Business Studies Paper 2 Questions and Answers - Form 3 End Term 3 Exams 2023

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Instructions to candidates

  • This paper consists of six questions.
  • Answer any five questions.
  • All questions carry equal marks.
    1. Explain five external factors that an entrepreneur needs to consider when evaluating a business opportunity. (10 marks)
    2. Outline five differences between a partnership and a cooperative forms of business units. (10 marks)
    1. Explain five positive implications of overpopulation to a country. (10 marks)
    2. The diagram given below shows changes in the supply curve.
      Explain five factors that may have led to the change from S1S1 to S2S2. (10 marks)
    1. Explain five limitations of using billboards as medium of advertising. (10 marks)
    2. Explain five internal economies of scale that a firm can enjoy as its scale of production increases. (10marks)
    1. Highlight four documents that are sent to the seller by the buyer in home trade.  (8 marks)
    2. On May 1, 2021, Mjanja Shop had cash in hand sh.87,000 and cash at bank sh.250,000. During the month, the following transactions took place:
      May 2: Cash sales sh.60,000
              3: Paid salaries sh.101,500 by cheque
              7: Received a cheque of sh.76,000 from Henry after allowing him a cash discount of 5%
            13: Bought office furniture by cheque sh.86,000
            17: Settled Martha’s account for sh.34,200 in cash, having deducted sh.800 cash discount.
            20: Received a cheque for sh.165,000 in respect of cash sales.
            22: Paid wages sh,25,000 in cash.
            24: Withdrew sh.32,000 from the bank for office use.
            25: Withdrew sh.4000 cash for personal use
            29: Received sh.17,000 cash form Martin in settlement of his account less sh.1000 cash discount.
            31: Deposited all the money into the bank except sh.24,000.
      Prepare a three-column cash book duly balanced. (12 marks)
    1. Differentiate between life assurance and property insurance (10marks)
    2. Explain five circumstances under which personal selling may be most appropriate. (10 marks)
    1. Explain five circumstances that would influence a producer to use wholesalers in distributing his produce. (10 Marks)
    2. The following balances were extracted from the ledger accounts of Bidii traders for the year ended 31st December 2020.
      Capital                                           940, 000.
      Bank                                              100, 000
      Accrued expenses                         20, 000.
      Debtors                                          60, 000
      Creditors                                        60, 000
      Stock                                             100, 000
      10 Years Bank loan                       200, 000
      3-year ICDC loan                          100, 000
      Vehicle                                          300, 000
      Plant and machinery                     200, 000
      Land                                              500, 000
      Drawings                                       40, 000
      Cash                                              20, 000
      Prepare Bidii traders trial balance for that year ended 31st December 2020. (10 Marks)

