1

1 SSG manufactures mobile (cell) phones using batch production. Quality control is important. SSG has 130
employees who all receive on-the-job training. The Marketing Manager is analysing cost and output data
for
product X. An extract is shown in the table below. As product X is in the maturity stage of the product life
cycle SSG is considering possible extension strategies.

Extract from SSG’s cost and output data for product X

Rent and other expenses per month $300 000

Variable cost per unit $80

Output per month 12 000

Calculate total variable cost per month. Show your working.

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[Total: 2]
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2 SSG manufactures mobile (cell) phones using batch production. Quality control is important. SSG has 130
employees who all receive on-the-job training. The Marketing Manager is analysing cost and output data
for
product X. An extract is shown in the table below. As product X is in the maturity stage of the product life
cycle SSG is considering possible extension strategies.

Extract from SSG’s cost and output data for product X

Rent and other expenses per month $300 000

Variable cost per unit $80

Output per month 12 000

Identify four factors a business should consider when deciding which method of production to use.

Factor 1: ...................................................................................................................................................

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Factor 2: ...................................................................................................................................................

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Factor 3: ...................................................................................................................................................

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Factor 4: ...................................................................................................................................................

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[Total: 4]
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3 CHW manufactures electrical products including cameras. The business is developing new products. The
Managing Director knows that the stage of the product life cycle can influence CHW’s marketing decisions
about promotion. He is analysing data for one of its products. An extract is shown in the table below. The
business would also like to introduce flow production into the factory.

Extract from CHW’s data for one type of camera (2021)

Selling price per unit ($) 120

Variable cost per unit ($) 40

Fixed costs ($) 200 000

Margin of safety (units) 500

Do you think flow production is the best method of production for a manufacturing business to use? Justify
your answer.

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[Total: 6]
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4 BCZ is a multinational company which operates in 12 countries. It manufactures cement, a building

material
used by construction companies, so quality assurance is important. Making cement creates external costs.
One of BCZ’s factories is located in country X. The government of country X plans to introduce new legal
controls that will reduce the maximum number of working hours from 45 to 35 hours per week.

Do you think it is better for a large manufacturer to use quality assurance rather than quality control? Justify
your answer.

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[Total: 6]
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5 MTD manufactures specialist cleaning products including soap. Batch production is used. The business
uses
just-in-time inventory control. MTD took 18 months to develop its latest environmentally friendly cleaning
product. The Marketing Manager has to decide on the packaging and method of promotion for this new
product. She said: ‘All our stakeholders, including pressure groups, are important. MTD wants to
contribute
to sustainable development.’

Explain two possible advantages to MTD of using just-in-time inventory control.

Advantage 1: ............................................................................................................................................

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Explanation: ............................................................................................................................................

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Advantage 2: ............................................................................................................................................

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Explanation: ............................................................................................................................................

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[Total: 6]
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6 CHW manufactures electrical products including cameras. The business is developing new products. The
Managing Director knows that the stage of the product life cycle can influence CHW’s marketing decisions
about promotion. He is analysing data for one of its products. An extract is shown in the table below. The
business would also like to introduce flow production into the factory.

Extract from CHW’s data for one type of camera (2021)

Selling price per unit ($) 120

Variable cost per unit ($) 40

Fixed costs ($) 200 000

Margin of safety (units) 500

Calculate the break-even level of output for 2021. Show your working.

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[Total: 2]
 7

7 CXN manufactures glass bottles using flow production. The business has a number of stakeholder groups
including its 130 employees. CXN has benefitted from globalisation. Its products are exported to 39
countries.
The Managing Director knows that depreciation of an exchange rate can affect business activity. She thinks
all manufacturing businesses should contribute to sustainable development.

Explain one advantage and one disadvantage to CXN of using flow production.

Advantage: ...............................................................................................................................................

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Explanation: ............................................................................................................................................

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Disadvantage: ..........................................................................................................................................

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Explanation: ............................................................................................................................................

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[Total: 6]
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Identify X and Y.

X: .............................................................................................................................................................

Y: ............................................................................................................................................................. [2]

[Total: 2]

9 Identify two limitations of break-even analysis.

Limitation 1:.............................................................................................................................................

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Limitation 2:.............................................................................................................................................

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[Total: 2]
 9

10 SWB is in the secondary sector. It produces 150 000 wooden bookcases each week using batch production.
SWB sells all its output to one customer. Quality control is important. SWB has 240 employees, of which
100 are part-time workers. SWB’s managers use noticeboards around the factory and meetings with
employees
every month to help reduce communication barriers. The Operations Manager is considering introducing
just-in-time inventory control to reduce the amount of waste.

Outline one advantage and one disadvantage to SWB of using quality control.

Advantage:................................................................................................................................................

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Disadvantage:...........................................................................................................................................

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[Total: 4]

11 Identify two factors a business should consider when deciding whether to introduce just-in-time inventory
control.

Factor 1:....................................................................................................................................................

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Factor 2:....................................................................................................................................................

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[Total: 2]
 10

12 The economy of country C is experiencing economic growth. Based on secondary market research data,
Samuel started a plumbing business. His business installs and repairs bathroom equipment. Samuel operates
as a sole trader. He used all his $500 savings to buy the tools needed. Samuel had to decide on a suitable
pricing method to use. He thinks that providing a good quality service could help his business to increase
added value.

Outline how providing a good quality service could help Samuel’s business increase added value.

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[Total: 4]
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13 VDN is a private limited company. One of VDN’s objectives is to be ethical. VDN produces office products
including pens and paperclips. All raw materials are imported. The Managing Director plans to introduce
new machinery to help lower average costs. This will require training for VDN’s 380 employees. The
Managing Director also wants to introduce Kaizen into the factory.

