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7115 w11 in 21 .pdf


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Title: 7115-21insNov11_50839.indd
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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS
General Certificate of Education Ordinary Level

7115/21

BUSINESS STUDIES
Paper 2

October/November 2011

INSERT
1 hour 45 minutes
READ THESE INSTRUCTIONS FIRST
This Insert contains the case study material.
Anything the candidate writes on this Insert will not be marked.

This document consists of 3 printed pages and 1 blank page.
DC (CW/DJ) 50839
© UCLES 2011

[Turn over

2
Everyday Suits
Simon owns a business called Everyday Suits. It is a private limited company. The business makes
suits for men using batch production. The production workers are paid an hourly wage. They have no
fringe benefits, as Simon believes the workers should be happy that they have a job. Simon employs
100 production workers who work on the production of suits. He has 5 employees who help him in
the office. There is only one manager who is responsible for Finance. Simon carries out all the other
management functions for the business.
The business has grown quickly and profits have also increased rapidly over the last two years. To
finance the rapid growth of the business Simon has taken out a large bank loan for $15 000 which is
being repaid over 5 years.
Simon wants to continue to expand the business. He wants to increase the range of suits to add to his
current range of medium priced suits. There is a lot of competition for medium priced suits and this
market segment is not growing. He has identified two other market segments for suits, both of which
have increasing demand. However, he is unsure which market segment option to choose.
Option 1:
Start selling expensive suits that are hand made and of high quality material. These suits would be
made to measure for each customer and individually designed. The market for these suits is a niche
market. He would need to employ more skilled workers.
Option 2:
Start selling low priced suits to the mass market. However, to enter this market Simon will need to
invest in machinery to produce suits on a large scale. He could gain from economies of scale which
would be an advantage.
Appendix 1
Balance Sheet for Everyday Suits at 31st August 2011 in $
2011

2010

20 000

20 000

10 000
30 000
0
40 000

5 000
10 000
5 000
20 000

10 000
20 000
30 000

20 000
0
20 000

Working capital
Net Assets employed

10 000
30 000

0
20 000

Financed by:
Share capital
Profit and loss reserves
Bank loan
Capital employed

10 000
5 000
15 000
30 000

10 000
10 000
0
20 000

Fixed Assets
Equipment
Current Assets
Stock
Debtors
Cash at Bank
Total
Current Liabilities
Creditors
Overdraft
Total

© UCLES 2011

7115/21/INSERT/O/N/11

3
Appendix 2
Proposed Organisation Chart for Everyday Suits
Simon
?

?

?

?

Finance

Appendix 3
Added value for Everyday Suits

LE

SA

Rolls of
cloth purchased

© UCLES 2011

Cut-out sections
for suit

Sections sewn
together to
make finished suit

7115/21/INSERT/O/N/11

LE

SA

Sold to retailers

4
BLANK PAGE

Permission to reproduce items where third-party owned material protected by copyright is included has been sought and cleared where possible. Every
reasonable effort has been made by the publisher (UCLES) to trace copyright holders, but if any items requiring clearance have unwittingly been included, the
publisher will be pleased to make amends at the earliest possible opportunity.
University of Cambridge International Examinations is part of the Cambridge Assessment Group. Cambridge Assessment is the brand name of University of
Cambridge Local Examinations Syndicate (UCLES), which is itself a department of the University of Cambridge.

© UCLES 2011

7115/21/INSERT/O/N/11


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