Practise Edexcel Business questions on cash flow, budgets and financial planning, interpreting figures before explaining liquidity risks and management decisions.
Source for use with Section B
Extract C
About Skechers
Skechers is a global footwear company that designs and develops shoes for men, women and children. It sells its products online and in more than 2,700 shops in 170 countries through its established distribution channels. The annual sales revenue of the business increased from $3.52bn in 2016 to $4.16bn in 2017.
Skechers' marketing department uses both primary and secondary market research. Focus groups and interviews are used during the design stage to collect opinions on new shoes before they are launched onto the market. Focus groups are also used to gain feedback on the performance and comfort of existing styles of shoes. Since 1992 when it launched its first shoe, the company has diversified into several new lines, targeting different market segments and different activities.
The range is updated regularly and includes shoes for walking, work and casual wear. The portfolio includes 3,000 different styles of footwear for all ages that offer quality and comfort. Its best-selling shoe is the Go-Walk brand, sold globally. More recently the company has designed and sold shoes for athletes and is now competing with companies such as Nike and Adidas.
Organisation of Skechers
Although Skechers has offices and shops globally it has maintained a centralised organisational structure. At the corporate headquarters in California, USA, Skechers research, design, and develop the shoes as well as controlling global marketing campaigns and operations. Offices based in South America, Europe and Asia oversee the regional operations.
David Weinberg is the Chief Operating Officer (COO) based in the USA head office. He is responsible for the day-to-day operations. These include planning Skechers policies and objectives and developing financial and distribution strategies to expand the business.
Extract C
About Skechers
Skechers is a global footwear company that designs and develops shoes for men, women and children. It sells its products online and in more than 2,700 shops in 170 countries through its established distribution channels. The annual sales revenue of the business increased from $3.52bn in 2016 to $4.16bn in 2017.
Skechers' marketing department uses both primary and secondary market research. Focus groups and interviews are used during the design stage to collect opinions on new shoes before they are launched onto the market. Focus groups are also used to gain feedback on the performance and comfort of existing styles of shoes. Since 1992 when it launched its first shoe, the company has diversified into several new lines, targeting different market segments and different activities.
The range is updated regularly and includes shoes for walking, work and casual wear. The portfolio includes 3,000 different styles of footwear for all ages that offer quality and comfort. Its best-selling shoe is the Go-Walk brand, sold globally. More recently the company has designed and sold shoes for athletes and is now competing with companies such as Nike and Adidas.
Organisation of Skechers
Although Skechers has offices and shops globally it has maintained a centralised organisational structure. At the corporate headquarters in California, USA, Skechers research, design, and develop the shoes as well as controlling global marketing campaigns and operations. Offices based in South America, Europe and Asia oversee the regional operations.
David Weinberg is the Chief Operating Officer (COO) based in the USA head office. He is responsible for the day-to-day operations. These include planning Skechers policies and objectives and developing financial and distribution strategies to expand the business.
Using Extract C, calculate to 2 decimal places, the percentage change in sales revenue for Skechers between 2016 and 2017. You are advised to show your working.
Extract C
Darwin Film Society and the Deckchair cinema
Darwin Film Society (DFS) is a social enterprise that helps community groups and charitable organisations to show films for fundraising events. It is mainly run by volunteers but does have a small number of salaried employees who oversee the running of the film society throughout the year. In addition to the fundraising events, DFS set up the Deckchair cinema in 1994. The Deckchair cinema shows films outdoors from April until November each year. The atmosphere is very relaxed, with 250 deckchairs for customers to use. The skies are usually cloud-free and the stars make a great backdrop for the screen. DFS has a growing membership of more than 1,000 people. Most of DFS's revenue comes from ticket sales and film society members who pay Aus$75 per year. Membership includes free entry to four screenings at the Deckchair cinema, reduced ticket prices for further screenings and priority access to any DFS event. Most membership fees are paid in April and May and are credit sales. Between December and March, the Deckchair cinema is closed and there are no screenings, charitable or special events. However, all other cash outflows need to be paid during these months. Since 2012, environmental protection legislation in Darwin states that all drinks bottles must be labelled to show that Aus$0.10 will be refunded when the container is returned to an official collection point. As part of its ethical profile, DFS provides recycling bins at the Deckchair cinema, where bottles can be collected for this Container Deposit Scheme (CDS). All money raised supports local charities. In addition, bottled water is no longer sold at the cinema to further reduce waste. Instead, customers are invited to enjoy filtered water free of charge from the sales kiosk.
