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AS Alevel Study and Revision Guide NTY Answers
AS Alevel Study and Revision Guide NTY Answers
8 Interview: Ask pre-planned questions of each 18 Promotion: For instance the opportunity to lead a
candidate and compare their responses; this enables team.
body language to be seen plus follow-up questions Participation: The workers could be involved in
can be asked if necessary. making production decisions.
Aptitude tests: Give each candidate a test on the 19 Achievement: The need to reach goals and to be
skills that they will need in the job to see if the recognised for doing so.
candidate is physically/mentally able to do the
Authority: The need of employees to have some
work.
control and power over the way they work.
9 Details of the work; job title; working hours; length
Affiliation: The need to be part of a group, to be
of contract; holiday entitlement; how the contract
liked — the desire to work in a friendly atmosphere.
can be ended.
20 Vroom’s theory is based on expectancy of rewards
10 Redundancy occurs when the work/job is no longer
that employees value if targets are achieved.
required and so the person doing that work is also
Without an effective appraisal system, it would
no longer required.
not be possible to determine whether targets had
Dismissal is when the contract of employment is been achieved and who had met them and who had
terminated by the employer, due to unsatisfactory not. The system must be fair so that people who do
work or ‘gross misconduct’, and the person is asked achieve their targets are rewarded and those who
to leave the place of work. do not reach pre-set targets do not receive rewards.
11 Employees will be more skilled and productive due Without this, the expectations of workers are
to acquiring more skills and knowledge; motivates undermined.
employees because they feel valued because the 21 Managers can set suitable objectives that are
business has invested in them; helps to prepare challenging but realistic and support employees
employees for promotion. to work to their full potential to achieve these.
12 On-the-job training takes place within the business If managers also have access to good-quality
and often involves watching other workers doing information, for instance from market research, they
their work. can be proactive rather than reactive in launching
Off-the-job training takes place in a school or new products. All these functions can increase
college away from the business premises and is profits, if carried out successfully.
usually given by external specialists. 22 Quick decisions can be made, which is essential in
13 Motivation is the desire, enthusiasm and willingness some situations. Employees are told what to do and
to work towards a stated goal. time is not spent gaining feedback from them. Some
employees do not want to be included in decision-
14 Social needs: People usually need to feel part of a
making and would be more comfortable being given
group and to have interaction with other people,
instructions.
for instance by working as part of a team.
23 More ideas can be gained because employees
Esteem needs: People need to feel the respect of their
can make valuable contributions. Workers are
peers; they need to feel recognised and appreciated
more highly motivated because they feel valued
either as a worker and/or as a person. Esteem needs
and included in business decisions. Workers get
may be met by promotion or other recognition, such
feedback from managers and are able to feed back
as an ‘employee of the month award’.
to managers on ideas put forward. All this can
15 Piece work means that employees will be paid increase productivity and the flow of innovative
a stated amount for each unit or piece of work ideas.
completed.
24 Consulting with employees can be very time-
16 The more that employees produce, the more they consuming. In emergency situations and some
will earn. This will motivate those workers who are business situations, there is not time to consult
motivated by money (Taylor’s economic man theory) as quick decisions must be made. Times when
and who desire a higher income. management do not consult employees can cause
17 Commission: Sales people could receive a resentment. Employees might not know best how to
percentage of the total sales that they achieve. This deal with a particular situation; they do not have
would motivate them to sell more. the experience or skills, unlike the managers.
Profit-related pay: If the retail business becomes 25 Highly skilled and self-motivated workers. This
more profitable due to the efforts of its employees, means that they do not need constant supervision
it could reward its workers with a share of the as they are probably doing highly technical work,
profits. This ensures that all employees strive to e.g. R&D. They are driven by their interest in what
make the business as profitable as possible. they do and therefore do not need supervising.
They are motivated by the nature of the work.
19 a Focus groups: Allow discussion of reasons 27 Reinforces brand image, such as updating an already
for like/dislike; detailed responses; consumer popular game; enables entry to new markets, such
sees/tastes examples of products, so instant as designing a game for a group who are less likely
reactions may be observed. to already play computer games, such as teenage
b Test marketing: Real marketing situation, but girls.
on a small scale; consumer reactions may be 28 Unique selling point (USP) is the one particular
observed and tracked; expensive mistakes can be factor that makes a product different from
corrected before full launch. competitors.
