A-AS Level (CIE) Business Studies Paper-2: Specimen Questions with Answers 12 - 13 of 52

Question 12


Write in Short

Short Answer▾

Explain the terms:

a. Segmentation


Market segmentation is the process of dividing a heterogeneous market into homogeneous sub-unit. Example- A firm decided to launch the product for the urban male customer. Market segmentation helps a business in competing in a highly competitive market. A successful marketer, knows that all elements of the marketing mix are imitable. Eventually, competition will catch up and, at the end of the day, it will be a promotion and price war. To be able to overcome this threat from competition, successful marketers always segment their markets, position themselves in a segment, they perceive they will be able to defend against competition attacks and emerge as the segment leader.


Case Study-7

A company՚s requirement for ten days are 6,300 units. The ordering cost per order is $ 10 and the carrying cost per unit is $ 0.26. The following is the dis-countable schedule applicable to the company.

The Following is the Discountable Schedule Applicable to the Company
No. of orders12345678910
Order in size630031502100157512601050900787.5700630
Av. inventory315015751050787.5630525450393.7350315
Carrying cost8194102732051641371171029182
Order cost102030405060708090100
Total cost829430303245214297187182181182
Less: discount31518995956363----
Total cost after discount514241208150151234187182181182
The Following is the Discountable Schedule Applicable to the Company
Lot SizeDiscount per unit ($)
1 - 999

1000 - 1499

1500 - 2499

2500 - 4999

5000-and above






Question 13 (1 of 5 Based on Passage)


Write in Short

Short Answer▾

At which quantity should the company place order?


The use of the EOQ approach can be extended to production runs to determine the optimum size of manufacturer. Two cost involved are set-up costs and carrying cost. Set-up cost include costs on the following activities: preparing and processing the stock orders, preparing drawings and specifications, tooling machines set-up, handling machines, tools, equipment՚s, and materials over time. The economic production size will be one where the total of set-up and the carrying cost is minimum. When the quantity discounts are available, the company should place four order of 1575 units each as the total cost is minimum $ 150.

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