PLACE YOUR CANDIDATE LABEL HERE · • Part 2 – Marketing Management • Part 3 – Human...

Tasmanian Certificate of Education External Assessment 2016

BUSINESS STUDIES (BST315116)

SECTION A Time: 40 minutes

Candidate Instructions 1. You MUST make sure that your responses to the questions in this examination paper will show

your achievement in the criteria being assessed.

2. You MUST answer FOUR questions from this section. ONE question from each of the following:

• Part 1 – Business Environment/Operations Management• Part 2 – Marketing Management• Part 3 – Human Resource Management• Part 4 – Financial Management

3. You must write concise and well-structured answers for each of the questions you have chosen.

4. You are encouraged to include diagrams, where relevant.

5. Answers must be written in the spaces provided on the examination paper.

6. Each question is worth 10 marks (4 x 10 = 40 marks).

7. You should make sure you answer all parts within each question so that the criterion can beassessed.

8. This examination is 3 hours in length. It is recommended that you spend approximately40 minutes in total answering the questions in this booklet.

9. All written responses must be in English.

On the basis of your performance in this examination, the examiners will provide results on each of the following criteria taken from the course statement:

Criterion 1 Describe and use business terms, concepts, principles and ideas related to the management of business in Australia.

Criterion 5 Communicate business ideas and information.

© Copyright for part(s) of this examination may be held by individuals and/or organisations other than the office of Tasmanian Assessment, Standards and Certification.

Pages: 20 Questions: 8

PLACE YOUR CANDIDATE LABEL HERE

BST315116 Page 2 of 20

PART 1 – BUSINESS ENVIRONMENT/OPERATIONS MANAGEMENT

You MUST answer ONE question from this Part. You are encouraged to include diagrams, where relevant. Question 1 Describe TWO internal influences on the business environment. Explain how changes in each ONE of these influences could affect ONE stakeholder of a business. (10 marks) ...................................................................................................................................................................

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Question 1 (continues)


Question 1 (continued) ...................................................................................................................................................................

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Question 2 Explain the concept of Quality Control. Discuss TWO benefits of using the concept Quality Control to improve the production process. (10 marks) ...................................................................................................................................................................

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PART 2 – MARKETING MANAGEMENT

You MUST answer ONE question from this Part. You are encouraged to include diagrams, where relevant. Question 3 Describe THREE elements of a target market. Explain why the identification of the target market is an important consideration when developing promotional strategies. (10 marks) ...................................................................................................................................................................

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Question 4 Describe THREE pricing strategies. Explain how ONE of these pricing strategies can aid a business to increase sales. (10 marks) ...................................................................................................................................................................

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PART 3 – HUMAN RESOURCE MANAGEMENT

You MUST answer ONE question from this Part. You are encouraged to include diagrams, where relevant. Question 5 Describe THREE responsibilities the employer has towards its employees. Explain how these can help develop a positive business culture. (10 marks) ...................................................................................................................................................................

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Question 6 Describe THREE ways to attract and retain staff. Explain how ONE of these strategies could minimise staff turnover. (10 marks) ...................................................................................................................................................................

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PART 4 – FINANCIAL MANAGEMENT

You MUST answer ONE question from this Part. You are encouraged to include diagrams, where relevant. Question 7 Describe THREE financial objectives a business may set. Using ONE example, explain how a financial goal can conflict with the goal of achieving corporate social responsibility. (10 marks) ...................................................................................................................................................................

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Question 8 Describe TWO advantages and ONE disadvantage of debt finance. Explain how debt finance can increase the profitability of a business. (10 marks) ...................................................................................................................................................................

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BST315116 Page 20 of 20

This question paper and any materials associated with this examination (including answer booklets, cover sheets, rough note paper, or information sheets) remain the property of the Office of Tasmanian Assessment, Standards and Certification.



SECTION B Time: 40 minutes



2. You MUST answer TWO questions from this section.

3. You must write brief and clear answers for each of the questions you have chosen.








Criterion 2 Use tools, techniques and processes to assess data and information about business performance.






