Tag: Business Studies

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.

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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.

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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.

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Footwear retailer Lucy Shoes sells branded leisure, sport and fashion shoes for men, women and children. 

What is the most likely reason for Lucy Shoes to use market segmentation is to?

Select ONE answer:

1. limit the range of products being offered
2. reduce the need for market research
3. more effectively target its market
4. avoid the need to advertise

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 – market segmentation increases the range of products Lucy Shoes will need to offer to meet the needs of the different segments it caters for.
2. Not correct – Lucy Shoes will still need to do market research into the changing tastes and preferences of its market segments.
3. Correct – Definition of market segmentation: Categorises potential customers according to characteristics based on gender, age, income, etc. By segmenting the market Lucy Shoes can match its shoes to consumer wants/needs more accurately. This means it can potentially increase sales and profitability/reduce the threat of direct competition.
4. Not correct – Lucy Shoes still needs to advertise in order to increase awareness of its products to different segments.

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Fast food chain McDonald’s consistently reaches number one in the Top 100 Global Franchise Rankings. 

Which one of the following is an advantage of buying a McDonald’s franchise?

Select ONE answer:

1. Using an established brand name
2. Making all your own decisions
3. Finding your own suppliers
4. Keeping all the profits

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 – is wrong because employees are more empowered as flexible eCorrect – Definition of a franchise: e.g. A way of running a business that allows an individual or business to pay for the right to use another firm’s branding, product knowledge and systems for a prescribed period of time. McDonald’s is a global fast food chain and recognised by consumers everywhere and symbolised. Which means buyers of McDonald’s franchises will find it easier and much less risky to build a fast food business rather than starting with an unknown and new business name.
2. Not correct – franchisees cannot make all the decisions because some decisions are made by the franchisor .
3. Not correct – the franchisor controls the suppliers.
4. Not correct – the franchisee will be required to pay a share of profits to the franchisor.

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