1.1 Understanding Business Activity IGCSE Business (0450)
Unit 1
Chapter 1 - Understanding Business Activity
Chapter 1 - Understanding Business Activity
1. Crispy Crunch is the brand name of a breakfast cereal made by Banbury. The
business spends a lot of money on promoting its brands. Some Banbury managersthink this spending is not cost effective. ‘Perhaps modernising our factories to
automate the production process would be a better use of our capital’ said one
manager, ‘I think a lot of our marketing expenditure is wasted’.
OCT/NOV 2011 V3 Q3
b. What is meant by the term ‘capital’?
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2. Bowland manufactures bicycles from components purchased from suppliers. The
production method makes use of specialisation. The Finance manager said: ‘It has
been a successful year because profit is up. However cash flow is still negative.
Trade receivables (debtors) have increased and we have purchased a lot of new
equipment.’ Bowland’s management believes that improving quality has been the
most important reason why bicycle sales have increased.
MAY/JUNE 2015 V3 Q3
a. What is meant by ‘specialisation’?
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production method makes use of specialisation. The Finance manager said: ‘It has
been a successful year because profit is up. However cash flow is still negative.
Trade receivables (debtors) have increased and we have purchased a lot of new
equipment.’ Bowland’s management believes that improving quality has been the
most important reason why bicycle sales have increased.
MAY/JUNE 2015 V3 Q3
a. What is meant by ‘specialisation’?
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3. KLG is based in country X. It specialises in making electrical parts which it sells to
washing machine manufacturers in country X. The Managing Director is planning to
relocate to country Y, which is 4 a low-cost country. She said: ‘This will allow us to
pay employees low wages for working long hours as there are few legal controls on
employment and health and safety. KLG cannot be both ethical and profitable.
Changes in exchange rates and import tariffs might cause us problems when we start
exporting.’
MAY/JUNE 2016 V2 Q4
b. Identify two benefits to KLG of specialization.
Benefit 1: ...........................................................................................................................................
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Benefit2:.............................................................................................................................................
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washing machine manufacturers in country X. The Managing Director is planning to
relocate to country Y, which is 4 a low-cost country. She said: ‘This will allow us to
pay employees low wages for working long hours as there are few legal controls on
employment and health and safety. KLG cannot be both ethical and profitable.
Changes in exchange rates and import tariffs might cause us problems when we start
exporting.’
MAY/JUNE 2016 V2 Q4
b. Identify two benefits to KLG of specialization.
Benefit 1: ...........................................................................................................................................
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Benefit2:.............................................................................................................................................
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4. APQ is a multinational company. It makes chemicals that are sold to farmers which
help increase the amount of food produced. It plans to open a factory in country X, a
developing country with low 1 interest rates. The Finance Director said: ‘This factory
will create many external benefits. APQ is a public limited company which tries to act
in an ethical way with all its stakeholder groups.' The new factory will cost $100m and
there will be an opportunity cost for APQ. The Finance Director cannot decide which
source of finance to use for the new factory.
OCT/NOV 2016 V2 Q1
a. What is meant by ‘opportunity cost’?
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help increase the amount of food produced. It plans to open a factory in country X, a
developing country with low 1 interest rates. The Finance Director said: ‘This factory
will create many external benefits. APQ is a public limited company which tries to act
in an ethical way with all its stakeholder groups.' The new factory will cost $100m and
there will be an opportunity cost for APQ. The Finance Director cannot decide which
source of finance to use for the new factory.
OCT/NOV 2016 V2 Q1
a. What is meant by ‘opportunity cost’?
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