Cambridge IGCSE and O Level Business Studies

Section 4 – Revision questions

Two-mark questions
1 Define ‘production’. the provision of a product/service to sastify consumer wants and needs

2 Identify two inputs of the production process. land/capital/labour/enterprise

3 A business produced 50 000 units of output last year. It employs 40 production workers. Calculate the labour
productivity for last year. 50 000/40=1250
job production (Sn xut riêng theo n t hàng)/batch production (Sn xut sn
4 Identify two methods of production. phm theo dây chuyn/theo lô)/flow production (Sn xut liên tc)

5 Identify two ways technology might be used to improve the production process. reduce AC, improve
quality/productivity
6 Identify two limitations of not holding inventory. rent warehouse/out-of-date/damaged/insurance cost

7 Define ‘lean production’. techniques to cut down on waste and increase efficiency
simpler, easier; greater job
8 Identify one benefit and one limitation of technology to employees. security/demotivation, redundancy

9 Identify two examples of fixed costs. salary, rent

10 Define ‘total cost’. equal VC+FX

11 A business produced 5000 units of output at a total cost of $75 000. Calculate the average cost. 75000/5000=15

12 Define ‘diseconomies of scale’. are the factors that lead to an increase in AC as an business grows beyond a
certain size.
13 Define ‘break-even point’. the level of sales at which TC= total revenue

14 Define ‘margin of safety’. the amount by which sales exceed the break-even point

15 Identify two limitations of break-even charts. assume no inventories/straight line assumption/FC not always
constant/concentrate on BE
16 Define ‘quality’. to produce goods/services which meets customer expectations

17 Identify two methods of achieving quality production.

18 Identify two factors that influence business location. qualitative factors/quatitative factors
access to global market/lower labour
19 Identify two reasons why a business might decide to locate in another country. cost/avoidance legal barriers, import
taxriffs/transport cost
20 Identify two legal controls affecting location decisions. culture difference/ethical concern

show BE output/margin of safety/decision making/area of profit-loss

 Production: The provision of a product/a service to satisfy
consumer needs and wants.
Productivity: output measured against inputs used to
Four-mark questions create it.
1 Outline the difference between ‘production’ and ‘productivity’.

2 Outline two functions of operations management.

- increase salary
3 Outline one benefit and one limitation to employees of measures to improve labour productivity. - pressure

4 Other than training, define two ways of improving labour productivity. improve motivation/new
technology/quality management decisions
5 Outline one benefit and one limitation to a business of becoming more capital intensive.

6 Identify one benefit and one limitation to employees of flow production. - boring system, lack motivation
- storage requirements
7 Outline two costs of holding inventories. rent warehouse/ insurance cost/ damaged, theft/out-of-date

8 Outline two factors that might influence the success of just-in-time (JIT) inventory management. no rent for warehouse
cash flow
9 Outline two ways technology has changed production methods. simpler, easier/productivity/quality/AC decrease
purchasing (bulk-buying discounts)/marketing
10 Outline the importance of two economies of scale. (transport/advertising)/financial (lower IR)/managerial
(specialist in all departments)/technical (specialist/latest
11 Outline two causes of diseconomies of scale.
equiqment)
poor communication/lack of commitment from employees/weak
coordination
12 Outline one benefit and one limitation of break-even analysis. - area of loss/benefit/show BE output/margin of
safety/help in decision making
13 Outline two uses of cost data to a business. - focus on BE/FC not always constant/assume no
inventories/"straight line" consumption
14 Outline two reasons why quality is important to a business. develop strong brand image/keep existing customers,
attract new ones/charge premium price/reduce cost
15 Outline two problems of quality control by inspection. from returns and fix/cycle of the product

16 Outline two benefits of quality assurance.

17 Outline the relationship between quality and a product’s life cycle. high quality, longer product cycle
nearby shops/shoppers/customer parking/rent
18 Outline two factors a retailer needs to consider when deciding on the location for a new store.

19 Outline two ways the government might influence the location decision. grants/help/rule/tax

20 Identify one benefit and one limitation of locating in another country.

- lower labor cost/access to global market/import tariff/legal barriers avoidance/incentive from the
country/transport cost.
- ethical concerns/cultural differences/quality issues/communication problem
Six-mark questions
1 Sweet Sensation (SS) is a manufacturer of candy. It uses batch production methods. In recent months it has not
been able to make enough of its most popular product, Candy Bears. The operations director is considering
introducing flow production methods for Candy Bears. The finance director is concerned at the level of
investment that this will require. Employees are also concerned about this proposal. - flexible/variety to workers' jobs
- warehouse space/expensive
a Explain one advantage and one disadvantage to SS of batch production methods.
because semi-finished products
b Do you think SS should introduce flow production for Candy Bears? Justify your willanswer.
need moving to the next
production stage.
c Explain two reasons why you think employees at SS are concerned about the operation director’s proposal
to introduce flow production.

2 Meesum Electricals (ME) is a manufacturer of consumer electrical goods. It has two factories in Country Z.
ME is a very successful company with a strong brand image in Country Z. Labour costs in Country Z have
been rising recently. The owners are thinking of relocating one of their factories to Country Y. Country Y is a
low-labour-cost economy with a good supply of skilled and semi-skilled employees. ME currently sells 35%
of its output in Country Y. The operations director is concerned about the effect any relocation might have on
quality.
lower labor costs/skilled workers/close to the market (35%)/delivery cost.
a Do you think ME should relocate one of its factories to Country Y? Justify your answer.

b Explain one benefit and one limitation to ME’s employees if the company decides to relocate one factory to
Country Y. - communication problems/ethical concerns/cultural differences.
- employed
c ME decides to relocate a factory to Country Y. Explain two methods ME could use to ensure that quality in
the new factory meets consumer expectations.

quality standards are set and applied at all stages of production/trained carefully by the employees
used to work in Z