Category: Business Studies

Alex’s Big Bikes is a Stafford motorcycle manufacturer. In 2020, it introduced just in time (JIT) in its factories.

This change is most likely to result in?

Select ONE answer:

1. a reduction in the level of buffer inventory
2. an increase in working capital
3. a reduction in the cost of delivery
4. an increase in reorder quantities

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 – JIT is an inventory system that does away with the need to hold large quantities of components.  This results in Alex’s Big Bikes only holding just enough components for the current production of motorcycles.  The need for buffer stock is reduced because supplies are delivered for specific production runs/delivered as needed.
2. Not correct – there should be a decrease in working capital as less inventory is held.
3. Not correct – JIT normally requires smaller delivery quantities, more often and this will cost more.
4. Not correct – reorder quantities are likely to decrease as fewer motorcycles are produced and delivered at a time. 

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

PricklyPear plans to increase the output of its mobile phones from its existing facilities in Stafford to improve its capacity utilisation.

Which is the best way to improve capacity utilisation at PricklyPear? 

Select ONE answer:

1. Increase prices of their mobile phones
2. Reduce spending on advertising
3. Increase the workforce productivity
4. Reduce inventory levels

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 3

1. Not correct – an increase in prices results in less demand from consumers who may also switch to cheaper rivals, both will lead to a fall in production and therefore capacity utilisation.
2. Not correct – less advertising may lead to a fall in demand for PricklyPear and a fall in production which will cause capacity utilisation to fall even more
3. Correct – Definition of capacity utilisation e.g. the amount of actual output expressed as a percentage of the maximum possible output.  An increase in productivity will enable PricklyPear’s existing workforce to produce more mobile phones per worker.  The output of the phones is therefore increased from using the same facilities.
4. Not correct – reducing inventory levels also means that there is more unused space i.e. capacity utilisation decreases

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

John owns a garden landscaping business.

He has been advised by his accountant Bob to set budgets for the business.

John uses variance analysis to monitor these budgets.

The table below shows the budget data from a recent very important gardening contract. 

Budgeted (£)              Actual (£)

Overheads                     300                             300

Labour                           1200                           900

Raw materials                800                            800

What is the variance between Budgeted and Actual data?

Select ONE answer:

1. £1 700 adverse
2. £1 700 favourable
3. £300 adverse
4. £300 favourable

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
2. Not correct
3. Not correct
4. Correct – The actual cost: £300 + £900 + £800 = £2 000.  The budgeted cost: £300 + £1 200 + £800 = £2 300.  Formula for cost variance = Actual – Budget

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

Alex is the owner of a hat shop called Alex’s Hats.

His main objective is to increase sales revenue. 

Which one of the following options is most likely to achieve this objective? 

Select ONE answer:

1. Reduce advertising in the local newspaper
2. Reduce the price of shoes with price inelastic demand
3. Reduce her opening times Monday to Friday
4. Reduce the price of shoes with a price elastic demand

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 – changes in tastes and fashion directly affects the kind of food Not correct – this may result in less awareness of Alex’s Hats, which could reduce the number of hats sold and therefore overall revenue falls.
2. Not correct – this will not increase sales revenue as customers are less sensitive to a price reduction and will only increase the amount they purchase by a small percentage.
3. Not correct – this may result in less sales for Alex as customers have less opportunity to shop.
4. Correct – sales revenue is income earned from selling a product or service.  A small change in price of a price elastic hat will lead to a proportionately greater increase in quantity sold.  The loss of revenue from the reduction in price will be more than made up by the increase in sales of hats, therefore increasing revenue.

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

A global think-tank predicts a world population of over 9 billion people by 2050.

This will require a 70% increase over the current global food production to be able to feed everyone.

Which one of the following options is a direct factor in the supply of food? 

Select ONE answer:

1. Changing tastes and fashions
2. Growth in disposable income
3. Advertising to consumers
4. Levels of technology

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 – changes in tastes and fashion directly affects the kind of food consumed and not the availability.
2. Not correct – growth in disposable incomes affects the consumers’ ability to buy different kinds of food and different amounts.
3. Not correct – advertising to consumers affects their desires for particular types of goods and services leading to changes in demand not supply.
4. Correct – Supply is the amount a producer is willing and able to supply at a given price in a given time period. Technology can be used to increase the quantity or quality of a product supplied.  For example, the increasing use of genetically modified food to increase crop yields is a use of technology in food production.

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