GCSE Business Paper 2
Covers Enterprise and Entrepreneurship, Spotting a Business Opportunity, Business Aims and Objectives and 9 more.
Questions
Question 1 [2 marks]
Operations Management
State two methods of production a business could use to make its products.
Question 2 [3 marks]
Enterprise and Entrepreneurship
A qualified electrician earns 32000 pounds a year working for a large firm and is considering leaving to set up his own electrical contracting business.
Explain one opportunity cost the electrician gives up by leaving his job to start the business.
Question 3 [3 marks]
Cash Flow
A new mobile hairdresser is preparing to launch and has been advised to prepare a cash flow forecast before starting.
Explain one reason why preparing a cash flow forecast is useful for the new business.
Question 4 [3 marks]
Profit and Financial Performance
Explain one reason why two businesses with the same sales revenue could have very different gross profit margins.
Question 5 [4 marks]
Quality and Supply Chains
A cafe has always bought its coffee beans from whichever supplier is cheapest that month, switching suppliers frequently.
Explain two benefits to the cafe of instead building a long-term relationship with one trusted supplier.
Question 6 [4 marks]
The Marketing Mix
A soft drinks brand always prices its product at 1.99 pounds rather than 2.00 pounds.
Explain two reasons why the brand uses this psychological pricing.
Question 7 [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 8 [4 marks]
External Influences on Business
The government increases the National Minimum Wage.
Explain two effects this could have on a business that employs a large number of staff on the minimum wage.
Question 9 [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 10 [5 marks]
External Influences on Business
A cafe employs 8 staff on the minimum wage, each working 30 hours a week. The minimum wage rises from 10 pounds to 11 pounds an hour.
Calculate the extra weekly wage cost this rise creates for the cafe, and the extra cost over a year, assuming 52 weeks.
Question 11 [5 marks]
Business Ownership and Growth
A small factory produces 2000 units a month with total costs of 24000 pounds.
After expanding, it produces 5000 units a month with total costs of 45000 pounds.
Calculate the average cost per unit before and after the expansion, and state whether the business has benefited from economies of scale.
Question 12 [6 marks]
Business Aims and Objectives
A small brewery's objective has been survival, and it broke even in year 2, with revenue of 180000 pounds and total costs of 178000 pounds.
For year 3, the owner sets a new objective: a net profit margin of at least 10 percent, on forecast revenue of 220000 pounds and forecast total costs of 198000 pounds.
Calculate whether the year 3 forecast would meet the 10 percent net profit margin objective, and evaluate whether setting this objective now is realistic for the brewery.
Question 13 [6 marks]
Spotting a Business Opportunity
A regional ice cream brand had annual sales of 240000 pounds last year, in a market worth 1200000 pounds a year.
This year, a new rival launched, the market grew to 1400000 pounds, and the brand's own sales grew to 252000 pounds.
Calculate the brand's market share last year and this year, and evaluate whether this year's performance should be considered a success.
Question 14 [6 marks]
Profit and Financial Performance
A software company's figures are shown below.
Year 1: revenue of 200000 pounds, net profit of 20000 pounds. Year 2: revenue of 260000 pounds, net profit of 20800 pounds, after taking on extra staff to support the higher sales.
Calculate the net profit margin for each year, and evaluate whether Year 2 represents an improvement in the company's financial performance.
Model solutions
| Question 1[2 marks] | |
|---|---|
| Answer or working | Marks |
| a valid method, such as job production | B1 |
| a second valid method, such as batch production or flow (mass) production | B1 |
| Final answer: Any two of: job production, batch production, flow (mass) production | |
| Question 2[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying an opportunity cost, such as the guaranteed 32000-pound salary | B1 |
| developing it, such as this being the next best alternative given up by choosing self-employment | B1 |
| linking this to the electrician needing the new business to eventually replace or exceed this income | B1 |
| Final answer: The opportunity cost is the guaranteed 32000-pound salary given up, the next best alternative, which the new business must eventually replace or exceed | |
| Question 3[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a reason, such as predicting the months when the business might run short of cash | B1 |
| developing it, such as allowing the business to arrange finance, such as an overdraft, in advance of any shortfall | B1 |
| concluding that this reduces the risk of the business being unable to pay its bills or suppliers on time | B1 |
| Final answer: A cash flow forecast predicts months when cash might run short, letting the business arrange finance such as an overdraft in advance and reducing the risk of being unable to pay bills on time | |
| Question 4[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that their cost of sales can differ, even with similar revenue, such as how much they pay for stock or materials | B1 |
| developing this, such as one business being charged more by suppliers, or having more wastage | B1 |
| concluding that a larger share of each pound of revenue is then used up before gross profit is calculated, even though total revenue is the same | B1 |
| Final answer: Businesses can have very different costs of sales, for example paying more for stock or having more wastage, leaving a different gross profit even from the same revenue | |
