Exam code: 7132
Based on the following data, which relates to business X.
Year | 2020 | 2021 |
Revenue | £1 000 000 | £1 000 000 |
Average price per unit | £5 | £5 |
Units of output | 200 000 | 200 000 |
Number of employees | 20 | 22 |
Number of leavers | 6 | 6 |
Total employee costs | £500 000 | £550 000 |
Which one of the following outcomes happened between 2020 and 2021 for business X?
Labour productivity | Labour turnover | |
A | Decreased | Decreased |
B | Decreased | Increased |
C | Increased | Decreased |
D | Increased | Increased |
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Based on the following data, which relates to business X.
Year | 2020 | 2021 |
Revenue | £1 000 000 | £1 000 000 |
Average price per unit | £5 | £5 |
Units of output | 200 000 | 200 000 |
Number of employees | 20 | 22 |
Number of leavers | 6 | 6 |
Total employee costs | £500 000 | £550 000 |
Which one of the following outcomes happened between 2020 and 2021 for business X?
Employee costs per unit | Employee costs as a percentage of turnover | |
A | Decreased | Decreased |
B | Decreased | Increased |
C | Increased | Decreased |
D | Increased | Increased |
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Stated below are three possible changes for a business.
A reduction in wage levels.
An increase in labour productivity.
An increase in labour turnover.
Other things being equal, which of the following changes is the most likely to lead to an increase in employee costs as a percentage of turnover?
1 and 2 only
2 and 3 only
2 only
3 only
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Chillax Ltd
Chillax Ltd runs six luxury health spas in southern England. Health spas offer health and beauty treatments such as steam baths, exercise and massage. Chillax Ltd’s customers expect high levels of service.
The business focuses on quality. It emphasises the importance of getting the customer experience right. It feels this is more about how employees interact with customers than the facilities in each health spa. The quality of customer experience is monitored through frequent customer surveys using the Chillax App. The business regularly has positive reviews online.
Chillax Ltd invests heavily in training, consults regularly and provides frequent feedback to staff. It feels that its high level of employee engagement has many benefits and ultimately ensures happy customers.
Chillax Ltd is unusual in the Health and Beauty sector in that many businesses in that sector have very high rates of labour turnover averaging over 30%.
Table 2 Selected employee data for Chillax Ltd for 2020 (31 December 2020)
Number of employees on 1 January 2020 | 180 |
Employees leaving during the year | 24 |
Employees staying all year | 162 |
Using Table 2 calculate the employee retention rate for Chillax Ltd in 2020.
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Chillax Ltd
Chillax Ltd runs six luxury health spas in southern England. Health spas offer health and beauty treatments such as steam baths, exercise and massage. Chillax Ltd’s customers expect high levels of service.
The business focuses on quality. It emphasises the importance of getting the customer experience right. It feels this is more about how employees interact with customers than the facilities in each health spa. The quality of customer experience is monitored through frequent customer surveys using the Chillax App. The business regularly has positive reviews online.
Chillax Ltd invests heavily in training, consults regularly and provides frequent feedback to staff. It feels that its high level of employee engagement has many benefits and ultimately ensures happy customers.
Chillax Ltd is unusual in the Health and Beauty sector in that many businesses in that sector have very high rates of labour turnover averaging over 30%.
Table 2 Selected employee data for Chillax Ltd for 2020 (31 December 2020)
Number of employees on 1 January 2020 | 180 |
Employees leaving during the year | 24 |
Employees staying all year | 162 |
To what extent should all businesses be concerned if they have high rates of labour turnover?
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The data below relates to a factory.
Capacity = 180 units per day
Number of employees = 16
Wages per day = £60 per employee
Selling price of product = £15 per unit
Capacity utilisation of factory = 80%
Assuming that all output is sold, calculate the factory’s employee costs as a percentage of turnover.
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Drake Hotels PLC owns 20 budget hotels in the UK. Each one is located in a different city. The industry is very competitive and Drake’s managers all have an objective to help the business to be as efficient as possible.
Drake Hotels PLC’s operating profit for the financial year 2019–20 was £18 million. Last month the company appointed a new Chief Executive, Mary Myers, to increase the profitability of the business. Mary was previously the Marketing Manager of an upmarket hotel chain.
Mary is already considering an investment proposal for a luxury hotel in Oxford. This hotel would target overseas visitors who might want to visit the city. Drake Hotels has found a suitable building but needs to invest to develop it.
Appendix A Investment appraisal results for the proposed investment into a new hotel in Oxford (based on net inflows for first eight years).
