Business Studies Paper 1 Questions and Answers - ACK Diocese Mumias Joint Evaluation Mock 2022

• Answer ALL the questions in the spaces provided.
• Candidates should answer the questions in English

1. State the unit of carriage for each of the following modes of transport 4mks)
   Mode of transport              unit of carriage
   Porterage                           ______________
   Cartage                              _______________
   Sea                                    ________________
   Air                                      ________________
2. Outline four elements of demographic environment that may influence the operation of a business.  (4 marks)
3. State four reasons why consumers have to make choices between competing wants. (4marks)
4. In the spaces provided below, indicate the type of utility created by each of the following business activities
   Business activity                                        Type of utility (4marks)
   Selling face masks to customers –
   Transporting onions-
   Storing onions in a granary-
   Making a camera-
5. Outline four circumstances under which differed payment may be used (4marks)
6. State four advantages of transacting business through the internet.                                  (4marks)
7. The following information relates to Mumbua traders for the year ended 31^st April 2015.
                                       Shs.
   Cash at bank              30,000
   Cash in hand              40,000
   Current liability           500,000
   Sales                          920,000
   Opening stock            150,000
   Closing stock              230,000
   Margin 25%
   Expenses 15% of sales
   Determine
   1. Gross profit                        (1mark)
   2. cost of sales            (1mark)
   3. Purchase for the year            (1mark)
   4. Net profit            (1mark)
8. For each of the following transactions indicate the account to be debited and credited.4 marks
   

   Transaction	A/c debited	A/c credited
   a) Received discount from Top Suppliers
   b) Allowed discount to Shujaa Traders
   c) Sold furniture to Owuor in cash
   d) Took stock worth sh.200 for personal use

9. Identify four benefits of international trade to a country         (4marks)
10. Alice a retailer had a capital balance of  sh.160,000 as at 30^th June 2016.  During the year ended June 30^th 2017, the business made a profit of 130,000.  Alice the proprietor made drawings of 1500 each month for her personal use.  Compute the business capital as at 30^th June 2017       (3marks)
11. Highlight four reasons that would make an organization use cell phones for communication within and outside the organization.              (4marks)
12. State four benefits of  “pooling of risks” to insurance company.                 (4marks)
13. Outline four circumstances under which a firm may locate its operations near the source of raw materials. (4 marks)
14. Highlight four measures that the government can take to reduce mortality rate in the country.  (4marks)               
15. Many countries in Africa, Latin America and Asia are considered as under developed. Outline four characteristics underdeveloped countries have in common.  (4marks)
16. State four ways of improving service delivery in parastatals and state corporation. (4marks)
17. State four locations in a country where bonded warehouse are likely to be found.        (4marks)
18. The following information was extracted from the books of Amani traders on 31^st Dec 2010
    Commission received     22,000
    Sales                             763,000
    Loan interest                   52,500
    Purchases                     474,000
    General expenses           30,000
    Drawings                         96,000
    Rent                               120,000
    Salaries owing                  72,000
    Electricity pre paid            85,000
    Prepare Amani traders trial balance for the month ended 31^st Dec 2010.(5 marks)
19. The diagram below shows a shift in supply curve form S₀S₀ to S₁S₁.
    
    State four factors that may account for the above shift.     (4marks)
20. Outline four contributions of the households to the national income of a country.    (4marks)
21. State four circumstances under which a customer would prefer to be paid by a banker’s cheque.    ( 4 marks)
22. outline four benefits of becoming a member of a savings and credit cooperative society.(SACCO).                               (4marks)
23. Highlight four methods used by a monopolistic firm to differentiate products.(4marks)       
24. State four circumstances under which a business firm may use photocopying as a means of reproducing documents.         (4 marks)
25. Apart from government borrowing, outline four other sources of government revenue.  (4marks)

MARKING SCHEME

1. Unit of carriage
   • Human beings
   • Carts
   • Ships
   • Airplanes
2. Elements of demographic environment that may influence operation of business
   • Population size
   • Geographic distribution of population
   • The population density
   • Distribution of population by sex/gender
   • Distribution of population by age
   • Population growth rate.     4x1=4
3. Reasons why consumers have to make choices between competing wants
   • Wants are unlimited in number
   • Commodities differ in quality and others have salient features
   • There may be varieties of products that satisfy the same wants
   • Some wants are more urgent and intense than others
   • Due to limited/scarce resources
   • Some commodities sell at different prices
   • Consumers financial position vary with time
   • Some wants  are recurrent
   • Human wants are competitive.  4x 1 = 4mks
4. utility created by each of the following business activities
   • Possession
   • Place
   • Time
   • Form                                                               4x1=mks
5. Circumstances under which differed payment may be appropriate
   • When the seller wants to attract or retain customers
   • When the seller wants to increase sales
   • When the seller wants to use credit facilities as a competing tool
   • When the seller want to dispose off slow moving stock
   • When credit worthiness of a customer is unquestionable   4x1=4
6. Advantages of transacting business through the internet
   • Facilitates access to a worldwide market
   • It’s a faster way of doing business
   • Large and small businesses can transact internationally without discrimination.
   • Reduces paper work and number  of transactions
   • Saves money in terms of sending, receiving and storing business information.
   • One can access other business information from the internet that can improve running of business.4 x 1 = 4 mk
7.  
   