| Question 5[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a benefit, such as the supplier getting to know the cafe's specific needs and order patterns over time | B1 |
| developing it, such as the supplier prioritising the cafe over newer customers during a shortage | B1 |
| identifying a second benefit, such as trust built over time leading to better terms, for example loyalty discounts or more flexible payment | B1 |
| developing it, such as this reducing cost or improving cash flow compared with always negotiating from scratch with an unfamiliar supplier | B1 |
| Final answer: Two developed benefits, such as the supplier prioritising the cafe during a shortage, and trust over time leading to better terms such as loyalty discounts or flexible payment | |
| Question 6[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that customers perceive 1.99 as noticeably cheaper than 2.00, even though the actual difference is only 1 penny | B1 |
| developing it, such as customers tending to focus on the first digit, so the price seems to be under 2 pounds rather than about 2 pounds | B1 |
| identifying a second reason, such as the precise price appearing more carefully calculated | B1 |
| developing it, such as this making the product seem better value than a competitor's rounded price, encouraging customers to choose it | B1 |
| Final answer: Two developed reasons, such as customers perceiving 1.99 as noticeably cheaper due to the first digit, and a precise price appearing more carefully calculated and better value than a round price | |
| Question 7[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 8[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying an effect, such as the business's wage costs increasing | B1 |
| developing it, such as reducing profit unless the business raises prices or cuts costs elsewhere | B1 |
| identifying a second effect, such as staff being more motivated or less likely to leave | B1 |
| developing it, such as higher pay improving morale and reducing costly staff turnover | B1 |
| Final answer: Two developed effects, such as higher wage costs reducing profit unless prices rise, and potentially higher staff motivation and lower turnover | |
| Question 9[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 10[5 marks] | |
|---|---|
| Answer or working | Marks |
| extra weekly cost = 8 times 30, times 1 | M1 |
| 240 pounds | A1 |
| extra annual cost = 240 times 52 | M1 |
| 12480 pounds | A1 |
| identifying that the cafe may need to raise its prices, reduce staff hours, or accept lower profit to cover this extra cost | B1 |
| Final answer: Extra weekly wage cost = 240 pounds; extra annual wage cost = 12480 pounds; the cafe may need to raise prices, cut hours, or accept lower profit | |
| Question 11[5 marks] | |
|---|---|
| Answer or working | Marks |
| average cost before = 24000 divided by 2000 | M1 |
| an average cost before of 12 pounds per unit | A1 |
| average cost after = 45000 divided by 5000 | M1 |
| an average cost after of 9 pounds per unit | A1 |
| concluding that this shows economies of scale, since the average cost per unit has fallen as output has increased | B1 |
| Final answer: Average cost before = 12 pounds per unit; average cost after = 9 pounds per unit; yes, this shows economies of scale, as average cost has fallen with higher output | |
| Question 12[6 marks] | |
|---|---|
| Answer or working | Marks |
| net profit = 220000 minus 198000 | M1 |
| 22000 pounds | A1 |
| dividing 22000 by 220000 and multiplying by 100 | M1 |
| a net profit margin of 10.0 percent, exactly meeting the objective | A1 |
| identifying that this relies on the revenue and cost forecasts being accurate, and forecasts often differ from actual results, particularly for a business with only two years of trading history | B1 |
| a justified conclusion recommending caution, since the forecast only just meets the target and the brewery has limited trading history to base it on | B1 |
| Final answer: Net profit = 22000 pounds; net profit margin = 10.0 percent, which exactly meets the objective; a justified judgement recommending caution given the brewery's limited trading history and how narrowly the forecast meets the target | |
| Question 13[6 marks] | |
|---|---|
| Answer or working | Marks |
| last year's share = 240000 divided by 1200000, multiplied by 100 | M1 |
| 20 percent | A1 |
| this year's share = 252000 divided by 1400000, multiplied by 100 | M1 |
| 18 percent | A1 |
| identifying that sales revenue itself grew, from 240000 to 252000 pounds, which looks like success in absolute terms | B1 |
| a justified conclusion that market share actually fell, from 20 to 18 percent, because the market and the new rival grew faster than the brand's own sales, so this is not straightforwardly a success | B1 |
| Final answer: Market share last year = 20 percent; market share this year = 18 percent; a justified judgement that this is not a full success, since market share fell even though revenue grew | |
| Question 14[6 marks] | |
|---|---|
| Answer or working | Marks |
| Year 1 margin = 20000 divided by 200000, multiplied by 100 | M1 |
| a Year 1 margin of 10.0 percent | A1 |
| Year 2 margin = 20800 divided by 260000, multiplied by 100 | M1 |
| a Year 2 margin of 8.0 percent | A1 |
| identifying that revenue and the absolute amount of net profit both grew, which looks like an improvement at first glance | B1 |
| a justified conclusion that this is not a clear improvement, since net profit margin actually fell from 10.0 to 8.0 percent, likely because the extra staff costs grew faster than profit did | B1 |
| Final answer: Year 1 net profit margin = 10.0 percent; Year 2 net profit margin = 8.0 percent; a justified judgement that this is not a clear improvement, since margin fell even though revenue and profit both grew | |