Business (AS & A Level) · Oct / Nov 2021 · Paper 23 · Question 1

Van Man (VM) Obi is a sole trader who operates a van service. He used to be employed by a similar business but realised that he likes to be in control. Obi used all of his savings to start his business so that he did not have to go into debt. He owns three vans which can carry furniture, packages and other large items. He has eight full-time employees who drive the vans and move items. Customers can hire a van with two employees to move these items from one place to another. The cost per day of providing a van with two employees is $170. The prices of the service are shown in Table 1.1. Table 1.1: Price of hiring one van (including two employees) Price for the first day’s hire Price for each additional day $250 10% discount on the price for the first day’s hire Demand for Obi’s service is growing fast. To supply this demand he needs a new van and he is investigating sources of finance. He has a choice of two vans. The details of the vans are in Table 1.2. Table 1.2: Van details Van A Van B Capital cost $30 000 $40 000 Estimated maintenance costs per year $600 $450 Insurance cost per year $500 $550 Expected life 7 years 9 years Van owner reviews • Easy to drive but not very fast • Boring but fuel efficient • Engine is very noisy, but reliable • Fast and great fun to drive • Looks great and the range of colours is fantastic • It broke down a few times, but the manufacturer repaired it quickly 5 10 15 20 25

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