CHW manufactures electrical products including cameras. The business is developing new products. The Managing Director knows that the stage of the product life cycle can influence CHW’s marketing decisions about promotion. He is analysing data for one of its products. An extract is shown in Table 3.1. The business would also like to introduce flow production into the factory. Table 3.1 Extract from CHW’s data for one type of camera (2021) Selling price per unit ($) Variable cost per unit ($) Fixed costs ($) Margin of safety Identify one benefit and one cost to a business of developing new products. Benefit: Cost: Calculate the break-even level of output for 2021. Show your working. Outline two ways CHW could increase its margin of safety. Way 1: Way 2: 1 17 Explain two ways in which the stage of the product life cycle might affect CHW’s marketing decisions about promotion. Way 1: Explanation: Way 2: Explanation: Do you think flow production is the best method of production for a manufacturing business to use? Justify your answer. [ 1 17

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THEORY

2022

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FlyAway is an airline business. It is in the tertiary sector. It offers low-price flights for business customers in country J. Customers have to pay extra for luggage and food on the flight. It is a very competitive market. The Marketing manager knows that improving customer service is important. Bookings and advertising are done through FlyAway’s ticket shops and its website. The Marketing manager cannot decide whether to close its ticket shops and use only e-commerce. Table 1: Selected information about two of FlyAway’s routes Break-even number of passengers per flight Average price per ticket ($) Average number of passengers per flight Route What is meant by ‘tertiary sector’? Calculate the revenue gained from an average flight on route 2. Identify and explain two ways in which break-even information could help FlyAway. Way 1: Explanation: Way 2: Explanation: 1 8 Identify and explain two ways in which FlyAway could improve customer service. Way 1: Explanation: Way 2: Explanation: Do you think FlyAway should use only e-commerce? Justify your answer. [ 1 8

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THEORY

2017

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HGH makes truck engines using batch production. Quality assurance is important. Last year profit decreased by 30%. The Managing Director has decided to close one of its two factories based on the information in Table 1. He said: ‘The problems are high energy costs and increased competition from imports. The Government should introduce measures such as import quotas to help protect businesses like us. If it does not then both factories may close'. Table 1: Cost and other information about the two factories Factory 2 Factory 1 Output per month Number of employees X Labour productivity per month Low High Level of trade union membership $300000 $200000 Rent of site per month What is meant by 'quality assurance'? Calculate the value of X from Table 1. Identify and explain two ways the Government might help HGH become more competitive. Way 1: Explanation: Way 2: Explanation: 1 9 Identify and explain one advantage and one disadvantage to HGH of using batch production. Advantage: Explanation: Disadvantage: Explanation: Recommend which factory HGH should close. Justify your answer using the information in Table 1. [ 1 9

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THEORY

2017

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Duckett makes cleaning products including washing powder using a range of chemicals. The Operations Director plans to relocate production to either country X or country Y. He said: ‘Environmental pressures and an increase in legal controls on marketing are the main reasons for relocating. We are operating at break-even output and we cannot afford to pay our 450 workers the increased minimum wage of $8 per hour. Many stakeholders will be affected.’ Table 2: Information about two possible locations that Duckett could choose for its new factory Country Y Country X $1 $4 Labour costs (per hour) $600 $3000 Rent and other fixed costs (per month) $10000 $5000 Transport costs (per month) What is meant by ‘break-even output’? Identify two environmental pressures that Duckett might have to respond to. Pressure 1: Pressure 2: Identify and explain two ways in which legal controls on marketing might affect Duckett. Way 1: Explanation: Way 2: Explanation: 1 11 Identify and explain two ways in which the local community might be affected by Duckett’s relocation decision. Way 1: Explanation: Way 2: Explanation: Recommend which location Duckett should choose. Justify your answer, using the information in Table 2. [ 1 11

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THEORY

2018

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Samira owns a successful business selling takeaway fried food. She employs 2 part-time workers. Last year revenue fell for the first time in 10 years. This was because of increased competition from a well-known franchise. To respond to this, Samira could lower her prices, as shown in Table 1. Another option is to start a delivery service. Samira plans to do some market research. She has to decide whether to use secondary research or set up a focus group with some of her customers. Table 1: Price and variable cost information for Samira’s business New price Current price $3 $4 Average price per item $2 $2 Average variable cost per item Forecast average number of customers per week What is meant by ‘franchise’? Calculate Samira’s forecast weekly revenue if she lowered the price of her products. Identify and explain two reasons why revenue is important for Samira’s business. Reason 1: Explanation: Reason 2: Explanation: 1 15 Identify and explain two factors Samira should consider before starting a delivery service. Factor 1: Explanation: Factor 2: Explanation: Do you think Samira should use secondary research or a focus group to gather market research information? Justify your answer. [ 1 15