20 a Surveys: Take time to set up, carry out and 29 Specific unique design or materials; ease of
analyse results; respondents may not give assembly.
truthful answers for fear of offending the
30 Product life cycle describes five stages, from
researcher.
development to introduction, growth, maturity and
b Observation: Interaction between observer and
decline, showing sales over time.
observed may affect behaviour and results;
usefulness limited to a few research objectives, 31 An extension strategy is marketing activities
for instance measuring footfall in a shopping designed to maintain or increase sales of a product
area. that is in decline. The high-sugar soft drink could
be targeted at sports people as an ‘energy drink’.
21 a Market research is the process of gathering
information about markets, customers, 32 Product portfolio analysis identifies ‘cash cow’
competitors and the effectiveness of marketing products that can be ‘milked’ to support newer
methods. products, such as ‘question marks’. This means that
b Primary or field research is gathering the surplus from older, successful products may be
information for the first time, directly from used in the marketing of newer products.
sources in the market. It will be up to date and 33 Cash cows: Potato crisps of various flavours in big
directly relevant to the reason for collection. and small bags.
c Desk research is using information that Question marks: Newer products such as root
has been gathered already, either by the vegetable crisps.
business (e.g. sales figures and trends) or by Stars: Speciality branded crisp flavours in big bags,
other organisations, such as market research such as ‘sea salt and cider vinegar’.
companies. It also includes government
Dogs: Old-fashioned ‘salt and shake’ crisps.
statistics, and may be gathered from online
sources. 34 a A launch strategy such as ‘skimming’, as this
d Qualitative research is gathering information should be innovative. This will help recover R&D
that is expressed in words, e.g. about feelings costs.
and attitudes. Interviews are an example of a b Competitive pricing if mass market, or premium
qualitative research method. pricing if designer brand.
c Cost plus pricing (or full cost), where a mark-
22 Sampling is the process of gathering information
up percentage is added to unit cost (full cost
from a representative group of all those you are
divided by number of units).
interested in (sample from the target population).
35 Skimming or penetration.
23 A quota sample takes a set number of people with
different characteristics. 36 Competitive; full cost; contribution.
A stratified sample is taken by dividing up the 37 Loss leaders; psychological.
population into groups with shared characteristics 38 Promotion is a range of activities to communicate
and choosing from them. and interact with consumers in order to inform and/
24 It is important to obtain a random sample because or persuade so that attitudes and buying behaviour
it will represent the total population, as each change.
member has an equal chance of being selected. 39 a Above-the-line methods use media space that is
25 a Tangible: Colour; camera specification. paid for, such as TV or newspaper adverts.
Intangible: Brand image; ability to keep in touch Below-the-line methods are not directly paid for,
with friends. such as public relations or special offers.
b Tangible: Shape of bottle and packaging; type of b ATL (TV advertising): Reaches many people but
smell. at a high cost.
Intangible: Celebrity endorsement of brand; ATL (billboards): Reach many people but in
makes wearer attractive to prospective partners. restricted locations and are often not noticed.
BTL (in-store posters): Cheap but only reach
26 Product development is the creation of products
people who are already in the store.
with innovative or different characteristics that
offer added value to the customer.
16 a Raw materials are the basic physical resources picking up products; loading into vans in order of
needed for production, for example cloth, delivery.
thread, ingredients, metal. 26 Outsourcing means contracting another business
b Work in progress is partly finished goods in the to carry out part of a firm’s production process,
process of being transformed into final products, such as a component. A toy manufacturer that is
for example cloth that has been cut out and experiencing a surge in demand and approaching
pinned together awaiting sewing. maximum capacity may pay another company
c Finished goods are products ready for sale. to make parts for its toys, or more specialised
17 To satisfy customer needs for different sizes and to components such as motors. This will enable
keep a range of styles to ensure customer choice. consumer demand to be met without major
18 Bakery products such as bread and cakes, also investment in expansion of production facilities.
ingredients, are perishable so it would be best to
try and match supply with likely demand and not
hold excess stock. Chapter 5
19 a The lowest level of minimum inventory that 1 Start-up capital is the money that a business needs
avoids variations in supply that would stop when first setting up. It is used to acquire premises
production. and equipment so that the business can begin to
b Once inventory falls to this level it is necessary operate.
to order more. This will depend on the nature of
2 A small business such as a sole trader or partnership
the inventory and the lead time.
will have fewer options for finance, as it cannot
c The time taken for inventory to arrive, after it
raise additional finance through share capital.
has been ordered.
