Business Studies Paper 1 Questions and Answers - Bungoma Diocese Mock Exams 2021/2022

INSTRUCTIONS:

• Answer all questions
• Write the answers in the spaces provided
• Answers should be written in English\

1. State four advantages of a partitioned office layout to the office staff. (4mks)
2. For each of the farm resources given below, identify the appropriate factor reward (4mks)
        RESOURCE        FACTOR REWARD
   1. Farm yard            ………………………..
   2. Farm guards        ………………………..
   3. Farm owner         …………………………
   4. Livestock              …………………………
3. List the principle of insurance that was violated in each of the following instances given below (4mks)
   

   INSTANCE	PRINCIPLE
   (i) A car owner was paid ksh. 400,000 when his car worth ksh. 390,000 was stolen
   (ii) Okado insured his neighbors retail shop against robbery
   (ii) A school was compensated when its bus got burnt by rioting students yet it had been insured against a road accident
   (iv)A hotel owner took away remains of items destroyed by fire being fully paid for the damages

4. Give four reasons why business firms participate in conserving the environment (4mks)
5. State four measures that a county government may take to improve the quality of its services to the residents of the county (4mks)
6. Outline four reasons that make human wants difficult to satisfy (4mks)
7. Give four types of small scale retail businesses that can operated without shops. (4mks)
8. The information below was extracted from the books of Khadudu Hardware’s for the year 2019
                                                 Ksh.
   Capital (31/12/2019)             980,000
   Investment                            300,000
   Monthly drawings                 10,000
   Capital (01/01/2019)             600,000
   Required; determine the net profit for the year (3mks)
9. The diagram below shows the circular flow of income in a two sector economy
   
   1. Name the economic agent marked A and B   (2mks)
   2. Identify the expenditure represented by the arrows X and Y   (2mks)
10. Highlight four advantages of a private warehouse to a manufacture (4mks)
11. Give four disadvantages of using mobile phones for communication in an organization (4mks)
12. Outline three differences between monopoly and oligopoly as product markets. (3mks)
13. State four measures that the Central Bank can take to reduce inflation in the country (4mks)
14. Give four reasons why governments impose taxes on incomes (4mks)
15. The diagram below shows a change in the supply of a farm products in a market
    
    Outline four circumstances under which the supply curve would shift from S₁S₁ to S₂S₂(4mks)
16. For each of the business transactions given below name the ledger account to be debited and to be credited (4mks)
    

    TRANSACTION	DR.	CR.
    (i) Proprietor took goods worth Ksh. 2000 for family use
    (ii) Goods valued at Ksh. 4500 were sold on credit
    (iii) A cheque of Ksh. 8000 was issued by the business in payment of rent
    (iv) The business withdrew Ksh. 15,000 from the bank account for office use

17. State FOUR disadvantages of pipeline transport (4mks)
18. The information below relates to Musoma Bookshop for the year ended 30.09.2020
    Sales                        Ksh.1,500,000
    Opening stock          Ksh. 250,000
    Purchases                Ksh. 1,300,000
    Mark up                           25%
    Determine:
    1. Gross profit (2mks)
    2. Cost of sales (2mks)
19. Mrs. Obote sells a variety of fruits, vegetables and cereals in a market stall located in an urban market. Identify four methods that she may use to increase her volume of sales (4mks)
20. List the type of unemployment that suits each of the descriptions below (4mks)
    

    Description	Type of unemployment
    (i) A large number of laborers crowded on a small piece of work.
    (ii) School leavers without information on where to get a job.
    (iii) Many people kept out of employment because of physical disabilities.
    (iv) A female job seeker opting to get married instead of being idle.

