This paper was set during the hyper-inflationary period hence the unusually high figures for items e.g the selling price for a pair of shoes. The structure of the paper and its nature has not changed however.
Students writing an exam. Image by Herald

Students writing an exam. Image by Herald


General Certificate of Education Advanced Level

BUSINESS STUDIES                                                                                                           9891/1


NOVEMBER 2012 SESSION                           3 hours

TIME 3 hours


  • Answer all questions in Section A and any three in Section B.
  • 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: Data response [25 Marks]

    Answer all questions

    Read the passage below and answer the questions that follow.

    Blue Collar Clothing Company

    Bluecollar, a company formed five years ago, is in the business of manufacturing clothes and clothing materials. The company’s customers are mainly retail outlets and other clothing manufacturers. Of late the company has been doing well but because of intense pressure from competition, management has decided to expand the company’s operations.
    Management has two options from which to select the course of action to follow in their pursuance of growth. In addition to monitoring the ever-changing business environment, they will have to decide on the most cost effective and profitable option.
    The first option is to diversify into the production of quality footwear.
    The company may have to buy or lease buildings and machinery for the new venture. The Operations Manager has provided the Managing Director with the following figures for considering.
    Fixed Costs                               $753 750 per month
    Raw materials per pair          $2 300
    Direct Labour per pair           $1 800
    Production at full capacity    603 pairs per month
    Selling Price                             $6 350 per pair
    The second option is to merge with a clothing retail chain that has a 40 % market share and is regarded as one of the biggest clothing companies in the country.
    1       (a) Explain the meaning of the following terms as they are used in the passage:
    (i) diversify. [3] (ii) market share [3] (b) In June 2003, the company decided to produce footwear at full capacity.
    (i) the contribution per pair [2] (ii) the break even point for the month in units. [2] (iii) the margin of safety [2] (iv) the net profit for June 2003. [3] (c) Evaluate the costs and benefits of each option. [10]

    Section B: Essays [75 Marks]

    2.     (a) Why is it important for businesses to plan? [10] (b) Explain the concept of management by objectives and discuss its importance to business organisations. [15] 3.     (a) Discuss the contribution made by economies of scale to an organisation of your choice. [10] (b) Explain how and why the government of Zimbabwe might influence the growth of businesses. [15] 4.     (a) Evaluate any two investment appraisal methods that can be used by a financial manager. [15] (b) Why should managers not rely on quantitative information only? [10]

    5.      A newly appointed Personnel Manager has announced that there is a bad industrial relations within the                        business organisation.
    (a) Discuss the symptoms he might have observed before making the announcement. [10] (b) If you were part of the management team, how would you try to promote good industrial relations within the                 organisation? [15]

    6.      Evaluate the contribution made by branding and packaging to an organisation’s marketing effort. [25]

    7.      Evaluate the contribution made by early management theorists to modern day management approaches. [25]

    8.      Explain, with the aid of an appropriate diagram, how a decision tree can be used in decision making. How                     useful is such a model to managers? [25]

    9.       Assess the contribution made by a work study programme to a manufacturer of shoes. [25]

    10.     (a) ” A balance sheet reflects a true and fair worth of a business at a given date.”
    To what extent is this statement true? [10] (b) With the aid of examples, explain how each of the following would affect the reported profits of a business:
    (i) The first-in-first-out (FIFO) method of stock valuation, [7] (ii) The straight line and diminishing balance methods of depreciation. [8]