WCED: SENIOR CERTIFICATE EXAMINATION/M’2006 (0031S

WCED: SENIOR CERTIFICATE EXAMINATION/M’2006 (0031S) BUSINESS ECONOMICS HG/P1

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INSTRUCTIONS 1. Answer SIX questions. 1.1 Section A: QUESTION 1 is compulsory and must be answered on the enclosed answer sheet. 1.2 Section B: Answer only TWO questions. 1.3 Section C: Answer only THREE questions. 2. Plan the TIME to be spent on each question and the LENGTH of each answer

according to the marks allocated to the question. 3. Begin the answer to each question on a new page. Write the number of the

question above each answer and leave spaces between subsections. Use the numbering system used in this question paper.

4. NEATNESS, LEGIBLE HANDWRITING, CORRECT BUSINESS ECONOMIC

TERMS and the SYSTEMATIC PRESENTATION of facts will count in your favour. 5. Use FULL SENTENCES, except when instructed not to do so, and refrain from

‘padding’ your answers with unnecessary information. 6. Do not use RED or GREEN ink. 7. Remove the ANSWER SHEET for Question 1 from the CENTRE of the question paper and put the completed ANSWER SHEET inside the front cover of your answer book. 8. Rubric for awarding insight marks in SECTION B is on the answer page of SECTION A.


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SECTION A (COMPULSORY) Answer QUESTION 1 on the enclosed answer sheet. QUESTION 1 1.1 Study STATEMENT 1 and STATEMENT 2 and then consider whether

STATEMENT 1 is true or false AND whether STATEMENT 2 is true or false. Then choose the correct answer from the following possibilities and mark

your answer by making a cross (x) in the appropriate block on the answer sheet: A – if both statements are TRUE B - if statement 1 is TRUE and statement 2 is FALSE C - if statement 1 is FALSE and statement 2 is TRUE D - if both statements are FALSE

STATEMENT 1

STATEMENT 2

1.1.1 The memorandum of association indicates the relationship between the company and outsiders.

The articles of association contains the internal rules and regulations of a company.

1.1.2 Speciality goods normally have low prices and purchases are often repeated.

Consumers are willing to look for goods classified as shopping goods before they decide to buy

1.1.3 Excess payment is a predetermined amount of each claim covered by the policy.

Subrogation is where the same risk is covered by more than one policy or insurer.

1.1.4 Process layout occurs when machines with the same function are grouped together.

Product layout is especially suitable in cases where a small quantity of a large range of products is produced.

1.1.5 The modus is the difference between the highest and lowest values of a data set.

The median is the value exactly in the centre of a set of data.

1.1.6 Planning involves formulating aims which the organisation would like to reach in the future with the aid of appropriate programmes.

Organising means to make a structure available to enable the plan to be put into action.

1.1.7 The CSIR acts as a sensitive barometer of economic conditions and price tendencies.

The JSE assists in the development of products and services.

(7 x 3) [21]


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1.1 Indicate whether the statements are TRUE or FALSE. If a statement is false, supply a reason for your answer or rewrite the statement in its correct form.

1.1.1 Minimum subscription is a guarantee by the financial institution to purchase any unsold shares.

1.1.2 The informal sector is an example where the owner of the business sells the right to conduct a business for own interest, to another person.

1.1.3 (Current assets – Stock): Current liabilities is used to determine the current capital ratio.

1.1.4 Production control is the number of products which must be produced within a specific period in the future.

1.1.5 The hardware of the computer refers to programs such as wordprocessing and spreadsheets.

1.1.6 Controlling is considering all alternatives in a given situation and then choosing the best alternative.

1.1.7 The Corporation for Public Deposits has the authority to take steps in order to control credit and money in circulation. (7 x 3) [21]

1.3 Choose from Column B the term that fits a statement in Column A.

Write down only the LETTER from Column B next to the relevant number on the answer sheet.

COLUMN A COLUMN B 1.3.1 Production A Develop tactical and operational plans

B A representation of values in 1.3.2 Histogram vertical or horizontal columns

C Processed data with a specific meaning 1.3.3 Top level management D The transformation of raw materials into

finished products 1.3.4 CSIR E A financial plan for a fixed term

F Observations and the gathering 1.3.5 Project budget of facts or figures, such as numbers

G Maintenance is done on a regular basis 1.3.6 Remedial maintenance H Indicates tendencies such as the highest

and lowest points of a variable 1.3.7 Middle level management I A one-time budget prepared for a special

project 1.3.8 JSE J A machine is fixed after it has broken

K Controls open market transactions such as 1.3.9 Data the buying and selling of state shares

L Involved in strategic planning 1.3.10 Lower level management M Renders a supporting service to

manufacturing industries 1.3.11 SARB N Involved in operational control

O Offers the opportunity to convert an investment into cash relatively easily (11 x 2) [22]


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1.4 Complete the following sentences by filling in the missing word(s) on the answer sheet.