21. Highlight four population characteristics of a country that is economically underdeveloped (4mks)
22. Give four reasons why some producer firms carry out production close to the product market (4mks)
23. Outline four circumstances under which a manufacturer would not require the services of middlemen (4mks)
24. List four ways used to classify partners in a business (4mks)
25. The two column cash book below is incomplete
    

    Date	Details	F	Cash	bank		Date	Details	F	Cash	Bank
    2020   Jan 1   10   18   28	Capital    Sales   Cash  Debtors	CI	(Ksh.)  350,000           Q      70,000    600,000	(Ksh.)   150,000  250,000  400,000		2020  Jan 3    4   18   25    31	Rent  Purchases   Bank  Electricity  balance	CI   c/d	(ksh)  200,000    P   R  600,000	(ksh)     T  15,000   345,000    S

    
    Determine the missing values represented by letters P, Q, R, S and T

MARKING SCHEME

1. Advantages of a partitioned office layout to the office staff.
   • There is confidentiality
     
   • Self-esteem/ status symbol is upheld
     
   • Minimal distraction of work
     
   • Security of personal belongings is guaranteed
     
   • Contagious diseases can be easily controlled
     
   • Is not crowded/is easy to clean /look tidy
     
   • Idle take/ gossiping is avoided 4@1=4
2. Resource                 factor reward
   • Farmyard          rent
   • Farm guards    wage
   • Farm owner      profit
   • Livestock          interest 4@1=4
3. Principles of insurance violated
   1. Principle of indemnity
   2. Principle of insurable interest
   3. Principle of proximate cause
   4. Principle of subrogation 4 @1 = 4
4. Reasons why business firms participate in conservation of the environment
   • It’s a government requirement
   • It’s a corporate responsibility
   • It enhances safety of employees
   • It earns a positive public image
   • It enhances the natural beauty of the land
   • It guards raw materials against rapid depletion 4@1=4
5. Measures that a county government may take to improve the quality of its services to the residents of the county
   • Close supervision of the workforce
   • Fair remuneration of employees
   • Adequate staffing/hiring enough workers
   • Hiring/ using qualified (trained) staff
   • Dismissing errant staff
   • Providing equipment/machine for use by the staff
   • Drafting a code of conduct for staff
   • Prompt remuneration of staff
   • Outlawing corruption/fraud 4@1=4
6. Reasons that make human wants difficult to satisfy
   • some are habitual/addictive
   • They vary with time
   • They are competitive
   • They are complementary
   • They occur repeatedly
   • They require resources which are scarce
   • They are unlimited 4@1=4
7. Types of small scale retail business that can be operated without shop
   • Itinerant trading/hawking/peddling
   • Use of automatic vending machine
   • Roadside selling
   • Open air market trading 4@1=4
8. NET PROFIT= CC − IC − I+D
   =980,000 − 600,000 − 300,000+120,000
   =110,000 − 900000
   =Ksh. 200,000 6 @ ½ =3
9.  
   1. Economic agents marked A and B
      1. A---firms
      2. B---households
   2. expenditures represented by arrows X and Y
      1. X---expenditure on finished goods
      2. Y---factor reward/payments to factors 4@1=4
10. Advantages of a private warehouse to a manufacturer
    • Any type of goods may be stored
    • User is in full control of its use
    • Procedure for receiving and releasing goods can be relaxed
    • Is designed to appropriately suit the user
    • No storage fee is paid
    • Is located close to the user
    • Goods are kept for as long as the user wishes 4@1=4
11. Disadvantages of using mobile phones for communication in an organization
    • Are prone to abuse/misuse
    • Are easily lost/ misplaced due to small size
    • Have high maintenance cost
    • Are prone to signal failure
    • Are prone to power failure
    • Massages can be tracked/spied 4@1=4
12. Differences between monopoly and oligopoly
    

    Monopoly	Oligopoly
    I. Has only one seller (firm) II. Has barriers to entry and exit III. Product promotion is absent/low IV. The firm is independent in its actions V. Product sold has no close substitute VI. Has no competition for buyers	I. Has a few firms (sellers) II. May have freedom to entry and exit III. Product promotion is vigorous/intensive IV. Firms are interdependent in their actions V. Products sold have close substitutes VI. There is competition for buyers

