10. Finance and accounting (A Level)
A section of Business Studies, 9609
Listing 10 of 23 questions
Budding Gardens (BG) BG is a partnership owned and managed by Barry and Michael. BG is in the tertiary sector. BG is a landscape gardening business. Its revenue comes from two main services that it provides to customers: Landscaping – BG redesigns customers’ gardens, for example by adding new features such as water fountains or seating areas Basic gardening services such as digging and grass cutting. Barry and Michael work well together. Barry deals with marketing and agrees contracts and prices with customers. He also manages the finances. Michael focuses on the technical side of the business such as garden design. He also has responsibility for the four full-time employees. Michael has come to Barry with a problem. One of the large lawnmowers used to cut grass has broken down and needs replacing. The cost of the new lawnmower machine will be $10 000. Michael has asked Barry if there is finance available for capital expenditure. Barry needs to determine the best source of finance to use for the new lawnmower. BG has a low level of working capital. Barry has been looking at the latest financial accounts (see Table 3). Table 3: Extract from the income statement for the year ended 31 May 2017 $000s Revenue Cost of sales Expenses Profit for the year One of BG’s competitors, LawnsRus, has recently been in trouble. A customer made a serious complaint about damage that an employee caused whilst mowing her lawn. The business had to pay a large amount in compensation to the customer. Barry believes that this may increase demand for BG’s services in the local market. Define the term ‘demand’ (line 26). Briefly explain the term ‘tertiary sector’ (line 1). Refer to Table 3. Calculate the gross profit margin. Explain one way that BG could improve its profit margin. Analyse two possible sources of finance that BG could use for the new lawnmower. Discuss the advantages and disadvantages to Barry and Michael of the business being a partnership.
9609_s17_qp_23
THEORY
2017
Paper 2, Variant 3
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Hannah’s Handbags (HH) Hannah started HH six years ago. HH operates in a niche market providing unique bags. The bags are made using job production. As demand grew for the bags, Hannah took on a partner, her brother Kwom. They both agreed to keep the name ‘Hannah’s Handbags’ as it is an established, reputable and widely recognised brand. HH operates from a small workshop and showroom. Customers are encouraged to visit the showroom to discuss design and materials with either Hannah or Kwom. HH employs four highly skilled specialist production staff. Table 2.1 shows an extract from the latest income statement. Table 2.1: Extract of financial data for HH (year ended 30 October 2019) $000 Revenue Cost of sales Expenses A new product Hannah and Kwom would like to expand the business by producing a limited number of batch produced bags to sell online. Hannah has noticed other bag producers do this successfully. The new market has many more competitors, with 15 large businesses and many small ones. The bags would have to be priced competitively. Kwom estimates that this new venture would require additional finance of $350 000. HH would also require a specialist IT provider to set up a website and a marketing agency to run a viral marketing campaign. Define the term ‘income statement’ (line 8). Explain the term ‘viral marketing’ (line 20). Refer to Table 2.1. Calculate the gross profit margin. Explain one reason why HH needs accurate cost data. Analyse one advantage and one disadvantage to HH of using job production. Evaluate the likely success of the marketing mix for the new product.
9609_s20_qp_21
THEORY
2020
Paper 2, Variant 1
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Seaside Hotel (SH) SH is a large hotel located in a tourist area of country H. SH has 120 rooms and employs 42 workers during the peak season which is from April to September. Table 2.1 shows employee data for SH’s peak season. Table 2.1: Employee data for SH’s peak season Type Number Main tasks Manager • decision making • supervising other employees Cleaner • cleaning rooms, corridors and reception area to required standard • maintaining a clean and safe working environment Customer service • greeting guests upon arrival • making sure guests are satisfied Marketing • designing promotional materials • promoting hotel to increase number of guests Other • various SH makes half of the cleaners and customer service employees redundant at the end of the peak season. To break even, the hotel must sell 72 rooms per night. The hotel offers good views of the sea and it is very busy in the peak season when the weather is hot. Table 2.2 shows SH’s sales of rooms. Table 2.2: SH’s sales of rooms 2021–2022 Time period Average percentage of rooms sold per night April 2021 – September 2021 95% October 2021 – March 2022 45% SH does not have a restaurant. It has a joint venture with a restaurant close to the hotel where SH’s customers receive a discount on their food and drink. The hotel advertises the restaurant on social media and the restaurant advertises the hotel on its menu. Tia is one of the managers of SH. She has an autocratic leadership style and is responsible for the cleaners and marketing employees. The directors of SH aim to increase the value added to the service that SH provides. Define the term ‘redundant’ (line 16). Explain the term ‘joint venture’ (line 25). Refer to Table 2.2 and any other information. Calculate the average margin of safety from April to September 2021. Explain two possible limitations to SH of using break-even analysis. Analyse one possible advantage and one possible disadvantage to SH of Tia’s autocratic leadership style. Recommend how SH could increase the value added to its service. Justify your recommendation.
