Business Studies Paper 1 Questions and Answers - Sukellemo Joint Mock Examinations July 2020

INSTRUCTIONS TO CANDIDATES

Answer all the questions in the spaces provided.
This paper consists of 8 printed pages.
Candidates should check the question paper to ensure that all pages are printed as indicated and no questions are missing

QUESTIONS

Identify four types of business activities. (4marks)
State four ways in which a consumer can make use of scarce resources to satisfy unlimited scarce resources (4 marks)
Outline four utilities created in the process of production (4 marks)
Outline four reasons why a new business may fail. (4 marks)

State the best type of machine one would use to perform the following tasks. (4 marks)

Function	Type of machine
(a).To trim papers to the required sizes.
(b) To fold documents, put them in envelopes and seal team.
(c) To make exact copies of a certain original document.
(d) To arrange papers in a required order.

Outline four features of mail-order business. (4 marks)
Highlight four circumstances under which business organizations may choose to merge. (4 marks)
Describe four characteristics of debentures. (4 marks)

Identify the following Acts of Parliament used by the government to protect the consumer. (4marks)

Description	Act of Parliament
a) Requires that traders maintain high standards of hygiene
b) Requires that traders use correct weighing equipment
c) Requires that producers do not include harmful substances in products
d) Requires that traders only engage in businesses for which they are permitted

State four ways in which the nature of goods would influence the choice of transport. (4 mks)
Outline four circumstances under which a trader would prefer letter rather than telephone when communicating with suppliers. (4 marks)
State four differences between insurance and assurance (4 marks)

Insurance
Assurance
Highlight four ethical issues that a business should consider while engaging in product promotion. (4 marks)
Given below is supply for a commodity.

Outline four causes of a shift to the right in the above diagram. (4 marks)
State four reasons why the government encourages the location of firms in rural areas. (4 mks)
State four features of an oligopoly market structure. (4 marks)
Four circumstances under which intermediaries may be removed from the chain of distribution(4marks)
The diagram below represents the relationship between population and income per-capita

State what is represented by:(4 marks)
1. P axis
2. S axis
3. R
4. Q

State the effect of the following transactions on the balance sheet totals by writing increase, decrease or no effect. (4 marks)

Transactions	Effect
a) Bought machinery on credit
b) Withdrew cash from a business to pay his wife's hospital bill
c) Purchased stock in cash
d) Paid outstanding loan by cheque

The following is an extract of a Cashbook.

Date	Details	Cash	Bank	Date	Details	Cash	BANK
May 2	Balance	W		May 6	Balance		60.000
12	Sales	20,000		19	Purchases		30,000
20	Were		50,000	22	Rent	6,000
28	Sales		120,000		Bal c/d	Y	X
			120,000			60,000	Z

Determine the figures represented by:

The following balances relates to the retail business of Katana for the month of July 2016.
Sales 50,000
Expenses 10% of sales
Cost of goods sold 40,000
Calculate:
1. Mark up. (1 mark)
2. Margin.(1 mark)
3. Total expenses. (1 mark)
4. Net profit. (1 mark)
State four banking services that the Central Bank of Kenya provides to the government. (4 mks)
Highlight four factors that should be observed when coming up with a good tax system. (4 mks)
State four factors that can hasten economic development in a country. (4 marks)
A business had the following record for the year ended 31th December 2016.
Shs.
Capital as at 31/12/16 64,000
Net profit for the year 14,000
Capital as at 1st Jan 2016 42,000
Drawings for the year 18,000
Calculate the aduitional investments made during the year

