BUSINESS STUDIES ANSWERS

FORM IV

PP1

MARKING SCHEME

1.a) Utility-ability of a good or service to satisfy human wants.

b) Producer goods-Goods used in producing other goods eg machinery

c) Scarcity and choice-resources are few but wants are many so or consumers must choose the most important

d) Scale of preferences-a list of wants in order of their importance.

2. Factors that account for predominant direct production.

• Reliance on poor technology
• Low income due to poverty which limits production activities
• Negative attitude towards commercialization of most productive activities
• Poor resource endorcement
• Lack of market for some goods.
• Lack of skills.

3.                                 Shares                                                 Debentures

i.Ashare is a unit of capita in a company	i. A debenture is a unit of a loan advanced to public limited company.
ii. Shareholders are owners of the company	ii.Debenture holders are creditors to the company.
iii. Shares earn dividends from the profits made	iii. Debentures earn interest which is an experience to the company
iv.Dividends on shares are payable only when the company makes profit and declares dividend	iv.Interest on debentures accurse every year and is payable whether the company makes a profit or  a loss.
i	V.Debentures are loans and security must be given by the company.
vi. Shares represent capital investment and hence does not need security.	Vi.Debentures golders have no say in the right of the company they have no Voting rights.
vii. Share capital in a business cannot be withdrawn under the company is dissolving.	Vii.Debentures can be withdrawn any time and the debenture refunded by the company.

4. Pd (price elasticity for product A)

= Proportunities change in quality demand

   Proportunities change in price.

=Change in quantity =        change in price

Quantity before change    Price before change]

=12-10                         2-3

     10              

6. Four Functions of Kenya Bureau of standards (KEBS)

Ø  Setting up to required standards are maintained through regular inspection

Ø  Prosecuting those who produce inferior goods

Ø  Putting up a stamp of approval to show that establishment standards have been met,

Ø  Carrying out testing on measuring apparatus to establish accuracy and standards

7. Factors limiting number of entrepreneurship in an area.

1.      Lack of capital                       

2.      Lack of entrepreneurial skills/technology

3.      Lack of interest in a personal business

4.      Lack of ability to borrow

5.      Poor infrastructure of roads/communication/health/water system etc.

6.      Insecurity

7.      Lack of materials

8.      Lack of Labour

9.      Lack of land

            Any 4x1=4mks

8.                    

Output	Total cost	Average cost	Marginal COST
0	55	-	-
1	70	70	15
2	82	41	12
3	87	29	5
4	92	23	5

9. Reasons why inland water transport is not popular as a means of transportation in Kenya.

1. Inland water transport is not flexible because boats can only travel on water and load and offload at quays.           
2. Many rivers in Africa are not navigable because of the changing seasons and many have rapids and falls.
3. Inland water transport is slow and therefore nor suitable for urgently needed perishable goods.
4. These Rivers are usually affected by strong winds and storms.
5. Many rivers are narrow and shallow hence do not allow use of large verses.
6. The rivers are usually affected by strong winds and storms
7. They are affected by water weeds e.g hyacinth.

    Any 4x1=4mks.

10. Benefits or Organizing

1. It provides a framework within which work ids done
2. It facilitates division of labour/work/activities
3. It promotes the best use or resources
4. It avoids duplication of work activities
5. It helps to assign duties/activities to individuals
6. It promotes coordination of Industrial efforts to archive common objectives

1 x 4 = (4mrks)

11. Sources of oligopoly POWER

1. High initial cost of production beyond ability of other firms.
2. Patent rights or trade marks
3. Exclusive control of crucial raw materials by a few firms.
4. Use of unique technology by a few firms.
5. Merger of several related firms into a few larger firms.
6. Small size of the markets –best served by few firms
7. Government protectionist policy-allow a few firms to operate.

         1x any 4 correct answers = 4 mks.

12. Benefits of national income

v  It provides information of the economy over a given period.

v  It helps to measure the standards of a living.

v  It helps to compare standards in different countries.

