5. Finance and accounting (AS Level)
A section of Business Studies, 9609
Listing 10 of 99 questions
Sadiq’s Social Restaurant (SSR) SSR is a small social enterprise located in a low-income inner city area. SSR employs young people who have not been successful at school. It aims to teach them valuable work skills and to help them gain qualifications, so that they have more chance of getting full-time employment elsewhere. SSR’s customers are very supportive of this social enterprise. They are willing to accept a slower service and a simpler menu in exchange for the chance to help disadvantaged young people gain qualifications. The current average price for a meal at his restaurant is $5.50, which is lower than local competitors. Sadiq, who manages SSR, wants to increase its size by opening a second restaurant so that he can help more young people. He relies on local schools and colleges to recommend young people for his enterprise. He has been told that there would be government grants available to pay for induction and training. Sadiq has identified two possible locations that he can rent for the second restaurant. Start-up capital would be from retained earnings and an overdraft facility from his bank. Table 2.1 shows forecast data about each of the locations. Table 2.1: Forecast data for each location City centre Edge of city Start-up capital costs $5000 $10 000 Monthly fixed costs $1000 $375 Average cost of ingredients (per meal) $1.50 $1.50 Other variable costs (per meal) $2.25 $1.30 Expected number of customers (per month) Table 2.2 shows additional information taken from Sadiq’s research. Table 2.2: Additional information for each location City centre Edge of city • Previously used as a restaurant • A range of other restaurants nearby • No parking facilities • Previously a non-food shop but has permission to convert to a restaurant • No other competition • Large car park Define the term ‘induction’ (line 12). Briefly explain the term ‘social enterprise’ (line 5). SSR uses cost-based pricing to add 60% to variable costs when pricing each meal. Refer to Table 2.1. Calculate the average price of each meal in the proposed city centre restaurant. Briefly explain one advantage to SSR of using cost-based pricing. Analyse two possible impacts on stakeholders of SSR if the second restaurant is successful. Recommend which location SSR should choose for its second restaurant. Justify your recommendation.
9609_m19_qp_22
THEORY
2019
Paper 2, Variant 2
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Designer Clothing (DC) DC is a medium sized private limited company. DC has three main shareholders. It has been trading for ten years. DC makes luxury dresses for women using job production methods. DC has an excellent reputation for quality. A DC designer has a meeting with every customer to design a dress that satisfies the customer’s individual needs, including choice of fabric and colour. Cost-based pricing is used with 50% added to the total costs. DC’s employees are highly skilled and paid hourly rates (a time based system). Ikram, one of the designers, has just had a meeting with a new customer, Lydia. She wants him to design and make a new dress for her. Ikram has worked out the following information for the dress. Table 1: Production data for the dress for Lydia Production time 20 hours Hourly rate (time based) $10 Material costs $250 Other costs such as packaging $50 Jenny, the Managing Director, wants to use DC’s excellent reputation and move into a new market. Jenny wants to create a new range of DC branded trousers for women. She has developed some elements of a marketing mix for the new trousers (see Table 2). Table 2: Elements of a marketing mix for the new trousers Product Quality trousers aimed at women aged 25-50 years Distribution channel Sold in large shops Promotion Branded with the DC logo Jenny is waiting for a market research report including feedback from a focus group. She thinks that the pricing strategy DC currently uses will not be appropriate for the new trousers. The new product range will be made using a batch production method. The Production Director, Khaleal, has identified the machinery needed for the new production method. Khaleal is worried about the problems that introducing the new production method will cause DC’s employees. Define the term ‘shareholders’ (line 1). Briefly explain the term ‘focus group’ (line 22). Refer to Table 1 and other information. Calculate the price of the dress for Lydia. Explain one payment method (other than time based) that DC could use to pay its employees. Analyse two human resource problems that DC might experience from the introduction of the new batch production method. Discuss a suitable pricing strategy that DC could use for the new range of trousers.
9609_s17_qp_23
THEORY
2017
Paper 2, Variant 3
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Jones Sticky Labels (JS) JS is a private limited company that produces sticky labels for the industrial market. JS was set up by Lucy Jones 15 years ago. The market for sticky labels is very specialised and there are no competitors within the home country because of low demand. However, the majority of JS’s customers are in other countries and the international market is much more competitive. JS owns one factory where all the sticky labels are manufactured. The business employs 300 workers on eight production lines. The sticky labels are designed using Computer Aided Design (CAD) and manufactured using batch production. When a customer wants sticky labels, JS will create a new design, send the design to the customer for approval and then order the materials required for production. Each design of sticky label is unique and will take different amounts of time and effort to produce. The typical lead time is four weeks. One of JS’s customers is a supermarket chain which puts sticky labels on many of its products. These range from promotional sticky labels that are put on products that need to be sold quickly through to small sticky labels that are put on fruit to identify their variety. JS has recently received an order from the supermarket chain for 50 000 sticky labels at a total price of $2750. The costs of producing these labels is shown in Table 1. Table 1: Cost data ($) Variable Costs: Cost of materials (per 1000 sticky labels) Cost of labour (per 1000 sticky labels) Fixed Costs: Administration cost Other allocated fixed costs The employees at JS are currently paid an hourly wage. Many employees object to this payment method because some jobs have worse working conditions than others and those who put more effort into their work are not rewarded. The employees have threatened to take action if a more suitable payment method is not introduced. Define the term ‘industrial market’ (line 1). Briefly explain the term ‘lead time’ (line 11). Refer to Table 1 and lines 16–17. Calculate the profit that JS would make on the supermarket order. Explain one possible problem of allocating fixed costs for JS. Analyse two advantages to JS of using Computer Aided Design. Evaluate suitable payment methods for the employees at JS.