Question 9 Luigi operates Luigi’s Pizzeria in the centre of Hobart. While the costs of inputs have been increasing steadily, the sale price of $20.00 per pizza has not changed since 2012. Luigi is considering a new pricing strategy in response to falling profits. The costs for an average pizza at Luigi’s Pizzeria have been estimated as follows:

• Raw materials are $9.00 per pizza. • Rent $3 500 per month. • Other overheads (phone, electricity etc.) are $4 000 per month. • Wages are $18.00 per hour. It takes 10 minutes to make every pizza. • Packaging for every pizza is $0.50. (a) Calculate the break-even point for each month of the year. (4 marks)

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(b) Calculate the break-even point for every month if Luigi sets a desired profit of $50 000 per year.

(4 marks)

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(c) Sales over the past month have been 1 200 pizzas. Using your calculations in (a) and (b) above,

explain if this finding is positive or not for Luigi’s Pizzeria. (4 marks)

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Question 9 (continued) (d) Suggest TWO costs you could adjust in order to make a minimum profit of $50 000 per year.

(4 marks)

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(e) Assuming Luigi sells 1 200 pizza’s per calendar month and costs remain constant, calculate the

sales price he would need to charge in order to make a profit of $50 000 per year. (4 marks)

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Question 10

All Size Clothing has been operating in Hobart since 2005. Recently All Size Clothing has experienced tough competition and is facing cash flow problems.

Consider the following financial data for All Size Clothing over the past two years.

Financial data for the financial year ending 30 June 2015 and 2016

2015 2016 Sales 500 000 440 000 Cost of Goods Sold 250 000 230 000 Expenses 200 000 200 000 Total Current Assets 200 000 120 000 Total Current Liabilities 150 000 140 000 Average Owner’s Equity 500 000 300 000

Using the table provided you are required to:

2015 2016

(a) Calculate the Gross Profit Ratio for 2016.

(2 marks)

50%



Question 10 (continued)

(b) Calculate the Rate of Return on Owner’s Equity for 2016.

(2 marks)

2015

10%

2016

(c) Calculate the Current Ratio for both years (2015 and 2016)

(4 marks)

2015

2016




(d) Identify and explain TWO factors that have contributed to the profitability of All Size Clothing between the financial years.

(4 marks) Factor 1:

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(e) Draw ONE conclusion about the profitability of the business and ONE conclusion about the liquidity of the business.

(4 marks) Conclusion about profitability:

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(f) Identify TWO strategies All Size Clothing can use to increase its profitability in the next financial

year. Explain your decisions. (4 marks) Strategy 1: ..........................................................................................................................................................

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Question 11

These ratios and indicators have been calculated for Jeans East Ltd.

Ratios and Indicators 2014 2015 2016 Industry Average

(2016) Debt to Equity (Gearing) Ratio 120% 110% 90% 120%

Rate of Return on Owners Equity 13% 12% 17% 15%

Debtors Collection Period (days)

48 45 43 40

Market share 5.0% 5.5% 5.0% 4.0% Staff turnover per annum 19% 18% 21% 23%

Use this data to answer the following questions.

(a) Identify THREE trends: ONE in Debtors’ Collection Period; ONE in financial stability and ONE in profitability. (3 marks)

Trend 1 – Debtor’s Collection Period:

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Trend 2 – Financial Stability:

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Question 11 (continued) (b) Identify THREE factors that may have contributed to the trends outlined in (a). (3 marks)

Factor 1 – Debtor’s Collection Period: ..........................................................................................................................................................

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(c) Make TWO statements: ONE about profitability and ONE about Debtors Collection Period

compared to the industry average. (2 marks) Statement 1 – Profitability: ..........................................................................................................................................................

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Statement 2 – Debtor’s Collection Period: ..........................................................................................................................................................

