Month: August 2021

A few years ago, the airline Cathay Pacific reported an 80% decrease in its half-year profits. 

Which ONE of the following is the MOST LIKELY reason for this decrease in profits?

Select ONE answer:

1. An effective advertising campaign
2. A strong economic climate
3. Cheaper aviation fuel
4. An increase in competition from other airlines

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct – this would have increased sales of tickets due to more brand awareness and therefore possibly increased profits
2. Not correct – this would lead to more sales and therefore profits because of an increase in demand caused by a growing economy, and thus increase in incomes
3. Not correct – cheaper aviation fuel would have led to a decrease in costs and therefore an increase in profits.
4. Correct – Definition of profits e.g. total revenue – total costs.  More competition from other airlines would result in a greater choice for customers & a downward pressure on prices.  This could have decreased sales/revenue and therefore profits.

This work is licensed under a Creative Commons Attribution 4.0 International License.

A few years ago, 50% of the food grain crop in an Indian state failed due to a lack of rainfall. 

Which ONE of the following would be the most likely impact of the food grain crop failure?

Select ONE answer:

1. A shift in the supply curve of food grains to the right
2. A shift in the supply curve of food grains to the left
3. A movement along the supply curve for food grains
4. A decrease in the price of food grains

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct – a shift in the supply curve to the right would indicate an increase in the supply of food grains.
2. Correct – Definition of supply: the amount a producer is willing and able to supply at a given price in a given time period. Lack of rain meant that half the food grain crops had failed which meant less grain could be supplied.  The supply curve will shift to the left because the amount of food grain available will be reduced no matter what price people are prepared to pay.
3. Not correct –  movement along the supply curve would only occur if the demand curve shifts or a change in price causing a movement along the supply curve.
4. Not correct – the decrease in the price of food grains would only occur if there had been an increase in supply or a fall in demand 

This work is licensed under a Creative Commons Attribution 4.0 International License.

In 2016, UK corporation tax was 20%.  Initially a decrease in corporation tax will most likely lead to a/an?

Select ONE answer:

1. increased retained profit
2. decreased employee wages
3. decreased fixed costs
4. increased selling price

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – Definition of corporation tax: a tax on profits. If corporation tax is reduced from 20% on profits, companies will pay less in tax.  This means companies will be able to increase the level of their retained profits that they keep.
2. Not correct – because paying less tax could lead to more retained profit and an increase in wages.
3. Not correct – fixed costs are not affected by increase or decreases in corporation tax.
4. Not correct – companies are more likely to hold or decrease their selling price if there are tax savings to be had.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex started his own business, Alex Landscapes Gardening.  Alex was previously an employee of another business. 

What was the opportunity cost for Alex when he started his business?

Select ONE answer:

1. Cost of marketing to attract customers
2. Loss of earnings from employment
3. Payment of taxes on profits
4. Risk of business failure

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct – any marketing costs are a cost to the business and not the next best alternative for Alex.
2. Correct – Definition: opportunity cost is the cost of the next best alternative foregone.  Alex had to choose between being self-employed or receiving an income from paid employment. The result is the sacrifice of a regular secure income for the potential of higher income he might generate from self- employment.
3. Not correct – paying taxes on profits is a legal requirement for businesses and not an alternative option.  As an employee Alex paid income tax, which as a sole trader he will now have to pay on his profits so is not an opportunity cost.
4. Not correct – risking business failure is a characteristic of an entrepreneur not the opportunity forgone to run your own business.  Risk of business failure only occurs after the business is up and running and is not an opportunity cost of starting a business.

This work is licensed under a Creative Commons Attribution 4.0 International License.

Alex Research Ltd specialise in carrying out product trials for very big companies such as car companies and big retailers. 

Businesses carry out product trials on new products in order to?

Select ONE answer:

1. guarantee sales levels
2. assess levels of demand
3. achieve economies of scale
4. collect secondary research

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 2

1. Not correct – market segmentation increases the range of products Lucy Shoes will need to ofNot correct – product trials are only assessing what consumers think about a product and the product could still fail even after product trials.
2. Correct – Definition: a launch of a product on a limited scale to measure initial reactions from potential customers. Big companies can use the feedback from customers to adapt or modify its products. If demand is low, products can be modified before a national launch, increasing the likelihood of a successful launch.
3. Not correct – product trials may not achieve economies of scale due to smaller production runs.
4. Not correct – products trials are a method of primary research as they are collecting first-hand information directly from the consumer.

This work is licensed under a Creative Commons Attribution 4.0 International License.