Financial Planning (Edexcel A Level Business): Exam Questions

Read the following extracts (E to H) (opens in a new tab) (opens in a new tab)before answering 

Using the data in Extract F, calculate the monthly labour cost per car. You are advised to show your working

Read the following extracts (E to G) (opens in a new tab) before answering

Using the data in Extract F, calculate the total profit variance for Zara in 2016. You are advised to show your working

Read the following extracts (A to D) (opens in a new tab) before answering

Using Extract B, calculate the contribution per unit of one lip balm. You are advised to show your working

Read the following extracts (E to H) (opens in a new tab) before answering

Explain one reason why the head of each division of Buy it Direct is responsible for managing its own budget

Read the following extracts (A to D) (opens in a new tab) before answering

Using the data in extract B, calculate the increase in the average price of monthly membership of UK health and fitness clubs between March 2014 and March 2017

Read the following extracts (E to H) (opens in a new tab) before answering

Using the information in Extract G, calculate how many rooms need to be occupied each month for the business to break-even.

Read extracts A to D before answering questions

Extract A

Aurelia Kitchens Ltd

Aurelia Kitchens Ltd is a privately owned UK manufacturer of premium fitted kitchens. The business designs, manufactures and installs kitchens for domestic customers across the UK. Aurelia positions itself as a high-quality brand, competing on design, durability and customer service rather than low prices.

Aurelia Kitchens Ltd was founded in 2008 by two former furniture designers. The business operates from a single manufacturing site in the West Midlands and employs 165 people. Aurelia sells its kitchens through a network of 12 UK showrooms, all owned by the business.

Demand for fitted kitchens increased during 2020 and 2021, as more people invested in home improvements. Aurelia experienced strong sales growth during this period and expanded its workforce by recruiting additional skilled production workers and installation teams.

Aurelia’s management team believes that long-term growth will depend on improving productivity at its factory and making strategic investment decisions to support future demand.

Extract B

Employment and productivity at Aurelia Kitchens Ltd

Aurelia’s managers are reviewing labour productivity and unit costs. Some experienced workers have raised concerns that recent recruitment has reduced average skill levels on the factory floor, increasing the need for supervision and training.

Extract C

Investment options under consideration

Aurelia is considering investing in new computer-controlled cutting and assembly machinery. The machinery would automate several stages of the production process and reduce reliance on manual labour.

The proposed investment would cost £2.4 million and is expected to last five years, with no residual value. Forecast cash inflows from the investment are shown below.

Aurelia’s management uses a discount rate of 9% when appraising investment projects.

Extract D

Growth strategy

Aurelia’s sales director has suggested expanding into the European market, beginning with Ireland and the Netherlands. This would involve exporting kitchens manufactured in the UK and working with local installation partners.

However, some directors favour focusing on the UK market and increasing capacity at the existing factory. They argue that exporting would increase complexity, currency risk and delivery times, potentially damaging Aurelia’s reputation for customer service.

The directors must decide which growth strategy is most suitable for Aurelia over the next five years.

Explain one reason why controlling unit costs may be important to Aurelia Kitchens Ltd.