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UK GCSE JAN 2010 : Unit 3 Business Finance

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Centre Number 71 Candidate Number General Certificate of Secondary Education Unit 3: Business Finance [GDB31] GDB31 Applied Business Double Award *GDB31* January 2010 WEDNESDAY 13 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. 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 page at the back of this booklet. For Examiner s use only Question Number INFORMATION FOR CANDIDATES 1 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. 2 3 4 5 6 Total Marks 4985 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 Irish Times Suzanne Ryan has just presented her business plan to her local INI business advisor. She proposes to provide a child minding service for children under the age of eight in her own home. She plans to offer a range of other services including educational facilities for the children, meals and transport to and from school as required. 5 10 Suzanne has the necessary qualifications and experience and is registered through OFSTED. Demand for childcare continues to outstrip supply. Suzanne hopes to capitalise on the current situation and to have her business up and running as soon as possible. The childcare sector is very competitive. Parents look for reliable, flexible and thoughtful childcare and Suzannne hopes to provide an individual service to meet these needs. She aims to provide a homely service, substantial meals, good play facilities and a willingness to accompany children in her care to external appointments, e.g. the dentist. Her objectives for the coming year are to achieve a turnover of 17 000 and to become a key quality player in the childcare market. 15 The business will charge 4 per hour for a full-time child. Part-time children will be charged a rate of 4.50 per hour. Suzanne plans to operate a cash payment policy only. The business will not require any additional staff for the first year and an accountant will be employed to complete the tax returns. There are no major capital requirements. Suzanne will buy food as required for the children on a weekly basis. Toys will be bought from Symths Toy Store and any additional materials required will be purchased as and when needed. CCEA 4985 2 1 (a) Suzanne needs a car to transport children to and from appointments. What is the most suitable source of finance that she can use to purchase a car? Examiner Only Marks Remark _______________________________________________________ [1] (b) Give one advantage to Suzanne of using this source of finance. _________________________________________________________ _______________________________________________________ [1] (c) Give one disadvantage to Suzanne of using this source of finance. _________________________________________________________ _______________________________________________________ [1] (d) Suzanne needs approximately 500 to cover the start-up costs for her business. Where is she most likely to get this money? _______________________________________________________ [1] (e) Give one advantage to Suzanne of using this source of finance. _________________________________________________________ _______________________________________________________ [1] (f) Give one disadvantage to Suzanne of using this source of finance. _________________________________________________________ _______________________________________________________ [1] 4985 3 [Turn over (g) Suzanne has a number of expenses that have to be paid. Identify the most appropriate method of payment for each expense. Give one advantage and one disadvantage to Suzanne of each method. Any chosen method of payment may only be used once. (i) telephone bill Method of payment ___________________________________________________ [1] Advantage _____________________________________________________ ___________________________________________________ [1] Disadvantage _____________________________________________________ ___________________________________________________ [1] (ii) vehicle insurance Method of payment ___________________________________________________ [1] Advantage _____________________________________________________ ___________________________________________________ [1] Disadvantage _____________________________________________________ ___________________________________________________ [1] 4985 4 Examiner Only Marks Remark (iii) Motor expenses Examiner Only Marks Remark Method of payment ___________________________________________________ [1] Advantage _____________________________________________________ ___________________________________________________ [1] Disadvantage _____________________________________________________ ___________________________________________________ [1] (h) Suzanne will operate her business on a cash payment policy only. Discuss her reason for this. _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] 4985 5 [Turn over 2 (a) Suzanne has been asked by her business advisor to prepare a cashflow forecast for the six month period to June 2010. Use the following information to complete the cash-flow forecast on page 8. 1 full-time child 40 hours per week @ 4 per hour = 640 per month 1 part-time child 20 hours per week @ 4.50 per hour = 360 per month Receipts January 1 full-time child 40 hours per week @ 4 per hour 1 part-time child 20 hours per week @ 4.50 per hour February 1 full-time child 40 hours per week @ 4 per hour 2 part-time children 20 hours per week @ 4.50 per hour March 1 full-time child 40 hours per week @ 4 per hour 2 part-time children 20 hours per week @ 4.50 per hour April 1 full-time child 40 hours per week @ 4 per hour 2 part-time children 20 hours per week @ 4.50 per hour May 1 full-time child 40 hours per week @ 4 per hour 2 part-time children 20 hours per week @ 4.50 per hour June 2 full-time children 40 hours per week @ 4 per hour 2 part-time children 20 hours per week @ 4.50 per hour 4985 6 Examiner Only Marks Remark Payments Examiner Only Marks Jan Feb March April May June Remark National Insurance 26 26 Rates 70 70 70 70 70 70 Heat and Light 70 70 70 70 70 70 Telephone 30 30 30 30 30 30 Insurance excluding vehicle 43 Vehicle Insurance 30 30 30 30 30 30 Motor Exp. 40 40 40 40 40 40 Advertising 60 Accountancy Fees Drawings 350 800 800 800 800 800 800 Opening Bank Balance 0 4985 7 [Turn over Client Name Suzanne Ryan Examiner Only Marks Cash-Flow Forecast for the period January June 2010 January February