3 Assuming this applies to a country where February
20 The supply chain is the sequence of links involved
is a winter month, the company may be buying
in the production and distribution of a product. The
stock/inventory in readiness for the coming summer
likely supply chain in this instance may be farm,
season, but sales will not start until April/May.
abattoir, food processing plant, central supplier for
Therefore there will be more cash outflow than
restaurant chain, individual restaurant, consumer.
inflow.
21 Reduces storage costs; reduces insurance costs of
4 Bankruptcy happens when an individual, sole trader
storage facilities; avoids inventory becoming out of
or partnership with unlimited liability is unable to
date, damaged or obsolete.
pay its debts.
22 ‘Just in case’ inventory management means that
Liquidation is when a limited company is dissolved,
businesses hold more than minimum levels of stock
due to being unable to continue trading. The
in case of short-term changes in demand. However,
business assets are then sold to pay debts and
if these do not happen, then inventory may perish
shareholders may receive the remaining money, if
or go out of fashion and become worthless. This
there is any.
would be a waste of the money spent on inventory.
Stockholding costs will also be high. 5 Working capital is the money used for day-to-day
business activities. Working capital is current
23 The percentage of maximum output (capacity) that
assets minus current liabilities.
is currently being produced.
Current output 6 Too much working capital means that the business
Formula is: × 100 is experiencing an opportunity cost; the extra
Maximum output
working capital could be invested in an interest-
400
24 a × 100 = 66.7 % bearing account or could be used to purchase
600 equipment that could increase business profit.
b The business may be a start-up looking to grow 7 Disadvantage: The money is not earning anything
output and sales every month. for the business.
The economy may be in a downturn/recession,
leading to lower sales and therefore output until Advantage: It gives the business security that it
the economy recovers. can settle its short-term debts.
c 90 per cent is the highest recommended 8 Delaying trade payables may improve cash flow, but
capacity utilisation to ensure time for machine suppliers may be reluctant to continue supplying
maintenance, servicing, carrying out repairs. late payers, or even ask for interest on the
Increasing CU to 90 per cent will mean greater outstanding amounts.
efficiency and lower unit costs (economies of Asking trade receivables to pay more quickly will
scale) as resources are being used efficiently, also improve cash flow, but the business may lose
with little ‘idle’ time. credit sales.
25 By training workers to identify the location of 9 Revenue expenditure is on day-to-day items that
products quickly; using technology to help in will be used in the business in a short period of
to fixed costs by calculating selling price minus 43 Use: To calculate the level of profit at any given
variable cost per unit. level of output.
36 Contribution costing is used, for instance, when Limitation: It is assumed that all output is sold,
making a decision on whether to accept a big whereas some might stay as inventory.
special order when the customer has offered a lower 44 To ensure fair allocation of spending, and payment
price. of costs, depending on the size of the department.
If a company is using price discrimination (different To target and enable monitoring of spending by
prices for different groups of customers) or dynamic individual departments.
pricing, contribution costing may be used to ensure
45 Benefit: It helps to monitor sales, and costs and
that all units make some contribution to fixed
budgets may be adjusted accordingly.
costs. For instance, for the budget airlines the extra
variable cost of carrying an additional passenger is Drawback: If budgets are not flexible they can
very low, as long as there are seats available on a become out of date or meaningless, for instance if
flight. sales are low due to an economic shock.
37 Total contribution = Total revenue – Total variable 46 Flexible budgeting adjusts future predicted figures
costs, whereas to get profit you also need to take in the light of actual figures that are recorded once
off fixed costs. Profit = Total revenue – Total costs. the financial year starts. For instance, if sales are
higher than expected, cost budgets may be adjusted
38 When deciding what price to charge for a product/
upwards as more inventory will be needed.
service — the price charged would need to cover all
costs incurred and possibly some profit. Zero budgeting means that each department or
cost centre starts with a zero base, so all costs and
Businesses use costs information to monitor the
revenue budgets need to be justified.
performance of different parts of the business to
identify inefficient areas and examples of good 47 Flexible budgeting is appropriate during periods of
practice. economic uncertainty, so that budget figures can
be adjusted in the light of prevailing conditions —
39 Total cost = $100k + (4000 × $5) = $120k
120k fast-growing sales and costs in a boom or falling
Average cost = = $30 sales in a recession.
