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business accounting
Edexcel Business A Level Year 1 Includes AS 1st Edition Ian Marcouse, Andrew Hammond, Nigel Watson - Solutions
3 Why is it valuable to have a yardstick against which performance can be measured?
2 List three advantages that a budgeting system brings to a company.
1 Explain the meaning of the term ‘budgeting’.
2 Evaluate the extent to which break-even analysis might be of value when running a business such as Primark, or any other business you have researched.
1 Evaluate the different ways in which break-even analysis might benefit a new small business offering Thai food for takeaway and delivery.
4a) Calculate the monthly profit based on the estimated number of customers.b) Calculate the monthly profit if customer numbers prove to be 50 per cent higher.
3 Outline three ways in which Mary’s Garden’s margin of safety could be expanded.
2 Calculate the monthly:a) break-even number of customersb) margin of safety based on estimated customer numbers.
1 Calculate the total:a) monthly fixed costsb) variable costs per customerc) contribution per customer.
4 Assess whether Shelley should rely on break-even analysis when taking business decisions. Justify your view.
3 Shelley has decided to manufacture the shirts in Poland. As a result, the variable cost per t-shirt (including commission and distribution costs) will fall to £15 per t-shirt. However, fixed costs will rise to£12,000.a) Calculate the new level of break-even for Shelley’s t-shirts.b) Calculate
2 Calculate the following:a) the variable cost of producing 1,000 t-shirtsb) the contribution earned through the sale of one t-shirt.
1 What is meant by the term ‘break-even chart’?
4 Paul is worried that his break-even chart may be ‘misleading’. Do you agree with him? Justify your view.
3 Paul has decided to increase his prices to give an average revenue per customer of £120.a) Draw the new total revenue line on your break-even chart to show the effect of this change.b) Mark on your diagram the new break-even point.c) Calculate Paul’s new break-even number of customers to
2 Paul’s market research shows that in his first month of trading he can expect 450 customers at his hotel.a) If Paul’s research is correct, calculate the level of profit or loss he will make.b) Illustrate this level of output on your graph and show the profit or loss.
1a) Construct the break-even chart for Paul’s planned business.b) State, and show on the graph, the profit or loss made at a monthly sales level of 600 customers.c) State, and show on the graph, the margin of safety at that level of output
10 A business is currently producing 200,000 units of output annually, and its break-even output is 120,000 units. What is its margin of safety?
9 Why might a business wish to calculate its margin of safety?
8 Explain how, using a break-even chart, you would illustrate the amount of profit or loss made at any given level of output.
7 What point on a break-even chart actually illustrates break-even output?
6 Explain why the variable cost and total revenue lines commence at the origin of a break-even chart.
5 A business sells its products for £10 each and the variable cost of producing a single unit is £6. If its monthly fixed costs are £18,000, how many units must it sell to break even each month?
4 How would you calculate the contribution made by each unit of production that is sold?
3 List the information necessary to construct a break-even chart.
2 State three reasons why a business may conduct a break-even analysis.
1 What is meant by the term ‘break-even point’?
2 When a rival surfing school opened next door, ‘Jo’s Surf School’ saw a sharp fall in sales. Evaluate the most important actions it should take to rebuild its sales revenue.
1 In 2014, Tesco plc suffered a slide in its sales, with weekly data showing a 4 per cent decline compared with 2013. Evaluate how a supermarket chain such as Tesco could set about rebuilding its sales revenue.
3 Assess the case for and against a bank lending Robert £10,000 on the basis of his forecast profits.
2 Robert estimates that if he cut his prices by 10 per cent, he would have 20 per cent more customers each month.a) Calculate the outcome of these changes.b) Assess whether this change would benefit Robert.
1 What is meant by the term ‘variable costs’? Give an example.
4 At full capacity output of 24,000 units, a firm’s costs are as follows:• managers’ salaries: £48,000• materials: £12,000• rent and rates: £24,000• piece-rate labour: £36,000.Calculate the firm’s total costs at 20,000 units.
3 ‘Last week our sales revenue was £12,000, which was great. Our price is £2 a unit, which I think is a bit too cheap.’a) Calculate how many unit sales were made last week.b) If a price rise to £2.25 cuts sales to 5,600 units, calculate the change in the firm’s revenue.c) Express that
2a) If a firm sells 200 Widgets at £3.20 and 40 Squidgets at £4, calculate its total revenue.b) Each Widget costs £1.20 to make, while each Squidget costs£1.50. Calculate the firm’s total variable costs.
1 During the summer weeks, Devon Ice Cream has average sales of 4,000 units a week. Each ice cream sells for £1 and has variable costs of 25p. Fixed costs are £800.a) Calculate the total weekly costs for the business in the summer weeks.b) Calculate Devon Ice Cream’s weekly revenue in the
8 Examine the view that ‘cost-cutting is a short-sighted approach to business’.
7 Explain why fixed costs can only alter in the long term.
6 Distinguish, with the aid of examples, between fixed and variable costs.
5 State two reasons why firms have to know the costs they incur in production.
4 If a business sells 4,000 units of Brand X at £4 each and 2,000 units of Brand Y at £3 each, what is its total revenue?
