Business Studies - Exam Questions 2000
Paper 9 question 5 (2000)

What is meant by a critical path? [5 marks]

The village bakery has asked you to advise them about setting up a web site, including a trading function.

(a) Draw up a project plan, illustrated by a GANNT chart and indicate the critical path. [5 marks]

(b) Make an estimate of the costs involved, and estimate how much working capital you would need. [5 marks]

(c) What other advice would you give them?

Solution notes:

In a project plan the Critical Path is the longest sequence of dependent activities that lead to the completion of the plan.

The critical path defines the shortest time in which a project can be completed.

Any delay of a task on the critical path will delay completion of the whole plan.

StartProject start
Gather requirements Initial discussions with the client
Agree specAgree approach and functionality with client
Acquire Internet account Standard ISP account
Acquire hardwarePC etc for client's use
Acquire merchant systemProbably facility provided by ISP; use client's existing credit card processing
Develop UIGraphical style
Agree UIAgree look with client
Alpha buildSay about 20 pages at half day per page plus photos and order form
TestTest the site; check with client; process dummy transactions
Beta buildMake corrections required
TestTest and check again
After-care and maintenance will also be needed.

Critical path in red.

Days Cost/dayTotal
Analyst/Web page author4830014400
Graphic Design65003000

Maintenance/running costs:Per month
Maintenance say 12% p.a.194
Depreciation - say 60 months323
Total monthly cost617

(c) Assume 50% is paid up-front and 50% on completion then approximately £10K of working capital would be needed.

Alternatively based on 10% on signature, and monthly payments, paid on 30 days thereafter

Month 1Month 2Month 3
End Month 17740
End Month 29720
Cash at end-6660-97200

Again about £10K working capital.

(c) Assuming the bakery's profit is about 10% of turnover, the web pages will need to generate an extra £6000 of business each month. At, say, £10 for a cake, this means selling an extra 600 cakes a month or 30 per working day.

Hard, but possible, but may require increase in production. Better means of distribution, such as overnight courier services may also be required.

Customer details may require registration under the Data Protection Act.

Other factors, such as increased publicity and reduction of seasonal effects may help justify the cost.

Web pages do not exist, or work, in isolation. The baker will need to do other things to guide people to his web-site, for example by including the URL in conventional advertising.

Introducing the Internet to a conventional business may trigger more far-reaching changes than just a new order-taking system. Although for a small producer the order-taking system may simply print manual, paper based orders, as the business grows consideration may be given to for example, automatic stock control systems, just-in-time ordering systems, and upgraded accounting and information systems such as customer lists and a recipe database. Supplies, such as flour, may possibly be ordered advantageously via the 'net. The net gives access to a wider range of suppliers and equipment manufacturers, as well as specialist discussion groups, both professional and amateur, for example mailing lists devoted to particular sorts of bread recipes. The business, potentially, stops being local and has a global marketplace.