March April May June Sales Total Receipts Payments National Insurance Rates Heat and Light Telephone Insurance excl. vehicle Vehicle Insurance Motor Expenses Advertising Accountancy Fees Drawings Total Payments Opening Bank Balance Add Receipts Less Payments Closing Balance [12] 4985 8 Remark (b) Comment on the closing balance figure for January. Examiner Only Marks Remark _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] (c) As Suzanne s business advisor, suggest two steps that she could take to solve the January closing balance figure. Step 1 _________________________________________________________ _______________________________________________________ [1] Step 2 _________________________________________________________ _______________________________________________________ [1] (d) What does this cash-flow forecast tell you about the possible future of the business? _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [4] 4985 9 [Turn over 3 (a) Explain two benefits to Suzanne of drawing up a cash-flow forecast. Examiner Only Marks Benefit 1 _________________________________________________________ _______________________________________________________ [1] Benefit 2 _________________________________________________________ _______________________________________________________ [1] (b) From your experience of using a computer spreadsheet to construct a cash-flow forecast, give two advantages to Suzanne of using a computer to do this task. Advantage 1 _________________________________________________________ _______________________________________________________ [1] Advantage 2 _________________________________________________________ _______________________________________________________ [1] (c) Explain the meaning of the term cash-flow. _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] (d) Suzanne has difficulty understanding the difference between cash-flow and profit. Explain the difference to her. _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] 4985 10 Remark BLANK PAGE (Questions continue overleaf) 4985 11 [Turn over 4 (a) Suzanne has identified a number of costs. Classify these costs in the table below by ticking the appropriate box. Start-up Cost Examiner Only Marks Running Cost Child car safety seats Cot Heat and Light Advertising Reading materials [5] (b) Explain the difference between a start-up cost and a running cost. _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] (c) Details of the projected costs and revenues for Suzanne s business for the year ended 31 December, 2010 are given below. Use this information to complete the projected Trading Profit and Loss Account on page 13. Sales (Receipts) Cost of Sales National Insurance Contributions Rent and Rates Heat and Light Telephone Insurance (excl. vehicle) Vehicle Insurance Motor Expenses Advertising Accountancy Fees Depreciation 4985 17 000 0 104 840 840 360 43 360 480 60 350 90 12 Remark Projected Trading and Profit and Loss Account for Suzanne Ryan for the year ending 31 December 2010. Examiner Only Marks Remark Sales Cost of Sales Gross Profit Expenses Total Expenses Net Profit [7] 4985 13 [Turn over (d) Explain the meaning of the term net profit. Examiner Only Marks _______________________________________________________ [1] (e) What are drawings? _________________________________________________________ _______________________________________________________ [1] (f) Explain why it is important for Suzanne to prepare a projected Trading Profit and Loss Account. _________________________________________________________ _________________________________________________________ _______________________________________________________ [2] (g) What advice would you give Suzanne regarding the net profit figure in the projected Trading Profit and Loss Account? _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _________________________________________________________ _______________________________________________________ [4] 4985 14 Remark BLANK PAGE (Questions continue overleaf) 4985 15 [Turn over 5 (a) Suzanne aims to achieve a turnover of 17 000 in her first year of business. She has been advised to prepare a Sales Budget. Examiner Only Marks What is a Sales Budget? _________________________________________________________ _______________________________________________________ [1] (b) Below is a section of Suzanne s Sales Budget for the months of October to December 2010. Complete the table below by inserting the correct figure in the blank spaces. October Actual Budget 1360 1000 November Variance Actual December Budget Variance Actual 1360 0 Budget 1360 Variance 340 [3] (c) What does the sales variance figure for December mean for Suzanne? _________________________________________________________ _______________________________________________________ [2] (d) Outline two benefits to Suzanne of preparing a Sales Budget. Benefit 1 _________________________________________________________ _______________________________________________________ [1] Benefit 2 _________________________________________________________ _______________________________________________________ [1] 4985 16 Remark (e) Complete the blanks in the paragraph below to help Suzanne understand break-even analysis. Examiner Only Marks Remark Break-even is the point when sales revenue is equal to ______________________. To the left of that point means the business is making a ______________________ and to the right of that point means the business is making a ______________________. Total costs consist of ______________________ and variable costs. An increase in the hourly rate for childcare will mean a ______________________ in the break-even point. The break-even point may be calculated by using the following formula: Break-even = Fixed costs ............................................. minus variable cost. 4985 17 [6] [Turn over 6 As Suzanne s business advisor, you have been asked to give her some financial advice under the following headings: the importance of keeping accounts and the value to her of final accounts. Present below the main points of your advice. ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ______________________________________________________________ [9] 4985 18 Examiner Only Marks Remark Extra page if required Examiner Only Marks ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ 4985 19 Remark 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. T79687/2

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