3 For what reasons may a firm seek to maximise its sales revenue?
2 State two circumstances in which a company may be able to charge high prices for a new product.
1 Why may a business initially receive relatively low revenues from a product newly introduced to the market?
2 ‘Quantitative sales forecasting techniques have only limited use.Qualitative judgements are needed in a constantly changing world.’Evaluate this statement.
1 Evaluate this statement: ‘Since we can never know the future, it is pointless trying to forecast it.’
4 Assess whether Eicher is right to price the Royal Enfield CT at£1,000 below the equivalent Triumph bike.
3 Use Figure 33.7 to assess the possible difficulties created for a motorbike manufacturer from the strongly seasonal sales pattern in the UK market.
2 Assess how a British motorcycle producer might use the sales trend information provided in Figures 33.6 and 33.7.
1 Use Figure 33.6 to assess one reason in favour and one reason against launching into the UK market for motorbikes in 2013.
7 Explain briefly how Superdry’s brand owner, Supergroup plc, might make use of contingency planning.
6 What is meant by an ‘economic variable’?
5 Marks & Spencer is forecasting a sales increase of 2 per cent in the coming year. Explain how two possible actions by rivals Next and John Lewis might cause actual sales to perform less well than this.
4 Trends are important in sales forecasting, and can be affected by fashion. Outline two factors that might lead to a product falling out of fashion.
3 Explain how two of the following Heinz managers could be helped by two weeks’ warning that sales are forecast to rise by 15 per cent:a) the operations managerb) the marketing manager, Heinz Beansc) the human resource managerd) the chief accountant.
2 Explain how you can show the trend in a series of data.
1 What is a sales forecast?
2 ‘Cash flow management is important for small companies but not for large companies.’ Evaluate this statement.
1 Evaluate the importance of cash flow forecasting for a new retail business.
2 Given the situation the business was in by the end of day one, evaluate the actions the entrepreneurs might take to overcome their cash flow problems.
1a) Explain the day one cash flow problems at PoundLandline Ltd.b) Assess whether Sonia and Colin could be blamed for these causes of the cash flow difficulties.
12 Outline three ways in which a business can improve its cash flow situation.
11 Outline two problems that may arise if a firm is operating with very poor cash flow.
10 Explain why ‘good management of cash flow starts with good forecasting’.
9 How could a firm benefit from constructing its cash flow forecasts on a computer spreadsheet?
8 What problems could a firm face if its cash flow forecast proved unreliable?
7 How could a firm benefit from delaying its cash outflows?
6 Give two reasons why a bank manager may want to see a cash flow forecast before giving a loan to a new business.
5 Explain two limitations of cash flow forecasts.
4 What is a cash flow forecast?
3 Why is it important to manage cash flow?
2 What is meant by ‘cash flow’?
1 Identify two circumstances in which a new business might decide not to write a business plan.
2 Your parents have decided to open a greengrocer selling only organic produce. They plan on making it a 50/50 partnership.Evaluate whether this business idea is wise.
1 As part of your plan to open a new restaurant, you establish Prime Ribz Ltd as a private limited company. Examine the financial issues that may arise in your first year and evaluate which issue might prove the most difficult.
2 Assess the importance to the UK of the decline in the percentage of small firms that employ any staff.
1 Assess two possible reasons why the rate of net new business start-ups jumped in 2014.
6 An aunt is about to start a business and asks you to advise on whether to start as a sole trader or a private limited company.Please do so.
5 From your general knowledge, give three examples of public limited companies.
4 Explain why a sole trader cannot raise share capital.
3 Outline two circumstances in which a supplier might give credit to a newly formed limited company.
2 Outline why the liabilities involved as a business partner might be even more of a worry than for a sole trader.
1 Explain in your own words the risks involved in starting a business that has unlimited liability.
2 For the founder of a rapidly growing small business, evaluate whether it is better to keep at least 51 per cent of the share capital or to finance growth in the safest way for the long-term health of the company.
1 While at university, you develop a game for mobiles based on tractors, farms, rabbits and foxes – and everyone loves it. Your parents lend you £4,000 and you have £2,000 but you estimate that it will cost about £20,000 simply to get the game ready for use and to give it some publicity.
3 Evaluate the benefits of crowdfunding compared with traditional venture capital funding when starting a business such as Chivote.
2 Explain the benefit to your cash flow of having a supplier who offers credit terms instead of cash only.(4)
1 A weakness of crowdfunding might be that it is effective only with consumer-friendly, attractive products or services. Examine whether that is really a problem.
3 Assuming this information is widely known, assess the probable attitude of any Chinese banks that Karishma approaches.
2 Assess the circumstances in which Karishma should proceed with her idea, if she were able to obtain the start-up finance.
1 Explain to Karishma two implications of Paul Martin’s reply for her plans for start-up finance.
8 Outline one advantage and one disadvantage of using an overdraft.
7 Explain why a new business could find it difficult to get external funding for its development.
6 Outline two sources of finance that can be used for long-term business development.
5 Read ‘Real business: 3D finance’ on page 192. Explain why it may have been difficult for a business such as this to get a bank loan.
4 What information may a bank manager want when considering a loan to a business?
3 Outline two ways in which businesses can raise money from internal sources.
2 Why do banks demand collateral before they agree to provide a bank loan?
1 Describe the problem caused to a company if a major customer refuses to pay a big bill.
2 ‘Companies succeed because of great marketing management; they fail because of bad financial management.’ Evaluate whether this old business saying is still true today.
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