GCSE 613/01 APPLIED BUSINESS. (Double Award) P.M. TUESDAY, 9 June hours. Candidate Name. Centre Number.

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1 Candidate Name Centre Number 0 Candidate Number GCSE 613/01 APPLIED BUSINESS (Double Award) P.M. TUESDAY, 9 June hours For Examiner s use Question Maximum mark Mark awarded Total 100 ADDITIONAL MATERIALS In addition to this examination paper you will need a calculator. INSTRUCTIONS TO CANDIDATES Write your name, centre number and candidate number in the spaces at the top of this page. Answer all the questions. Write your answers to all the questions in the spaces provided in this question-and-answer booklet. INFORMATION FOR CANDIDATES The mark allocation for each part of a question is shown in brackets. VP*(S )

2 2 Examiner Answer all the questions in the spaces provided. 1. Study the information below and then answer the questions that follow. Purrfect Pets Ltd is a large out-of-town store that sells all kinds of products related to pets. It doesn t, however, sell any animals. Purrfect Pets Ltd buys its stock from one major supplier, Pet Heaven, and sells its products both wholesale to smaller pet stores and retail to customers visiting the store. The company introduced a computerised accounting system last month to help manage its large number of financial transactions and is now considering installing a bar code system to assist the business in its management of stock. Paul Thomas was employed by the company two years ago as an accounts clerk to ensure that all financial transactions are correctly recorded. He also has the responsibility for paying suppliers and for chasing payment from customers who have taken too much credit. (a) When Purrfect Pets Ltd buys stock from Pet Heaven a number of documents will be used. These include: Delivery Note Invoice Purchase Order Statement of Account Identify which document would be used in the following situations. Tick one box for each answer. [4] (i) Purrfect Pets Ltd will send this document to Pet Heaven when it wants to buy some stock. Statement of Account Delivery Note Purchase Order (ii) Pet Heaven will send this document to Purrfect Pets Ltd with the stock when delivered. Delivery Note Invoice Purchase Order

3 3 Examiner (iii) Pet Heaven will send this document to Purrfect Pets Ltd to request payment for a specific order. Statement of Account Invoice Purchase Order (iv) Pet Heaven will send this document to Purrfect Pets Ltd at the end of the month to inform Purrfect Pets Ltd of how much is still owed. Statement of Account Delivery Note Purchase Order (b) Purrfect Pets Ltd usually pays Pet Heaven by cheque. This method of payment is better than using cash. Evaluate this statement. [5] (c) Suggest an alternative method Purrfect Pets Ltd might consider in the future to pay Pet Heaven. Explain one benefit of this method of payment to Purrfect Pets Ltd. [3] Method of payment Benefit Turn over.

4 4 Examiner (d) Paul Thomas, the accounts clerk, is responsible for checking the accuracy of all financial documentation. He has to check all sales invoices before they are sent to a customer. The sales invoice, that is shown on the opposite page, relates to the following order made by a local pet shop, Pet Care. Pet Care 4 Sunnyside Road Newport NE32 5UK Tel: (0452) Fax: ( 0452) To: PURCHASE ORDER Purrfect Pets Unit 5 Bryn Industrial Estate Newport NE12 6YH Order No: Date: Quantity Description Item Ref: Unit Price ( ) 3 Rabbit Hutches RH Bags of Cat Litter CL Authorised: T James Date:

5 5 Examiner Check the following Sales Invoice, sent on the 7 July 2009, and circle all the errors that you find (there are six errors present). [6] Purrfect Pets Ltd Unit 5 Bryn Industrial Estate Newport NE12 6YH Tel: (0452) Fax: ( 0452) To: INVOICE # 789 Pet Care 4 Sunnyside Road Newport NE32 5UK Order No: Date: Quantity Description Item Ref: Unit Price ( ) Total Price ( ) 3 Rabbit Hutches RH Bags of Cat Litter CL Goods Total % Discount Sub-total 15% Total to Pay Delivery: Immediate Authorised By: PP VAT Registration Number: Turn over.

6 6 Examiner (e) Discuss the possible consequences for Purrfect Pets Ltd if this Sales Invoice was posted to Pet Care without the corrections being made. [4] (f) Until a couple of months ago invoices, such as the one shown in (d), would have been produced manually. Now these and other documents are produced using the new computerised system. State three advantages and three disadvantages the new computerised system will have when compared with the manual one. [6] Advantage Advantage Advantage Disadvantage Disadvantage Disadvantage

7 7 Examiner (g) Purrfect Pets Ltd is also considering the installation of a bar-coded stock system. Explain how such a system will help the business to reduce costs. [4] Total Mark Turn over.

