UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS

General Certificate of Education Ordinary Level

* 1 9 9 2 1 9 4 6 7 9 *

BUSINESS STUDIES 7115/11

Paper 1 October/November 2013
1 hour 45 minutes
Candidates answer on the Question Paper.
No Additional Materials are required.

READ THESE INSTRUCTIONS FIRST

Write your Centre number, candidate number and name on all the work you hand in.
Write in dark blue or black pen.
Do not use staples, paper clips, highlighters, glue or correction fluid.
DO NOT WRITE IN ANY BARCODES.

Answer all questions.

The businesses described in this paper are entirely fictitious.

At the end of the examination, fasten all your work securely together.
The number of marks is given in brackets [ ] at the end of each question or part question.

This document consists of 11 printed pages and 1 blank page.

DC (CW) 77145
© UCLES 2013 [Turn over
 2

1 Earnshaw is a company that buys raw materials and components in bulk. It uses them to For
manufacture furniture using flow production methods. Productivity in the factory is high. Examiner’s
Currently Earnshaw has high costs of holding stock. The Managing Director wants to Use

introduce lean production methods.

(a) What is meant by ‘productivity’?

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [2]

(b) Identify two advantages to Earnshaw of buying raw materials in bulk.

Advantage 1: ....................................................................................................................

..........................................................................................................................................

Advantage 2: ....................................................................................................................

..................................................................................................................................... [2]

(c) Identify and explain two features of flow production.

Feature 1:..........................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Feature 2: .........................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..................................................................................................................................... [4]

© UCLES 2013 7115/11/O/N/13

 3

(d) Identify and explain three benefits to Earnshaw of using lean production methods. For
Examiner’s
Benefit 1: .......................................................................................................................... Use

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Benefit 2: ..........................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Benefit 3: ..........................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..................................................................................................................................... [6]

(e) ‘If Earnshaw is to grow in the future then its unit production costs must fall’.
Do you agree? Justify your answer.

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2013 7115/11/O/N/13 [Turn over

 4

2 Muammar sells boxes of spices to markets. Workers in Muammar’s business are paid on a For
piece rate basis. Table 1 gives financial details of the business in 2012. Examiner’s
Use

Table 1

Fixed costs per month $10 000

Employee wages $2 per box
Raw materials $3 per box
Marketing costs $1 per box
Selling price $8 per box
Sales per month [average] 9000 boxes

(a) Identify two examples of fixed costs for Muammar’s business.

Example 1: .......................................................................................................................

Example 2: .................................................................................................................. [2]

(b) Identify two reasons why sales may vary from month to month.

Reason 1: ........................................................................................................................

..........................................................................................................................................

Reason 2: ........................................................................................................................

..................................................................................................................................... [2]

(c) Calculate the annual profit that Muammar made in 2012.

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2013 7115/11/O/N/13

 5

(d) Identify and explain one advantage and one disadvantage to Muammar of using piece For
rate to pay his workers. Examiner’s
Use

Advantage: .......................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Disadvantage: ..................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

(e) Muammar is planning to change the selling price of the boxes to $7 each. Do you think
this change would benefit the business? Justify your answer.

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2013 7115/11/O/N/13 [Turn over

 6

3 Yura is the Managing Director of a company that sells holidays. The company organises For
hotels, air flights and car hire for customers. For the first time, the company is going to do Examiner’s
some market research. Secondary sources will be used and a sample of customers will be Use

selected for primary research.

(a) What is meant by ‘market research’?

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [2]

(b) Identify two advantages of using secondary sources.

Advantage 1: ....................................................................................................................

..........................................................................................................................................

Advantage 2: ....................................................................................................................

..................................................................................................................................... [2]

(c) Identify and explain two methods of sampling that the company could use.

Method 1: .........................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Method 2: .........................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [4]

© UCLES 2013 7115/11/O/N/13

 7

(d) Identify and explain two ways of segmenting the market for holidays that the company For
could use. Examiner’s
Use

Way 1: ..............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Way 2: ..............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

(e) Yura believes that the price is the most important part of the marketing mix for holidays.
Do you think that he is correct? Justify your answer.

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2013 7115/11/O/N/13 [Turn over

 8

4 Table 2 gives data about the economy of country C. For

Examiner’s
Use
Table 2

National income
Year per person ($) Inflation (%) Unemployment (%)
2010 650 5 10
2011 640 3 12
2012 600 1.5 18

The economy of country C is in recession. The Government wants to create more jobs by
encouraging more businesses to start up. However some pressure groups are against this
because they think that more businesses will cause more external (social) costs.

(a) What is meant by ‘recession’?

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [2]

(b) Identify two possible reasons why national income per person has fallen between 2010
and 2012.

Reason 1: ........................................................................................................................

..........................................................................................................................................

Reason 2: ........................................................................................................................

..................................................................................................................................... [2]

(c) Identify and explain two ways that a Government could help new businesses to start up.

Way 1: ..............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Way 2: ..............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..................................................................................................................................... [4]

© UCLES 2013 7115/11/O/N/13

 9

(d) Identify and explain three external (social) costs that might be caused by an increase in For
the number of businesses in country C. Examiner’s
Use

Cost 1: .............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Cost 2: .............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Cost 3: .............................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..................................................................................................................................... [6]

(e) Do you think that new start-up businesses can be successful in country C? Justify your
answer.

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2013 7115/11/O/N/13 [Turn over

 10

5 Dmit is a partner in a small retail clothing business. The business has been successful, but it For
is finding it difficult to compete against larger retailers. The partners are thinking of converting Examiner’s
the partnership into a private limited company. Use

(a) Identify two features of a partnership.

Feature 1: .........................................................................................................................

..........................................................................................................................................

Feature 2: .........................................................................................................................

..................................................................................................................................... [2]

(b) Identify two ways of measuring the success of a business.

Way 1: ..............................................................................................................................

..........................................................................................................................................

Way 2: ..............................................................................................................................

..................................................................................................................................... [2]

(c) Identify and explain two reasons why the business might be finding it difficult to compete
against larger retailers.

Reason 1: ........................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

Reason 2: ........................................................................................................................

..........................................................................................................................................

Explanation: .....................................................................................................................

..................................................................................................................................... [4]

© UCLES 2013 7115/11/O/N/13

 11

(d) Identify and explain three methods of promotion that the partnership could use to For
increase sales. Examiner’s
Use

Method 1: .........................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Method 2: .........................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Method 3: .........................................................................................................................

Explanation: .....................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

(e) Consider the advantages and disadvantages of converting the partnership into a private
limited company. Recommend whether the partners should do this. Justify your answer.

Advantages: .....................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Disadvantages: ................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..........................................................................................................................................

Recommendation: ............................................................................................................

..........................................................................................................................................

..........................................................................................................................................

..................................................................................................................................... [6]

© UCLES 2013 7115/11/O/N/13

 12

BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.

University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2013 7115/11/O/N/13