4. Operations management (AS Level)
A section of Business Studies, 9609
Listing 10 of 59 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 ($) Total costs Fixed costs Sales revenue ZB’s break-even chart for February Due to the increase in orders, Zoe and Luis want to focus on developing the business. They recruited 2 supervisors to manage the 15 production employees. To support the new supervisors, Luis organised some off-the-job training. All production employees are currently paid a salary. However, ZB’s labour turnover has increased recently. One of the new supervisors has recommended that ZB should introduce performance-related pay. Zoe and Luis are currently considering this recommendation. Identify one feature of JIT inventory management. Explain the term niche market. Refer to and other information. Calculate the margin of safety in February. Explain one way that Zoe and Luis can use break-even analysis. Analyse two benefits to ZB of providing off-the-job training to the new supervisors. Evaluate whether ZB should introduce performance-related pay.
9609_m24_qp_22
THEORY
2024
Paper 2, Variant 2
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Motorcycle Components (MC) MC is a large public limited company that produces a range of components used by motorcycle manufacturers. MC’s mission statement is ‘to be the world leader in delivering quality motorcycle components to our customers’. The motorcycle component industry is very competitive and MC’s customers expect high quality and a short lead time. MC operates a Just in Time (JIT) inventory control system. MC’s good relationships with its suppliers ensure that JIT operates efficiently. The production workers at MC are highly skilled and the business benefits from a low labour turnover. Liquidity management is very important in the motorcycle component industry. The industry average for the acid test ratio is 1. A summary of some key data for MC has been prepared by the Finance Director, as shown in Table 2.1. Table 2.1: Summary financial data as at 30 April 2022 ($ million) Trade receivables Cash Inventory Trade payables Other current liabilities The Operations Director, Jay, is proposing new capital expenditure of $4 million. Jay thinks that automation of the production process will have significant financial benefits for MC. He wishes to gain approval from the Board of Directors to implement a process innovation project. Jay believes that, with good communication and the involvement of employees, he can effectively manage the project. Define the term ‘lead time’ (line 5). Explain the term ‘mission statement’ (line 2). Refer to Table 2.1. Calculate MC’s acid test ratio. Explain one reason why the acid test ratio is useful to MC’s Finance Director. Analyse two benefits to MC of Just in Time (JIT) inventory control. Evaluate the possible impact on MC from introducing process innovation.
9609_s22_qp_21
THEORY
2022
Paper 2, Variant 1
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Great Desks (GD) GD is a co-operative owned by all of its employees. It manufactures desks for schools, offices and home use. The products are handmade using job production. GD uses just in time (JIT) inventory control. GD operates in a highly competitive market and uses personal selling to promote its products to wholesale and retail outlets. GD’s employees accept low salaries as most of their income comes from a share of profits at the end of the year. Following five years of rapid growth in sales and profits, GD plans to open its own retail shop. This is because the number of people who work from home is predicted to grow, which will lead to higher demand for desks for home use. GD will need $2m to open the shop. GD’s forecast cash flow from 2023 to 2025 is shown in Table 2.1. Table 2.1 GD’s forecast cash flow 2023 to 2025 ($m) Cash inflow Revenue 4.0 6.0 9.0 Total inflow 4.0 6.0 9.0 Cash outflow Utilities (power, water etc.) 1.5 1.5 2.0 Employee costs 0.5 0.5 0.5 Purchases 2.0 3.5 4.5 Marketing 3.0 5.5 5.0 Total outflows 7.0 11.0 12.0 Net cash flow (3.0) (5.0) Opening balance 9.0 6.0 Closing balance 6.0 1.0 GD’s employees are concerned about the management style of Steve, the Managing Director, who they say: • spends too much time trying to make people happy rather than solving problems • responds to opinions rather than setting long-term plans • fails to recognise threats to the business and does not see the need for new ideas • takes decisions on the votes of employees rather than the merits of the arguments. Identify one advantage to a business of using job production. Explain the term just in time (JIT). Refer to Table 2.1. Calculate GD’s forecast closing balance in 2025. Explain one disadvantage to GD’s employees of it being a co-operative. Analyse two sources of finance GD could use to open its new shop. Evaluate whether Steve’s management style will contribute to GD’s future success.
9609_s23_qp_23
THEORY
2023
Paper 2, Variant 3
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Questions Discovered
59