May/ June 2006

1a (i) Volume of Sales of Computer games = 3/8 x $ 240m

= $ 90m

1a (ii) Value of Playwell's exports = 10% of $ 240m

= $ 24m

1b (ii) Price elasticity of demand measures the extent of responsiveness of

demand over change in price. Inelastic demand is when a percentage change
in price is less than the percentage change in quantity demanded, caused by
the price change. The value of a price inelastic good is less than 1.

1b (ii) The business would have to be careful in choosing price for a good
having an inelastic demand. This is because a decision to increase the price
of board games, would increase business revenue, despite of reducing the
quantity demanded, but the fall would be of less percentage, than the
percentage increase in price.

1c If Playwell distributes its products in more number of outlets, then this

would help those customers who had wanted to purchase these, but didnot
have any outlet offering it nearby to where they lived. By this, those
customers would also get a chance to purchase company's products who
could not due to unavailability factor.

A research can be carried out in those areas where there is a demand for
such games, but due to these goods being unavailable in the market, they
could not buy it. Goods can be distributed in those areas and the business
can thereby make revenues from areas it did not before.

Some people who may not be knowing about the product may become
regular customers after purchasing it once for trial purpose.

Thereby, being an element of marketing mix, wide distribution is an

important aspect and can help increase revenue, if accompanied by other
marketing mix elements too.

1d Playwell may not have researched if the product's demand is in other

countries or not, which may not help increase sales. And the product may not
be distributed to the right retailers, or may not be distributed through a
proper channel. Intermediaries may have to be researched and contacted,
which Playwell may be bad at. Playwelll may not be able to promote its
product properly and thereby may fail to make a name in other markets.
2a (i)

- by calculating number of employees

- by calculating output

- by calculating sales revenue

2a (ii) Mirex operates in tertiary sector of the economy. This is because it

sells products and does not manufacture or extract materials.

2a (iii) A competitive market is the one that has number of competitors in

the market, competing with eachother, all trying to fulfill their business
objectives. However, a competitive market is thought to be an efficient one.

2b New technology would not make as much waste as the previous one did.
It may also not make as much noise, as the other one used to. This would
reduce noise pollution made. Along with this, the new technology might also
be quick. This means it would produce more goods in the same period in
which the old one made few. This would make the business become more
time efficient. Less inputs might be taken to produce a unit of output, which
makes Mirex cost- efficient too.

2c (i) Stakeholders are those parties that have interest in the activities of the
business. These groups are directly or sometimes indirectly affected by the
way the business carries out its operations. An example is the government.

2c (ii) One of the major stakeholder of Mirex are the workers. These people
aim to get return for the efforts that they put in for the business. They aim to
get job security, power, opportunities for promotion, chances of increments,
recognition for good work, get their social and other needs fulfilled, along
with others. Mirex may decide to make few workers redundant in order to
reduce its costs. This will affect their objectives. Or management's decision to
reduce their wages would also affect their objectives.

Another stakeholder are the competitors, who aim to leave Mirex back and
stay ahead in terms of profit levels, market share, etc. Mirex decision to
distribute its products widely or promote its product extensively can result in
competitors sales to fall. Or an increase in volume of sales of Mirex's products
due to a fall in price would also affect their objective of acheiving high market
share.

3a (i) Wages
3a (ii) Rent

3b

3b (ii) 600 pizzas

3b (iii) Units selling pirce - variable costs) - fixed costs

700 pizzas ($7 - $4) - $1800

$2100 - $1800 = $300 per week

$300 x 52 weeks = $15,600

3c Return on capital employed = Net Profit x 100%

Capital Employed

= $15,600 x 100%

$100,000

= 15.6%

3d Gino is not correct to say that if in one year, he has earned high profits,
he would be able to do so in further next year as well. If he does not give in
same efforts and time, then there is a likelihood of his business to make less
profit or maybe loss. He would need to make sure that he makes higher
revenue than before, and if not increases it, atleast maintains it to that level.
And also that he tries to reduce his expenses than what they were before.
Gino may try to produce more number of goods. He may also need to spend
more on promoting his products, so as to retain old customers as well as to
attract new ones. Without efforts, the products would not make much profit
for Gino, no matter how high profit it might have taken for him in the present
year.