Explain one advantage and one disadvantage to VDN of introducing Kaizen.

Advantage: ...............................................................................................................................................

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Explanation: ............................................................................................................................................

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Disadvantage: ..........................................................................................................................................

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Explanation: ............................................................................................................................................

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[Total: 6]
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14 NSN is a multinational company. It makes cars. Over the years, technology has changed production
methods.
NSN uses just-in-time inventory control in all its factories. NSN plans to open a new factory in country Z
creating 7 000 jobs. Country Z’s Government has offered an $80m grant to NSN. A spokesperson for NSN
said: ‘Governments should support business activity. There were also other
factors that influenced our decision to build the new factory there including the possible effects of
economic
growth.’

Do you think the ways technology has changed production methods benefits all employees? Justify your
answer.

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[Total: 6]
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15 CTF is an ethical business. It manufactures a range of toys. CTF operates in a competitive market. Over the
years technology has changed production at CTF. The Operations Manager is analysing break-even
information.
An extract of the cost and revenue data for product X is shown in the table. Following the closure of its
local
supplier, the Operations Manager is considering importing raw materials for product X.

Cost and revenue data for product X in 2020

Fixed costs $210 000

Variable cost per toy $25

Price per toy $40

Output 18 000

Explain two ways that technology might have changed production atCTF.

Way 1:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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Way 2:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
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16 CTF is an ethical business. It manufactures a range of toys. CTF operates in a competitive market. Over the
years technology has changed production at CTF. The Operations Manager is analysing break-even
information.
An extract of the cost and revenue data for product X is shown in the table. Following the closure of its
local
supplier, the Operations Manager is considering importing raw materials for product X.

Cost and revenue data for product X in 2020Fixed costs

Fixed costs $210 000

Variable cost per toy $25

Price per toy $40

Output 18 000

Outline one benefit and one limitation to CTF of using break-even analysis.

Benefit:.....................................................................................................................................................

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Limitation:................................................................................................................................................

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[Total: 4]

17 Define ‘batch production’.

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[Total: 2]
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18 Lola and Raul are in a business partnership. They make a range of hand-printed products including t-shirts,
bags and posters using job production. Most of Lola and Raul’s customers are tourists. Lola designs and
prints all the products at the back of a small shop. Raul is responsible for sales and finance. Production is
slow and it is difficult for Lola to keep up with demand. Raul wants to increase output. One way of doing
this is to introduce some machinery into the process. Raul also wants to develop a website.

Do you think introducing machinery is a better way for a small business to increase output than recruiting
more employees? Justify your answer.

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[Total: 6]

19 Define ‘break-even’.

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[Total: 2]
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20 After identifying a gap in the soft drinks market, Jerome developed a low sugar drink. He borrowed $5000
from family and friends to start-up a business and to provide working capital. Jerome operates as a sole
trader.
To promote his product, Jerome handed out free samples in the town centre. In the first year, Jerome’s
business
sold 10 000 units. This is 200 units more than his break-even output. Jerome is considering ways to
increase
added value.

Outline two ways that break-even information can help Jerome’s business.

Way 1: ......................................................................................................................................................

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Way 2: ......................................................................................................................................................

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[Total: 4]

21 Identify two methods (other than technology) a business can use to improve efficiency.

Method 1: ................................................................................................................................................

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Method 2: ................................................................................................................................................

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[Total: 2]
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22 Mercy and Ayo are entrepreneurs. They plan to open a shop selling homemade ice cream. Mercy
wants the business to be ethical and only buy high quality organic milk from local farms. Ayo used
sampling
to help him carry out some primary market research. An extract of the results from the 300 people in the
sample is shown in the table below. Ayo thinks a new business has a better chance of success if it is located
where there is no competition.

Results from a market research question

What price are you willing to pay for a pot of ice cream? % of sample

$0.50 - $1.50 90%

$1.51 to $2.50 55%

$2.51 - $3.50 20%

Over $3.50 5%

Do you think a new business has a better chance of success if it locates where there is no competition? Justify
your answer.

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[Total: 6]
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23 DWT makes solar panels in country Y. This is a low-cost country which is experiencing rapid economic
growth. DWT’s production method makes use of specialisation. All 120 of DWT’s employees know that
ensuring quality production is important. DWT imports some of its raw materials. The Government of
country
Y plans to introduce import tariffs of 50%. DWT’s Managing Director said: ‘This decision will affect all of
our stakeholders. Why do governments introduce trade restrictions such as import controls?’

Outline two ways DWT could try to ensure quality production.

Way 1:.......................................................................................................................................................

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Way 2:.......................................................................................................................................................

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[Total: 4]
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24 BFF makes a range of computer screens that it sells to other manufacturers. The Managing Director has
been
looking at BFF’s income statement. She is worried about the effects of an increase in the cost of materials.
She said: ‘Changes in technology have improved our production methods. BFF needs to remain competitive
as imports of computer screens are increasing.’ The Managing Director has to decide whether BFF should
increase its prices.

Identify and explain two ways changes in technology used in production could help BFF to remain competitive.

Way 1:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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Way 2:.......................................................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]
 20

25 NBV is a multinational company. It makes building products such as bricks. Last year NBV’s financial
accounts showed capital employed as $144 billion. NBV has operations in 18 countries and a total 4
workforce
of 400000. NBV experiences some diseconomies of scale. All raw materials are purchased from the
countries
it operates in to avoid problems with exchange rates. NBV plans to open a factory in Country B for the first
time.

Identify and explain two diseconomies of scale that NBV might experience.

Diseconomy of scale 1:............................................................................................................................

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Explanation:.............................................................................................................................................

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Diseconomy of scale 2:............................................................................................................................

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Explanation:.............................................................................................................................................

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[Total: 6]