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(d) (i) Present and interpret ONE conclusion about market share. (3 marks)

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(e) (i) Identify and explain ONE strategy the business could use to decrease staff turnover. (3 marks)

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(ii) Identify and explain ONE strategy the business can use to increase market share of the business. (3 marks)

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This question paper and any materials associated with this examination (including answer booklets, cover sheets, rough note

paper, or information sheets) remain the property of the Office of Tasmanian Assessment, Standards and Certification.



SECTION C Time: 50 minutes



2. You MUST answer TWO questions from this section.









Criterion 3 Analyse problems arising from business practices and management strategies.






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Question 12 In 2014 Debbie Brown started her mountain biking business, Green Derby, which was part of the Tasmanian Government’s initiative to open up the state’s outdoor areas to locals and interstate tourists. With the opening of new mountain bike tracks, Debbie thought her business would be successful, given that Green Derby was one of the first mountain bike businesses to be set up in the area. However, current cash flow is poor and sales are 40% below budget. The bikes she purchased for hire have not been hired out consistently. Being excellent quality bikes, they cost more to hire out than lesser quality bikes. Since the start of 2016, lower cost competitors have set up business as well. Her TV advertising campaign in July of 2015 did not make the expected difference to sales. Debbie has observed that many riders are specialist mountain bike riders who bring their own bikes and do not need to purchase her tours or hire her bikes. She has noted that there are few repeat customers and that not many new ‘novice’ mountain bike riders are attracted to the area. Many people who come to the area cannot find accommodation or places to eat and drink. Some customers have complained when tours have been cancelled due to small numbers. (a) Debbie’s promotional strategies have not worked. Explain TWO problems that this has caused.

(4 marks) Problem 1: ..........................................................................................................................................................

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(b) Debbie did not conduct any market research for Green Derby. Identify and analyse the problems if a target market is not identified accurately. (5 marks)

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(c) Product (as one part of the marketing mix) strategies are important to all businesses. Identify and analyse how the current products are impacting the business performance of Green Derby.

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Question 12 (continued) (d) Debbie is considering adopting social media as part of the promotional mix. Identify TWO social

media strategies and analyse how they could help Debbie attract more customers. (6 marks) Strategy 1: ..........................................................................................................................................................

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Question 12 (continued) (e) There are implications for Debbie’s business if she fails to consider environmental and economic

issues when accessing remote areas of North West Tasmania. Critically analyse the environmental and economic issues Debbie will need to consider. (6 marks) ..........................................................................................................................................................

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Question 13

Debbie Brown started her mountain biking business Green Derby in 2014 which was part of the Tasmanian Government’s initiative to open up the State’s outdoor areas to locals and interstate tourists. With many tracks opening up Debbie thought her business would be successful, given Green Derby was one of the first mountain bike businesses to start up in the area.

However, cash flow is poor and sales are considerably below expectations. Employees are difficult to attract and the employees she has sourced from the nearby area are not highly trained or motivated. Presently she is seeking to employ a tour guide and bike mechanic to join the business.

The bikes she purchased for hire have not been hired out consistently. This has been partly due to delays in repairing bikes. Last month her best tour guide left her business to join a new competitor as a manager.

Many people who come to the remote area cannot find accommodation or places to eat and drink. Staff accommodation options are also limited.

(a) Identify and explain TWO Human Resource Management problems Green Derby could have with attracting and retaining new staff. (4 marks)

Problem 1:

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Problem 2:

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Question 13 (continued) (b) Assess TWO causes of poorly trained and unmotivated staff. (4 marks)

Cause 1: ..........................................................................................................................................................

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(c) Identify and evaluate impacts of a high staff turnover on business performance. (5 marks)

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(d) Evaluate ONE implication of developing a positive business culture for EACH of the following stakeholders. (6 marks)

Managers:

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(e) The mission statement of Green Derby states it practices corporate social responsibility.