    3@ =3
13. Measures that the central bank can take to reduce inflation in the country
    • Selling government securities to the public
    • Extending/postponing maturity period for government securities held by the public
    • Increasing the size of legal cash reserves of banks
    • Increasing the size of collateral/security for loans
    • Raising the cash/liquidity ratio of banks
    • Lowering the credit ceiling for borrowers
    • Instructing banks to issue loans for only specified enterprises/ purpose
    • Persuading banks to avoid being too generous to borrowers
    • Raising the rate of interest on loans 4@1=4
14. Reasons why government impose taxes on incomes
    • To raise its revenue
    • To redistribute income/wealth equitably
    • To discourage unnecessary/ harmful consumption
    • To reduce inflation/ purchasing power
    • To suppress monopoly in production 4@1=4
15. Circumstances under which a supply curve would shift from S₁S₁ to S₂S₂ (decrease in supply)
    • When technology used is obsolete/lower
    • When there is an outbreak of natural calamities (drought/diseases/pests)
    • When the cost of farming increases
    • When the price of alternative product is higher
    • When the number of farmers decreases
    • When the government policy is unfavorable
    • When the market is not easily accessible 4@1=4
16.       DR.                     CR.
    1. Drawings a/c       purchases a/c
    2. Debtors a/c          sales a/c
    3. Rent a/c               bank a/c
    4. Cash a/c              bank a/c                  8@½=4
17. Disadvantages of pipeline transport
    • It cannot convey solid goods
    • Its unidirectional/ has no reverse journey
    • Initial cost/ cost of construction is high
    • Leakages cannot be detected easily
    • Its inflexible in terms of route
    • Only a single commodity can be transported at a time
    • It reduces chances of employment
    • It’s an easy target by enemies during war 4@1=4
18. Sales …………………………shs.……1,500,000
    Opening stock………………… shs ….... 250,000
    Purchases…………...………… shs …..1,300,000
    .Mark up ………………………….………..25%
    1. Mark up 25 
                     100
       Margin     25        25 
                   100+25    125
       Gross profit   25   × 1,500,000                  6 @½ = 3
                            125
                            =Ksh. 300,000
    2. Cost of sales =net sales  −gross profit
       1,500,000 − 300,000                                    4@½ =2 max 5
                      = Ksh 1,200,000
19. Methods that can be used by Mrs. Obote to increase the volume of sales
    • Attractive display of stock
    • Handling customers well
    • Giving discounts to customers
    • Selling to customers on credit
    • Providing after sale services
    • Providing free gifts
    • Providing free samples 4@1=4
20. Types of unemployment described
    1. Hidden unemployment
    2. Frictional unemployment
    3. Residual unemployment
    4. Disguised unemployment 4@1=4
21. Population characteristics of a country that is economically under-developed
    • High birth rate
    • High death rate
    • High population growth rate
    • Low life expectancy
    • Rapid rural-urban migration
    • Low literacy level
    • Low standards of living
    • A declining type of population 4@1=4
22. Reasons why some producer firms carry out production close to the product market
    • It lowers the cost of distributing the product
    • It reduces breakages for fragile products
    • It reduces spoilage for perishable products
    • It enable the producer to exert influence on the market 4@1=4
23. Circumstances under which a manufacturer would not require the services of middlemen
    • When the products are highly fragile
    • When the products are highly perishable
    • When the manufacturer has own retail outlets
    • When production is carried out close to the market
    • When products are sold through tender
    • When products are produced on order (have a ready market)
    • When production is on a small- scale
    • When the products are technical in nature 4@1=4
24. Ways used to classify partners in a business
    • Age of the partner
    • Participation/activities of the partner
    • Contribution of capital
    • Liability borne by the partner 4@1=4
25.  
    1. P Ksh. 250,000
    2. Q Ksh. 180,000
    3. R Ksh. 150,000
    4. S Ksh. 400,000
    5. T Ksh. 40,000 5@1=5