GCSE Business Paper 1
Covers Enterprise and Entrepreneurship, Spotting a Business Opportunity, Business Aims and Objectives and 9 more.
Questions
Question 1 [3 marks]
Business Ownership and Growth
Explain one reason why a small partnership might choose not to convert to a private limited company, even as it grows.
Question 2 [3 marks]
Profit and Financial Performance
A shop has sales revenue of 50000 pounds and cost of sales of 32000 pounds for the year.
Calculate the shop's gross profit, and its gross profit margin to one decimal place.
Question 3 [3 marks]
The Marketing Mix
Explain one reason why a new energy drink brand might use a penetration pricing strategy when it first launches.
Question 4 [3 marks]
Business Aims and Objectives
A well-established chain of five supermarkets has traded successfully and profitably for over twenty years.
Explain one reason why profit maximisation, rather than survival, is likely to be this business's main objective.
Question 5 [4 marks]
External Influences on Business
A UK clothing retailer imports most of its stock from overseas, priced in US dollars.
The value of the pound falls sharply against the dollar.
Explain two effects this fall in the exchange rate could have on the retailer.
Question 6 [4 marks]
Human Resources
A restaurant currently employs all its kitchen staff on permanent contracts, even though customer numbers are much higher in summer than in winter.
Explain two benefits to the restaurant of instead employing some staff on temporary contracts for the busy summer period only.
Question 7 [4 marks]
Cash Flow
A plumbing business forecasts the following for March: cash inflows of 6200 pounds, cash outflows of 7050 pounds, and an opening balance of 1400 pounds at the start of the month.
Calculate the net cash flow for March, and the closing balance at the end of March.
Question 8 [4 marks]
Quality and Supply Chains
A phone case factory produces 4000 cases a week. 3 percent are found faulty during inspection and are scrapped at a cost of 2 pounds each in wasted material.
A further 1 percent pass inspection but are later returned by customers, at a cost of 7 pounds each in refund and postage.
Calculate the total weekly cost of the faulty items caught at inspection, and the total weekly cost of the items returned by customers.
Question 9 [4 marks]
Human Resources
A retailer is deciding whether to train its new sales staff before they start serving customers.
Explain two benefits to the retailer of providing training for new staff.
Question 10 [5 marks]
Break-even Analysis
A dog grooming salon has fixed costs of 2800 pounds per month.
It charges 35 pounds per groom, and the variable cost per groom is 10 pounds.
The salon currently completes 130 grooms a month.
Calculate the break-even number of grooms per month, and the margin of safety at the current output of 130 grooms.
Question 11 [5 marks]
Spotting a Business Opportunity
In a small town, three plumbing firms share a market worth 500000 pounds a year.
Firm A has annual revenue of 175000 pounds and Firm B has annual revenue of 235000 pounds.
Calculate Firm A's market share and Firm B's market share as percentages, and state which firm has the larger share.
Question 12 [6 marks]
Operations Management
A candle company has grown from making one-off custom candles by hand to now having steady, high demand for one standard, best-selling scent.
It is deciding whether to switch this best-selling line to flow production on a small production line.
Evaluate whether the company should switch its best-selling candle to flow production.
Question 13 [6 marks]
Enterprise and Entrepreneurship
A trainee accountant earning 30000 pounds a year is considering leaving his job to open an artisan bakery, using his entire 25000 pounds of personal savings as start-up capital.
Evaluate whether the trainee accountant should give up his job and savings to open the bakery.
Question 14 [6 marks]
The Marketing Mix
A children's clothing brand has always sold exclusively through independent boutique shops.
It is considering also selling through a large national supermarket chain, which would mean significantly lower prices per item to meet the supermarket's bulk-buying terms.
Evaluate whether the brand should start selling through the supermarket chain.
Model solutions
| Question 1[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that remaining a partnership keeps a simpler set-up, such as no requirement to publish annual accounts | B1 |
| developing this, such as the partners keeping their financial affairs and business decisions more private than a limited company must | B1 |
| concluding that this simplicity can matter more to some owners than gaining limited liability, especially if they judge their own risk of large debts to be low | B1 |
| Final answer: Remaining a partnership avoids the extra paperwork of a limited company, such as publishing accounts, and keeps the partners' affairs more private | |
| Question 2[3 marks] | |
|---|---|
| Answer or working | Marks |
| gross profit = 50000 minus 32000 = 18000 pounds | M1 |
| dividing gross profit by sales revenue and multiplying by 100 | M1 |
| a gross profit margin of 36.0 percent | A1 |
| Final answer: Gross profit = 18000 pounds; gross profit margin = 36.0 percent | |
| Question 3[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that a low initial price is set | B1 |
| developing this, such as attracting customers away from established rival brands quickly | B1 |
| concluding that this helps the new brand build market share and awareness before it later raises prices | B1 |
| Final answer: A low launch price attracts customers from established rivals, helping the brand build market share and awareness before prices rise later | |
| Question 4[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that the business is well-established with a proven, reliable customer base | B1 |
| developing it, such as no longer needing to prioritise simply staying open, unlike a brand-new business | B1 |
| concluding that it can instead focus on maximising the return generated from its existing, secure position | B1 |
| Final answer: As a well-established business with a proven customer base, it no longer needs to prioritise survival, so it can focus on maximising the profit from its secure position | |
| Question 5[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying an effect, such as the pound cost of importing stock rising, since more pounds are needed to buy the same amount of dollars | B1 |
| developing it, such as this squeezing the retailer's profit margin unless it raises its UK selling prices | B1 |
