounting skills. Define the term ‘retained earnings’ (line 15). Briefly explain the term ‘public limited company’ (line 1). Calculate VC’s working capital. Explain two ways in which VC could increase its working capital. Analyse two methods of selection VC could use when choosing a new manager for the factory. Evaluate the usefulness of the product life cycle to VC when making marketing decisions.
9609_s18_qp_21
THEORY
2018
Paper 2, Variant 1
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Nearly New (NN) NN sells second-hand computers. NN is owned by Nathan who is a sole trader. Nathan is a fully trained and qualified computer engineer. Nathan buys broken computers from large electrical retailers and repairs them. The repaired computers are then sold through NN’s website. Nathan uses a cost-based pricing strategy and adds 50% to the cost of the computer and the cost of repairs. Nathan currently works alone and has no employees. Nathan has recently purchased, for $2000, a batch of 20 laptop computers all of which have broken screens. Nathan thinks that each will cost $50 to repair and he hopes to make a profit from selling them. One of Nathan’s biggest problems is cash flow. Nathan pays for all of his inventory in cash and he must spend time repairing the computers before he can sell them. Customers expect a range of computers to choose from and expect next day delivery. This means that most of Nathan’s working capital is tied up in inventory. Sometimes Nathan is offered large batches of computers and he cannot buy them because he does not have the cash available. Nathan wants to recruit an employee to allow him to increase the production at NN. He has interviewed two potential employees and he has made some notes about their suitability (see Table 2). Table 2: Nathan’s notes on the potential employees Name Katy Sahdat Current income per year $20 000 $25 000 Industry experience Two years as a computer repairer for a large electrical retailer Ten years as a sole trader repairing computers Qualifications University degree in computer engineering No formal qualifications Age Skills • Repairing computers • Being organised • Repairing computers • Managing employees • Communication with customers Define the term ‘inventory’ (line 9). Briefly explain the term ‘sole trader’ (line 1). Calculate the total profit that Nathan would make if he sold the whole batch of repaired laptop computers (lines 4 to 8). Explain one advantage to Nathan of using a cost-based pricing strategy. Analyse two methods Nathan could use to improve NN’s cash flow. Recommend which one of the two potential employees Nathan should select. Justify your recommendation.
9609_w17_qp_22
THEORY
2017
Paper 2, Variant 2
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Cartoon Costumes (CC) Ava is an entrepreneur. After leaving school she set up CC as a private limited company and she owns 100% of the shares. CC sells ‘dressing up’ costumes for children using ecommerce. Each costume is based on popular TV and movie characters that appeal to children. CC owns a large sewing machine which Ava uses to create the costumes. Each costume is made from brightly coloured materials which CC purchases in bulk. Ava has to produce more inventory to grow the business. This can be expensive so Ava is thinking of using crowdfunding to finance this growth. CC has completed its second full year of trading. An extract from the statement of financial position is in Table 2.1. Table 2.1: Extract from CC’s statement of financial position at 31 August $(000) $(000) Non-current assets Current assets Current liabilities Non-current liabilities Reserves and equity Until recently CC operated from Ava’s house. However, two months ago she rented a shop in a shopping centre. Ava wants to recruit a salesperson for the shop so that she can concentrate on designing and making costumes. Details about the two best applicants are in Table 2.2. Ava must now decide who to employ. Table 2.2: Details about the two best applicants Liu Ahura Date of birth 12 February 2004 19 September 1975 Employment history • 2 years working part-time in a small retail food shop • 10 years as an actor • 10 years as manager of a large clothing shop • 5 years unemployed Highest qualifications A Levels in Business, Design Technology and Mathematics University degree in Acting Personal attributes • Good customer service skills • Likes working with other people • Highly motivated • Good administrative skills • Works well on their own Career ambitions • Would like to go to university • Would like to own a business in the future None Define the term ‘inventory’ (line 7). Explain the term ‘entrepreneur’ (line 1). Refer to Table 2.1. Calculate the change in CC’s working capital between 2021 and 2022. Explain the distinction between revenue expenditure and capital expenditure for CC. Analyse one possible advantage and one possible disadvantage to CC of using crowdfunding to finance growth. Refer to Table 2.2 and other information. Recommend which person Ava should employ. Justify your recommendation.
9609_w22_qp_22
THEORY
2022
Paper 2, Variant 2
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Questions Discovered
23