Extract D
Cash flow forecast for Darwin Film Society (DFS) April-July 2021
Extract D Cash flow forecast for Darwin Film Society (DFS) April-July 2021
Using the data in Extract D, calculate, to two decimal places, fixed costs for Darwin Film Society (DFS) as a percentage of total cash outflow for May 2021. You are advised to show your working.
Extract C
Darwin Film Society and the Deckchair cinema
Darwin Film Society (DFS) is a social enterprise that helps community groups and charitable organisations to show films for fundraising events. It is mainly run by volunteers but does have a small number of salaried employees who oversee the running of the film society throughout the year. In addition to the fundraising events, DFS set up the Deckchair cinema in 1994. The Deckchair cinema shows films outdoors from April until November each year. The atmosphere is very relaxed, with 250 deckchairs for customers to use. The skies are usually cloud-free and the stars make a great backdrop for the screen. DFS has a growing membership of more than 1,000 people. Most of DFS's revenue comes from ticket sales and film society members who pay Aus$75 per year. Membership includes free entry to four screenings at the Deckchair cinema, reduced ticket prices for further screenings and priority access to any DFS event. Most membership fees are paid in April and May and are credit sales. Between December and March, the Deckchair cinema is closed and there are no screenings, charitable or special events. However, all other cash outflows need to be paid during these months. Since 2012, environmental protection legislation in Darwin states that all drinks bottles must be labelled to show that Aus$0.10 will be refunded when the container is returned to an official collection point. As part of its ethical profile, DFS provides recycling bins at the Deckchair cinema, where bottles can be collected for this Container Deposit Scheme (CDS). All money raised supports local charities. In addition, bottled water is no longer sold at the cinema to further reduce waste. Instead, customers are invited to enjoy filtered water free of charge from the sales kiosk.
Using the data in Extract D, analyse two possible problems for Darwin Film Society (DFS) from its cash flow forecast from April–July 2021. (6)
Sources for use with
Extract A
Bee Hive Candles
US-based business, Bee Hive Candles (BHC) produces candles made from 100% pure beeswax. All candles are handmade using beeswax from US bees. Jennifer Wesolowski started the business in 2000, using personal savings. She decided to change from making candles as a hobby to setting it up as a business. A wide range of candles are offered but by using 100% beeswax, all candles are environmentally friendly. Unlike typical paraffin candles, they are biodegradable and produce no harmful toxins. They burn for longer, meaning better value for money. Although still a small business, BHC is growing. This is due to increasing consumer awareness of environmental issues and positive feedback on social media platforms. Jennifer remains dedicated to making quality candles and offering outstanding customer service. Newsletters are emailed to existing customers to advise of new products and offers. BHC charges $9.95 to send its candles to customers all over the US but at the moment does not accept orders from outside the US. Prices of the candles range from $6.95 to over $100 for a large pack of candles. The best-selling product is the pillar candle, priced at $17.95. It is popular because of its relatively low price and burns for approximately 50 hours.
Extract B
Candle sales in the US – some figures
• The US has the largest share of customers buying candles in the world.
• In the US 35% of all candles are sold online and this is increasing.
• Beeswax candles account for only 2% of all candle sales in the US market; this figure is increasing.
• Paraffin candles are currently the most popular type of candle, with nearly 40% of the market. This is followed by soy wax, palm wax and beeswax.