9609_w17_qp_23
THEORY
2017
Paper 2, Variant 3
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UPlane Components (UC) UC is a private limited company providing engine parts for commercial aircraft. It uses batch production in factory A and flow production in factory B. As part of UC’s commitment to corporate social responsibility (CSR), it provides a training scheme for the long-term unemployed, based in factory A. UC’s products are sold to aircraft engine manufacturers. Demand for aircraft engines has increased by 45% over recent years. The aircraft engine manufacturers want inventory just when needed and are demanding a reduction in prices. In 2017, UC opened factory B which is 5 km away from factory A. Factory B has a high level of automation, resulting in low unit costs for the parts produced there. Production is capital intensive. UC has a plan to automate factory A. The production workers are not happy about this proposal and have asked for more details. The workers’ representatives have asked for a meeting with the human resource manager. In December 2019 a fault was discovered in one of the engine components supplied by UC and produced in factory A. UC had to recall 2000 parts at a cost of $200 000. This has had an impact on part of its triple bottom line and UC is unlikely to meet its targets. Table 1.1 shows some financial data for UC. Table 1.1: Financial data for UC Year ending 30 November 2019 ($m) Year ending 30 November 2020 ($m forecast) Revenue 5.8 6.4 Cost of sales 2.3 3.4 Expenses 1.3 1.6 Cost of recall - 0.2 Amjit, the human resource manager, believes that the fault was caused by the negligence of Jack, one of the production supervisors. Jack claims that he was made to work overtime to try and meet production targets. This caused him to become tired and make a mistake in one batch of parts. Amjit wants to dismiss Jack. Define the term ‘corporate social responsibility (CSR)’ (line 3). Explain the term ‘triple bottom line’ (line 15). Refer to Table 1.1. Calculate the forecast profit margin for the year ending 30 November 2020. Explain one likely effect on UC of a decrease in profit. Analyse two likely effects on the other employees if Jack is dismissed. Recommend whether UC should automate factory A. Justify your recommendation.
9609_w20_qp_21
THEORY
2020
Paper 2, Variant 1
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Gemini Theatre (GT) GT is a private limited company fully owned by the Gemini family. It owns a small theatre. This building is used to show live stage performances. Some of the performances are created by GT and some are created by visiting groups who rent the theatre. Table 2.1 shows the planned performances for January 2021. Table 2.1: Planned performances for January 2021 Name of performance Created by Number of performances Ticket price Percentage of tickets sold A Summer Dream Visiting group $40 100% Wise Owl GT $15 60% La Poeme Ballet GT $20 40% GT gains all the revenue from performances created by GT. Visiting groups must pay 50% of their total ticket revenue to GT. The theatre has a maximum of 250 tickets that can be sold for each performance. GT uses cost-based pricing to set each ticket price for its own performances. Each performance makes a profit but the company often experiences cash flow problems. GT needs to recruit a new Theatre Manager. The person hired will have many duties, including the responsibility for all of GT’s administration as well as some accounting. The Directors are considering two people who were both recently interviewed. Table 2.2 contains information gained from the interview process. Table 2.2: Information gained from the interview process Nick Portia • Three years working for a similar theatre business • A Levels in Business, Art and Chinese • Very organised and efficient • No management experience • Wants to move overseas in the future • Eight years working as a manager for a bank • No formal qualifications • Late for the interview • Good sense of humour • Looking for a long-term career Define the term ‘cost-based pricing’ (line 14). Explain the difference between ‘cash’ (line 15) and ‘profit’ (line 15). Refer to Table 2.1 and any other relevant information. Calculate the revenue GT will receive from all the performances of ‘A Summer Dream’ in January 2021. Explain one possible advantage to GT, other than increased revenue, of renting the theatre to visiting groups. Analyse two factors which might affect the demand for the performances at GT’s theatre. Recommend whether GT should employ Nick or Portia for the position of Theatre Manager. Justify your recommendation.
9609_w20_qp_22
THEORY
2020
Paper 2, Variant 2
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Questions Discovered
99