Critically analyse the social and ethical implications which Debbie needs to consider in order to practice corporate social responsibility. (6 marks)

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Question 14 Teeming Engineering is a business located in Launceston. While it has been an established business for over 50 years, Teeming Engineering has suffered declining sales, lower customer satisfaction and the rate of recalls has impacted negatively on the cash flow of the business. Due to liquidity problems, the manager has postponed plans to upgrade machines for technologically advanced laser cutters. There is also a lack of demand for the older style products produced by Teeming Engineering. The average age of the workforce is over 55 with many employees reluctant to change work practices. The manager wants to stay operating in Tasmania and is suitably inspired by the Government’s stance to encourage innovation and high technology projects. A business consultant has suggested that management considers Total Quality Management, adopts a culture of continuous improvement and spends more money on Research and Development. (a) Identify and explain TWO operational problems experienced by Teeming Engineering. (4 marks)

Problem 1: ..........................................................................................................................................................

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.......................................................................................................................................................... .......................................................................................................................................................... .......................................................................................................................................................... .......................................................................................................................................................... .......................................................................................................................................................... .......................................................................................................................................................... .......................................................................................................................................................... Problem 2: ..........................................................................................................................................................

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(b) Assess TWO causes that may have led to declining sales and lower customer satisfaction. (4 marks)

Cause 1:

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Question 14 (continued) (c) Analyse the impacts of adopting innovation and Total Quality Management (TQM) on business

performance at Teeming Electronics. (5 marks) ..........................................................................................................................................................

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(d) Identify and evaluate TWO challenges for managers and ONE challenge for the present employees to implement TQM and a continuous improvement policy. (6 marks) Challenge 1 for Managers: ..........................................................................................................................................................

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Question 14 (continued) (e) Critically analyse the social and economic implications which Teeming Engineering need to

consider in deciding whether to retain their business operations in Tasmania or relocate elsewhere. (6 marks) ..........................................................................................................................................................

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SECTION D Time: 50 minutes



2. You MUST answer ONE question from this section.




6. Each question is worth 50 marks. (1 x 50 = 50 marks)





Criterion 2 Use tools, techniques and processes to assess data and information about business performance.

Criterion 4 Make recommendations to improve management practices and business performance.






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Question 15 TASAPPS is an IT company that has developed a budgeting and finance app. Sales revenue has been very low and the market for finance apps is very competitive. TASAPPS is seeking a partnership with a finance company or a bank to develop and market its current and future apps. Last year, the company attracted a number of investors to fund its strategy to market and sell its products to the finance industry. TASAPPS raised $9 000 000 of capital for its venture. The aim of the company’s business model is to generate enough cash sales to attract a bigger company to take them over in the future. Its apps are free to all clients in the first year. The aim is to develop premium features that can be charged a fee to established users to generate sales revenue. TASAPPS is also seeking a celebrity to endorse its app. A team of sales staff will sell TASAPPS products around Australia. Staff turnover for the product development team has been higher than the industry average. The Enterprise Content Management (ECM) market size was estimated to be US$5.5 billion in 2014 and is expected to grow at 14.5% per year driven by increased use of mobile devices and consumerisation of new applications using mobile devices. (a) In the space provided, construct a SWOT table for TASAPPS. Identify TWO strengths, TWO

weaknesses, THREE opportunities and TWO threats.

S Strength 1: Strength 2:

(2 marks)

W Weakness 1: Weakness 2:

(2 marks)




O Opportunity 1: Opportunity 2: Opportunity 3:

(3 marks)

T Threat 1: Threat 2:

(2 marks) (b) For TWO of the opportunities identified in your SWOT analysis, suggest a strategy to take

advantage of each opportunity. (4 marks) Strategy 1: ..........................................................................................................................................................

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Question 15 (continued) (c) Suggest ONE strategy to address ONE threat identified in your SWOT analysis. (2 marks)

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Question 15 (continued) Based on the assumption that the business will start in January 2016, after its capital raising from investors, a copy of the most recent Balance Sheet as at the 31st December 2015 and a proposed Cash Budget for the years 2016–2017 are set out below.