1.4.1 __________ costs change according to the number of

units produced. 1.4.2 Many businesses use __________ to store accounting information,

process financial information and correspond with clients and other businesses by means of e-mail.

1.4.3 __________ is the right to assign duties and ensure that they are carried out. 1.4.4 __________ is the process of influencing and guiding human behaviour to

comply with the policy of the business. 1.4.5 To ensure that the objectives of the organization are achieved, the activities of

the various groups and individuals must be __________. 1.4.6 The JSE publishes __________ prices daily to keep investors and potential

investors informed. 1.4.7 The __________, together with the treasury, constitutes the monetary authority

in South Africa. 1.4.8 The Land and Agricultural Bank grants __________ loans to co-operative

organisations during the harvesting season. (8 x 2) [16]

TOTAL SECTION A: /80/


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SECTION B The questions in this section are based on the ADDENDUM – EDCON (Edgars Consolidated Stores) LIMITED. Answer any TWO questions. Do not answer more than TWO questions. Logical reasoning is required. Give only what is required. QUESTION 2 FORMS OF OWNERSHIP

Edcon Ltd began the implementation of its expansion strategy, over and above fashion, with the purchase of Super Mart (general merchandise, 17 stores) and CNA (Pty) Ltd (books & stationery, approximately 186 stores). Boardmans CC (homeware & furniture) was added in April 2004 with a further 25 stores. INSTRUCTIONS Identify the two forms of ownership represented by Edcon Ltd and CNA (Pty) Ltd and tabulate the differences between Edcon Ltd and CNA (Pty) Ltd with regard to the following: number of members, management, capital, transferability of ownership, availability of financial information, meetings, formation procedure, listing on the securities exchange. As a result of the takeover, Edcon Ltd is the controlling company. Identify and briefly describe the type of takeover that took place between Edcon Ltd and Super Mart, CNA and Boardmans. What would the reasons be for the takeovers and what dissatisfaction would arise from this amalgamation? What can Edcon Ltd. do as a controlling company? Maximul factual 44 Insight 6 Total 50


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QUESTION 3 MARKETING FUNCTION

Edgars makes extensive use of advertising. They advertise on television, the internet, in the newspaper and offer a club magazine `imagine’ to its club members free of charge. They regularly have weekly `4-day sales’, monthly 20 to 33%-discounts on selected goods and quarterly `red hanger sales’. Club members also receive discount vouchers for special occasions such as Valentine’s Day, Mother’s Day, Father’s Day and Birthday promotions. INSTRUCTIONS Explain institutional advertising as a kind of advertising by Edgars and also explain the advantages of all their advertising efforts. Edgars uses a number of sales promotion strategies. Briefly describe FIVE of these strategies. Advertising is costly, but also increases sales. What is the effect of advertising on Edgars’s prices? Name the types of media used by Edgars. How well did Edgars consider the characteristics when they chose their advertising medium? Maximum factual 44 Insight 6

Total 50


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QUESTION 4 FINANCIAL FUNCTION

Edgars offers a wide choice of payment options with its different account types. These include the Edgars grey card (6 months interest free credit), the Edgars red card (interest-bearing credit) and the Edgars purple cash card (a loyalty card by means of which customer benefits can be earned). These cards are also accepted at any of the 9 retail brands. According to company policy, the duties of the credit control managers at Edgars stores are to ensure that proper control over credit granting is exercised at all times; to see to it that all credit departments know their duties; to make sure that the creditworthiness of each potential customer is determined according to company policy; to generate enough cash to run an Edgars store effectively. INSTRUCTIONS Explain what form of credit is granted by Edgars as well as how and why you, as newly appointed credit control manager, will ensure that credit is granted selectively according to company policy. Maximum factual 44 Insight 6 Total 50


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QUESTION 5 PRODUCTION FUNCTION, GENERAL MANAGEMENT AND THE ENTERPRISE AND ITS ENVIRONMENT

