UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education
Advanced Subsidiary Level and Advanced Level
9707/21
BUSINESS STUDIES
Paper 2 Data Response
October/November 2013
1 hour 30 minutes
Additional Materials:
Answer Booklet/Paper
* 1 2 7 7 9 0 2 0 7 9 *
READ THESE INSTRUCTIONS FIRST
If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
The businesses described in this question paper are entirely fictitious.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
This document consists of 4 printed pages.
DC (NH/SW) 66135/2
© UCLES 2013
[Turn over
2
1
Clare’s Clothes (CC)
Clare is a sole trader who has been selling women’s clothing in her local area for the last
10 years. She has built up a reputation for selling quality clothes at competitive prices. Her
shop has clothes from well known fashion designers. Now her main business objective is to
increase profit over the next 3 years.
To achieve this objective Clare is thinking of opening a second shop in another location. She
is considering 2 possible locations for the new shop and has collected the data shown in
Table 1.
5
Table 1: Data for each location
Location A
(High Street in neighbouring town)
•
•
•
•
•
A town with large population of
females aged 20–45
Rents are high
Two national clothing retailers in the
same street
Rising unemployment in the town
Clare can travel to/from this location
easily
Location B
(Retail park outside of town)
•
•
•
•
•
A new retail park with plenty of car
parking spaces
Very high number of potential
customers
Clare can get a discount of 25%
on the rent but it will still be more
expensive than Location A
Very modern area surrounded by a
wealthier population
Clare will have to travel further to
this location
10
15
20
Clare has always wanted to own and manage a business but she was disappointed with the
level of net profit last year. She knows expansion is an opportunity to make more profit but is
unsure of where she can get appropriate finance. Her accountant has given her the figures in
25
Table 2.
Table 2: Key financial data for year ended 2012
Inventory
$7000
Trade receivables
$2500
Trade payables
$6000
Overdraft
$1500
Net profit margin
8%
Clare knows she needs at least $15 000 to set up the new shop. Clare has made an
appointment with her accountant to talk about whether she should take the risk and expand
the business.
© UCLES 2013
9707/21/O/N/13
30
3
(a) Explain the following terms:
(i)
business objective (line 3)
[3]
(ii)
net profit (line 23).
[3]
Refer to Table 2. Calculate the current ratio.
[3]
Using your answer from (b)(i), comment on the liquidity of CC.
[3]
(b) (i)
(ii)
(c) Analyse the factors that Clare will need to consider when deciding on a source of finance to
raise the $15 000 to expand her business.
[8]
(d) Using Table 1 and other appropriate information, recommend the most suitable location for
CC’s new shop.
[10]
© UCLES 2013
9707/21/O/N/13
[Turn over
4
2
Freshly Frozen (FF)
FF is a small family partnership that manufactures a range of ice-creams. FF sells to local
retailers and also to wholesalers. FF specializes in making ice-cream from 100% natural
ingredients and this is FF’s unique selling point. FF is able to compete with the larger
ice-cream manufacturers because of its reputation. FF’s marketing campaigns focus on two
main facts:
•
•
5
All the fruits used to make the ice-creams are 100% fresh (used within 2 days of arriving
at the factory)
Fruits are sourced from local farmers.
FF’s top selling flavours are strawberry, raspberry and orange. Ice-creams are made using
batch production. The Marketing manager, Dave, has come up with the idea of launching a 10
new ice-cream called ‘Fruit Burst’. He has worked out the costs and selling price as shown in
Table 3. He is expecting to do market research within the next two months.
Table 3: Financial data on ‘Fruit Burst’
Additional fixed costs
$25 000
Unit variable costs
$0.95
Selling price
$2.25
15
Jenny, the Human Resources manager, has just had a meeting with one of the employees,
Arfan. Arfan has some concerns. Arfan has explained that some of the employees are
feeling worried. They are pleased that the business is doing well but they have heard about
‘Fruit Burst’. They are worried that they will have even more work to do and longer working 20
hours. They are paid the same hourly rates for all hours worked. They have had to cope with
temporary workers joining so that FF can meet its delivery dates to its customers. Existing
employees are also expected to train the temporary workers which slows down their own
production.
(a) Explain the following terms:
(i)
partnership (line 1)
[3]
(ii)
batch production (line 10).
[3]
Refer to Table 3. Calculate the break-even output for ‘Fruit Burst’.
[3]
Explain one advantage to FF of using break-even analysis.
[3]
(b) (i)
(ii)
(c) Analyse the human resource problems for FF if it ignores Arfan’s concerns.
[8]
(d) Evaluate the market research methods that Dave could use to help decide whether or not to
launch the new ‘Fruit Burst’ product.
