Total marks: 80 · Duration: 1 hour 30 minutes
Instructions to candidates
• Answer all questions. • Each question is based on a short case study. Read each case study carefully before answering. • You may use a calculator. Show all your working. • The businesses described in this question paper are fictitious. • The number of marks for each question or part question is shown in brackets [ ]. • Each question is worth 20 marks.
Paper
Question 1 — Island Squeeze
Island Squeeze is a partnership owned by Priya and Arjun. It makes fresh fruit juice in Mauritius and sells it to hotels and supermarkets. The business employs 14 workers and is in the primary and secondary sectors, as it grows some of its own fruit on a small farm. Demand from tourist hotels has grown quickly, and the partners want to buy a new bottling machine costing $120,000. They are thinking about changing the business into a private limited company to raise the finance.
(a) Define partnership. [2]
(b) Define secondary sector. [2]
(c) Identify two sources of finance, other than selling shares, that Island Squeeze could use to buy the new bottling machine. [2]
(d) Outline two reasons why Island Squeeze's growth may be limited by its being a partnership. [4]
(e) Explain two stakeholders who might be affected by Island Squeeze's expansion, and how each might be affected. [4]
(f) Do you think Priya and Arjun should change Island Squeeze into a private limited company? Justify your answer. [6]
Question 2 — Kestrel Hotels
Kestrel Hotels owns six hotels in Ghana. Staff turnover among its receptionists and kitchen staff is high, at 32% per year. The human resources manager believes this is because pay is low and there are few chances for promotion. Kestrel Hotels recruits most new workers externally through job advertisements in newspapers and online. It is considering introducing a bonus scheme and more on-the-job training.
(a) Define on-the-job training. [2]
(b) Define external recruitment. [2]
(c) Kestrel Hotels employs 250 workers. 80 workers left the business last year. Calculate the number of workers Kestrel would need to recruit this year to keep its workforce at 250, if the same number leave. [2]
(d) Outline two problems that high labour turnover could cause for Kestrel Hotels. [4]
(e) Explain two ways Kestrel Hotels could use non-financial methods to motivate its workers. [4]
(f) Kestrel Hotels is deciding between introducing a bonus scheme and increasing training. Which option is more likely to reduce labour turnover? Justify your answer. [6]
Question 3 — Zuri Sportswear
Zuri Sportswear is a private limited company in Kenya that designs and sells running clothes. Its products are popular with serious athletes and are sold at a premium price in specialist sports shops. Zuri wants to launch a new range of cheaper clothing aimed at teenagers. It has carried out some primary market research using an online questionnaire, which received 400 replies.
Table 3.1 shows some of the results.
| Question: "What is the most you would pay for a running top?" | Number of replies |
|---|---|
| Less than $10 | 64 |
| $10–$19.99 | 188 |
| $20–$29.99 | 112 |
| $30 or more | 36 |
| Total | 400 |
(a) Define premium pricing. [2]
(b) Define primary market research. [2]
(c) Using Table 3.1, calculate the percentage of replies that would pay $20 or more for a running top. [2]
(d) Outline two limitations of the online questionnaire as a method of market research for Zuri. [4]
(e) Explain two methods of promotion Zuri could use to reach teenagers. [4]
(f) Should Zuri sell the new teenage range under the Zuri brand name, or under a different brand name? Justify your answer. [6]
Question 4 — Pacific Bakes
Pacific Bakes makes bread and cakes in a factory in Fiji and sells them to shops. It is considering opening a new production line to make frozen pizzas. Table 4.1 shows forecast data for the frozen pizzas.
| Forecast data for frozen pizzas | |
|---|---|
| Selling price per pizza | $6.00 |
| Variable cost per pizza | $3.50 |
| Fixed costs per month | $10,000 |
| Forecast sales per month | 6,000 pizzas |
Pacific Bakes has a cash-flow forecast that shows a negative closing balance in two months of the next year, because many of its customers pay on 60 days' credit.
(a) Define variable cost. [2]
(b) Define cash-flow forecast. [2]
(c) Using Table 4.1, calculate the break-even level of output per month for the frozen pizzas. [2]
(d) Using Table 4.1, calculate the forecast margin of safety per month. Show your working. [4]
(e) Explain two ways Pacific Bakes could improve its cash flow. [4]
(f) Pacific Bakes must decide whether to make the pizzas using batch production or flow production. Which method should it choose? Justify your answer. [6]