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UK GCSE JUN 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] THURSDAY 14 JUNE, AFTERNOON 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. Answer all six questions. 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. For Examiner s use only Question Number 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. 1 2 3 4 5 6 Total Marks GDB3S7 2321 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. THE DICKSON SCHOOL OF SPEECH AND DRAMA The Dickson School of Speech and Drama is a business venture set up and run by two sisters, Sarah and Emily Dickson. The sisters have extensive experience in the speech and drama business and intend to offer an individually tailored quality service at good value for money. Sarah and Emily have worked as teaching assistants at a local School of Speech and Drama. They were involved in every aspect of the school from reception duties to the teaching of classes. This experience, along with their enthusiasm, drive and ambition has given them the confidence to open their own school. The sisters have had the benefit of a good education. Sarah is a qualified teacher and Emily has just finished her degree in Business Studies. They have also successfully completed a teacher s diploma in Speech and Drama. Both women are very interested in sport, music and drama. They come highly recommended by their former teachers and work colleagues. The school aims to provide speech and drama classes to match the age and interests of its pupils. It will encourage and prepare pupils to take part in shows, radio and local television presentations, demonstrations, spoken poetry and community events. As a result of intensive market research, Sarah and Emily have identified a need in the local area for a Speech and Drama school. They applied for and received a government grant. They have arranged to rent the local community hall at a reasonable fee. They are going to use their personal savings to purchase necessary items such as a computer, CD player and books. The hall is furnished with tables and chairs. 1 When the Dickson sisters are starting up their business there are two types of costs they will have to consider start-up costs and running costs. (a) Explain what is meant by start-up costs. _________________________________________________________ ______________________________________________________ [1] GDB3S7 2321 2 Examiner Only Marks Remark (b) Give two examples of a start-up cost for the Dickson School of Speech and Drama. Examiner Only Marks Remark 1. ____________________________________________________ [1] 2. ____________________________________________________ [1] (c) Explain what is meant by running costs. _________________________________________________________ ______________________________________________________ [1] (d) Give two examples of running costs for the school. 1. ____________________________________________________ [1] 2. ____________________________________________________ [1] (e) Give two reasons why it is important for the sisters to know what the costs of the business are likely to be. 1. _______________________________________________________ ______________________________________________________ [1] 2. _______________________________________________________ ______________________________________________________ [1] (f) If the price of heating oil rises, how will this affect the business? _________________________________________________________ ______________________________________________________ [1] (g) What could the owners do if the price of oil continues to increase? Explain your answer. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3S7 2321 3 [Turn over 2 As part of their business plan, Sarah and Emily are required to draw up a projected trading and profit and loss account and balance sheet for its first year of trading. Details of the projected costs and revenues for the Dickson School of Speech and Drama are as follows: Sales 20,000 Cost of sales 500 Rent and rates 1,640 Electricity/Heating 250 Telephone 320 Insurance 450 Advertising 450 Postage, printing and stationery 200 Professional fees 740 Accountancy fees 250 (a) Use the information above to complete the projected Trading and Profit and Loss Account on page 5. GDB3S7 2321 4 Examiner Only Marks Remark The projected Trading and Profit and Loss Account of the Dickson School of Speech and Drama for the year ending 31st December, 2006. Examiner Only Marks Remark Sales Cost of Sales Gross Profit Expenses Total Expenses Net Profit [8] GDB3S7 2321 5 [Turn over (b) Use the following information to complete the projected Balance Sheet on page 7 for the Dickson School of Speech and Drama for its first year of trading. CD player Books Drawings Overdraft Grant Cash Computer Owner s capital 150 350 17,000 500 1,400 100 400 900 Refer to the projected Trading and Profit and Loss Account for net profit figure GDB3S7 2321 6 Examiner Only Marks Remark Projected Balance Sheet of The Dickson School of Speech and Drama 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 Less drawings CAPITAL EMPLOYED [10] GDB3S7 2321 7 [Turn over 3 (a) List three stakeholders who might be interested in the accounts of the Dickson School of Speech and Drama. 1. ____________________________________________________ [1] 2. ____________________________________________________ [1] 3. ____________________________________________________ [1] (b) Explain clearly the interests of each of the above stakeholders that you have identified. Stakeholder 1 _____________________________________________ _________________________________________________________ ______________________________________________________ [2] Stakeholder 2 _____________________________________________ _________________________________________________________ ______________________________________________________ [2] Stakeholder 3 _____________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) The figures given for the projected final accounts are estimates. These figures are unlikely to be the same when the accountant prepares the actual accounts. Give two reasons why this may be the case. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3S7 2321 8 Examiner Only Marks Remark (d) What is the term used to describe the difference between the actual and the projected figures? Examiner Only Marks Remark ______________________________________________________ [1] (e) Give two advantages to the business owners of drawing up projected final accounts. Advantage 1 ______________________________________________ _________________________________________________________ ______________________________________________________ [1] Advantage 2 ______________________________________________ _________________________________________________________ ______________________________________________________ [1] (f) Why is it important for a business to have adequate working capital? _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (g) Comment on the figure for working capital in the projected Balance Sheet for the Dickson School of Speech and Drama. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] GDB3S7 2321 9 [Turn over 4 (a) If the Dickson School of Speech and Drama have 250 pupils per month and the charge for a monthly lesson is 8 per pupil, how much sales revenue does it collect in a month? ______________________________________________________ [1] (b) If the fixed costs per month are 500, the variable costs per lesson are 4, and the charge for a lesson is 8 per pupil, how many lessons will they have to give per month to break even? Show your calculations below. Answer _________________________ [3] (c) If the insurance costs for the business rise, what effect will this have on the break-even point? _________________________________________________________ ______________________________________________________ [1] (d) In October the number of pupils drops to 100. Using the information in (b) above, discuss the financial problem this will cause the Dickson School of Speech and Drama. _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3S7 2321 10 Examiner Only Marks Remark (e) If the school has 200 pupils per month, how much profit per month would it earn? Show your calculations below. Answer ____________________________ Examiner Only Marks Remark [3] (f) Explain two advantages to Sarah and Emily of using break-even as an aid to decision making. Advantage 1 ______________________________________________ _________________________________________________________ ______________________________________________________ [2] Advantage 2 ______________________________________________ _________________________________________________________ ______________________________________________________ [2] (g) Give two advantages to Sarah and Emily of using a spreadsheet to construct a break-even table. Advantage 1 ______________________________________________ _________________________________________________________ ______________________________________________________ [2] Advantage 2 ______________________________________________ _________________________________________________________ ______________________________________________________ [2] GDB3S7 2321 11 [Turn over 5 In order to start up the business, Sarah and Emily need 900 to purchase necessary equipment. Examiner Only Marks (a) Identify two suitable sources of finance for the above. Source 1 ______________________________________________ [1] Source 2 ______________________________________________ [1] (b) Which source of finance do you think would be the most appropriate? Give two reasons to support your answer. Source __________________________________________________ Reason 1 _________________________________________________ ______________________________________________________ [1] Reason 2 _________________________________________________ ______________________________________________________ [1] (c) In order to ensure that the school has sufficient funds to pay bills, the teachers must encourage parents of pupils to pay promptly for lessons. Sarah and Emily are thinking of writing to parents outlining the advantages and disadvantages of different methods of payment. Complete the table below by giving one advantage and one disadvantage of each of the listed methods of payment. Method of payment Advantage Disadvantage Cash Cheque Direct debit [6] GDB3S7 2321 12 Remark (d) Jimmy Jones has four lessons per month at the school. Each lesson costs 8. Mrs Betty Jones pays for her son s lessons in September on the last day of the month. She has an account with the Northern Trust Bank. All cheques are to be made payable to The Dickson School of Speech and Drama. Examiner Only Marks Remark Complete the cheque and counterfoil below using the above information. 68-70-23 _________ ________________________________ _________________ _________ Pay or order ____________________________________ ____________________________________ __________________________ _____________________ Cheque No. 141223 Cheque No. 141223 Sort Code 68-70-23 Account Number 34768123 [5] GDB3S7 2321 13 [Turn over 6 The owners of the speech and drama school have been advised by their accountant to carefully consider budgeting as a method of financial planning. As a junior accountant in the firm, you have been given the following task: Discuss with Sarah and Emily the advantages and the disadvantages of budgeting for the Dickson School of Speech and Drama. Set out the main points you intend to make in the space below. ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ _________________________________________________________ [9] GDB3S7 2321 14 Examiner Only Marks Remark Extra page if required Examiner Only Marks Remark ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 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________________________________________________________________ ________________________________________________________________ ________________________________________________________________ GDB3S7 2321 17 Examiner Only Marks Remark THIS IS THE END OF THE QUESTION PAPER GDB3S7 2321 18 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) T17016/3

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