[10]
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 2013
9707/21/O/N/13
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education
Advanced Subsidiary Level and Advanced Level
9707/22
BUSINESS STUDIES
Paper 2 Data Response
October/November 2013
1 hour 30 minutes
Additional Materials:
Answer Booklet/Paper
* 0 9 5 1 3 5 1 0 1 1 *
READ THESE INSTRUCTIONS FIRST
If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
The businesses described in this paper are entirely fictitious.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
This document consists of 4 printed pages.
DC (SJF) 66798/1
© UCLES 2013
[Turn over
2
1
Fizzy Drinks (FD)
FD is a large, family owned, private limited company that has three factories. FD produces
3 different soft drinks. Each factory manufactures and puts in bottles all three different soft
drinks using batch production. The Production Director, Iqbal, wants to change the method
of production to flow production. Each factory would then specialise in the production of just
one of the soft drinks. This would mean Factory A would make Fizzy Cola, Factory B would
make Fizzy Lemonade and Factory C would make Fizzy Orange.
5
Iqbal has calculated that there would be a substantial cost saving from not having to switch
production from one batch to another. FD is expecting even larger orders for their soft drinks
in the future.
Sharon, the Human Resources Director, understands the production benefits from flow
production. However, she is worried about the impact on employees who like the variety of
batch production. Employees are concerned about possible redundancies from the change.
10
The Finance Director, Pradeep, has just received the latest extracts from the financial
accounts (see Table 1 and Table 2).
Table 1:
Extract from Income Statement
Table 2:
Extract from Balance Sheet
$000s
$000s
Revenue
2500
Non-current assets
Cost of sales
1150
Current assets*
350
Gross profit
1350
Current liabilities
200
Profit before tax
770
Working capital
150
Retained profit
475
Net assets
*includes inventory
2000
9707/22/O/N/13
20
2150
75
The profit before tax has increased by 25% from last year and Pradeep knows that this will
please the other directors who had set an objective to increase profit before tax by 20%.
Pradeep knows that the directors are considering buying a fourth factory. This would require
additional finance of nearly $2 million. The directors plan to change FD into a public limited
company.
© UCLES 2013
15
25
3
(a) Explain the following terms:
(i)
private limited company (line 1)
[3]
(ii)
non-current assets (line 18).
[3]
Refer to Table 2. Calculate the acid test ratio.
[3]
(b) (i)
(ii)
Explain one advantage to FD from setting an objective such as ‘increase profit before tax
by 20%’ (line 25).
[3]
(c) Analyse the disadvantages to FD if it changes to a public limited company.
(d) Discuss whether FD should change to flow production method.
© UCLES 2013
9707/22/O/N/13
[8]
[10]
[Turn over
4
2
School Sports Shop (SSS)
Business Studies students at the local secondary school are planning to set up a new
business, called SSS. They have asked the Principal (Head Teacher) if they can set up a
social enterprise selling the school sports uniform. Parents and students will be the target
market. Currently, parents have to buy the uniform from an expensive local supplier. Any
profit made by SSS will be invested back into improving the facilities for the students; for
example, buying table tennis equipment.
The Principal is keen to encourage students to think about becoming entrepreneurs and
has agreed to the proposal. The students have found a suitable location for the shop within
the school. They have spent time painting it and fitting shelves. They have also decided to
widen their product range to include school bags and stationery items such as notepads and
folders.
There are twelve students involved in SSS and Jane has been voted as the Managing
Director. Jane is organising job roles for the other students. She has asked Diwan to be the
Marketing Director and to think of ideas to promote the new shop. Jane is worried that the
promotional budget will be very limited. SSS was started with a loan of $500 from the school.
5
10
15
Paula will be the student in charge of buying the products that will be sold in the shop. Paula
has prepared the information shown in Table 3. This is the unit cost that SSS will have to pay
the suppliers for each of their products. Paula knows that these costs are high because she
is not ordering in large enough quantities to gain discounts.
Table 3: Unit cost for some products to be sold in the shop
School bag (plain black)
$10
Sports jacket (variety of sizes)
$35
Shorts (variety of sizes)
$8
Sport socks (per pair)
$6
Plastic folder (pack of 5)
$7
20
25
Paula has suggested that SSS uses cost-based pricing but Jane is unsure because she
worries that this may make the prices too high.
(a) Explain the following terms:
(i)
target market (lines 3–4)
[3]
(ii)
entrepreneurs (line 7).
[3]
(b) (i)
Paula plans to add 20% to the unit cost of each item in order to calculate the selling
price. Using Table 3, calculate the selling price for a sports jacket.
[2]
(ii)
Using your answer from (b)(i), explain two disadvantages to SSS of using cost-based
pricing.
[4]
(c) Analyse the advantages to SSS of being a social enterprise.
(d) Discuss suitable methods that Diwan could use to promote SSS.