MARKING SCHEME

Identify four types of business activities
- Extraction
- Processing of raw materials
- Manufacturing
- Construction
- Distribution of goods
- Trade
- Provision of services (4x 1 = 4mks)
State four ways in which a consumer can make use of scarce resources to satisfy unlimited scarce resources
- A consumer can make a choice among competing wants using scale of preference
- A consumer can conserve the available resources
- A consumer can recycle some resources
- Resources that is multipurpose to be used
- A consumer to be innovative and create new products (4x 1 =4mks)
Outline four utilities created in the process of production (4 marks)
- Form Utility-changing the form of goods through activities such as processing, manufacturing
- Time Utility-Keeping/storing of goods until the time whes they are required
- Place Utility - Closing the geographical gap between the producer and consumer through transport
- Possessive - Change of ownership of goods through trade (4 x 1 =4mks)
Outline four reasons why a new business may fail.
- Inadequate capital (don't accept lack of:-)
- Inappropriate marketing strategies thus low sales.
- Unfair, unhealthy competition.
- Inefficient management skills.
- Inadequate manpower
- Inappropriate technology or poor technology (4x 1 =4mks)
State the best type of machine one would use to perform the following tasks. (4 marks)
1. Guillotine
  - Composite machine
  - Photocopiers
2. Collator (4x 1 = 4mks)
Outline four features of mail-order business.
- They sell goods through the post office
- They advertise through print/ electronic media, etc
- Transactions are carried out through the post office
- Customers do not visit the business premises
- Sell mainly on COD or CWO terms
- may have large warehouses
Highlight four circumstances under which business organizations may choose to merge.
- Where persistent decline in profitability exists
- Where there is a need to control output
- Where there is intention to venture into new lines of business
- Where there is need to control wider market/increase sales
- Where there is need to expand capital base
- Where there is intention to venture into new markets
- Where there is need to bring on board new skills/competences
- Where there is need to share research information/ findings
Describe four characteristics of debentures.
- Carry a fixed rate of interest
- Interest is paid whether the company has made profits or not
- On dissolution, debenture holders are paid first before shareholders
- May be redeemable or irredeemable (4 x 1 =4mks)
Identify the following Acts of Parliament used by the government to protect the consumer. (4mks
- Public health act
- Weights and measures act
- Food and drug act
- Licensing act.(4x 1 =4mks)
State four ways in which the nature of goods would influence the choice of transport. (4 marks)
- If goods are perishable, a fast and appropriate means is used
- If goods are fragile, a smooth means of transport is used
- If goods are highly valued, a safe and secure means is required
- If goods are urgently required, a faster means is used
- If goods are bulky and heavy, they require spacious and heavier/strong means to withstand the weight(4x14mks)
Outline circumstances under which a trader would prefer letters rather than a telephone when communicating with suppliers
- When there is need to have a permanent record for future reference
- When the message is complicated in nature and recipient business needs time to study and understand the message
- When the content of the message needs to remain confidential
- When the message is long and detailed
- When similar message is meant for many people circulars can be used
- Where the telephone is not available letters can be used
- When the message is not urgent(4x 1 =4mks)

State four differences between insurance and assurance(4 marks)

Insurance	Assurance
I. Protection offered to property (against unforeseen risks)	i) Protection offered to life ( against unforeseen risks)
II. Risk insured against may or not happen	ii) Risks insured against must happen (and time is not known
III. The insurance contract is renewable after every year (short term)	iii) Insurance contract is for life and does not require renewal ( long term)
IV. Compensation is given to owner of property in case of loss/uncertain	iv) Compensations are given to beneficiaries in case of death/uncertain
v) A replacement for the good lost can be given/contract of indemnity	v) Lost life can never be replaced/not a contract of indemnity
vi) Has no surrender value	vi) Has a surrender value
vii) Policy cant be used as collateral to secure loans	vii) Policy can be used as collateral to loans
viii) Has no maturity date	viii) Has a maturity date
ix) Principle of subrogation applies	ix) Principle of subrogation does not apply
x) Cannot be used as a savings scheme	x ) Can be used as a savings scheme
xi) Sum insured depends on the blanket value of the insured property/not adjustable	xi) Sum insured depends on the ability to pay the premium/can be adjusted
xii) Proof of insurable interest	xii) No need of proof of insurable interest at the time of death
xiii) Policy cannot be assured	xiii) Policy can be assured