8 8 Examiner 2. Study the information below and then answer the questions that follow. Cast Away is a sole trading business that sells fishing tackle. Its owner, Tom Fish, runs the business from a small shop, which he owns, in the busy seaside town of Tenby in West Wales. The shop next door has just become available to rent and Tom s son is trying to persuade his father to use this shop to expand his activities to include the sale of fishermen s clothing and footwear. Before making his decision, he has sought the advice of his accountant who is responsible for preparing his year-end accounts. (a) Tom has provided the accountant with the following information for the end of his financial year, 31 May Use the figures below to complete the shaded areas of Cast Away s Profit and Loss Account. [4] Item Sales Stock Purchases/Cost of Sales Business Rates Electricity Telephone Wages Insurance 5 470

9 9 Examiner Cast Away Profit and Loss Account for the Year Ending 31 May 2009 Sales Item Less: Cost of Sales Gross Profit Less Expenses: Business Rates Electricity Telephone Total Expenses Net Profit / (Loss) (b) (i) Cast Away nearly always makes a profit but cash flow problems have occurred in the past. Explain how Tom s business could show a profit in his profit and loss account but still be experiencing cash flow problems. [2] (ii) The Balance Sheet is a better financial statement to show the financial health of the business. The Net Current Assets figure, in particular, will indicate the amount of disposable funds the business has available to pay its debts. Fill in the shaded areas below to complete the calculation for Net Current Assets. [2] = Net Current Assets Turn over.

10 10 Examiner (c) If Tom decides to go ahead with the planned expansion he will encounter start-up and running costs. Define each of these costs and give one relevant example for each type of cost. [6] (i) Definition and example of a running cost. (ii) Definition and example of a start-up cost. (d) As Cast Away has experienced cash flow problems in the past, the accountant has advised that it would be beneficial to draw up a Cash Flow Forecast for the business for the next four months, taking into account the expansion idea. Evaluate the usefulness of preparing this forecast. [4] (e) A draft Cash Flow Forecast has been prepared below for the first four months of the planned expanded business. The planned start date is 1 June 2009 and the forecast will need to take into account: The purchase of new shop fixtures and fittings in June. They will cost and will be paid for in July. Employing 1 new employee, Tom s son, from 1 June. His wages will be 880 per month. The rent of the shop will increase in August to 600 per month. Electricity is paid quarterly and is expected to be 780 to be paid in August.

11 11 Examiner Complete the Cash Flow Forecast below for Cast Away by completing all of the shaded boxes. [9] Cast Away Cash Flow Forecast for the four months ended 31 September 2009 June July August September Opening Balance at Bank RECEIPTS Sales TOTAL RECEIPTS PAYMENTS Purchases Business Rates Rent of Shop Fixtures and Fittings Wages Tom Wages Tom s son Telephone Electricity Insurance TOTAL PAYMENTS Closing Balance at Bank Turn over.

12 12 Examiner (f) Using the information from the cash flow in (e), (i) should Tom go ahead with the planned expansion? Explain your answer. [4] (ii) explain one action Tom could take to improve the cash flow position. [2] (g) This Cash Flow Forecast has been prepared using the spreadsheet package, Excel. Evaluate the use of computerised spreadsheets in the production of Cash Flow Forecasts. [6] Total Mark

13 13 BLANK PAGE Turn over.

14 14 Examiner 3. Study the information below and then answer the questions that follow. Wil and Amber are considering setting up in partnership as a specialist café called Chocs Away. They will conduct their business from a small rented shop on a busy high street. This café will be unique as Amber and Wil, who have both just completed a confectionery course at the local college, plan to make their own chocolates to sell with a selection of hot and cold drinks. The monthly costs and revenues for the business are expected to be as follows: The average customer will spend 5.00 for a selection of chocolates and a drink Variable costs are 3.00 per customer Fixed costs are (a) Wil and Amber have managed to raise some of their start-up capital from their own personal savings. They have both had jobs working on Saturdays for the last two years. However, they will need additional finance to enable them to purchase fixtures and fittings for their café. State two sources of finance that may be available to Chocs Away and briefly evaluate each source. [6] Source of Finance Evaluation (i) (ii)

15 15 (b) Using the information at the start of the question, complete the table below. [4] Examiner Customers per month Fixed Costs ( ) Variable Costs ( ) Total Costs ( ) Total Revenue ( ) (c) Use the information in the table in (b) to construct a break-even chart on the graph below. All lines must be labelled clearly. [6] Monthly Cost / Revenue 000 s Monthly number of Customers 000 s (d) (i) State the number of customers Chocs Away must have to break even. [1] (ii) Label the break-even point on your chart in (c) above. [1] Turn over.

16 16 Examiner (e) State the profit the business would make in a month if it had customers. [2] (f) If Wil and Amber plan to draw conclusions from a break-even chart, what limitations would they need to consider? [4] (g) Wil and Amber have also decided to construct a budget for the first year of trading. (i) What is a budget? [2] (ii) State three advantages to Wil and Amber of preparing a budget when setting up the business. [3] I II III Total Mark