0450_w19_qp_12

THEORY

2019

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Burnett manufactures a range of sports shoes. The Operations Director is planning to increase the scale of production at its factory. She hopes it could lead to more than one economy of scale. The extra output would allow Burnett to export its shoes for the first time. Table 1: Costs and revenue for current production levels Fixed costs per month $250 000 Labour costs per pair of shoes $15 Material costs per pair of shoes $10 Average selling price per pair of shoes $50 Planned sales per month (pairs of shoes) 20 000 20 000 15 000 10 000 TR FC 100 000 150 000 200 000 250 000 300 000 350 000 400 000 450 000 500 000 550 000 600 000 650 000 700 000 750 000 800 000 850 000 900 000 950 000 1 000 000 50 000 output (pairs of shoes) costs and revenue $ Figure 1 Draw the monthly total cost line on Figure 1. Use the chart to calculate the monthly profit if Burnett produces and sells 20 000 pairs of shoes. Identify and explain two possible economies of scale that Burnett could benefit from. 1: Explanation: 2: Explanation: Identify and explain two ways in which break-even charts can be useful to the Operations Director of Burnett. Way 1: Explanation: Way 2: Explanation: Which do you think are the two most important factors for Burnett to consider when deciding whether to export its products? Justify your choices.

0450_m15_qp_12

THEORY

2015

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GXC produces car components in country X using imported raw materials. This year, GXC has invested in new machinery. This has resulted in the redundancy of 100 employees, 30% of its workforce. Some stakeholder groups were unhappy about this decision. GXC uses flow production and benefits from economies of scale. It sells the components to car manufacturers based in country Y. The exchange rate of country X’s currency has recently appreciated. GXC’s Managing Director is worried about this. Identify two economies of scale. Example 1: Example 2: What is meant by ‘redundancy’? Identify and explain one advantage and one disadvantage to GXC of using flow production. Advantage: Explanation: Disadvantage: Explanation: 1 16 Identify and explain two stakeholder groups that could be affected by GXC’s decision to invest in new machinery. Stakeholder group 1: Explanation: Stakeholder group 2: Explanation: Do you think GXC’s Managing Director should be worried about the recent appreciation of the exchange rate of country X’s currency? [ 1 16

0450_m19_qp_12

THEORY

2019

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ABC manufactures a range of cars. ABC plans to build a new type of car at its factory in country X. This will expand production capacity at the factory by 100 000 cars per year. ABC hopes to benefit from economies of scale, which should help to reduce the break-even level of output. ‘It’s good that we have motivated workers’ said the Operations manager. ABC plans to start exporting some of its cars. What is meant by ‘break-even level of output’? Identify two factors which could influence employee motivation at ABC. Factor 1: Factor 2: Identify and explain two economies of scale that ABC could benefit from. Economy of scale 1: Explanation: Economy of scale 2: Explanation: Identify and explain two possible problems for ABC of increasing production. Problem 1: Explanation: Problem 2: Explanation: Do you think it is a good idea for ABC to start exporting some of its cars? Justify your answer.

0450_s14_qp_13

THEORY

2014

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Ramford is a private limited company. It has four factories which make a wide range of food products including breakfast cereal and ice cream. The Finance Director is worried about the company’s financial performance. She has read that many businesses failed in the last year. ‘I think we are suffering from diseconomies of scale’ she said. Ramford’s directors have decided to cut the number of different products it makes from 80 to 10. Table 2: Extract from accounts Revenue ($m) (Net) profit ($m) Capital employed ($m) (Net) profit margin 35% ? Return on Capital Employed 25% ? What is meant by a ‘private limited company’? Identify two causes of business failure. Cause 1: Cause 2: Identify and explain two diseconomies of scale that Ramford might be experiencing. Diseconomy 1: Explanation: Diseconomy 2: Explanation: Identify and explain two factors that Ramford should consider when deciding which products to remove from its product range. Factor 1: Explanation: Factor 2: Explanation: Do you think the Finance Director is right to be worried about the financial performance of Ramford in 2014? Justify your answer using the data in Table 2 and appropriate ratios.

0450_w15_qp_11

THEORY

2015

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NBV is a multinational company. It makes building products such as bricks. Last year NBV’s financial accounts showed capital employed as $144 billion. NBV has operations in 18 countries and a total workforce of 400000. NBV experiences some diseconomies of scale. All raw materials are purchased from the countries it operates in to avoid problems with exchange rates. NBV plans to open a factory in Country B for the first time. Some people think this decision will only bring drawbacks for other businesses in country B. What is meant by ‘exchange rate’? What is meant by ‘capital employed’? Identify and explain two ways NBV’s managers could use its financial accounts to help make decisions. Way 1: Explanation: Way 2: Explanation: 1 15 Identify and explain two diseconomies of scale that NBV might experience. Diseconomy of scale 1: Explanation: Diseconomy of scale 2: Explanation: Do you think NBV’s decision to set up a factory will only bring drawbacks to other businesses in country B? Justify your answer. 1 15

0450_w19_qp_12

THEORY

2019

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