Highlight four ethical issues that a business should consider while engaging in product promotion (4 marks)
- Cheating or the performance of products
- Cheating on ingredients used
- Not disclosing the side-effects of products
- False pricing
- Negative effects on the environment
- Social cultural conflicts
Outline four causes of a shift to the right in the above diagram
- Use of modern technology in production
- Reduction in cost of production i.e. (low tax, increase in subsidies)
- Favorable weather conditions.
- Increase in supply of inputs and raw materials.
- Favourable government policy offering subsidies and low tax)
- Increase in number of producers. Reduction in prices of related products.
- When producers expect price increase in the future. (4x14mks)
State four reasons why the government encourages the location of firms in rural areas.
- The need to create balanced regional development
- In order to reduce rural urban migration
- To open up under developed areas.
- To create more jobs in areas.
- To exploit idle natural resources in various areas.
- To improve infrastructure in various areas.
- To improve social facilities in various areas. (4x1 =4mks)
State four features of an oligopoly market structure.
feature of an oligopoly market structure. (4 marks)
- Few sellers/firms.
- Firms are large in size.
- Interdependence of firms in the industry.
- Deal with products that are differentiated.
- Rivalry among firms resulting to price wars.
- Has a kinked demand curve. (4x 1 - 4mks)
Four circumstantiates under which a intermediaries may be removed from the chain of distribution.(4mks)
- If goods are being sold through tendering
- In case the business can afford the cost of distribution
- If the market is small
- If the goods are technical in nature /require demonstration
- If the goods are made to customers' specifications
- If the goods are perishable
- If goods are dangerous/risky (4 x 1 -4mks)
State what is represented by:
- Paxis - Per- capita income
- Saxis - Population
- R-Over population
- Q - Optimum point (4x 1 =4mks)
State the effect of the following transactions on the balance sheet totals by writing increase, decrease or no effect. (4 marks)
- Increase
- Decrease
- No effect
- Decrease (4x 1 =4mks)
Determine the figures represented by;
- W = 40,000
- X=80,000
- Y - 54,000
- (iv) Z=170,000 (4x 1 =4mks)
The following balances relates to the retail business of Katana for the month of July 2016.
Sales 50,000
Expenses 10% of sales Cost of goods sold 40,000
1. Mark up = Gross profit = 10,000
  Cost of sales = 40,000
2. Margin = Gross profit = 10,000 = 20%
  Sales 50,000
  Or
  Margin = 1 = 1
  4 + 1 5
3. Total expenses = 10 x 50,000 = Sh. 5,000
  100
4. Net profit = Gross profit - Expenses
  10,000 - 5,000 = sh. 5,000
State four banking services that the central Bank of Kenya provides to the government. (4 mks)
- Accepts government deposits for safe keeping.
- Banker to the government
- Issues currency on behalf of government
- Arrange and pays public debt on behalf of the government.
- Advises government (on monetary policies)
- Intervene in foreign currency market on behalf of the government controls foreign exchange)
- Acts as a guarantor of government loans (local and abroad)
- Lender to the government (4 x 1 =4mks)
Highlight four factors that should be observed when coming up with a good tax system
Characteristics of a good tax system (4mks)
- Equitable
- Certain
- Convenient
- Economical
- Flexible
- Ability to pay
- Diversified Simplicity (4x 1 =4mks)
State four factors that can hasten economic development.
- Industrialization
- Presence of a strong entrepreneurial culture
- Improvement of infrastructure
- Presence of natural resources
- Increase of social amenities
- Improvement of education
- Use of modern technology capital
- Good governance/democracy (4x 1 =4mks)
A business had the following record for the year ended 31 December 2016.
Shs.
Capital as at 31/12/16 64,000
Net profit for the year 14.000
Capital as at 1st Jan 2016 42,000
Drawings for the year 18,000
Calculate the additional investments made during the year
CC=OC + P + I-D
64,000 = 12,000+ 14,000+ I - 18,000
64,000 = 38,000+ I
I = 64,000 - 38,000
1= 26.000