Paper 2 Focus

Question 1

Gross profit margin

Answer 1

Revenue - cost of goods sold
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Revenue

Question 2

Net profit margin

Answer 2

Revenue - cost
———————
Revenue

Question 3

Gross profit

Answer 3

Revenue - cost of goods sold

Question 4

Net profit

Answer 4

Gross profit - operating expenses and taxes

Question 5

Buffer stock

Answer 5

The lowest amount of stock a business can store on site while still being able to operate effectively

Question 6

Retained profit

Answer 6

Amount of a business’s net income that is kept within its accounts, rather than paid out to shareholders.

Question 7

Logistics

Answer 7

Logistics is the movement, storage, and operations around whatever the business is in.

Question 8

Procurement

Answer 8

Procurement is the buying or purchasing of goods or services.

Question 9

Job production

Answer 9

Individual products made one by one

Advantages
- high profit margins for bespoke products

Disadvantages
- Highly skilled staff are required, which increases costs

Question 10

Batch production

Answer 10

Advantages
- able to make a variety of sizes or flavours

Disadvantages
- not as flexible regarding customers’ tastes as job production

Question 11

Flow production

Answer 11

Making identical products on an assembly line

Advantages
- able to make for larger quantities

Disadvantages
- expensive to buy all the machinery needed for automation

Question 12

Average rate of return

Answer 12

Average annual profit
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Initial investment