AQA A Level Business Studies
Topic questions Business economics Operations management
6 questions · 75 marks · about 1.5 hours
A business sets two operational objectives for its four factories:
to achieve a minimum capacity utilisation of 80%
to achieve a minimum labour productivity of 2 units per employee.
The table below provides data for each factory.
Read the information below and then answer the questions that follow.
AJS plc
AJS plc is a manufacturer of non-recyclable packaging. This packaging is widely used by takeaway food outlets. AJS plc plans to invest £500 000 in new technology to increase capacity and make its factory more capital intensive.
Appendix A Data on proposed investment (produced by AJS plc’s operations manager)
| Year | Annual net cash flow£000s | Discount factor (10%) |
| 0 | (500) | 1.00 |
| 1 | (50) | 0.91 |
| 2 | 250 | 0.83 |
| 3 | 600 | 0.75 |
Appendix B UK market for non-recyclable takeaway food packaging
Appendix C UK market for recyclable takeaway food packaging
Appendix D Selected Human Resource data 2022
| AJS plc | Industry average | |
| Average salary | £22 000 | £26 000 |
| Salary costs as a percentage of turnover (%) | 40 | 35 |
| Labour turnover (%) | 15 | 4 |
| Working days lost through industrial action | 25 | 5 |
| Average number of applicants for vacancies | 14 | 55 |
Appendix E Selected Financial data for AJS plc
| 2022 | |
| Current assets | £550 000 |
| Current liabilities | £270 000 |
| Non-current liabilities | £4m |
| Operating profit | £3m |
| Gearing | 22% |
| Change in the share price of AJS plc over the year | –15% |
| Change in the share price of the top 100 UK companies over the year | +8% |
Calculate the Net Present Value for AJS plc’s proposed investment.
Using Appendix E, calculate the Return on Capital Employed for AJS plc in 2022.
Analyse why AJS plc has decided to become more capital intensive.
With reference to the data provided, would you advise a potential investor to buy shares in AJS plc?
Justify your view.
Analyse why Logger Boards Ltd prioritises meeting environmental objectives when making operational decisions.
To what extent does the data in Appendix A suggest that building the new production facility will improve Logger Boards Ltd’s operational efficiency?
Analyse why a business might choose to use labour intensive processes rather than capital intensive processes.
The data below relates to a factory.
Capacity = 180 units per day
Number of employees = 16
Wages per day = £60 per employee
Selling price of product = £15 per unit
Capacity utilisation of factory = 80%
Assuming that all output is sold, calculate the factory’s employee costs as a percentage of turnover.
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