Exam Revision

Which one is a variable cost?

• Packaging

• Rent

• Loan Repayments

• Insurance

How can a business add value to a product/service?

• Increase the price

• Reduce the Quality

• Use Quality materials

• Use a market map.

Answer explanation

Customers are happy to pay more for a product if they feel its quality makes it durable/fit for purpose. Will also last longer!

Starting a business may be very daunting, the rewards can be great but an entrepreneur must try to minimize the (begins with R)

(a)  

What does insolvency mean?

• A product is no longer in demand

• A product has become obsolete

• A business can no longer pay their debts

• A business has gone in to solvation

Liam is operating a local cheese producing company. His cheeses are getting more and more popular. However, there are some high costs associated with making each cheese. How could he reduce a variable cost?

• Try to negotiate a cheaper rent on the premises he operates from?

• Try to get a better rate on the loan for the machinery?

• Try to negotiate a better deal with the suppliers who bring in the cow feed?

• Take one of the cows out on a date at the local Kebab shop?

Caspian has started a started a Natural Remedy Shop. Using plants/flowers from his local area to help support problems such as hayfever, Arthritis etc.

He requires a loan of 15,000

His total repayment will be 17,225

Length of loan is 5 years.

Calculate the interest as a percentage of the loan. (to 2 decimal places)

(a)  

Two benefits of being a ltd business? (private limited)

• You will be limited with your liability to any debts you have.

• You can sell shares on the stockmarket

• You can sell shares to family/friends

• You have unlimited liabilty.

Bailey has started his own Sports Shop selling sports wear/team wear for local clubs. In January he makes-

Number of sales= 1700

Sales price= £20

Variable Cost= 13

His breakeven point is 1500 sales

What is the margin of safety for January?

(a)  

When we divide our potential target market into small groups using similar characteristics such as age, income, location (demographics)

Begins with M and there are two words

(a)  

What are potential impacts of becoming a Franchisee

• training and support provided

• Access to a good location

• Known and Trusted Brand

• You can create your own rules eg-prices/offers