4a There are many reasons for B.M.F to use flow production method. This
method suits the requirements of the company in a sense that it needs to
produce quite a large number of output, which is fulfilled by this method.
Another thing is that the company wants all its products to have same
features added, so makes the machinery do this repetitive task of making all
pass from the same process. Flow production is also quick, so it makes more
output for the business to sell. That is why B.M.F must be using this method.

4b Out of many ways of motivating workers, B.M.F could do so by giving

performance related pays to them. Those workers who do good in the tasks
given to them or perform their duties properly, and say are regular and do
not get off much can be given some more money for his extra efforts that he
has put for the interest of the business.
Or a set-up like paying a worker who exceeds the set minimum limit of output
to produce every day or week, can get say $10 per extra output that he
produces.

Another way is a non- financial motivator, which is to give titles to workers

according to how he works. New titles, or badges can be introduced. By
giving these, workers would feel a little superior than others as a result of
their sincerity at work, and would also make the rest get motivated to
achieve that status and respect too. For example, a worker can be given title
of Employee of the month, which would make others work even more
efficiently, so as to get that title with pride.

4c High productivity is necessary for B.M.F for various reasons. Firstly, it will
be able to cut its costs, by for example making workers redundant, when
others left can produce as much as it was produced when those made
redundant were there. Productivity can also be gained from technological
updated machinery being installed. This would mean less time is taken to
produce goods, thus gaining time efficiency, so as to maintain or increase
market share. Another thing is that the business needs to be cost efficient so
as to reduce as much expenses as it can in order to make high profits.

4d Social costs are those non-monetary costs that the society has to bear
and pay because of the activities of the business. These are also called the
spillover effects or negative externalities. Some of the members of the
community as a whole might not have been happy with the plan of setting up
a B.M.F factory in Country Y due to the fact of the factory polluting the
environment. Another reason could have been the factory's deforesting the
area and building its plant there. This would also affect environment. Other
social costs are exploiting local workers, charging higher price to people, etc.

5a (i) Economic recession occurs when the prosperity of the economy feds
away along with the purchasing power of the people. In such a situation, the
sales of most of the businesses are very low due to less money supply in the
market. This is a period of economy's downfall. However, those businessmen
selling needy items can still make high profits.

5a (ii) Recession must have affected B.M.F quite badly. The reason behind
this would have been that during this time, the purchasing power of most of
the people would have gone very low. They would surely not prefer
purchasing much of luxurious items, unless needed. Furniture being a luxury
product would be less demanded. This would have led to a fall in the sales
value of business' product and thereby a fall in revenue and thus profit would
also have been experienced by B.M.F.

5b All three options are affecting workers negatively and are against
objectives of trade union. Option 2 is the one where all workers will be in job,
but will get less paid for the same number of units they produce and the
same efforts that they put in. Option 3 will not make anyone jobless, but paye
less to the workers. While the first option, Option 1 will make around 100
workers jobless and will not reduce any worker's pay. This seems to be a
better option as it is also difficult for workers to adjust themselves to live in
less pay, and may also be a demotivating factor if they require to put the
same efforts.

However, an overall decision needs to be based upon many other factors too.
So a conclusion can not be reached upon within less information given.

5c Labour costs are not the only costs of the business. The business
definitely needs to reduce its other costs too. Or besides this, it can improve
its credit system too. For improving financial problem for short term, it can
encourage its current debtors to pay quickly and may stop giving goods on
credit basis and make only cash sales. It can make very less credit sales, and
those debtors too can be asked to make payments promptly. Accompanied
with this should be business' delay in paying its creditors. This would retain
some money in the business for short term. For the longer term, the business
can take more shareholders in.

5d The business must first make sure whether the chair had some faults or
not. If there was not any fault then the customer must be assured of the chair
being completely fine. But if there was some problem in it, then the business
should not ignore it. The reason being that the company would not only make
bad image for that customer, but through indirect way, for others too.
Moreover, it would give chance to the customer of dragging him to the court.
This would give further bad image about B.M.F and its products. Thereby the
customer complaint(s) should be considered and should be taken necessary
protective action for.