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Edexcel Business A Level Year 1 Includes AS 1st Edition Ian Marcouse, Andrew Hammond, Nigel Watson - Solutions
2 At what level of capacity utilisation will fixed costs per unit be lowest for any firm? Briefly explain your answer.
1 What is meant by the phrase ‘100 per cent capacity utilisation’?
2 New competition from Chinese-made cars is undercutting the prices of British-made cars by 35 per cent. Evaluate the possible impact of a sustained programme by management to boost labour productivity at a British car factory.
1 Faced with falling sales and sharply falling market share, the boss at Morrisons supermarkets decides to implement a 12-month Productivity Improvement Programme (PIP). Evaluate how the boss should set about this task.
4 Evaluate the possible gains from involving employees in discussions about how to improve productivity.
3 Assess whether Farah should increase the pay of her employees to£10 an hour.
2a) Calculate the average labour cost per pot at FS Ltd if employees are paid £8 an hour and their daily output is 160 pots each.b) Calculate the wage cost per pot at Frandon (assume an eighthour day).c) Assess the short- and long-term benefits to Frandon of its lower labour costs per unit.d) Jeff
1a) FS Ltd employs 50 pot makers while Frandon Ltd employs 30 people in production. Calculate the total output for each of the two companies.b) With reference to FS Ltd and Frandon Ltd, explain the difference between ‘total output’ and ‘productivity’.
4 Assess whether it is ethical to employ graduates to act as human advertisements.
3 Assess the view that low productivity always leads to low profitability.
2 The manager of a Pizza Express estimates that a team of five wobble boarders working for eight hours daily will boost the restaurant’s gross profit by £500 per day. According to the local job centre, there will be plenty of people willing to undertake this work at the national minimum wage of
1 Explain how the manager of a Domino’s pizza outlet might measure the productivity of their wobble boarders.
10 Explain how productivity can be linked to unit labour costs.
9 Explain how motivation and productivity may be linked.
8 Calculate the change in productivity at BDQ Co (see Table 41.3) since last year. Output Number of staff Last year 32,000 50 This year 30,000 40
7 Outline the likely effect of increased motivation on the productivity of a teacher.
6 Identify two factors which help and two factors which limit your productivity as a student.
5 How can increased investment in machinery help to boost productivity?
4 Explain how a firm may be able to increase its employees’productivity.
3 How does productivity relate to labour costs per unit?
2 Why may it be hard to measure the productivity of staff who work in service industries?
1 What is meant by the term ‘productivity’?
2 For a business such as Tesco, evaluate whether marketing or resource management is more likely to be the key to improving operational performance.
1 In 2014, UK food producer Pasta Reale collapsed into administration, costing 169 jobs. Even though its sales revenue was£39 million in the 18 months to March 2013, the business lost money. Evaluate how likely it is that poor resource management was the key factor in its operating losses.
4 IKEA sources its raw materials from suppliers all over the world.Evaluate the challenges that this might pose for IKEA’s supply chain management.
3 Assess two possible weaknesses of IKEA’S resource management.
2 Assess whether IKEA’s highly effective resource management is the most important factor in determining the company’s success.
1 Outline one aspect of IKEA’S resource management that helps the company to minimise its costs.
6 Outline one possible benefit to a business from ‘delighting’ rather than ‘satisfying’ its customers.
5 Examine the possible effects on a firm such as Coca-Cola of being unreliable in delivering to a big customer like Waitrose.
4 Identify three ways in which staff might be at fault in production line errors that cause wastage.
3 Choose one of the examples in Table 40.1 and outline one strength and one weakness of that business idea.
2 Explain two key elements of resource management for:a) a children’s shoe shopb) a new, all-business-class airline.
1 Why may the quality of product design be less important for some businesses than others?
2 A fashion clothing retailer has made losses for the past two years and its bank is discussing whether the business should close down.Evaluate the ways in which the retailer might be turned back into a profitable business.
1 A pizza company’s sales go through the roof when it advertises a‘low-carb pizza’. Evaluate the possible reasons why this business might still face financial failure within the next few years.
3 Tinsley Special Products was based mainly in the North East of England, where income levels are among the lowest in the country.Assess whether the business should therefore have been propped up with central government funding.
2 Assess two factors that may have ‘impacted’ on cash flow so negatively as to cause the collapse of the business.
1 Assess what might cause a ‘downturn in trade’ for a small manufacturer such as Tinsley Special Products.
3 Assess whether the short extract from the report proves its case that there was ‘an element of intent in the bank’s decision to distress these businesses’.
2 Assess the possible impact on the business owner of being put on a‘journey towards administration, receivership and liquidation’
1a) Explain what might be meant by the phrase ‘artificially distresses an otherwise viable business’.b) Explain one action a bank could take that would distress a business customer.
8 Explain what John Maynard Keynes meant by his quote on page 248.
7 Must a business failure always have a personal failure at its heart?Explain your thinking.
6 Explain how each of the following might damage the financial position of a new small firm:a) a rise in interest ratesb) fewer customers arriving than had been forecast.