Extract A Bee Hive Candles US-based business, Bee Hive Candles (BHC) produces candles made from 100% pure beeswax. All candles are handmade using beeswax from US bees. Jennifer Wesolowski started the business in 2000, using personal savings. She decided to change from making candles as a hobby to setting it up as a business. A wide range of candles are offered but by using 100% beeswax, all candles are environmentally friendly. Unlike typical paraffin candles, they are biodegradable and produce no harmful toxins. They burn for longer, meaning better value for money. Although still a small business, BHC is growing. This is due to increasing consumer awareness of environmental issues and positive feedback on social media platforms. Jennifer remains dedicated to making quality candles and offering outstanding customer service. Newsletters are emailed to existing customers to advise of new products and offers. BHC charges $9.95 to send its candles to customers all over the US but at the moment does not accept orders from outside the US. Prices of the candles range from $6.95 to over $100 for a large pack of candles. The best-selling product is the pillar candle, priced at $17.95. It is popular because of its relatively low price and burns for approximately 50 hours.
The variable cost of the pillar candle for Bee Hive Candles (BHC) has increased from
$4.70 to $5.50.
Using the data in Extract A, explain one way the change in the contribution of the
pillar candle may affect BHC's break-even point.
Analyse two reasons why BHC's actual sales may be higher than the sales
forecasts.
Extract C
Darwin Film Society and the Deckchair cinema
Darwin Film Society (DFS) is a social enterprise that helps community groups and charitable organisations to show films for fundraising events. It is mainly run by volunteers but does have a small number of salaried employees who oversee the running of the film society throughout the year. In addition to the fundraising events, DFS set up the Deckchair cinema in 1994. The Deckchair cinema shows films outdoors from April until November each year. The atmosphere is very relaxed, with 250 deckchairs for customers to use. The skies are usually cloud-free and the stars make a great backdrop for the screen. DFS has a growing membership of more than 1,000 people. Most of DFS's revenue comes from ticket sales and film society members who pay Aus$75 per year. Membership includes free entry to four screenings at the Deckchair cinema, reduced ticket prices for further screenings and priority access to any DFS event. Most membership fees are paid in April and May and are credit sales. Between December and March, the Deckchair cinema is closed and there are no screenings, charitable or special events. However, all other cash outflows need to be paid during these months. Since 2012, environmental protection legislation in Darwin states that all drinks bottles must be labelled to show that Aus$0.10 will be refunded when the container is returned to an official collection point. As part of its ethical profile, DFS provides recycling bins at the Deckchair cinema, where bottles can be collected for this Container Deposit Scheme (CDS). All money raised supports local charities. In addition, bottled water is no longer sold at the cinema to further reduce waste. Instead, customers are invited to enjoy filtered water free of charge from the sales kiosk.
Extract D
Cash flow forecast for Darwin Film Society (DFS) April-July 2021
Extract D Cash flow forecast for Darwin Film Society (DFS) April-July 2021
Using the data in Extract D, calculate, to two decimal places, fixed costs for Darwin Film Society (DFS) as a percentage of total cash outflow for May 2021. You are advised to show your working.
Sources for use with
Extract A
Bee Hive Candles
US-based business, Bee Hive Candles (BHC) produces candles made from 100% pure beeswax. All candles are handmade using beeswax from US bees. Jennifer Wesolowski started the business in 2000, using personal savings. She decided to change from making candles as a hobby to setting it up as a business. A wide range of candles are offered but by using 100% beeswax, all candles are environmentally friendly. Unlike typical paraffin candles, they are biodegradable and produce no harmful toxins. They burn for longer, meaning better value for money. Although still a small business, BHC is growing. This is due to increasing consumer awareness of environmental issues and positive feedback on social media platforms. Jennifer remains dedicated to making quality candles and offering outstanding customer service. Newsletters are emailed to existing customers to advise of new products and offers. BHC charges $9.95 to send its candles to customers all over the US but at the moment does not accept orders from outside the US. Prices of the candles range from $6.95 to over $100 for a large pack of candles. The best-selling product is the pillar candle, priced at $17.95. It is popular because of its relatively low price and burns for approximately 50 hours.
Extract B
Candle sales in the US – some figures
• The US has the largest share of customers buying candles in the world.
• In the US 35% of all candles are sold online and this is increasing.