9609_s22_qp_22
THEORY
2022
Paper 2, Variant 2
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Exam Success (ES) Amaya is a sole trader who owns and manages ES. Amaya was a teacher for 20 years. She decided to leave teaching and start up ES to offer individual tuition for students in their own homes. For the first year, Amaya was the only worker, tutoring students for Business qualifications. In the second year she used methods of selection to choose two teachers to join her team. This meant that ES was also able to offer individual tuition in Mathematics and Science. ES has now been trading for five years. Fig. 1 shows the revenue for ES from the first five years of trading. Fig. 1: Revenue for first five years of trading ($)  <HDU <HDU <HDU <HDU <HDU          Amaya is concerned about the fall in revenue for individual tuition in students’ own homes. She has forecasted a fall of 20% in revenue for Year 6. In response to this, Amaya has done some secondary market research using web-based sources to find out the information shown in Table 1. Table 1: Market information Households with a reliable Internet connection 75% Number of competitors providing tuition in students’ homes Number of businesses selling Internet tuition courses Average profit margin for tuition in students’ homes 15% Average profit margin for Internet courses 35% Based on this market research, Amaya has an idea to develop a new range of Internet courses. Each student would pay a monthly fee to ES to be able to access the courses on a website. Amaya will need to pay a business to create the website for ES but she believes that, if the Internet courses are successful, they could be sold across the whole country. Define the term ‘sole trader’ (line 1). Briefly explain the term ‘methods of selection’ (line 4). Refer to Fig. 1 and information on lines 10–11. Calculate the forecast revenue for Year 6. Explain two ways Amaya might increase the forecast revenue. Analyse one advantage and one disadvantage to Amaya of using web-based sources of market research. Recommend whether Amaya should develop a new range of Internet courses. Justify your view.
9609_w16_qp_23
THEORY
2016
Paper 2, Variant 3
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Swimming Pools (SP) SP is a public sector organisation. SP operates many swimming pools across country X. The main objective for SP is to provide a quality service to the local community. Each swimming pool is used by consumers from different market segments (see Table 1). Table 1: SP’s market segments Market segment Time when pool is used by this segment Schools which rent the pool for swimming lessons Daytime Children for fun swimming Weekends Adults for fitness swimming Evenings SP currently uses price discrimination. Most of the swimming pools have a steady demand throughout each week. One of SP’s swimming pools, The Lido, is currently making a loss. Table 2 shows the income statement for The Lido for the last 12 months. Table 2: Extract from The Lido’s income statement ($000s) Revenue Cost of sales Gross Profit SP Head Office allocated costs* Overhead expenses Profit/for the year (30) *Each of SP’s swimming pools must pay for some of the Head Office costs The Lido is based in an area with many schools that are under the control of the government. Unemployment in the area is high. The manager has reduced the price for customers who are under 18 years old or do not have a job. Define the term ‘market segment’ (line 3). Briefly explain the term ‘public sector organisation’ (line 1). Calculate the gross profit margin (%) for The Lido. Explain how one stakeholder of SP might be affected by The Lido making a loss. Analyse one advantage and one disadvantage to SP of using price discrimination. Recommend whether SP should close The Lido. Justify your answer.
9609_w18_qp_21
THEORY
2018
Paper 2, Variant 1
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Fish and Chips (FC) Min is a sole trader who is the owner and overall manager of FC. Min started the business as a restaurant but FC has grown so that it now operates in the primary, secondary and tertiary sectors. Min sees this as FC’s unique selling point (USP). Min allocates costs and revenues to each section of the business. She then calculates the profit margin for each section (see Table 3). Table 3: Overview of FC Sector Activity Employees Annual revenue ($000s) Profit margin Primary Catching fish using FC’s own boat 1 captain 2 fishermen 2% Secondary Cooking fish in FC’s own kitchen 1 head chef 2 assistant chefs 1% Tertiary Serve the cooked fish with chips and vegetables in FC’s own restaurant 1 restaurant supervisor 3 servers 1 cleaner 15% Min considers herself to be an excellent manager, having studied business at university. She manages her employees using Herzberg’s motivation theory. Min has had an objective of growth but she is now happy with the size of FC. She intends to change the objective to profit maximisation. Define the term ‘unique selling point (USP)’ (line 3). Briefly explain ‘Herzberg’s motivation theory’ (line 18). Using Table 3, calculate the total annual profit for FC. Explain one problem that Min might have in allocating costs. Analyse two appropriate ways that could be used to measure the size of FC. Evaluate which stakeholders might be most affected by the change in FC’s business objective from growth to profit maximisation.
9609_w18_qp_23
THEORY
2018
Paper 2, Variant 3
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Questions Discovered
23