w
w
om
.c
s
er
BUSINESS STUDIES
ap
eP
m
e
tr
.X
w
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level
7115/02
October/November 2009
Paper 2
1 hour 45 minutes
INSERT
READ THESE INSTRUCTIONS FIRST
This insert contains the case study material.
This document consists of 4 printed pages.
IB09 11_7115_02_INS/FP
© UCLES 2009
[Turn over
2
Dilip’s Vegetable Farm
Dilip owns a large farm that he inherited from his father in Country A. He is a sole trader. Dilip grows
vegetables and these are all sold at weekly markets at nearby towns.
Dilip doesn’t have any farm machinery. He employs 5 farm workers all year round to help grow the
vegetables. Dilip employs an additional 20 workers to help pick the crops by hand each year. Dilip’s
leadership or management style is autocratic, the same as his father. Wages are low as there is a lot
of unemployment in the local area and many farmers pay below the legal minimum wage.
Many other farmers in country A have signed contracts to supply vegetables to a large supermarket
chain located in Europe. The buyer from this supermarket wants different types of vegetables to those
currently being grown by Dilip. The quality of the vegetables has to be high or the buyer from the
supermarket won’t buy the vegetables.
Dilip is also considering changing to selling to the European supermarket chain. He will need to grow
different vegetables. He will also need to buy machinery costing $10 000 to package the vegetables
to be sent to the port for shipment to the European market.
Appendix 1
Daily News
October 2009
Local people say that the increasing number of farms selling their fruit and vegetables to foreign
companies is causing food prices to rise in local markets. Consumer pressure groups say it is due to
reduced local supplies.
Government officials argue that the low exchange rate is the reason why so many farmers are selling
their fruit and vegetables abroad. The officials have told the farmers that the exchange rate may
increase (an appreciation) in the future.
There is an increased demand for ‘fair trade’ products throughout the world. The farmers who grow
these crops are paid a higher price than they would get selling at the normal international price. These
‘fair trade’ prices are about 10% more than the usual selling price. In return, the farmer must ensure
that no children are working on the farms and that the legal minimum wage is paid to employees. The
farms need to be inspected regularly to be allowed to say they are selling ‘fair trade’ products.
© UCLES 2009
7115/02/O/N/09
3
Appendix 2
$
Figure 1: Break even chart for Dilip’s Vegetable Farm each year
- vegetables sold at local markets
5000
4000
Total Revenue
3000
Total Cost
2250
2000
Fixed Cost
1000
0
4000
8000 9000
kg of vegetables
Variable cost = $0.125 / kg
Figure 2: Forecast break even chart for Dilip’s Vegetable Farm each year
- vegetables sold to the European supermarket
Total Revenue
$
6750
Total Cost
3000
2000
Fixed Cost
0
4000
9000
kg of vegetables
Variable cost = $0.25 / kg
Note: 9000 kg of vegetables are produced every year.
© UCLES 2009
7115/02/O/N/09
[Turn over
4
Appendix 3
MEMORANDUM
To:
From:
Date:
Re:
Dilip
Sam (Farm Manager)
2 October 2009
Houses for rent
We have discussed several different ways to increase the farm’s profit. It has been agreed to convert
some of the old farm buildings to houses for tourists to rent. There are areas of natural beauty near to
the farm where people can walk and watch wild animals.
I have carried out some primary research into the demand for holiday houses using interviews with
potential customers. This has shown that many people from the capital city would like to come to the
countryside for 3–4 day holiday breaks. The market segment we should aim at is high income groups
who want luxury holiday houses. We will need to employ well trained workers who can provide a
quality service for the guests staying at the houses.
I think this will be an excellent way of increasing the farm’s profitability. We need a large investment of
$50 000 to convert the old farm buildings to 5 houses. We also need to employ 10 more workers who
are trained to cook and serve the guests staying at the houses.
Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.
© UCLES 2009
7115/02/O/N/09