• Beeswax candles account for only 2% of all candle sales in the US market; this figure is increasing.
• Paraffin candles are currently the most popular type of candle, with nearly 40% of the market. This is followed by soy wax, palm wax and beeswax.
Analyse two reasons why BHC's actual sales may be higher than the sales
forecasts.
Source for use with Section B
Extract C
Beach in the summer, Bali in the winter
Soul Boul is a small business selling smoothie bowls from a beachside cafe in New Zealand. The smoothie bowls are made with yogurt, fresh fruit and topped with berries, seeds and more fresh fruit. The colourful bowls look amazing, are fun to eat and taste delicious.
Co-founders, Stacey Horton and Alexandra Bell, met at university and became friends through a shared interest in nutritious food and healthy lifestyles. The idea for Soul Boul came from a holiday Alexandra took to Bali, Indonesia.
“I was amazed at all the incredible, healthy foods available there, which included numerous smoothie bowls. I spent a considerable amount of time taste-testing different recipes in Bali. I began to think of business names and logo concepts and came back to New Zealand to ask Stacey if she would set up a lifestyle business with me,” Alexandra explained.
Stacey and Alexandra had previously worked in the hospitality industry for six years and saved a lot of their wages during that time. However, Stacey lost her job when her former employer’s business failed to break-even and closed down. Therefore, she was initially reluctant to risk her savings.
“I worked for a busy tourist hotel,” said Stacey. “It had a lot of guests but also a lot of competition, with three other hotels competing for business within 1 km. At first I was worried Soul Boul may end up as a failing business too but then I realised the reasons the hotel failed were things we could make sure did not happen to us.”
“The quality of our ingredients is always high,” said Stacey. “The hotel manager was not interested in maintaining quality. He said foreign guests were unlikely to return anyway but there would always be other tourists to replace them! This led to negative reviews on social media and the poor reputation spread.”
Stacey took the positives from her experience in hospitality and learned from the negatives. Stacey and Alexandra have a positive attitude, plenty of energy for their ideas and are prepared to work hard. It does help that they earn enough during the summers working to be able to spend winters relaxing on a low budget in Bali, whilst sampling new ideas for ingredients.
In 2018, Soul Boul’s revenue totalled NZ$104 625 from selling smoothie bowls at NZ$12.50 each. By keeping costs to a minimum, operating profit was NZ$32 175.
Source for use with Section B
Extract C
Beach in the summer, Bali in the winter
Soul Boul is a small business selling smoothie bowls from a beachside cafe in New Zealand. The smoothie bowls are made with yogurt, fresh fruit and topped with berries, seeds and more fresh fruit. The colourful bowls look amazing, are fun to eat and taste delicious.
Co-founders, Stacey Horton and Alexandra Bell, met at university and became friends through a shared interest in nutritious food and healthy lifestyles. The idea for Soul Boul came from a holiday Alexandra took to Bali, Indonesia.
“I was amazed at all the incredible, healthy foods available there, which included numerous smoothie bowls. I spent a considerable amount of time taste-testing different recipes in Bali. I began to think of business names and logo concepts and came back to New Zealand to ask Stacey if she would set up a lifestyle business with me,” Alexandra explained.
Stacey and Alexandra had previously worked in the hospitality industry for six years and saved a lot of their wages during that time. However, Stacey lost her job when her former employer’s business failed to break-even and closed down. Therefore, she was initially reluctant to risk her savings.
“I worked for a busy tourist hotel,” said Stacey. “It had a lot of guests but also a lot of competition, with three other hotels competing for business within 1 km. At first I was worried Soul Boul may end up as a failing business too but then I realised the reasons the hotel failed were things we could make sure did not happen to us.”
“The quality of our ingredients is always high,” said Stacey. “The hotel manager was not interested in maintaining quality. He said foreign guests were unlikely to return anyway but there would always be other tourists to replace them! This led to negative reviews on social media and the poor reputation spread.”
Stacey took the positives from her experience in hospitality and learned from the negatives. Stacey and Alexandra have a positive attitude, plenty of energy for their ideas and are prepared to work hard. It does help that they earn enough during the summers working to be able to spend winters relaxing on a low budget in Bali, whilst sampling new ideas for ingredients.