5 In your own words, explain the meaning of the term ‘overtrading’.
4 Explain in detail the effect a sudden loss of a big customer might have on the cash flow of a small company.
3 Explain what Lewis Lehr meant by his quote on page 247.
2 Explain how a change in technology might harm the position of a small driving school in a rural area.
1 Briefly look again at Forbes magazine’s ‘five reasons new businesses fail’ on page 247. Which do you think is the single most important reason and why?
2 Evaluate the following statement: ‘Managing working capital is not just the business of the finance department; it is the responsibility of everyone in the business.’
1 Evaluate the extent to which working capital management is vital for the future of any business.
4 Assess what you see as the three main themes that come through from the ‘important cash flow rules’.
3 Outline one advantage and one disadvantage involved in chasing late payers.
2 Explain the difficulties that may arise for a business that uses all its working capital supplying one customer.
1 Explain why late payment from customers can be such a serious matter.
8 How does better stock management help a firm to control its working capital requirements?
7 Outline three ways in which a business can improve its working capital situation.
6 On 1 February, JG Co received an order for £20,000 worth of office furniture. Between 15 February and 20 March, the company spent£11,000 on materials and labour. Between 20 March and 31 March, a further £4,000 was contributed to fixed costs such as quality control. The finished order was
5 Why may a business be unable to get a loan or overdraft if it has working capital difficulties?
4 What problems could arise if a firm is operating with very low working capital?
3 What is working capital used for? Give two examples.
2 What is capital expenditure?
1 What is working capital?
2 In 2014, Snapchat boosted user numbers to more than 200 million people, but had not found a way to generate revenue, let alone profit. Evaluate the difficulties for a new app in turning usage into profit.
1 When recession hits, wise financial managers focus more on cash flow and less on profit. Evaluate why that might be the case.
4 Assess the advantages and disadvantages to the business of the staff cost-saving actions taken by Renis.
3 Apart from the methods mentioned in the text, assess two other actions SOFA-SOGOOD could take to improve its profitability.
2 Explain why a fall in price might not have led to an increase in revenue.
1 What is meant by:a) revenueb) costsc) net profit?
11 Identify whether each of the following business start-ups would be cash-rich or cash-poor in the early years of the business:a) a pension fund, in which people save money in return for later pay-outsb) building a hotelc) starting a vineyard (grapes only pickable after 3–5 years).
10 Give two reasons why a profitable business could run out of cash when it expands too rapidly.
9 Explain one way in which operating profit might be affected by a decision within:a) the marketing functionb) the operations function.
8 Explain why cutting costs might end up reducing profits.
7 Explain two ways of increasing profits.
6 What is the formula for the operating profit margin?
5 Is profitability measured in pounds or percentages?
4 How could a company jeopardise its future by paying out generous dividends to shareholders?
3 Does an increase in price necessarily increase revenue? Explain your answer.
2 What is meant by ‘operating profit’?
1 What is meant by ‘revenue’?
2 Evaluate whether it is true to suggest that budgets are the most important financial documents for most managers.
1 ‘Budgeting systems can often be demotivating for middle managers.’Evaluate the extent to which this might be true.
3 Assess whether budgets have a purpose in a business such as Chessington.
2 On a particularly hot week in August, the actual sales figures were 41 per cent higher than the budget. Did the merchandise manager deserve a bonus?
1 Explain two other ways in which management might have constructed the sales budget for 2014.
4 The directors of Clinton & Collins Ltd knew that the recession was causing problems for the firm but were unsure as to whether things were improving or worsening. Assess the extent to which the data suggests an improvement.
3 Explain how the firm could have set these budgets.
2 Explain why Clinton & Collins Ltd may have chosen to set monthly budgets.
1 Use the data given in Table 36.6 to explain why February’s profits were worse than expected.
3 Assess two ways in which a manager might set about improving the accuracy of a sales budget.
2 Assess one financial strength and two weaknesses in these data, from the company’s viewpoint.
1 Give the five numbers missing from the variance analysis shown in Table 36.5.
10 Look at Table 36.4, then answer the following questions.a) Calculate the budgeted and actual profit figures for both months.(2)b) Identify a month with:i) a favourable revenue variance ii) an adverse variable cost variance iii) a favourable fixed cost variance iv) an adverse total cost variance
9 Explain what is meant by a ‘favourable cost variance’.
8 How could a firm respond to an increasingly adverse variance in labour costs?(4)
7 Copy and complete the budget statement shown in Table 36.3 by filling in the gaps.(8)
6 Why should budget holders have a say in the setting of their budgets? January February March April Income 4,200 4,500 4,000 Variable costs 1,800. 2,000 1,800 Fixed costs 1,200 1,600 1,600 Total costs 3,600 4,100 Profit 600
5 Briefly explain how most companies actually set next year’s budgets.
4 What are the advantages of a zero-based budgeting system?
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