                                                                                       MARKING SCHEME

    1. Five external factors that an entrepreneur need to consider when evaluating a business opportunity.
      • Government policy – in terms of requirements for certain businesses before starting a business.
      • Market –  with reference to availability of customers before starting the business.
      • Technology – in relation to appropriateness and the cost of the technology.
      • Raw materials –  in terms of their availability, prices, quality, and quantity.
      • Amount of capital required – to see whether to go for more credit or what he/she has is enough.
      • Impact of the business operations on the environment –  by carrying out an environmental assessment with the concerned authority/NEMA
      • Assessment of the level of competition – to be able to understand the market and penetration strategies to adopt.
      • Security – which will give a conducive atmosphere for business to start and thrive.
      • Level of infrastructure – in terms of roads, water /power supply, sewerage system etc.
       Cooperatives  Partnership
       a). Min 10 and Max infinity members  a). Min 2 and Max20/50 Partners
       b). Formed under the cooperative act  b). Formed under the partnership act
       c). Managed by a committee of 9 members  c). Managed by partners.
      (active/real/general partners)
       d). Main source of capital is from
      members registration and sale of
       d). main source of capital is from
      partners contribution
       e). Main objective is to cater for the
      interest of members
       e). Main objective is to make profits
    1. Positive implications of overpopulation to a country.
      • Provides increased market/large market for goods/services, hence stimulating investment.
      • Increase in Labor Market/creates a large pool of labor thus an increased labor force from where producers can satisfy their labor, force needs.
      • It leads to maximum/better/optimal utilization of a country’s resources due to high demand.
      • It results in high consumption of goods and services which stimulates investments.
      • Promotes labor mobility as jobless people tend to migrate in search of employment/jobs.
      • Enhance creativity as individuals become innovative to earn a living.
    2. Factors that may have led to the change from S1S1 to S2S2.
      • Increase in the cost of production - making it for producers to produce/supply less goods/services in the market.
      • Increase in taxation - making the cost of production high which may be unaffordable by many firms leading to less quantity produced.
      • Inadequate/less factors of production - making producers produce less goods and services.
      • Industrial unrest - which if continuous may lead to shortage in the supply of goods in the market.
      • Withdrawal of some firms from the industry - leading to few firms producing less good for the market in the short run period.
      • Reduced subsidies on cost of production - making many firms be unable to meet the cost of production or end up producing less quantity of goods and services.
      • Future expectation/speculation of increase in prices of goods and services - thus firms opting to hoard/ supply less and supply more when the prices are high in the market.
    1. Limitations of using billboards as medium of advertising.
      • Can easily be damaged and vandalized.
      • Expensive to construct/hire - thus may have an effect of increased prize of goods and services.
      • May not be effective - where the customers need to examine the product/in need of more detailed information about the products.
      • May obscure/obstruct/distract motorists’ visibility - hence contributing to road accidents.
      • Messages may fade with time - since they are exposed to adverse elements of weather.
      • Interfere with the environment - in terms of view.
      • May not target a specific market/target group - or cater for specific segment of the market.
      • May distract passerby’s, - especially motorists.
      • Are exposed to elements of weather - hence the massage may fade with time
    2. Internal economies of scale that a firm can enjoy as its scale of production increases
      • Managerial economies - specialization and division of labor enhance management.
      • Research economies - firm can afford to finance research and development.
      • Financial economies - firm have access finance from banks as they have enough assets to act as collateral.
      • Technical economies - firm can use modern machinery which increase efficiency.
      • Marketing economies - firms can buy raw materials and stock in bulk getting discounts which in turns enables them to sell product as competitive prices.
      • Welfare economies - firms can provide recreation and other facilities e.g., housing, transport for their workers. 5x2 = 10mks
    1. Documents sent to the seller by the buyer in home trade. (8 marks)
      • Letter of inquiry - A written request by a potential/prospective buyer for information about the goods/services dealt by a seller.
      • Order /LPO - Written form of letter requesting a potential seller to supply the buyer with the specified goods.
      • Goods Received Note - A document sent to the seller after the goods have been received, checked, and recorded in the Goods Received Book.
      • Damaged goods note - A document that accompanies the goods returned to the seller by the buyer.
      • IOU – sent to acknowledge a debt
    2.                                                                                 Mjanja Shop
                                                                           Three column cashbooks
                                                                            For the month of May 2021
    1. Difference between life assurance and property insurance 5x2=10mks)
       Life  Property
       - Risks are bound to happen.
       -  May be used as security for loan.
       -  Value of the policy appreciates, and sum            assured paid to maturity date.
       -  The insured may insure same risk with                different companies.
       -  Not subject to the principal of indemnity,              subrogation, and contribution
       -  No limit on amount spelt out on a cover

       - Risk may or may not occur.
       - Not used a security for loan
       - Sum insured remains constant.

       - The insured is normally required to            insure risk with one company.
       - Subjected to all insurance principles.

       - Cover value depends on the value of      the property

    2. Circumstances under which personal selling may be appropriate
      • When launching a new product because it requires a lot of awareness creation, persuasion and convincing.
      • When a product is tailored to meet customers specification because customers have got varying tastes and preferences.
      • When demonstrations are required – especially for technical products.
      • When the value of the product is high to avoid risks of losing such products if other methods were used.
      • When the organization can afford to finance the sales force as the cost of maintaining them may be remarkably high
      • Where the market is concentrated in one area as the cost of accessing the market is reduced if personal selling is used.
        5x 2 = 10mks
    1. Circumstances that would influence a producer to use wholesalers in distributing his produce.
      • If he needs to only specialize in production.
      • If he lacks means to distribute his goods.
      • If the market is quite large.
      • If it is economical to use the wholesalers.
      • If the wholesales are versed with the market and he is not.  5 x 2 = total 10 Marks
    2. Bidii traders’ balance sheet for the year ended 31st December 2010.
                                                                BIDII TRADERS
                                                          TRIAL BALANCE(√1mark)
                                                       AS AT 31ST DECEMBER 2010
                                                                                                               Total 10 marks
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