TASAPPS Balance Sheet as at 31st December 2015

$ $ $

Current Assets Cash at Bank 500 000

Cash from investors 9 000 000 Accounts Receivable 540 000 10 040 000

Non-Current Assets

Office Furniture and Equipment 60 000 60 000

Total Assets

10 100 000 Current Liabilities

Accounts Payable 650 000

Non-Current Liabilities Bank Loan 1 000 000

Total Liabilities

1 650 000 Net Assets

$ 8 450 000

Owner’s Equity Capital

8 450 000 Retained Profits

0

Total Owner’s Equity

$ 8 450 000

Cash Budget for 2016 and 2017 2016 $m

2017 $m

Cash at start 0.50 3.40

Funds raised from investors 9.00 0.00

Sales of applications 0.30

Total Cash available 9.50 3.70

Less cash outlays

Product development 1.40 0.80

Sales and marketing 2.50 1.50

General operating expenses 1.10 1.25

Expenses to setup of business 1.10 0.00

Total cash outlays 6.10 3.55

Cash at end 3.40 0.25



Question 15 (continued) You have been appointed as a business consultant for TASAPPS and you have been requested to prepare a clear, accurate and comprehensive report on the business using the headings below. You are also asked to recommend whether the proposed expansion of the business should go ahead. (d) Mission

Write a mission statement for TASAPPS. (2 marks)

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(e) Operations

Prepare a brief plan to employ new software engineers for TASAPPS. (3 marks)

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Question 15 (continued) (f) Marketing

Identify and explain TWO suitable pricing strategies to increase sales of the company’s apps. (4 marks)

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(g) Marketing

Recommend TWO social media strategies to promote their products. (4 marks)

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Question 15 (continued) (h) Finance

TASAPPS anticipates a need for another $3 000 000 for research and development, extra training and marketing into the third year (2018). You have to recommend whether to increase owner’s equity or raise debt finance from the BMX Bank.

(i) Calculate the Debt to Equity ratio for three scenarios below.

Required Ratio calculation

Debt to Equity ratio before expansion

(2 marks)

Debt to Equity ratio after expansion with extra bank loan of $3 000 000

(2 marks)


BST315116 Page 10 of 24


Debt to Equity ratio after expansion with extra capital contribution of $3 000 000

(2 marks)

(ii) Comment on the financial stability of TASAPPS based on the information calculated. (4 marks)

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(i) Critically analyse the economic and ethical implications of TASAPPS planned investment into a new range of apps. (6 marks) .......................................................................................................................................................... ..........................................................................................................................................................

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Question 15 (continued) (j) Recommendations

Make a recommendation whether TASAPPS should: (6 marks)

• Raise the $3 000 000 through an extra bank loan. • Raise the $3 000 000 through additional capital contributions. • Not proceed with the extra $3 000 000 investment. ..........................................................................................................................................................

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Question 16 Guitar Bakery has been operating in Tasmania for 25 years. Its reputation and brand name has been positive for this time. However, since 2013 sales have been declining even though the business has decreased its sales prices to stay competitive. The workforce is mainly male and the average age is 50 years of age. Given new competition in the bakery market, the owners of Guitar Bakery are keen to innovate to access new markets and bake new products. They are impressed by the new frozen dough technology which enables bakers to make dough, freeze it so it can be used later, or sold onto other bakeries. Research has shown that Chinese consumption of bakery foods as well as consumption of coffee is expected to increase into the future. Guitar Bakery made a loss of $10 000 in 2015/2016. It expects to make a $10 000 profit in 2016/2017 if the business operations remain the same. The owners have employed you to make recommendations on a proposed restructure of Guitar Bakery. Below are proposed ideas to restructure Guitar Bakery. • Change product offerings. • Sell the current premises for $510 000 to relocate to another building and rent new premises for

$5 000 per month. • Generate a more positive business culture by collaborating with staff and employing younger

people. • Cost of new equipment is $200 000. (a) In the space provided, construct a SWOT table for Guitar Bakery. Identify TWO strengths, THREE

weaknesses, TWO opportunities and TWO threats.