In 2018, Soul Boul’s revenue totalled NZ$104 625 from selling smoothie bowls at NZ$12.50 each. By keeping costs to a minimum, operating profit was NZ$32 175.
Define the term 'break-even'. (Extract C, line 16)
Sources for use with
Extract A
Bee Hive Candles
US-based business, Bee Hive Candles (BHC) produces candles made from 100% pure beeswax. All candles are handmade using beeswax from US bees. Jennifer Wesolowski started the business in 2000, using personal savings. She decided to change from making candles as a hobby to setting it up as a business. A wide range of candles are offered but by using 100% beeswax, all candles are environmentally friendly. Unlike typical paraffin candles, they are biodegradable and produce no harmful toxins. They burn for longer, meaning better value for money. Although still a small business, BHC is growing. This is due to increasing consumer awareness of environmental issues and positive feedback on social media platforms. Jennifer remains dedicated to making quality candles and offering outstanding customer service. Newsletters are emailed to existing customers to advise of new products and offers. BHC charges $9.95 to send its candles to customers all over the US but at the moment does not accept orders from outside the US. Prices of the candles range from $6.95 to over $100 for a large pack of candles. The best-selling product is the pillar candle, priced at $17.95. It is popular because of its relatively low price and burns for approximately 50 hours.
Extract B
Candle sales in the US – some figures
• The US has the largest share of customers buying candles in the world.
• In the US 35% of all candles are sold online and this is increasing.
• Beeswax candles account for only 2% of all candle sales in the US market; this figure is increasing.
• Paraffin candles are currently the most popular type of candle, with nearly 40% of the market. This is followed by soy wax, palm wax and beeswax.
Extract A Bee Hive Candles US-based business, Bee Hive Candles (BHC) produces candles made from 100% pure beeswax. All candles are handmade using beeswax from US bees. Jennifer Wesolowski started the business in 2000, using personal savings. She decided to change from making candles as a hobby to setting it up as a business. A wide range of candles are offered but by using 100% beeswax, all candles are environmentally friendly. Unlike typical paraffin candles, they are biodegradable and produce no harmful toxins. They burn for longer, meaning better value for money. Although still a small business, BHC is growing. This is due to increasing consumer awareness of environmental issues and positive feedback on social media platforms. Jennifer remains dedicated to making quality candles and offering outstanding customer service. Newsletters are emailed to existing customers to advise of new products and offers. BHC charges $9.95 to send its candles to customers all over the US but at the moment does not accept orders from outside the US. Prices of the candles range from $6.95 to over $100 for a large pack of candles. The best-selling product is the pillar candle, priced at $17.95. It is popular because of its relatively low price and burns for approximately 50 hours.
The variable cost of the pillar candle for Bee Hive Candles (BHC) has increased from
$4.70 to $5.50.
Using the data in Extract A, explain one way the change in the contribution of the
pillar candle may affect BHC's break-even point.
Extract A
Arditi Tours
Arditi Tours is a bus company offering passengers travel between Pristina, in Kosovo, and Tirana, the capital of Albania. The 250 km journey takes about five hours, including a rest break and the formalities at the border crossing between Kosovo and Albania. The route is popular with students travelling to and from university, families who live across the border from one another and tourists. There are four buses every day, in both directions. The buses leave Pristina and Tirana at 05:00, 08:00, 11:00 and 15:00. A ticket for a one-way journey is €15. The price of the ticket includes two pieces of luggage weighing a maximum of 50 kg. Arditi Tours has a reputation for quality, reliability and clean buses. There are several competitors offering the same routes, at various times each day. Demand for travel varies considerably throughout the year, with services operating at full capacity some weeks but less than quarter capacity at others. The break-even point for Arditi Tours in April 2022 was 17 passengers per journey. The price of diesel that the buses use was €1.58 a litre in April 2022 but this price has been rising, leading to higher costs for Arditi Tours. April is a month of average demand for seats.