LEGIT Stores is well-known for its active wear supplied by the LEGIT factory. One range of clothing is completed before the production of another range starts. These retail stores have a well-defined organisational structure with its own personnel department. Edcon Ltd is a member of an organisation of businesses formed to protect and promote the interests of members. INSTRUCTIONS Identify the type of production system used by LEGIT factory and explain the benefits of such a production system. Edcon tries to ensure that the products of the 9 retail brands are produced at a constant acceptable quality. Explain the factors that would influence the quality control of Edcon Ltd’s suppliers. What measures can any of the 9 retail brands take to prevent accidents in their stores? Identify and discuss the organisational structure of LEGIT Stores. Identify and explain the services of the organisation to which Edcon Ltd is affiliated. . Maximum factual 44 Insight 6 Total 50

TOTAL SECTION B: /100/

Long-sleeved top R80

Striped vest R60


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SECTION C The questions in this section are based on the ADDENDUM – EDCON (Edgars Consolidated Stores) LIMITED Answer any THREE questions. Do not answer more than THREE questions. QUESTION 6 FORMS OF OWNERSHIP 6.1 In each of the following is ONE concept that does not fit. Indicate the concept and give a reason for your answer. 6.1.1 Can easily adapt to change; limited lifespan; one owner; slow decisionmaking. 6.1.2 Articles of association; Founding statement; Memorandum of association;

Partnership agreement. 6.1.3 The aim is to render a service to members; managed by members; legal personality;

unlimited continuity. 6.1.4 At least two members; financial information available only to members;

members have a limited liability; owners share in profits. [12]

6.2

Boardmans started out as a hardware store owned by Tom Boardman. In 1982 he went into partnership with Sam Newman and they bought two retail outlets. In 1986 they decided to form a close corporation until they were taken over by Pick ‘n Pay and eventually by Edcon.

6.2.1 Explain the requirements for the name of a sole trader, and use

‘Boardmans’ (before 1982) as an example. (4) 6.2.2 Give TWO reasons why Tom Boardman and Sam Newman formed a

partnership in 1982. (4) 6.2.3 What do you think was the main reason why the owners of Boardmans

changed to a close corporation? (2) 6.2.4 Indicate what the legal personality of ‘Boardmans’ was with regard to the

following forms of ownership: (a) Sole trader (b) Partnership (c) Close Corporation (6) [16]


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6.3 As a close corporation, Boardmans had to submit a document (CK1) to the Registrar of Close Corporations.

Give the name of the document and make a list of its contents. [8] 6.4 Prospectus 6.4.1 Define a prospectus. (2) 6.4.2 What was Edcon Ltd’s aim in issuing a Prospectus? (2) [4]

/40/

QUESTION 7 MARKETING FUNCTION 7.1 Complete the following sentences by writing down only the missing word(s)

next to each number. 7.1.1 During the __________ stage the consumer does not accept any substitute

for the trademark which is familiar to him/her. 7.1.2 __________ discrimination occurs when cool drinks are more expensive at

a sporting event than at the corner café as they have to be delivered there specially. 7.1.3 In the case of a __________ distribution channel, one intermediary is used

between the manufacturer of the product and the consumer. 7.1.4 Informal shops in residential areas run from houses, garages or storerooms are

known as _______. 7.1.5 __________ is a credible report on the business by another business or

person. (5 x 2)[10] 7.2 Study the illustrations of products offered by CNA below and then give

an example of each of the following (7.2.1 – 7.2.8):


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7.2.1 Multiple/Combination packaging of CNA 7.2.2 Speciality packaging of CNA 7.2.3 Slogan of CNA 7.2.4 Trade name 7.2.5 Fake discounts of CNA 7.2.6 Special events of CNA 7.2.7 Width of the product range of CNA 7.2.8 Depth of the product line of CNA (8 x 2) [16] 7.3 Bic is a well-known trademark of pens sold by CNA. Of what importance

is this to the consumer? [10] 7.4 Pricing 7.4.1 Define the pricing technique, competition orientated. (2) 7.4.2 Explain how this method of pricing can be applied by CNA. (2) [4]

/40/ QUESTION 8 FINANCIAL FUNCTION 8.1 Give ONE word or phrase for each of the following statements: 8.1.1 The portion of the total capital used to finance current assets and to pay

for current expenses 8.1.2 A kind of ordinary share where the shareholder has no say in the

management of the company 8.1.3 The holder of these shares may, in addition to the fixed percentage

dividend, share in profits after all other shareholders have received a dividend 8.1.4 Specific assets of the business are given as security for the debenture 8.1.5 Long-term sources such as the sale of shares and the issue of debentures (5 x 2) [10] 8.2 Edgars has its very own financial services and offers the following types of

insurance policies:

A SMART Insurance B Funeral Plan

Cover your car against dents Don’t let your funeral become and scratches. burden to your loved ones. 8.2.1 Distinguish between the two types of insurance offered by Edgars. (4) 8.2.2 Which basic principles are applied at A and B respectively? (4) [8]


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8.3 The building of one of the Edgars branches is valued at R200 000. It is insured for R150 000. A fire causes damages of R40 000.