S Strength 1: Strength 2:

(2 marks)

W Weakness 1: Weakness 2: Weakness 3:

(3 marks)


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O Opportunity 1: Opportunity 2:

(2 marks)

T Threat 1: Threat 2

(2 marks) (b) For the TWO weaknesses identified in your SWOT analysis, suggest one strategy to address each

weakness. (4 marks) Strategy 1: ..........................................................................................................................................................

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Question 16 (continued) (c) Suggest ONE strategy to take advantage of one opportunity identified in your SWOT analysis.

(2 marks)

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Guitar Bakery Guitar Bakery Balance Sheet as at 30 June 2016

BEFORE restructure Balance Sheet as at 30 June 2016

AFTER restructure

$ $

$ $

Current Assets

Current Assets

Stock of Materials 56 000

Stock of Materials 56 000 Cash at Bank 25 000

Cash at Bank 85 000

Accounts Receivable 10 000 91 000 Accounts Receivable 10 000 151 000 Non-Current Assets

Non-Current Assets

Land and Buildings 510 000

Land and Buildings 0 Plant and Machinery 350 000

Plant and Machinery 550 000

Motor Vehicles 35 000

Motor Vehicles 35 000 Office Furniture 25 000 920 000 Office Furniture 25 000 610 000

Total Assets

1 011 000 Total Assets

761 000 Current Liabilities

Current Liabilities

Accounts Payable 40 000

Accounts Payable 40 000 Non-Current

Liabilities

Non-Current Liabilities

Bank Loan 300 000

Bank Loan 50 000 Total Liabilities

340 000 Total Liabilities

90 000

Net Assets

$671 000 Net Assets

$671 000

Owner’s Equity

Owner’s Equity Capital

656 000 Capital

656 000

Retained Profits

15 000 Retained Profits

15 000

Total Owner’s Equity

$671 000 Total Owner’s Equity

$671 000 Please note the changes from the restructure: • From the sale of the Land and Buildings of $510 000 • $250 000 was paid for the Bank Loan • $200 000 is allocated for extra Plant and Machinery • Remaining $60 000 deposited into the Cash at Bank account.


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Guitar Bakery Projected Income Statement

AFTER restructure for year ended June 2017

2017 Financial year Sales

795 000

Less Expenses Production Costs 318 000

Admin Costs 36 000 Salaries 144 000 Training 32 000 Insurance 9 000 Promotion & Marketing 70 000 Rent 60 000 Total Expenses

669 000

Net Profit

126 000

You have been appointed as a business consultant for Guitar Bakery and have been requested to prepare a clear, accurate and comprehensive report on the business, including the proposed restructure of the bakery. Using the headings provided below write your report for Guitar Bakery. (d) Mission

Write a mission statement for Guitar Bakery. (2 marks)

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(e) Operations Outline the factors which will influence where the bakery could be located. (3 marks)

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Question 16 (continued) (f) Marketing

Recommend TWO marketing strategies to promote their products. (4 marks)

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(g) Marketing

Discuss TWO product marketing strategies for the expanded range of products that Guitar Bakery could implement. (4 marks)

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BST315116 Page 19 of 24

Question 16 (continued) (h) Calculate the following:

Required Before restructure Calculation after restructure (forecast profit of $126 000)

(i) Rate of Return on Owners Equity

(3 marks)

(Calculation already completed for you)

=14.9%

(ii) Debt to equity Ratio

3 marks)

Calculation already completed for you

= 50.7%

(iii) Comment on the profitability of Guitar Bakery. (4 marks)

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Question 16 (continued) (i) Critically analyse the economic and environmental implications of Guitar Bakery’s plan to expand its

business. (6 marks) .......................................................................................................................................................... ..........................................................................................................................................................

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Question 16 (continued) (j) Recommendations

Make a recommendation whether or not Guitar Bakery should: (6 marks) • Maintain current operations and not restructure the business. • Sell the building and move into new rented premises and buy new equipment. • Stay at the old premises and purchase new equipment.

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