Importing from Sweden

Question 1

Import

Answer 1

Buying goods produced by businesses in other countries

Question 2

Advantages of importing from Sweden

Answer 2

No import tax

More products can be produced

Question 3

Disadvantages of importing from Sweden

Answer 3

Exchange rates
Harder to control quality
Transport costs

Question 4

(Total) Revenue

Answer 4

Money received from sales (in a given amount of time)

Question 5

Costs

Answer 5

Expenses of a business, used to obtain the resources required to make and market the products

Question 6

How do you calculate total costs?

Answer 6

Total fixed cost + Total variable cost

Question 7

How do you calculate profit?

Answer 7

Revenue - costs

Question 8

How do you calculate gross profit?

Answer 8

Revenue - variable costs

Question 9

How do you calculate net profit?

Answer 9

Gross profit - fixed costs

Question 10

Why has the price of an Egerton fallen by £100 in the last 4 years?

Answer 10

Competitors have reduced their price, so AFL reduced theirs to keep their market share

Question 11

How much less does it cost to make an Egerton in Sweden than the UK?

Answer 11

£70, AFL make a profit on the Swedish ones

Question 12

In order to manufacture profitably in the UK, what 4 options must AFL consider?

Answer 12

Cheaper supplier
Reduce levels of stock hold
Invest in new machinery
Improve quality control

Question 13

How can AFL get a cheaper supplier?

Answer 13

Get it from an overseas company as they have cheaper labour

They must not compromise on quality though

Question 14

Why should they reduce levels of stock hold?

Answer 14

It means that there’s less storage which is cheaper

Question 15

Why should they invest in new machinery?

Example?

Answer 15

It would reduce costs in the long term

Biomass burner- eliminate energy costs

Question 16

Why would improving quality control increase profitability?

Answer 16

It would lower the costs arising from poor quality

ie customer service, waste materials

Question 17

What’s the problem with falling timber prices for AFL?

Answer 17

It will lower their competitors variable costs too, meaning they will lower their prices further

Question 18

What would happen to the town of Bowton in AFL closed their factory in the UK?

Answer 18

Small businesses would close- no one could afford to spend their money there
High unemployment rate

Question 19

What would have to local suppliers if AFL moved to Sweden?

Answer 19

They would see a fall in sales, and a fall in profit

Question 20

Why would it be expensive for AFL to close the Bowton factory?
How could this be overcome?

Answer 20

Lots of redundancy payments

Redeploy them, into marketing or warehousing