Financial Planning | Edexcel A Level Business Exam Questions & Answers 2015 [PDF]

1

4 marks

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

Using the data in Extract B, calculate the margin of safety. You are advised to show your working

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8

4 marks

Read extracts A to D before answering

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

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1

20 marks

Extract D
The End of the Road festival
The End of the Road festival is an annual music festival in England which focuses on independent rock and folk music.
Every time its founder, Simon Taffe went to a music festival, he thought: 'I could do this.' He went home and spent two weeks doing research, calling security firms and portable toilet companies.
The venues Simon contacted all said they wouldn't let him hold a festival. The only place agreed was the village of Larmer Tree on the border of Wiltshire and Dorset.
The first End of the Road festival was in September 2006 and cost £150,000. He sold his house to cover some of the cost and the rest came from loans. In the April of 2006, ticket sales were slow; no matter how much was put into advertising, sales did not grow. Simon realised then that he was going to lose a lot of money. He hired a van and drove around the country, dropping leaflets at any festival he could find.
The first festival made a loss of £35,000. Simon was 25 and still had his decorating business. The second year, the festival made a loss of £50,000. By the fourth year, the festival had just about become profitable.
In 2024, 15,000 people attended the End of the Road festival set in fields, woodland and Victorian gardens, and had six stages.
(Source: adapted from https://www.theguardian.com/lifeandstyle and https://en.wikipedia.org/wiki/EndoftheRoadFestival and https://www.theguardian.com/commentisfree)

Extract E
End of the Road festival – environmental and charity initiatives
FreeFill is a reusable Cup Scheme which charges festivalgoers £1 per cup to reduce single-use plastic consumption. The reusable aspect of this scheme has also helped End of The Road in reducing recyclable waste. The End of The Road donates some of its income to fund various clean water projects across the globe.
The End of the Road festival promotes War Child, a charity which aims to secure a safe future for every child affected by war, and supports it financially. War Child works with local communities and governments to help protect and educate children and support them to heal and learn.
(Source: adapted from https://endoftheroadfestival.com/environmental-initiatives/)

Extract F
UK music festivals
The Leeds and Reading festivals attract almost 200,000 fans between them. Smaller UK festivals sell between 5,000 and 20,000 tickets, and have experienced many problems including competition, and rising costs.
192 out of 600 operating in 2019 have closed. The Secret Garden Party in Cambridgeshire closed and symbolically burned down its main stage at the end of July 2024. Founder Freddie Fellowes said: 'It's no longer sustainable for independents to run festivals. The difficulty is that if you put your ticket price out early, you commit to a price and a budget. That is a huge risk. Profit Margins are incredibly tight.'
However, The Green Man festival, in south Wales, sold out in just two hours in 2025, and the Lake District's Kendal Calling has seen record ticket sales for August 2025. A general boom in summer events indicates that consumers are willing to spend money on memorable experiences.
Sponsorship is also important to festivals. Ticket prices would need to increase without it. Oxfordshire's Wilderness festival is sponsored by carmaker Audi.
(Source: adapted from https://www.theguardian.com/business/article/2024/aug/25/smaller-uk-music-festivals-struggle-to-be-heard-in-crowded-market)

Extract G
Selected festival prices and capacities
(Source: adapted from various festival websites)

In 2024, the End of the Road festival sold all available tickets. To improve the sales revenue of the festival in 2025, the organisers are considering either increasing ticket prices or increasing the capacity of the festival

Using the data in Extracts D, F and G, evaluate these two options and recommend which one is most likely to improve sales revenue

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Financial Planning (Edexcel A Level Business): Exam Questions