AS BUSINESS STUDIES Unit 1 Planning and Financing a Business

Transcription

1 Please write clearly in block capitals. Centre number Candidate number Surname Forename(s) Candidate signature AS BUSINESS STUDIES Unit 1 Planning and Financing a Business Thursday 19 May 2016 Afternoon Time allowed: 1 hour 15 minutes Materials For this paper you must have: a calculator. Instructions Use black ink or black ball-point pen. Fill in the es at the top of this page. Answer all questions. You must answer the questions in the spaces provided. around each page or on blank pages. Do all rough work in this book. Cross through any work you do not want to be marked. Information The marks for questions are shown in brackets. The maximum mark for this paper is 60. Questions 2(b) and 2(c) should be answered in continuous prose. In these questions you will be marked on your ability to: use good English organise information clearly use specialist vocabulary where appropriate. Advice You are advised to spend about 20 minutes answering Question 1. (JUN16BUSS101) G/TI/Jun16/E4 BUSS1

2 2 Read the case study and then answer the questions that follow. Ottermouth Souvenirs Liza s divorce meant that she had two young children to support. The redundancy from her job as a designer and sale of the house meant that she had a very large sum of money, but no income. Liza moved to Ottermouth, a resort on the Devon coast, to live with her parents, who were very eager baby-sitters. Liza decided to set up a souvenir shop in the town. 5 The local council had carried out some quantitative market research into the places that tourists visited. The results are shown in Figure 1 below. Figure 1: Tourism in Ottermouth Percentage of visitors spending time at specific locations. (The total is greater than 100% due to visits to multiple locations) Beach Shopping centre Pier Zoo 80% 40% 30% 15% Source: Ottermouth Council, Summer Based on a survey of 1,000 visitors. Souvenir shops rely mainly on passing trade people walking past the shop. There are two possible sites for the shop. These sites are shown on the map of Ottermouth below as Location A and Location B. Location A is on the main road leading from the shopping centre to the pier. Location B is next to the beach and close to CP2 which is the largest of the three car parks in Ottermouth. The annual rents are as follows: Location A: a year; location B: a year. Figure 2: Map of Ottermouth CP3 CP1 Shopping X centre X A Pier X Beach X B Zoo CP2 Sea N Key A and B CP1, CP2, CP3 X Alternative shop locations Car parks Locations of competitors After careful consideration Liza decided to choose Location B for her souvenir store. Now Liza had to choose between two ways of running her shop Ottermouth Souvenirs : OPTION 1. Operate as an independent souvenir shop OPTION 2. Become a franchisee for Last Resort, a franchisor that runs a successful chain of souvenir shops in UK holiday resorts. 25 (02)

