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UK GCSE JUN 2009 : Unit 3 Business Finance

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Centre number 71 Candidate number General Certificate of Secondary Education 2009 Unit 3: Business Finance GDB31 Applied Business Double Award [GDB31] tuESDAy 9 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. 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 Marks 1 2 3 4 5 6 total Marks 4194 170238_GDB31_Business_Unit_3_Jun1 1 9/10/08 11:43:20 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. BILL jACKSon PHotoGrAPHy Alice James Ltd / www.alicejames.co.uk Make sure your wedding, birthday, or other important event is a day to remember! When Bill Jackson did well in his GCSE examinations his parents gave him a camera as a reward. In his teenage years, Bill was already something of a professional with a camera having entered photography competitions while at primary and secondary school. 5 10 15 20 Bill did his first paid photography job at sixteen. A neighbour asked him to take photographs of a family celebration and the rest is history. Now, at 26 years of age, and after completing a number of photography courses, he wants to turn his hobby into a full time career and provide a professional photography service in his home town in Northern Ireland. After attending several courses run by INI, he prepared a business plan, used his savings to purchase the necessary machinery and arranged an overdraft facility with his bank. He owns a small two room premises that can be easily adapted to suit his needs. He will undertake photography for a variety of occasions such as weddings, anniversaries, christenings, first communions, confirmations, birthdays and other formal and informal occasions. He will offer a digital restoration service to customers who require old photographs restored. Bill has thoroughly analysed the market. It is highly competitive but it is a growth area as more and more people want high quality photographs of their friends and families on special occasions. There are a number of established photographers in the town and there will also be competition from amateur photographers trying to break into the market. Bill is confident that he will be able to compete successfully due to the unique style in which he completes his work and on his pricing strategy. 4194 170238_GDB31_Business_Unit_3_Jun2 2 2 Source: 9/10/08 11:43:21 1 (a) Bill has been asked to include a sales budget in his business plan. What is a sales budget? Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ ______________________________________________________ [1] (b) Using the following information complete the blanks in the section of Bill Jackson s Sales Budget below. The average selling price for a wedding is 700 and the average price for a portrait is 100. Sales Budget No. of Weddings No. of Portraits Total Sales July 4 3 3,100 August 5 4 September 5 5 Total Sales [3] (c) The actual results for July were as follows. No. of Weddings July No. of Portraits Total Sales 7 3 5,200 Calculate the variance for the month of July. _________________________________________________________ ______________________________________________________ [1] 4194 170238_GDB31_Business_Unit_3_Jun3 3 3 [turn over 9/10/08 11:43:21 (d) Should Bill be satisfied with his July figures? Explain your answer. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (e) Explain two benefits to Bill from setting a sales budget. Benefit 1 _________________________________________________________ ______________________________________________________ [1] Benefit 2 _________________________________________________________ ______________________________________________________ [1] (f) Name another important budget that Bill will have to include in his business plan. ______________________________________________________ [1] 4194 170238_GDB31_Business_Unit_3_Jun4 4 9/10/08 11:43:22 2 (a) Draw up a Cash-Flow Forecast for Bill Jackson for the three months January March 2009 based on the following information and using the format provided on the following page. Receipts Sales January February 3 600 5 400 200 50 50 40 25 50 40 600 50 50 50 25 50 40 800 50 50 25 50 40 250 10 30 10 Remark March 700 Examiner Only Marks Payments Materials Rates Heat and Lighting Telephone Vehicle Insurance Motor Expenses Professional Fees Advertising/Promotion Post/Printing/Stationery Sundry Expenses 10 Bill intends to take drawings of 900 per month. Opening Balance (250) 4194 170238_GDB31_Business_Unit_3_Jun5 5 [turn over 9/10/08 11:43:22 Bill jackson s Cash-flow forecast january March 2009 Examiner Only Marks January February Remark March receipts Sales total receipts Payments Materials Rates Heat and Lighting Telephone Vehicle Insurance Motor Expenses Professional Fees Advertising/Promotion Post/Printing/Stationery Sundry Expenses Drawings total Payments Opening Bank Balance Add receipts Less payments Balance at the end of the month [10] 4194 170238_GDB31_Business_Unit_3_Jun6 6 9/10/08 11:43:22 (b) What is a cash-flow forecast? Examiner Only Marks Remark _________________________________________________________ ______________________________________________________ [1] (c) Why is it important that Bill plans ahead by producing a cash-flow forecast? _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] (d) Is there any reason for Bill to be concerned about the success of his business? Use the information in the cash-flow forecast on page 6 to explain your answer. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [4] (e) Is the cash-flow forecast likely to be of interest to anyone other than Bill Jackson? If so, give a reason for your answer. Interest ______________________________________________________ [1] reason _________________________________________________________ _________________________________________________________ ______________________________________________________ [1] 4194 170238_GDB31_Business_Unit_3_Jun7 7 7 [turn over 9/10/08 11:43:23 3 Details of the projected costs and revenues for Bill Jackson s business for the year ending 31 December, 2009 are given below: Examiner Only Marks Remark 50 Weddings @ average price of 700 75 Portraits @ average price of 100 Cost of sales = 25% of sales Heat and Lighting Rates Telephone Vehicle Insurance Motor Expenses Insurance Advertising Postage/Printing/Stationery Professional Fees Maintenance/Service Charges Sundry Expenses 4194 170238_GDB31_Business_Unit_3_Jun8 8 600 500 590 300 630 350 1 000 60 500 60 120 9/10/08 11:43:23 (a) Use the information on the previous page to complete the projected Trading and Profit and Loss Account below. Examiner Only Marks Remark Projected Trading and Profit and Loss Account for the year ending 31 December, 2009 Sales ___________ Cost of Sales ___________ Gross Profit ___________ Expenses ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ ______________________ ___________ Total Expenses ___________ Net Profit ___________ [7] 4194 170238_GDB31_Business_Unit_3_Jun9 9 9 [turn over 9/10/08 11:43:23 (b) Explain two advantages of a projected Trading Profit and Loss Account to Bill Jackson. Examiner Only Marks Remark Advantage 1 _________________________________________________________ ______________________________________________________ [1] Advantage 2 _________________________________________________________ ______________________________________________________ [1] (c) If the number of marriages in the area decreased in the year 2009, what would be the effect of this on the net profit figure in the projected accounts above? ______________________________________________________ [1] (d) If the actual cost of sales figure in 2009 is higher than the projected figure, what effect would this have on Bill s profit? ______________________________________________________ [1] (e) As Bill s business advisor, what advice would you give him to reduce this rise in cost of sales figure? _________________________________________________________ _________________________________________________________ ______________________________________________________ [1] (f) As the owner of the business, Bill needs to draw up a Balance Sheet. What is a Balance Sheet? _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 4194 170238_GDB31_Business_Unit_3_Jun10 10 10 9/10/08 11:43:23 (g) Explain the usefulness of a Balance Sheet to Bill. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] 4194 170238_GDB31_Business_Unit_3_Jun11 11 11 [turn over 9/10/08 11:43:24 (a) Complete the table by identifying whether the costs listed below are fixed or variable. Place a tick in the appropriate column for each cost. Item Fixed Cost Examiner Only Marks Remark Variable Cost Heating and lighting Printing costs Rates Albums/frames Business insurance [5] (b) Explain the difference between a fixed cost and a variable cost. _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (c) Bill s fixed costs are 15,000 per year. Variable costs are 100 per wedding. He charges 700 for a wedding. Using the formula below, calculate the number of weddings that Bill needs to cover per year for the business to break even. Break-even = fixed costs Selling price minus variable cost Break-even point = [3] 4194 170238_GDB31_Business_Unit_3_Jun12 12 12 9/10/08 11:43:24 (d) If Bill increased the price charged for photographing a wedding, how would this affect his revenue? Explain your answer. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (e) How much profit will Bill make if he covers 40 weddings in a year? All calculations must be shown in the space below. [3] (f) If Bill s photography business makes large profits in any given year, does this mean that his business is efficient? Explain your answer. _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ ______________________________________________________ [3] 4194 170238_GDB31_Business_Unit_3_Jun13 13 13 [turn over 9/10/08 11:43:24 (a) In order to improve the quality of his photographs, Bill has decided to buy a new digital camera which costs 3850. Identify a suitable source of finance that Bill might use. Examiner Only Marks Remark ______________________________________________________ [1] (b) Give one advantage and one disadvantage of the source of finance above. Advantage _________________________________________________________ ______________________________________________________ [1] Disadvantage _________________________________________________________ ______________________________________________________ [1] (c) Bill spends approximately 800 per annum advertising his business in the local newspaper. Suggest a suitable method of payment that Bill could use to cover this cost. Give a reason for your answer. Method of payment ______________________________________________________ [1] reason _________________________________________________________ ______________________________________________________ [2] (d) Bill s rates bill for the year is 500. He wishes to take advantage of the Local Council s offer to pay in ten equal monthly instalments. Suggest a suitable method of payment for Bill to cover his rates account. Method of payment ______________________________________________________ [1] reason _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] 4194 170238_GDB31_Business_Unit_3_Jun14 14 1 9/10/08 11:43:24 (e) Suggest a suitable method of payment that Bill s customers could use to settle their accounts. Give a reason for your answer. Examiner Only Marks Remark Method of payment ______________________________________________________ [1] reason _________________________________________________________ _________________________________________________________ ______________________________________________________ [2] (f) Bill has arranged an overdraft facility with his bank. Give two advantages of this to Bill. Advantage 1 _________________________________________________________ ______________________________________________________ [1] Advantage 2 _________________________________________________________ ______________________________________________________ [1] (g) Give two disadvantages of this to Bill. Disadvantage 1 _________________________________________________________ ______________________________________________________ [1] Disadvantage 2 _________________________________________________________ ______________________________________________________ [1] 4194 170238_GDB31_Business_Unit_3_Jun15 15 1 [turn over 9/10/08 11:43:25 Bill s business advisor has advised him to find out about a computerised accounting system. Discuss with Bill the advantages and disadvantages of such a system and the competitive edge that he is likely to gain from it. Examiner Only Marks Remark ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ ____________________________________________________________ _________________________________________________________ [9] 4194 170238_GDB31_Business_Unit_3_Jun16 16 1 9/10/08 11:43:25 Extra page if required Examiner Only Marks Remark ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 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________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 4194 170238_GDB31_Business_Unit_3_Jun17 17 17 [turn over 9/10/08 11:43:25 Extra page if required Examiner Only Marks Remark ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 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Examiner Only Marks Remark ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 4194 170238_GDB31_Business_Unit_3_Jun19 19 19 9/10/08 11:43:26 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. T63469/3 170238_GDB31_Business_Unit_3_Jun20 20 9/10/08 11:43:26

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