Students writing an exam. Image by Herald.

Students writing an exam. Image by Nehanda Radio.


General Certificate of Education Advanced Level

BUSINESS STUDIES                                                                                                           9891/1


NOVEMBER 2012 SESSION                           3 hours

TIME 3 hours


  • Answer all questions.
  • Write your answers on a separate answer paper.


  • The number of marks is given in brackets
[] at the end of each question or part question.
  • You are advised to spend no more than 2 hours on Section A.
  • The businesses described in this paper are entirely fictitious.
  • 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.     (a) State any three different ways in which the size of a business might be measured.     [3] (b) Outline any three legal controls which might affect the way in which businesses operate.  [3] 2.   (a) Show the difference between the public sector and the private sector of an economy. [2] (b) Why might some goods and services be provided by the public sector in your country? [2] 3.     (a) What is an organizational chart? [2]

    (b) Explain one reason why an organization chart would be useful to employees in a business. [2]

    4.      (a) How useful is oral communication in an organisation? [4]

    (b) Comment on the importance of Trade Unions in employer/employee relations. [4]

    5.     (a) Distinguish between McGregor’s Theory X and Y. [4] (b) How might the differences in he two theories be reflected in the leadership style of managers? [4] 6.      State two reasons why the market for a product might decline in size. [2] 7.     (a) Other than price, what other factors could cause an increase in the demand for mobile phones?
    (b) A business sells a product whose demand is relatively price inelastic.
    Explain the effect on sales and revenue of a price increase. [3] 8.    (a) Define the term product portfolio. [2] (b) Explain the importance of the product life cycle in planning a product portfolio. [4] 9.    (a) A company manufactures product X and the following data is shown:
    Direct Costs per unit                            $70
    Overheads                                              $50 000
    Current output                                      120 000 units
    Selling Price                                           $140
    Full capacity output                              150 000 units
    From the above information, calculate the company’s capacity utilization. [2] (b) (i) State two ways in which a business may achieve added value. [2] (ii) Why is added value important for business? [2] 10.  (a) Distinguish between assets and liabilities of a business. [4] (b)Explain why businesses depreciate their fixed assets. [3] 11.   Briefly explain ways in which a manufacturer of toys might find break-even analysis useful. [6] 12.    The following information is provided for project Venus:
    Activity Preceding Activity Duration (days)
    A                                                                    –                                                                5
    B                                                                    A                                                               6
    C                                                                    A                                                               3
    D                                                                    A                                                               3
    E                                                                    B                                                               2
    F                                                                    D                                                               2
    G                                                                    B,C,F                                                         9
    H                                                                    E                                                                4
    (a) Define the term critical path. [2] (b) (i) Draw a network diagram for project Venus. [3] (ii) State the project’s total duration [1]

    Section B [30 Marks]

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

    Crystal College

    Crystal College is a private school owned by Ben Zaki who is also the Head of the school. The school has 400 students and charges $1 000 per term for each student. Ben’s aim is to make a significant profit every year but the last two years have been very difficult. Subject departments were over-spending while the increase in fees was not enough to cover the college costs. This also meant that the school could not update its equipment or maintain its buildings. Currently, Crystal College cannot accommodate more than 420 students.
    Recently, labour turnover has been high and this has led to a decline in the examination success rates. Those teachers who have been leaving highlighted a variety of reasons. Top of the list were lack of a bonus system for good results and Ben’s style of management. Ben discussed school issues with the Students Council before making changes. Teachers would only get to know about new policies through the notice board. He did not even use the school’s e-mail system. Some Heads of Departments resigned because they never knew how much they had to spend on text books yet they were the first to be criticized when results were bad. Worse still, they were even criticised when the results were good.
    From the look of things, Ben needs to act fast to arrest the situation or else, his school’s enrollment will soon go down.
    Ben has been told about another school in town, Hamlet, which is up for sale since the owners decided to retire. He has given it a thought and after evaluating a takeover, he made up his mind. The takeover would go ahead and a new post for Deputy Head of school would be created. The Deputy Head would be responsible for training new teachers and introducing a job evaluating system.
    13. Evaluate how communication between management and staff might be more effective within Crystal College. [10] 14. Analyse the benefits to Crystal College of introducing budgets managed by Head of Departments. [10] 15. Discuss the possible advantages and disadvantages to Crystal College of taking over Hamlet School. [10]