4k
Profit = $144k – $120k = $24k 48 If a department has a budget, such as the Marketing
40 The breakeven level of output is the level of output department having a budget for promotion, then
where the business makes neither a profit nor a this will help with decisions as to what type of
loss; Total revenue = Total costs. activity might be appropriate, for instance a very
Fixed costs
large budget would be needed for TV advertising.
41 49 A ‘favourable variance’ means higher sales or lower
Contribution per unit
costs than the budget figure.
42 The margin of safety is the difference between the
actual level of output and the breakeven level of 50 An ‘adverse variance’ means lower sales or higher
output when the actual level is above the breakeven costs than the budget figure.
level of output.
33 They might resist technology if they are afraid that 17 Barrier 1: Noise. Response: Change location or
they may lose their jobs, or if they are worried that media.
they will not be able to use it and will lose power Barrier 2: Information overload. Response: Reduce
and status, or if they don’t understand the benefits. content.
34 Contingency planning plans for unexpected events. 18 Chain networks follow the hierarchical structure
Crisis management deals with the event once it has within an organisation and communication can be
happened. either one way or two way.
In connected networks, everyone involved has the
opportunity to communicate with each other.
Chapter 7 19 Formal communication is information passed
1 Structure affects costs, which can affect price. through the formal channels within an organisation,
Structure affects the speed of decision-making. e.g. the chain of command.
2 In a functional structure, people can share Informal communication is information that is
expertise within a given function, but the structure passed outside of the official communication
may not encourage different parts of the business channels.
to work together. 20 Soft HRM would invest in training in order to
3 A regional structure may enable better decisions develop employees.
that are more focused on the demands of an area. 21 The employee may fear the appraisal will be
4 A product structure may enable better decisions negative and affect their pay or promotion
based on the requirements of a particular product prospects.
group. 22 Appraisals help individuals identify areas to develop
5 Delegation may motivate and use the skills of and help businesses identify whom to promote.
subordinates, but it involves risk as a superior is 23 Management by objectives ensures that all
losing control. employees are working towards the overall business
6 Delegation may motivate as it gives employees objective by setting targets for subordinates.
the chance to make decisions and gives them more 24 Management by objectives helps ensure everyone
power and status. is aligned to the same targets. The objectives may
7 A tall structure provides plenty of opportunities motivate staff.
for promotion, but the costs of the layers of
management are expensive.
8 A flat structure may reduce costs as there are fewer Chapter 8
layers of management, but it may increase workload
1 False: Quantity demanded does change but by less
for individuals as the span is wider.
proportionately than price.
9 To reduce costs; to give employees more
2 True: Demand increases with income.
responsibility.
3 False: It shows it is an inferior good.
10 Delegation occurs when a superior entrusts a
subordinate with a task. Decentralisation occurs 4 +0.25
when decisions generally are passed down the 5 +3
organisation. 6 –0.5
11 A centralised organisational structure can lead to 7 This is a 10 per cent positive change in income, so
quicker decision-making by those with an overview, demand increases by 18 per cent.
but it can mean the business is not responsive to 8 Income changes 4 per cent; demand changes –0.8 per
local conditions. cent, resulting in 4960 sales.
12 True: Line managers have authority over specified 9 True: They are substitutes; as the price of one
people within the organisation. rises, the quantity demanded of the other rises as
13 False: The staff function is advisory. customers switch.
14 It is important so people understand what to do 10 True: They are complements as this is a negative
and managers know what has happened. value.
15 Horizontal communication is with someone at 11 Demand increases 5 × 0.2 = 1 %
same stage in the business, e.g. two managers. 12 Demand rises 8 × 2.5 = 20%
Vertical communication is up and down the chain of 2 4
command, e.g. a superior to a subordinate. 13 Demand falls = 16.7 %; price rises = 20 %
12 −16.7 20
16 One-way communication would be X telling Y Cross-price elasticity = = -0.84
+20
something. Two-way communication would be X 14 a Normal; inelastic.
discussing something with Y. b Inferior; elastic.
A 3 B 8 D
3 3 5 8 10
18 E 22 H 25 I 30
18 4 22 3 25 5 30
0 C
0 2
F 1 G
1 13 12
14 The effective use of critical path analysis means 15 Any suitable project: A project has a series of
items can be ordered when required, so reducing activities, a specific objective and a timescale.
waste; it can reduce the time taken to complete a
project; it can make it easier to monitor progress.