Extract B
Data showing the average number of passengers travelling per day on Arditi Tours services from Pristina to Tirana in April 2022
Extract A
Arditi Tours
Arditi Tours is a bus company offering passengers travel between Pristina, in Kosovo, and Tirana, the capital of Albania. The 250 km journey takes about five hours, including a rest break and the formalities at the border crossing between Kosovo and Albania. The route is popular with students travelling to and from university, families who live across the border from one another and tourists. There are four buses every day, in both directions. The buses leave Pristina and Tirana at 05:00, 08:00, 11:00 and 15:00. A ticket for a one-way journey is €15. The price of the ticket includes two pieces of luggage weighing a maximum of 50 kg. Arditi Tours has a reputation for quality, reliability and clean buses. There are several competitors offering the same routes, at various times each day. Demand for travel varies considerably throughout the year, with services operating at full capacity some weeks but less than quarter capacity at others. The break-even point for Arditi Tours in April 2022 was 17 passengers per journey. The price of diesel that the buses use was €1.58 a litre in April 2022 but this price has been rising, leading to higher costs for Arditi Tours. April is a month of average demand for seats.
Extract B
Data showing the average number of passengers travelling per day on Arditi Tours services from Pristina to Tirana in April 2022
Using the data in Extracts A and B, discuss whether Arditi Tours should have been
concerned about its margin of safety in April 2022.
Source for use with Extract D Game, set and match Each year, Wilson produces 100 million tennis balls at its factory near Bangkok, Thailand. The factory covers an area of 11,000 m2 and operates 24 hours a day. Although it looks simple, a tennis ball goes through 24 stages during the production process. These stages include:
• crushing rubber to form a core for the ball
• cutting the core to size
• cutting felt into shapes to wrap around the rubber core
• joining the rubber core and felt shapes using glue.
Rubber used to make the tennis balls is sourced from Thailand, as well as imported from nearby Asian countries such as Vietnam and Malaysia. Machinery is used for many of the stages but employees are needed to operate the machinery and to carry out some of the more complex and skilful tasks. One of these is wrapping the felt around the rubber core as this is more accurate when done by hand. Wilson supplies tennis balls to many of the professional tennis tournaments that take place around the world each year. The most tennis balls supplied for a single tournament are for the French Open and the US Open. These tournaments each use 70,000 tennis balls. Each ball must meet a strict specification, according to weight, size and hardness. The materials must be consistent to meet the requirements of the International Tennis Federation.
Extract D Game, set and match Each year, Wilson produces 100 million tennis balls at its factory near Bangkok, Thailand. The factory covers an area of 11,000 m2 and operates 24 hours a day. Although it looks simple, a tennis ball goes through 24 stages during the production process. These stages include:
• crushing rubber to form a core for the ball
• cutting the core to size
• cutting felt into shapes to wrap around the rubber core
• joining the rubber core and felt shapes using glue.
Rubber used to make the tennis balls is sourced from Thailand, as well as imported from nearby Asian countries such as Vietnam and Malaysia. Machinery is used for many of the stages but employees are needed to operate the machinery and to carry out some of the more complex and skilful tasks. One of these is wrapping the felt around the rubber core as this is more accurate when done by hand. Wilson supplies tennis balls to many of the professional tennis tournaments that take place around the world each year. The most tennis balls supplied for a single tournament are for the French Open and the US Open. These tournaments each use 70,000 tennis balls. Each ball must meet a strict specification, according to weight, size and hardness. The materials must be consistent to meet the requirements of the International Tennis Federation.
Analyse two limitations for Wilson of using break-even analysis.