13. –Availability of funds for construction

     - Number of employees

      -Availability/adequate office equipment

      - Office space available

14. How consumers may benefit when producers compete

a)      Reduction in prices of products

b)      Improvement in quality of products

c)      Providing information on prices and where to buy

d)     Providing education on how to use the products

e)      Providing entertainment to consumers

f)       Providing a variety of goods

g)      Competition and demonstration where consumers can win prizes

15. Net profit=closing capital+Drawings

                              Additional capital – opening capital

                             =135000+6000-105000-15000

                             =210000

16. –Increase

     - No effect

     - Decrease

     - No effect

17. i) Open and voluntary membership

      ii) Democratic administration

      iii) Dividend payment – is bared on members contribution to the surplus in the co-operative

     iv) Limited interest on share capital

      v) Promotion of co-operative education

      vi) Co-operation with other co operations

18. i) An order

     ii) Bought note

    iii) Solid note

    iv) Acknowledgement note

     v) Credit status inquiry

    vi) Proforma invoice

 19.- He could be old as far as age is concerned

      - He could be in a risky occupation

      - He could be of poor health

     - He could be engaged in risky hobbies e.g. Mountain climbing

     - His place of residence could be risky

20. Disadvantages of an ageing population

          i.            Decline in labor supply

        ii.            Fall in quality of labor

      iii.            Decline in demand for goods for the young population

      iv.            Increase on welfare benefits

        v.            High dependency ratio

21. Benefits of effective communicating

a.       It provides and obtains information in good time

b.      It clarifies issues and instructions

c.       It enhances decision making

d.      It enhances co ordination among various departments

e.       It enhances public relations

f.       It improves customers services

22i) Increase in income of an individual

   ii) Drop in the price of the product

  iii) Increase in price of substitute goods

  iv) Subsidies by the government

   v) Increase in population

   vi) Future expectation in price

   vii) Increase of the product

23.(i) The government gets revenue

     ii) The government controls entry of harmful goods into the country

    iii) The government is able to verify documents for the goods in transit

    iv) The government can check the quality of goods imported

     v) The government is able to inspect the nature of goods imported

   vi) The government is able to check on illegal goods entering the country

24. Some documents

a)      Cash sale slip

b)      Invoice issued

c)      Credit note issued

d)     Credit note received

25. The services that the Central bank of Kenya may offer as a banker to commercial banks

- Issue of currency – It is the only institution authorized to issue currency in the country

- Banker to commercial banks – As commercial banks are required by law to deposit a certain

     percentage of their customers deposits in the central bank

- Acts as a link bank to external financial institutions

THE ELDORET EAST INTER SCHOOLS EXAMINATION

BUSINESS STUDIES

Form IV

Paper 2

Marking scheme

1.(a) Benefits of exhibition

          i.            He will be able to display his products for consumers to see

        ii.            He will be able to explain and demonstrate the use of the products correctly

      iii.            He will be able to learn new ideas to help him improve the quality of his products

      iv.            He will be able to give details information about his products

        v.            He will be able to respond to questions from the prospective customers and the general public

      vi.            He will be able to make new conducts with customers

    vii.            He may be able to receive new orders to supply the products during the gatherings

  viii.            He will be able to get information about his competitors

      ix.            He will be able to show and launch new products in the market

(Any 5 well explained x 2 = 10 mks)

(b) Circumstances under which both the retails and wholesale may be eliminated from the distribution chain.

·         Sale or purchase by tenders-this dictates the seller to deal with consumers directly

·         Technical goods- They require demonstration or after sale service

·         Retail outlet- where manufacturers have their own retail outlets

·         Perishable goods- to avoid spoilage

·         Low distribution cost- where the producer can under take the distribution function himself without extra cost

·         Small market/localized markets- can continently serve well when producers

·         Specialized orders/ classified goods and services- goods that are special orders by consumers are supplied directly to them

2. (a) Roles  trade plays in economy of Kenya

1. Linkage- Between producers and consumers thus goods are available where they are not produced

2. Market- producers are able to sell their products

3. Foreign exchange- profit earn is an important source of income/ foreign exchange nd the country.

4. Government revenue- trading activities are sources of revenue to the government in form of taxes

5. Employment opportunities- provide employment source in general and self employment

6. Promoting peace and understanding- trade encourages trading partner live harmoniously

7. Provision of goods- consumers are provided with variety of good for optimum satisfaction of their wants.

(b) Availability of close substitutes

     - Habit forming commodities

     - Time taken by consumers to adjust

     -  Durability of the commodity

     - Degree of necessity of the commodity

     - Proportion of income spent on the commodity

3. (a) Internal economies that accrue to single firm

    - Marketing economies (buying and selling)

    - Managerial economies/ skilled labor /specialization

    - Risk bearing economies

    - Transport and storage economies

    - Research economies

    - Technical economies

    - Welfare economies

(b) Services that the Central bank of Kenya offers to commercial banks

    - Accept deposit for safe keeping

    - Licensing the operations of commercial banks

    -Supervisions of banking operations

    - provide clearing facilities for cheques

    - Giving commercial banks loans as a lender of the last resort

    - Provide advisory services, banking economic matters

    - Source of currency for commercial bank operations

    - Buying and selling foreign currency from commercial banks

    - Acts as a mediator for commercial banks in case of dispute between them

    - Repatriate excess foreign currency on behalf of commercial banks

    - Statutory management during financial crisis.

