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UK GCSE JAN 2007 : Unit 3 Business Finance

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Centre Number 71 Candidate Number General Certificate of Secondary Education 2007 Unit 3: Business Finance GDB31 Applied Business Double Award [GDB31] WEDNESDAY 17 JANUARY, MORNING TIME 1 hour 30 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number in the spaces provided at the top of this page. Write your answers in the spaces provided in this question paper. There should be enough space for your answers. If you do require more space, you may complete your answers on the extra lined pages at the back of this booklet. Answer all seven questions. INFORMATION FOR CANDIDATES The total mark for this paper is 90. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. For Examiner s use only Question Number 1 2 3 4 5 6 7 Total Marks GDB3W7 1803 Marks Background Information The questions in this paper are based on the following information. You should read this carefully before you start to answer the questions. Blooming Bonanza for Northern Ireland Farmer Armagh is famous for the production and processing of fruit and vegetables. There are many orchards throughout the county but one of these has recently been turned into a carpet of scented stock. 5 10 15 Stock is a flower which is a popular purchase of shoppers across the United Kingdom but until now its season only lasted a few weeks in May and June. The UK multiples source their stock from growers in England and Holland. The stores and growers wanted to extend the season for the stock and to have it for sale in August and September but this was not possible. However, farmer Shane Donnelly, along with horticulture technologists from Greenmount Agricultural College have found a way to make the flowers bloom and bloom. The climate in the Orchard County is perfect for growing stock. The average summer temperature near Lough Neagh is 19 degrees Celcius and this compares favourably with the temperature in the mountain regions of the Mediterranean and Japan where this scented flower grows naturally. Temperature is not the only thing that the young farmer has on his side. Technologists from Greenmount Horticultural Campus have also been busy working on the development of new varieties of stock, planting techniques and specially adapted growing tunnels to help extend the season. People want to have seasonal summer flowers with colour and scent and Shane Donnelly aims to give them what they want. GDB3W7 1803 2 20 Business is certainly blooming and Shane currently supplies up to 5 000 bunches per week to some of Britain s biggest supermarkets. The production line near Portadown has only begun, orders are flooding in and the signs are that the flower market could prove a real bright spot in the rural economy. Source: www.news.bbc.co.uk GDB3W7 1803 3 [Turn over 1 (a) When Shane decided to grow scented stock for export, he needed a large amount of capital to finance his business. State two sources of finance available to him. 1. _______________________________________________________ 2. ____________________________________________________ [2] (b) Select the best option for Shane to gain immediate access to finance of less than 10 000. ______________________________________________________ [1] (c) Give one advantage to Shane of using this source of finance. _________________________________________________________ ______________________________________________________ [1] (d) Give one disadvantage to Shane of using this source of finance. _________________________________________________________ ______________________________________________________ [1] (e) Why might you advise Shane to use internal sources of finance? _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (f) Shane has to purchase machinery. List four methods of payment he may use to buy the machinery. 1. _______________________________________________________ 2. _______________________________________________________ 3. _______________________________________________________ 4. ____________________________________________________ [4] GDB3W7 1803 4 Examiner Only Marks Remark (g) State the most appropriate method. Examiner Only Marks Remark ______________________________________________________ [1] (h) Give one reason for your answer. _________________________________________________________ ______________________________________________________ [1] GDB3W7 1803 5 [Turn over 2 (a) Read the following passage and insert the correct word(s) in the space(s) provided. Examiner Only Marks As Shane is new to the business, he has written to a number of suppliers requesting a catalogue of their goods. Once he has decided what he wants, he will complete a _________ _________ . When completing this, he should include the following information: Order number so that it can be traced easily and matched against __________________ and __________________ . The __________________ that he will have obtained from the catalogue/price list. The name and address of the __________________ . A description of the goods ordered. The catalogue number of the goods required. A __________________ __________________ is usually sent with the goods. Shane can use it to check the goods when they arrive. He will then receive an __________________ which is a request for payment. If a mistake has been made on the latter document and Shane has been charged too much for the goods received, he will receive a __________________ __________________ . This will reduce the invoice price. At the end of the month, he will be sent a __________________ informing him of all his transactions during the month. Shane will then send a __________________ to the supplier to settle his debts. GDB3W7 1803 [10] 6 Remark (b) Shane is confused about the purpose of some of the documents and needs to be able to distinguish between them. You have been asked to help him. Examiner Only Marks Remark State the difference between an advice note and a delivery note. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [4] (c) Most of Shane s customers are the UK multiples and he supplies them on a weekly basis. How are they most likely to pay him for the stock? ______________________________________________________ [1] (d) Give reasons for your answer. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W7 1803 7 [Turn over 3 Stock is usually in flower in May and June, but the growing season has been extended to the end of September. The growing of stock is a seasonal business. Identify two financial problems that this might cause for Shane and suggest ways of dealing with them. Problem 1. ___________________________________________________ _________________________________________________________ [1] Solution _____________________________________________________ ____________________________________________________________ _________________________________________________________ [2] Problem 2. ___________________________________________________ _________________________________________________________ [1] Solution _____________________________________________________ ____________________________________________________________ _________________________________________________________ [2] 4 Shane knows the benefits of planning ahead. To help with this, he has been advised to draw up a budget. (a) What is a budget? _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (b) State a benefit to Shane of using budgets as a way of controlling his finances. _________________________________________________________ _________________________________________________________ ______________________________________________________ [1] GDB3W7 1803 8 Examiner Only Marks Remark (c) Shane produces three-month budgets for the business, one of which is shown below. April Actual Budget May Actual Budget Sales Revenue 40 000 50 000 Costs Wages Materials Overheads 3 000 10 000 2 000 3 000 12 500 2 500 3 000 Gross Profit 25 000 32 000 Examiner Only Marks Remark June Actual Budget 60 000 70 000 70 000 2 500 3 000 15 000 2 500 17 500 2 500 3 500 17 500 2 500 30 500 39 500 45 000 46 500 There is heavy frost in May and some of the stock is lost. Sales are down by 12 000 on the budgeted figure. Orders are high in June and workers have to work overtime to harvest the flowers pushing up the wages bill by 1 500. Shane sells his stock for four times the amount it costs to buy the materials used to produce it. All other costs are as budgeted. (i) Use the information above to complete the blanks in the budget. [3] (ii) Calculate the variance between the actual gross profit and the forecasted figure for May. _____________________________________________________ __________________________________________________ [1] (iii) What type of a variance is this? __________________________________________________ [1] (iv) What effect does this have on the gross profit? _____________________________________________________ _____________________________________________________ __________________________________________________ [1] GDB3W7 1803 9 [Turn over (d) Explain how the use of IT might help Shane in drawing up the budget on page 9. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (e) Shane had to think carefully about his costs before drawing up his budget. He identified two types of costs. What are they? 1. ____________________________________________________ [1] 2. ____________________________________________________ [1] (f) Give an example of each type of cost for Shane. 1. ____________________________________________________ [1] 2. ____________________________________________________ [1] 5 The following headlines have appeared in the Belfast Telegraph over the last few weeks. Study them and answer the questions below. 1 Decline in the amount of Northern Ireland produced goods purchased by local supermarkets. 2 Increased use of pesticides by local farmers. 3 Tesco stores in Northern Ireland look for cost saving measures to boost profits. (a) Identify the stakeholders most likely to be affected by the above headlines. 1. ____________________________________________________ [1] 2. ____________________________________________________ [1] 3. ____________________________________________________ [1] GDB3W7 1803 10 Examiner Only Marks Remark (b) Explain how each stakeholder will be affected. Examiner Only Marks Remark Stakeholder 1. ____________________________________________ ______________________________________________________ [1] Stakeholder 2. ____________________________________________ ______________________________________________________ [1] Stakeholder 3. ____________________________________________ ______________________________________________________ [1] (c) Describe how Shane can take advantage of the situations outlined in each of the headlines on page 10. 1. _______________________________________________________ _________________________________________________________ ______________________________________________________ [2] 2. _______________________________________________________ _________________________________________________________ ______________________________________________________ [2] 3. _______________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3W7 1803 11 [Turn over 6 Details of the costs and revenues for Shane Donnelly for the year ended 31st December, 2006 are given below. Sales ..................................100 000 Plants/Seeds ........................14 000 Telephone ................................ 400 Opening Stock .......................5 000 Motor Expenses ....................2 000 Electricity ................................ 700 Closing Stock ........................2 000 Fertilizers ..............................9 600 Heating ..................................3 000 Insurance ...............................6 300 Transport .............................10 000 Wages ..................................12 000 (a) Use the above information to complete the Trading and Profit and Loss Account on page 13. GDB3W7 1803 12 Trading and Profit and Loss Account for Shane Donnelly for the year ended 31st December, 2006. Examiner Only Marks Remark Sales Cost of Sales Gross Profit Expenses Total Expenses Net Profit [7] GDB3W7 1803 13 [Turn over (b) From the financial information given below, draw up the Balance Sheet on page 15 for Shane Donnelly. Land 100 000 Overdraft 6 000 Cash in hand 1 500 Tunnels 20 000 Creditors 3 000 Capital Debtors 7 000 Closing Stock Mortgage GDB3W7 10 000 1803 2 000 Profit (Use figure from Profit and Loss Account) 50 000 Motor Van 42 500 14 Balance Sheet for Shane Donnelly as at 31st December, 2006. Examiner Only Marks Remark Fixed Assets ___________ Current Assets Less Current Liabilities Working Capital (Net Current Assets) NET ASSETS Financed by: Long-term liabilities Capital employed [8] GDB3W7 1803 15 [Turn over (c) The working capital (net current assets) figure in the balance sheet on page 15 is a positive figure. What does this mean for Shane? _________________________________________________________ ______________________________________________________ [1] (d) If there was a negative figure for working capital (net current assets), what could Shane do to improve the situation? _________________________________________________________ ______________________________________________________ [2] GDB3W7 1803 16 Examiner Only Marks Remark 7 Discuss the usefulness of the information in the Profit and Loss Account and the Balance Sheet to Shane. Examiner Only Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ 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________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ GDB3W7 1803 21 Examiner Only Marks Remark THIS IS THE END OF THE QUESTION PAPER GDB3W7 1803 22 Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. SP (NF/CGW) T23344/4

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