3 3 Option 1 As an independent shop, Liza wanted most souvenirs to feature the name Ottermouth, as she thought this would be a way of adding value, but some of the samples that Liza saw were of low quality. However, this meant that, by choosing different suppliers, Liza could stock a mix of expensive, high-quality souvenirs alongside some cheaper ones. In March 2016 Liza interviewed 200 tourists, so that she could estimate her income budget. Her friend Alex ran a café and told her how much her sales varied each month. She advised Liza to close between November and February (as most tourist shops in Ottermouth closed then). Liza liked the idea of a 4 month break each year, as it would give her a lot of time with her children. Also, a friend had offered her regular freelance design work for the winter period. Liza knew the annual sales of two competitors for 2014 and was expecting to achieve a 12% market share as an independent shop. She used all of the information she had acquired to set up income and expenditure budgets for her independent souvenir shop. Option 2 Last Resort is a successful franchisor that makes souvenirs for tourists and sells them through shops run by its franchisees. Last Resort franchisees trade under their own names but can only stock Last Resort branded souvenirs. Last Resort is not prepared to provide tailor-made souvenirs for Liza. However, Last Resort has an excellent national reputation for the quality of its souvenirs and provides marketing support. Last Resort is particularly popular with teenagers and young adults in their 20s. Although Ottermouth mainly attracts young families, it is becoming increasingly popular amongst young adults, as it is ideal for wind surfing and has some excellent clubs. The four existing souvenir shops in Ottermouth focus on the family market, and Liza feels that she might be able to benefit from selling to a niche market if she becomes a Last Resort franchisee in the town Last Resort insists on its retailers being open throughout the year, even in the winter. However, the higher summer sales from the Last Resort franchise would mean that she could employ more temporary staff if she becomes a franchisee than if she remains independent. This would give her more time with her children in the summer months. Liza gathered some financial data from Last Resort. In the peak season a typical franchisee would earn total revenue of 1200 per day and incur daily fixed costs of 140. Variable costs would be 7 per souvenir and profit would be 535 per day. She also received data for the off-peak season. She used the figures provided to create her budgets for Option 2. Figure 3 compares Liza s budgets for Options 1 and 2. Figure 3: Liza s budgets for independent shop and Last Resort franchisee April 2016 to March 2017 Apr- June 2016 OPTION 1: Independent shop July- Sep 2016 Oct- Dec 2016 Jan- Mar 2017 OPTION 2: Last Resort franchisee Apr- June 2016 July- Sep 2016 Oct- Dec 2016 Jan- Mar Income budget ( 000) Expenditure budget ( 000) (6) (5) Profit budget ( 000) (7) (5) Liza had a decision to make. Should she operate as an independent shop (Option 1) or a Last Resort franchisee (Option 2)? Turn over (03)

4 4 Answer all questions in the spaces provided. You are advised to spend about 20 minutes on Question 1. 1 (a) What is meant by the term adding value? (line 28) [2 marks] 1 (b) What is meant by the term quantitative market research? (line 6) [2 marks] 1 (c) Liza s income budget for Option 1, the independent shop, was based on her expecting to achieve a 12% market share of the souvenir market in Ottermouth. Using Figure 3 calculate the size of the market for souvenirs in Ottermouth for the year April 2016 to March [3 marks] Size of the market for souvenirs Workings (04)

5 5 1 (d) (i) Calculate the total variable costs per day for a typical Last Resort franchisee. Base your answer on the information in lines 55 to 59. Show your working. [3 marks] Total variable costs per day Workings 1 (d) (ii) Using your answer to question 1(d)(i) and the information in lines 55 to 59, calculate the average daily quantity of Last Resort souvenirs sold and the average selling price of a souvenir. [4 marks] Average daily quantity of souvenirs sold Average selling price Workings 1 (e) Whatever option she chose, Liza planned to use temporary staff. Explain one advantage and one disadvantage of using temporary staff for Ottermouth Souvenirs. [6 marks] Turn over (05)

6 6 Extra space 20 (06)

7 7 2 (a) Analyse why Liza s income budget for Ottermouth Souvenirs might be inaccurate. [10 marks] Extra space Turn over (07)

8 8 2 (b) Liza decided on Location B rather than Location A for her souvenir shop. Do you agree with her decision? Justify your view. [15 marks] (08)

9 9 Extra space Turn over (09)

10 10 2 (c) Should Liza choose Option 1, the independent shop, or Option 2, the Last Resort franchise? Use the financial data available and other information in the case study to support your view. [15 marks] (10)

11 11 Extra space 40 END OF QUESTIONS (11)

12 12 There are no questions printed on this page DO NOT WRITE ON THIS PAGE ANSWER IN THE SPACES PROVIDED Copyright information For confidentiality purposes, from the November 2015 examination series, acknowledgements of third party copyright material will be published in a separate booklet rather than including them on the examination paper or support materials. This booklet is published after each examination series and is available for free download from after the live examination series. Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright-holders may have been unsuccessful and AQA will be happy to rectify any omissions of acknowledgements. If you have any queries please contact the Copyright Team, AQA, Stag Hill House, Guildford, GU2 7XJ. Copyright 2016 AQA and its licensors. All rights reserved. (12)