Ade’s Engineering Company(AEC) makes parts for cars and trucks. These are sold to car manufacturers in many countries. The parts include metal brake components and rubber seals to fit around windows. AEC operates in Country X, which until a few years ago, had an economy dominated by agricultural and coal mining. Over the last 20 years, the relative importance of the primary sector has declined. To be successful, AEC required natural resources to make acr parts and the services provided by the other businesses. Consumer income is rising rapidly in Country X. 1. What is meant by Primary sector [2] 2. Identify two examples of services that a business such as AEC requires [2] 3. Identify and explain 2 reasons why a business such as AEC could not be successful without other firms providing natural resources. [4] 4. Identify and explain two likely reasons why the relative importance of the primary sector of Country X’s economy has declined. [6] 5. A Government minister in Country X has recently said “The secondary sector of industry will always be more important than the tertiary sector to our economy”. Do you agree with this view? Justify your answer. [6]

Fanning company is considering the addition of a new product to its cosmetics line. the company has three distinctly different options: a skin cream, a bath oil, or a hair coloring gel. relevant information and budgeted annual income statements for each of the products follow. skin cream bath oil color gel budgeted sales in units (a) 110,000 190,000 70,000 expected sales price (b) $8 $4 $11 variable costs per unit (c) $2 $2 $7 income statements sales revenue (a × b) $880,000 $760,000 $770,000 variable costs (a × c) (220,000) (380,000) (490,000) contribution margin 660,000 380,000 280,000 fixed costs (432,000) (240,000) (76,000) net income $228,000 $140,000 $204,000 required: (a) determine the margin of safety as a percentage for each product. (b) prepare revised income statements for each product, assuming a 20 percent increase in the budgeted sales volume. (c) for each product, determine the percentage change in net income that results from the 20 percent increase in sales. (d) assuming that management is pessimistic and risk averse, which product should the company add to its cosmetics line? (e) assuming that management is optimistic and risk aggressive, which product should the company add to its cosmetics line?