4.2. Inventory management
A subsection of Business Studies, 9609, through 4. Operations management (AS Level)
Listing 10 of 25 questions
Zoe’s Bags (ZB) Zoe’s Bags (ZB) is an online retailer that makes and sells a range of luxury hand-made bags. The business was set up three years ago as a partnership by Zoe and her brother Luis and has grown each year. The bags are targeted at a niche market and made to customers’ orders. The business works closely with its main supplier of raw materials. ZB operates a just in time (JIT) inventory management system. All bags have a lead time of five days from when the customer submits the order. Following a magazine advertising promotion in January, orders grew by 50% in February to 1400 bags. Zoe and Luis found it difficult to organise the larger production team. A break-even chart for February is shown in . Units produced 10 000 20 000 30 000 40 000 50 000 60 000 70 000 Costs / Revenue ($) Total costs Fixed costs Sales revenue ZB’s break-even chart for February Due to the increase in orders, Zoe and Luis want to focus on developing the business. They recruited 2 supervisors to manage the 15 production employees. To support the new supervisors, Luis organised some off-the-job training. All production employees are currently paid a salary. However, ZB’s labour turnover has increased recently. One of the new supervisors has recommended that ZB should introduce performance-related pay. Zoe and Luis are currently considering this recommendation. Identify one feature of JIT inventory management. Explain the term niche market. Refer to and other information. Calculate the margin of safety in February. Explain one way that Zoe and Luis can use break-even analysis. Analyse two benefits to ZB of providing off-the-job training to the new supervisors. Evaluate whether ZB should introduce performance-related pay.
9609_m24_qp_22
THEORY
2024
Paper 2, Variant 2
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Magical Mirrors (MM) MM manufactures a range of mirrors using flow production. MM benefits from economies of scale. Ben and Mary, the owners of MM, changed the legal structure of the business two years ago from a partnership to a private limited company. They are the only shareholders of MM and have recently increased their investment in the company. There are long lead times from MM’s suppliers so MM maintains a high buffer inventory. This ensures that production can continue if there are any problems with deliveries. However, Ben is worried about the impact of high buffer inventories on MM’s finances (see Table 1). Table 1: Key financial data as at 31 May 2017 ($m) Inventory Trade receivables Trade payables Overdraft MM has two major human resource problems: MM’s labour turnover has been increasing and the number of people applying for jobs at MM is decreasing. MM currently pays high salaries to managers and high hourly rates to other employees. Mary has completed a survey of all MM’s employees. The survey showed the following results. • 45% of all employees stated that they had low motivation. The percentage was higher amongst employees who work in the production process. • 25% of all employees stated that the development of their skills was poor. Define the term ‘economies of scale’ (lines 1–2). Briefly explain the term ‘buffer inventory’ (line 6). Refer to Table 1. Calculate MM’s acid test ratio. Explain one way in which MM could improve its liquidity. Analyse one advantage and one disadvantage to Ben and Mary of changing MM from a partnership to a private limited company. Discuss how MM could solve its human resource problems.
9609_s17_qp_21
THEORY
2017
Paper 2, Variant 1
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Questions Discovered
25