Chapter 1: (Understanding Business Activity) Case Studies
Case Study 1:
BB is a bakery business that produces bread and cakes. It specialises in high
quality cakes for weddings and birthdays. There is little division of labour used. A
typical wedding cake is sold for $50 using bought-in ingredients costing $15.
Bashir, BB’s owner, wants to increase the added value and thinks the best way to
do this is to buy in cheaper ingredients for the bread and cakes his business
produces.
a. Define ‘division of labour’.
[2 marks]
b. Calculate the added value of each wedding cake.
[2 marks]
c. Outline two factors of production that BB needs.
[4 marks]
d. Explain one benefit and one drawback to BB of specialising in high-quality
cakes.
[6 marks]
e. The best way to increase added value is to buy in cheaper raw materials.
Do you agree? Justify your answer.
[6 marks]
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Chapter 1: (Understanding Business Activity) Case Studies
Case Study 2:
Gowri plans to start up her own business using her saving. She wants to produce
fashion clothes for women. She is a very good clothes designer but she does not
like stitching clothes together. Two friends have offered to help Gowri. Abha is
an experienced material or fabric cutter – she can cut lengths of material or fabric
for clothes with very little wastage. Aditi is quick at sewing fabric together.
a. Define ‘business.
[2 marks]
b. Identify two factors of production that Gowri will need for her new
business.
[2 marks]
c. Outline two possible opportunity cost that Gowri may have from her
decision to start her own business.
[4 marks]
d. Explain one advantage and one disadvantage to Gowri’s business of using
division of labour in making clothes.
[6 marks]
e. Do you think that a new business will be able to sell all of the clothes that
it makes? Justify your answer.
[6 marks]
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Chapter 1: (Understanding Business Activity) Case Studies
Case Study 3:
Mohammed own a bakery. He makes bread and cakes. He employs three workers
who help him mix the dough for the bread and cakes, put the dough into tins,
bake the bread and cakes, and serve customers. Mohammed has calculated that
the ‘added value’ of his business is low. His customers complain when he tries to
increase his prices. ‘We can buy the same bread and cakes at lower prices’, they
tell him.
a. Define ‘added value’.
[2 marks]
b. Identify the opportunity cost to Mohammed of buying new oven.
[2 marks]
c. Outline two benefits to Mohammed’s business of all of his workers being
able to do all of the jobs in the bakery.
[4 marks]
d. Explain two ways in which Mohammed could increase the value added of
his bakery business.
[6 marks]
e. A friend told an entrepreneur, ‘Your business would be more successful if
you just worked in the shop and let your workers make the products’. Do
you agree? Justify your answer.
[6 marks]
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