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HKDSE BAFS Paper 2B Business Management Structured Practice Paper (10 Questions, 100 Marks)
HKDSE BAFS Paper 2B Business Management
HKDSE BAFS Paper 2B Business Management structured practice paper: 10 original questions worth 100 marks in 60 minutes, covering market share, CVP analysis.
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Paper details Level: S6 (DSE) | Subject: BAFS Business Management | Time: 60 minutes | Marks: 100 | Questions: 10
Section A Business Operations and Marketing (50 marks)
Questions 1-3
| # | Question | Answer and marking notes |
|---|---|---|
| 1 | The total annual sales of a consumer electronics market in Hong Kong is 250,000 units. Company A sold 42,500 units and Company B sold 55,000 units. (a) Calculate the market share of Company A. (4 marks) (b) Calculate the market share of Company B and state the gap between the two companies. (3 marks) (c) If Company A aims to raise its market share to 20% while total market sales stay unchanged, how many additional units must it sell? (3 marks) |
Answer: (a) 42,500 / 250,000 x 100% = 17.0%. (b) 55,000 / 250,000 x 100% = 22.0%; Company A is 5.0 percentage points lower. (c) 250,000 x 20% = 50,000 units; 50,000 – 42,500 = 7,500 units. Marking note: percentage points must not be confused with percentages, and part (c) must subtract existing sales from the target. |
| 2 | A small retailer sells a household item at HK$120 per unit. Variable cost is HK$72 per unit and annual fixed cost is HK$288,000. (a) Calculate the unit contribution and the contribution margin ratio. (3 marks) (b) Calculate the break-even quantity and the break-even sales revenue. (4 marks) (c) If actual annual sales are 7,500 units, calculate the margin of safety in units and as a percentage, and the profit. (3 marks) |
Answer: (a) Contribution = 120 – 72 = HK$48; contribution margin ratio = 48 / 120 x 100% = 40%. (b) Break-even quantity = 288,000 / 48 = 6,000 units; revenue = 6,000 x 120 = HK$720,000. (c) Margin of safety = 7,500 – 6,000 = 1,500 units, that is 1,500 / 7,500 x 100% = 20%; profit = 1,500 x 48 = HK$72,000. Marking note: the ratio uses selling price as the denominator; the margin of safety uses actual sales as the denominator. |
| 3 | A trading company has cost of goods sold of HK$1,440,000, opening inventory of HK$260,000 and closing inventory of HK$220,000. Current assets are HK$520,000, including inventory of HK$220,000, and current liabilities are HK$260,000. Use 360 days a year. (a) Calculate the average inventory and the inventory turnover. (4 marks) (b) Calculate the inventory turnover period in days. (3 marks) (c) Calculate the working capital and the current ratio. (3 marks) |
Answer: (a) Average inventory = (260,000 + 220,000) / 2 = HK$240,000; inventory turnover = 1,440,000 / 240,000 = 6.0 times. (b) Turnover period = 360 / 6 = 60 days. (c) Working capital = 520,000 – 260,000 = HK$260,000; current ratio = 520,000 / 260,000 = 2.0 times. Marking note: the numerator is cost of goods sold, not sales revenue. |
Questions 4-5
| # | Question | Answer and marking notes |
|---|---|---|
| 4 | A factory employs 24 workers, each working 200 hours a month, producing 48,000 units a month at HK$85 per hour. After a new process is introduced, each worker works 190 hours a month and output rises to 50,160 units, with the wage rate unchanged. (a) Calculate output per labour hour before and after the change. (4 marks) (b) Calculate the percentage increase in labour productivity. (3 marks) (c) Calculate the unit labour cost before and after the change, and state the monthly saving in the total wage bill. (3 marks) |
Answer: (a) Before: 48,000 / (24 x 200) = 10 units; after: 50,160 / (24 x 190) = 11 units. (b) (11 – 10) / 10 x 100% = 10%. (c) Before: 85 / 10 = HK$8.50; after: 85 / 11 = HK$7.73; the wage bill falls from 4,800 x 85 = HK$408,000 to 4,560 x 85 = HK$387,600, a saving of HK$20,400. Marking note: part (c) must use total labour hours to obtain the wage bill. |
| 5 | A company produces 12,000 units at a total cost of HK$480,000, using capital employed of HK$900,000. (a) Calculate the unit cost. (3 marks) (b) Using cost-plus pricing with a 25% mark-up, calculate the unit selling price. (3 marks) (c) Using target return pricing with a target return of 15% on capital employed, calculate the required unit selling price. (4 marks) |
Answer: (a) 480,000 / 12,000 = HK$40. (b) 40 x (1 + 25%) = HK$50. (c) Target profit = 900,000 x 15% = HK$135,000; required revenue = 480,000 + 135,000 = HK$615,000; unit price = 615,000 / 12,000 = HK$51.25. Marking note: part (c) must add the target profit to total cost before dividing by units. |
Section B Financial Management and Business Decisions (50 marks)
Questions 6-8
| # | Question | Answer and marking notes |
|---|---|---|
