Business management · 2010 · November · Paper 2 · HL · Question paper

N10/3/BUSMT/HP2/ENG/TZ0/XX BUSINESS AND MANAGEMENT HIGHER LEVEL PAPER 2 Friday 19 November 2010 (morning) INSTrUc TIoNS To caNdIda TES  d o not open this examination paper until instructed to do so.  Section a: answer one question.  Section B: answer two questions. 2 hours 15 minutes 8810-5012 10 pages © International Baccalaureate organization 2010 88105012 N10/3/BUSMT/HP2/ENG/TZ0/XX 8810-5012 – 2 – SECTION A Answer one question from this section. 1. Dan Electro Dan Bowen is a sole trader who sells digital cameras directly to consumers. He owns an online business and all sales are processed electronically under the business name Dan Electro. The office, storage place and call centre are located together in an expensive and desirable city centre location. Dan started the business three years ago by borrowing a considerable amount of money from a bank. He used his residential property as collateral* for the loan. The cameras are bought and shipped from a reputable and reliable overseas supplier who charges a high price for good quality cameras and prompt transportation. Dan has to pay in advance for the cameras. Dan Electro’ s customers are very loyal and see their purchase as good value for money. Repeat purchases comprise a large percentage of Dan Electro’ s sales. Some customers have even indicated that they would pay a higher price for the cameras because of their quality and the good service he provides. Dan is now worried about the forecasted rise in interest rates, inflation and an increase in online competition. Dan Electro may face some cash flow difficulties in the coming years. He is considering various strategies in order to prevent such possible cash flow difficulties. Financial information for 2010 (all figures in US$) Fixed costs per year Rent 20 000 Marketing 4000 Administration 5000 Interest payments 1000 Variable costs per camera Camera 135 Transportation 45 Direct labour 20 Price per camera 250 Dan is expected to sell 700 cameras in 2010. * collateral: the borrower’s property is offered to the lender as security if the loan is not paid back (This question continues on the following page)