| identifying a second effect, such as demand from UK customers falling if prices are raised to compensate | B1 |
| developing it, such as this being especially likely if competitors who source stock differently do not need to raise prices by as much | B1 |
| Final answer: Two developed effects, such as a higher pound cost of imported stock squeezing margins, and a possible fall in demand if prices are raised to compensate | |
| Question 6[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a benefit, such as only paying these staff's wages during the busy summer period when they are actually needed | B1 |
| developing it, such as avoiding paying wages for extra staff during the quieter winter months when demand is much lower | B1 |
| identifying a second benefit, such as flexibility to adjust the size of the temporary team each year | B1 |
| developing it, such as this letting the restaurant respond to changing demand from one year to the next without being locked into permanent staffing | B1 |
| Final answer: Two developed benefits, such as only paying wages during the busy summer period, and the flexibility to adjust staff numbers each year depending on demand | |
| Question 7[4 marks] | |
|---|---|
| Answer or working | Marks |
| net cash flow = 6200 minus 7050 | M1 |
| a net cash flow of negative 850 pounds | A1 |
| closing balance = 1400 plus the net cash flow | M1 |
| a closing balance of 550 pounds | A1 |
| Final answer: Net cash flow = negative 850 pounds; closing balance = 550 pounds | |
| Question 8[4 marks] | |
|---|---|
| Answer or working | Marks |
| 3 percent of 4000 = 120 faulty items | M1 |
| a cost of 240 pounds (120 times 2) | A1 |
| 1 percent of 4000 = 40 returned items | M1 |
| a cost of 280 pounds (40 times 7) | A1 |
| Final answer: Cost of items faulty at inspection = 240 pounds a week; cost of items returned by customers = 280 pounds a week | |
| Question 9[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a benefit, such as staff being able to do their job more effectively and confidently from the start | B1 |
| developing it, such as reducing mistakes and improving customer service, which can increase sales | B1 |
| identifying a second benefit, such as staff feeling more valued and motivated | B1 |
| developing it, such as reducing staff turnover and the cost of recruiting and training replacements | B1 |
| Final answer: Two developed benefits, such as more effective, confident staff improving customer service, and higher motivation reducing costly staff turnover | |
| Question 10[5 marks] | |
|---|---|
| Answer or working | Marks |
| contribution per groom = 35 minus 10 | M1 |
| dividing 2800 by the contribution per groom | M1 |
| a break-even output of 112 grooms | A1 |
| margin of safety = 130 minus the break-even output | M1 |
| a margin of safety of 18 grooms | A1 |
| Final answer: Break-even = 112 grooms per month; margin of safety = 18 grooms per month | |
| Question 11[5 marks] | |
|---|---|
| Answer or working | Marks |
| Firm A's share = 175000 divided by 500000, multiplied by 100 | M1 |
| 35 percent | A1 |
| Firm B's share = 235000 divided by 500000, multiplied by 100 | M1 |
| 47 percent | A1 |
| correctly concluding that Firm B has the larger market share | B1 |
| Final answer: Firm A's market share = 35 percent; Firm B's market share = 47 percent; Firm B has the larger share | |
| Question 12[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour, such as flow production making the standard candle far faster and at a lower cost per unit, given the steady, high demand | B1 |
| developing it, such as the lower unit cost letting the company increase its profit margin or lower the price to sell even more | B1 |
| a point against, such as setting up a flow production line needing a significant upfront investment and being inflexible, suited only to that one scent | B1 |
| developing it, such as the dedicated equipment being hard to reuse for other products if demand for that specific scent later falls | B1 |
| a further factor, such as whether demand for the best-seller is stable enough to justify the investment, or whether a less committed method leaves more flexibility | B1 |
| a justified conclusion weighing the lower unit cost of flow production against the upfront investment and inflexibility if demand changes | B1 |
| Final answer: A justified judgement weighing the lower unit cost of switching the proven best-seller to flow production against the upfront investment and inflexibility if demand for that scent later changes | |
| Question 13[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour, such as gaining independence and the chance to turn his passion for baking into his main income | B1 |
| developing it, such as this potentially being more personally rewarding than continuing in a job that is not his own business | B1 |
| a point against, such as giving up his guaranteed 30000-pound salary and risking his entire 25000 pounds of savings | B1 |
| developing it, such as having no financial safety net left if the bakery struggles in its early months | B1 |
| a further factor, such as whether he has researched local demand or gained any relevant baking or business experience before committing everything | B1 |
| a justified conclusion weighing the appeal of independence against the total loss of income and savings if the bakery fails, related to how well-prepared his plan is | B1 |
| Final answer: A justified judgement weighing the appeal of independence and potential reward against the risk of losing his entire salary and savings if the bakery fails, depending on how well-researched his plan is | |
| Question 14[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour, such as reaching a much larger number of potential customers than the boutiques alone | B1 |
| developing it, such as significantly increasing total sales volume and national brand awareness | B1 |
| a point against, such as the lower prices required by the supermarket reducing the profit margin on every item sold that way | B1 |
| developing it, such as this also risking making the brand seem less premium or exclusive, harming its image with existing boutique customers | B1 |
| a further factor, such as whether the extra volume would make up for the lower margin, or whether the boutique range could be kept separate and premium | B1 |
| a justified conclusion weighing wider reach and volume against lower margins and the risk to the brand's premium image | B1 |
| Final answer: A justified judgement weighing the much wider reach and volume from the supermarket against the lower margin per item and the risk to the brand's premium image with existing boutique customers | |