| 6 | A company had sales of HK$300,000 in December, HK$400,000 in January and HK$450,000 in February. 60% of sales is collected in the month of sale and 40% in the following month. Cash payments in January and February are HK$330,000 and HK$360,000. The opening cash balance on 1 January is HK$60,000. (a) Calculate the January cash receipts and the closing cash balance. (4 marks) (b) Calculate the February cash receipts and the closing cash balance. (3 marks) (c) State two uses of a cash budget for a small business. (3 marks) |
Answer: (a) January receipts = 400,000 x 60% + 300,000 x 40% = 240,000 + 120,000 = HK$360,000; closing balance = 60,000 + 360,000 – 330,000 = HK$90,000. (b) February receipts = 450,000 x 60% + 400,000 x 40% = 270,000 + 160,000 = HK$430,000; closing balance = 90,000 + 430,000 – 360,000 = HK$160,000. (c) Any two: identifying cash shortages early and arranging an overdraft; timing purchases and payments; assessing expansion or borrowing needs; showing repayment ability to a lender. Marking note: the lagged receipt in (a) comes from December sales and in (b) from January sales. |
| 7 | A start-up borrows HK$600,000 from a bank at 6% a year, repayable in five equal annual principal instalments of HK$120,000. (a) Calculate the interest expense in the first and second years. (4 marks) (b) Calculate the total interest over five years. (3 marks) (c) If annual operating profit before interest is HK$150,000, calculate the interest cover in the first year and comment briefly on debt servicing ability. (3 marks) |
Answer: (a) First year interest = 600,000 x 6% = HK$36,000; second year interest = (600,000 – 120,000) x 6% = HK$28,800. (b) Opening principal balances are 600,000, 480,000, 360,000, 240,000 and 120,000, totalling 1,800,000; total interest = 1,800,000 x 6% = HK$108,000. (c) Interest cover = 150,000 / 36,000 = 4.17 times, which is acceptable, and the interest burden falls as the principal is repaid. Marking note: equal principal repayment means interest is charged on a falling balance, so the average balance must not be used as the annual charge. |
| 8 | In a survey of 800 respondents, 384 said they would buy a new product. The market has 250,000 households and management estimates that only 25% of those who said yes will actually buy. The product is priced at HK$180. (a) Calculate the proportion of respondents who said they would buy. (3 marks) (b) Estimate the number of interested households and the expected sales volume. (4 marks) (c) Calculate the expected sales revenue and state one limitation of this estimation method. (3 marks) |
Answer: (a) 384 / 800 x 100% = 48%. (b) Interested households = 250,000 x 48% = 120,000; expected sales = 120,000 x 25% = 30,000 units. (c) Expected revenue = 30,000 x 180 = HK$5,400,000. Limitation: stated intentions may not turn into actual purchases, and the sample may not represent the whole market. Marking note: part (b) requires two steps, and 25% must not be applied to the number of respondents. |
Questions 9-10
| # | Question | Answer and marking notes |
|---|---|---|
| 9 | A company produces 60,000 units a year. Current packaging costs HK$2.40 per unit. Recyclable packaging costs HK$3.10 per unit but reduces the waste levy by HK$0.90 per unit. (a) Calculate the annual packaging cost under the current and the new packaging. (4 marks) (b) Calculate the net change in annual cost after switching. (3 marks) (c) Apart from cost, state two reasons for switching to recyclable packaging. (3 marks) |
Answer: (a) Current cost = 60,000 x 2.40 = HK$144,000; new cost = 60,000 x 3.10 = HK$186,000. (b) Levy saving = 60,000 x 0.90 = HK$54,000; net cost = 186,000 – 54,000 = HK$132,000, which is HK$12,000 lower than the current HK$144,000. (c) Any two: meeting environmental legislation and buyer requirements; strengthening brand image and customer loyalty; responding to investor and community expectations; reducing long-term compliance risk. Marking note: part (b) must include both the higher packaging cost and the lower levy. |
| 10 | A retailer plans to open an online store with a one-off investment of HK$180,000 and annual operating costs of HK$36,000. The store is expected to generate additional contribution of HK$84,000 a year. Equipment life is five years with no residual value. (a) Calculate the annual net cash inflow and the payback period. (4 marks) (b) Calculate annual depreciation using the straight-line method and the accounting rate of return on average investment. (4 marks) (c) State two operating risks of running an online store. (2 marks) |
Answer: (a) Net cash inflow = 84,000 – 36,000 = HK$48,000; payback = 180,000 / 48,000 = 3.75 years. (b) Annual depreciation = 180,000 / 5 = HK$36,000; annual profit = 48,000 – 36,000 = HK$12,000; average investment = 180,000 / 2 = HK$90,000; rate of return = 12,000 / 90,000 x 100% = 13.33%. (c) Any two: cyber security and customer data leakage; uncontrolled logistics and return costs; platform outages disrupting transactions; online price competition eroding contribution. Marking note: part (b) uses profit, not cash inflow, in the numerator. |
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