BUSS1 Examination Question Practise

The Local Shop

Chewton Stores is the idea of Stacey and her brother Nick. They feel that Chewton, the Cornish village in which they
live, would benefit from a local independent shop. The village is 15 miles from the nearest town and supermarket and
there are several smaller villages surrounding Chewton without a local shop. It would sell a range of grocery items
including fruit and vegetables, a deli counter, hot pies and pasties together with made to order sandwiches. Chewton
Stores would also stock a range of magazines and newspapers and offer a dry cleaning service. There is a vacant
property that could be converted into a retail outlet. Stacey and Nick have undertaken both primary and secondary
research and have estimated that, being open seven days a week from 7am to 7pm, they would get 3 000 customers
in April (their first month of trading), which would increase by 20% in May. They also found out that the UK grocery
market was worth 128 billion in 2008.

From the research the financial forecasts are:Item

Fixed cost of rent
Other fixed costs
Variable cost stock
Other variable costs
Average spend per customer

Forecast Revenue/Costs
1 640 a month
750 each quarter (divided equally over the 3 months)
Average 1 950 a month
Average of 2.50 per customer
4.50

Following advice from their bank manager Stacey and Nick completed income and expenditure budgets for the first
two months of trading:April (000s)
13.5
1.89
1.95

Chewton Stores Budgets

Income
Expenditure: rent & other fixed costs
Expenditure stock
Expenditure other variable costs
Profit/(loss) budget

(a)
(b)

May (000s)
(c)
1.89
1.95
9
(d)

If the annual growth in the UK grocery market was 5% per annum calculate the value of the UK grocery
market at the end of 2010.

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(4 marks)
2

Using the figures for April calculate the monthly break-even quantity for Chewton Stores.

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(5 marks)
3

Calculate the missing figures in the Chewton Stores budgets for April and May.
(a)
(b)
(c)
(d)

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(2 marks)
(2 marks)
(2 marks)
(2 marks)

Following some further market research Stacey and Nick changed their forecast for customer numbers to
remain at the April figure of 3 000 for each month during their first trading year. Using this revised forecast
calculate the expected profit from Chewton Stores first year of trading.

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(5 marks)

When Stacey and Nick commenced trading they realised that the figure for the variable cost of stock was too
low, they increased this to 2 500 in their June budget. Complete their June budget.
(2 marks per figure - 10 marks in total)
Chewton Stores Budgets

June (000s)

Income
Expenditure: rent & other fixed costs
Expenditure stock
Expenditure other variable costs
Profit/(loss) budget

Total

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