Tag: Business Studies

Electromac announced a worldwide recall of every BigKen smartphone sold before September 2021 because of reported dangerous faults that make them explode in the hands of its users.

Consumer protection legislation requires that goods and services sold must be?

Select ONE answer:

1. guaranteed for life
2. produced under Fair Trade agreements
3. taxed by the government
4. fit for their intended purpose

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

• Not correct – Most goods or services cannot be guaranteed for life, as over time goods will wear out and/or become obsolete.
• Not correct – Fair Trade agreements are concerned with the rights of the supplier and not the consumer.
• Not correct – While many goods are taxed, this is decided by separate government legislation and not by consumer protection legislation.
• Correct – Consumer protection legislation is designed to give consumers rights if goods purchased do not meet certain requirements. As a result manufacturers such as Electromac must provide goods that are fit for purpose for example not having dangerous faults. When products are not fit for purpose, such as the BigKen, consumers are legally protected and manufacturers must take remedial measures such as recall/replacement/refund.

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In 2021, the Roxy Cinema reported a worldwide increase in box office revenue of 8%, whilst its retail sales of sweets increased by 12%.

Which one of the following is the MOST LIKELY reason for the increase in popcorn sales?

Select ONE answer:

1. Ice cream prices were reduced
2. Sweets are linked to gum disease
3. Incomes were falling
4. It is a complementary product

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 – ice cream is a substitute for sweets and cheaper ice cream would reduce the demand for popcorn.
2. Not correct – if people are concerned for their health they would consume less popcorn.
3. Not correct – because falling incomes would normally reduce cinema attendance.
4. Correct – Complementary products’ use is related to the use of an associated or paired product, where using more of one item generates demand for the other. People who visit the cinema will often buy sweets which makes them complementary goods. The increase in revenue suggests more people attended the Roxy Cinema, thus increasing sales of sweets.

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

Shampoos are often differentiated by features such as ‘with avocado oil’ or ‘with wild herbs and flowers’.

The MOST LIKELY reason for shampoo manufacturers to use product differentiation is to?

Select ONE answer:

1. reduce production costs
2. appeal to the mass market
3. give a competitive advantage
4. predict demand for a new product

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 – adding extra ingredients to differentiate the shampoos will add to production costs rather than reduce them.
2. Not correct – adding these ingredients the shampoo manufacturers are segmenting the market therefore not appealing to the mass market.
3. Correct – Product differentiation is the process of distinguishing a product or service from others in order to make it more attractive than its competitors. Manufacturers can highlight the use of specialised ingredients such as ‘wild flowers’ to differentiate from ordinary shampoos. Some customers who like exotic products or want certain treatments for their hair will buy the products that offer these perceived benefits, generating customer loyalty and potential higher sales revenue.
4. Not correct – shampoo manufacturers are already selling their products not trialing new products to predict potential demand.

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UK fashion T-shirt manufacturer Stafford Fashions Ltd needs a new machine costing £125 000 to cut fabric for its T-shirt production lines.

Which one of the following would be the MOST appropriate source of finance?

Select ONE answer:

1. Trade credit
2. Overdraft
3. Leasing
4. Debenture

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 – trade credit is normally designed for purchase of raw materials such as fabrics from suppliers rather than large items of capital equipment, such as a new machine.
2. Not correct – overdrafts are usually given to help cash flow problems in the short term not for long term purchases of assets.
3. Correct – leasing, allows a company to rent/without owning an asset. Leasing is the most suitable for SF Ltd because they will have the use of the cutting machine immediately. Therefore SF Ltd will not have to find, borrow or pay out the full £125k before starting to earn revenue and potentially profits from its operation.
4. Not correct – debentures offer longer term finance usually to develop much larger capital projects, which is not what is required to purchase a piece of equipment costing £125 000.

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