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General Certificate of Education Advanced Level

MANAGEMENT OF BUSINESS                                                                            9198/1

NOVEMBER 2007 SESSION        3 hours

TIME 3 hours


  • Answer all  questions.
  • Write your answers on the separate paper provided.
  • If you use more than one sheet of paper, fasten the sheets together.


  • The number of marks is given  in brackets
[] at the end of each question or part question.
  • The business described in the case study is entirely fictitious.
  • You are advised to spend no longer than 2 hours on Section A.
  • You are reminded of the need for good English and clear presentation in your answers.
  • Calculators may be used.
  • Section A [70 Marks]

    Answer all questions.

    1   What do you understand by the following terms:

              i) demerger;                                        [2]

             ii) divestment?                                    [2]

    2  How are businesses affected by an increase in taxation?         [4]

    3  a) Outline any three  drawbacks of import controls.  [3]

        b) Why are most governments keen to promote exports?    [4]

    4  a) How might workers actively resist change?        [3]

        b) Explain any two  consequences of a poor organisational structure. [3]

    5 The purchase price of an asset is $600 000 and annual depreciation using the straight line method is $80 000.


           a) The net book value after fours years,           [2]

           b) the expected life of the asset using the residual value of $200 000   [2]

    6    a) Why might a firm employ part-time works?   [3]

          b) What practices may be used in job enrichment?   [3]

    7   a) Give any three  reasons why informal communication channels are important in an organisation.  [3]

         b) Explain what you understand by the ‘exploitative-authoritative system’ in leadership study. [3]

    8   a) What is forecasting?    [2]

          b) State any three situations in which forecasting can be useful.  [3]

    9  How useful is ratio analysis to a firm’s management?   [5]

    10   a) State any three  factors a firm has to consider when choosing  a supplier.   [3]

           b) Outline any two qualitative and any two quantitative benefits derived from quality circles.  [4]

    11 a) How might branding help in the successful marketing of a product?  [3]

        b) Assess the usefulness of desk-research.               [4]

    12   a) Explain any two  factors which influence choice of finance.  [4]

           b) What might be the advantages and disadvantages of high gearing?   [4]

    Section B [30 Marks]

    Read the following case study and answer all the questions that follow.

    The Tee Business Ltd

    The Tee Business Ltd has been in business for the past eleven years. It specialises in manufacturing and selling high quality jackets. In the past few years, the jackets were sold at a price of $200 000 each.

    When the company is operating at full capacity, it produces 700 000 units per month. The firm’s sales department is made up of a highly qualified and professional sales team. Over the years, the team has been paid a fixed amount per month without any problem.

    Of late, the Managing Director, Ray Tim, has been contemplating to introduce a new payment system. This has been prompted by a recent fall in sales and, after consulting his Human Resources Manager, a decisions was made. A lower fixed amount per month plus a commission of $200.00 per jacket sold would now be paid to each member of the sales team.

    Ray believes that the new scenario will increase the sales volume to $600 000 in November. If this level is reached, the sales team will earn more money than before. The following information has been obtained from the Sales Department.

    Sales ($)560 000552 000540 000540 000(forecast)
    600 000

    It has been established that the current variable costs are $1000 per jacket and fixed costs are pegged at $20 million per month.

    On the other hand, Ray has other ideas. He also believes that if the price of each jacket is reduced by 10% sales will increase by approximately 12%. He also would like to purchase new equipment in a bid to improve productivity.

    13 a) Calculate the break-even output if the new payment system is adopted. [4]

         b)    i) Calculate the price elasticity of demand following the price  decrease.  [3]

    14  Discuss the impact of the  possible reaction of the sales team to the new incentive scheme. [10]

    15  How else might the Managing Director help to improve the productivity of his workforce?    [10]

    To access more exams go to the Business Studies Exam page.