Average rate of return 12% per year
Net Present Value £25 million
Source: Chief Executive
Appendix B Sensitivity analysis for the new Oxford hotel investment proposal
Two possible changes in the economy that might affect the investment appraisal results in Appendix A | Estimated probability of this change happening |
The value of the pound against other currencies is 10% higher than originally forecasted. | 20% |
The average GDP growth in overseas countries is 1.5% higher than originally forecasted. | 30% |
Source: Chief Executive
Appendix C Selected financial data for Drake Hotels PLC
£ million as at 1 May 2020 | |
Current assets | 15 |
Current liabilities | 18 |
Total equity | 170 |
Non-current liabilities | 280 |
Appendix D Forecasted data for Drake Hotels PLC’s new Oxford hotel investment proposal
Initial investment required £20 million
Estimated income elasticity of demand +2
Percentage of customers visiting from overseas 70%
Estimated cost of borrowing for this investment 8% per annum
Appendix E Room bookings by month and day of the week in Drake Hotels PLC’s budget hotels 2019
Analyse the challenges the Human Resource manager faces as a result of the patterns of room bookings in Appendix E.
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The table below provides data on a business.
2017 | 2018 | |
Number of employees | 25 | 20 |
Labour turnover (%) | 20 | 10 |
Total units of output | 500 | 420 |
Statement 1: ‘This business had a higher labour retention rate in 2018 than 2017.’
Statement 2: ‘This business had higher labour productivity in 2018 than 2017.’
Read statements 1 and 2 and select the correct option from the following
Statement 1 is true. Statement 2 is true.
Statement 1 is true. Statement 2 is false.
Statement 1 is false. Statement 2 is true.
Statement 1 is false. Statement 2 is false.
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Galin plc
Galin is a large multinational company that sells products in 10 different categories, including fabric care (eg washing powder), home care (eg furniture polish) and hair care (eg shampoo) products. It has 50 different brands and in 2018 achieved global sales of $60 billion.
Galin has chosen to have a regional organisational structure, dividing the world into six regions: North America, Europe, Asia, Latin America, the Middle East and Africa. There are major differences between these regions: for example, in terms of market conditions, labour markets and economic factors.
In 2018 Galin invested 3% of its sales revenue into research and development (compared with an industry average of 1%) and owned 55 000 patents. Its new products achieve high profit margins. When developing products, Galin encourages collaboration between people in different jobs.
An objective of the company for 2019 is to increase labour productivity.
Galin wants to increase labour productivity.
To what extent do you think that attempts by businesses to increase labour productivity will be welcomed by employees?
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The table below shows the changes in the average annual labour turnover rates for BBB plc and its competitors.
Time period | Annual labour turnover (%) | Annual labour turnover (%) |
1978–1987 | 15 | 15 |
1988–1997 | 12 | 18 |
1998–2007 | 10 | 18 |
2008–2017 | 8 | 23 |
Analyse how the changes in these data over time might have affected the ability of BBB plc to provide higher-quality products than its competitors.
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The rise of the discount food retailers
For many years four companies have dominated food retailing sales in the UK: Asda, Morrisons, Sainsbury’s and Tesco. However, these ‘big four’ retailers have faced growing competition from discount retailers such as Aldi and Lidl.
Figure 1: Total UK food retail sales
Figure 2: UK food retail sales of discount food retailers
Figure 3: A comparison of the ‘big four’ model with the discounter model
The typical discounter model | ‘big four’ model | |
Product range in stores | Relatively small | Large |
Brands | Large proportion of own label products traditionally targeting low to medium income earners | Large proportion of well-known brands traditionally targeting high to medium income earners |
Sales of food compared to non-food items (eg clothing and health and beauty products) | 80%:20% | 60%:40% |
Administration costs and overheads as percentage of turnover | 15% | 20% |
Typical profit margin | 3% | 2% |
Figure 4: Market map of the UK food retail sector
Figure 5: Extract from consumer survey:
“What benefit is most important in determining where you shop?”
Benefit | % of replies |
I can rely on what I need being in stock | 16 |
It has a good range of non-food products | 17 |
It has well trained, helpful staff readily available | 18 |
The stores are well designed and maintained | 14 |
Figure 6: Company and Human Resource Data
Aldi Stores Ltd (discount retailer) 2014 | Tesco (one of the ‘big four’) 2014 | |
Turnover | £6 893 million | £ 54 443 million |
Profit for the year | £250 million | £162 million |
Average salary per employee | £21 272 | £14 452 |
Total employee costs | £507 million | £6 968 million |
Number of employees | 23 858 | 482 152 |
The discount retailers are said to manage their human resources very effectively. Explain how the data in Figure 6 supports this view. Use calculations to support your answer.
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