4. (a) Circumstances of using letters for communication

    - Cut cost of communication because they are cheap

    - When sending information containing adequate details

    - Where there will be need of future reference

    - Where many copies are required for many recipients

    - Where the message being sent is confidential

    - Where the information sent is intended for evidence

 (b)                                           MAENDELEO TRADERS

                                                TRIAL BALANCE

  AS AT 31^ST DECEMBER 2008

                                                  DR                                            CR

Purchases                               50000

Premises                                 1,570,000

Creditors                                                                                    420000

Sales                                                                                           800000

Cash                                        140000

Rent received                                                                             230000

Drawings                                 240000

Capital                                                                                        1,000.000

                                                2450000                                      2450000

5(a) Five trends in management

-          Pollution- it must be reduced and prevented

-          Prostitution and aids – form of movement of people affects man power

-          State of economy- management must respond to economy. see ways of improving employment situation

-          Modernization – management using modern technology

-          Performance contracts- managers promoted only through good performance

(b)                                     SINA CHUKI TRADERS

                                         CASH BOOK

Date        Details   Discount    Cash    Bank    Date    Details      Discount      Cash     Bank

Allowed      Shs       Shs                                    Received       Shs       shs

1/1/08  Bal.b/d                     12600   25420   3/1/08  Transport                       2500

2/1/08   Sales                          3000               7/1/08  Drawing                        5500

5/1/08   Kemboi     171                     3420     8/1/08  Mwangi      126                           4074

16/1/08 Munene     196                     9800     8/1/08  Kosgei          63                           2037

16/1/08 Akila          143                    7150     8/1/08   Otieno          81                          2619

16/1/08  Odhiambo   52                    2600     8/1/08   Nasimiyu    156                         5044

16/1/08                                                           25/1/08  Salaries                                   17500

30/1/08   Expenses                  1500

31/1/08   Bal C/d                      6100     17116

562     15600    48390                                   426         15600      48390

1/2/08     Bal b/d     562         6100  17116

6.(a) circumstances under which an insurance company may find it necessary to reinsure

1. Value of the property- when the value of property is great, such as a ship, the risk is too high to be borne by a single insurer
2. Number of risks covered- when the insurance company has covered many different risks, it would be too costly to compensate many claims at once hence the need for re-insurance
3. Need to create more customers confidence- where the insurance company wants to create confidence in its clients by assuring them of compensation
4. Need to spread risks- where the insurance company wishes to share loss in event of a major loss occurring
5. Government policy- where the government may make it a legal requirement for an insurance company to re-insure
6. High risk of loss- where chances of loss through insured risks is high it becomes necessary to re-insure

 (b)                                          MAJI MATAMU TRADERS

                                                PROFIT AND LOSS ACCOUNT

                                               FOR THE YEAR ENDING 31/1/2009

 

Shs.                                               Shs

Discount allowed       142000     Gross profit                520600

Lighting                      25200        Rent received           120000

Interest on loan           1200

Repairs on premises   60000

Furniture & fittings     72030       Net loss                      61930

Motor vehicles            300000

General expenses        102100

TOTAL                      702530                                       702530

Shs.                                              Shs

Fixed assets                540000        Capital                    1400,000

Premises                     408170        Add N/Loss            61930

Furniture & fittings    900,000                                      1,338,070

Motor vehicles           1,848,170

T.F.A                                             5Yrs bank loan        472,500

Sundry creditors      227,000

Current assets

Sundry debtors            116,900

Closing stock              72,500

T.C.A                          189400

TOTAL                       2,037,570                                  2,037,570

       -It indicates the distribution of income which helps the government to plan

-It provides breakdown of various sectors in the economy

- It enables to access performance of the country over a given period

-It enables entrepreneur to make investment decisions

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