Business (AS & A Level) · Feb / March 2024 · Paper 22 · Question 1

Zoe’s Bags (ZB) Zoe’s Bags (ZB) is an online retailer that makes and sells a range of luxury hand-made bags. The business was set up three years ago as a partnership by Zoe and her brother Luis and has grown each year. The bags are targeted at a niche market and made to customers’ orders. The business works closely with its main supplier of raw materials. ZB operates a just in time (JIT) inventory management system. All bags have a lead time of five days from when the customer submits the order. Following a magazine advertising promotion in January, orders grew by 50% in February to 1400 bags. Zoe and Luis found it difficult to organise the larger production team. A break-even chart for February is shown in Fig. 1.1. 1500 1400 1300 1200 1100 1000 900 800 Units produced 700 600 500 400 300 200 100 0 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 Costs / Revenue ($) Total costs Fixed costs Sales revenue Fig. 1.1 ZB’s break-even chart for February Due to the increase in orders, Zoe and Luis want to focus on developing the business. They recruited 2 supervisors to manage the 15 production employees. To support the new supervisors, Luis organised some off-the-job training. All production employees are currently paid a salary. However, ZB’s labour turnover has increased recently. One of the new supervisors has recommended that ZB should introduce performance-related pay. Zoe and Luis are currently considering this recommendation. 5 10 15

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