   1. Gross profit
      Margin =   Gp    x 100
                     Sales
      Gp = 25  x 100
               920,000
      100Gp = 920000 x 25
       100             100
      Gp = 230,000 1 mk
   2. cost of sales
      sales – Gp = 920,000 – 230,000
                        = 690,000 1mk
   3. Purchase for the year
      COGS = OS + P + CI– RO – CS
      690,000 = 150,000 + P – 230,000
                    = 770,000 1mk
   4. Net profit
      Gp – expenses
      230,000 – (15  x 920000) = 230,000 – 138,000
                        100
                      = 92,000        1mk
8. Transaction

   Transaction	A/c debited	A/c credited
   a) Received discount from Top Suppliers	Disc. Received	Top Suppliers
   b) Allowed discount to Shujaa Traders	Disc. Allowed	Shujaa Traders
   c) Sold furniture to Owuor in cash	Cash	Furniture
   d) Took stock worth sh.200 for personal use	Drawings	Stock

    8 x ½  = 4mks
9. Benefits of international trade to a country
   • Enable a country to sell (dispose of its surplus)
   • Enable a country to acquire goods and services which its unable to produce locally
   • A source of government revenue when import taxes are received
   • Creates employment to people when they engage in various trading activities
   • Enable a country to get variety of goods                                       4x1=4 marks
10. Opening capital            160,000
    Profit                             130,000
    Drawing 1500 x 12           18,000
    Closing capital                    ?
    Cc = OC x P – D
    160,000 + 130000 – 18000
    = 272,000                                                                       3 marks
11. Reasons that would make an organization use cell phones for communication within and outside the organization
    • One gets immediate feedback
    • It is fast and can be used to send urgent messages
    • The sender has a good opportunity to convince and persuade the recipient
    • There is personal appeal
    • It is not very expensive particularly for making calls for a short duration of time
    • It can be used even when both the sender and recipient are far apart 4x1=4mks
12. Benefits of pooling of risks to insurance company
    • Enables insurance  company to compensate those who suffer loss when risks occur.
    • Enables insurance company to create a common pool of funds
    • Enables insurance company to spread risks over a large over a large number of insured.
    • The surplus funds can be invested e.g giving out loans or buying shares in real estates
    • Enables company to meet operating cost by using the pooled funds
    • Enables insurance company to calculate premiums to be paid by each client      4x1=4mks
13. Circumstances under which a firm may locate near source of raw materials
    • When raw materials are bulky
    • Where constant supply of raw materials is required to ensure continuous production
    • Where raw materials are highly perishable
    • Where the firm would like the raw materials to ensure the production of right quality.
    • Where the government policy gives incentives to industries that set up near source of raw materials
    • Where the market of the  product is concentrated near the source of raw materials   4x1=4
14. Measures that the government can take to reduce mortality rate.
    • Availing better health care
    • Ensure food security
    • Minimize internal conflicts and wars
    • Improve the environment
    • Vaccination
    • Disaster preparedness
    • Alleviating poverty
    • Control crime        4x1 = 4
15. Characterics of underdeveloped countries
    • Low per capita income
    • High population growth rate
    • High degree of poverty
    • Low literacy levels
    • High level of unemployment
    • Poor health care
    • Low life expectancy
    • Over reliance on primary level of production
    • Poor infrastructure
    • Outdated cultural practices         4x1 = 4.
16. Ways of improving service delivery in parastatals and state corporation
    • Regular auditing of books of accounts
    • Setting targets to be achieved by all firms
    • Retrenching some of the idle workers
    • Make them adapt modern technology
    • Employing qualified /skilled managers
    • Workers signing performance contract  4 x 1 = 4
17. Locations in country where bonded warehouses are likely to be found
    • Along the airport
    • Along the sea port
    • Along the border town
    • Along the railway terminals      4x1=4
18.                                                                                AMANI TRADERS
                                                                                     TRIAL BALANCE
                                                                                AS AT 31^ST DEC 2010
    

    Item	Dr	Cr
    Commission received Sales  Loan interest  Purchase General expenses Drawings Rent Salaries owing Electricity prepaid	52,500  474,000   30,000   96,000  120,000    85,000	22,000  763,500    72,000
    	857,500	857,500

19. Factors that cause a decrease in the quantities of good supplied
    • Increase in the cost of productio
    • Unfavourable weather conditions
    • Unfavourable government policies e.g high taxation
    • Low level of technology/use of outdated technology
    • In availability of factors of production
    • Strikes of workers
    • Exit of firms from the industry                           4x1=4mks
20. Contributions of households to the national income of a country
    • Providing a ready market for commodities produced
    • Providing labour for firms
    • Paying taxes to the government
    • Providing savings and investments in the country
    • Providing  land to firms
    • Offering capital to firms to facilitate production.                             4 x 1 = 4mks
21. Circumstances under which a customer would prefer to be paid by a bankers cheque
    • When debtors financial status in a doubt
    • When there is fear of delay in payment
    • When the amount involved is large
    • in case the traders deals in different currencies                                       4x1=4 marks
22. Benefits of becoming a member of a savings and credit cooperative society (SACCO)
    • Will get advice on area of finances
    • Earn interest on investment
    • Receive loans at low interest
    • Receive credit facilities
    • Assisted in times of problems (benevolent)
    • Source of savings
23. Methods used by a monopolistic  firm to differentiate products. 4mks
    • Packaging in different sizes
    • Branding
    • Blending  into different colours
    • Trademarks/salient features
    • Persuasive advertisement
    • Pricing
24. Circumstances under which a business firm may use photocopying as a means of reproducing documents
    • When high quality copies are required
    • When copies are required fast since it quicker than duplicating or printing
    • When coloured copies are required
    • When there is no need for comparison with original
    • When the business does not want to pollute the environment
25. Sources of government revenue
    • Taxes
    • Fines and penalties
    • Escheats
    • Interests and dividends on loans and investments
    • Profits form parastatals  of public investments
    • Fees from government utilities like national parks
    • Proceeds from sale of government property
    • Rent and rates paid for use of government property.