How much will the owner of the building receive when the claim is settled? (Show all calculations.) [5]

8.4 Assume that Edgars purchased a delivery vehicle 2 years ago to facilitate

the distribution of their goods. Study the information below and then answer the questions.

Year Cost price delivery vehicle

Depreciation Accumulated depreciation Carrying/ Book value

2004 2005

R20 000 R2 000 R1 800

R2 000 R3 800

R18 000 R16 200

8.4.1 Identify the method used by Edgars to calculate the depreciation of the

delivery vehicle. (2) 8.4.2 What will the carrying/book value be at the end of 2006? (Show all calculations; depreciation is calculated each year on

31 December.) (7) 8.4.3 Explain any other method that Edgars could use to calculate depreciation. (2) [11] 8.5 Define undercapitalisation. [2] 8.6 Briefly explain the following: 8.6.1 What effect would a state of undercapitalisation have on Edgars? (2) 8.6.2 What can Edgars do to rectify this situation? (2) [4]

/40/


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QUESTION 9 PRODUCTION FUNCTION AND ADMINSTRATIVE FUNCTION

9.1 The following statements are FALSE. Correct each statement by replacing

the underlined part with the correct term. Write down only the correct term next to each number.

9.1.1 Production planning consists of routing, dispatching and preparing for execution

of production. 9.1.2 Work study is done to develop a more efficient way of performing a task. 9.1.3 The fixed position layout is where the product remains static while

the workers are moved around. 9.1.4 Jobbing involves the movement of the product in the production process

without human intervention. 9.1.5 Primary costs are the sum of direct material costs and direct fixed

costs. (5 x 2) [10] 9.2 Study the break-even analysis graph below and then answer

the questions.

9.2.1 Define break-even analysis. (2) 9.2.2 What does production below the break-even point imply? (2) 9.2.3 Write down the letters A to E and next to each one the

applicable term. (5) 9.2.4 How many units must be sold to reach the break-even point?

(Refer to the diagram above). (2) [11]


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9.3 Merchandise sold by Super Mart is produced by factories with different

production systems, such as mass production, jobbing and batch production.

Choose the production system best suited for the production of each of the following products and explain why you have chosen it:

9.3.1 A 9.3.2 B 9.3.3 C (3 x 3) [9] 9.4 Edcon Ltd has decentralised the administrative activities of each of

its 9 retail brands. Explain THREE advantages that this decentralisation will have for Super Mart. [6]

9.5 Secondary data 9.5.1 Define secondary data . (2) 9.5.2 Of what importance will secondary data be for Super Mart? (2) [4]

/40/


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QUESTION 10 GENERAL MANAGEMENT AND THE ENTERPRISE AND ITS ENVIRONMENT

10.1 Choose the correct word(s) in brackets. Write down only the correct word

next to each number. 10.1.1 The CSIR helps with the (central; public; standard; technological)

development of new and better methods. 10.1.2 The JSE is an important link between investors and (employees;

entrepreneurs; professionals; shareholders). 10.1.3 The (Central Government; IMF; Minister of Finance; SARB) has the

sole right to issue banknotes. 10.1.4 The Land and Agricultural Bank grants long-term credit to farmers for

(harvesting; purchasing of land; seasonal expenses; purchasing of livestock and implements).

10.1.5 The CPD uses surplus short-term funds of the (public; private; foreign; business) sector to the advantage of the economy of the country. (5 x 2) [10]

10.2 In the office of the manager of JET Stores, the following was said by the Chief Executive Officer, Mr Adam:

10.2.1 Which method of communication is taking place here? (1) 10.2.2 Identify the additional elements of the management task

illustrated by A, B and C and explain each one. (3 x 3) 10.2.3 Explain FIVE duties of the CEO of JET Stores, Mr Adam. (5 x 2)

[20]


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10.3 The South African Bureau of Standards renders a wide spectrum of services.

Briefly explain FIVE of these services offered to JET Stores in particular. [10]

TOTAL SECTION C: /120/

GRAND TOTAL: /300/

Documents

WCED: SENIOR CERTIFICATE EXAMINATION/M’2006 (0031S