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This is a Consumer and Insurance Question - Junior Cycle Business Studies - Question 4 - 2015
Question 4
This is a Consumer and Insurance Question. Answer all parts of this question: Brendan Mitchell will be returning to Ireland on 1 July 2015 to live at The Quay, Ark... show full transcript
Worked Solution & Example Answer:This is a Consumer and Insurance Question - Junior Cycle Business Studies - Question 4 - 2015
Step 1
A) Brendan expects to use 400 units of electricity each month. Calculate the total cost per month for each company. (Show your workings.) Which company would you advise him to choose? Explain your answer.
Answer
To calculate the total cost for Brendan at both companies, we follow these steps:
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Electric Saver Calculation:
- Standing Charge: €10.50/month
- Unit Rate: €0.1701/unit for 400 units
- Total Unit Cost: 400 units × €0.1701 = €68.04
- Subtotal (without discount): €10.50 + €68.04 = €78.54
- Apply Discount: 15% of €78.54 = €11.78
- Subtotal after Discount: €78.54 - €11.78 = €66.76
- VAT (13.5%): €66.76 × 0.135 = €9.01
- Total Cost: €66.76 + €9.01 = €75.77
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Electric Power Calculation:
- Standing Charge: €10.90/month
- Unit Rate: €0.1715/unit for 400 units
- Total Unit Cost: 400 units × €0.1715 = €68.60
- Subtotal (without discount): €10.90 + €68.60 = €79.50
- Apply Discount: 20% of €79.50 = €15.90
- Subtotal after Discount: €79.50 - €15.90 = €63.60
- VAT (13.5%): €63.60 × 0.135 = €8.58
- Total Cost: €63.60 + €8.58 = €72.18
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Recommendation: Based on the calculations, the total cost for Electric Saver is €75.77 and for Electric Power is €72.18. Therefore, I would advise Brendan to choose Electric Power Company, as the net monthly payment will be cheaper by €3.59.
Step 2
B) Draft a letter, using today’s date, written by Gerry to Brendan explaining the principles of insurance which apply when purchasing insurance.
Answer
The layout of the letter is as follows:
The Square
Rathdowney
Co. Laois
9 June 2015
Mr. Brendan Mitchell
The Quay
Arklow
Co. Wicklow
Re: Information on purchasing home insurance
Dear Brendan,
In response to your query seeking advice on purchasing home insurance, I hope the following will be of benefit to you.
When purchasing insurance, you need to understand the relevant principles of insurance which are as follows:
1. **Insurable Interest**: You must have a financial interest in any item you want to insure; you must stand to gain by its existence or suffer financially by its loss.
2. **Utmost Good Faith**: You must answer all the questions on a proposal form truthfully/disclose all material facts which may affect the insurance contract.
I hope this is of some help to you and feel free to contact me at any time.
Yours sincerely,
Gerry Murphy
This letter includes key principles necessary for Brendan to understand while purchasing home insurance.
Step 3
C) Examine the following signs displayed in a sports shop: (i) Goods will not be exchanged (ii) State the relevant principle of consumer law that has been broken in each case.
Answer
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Goods will not be exchanged:
- This sign refers to the Consumer Rights Act, which provides that consumers have the right to exchange goods that are faulty or not as described.
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Go-Run Running Shoes:
- This statement implies misleading information provided to consumers regarding their rights, as it suggests no exchange or refund is allowed regardless of the condition of the product.