0450 Business Studies June 2024 Question paper 11

FBM is a boat building business. It has 100 skilled employees. The Operations Director is concerned that FBM holds a high level of inventory. She is also concerned that the business is starting to 1 experience diseconomies of scale. The Finance Director has been asked to analyse FBM’s cost and output data. An extract is shown in Table 1.1. Table 1.1 Extract from FBM’s cost and output data $5000 Variable costs per unit$600000 Fixed costs per year 300 Number of boats made each year Define ‘diseconomies of scale’. (a) [2] Identify two ways a business can use cost data to help make decisions. (b) Way 1: Way 2: [2] Identify four fixed costs a business might have. (c) Fixed cost 1: Fixed cost 2: Fixed cost 3: Fixed cost 4: [4] Explain one advantage and one disadvantage to FBM of holding a high level of inventory. (d) Advantage: Explanation: Disadvantage: Explanation: [6] Do you think customers have a more important role in the success of a business than its employees? Justify your answer. (e) [6]

ADN is a food retailer. It has 5 shops and 300 full-time employees. All ADN’s employees receive off-the-job training. ADN has a tall hierarchical structure. Managers have a narrow span of control 2 and all use an autocratic leadership style. ADN’s directors are planning to expand the business and cannot decide whether it is better for a business to use internal growth or external growth. Define ‘span of control’. (a) [2] Define ‘autocratic leadership style’. (b) [2] Outline two benefits to ADN of having full-time employees. (c) Benefit 1: Benefit 2: [4] Explain one benefit and one limitation to ADN of using off-the-job training. (d) Benefit: Explanation: Limitation: Explanation: [6] Do you think it is better for a business to use internal growth or external growth when planning to expand? Justify your answer. (e) [6]

IDT manufactures clothes for the mass market. It is a multinational company with factories in 4 countries. IDT has short-term and long-term financial needs. The Finance Director is analysing 3 IDT’s statement of financial position. An extract is shown in Table 3.1. He has been asked to calculate working capital and to explain how an increase in non-current liabilities might affect IDT. Table 3.1 Extract from IDT’s statement of financial position ($ million) 2023 2022 420 380 Current assets 280 250 Current liabilities 400 300 Non-current liabilities Define ‘mass market’. (a) [2] Calculate IDT’s working capital in 2023. (b) Working: Final answer: [2] Outline one reason why IDT might need the following types of finance: (c) Short-term finance: Long-term finance: [4] Explain two ways an increase in non-current liabilities might affect IDT. (d) Way 1: Explanation: Way 2: Explanation: [6] Explain two advantages to a business of being a multinational company. Which advantage do you think is likely to be the most important? Justify your answer. (e) [6]

CFG is a social enterprise. It buys cocoa beans from local farmers and then uses the beans to make chocolate. Being ethical is important to the business. CFG has developed a new chocolate 4 bar. The Marketing Manager plans to use skimming as its pricing method, and retailers as its distribution channel for the new product. He knows there are many legal controls over marketing that might affect a business. Define ‘social enterprise’. (a) [2] Identify two ways legal controls over marketing might affect a business. (b) Way 1: Way 2: [2] Outline one advantage and one disadvantage to CFG of using skimming as its pricing method. (c) Advantage: Disadvantage: [4] Explain one advantage and one disadvantage to CFG of using retailers as its distribution channel for the new product. (d) Advantage: Explanation: Disadvantage: Explanation: [6] Do you think being ethical will always lead to lower profit for a business? Justify your answer. (e) [6]