Extract C
Darwin Film Society and the Deckchair cinema
Darwin Film Society (DFS) is a social enterprise that helps community groups and charitable organisations to show films for fundraising events. It is mainly run by volunteers but does have a small number of salaried employees who oversee the running of the film society throughout the year. In addition to the fundraising events, DFS set up the Deckchair cinema in 1994. The Deckchair cinema shows films outdoors from April until November each year. The atmosphere is very relaxed, with 250 deckchairs for customers to use. The skies are usually cloud-free and the stars make a great backdrop for the screen. DFS has a growing membership of more than 1,000 people. Most of DFS's revenue comes from ticket sales and film society members who pay Aus$75 per year. Membership includes free entry to four screenings at the Deckchair cinema, reduced ticket prices for further screenings and priority access to any DFS event. Most membership fees are paid in April and May and are credit sales. Between December and March, the Deckchair cinema is closed and there are no screenings, charitable or special events. However, all other cash outflows need to be paid during these months. Since 2012, environmental protection legislation in Darwin states that all drinks bottles must be labelled to show that Aus$0.10 will be refunded when the container is returned to an official collection point. As part of its ethical profile, DFS provides recycling bins at the Deckchair cinema, where bottles can be collected for this Container Deposit Scheme (CDS). All money raised supports local charities. In addition, bottled water is no longer sold at the cinema to further reduce waste. Instead, customers are invited to enjoy filtered water free of charge from the sales kiosk.
Extract D
Cash flow forecast for Darwin Film Society (DFS) April-July 2021
Extract C
Darwin Film Society and the Deckchair cinema
Darwin Film Society (DFS) is a social enterprise that helps community groups and charitable organisations to show films for fundraising events. It is mainly run by volunteers but does have a small number of salaried employees who oversee the running of the film society throughout the year. In addition to the fundraising events, DFS set up the Deckchair cinema in 1994. The Deckchair cinema shows films outdoors from April until November each year. The atmosphere is very relaxed, with 250 deckchairs for customers to use. The skies are usually cloud-free and the stars make a great backdrop for the screen. DFS has a growing membership of more than 1,000 people. Most of DFS's revenue comes from ticket sales and film society members who pay Aus$75 per year. Membership includes free entry to four screenings at the Deckchair cinema, reduced ticket prices for further screenings and priority access to any DFS event. Most membership fees are paid in April and May and are credit sales. Between December and March, the Deckchair cinema is closed and there are no screenings, charitable or special events. However, all other cash outflows need to be paid during these months. Since 2012, environmental protection legislation in Darwin states that all drinks bottles must be labelled to show that Aus$0.10 will be refunded when the container is returned to an official collection point. As part of its ethical profile, DFS provides recycling bins at the Deckchair cinema, where bottles can be collected for this Container Deposit Scheme (CDS). All money raised supports local charities. In addition, bottled water is no longer sold at the cinema to further reduce waste. Instead, customers are invited to enjoy filtered water free of charge from the sales kiosk.
Using the data in Extract D, analyse two possible problems for Darwin Film Society (DFS) from its cash flow forecast from April–July 2021. (6)
Source for use with Extract A MV Pride There are around 100 inhabited islands in the Caribbean and the main form of transport between them is by boat. Boat travel between Union Island and Carriacou is only possible by owning or hiring a private boat. The only exception is to travel on the MV Pride, owned and captained by Mario Grand. The MV Pride runs a scheduled service for passengers between the two islands, providing a vital connection for the people who live and work in Union Island and Carriacou. It is a small boat, only 12.8 m in length, and can carry a maximum of 10 passengers. The service only runs two days a week, on a Monday and Friday. Mario charges $30 per passenger. The boat carries cargo, so passengers may be sharing the trip with large sacks of vegetables, boxes and crates. Mario has worked with boats all his life, learning the trade from his family. It is his passion as well as his livelihood. Although Mario offers the MV Pride for private hire to those wishing to travel on a day that is not scheduled, he does not spend money on advertising this fact, or on trying to gain market share from competing boat owners. He prefers to spend his days enjoying time on the water with friends when he is not running the boat service. Mario realised the value of using free services on social media, promoting the MV Pride’s scheduled service on Facebook and enabling tourists to ask questions via WhatsApp and email. As a result, the MV Pride typically runs at 100% capacity for each trip compared with 80% before he started using social media.
Discuss whether budgeting could be beneficial to Mario when running the MV Pride.