[8]
[10]
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 2013
9707/22/O/N/13
UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education
Advanced Subsidiary Level and Advanced Level
9707/23
BUSINESS STUDIES
Paper 2 Data Response
October/November 2013
1 hour 30 minutes
Additional Materials:
Answer Booklet/Paper
* 7 6 3 4 3 6 2 1 9 2 *
READ THESE INSTRUCTIONS FIRST
If you have been given an Answer Booklet, follow the instructions on the front cover of the Booklet.
Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
You may use a soft pencil for any diagrams, graphs or rough working.
Do not use staples, paper clips, highlighters, glue or correction fluid.
Answer all questions.
The businesses described in this paper are entirely fictitious.
At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.
This document consists of 3 printed pages and 1 blank page.
DC (CW) 65810
© UCLES 2013
[Turn over
2
1
Charlie’s Chocolates (CC)
CC is a large public limited company that manufactures a wide range of chocolate bars.
Production takes place in low wage countries so that costs can be kept low. CC has suffered
recently from poor publicity due to the high levels of sugar used in the production of its
chocolate. A national newspaper has recently published an article about how CC exploits
employees in low wage countries. The Marketing Director, Alan, is aware of recent trends
showing that consumers are becoming more ethical in their buying decisions. He thinks this
might explain why sales decreased by 10% last year.
5
He has asked to meet with the Managing Director, Ikram, to discuss a major change towards
more ethical production methods. This could mean re-locating production back to the home
country. This will increase costs and involve the recruitment of additional employees. In 10
response to recent Government guidelines to improve health, Alan wants to decrease the
amount of sugar used in the chocolate bars.
Alan is also thinking about the financial accounts for this year that he received this morning
from Ikram (see Table 1 and Table 2).
Table 1 –
Extract from Income Statement
Table 2 –
Extract from Balance Sheet
$000s
15
$000s
Revenue
7000
Non-current assets
3000
Cost of sales
4150
Current assets
900
Gross profit
2850
Current liabilities
400
Profit before tax
1350
Working capital
500
Retained profit
565
Net assets
3500
20
With sales declining from last year, Alan has to think carefully about the next steps for
marketing. He knows that the product range is of good quality – the problem is the poor image
of the company. For example, he is aware that a local consumer group is trying to organise a 25
demonstration outside one of CC’s factories in the next few weeks.
(a) Explain the following terms:
(i)
public limited company (line 1)
[3]
(ii)
marketing (line 24).
[3]
Refer to Table 1. Calculate the gross profit margin of CC.
[3]
(b) (i)
(ii)
Last year CC’s gross profit margin was 63%. Using your answer to (b)(i), comment on
the trend in the gross profit margin.
[3]
(c) Analyse the usefulness of the financial accounts to two of CC’s stakeholders.
[8]
(d) Discuss the factors that CC should consider in making a decision on whether or not to become
a more ethical business.
[10]
© UCLES 2013
9707/23/O/N/13
3
2
George’s Gym (GG)
George identified a potential niche market for a new gym in his local area. He set up GG as a
sole trader business three years ago. GG is a modern gym with the latest equipment.
George has recently gained planning permission to build a new swimming pool. George
wants to open the swimming pool because a national competitor is planning to open a new
gym close by and he wants GG to remain competitive. The swimming pool will cost $400 000
and George has yet to decide on the best source of finance. He has $50 000 in savings that
he could use and he does not have any mortgage or loans. George is thinking about seeking
a private investor but is unsure of the risks involved.
5
The local population is wealthy. Last year (2012), GG had 300 members who each paid a
membership fee of $60 per month. George is thinking about new ways of increasing revenue 10
such as offering additional ‘keep fit’ classes. He also plans to increase the monthly fee he
charges members to $66. His accountant has told him he needs to think about the price
elasticity of demand before making a pricing decision.
Table 3 – Annual revenue and profit for the previous 3 years ($000)
2010
2011
2012
Annual revenue
120
160
X
Profit
20
50
80
15
George hopes that the information in Table 3 will help show any potential lender how attractive
the gym is as an investment.
GG has a problem of a high labour turnover of personal trainers. Three of them have left in 20
the last six months. He has just employed a new personal trainer, Sally. George needs to
issue her contract of employment. George thinks that the reasons for the high labour turnover
include:
•
•
George is always busy and so he can never offer an effective induction training
25
programme for his employees
GG salaries are below average for the industry.
(a) Explain the following terms:
(i)
niche market (line 1)
[3]
(ii)
contract of employment (line 22).
[3]
Calculate the value of X in Table 3.
[2]
(b) (i)
(ii)
Explain how George might use the concept of price elasticity of demand in deciding
whether or not to increase GG’s membership fee.
[4]
(c) Analyse the disadvantages to GG of a high labour turnover of personal trainers.
[8]
(d) Discuss sources of finance that GG might use to pay for the new swimming pool.
[10]
© UCLES 2013
9707/23/O/N/13
4
BLANK PAGE
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 2013
9707/23/O/N/13