Extract A Żabka Polska Żabka is a chain of shops in Poland. The business started in 1998 and now has over 8,000 shops in Poland. Most of these shops are run by people who have paid for one of the franchising opportunities offered by Żabka. As well as selling a variety of groceries, the shops sell hot drinks and snacks that include hot soup and hot sandwiches. It is also possible to send parcels from the shops, saving customers time from having to visit post offices. More than 15 million Polish consumers live within 500 metres of the nearest Żabka. It prides itself on being close to its customers and understanding their needs. Żabka shops are developed with customers in mind. The shops are not only in the centre of large cities but in smaller towns too. Żabka's head office is in Poznań, where the six members of the Management Board are based. They make the decisions for Żabka, such as whether to use zero based budgeting for marketing the stores.
Extract B Sales revenue data in Polish złoty (zł) from a Żabka shop January-March 2022
Extract C Polish Government announces plans for lower income tax In 2022, the Polish Government announced plans to reduce income tax (the tax paid on personal income from paid and self-employment). It has presented the plans as part of its measures to protect Poles from the economic consequences of higher costs of living.
Assess the likely benefits to Żabka of using a zero based marketing budget.
Extract A Żabka Polska Żabka is a chain of shops in Poland. The business started in 1998 and now has over 8,000 shops in Poland. Most of these shops are run by people who have paid for one of the franchising opportunities offered by Żabka. As well as selling a variety of groceries, the shops sell hot drinks and snacks that include hot soup and hot sandwiches. It is also possible to send parcels from the shops, saving customers time from having to visit post offices. More than 15 million Polish consumers live within 500 metres of the nearest Żabka. It prides itself on being close to its customers and understanding their needs. Żabka shops are developed with customers in mind. The shops are not only in the centre of large cities but in smaller towns too. Żabka's head office is in Poznań, where the six members of the Management Board are based. They make the decisions for Żabka, such as whether to use zero based budgeting for marketing the stores.
Extract B Sales revenue data in Polish złoty (zł) from a Żabka shop January-March 2022
Extract C Polish Government announces plans for lower income tax In 2022, the Polish Government announced plans to reduce income tax (the tax paid on personal income from paid and self-employment). It has presented the plans as part of its measures to protect Poles from the economic consequences of higher costs of living.
Extract B Sales revenue data in Polish złoty (zł) from a Żabka shop January-March 2022
Using the data in Extract B, calculate the total variance in sales revenue for the Żabka shop for the three months January-March 2022. You are advised to show your working.
Sources for use with Section B
Extract C
UK Government will consider additional 25p charge on disposable coffee cups
The UK Government is considering adding an additional charge of 25p on all disposable
coffee cups. This is aimed at helping the environment. Consumer trends have already
shown people are prepared to pay more in order to prevent billions of tonnes of waste
packaging ending up in the world’s oceans, such as with the success of the existing 5p
charge on plastic bags.
The proposal was announced by the UK Prime Minister as part of the government’s
25-year environmental plan. The focus is on the need to reduce the amount of plastic
thrown away each year.
The UK currently throws away approximately 2.5 billion disposable coffee cups every year
with only a small number being recycled. If government plans go ahead, it is estimated
the 25p charge could raise £438m and reduce use of the throw away cups by 30%.
Starbucks is to trial the additional charge, in London, but with a lower initial charge of
5p per cup. A spokesman for the coffee house chain from the US said its procedures
were focused on reducing environmental concerns at the same time as maintaining the
great taste, quality and service customers expect from Starbucks. Money raised will go to
environmental charities researching better ways to recycle and protect the environment.
Starbucks currently sells reusable cups for £1 and offers a small discount for people using
their own cup. It is the second biggest coffee house chain in the UK (after Costa Coffee)
and the average price of its coffee is around £2.50.
Extract D
Selected financial information from Starbucks’ consolidated income statement
12 months ending 31 October 2017
| $ | |
|---|---|
| Revenue | 22,386,800,000 |
| Direct costs | 9,038,200,000 |
| Interest | 92,700,000 |
| Taxes | 1,432,600,000 |
Discuss whether budgeting will always allow Starbucks coffee houses to meet their objectives.