GCSE Business Paper 3
Covers Enterprise and Entrepreneurship, Spotting a Business Opportunity, Business Aims and Objectives and 9 more.
Questions
Question 1 [2 marks]
Enterprise and Entrepreneurship
State two reasons why a new business might fail within its first year of trading.
Question 2 [2 marks]
Business Ownership and Growth
State two disadvantages of operating as a sole trader.
Question 3 [2 marks]
Operations Management
State two benefits to a business of producing its products to a high standard of quality.
Question 4 [3 marks]
Break-even Analysis
A market stall sells handmade soaps for 8 pounds each. Each soap costs 3 pounds to make.
The stall's fixed costs are 250 pounds per week.
Calculate the contribution per soap, and the number of soaps the stall must sell each week to break even.
Question 5 [3 marks]
Human Resources
A warehouse manager wants to motivate staff without increasing the wage budget.
Explain one non-financial method the manager could use to motivate staff.
Question 6 [4 marks]
Business Aims and Objectives
A five-year-old software company has always prioritised rapid growth over profit, reinvesting all revenue into new features and marketing.
Explain two reasons why the company might now set profit as a new key objective.
Question 7 [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 8 [4 marks]
Spotting a Business Opportunity
A new gym is deciding how to segment its target market.
Explain two ways the gym could segment its customers to help target its marketing.
Question 9 [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 10 [4 marks]
Enterprise and Entrepreneurship
Priya is deciding whether to leave her salaried job, which pays 28000 pounds a year, to set up a mobile dog-grooming business.
Explain two risks Priya faces by giving up her job to become self-employed.
Question 11 [5 marks]
The Marketing Mix
A local bakery is choosing between two advertising options for a 240-pound budget: a local newspaper advert reaching an estimated 8000 people, or a social media advert reaching an estimated 20000 people for the same cost.
Calculate the cost per person reached for each option, and state which option is more cost-effective in reaching people.
Question 12 [5 marks]
Cash Flow
A landscaping business forecasts the following for June: cash inflows of 8400 pounds, cash outflows of 9600 pounds, and an opening balance of 900 pounds at the start of the month.
Calculate the net cash flow for June and the closing balance at the end of June. The business has an agreed overdraft limit of 1000 pounds; calculate how much of this overdraft limit remains unused at the end of June.
Question 13 [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.
Question 14 [6 marks]
Enterprise and Entrepreneurship
A first-time entrepreneur is planning to sell a new reusable water bottle she has designed.
She is deciding whether to manufacture the bottles herself in a rented unit, or to pay an established factory to manufacture them for her.
Evaluate whether the entrepreneur should outsource production to an established factory rather than manufacturing the bottles herself.
Question 15 [6 marks]
Break-even Analysis
A record shop is planning a small vinyl pressing run. Fixed costs are 1500 pounds for the run. Each record costs 6 pounds to press and sells for 18 pounds.
Based on past pre-orders, the shop can realistically expect to sell between 100 and 150 records from this run.
Calculate the break-even output, and evaluate whether the pressing run is likely to be profitable given this expected sales range.
Model solutions
| Question 1[2 marks] | |
|---|---|
| Answer or working | Marks |
| a valid reason, such as running out of cash | B1 |
| a second valid reason, such as a lack of demand for the product, strong competition, or poor planning | B1 |
| Final answer: Any two of: running out of cash, lack of demand, poor planning, strong competition, lack of management experience | |
| Question 2[2 marks] | |
|---|---|
| Answer or working | Marks |
| a valid disadvantage, such as unlimited liability | B1 |
| a second valid disadvantage, such as difficulty raising finance, or all the workload and risk falling on one person | B1 |
| Final answer: Any two of: unlimited liability, difficulty raising finance, all responsibility or workload on one person, limited by the owner's own skills | |
| Question 3[2 marks] | |
|---|---|
| Answer or working | Marks |
| a valid benefit, such as fewer returns or refunds | B1 |
| a second valid benefit, such as a better reputation, more repeat customers, or the ability to charge a higher price | B1 |
| Final answer: Any two of: fewer returns or refunds, better reputation, more repeat customers, ability to charge a higher price | |
| Question 4[3 marks] | |
|---|---|
| Answer or working | Marks |
| contribution per soap = 8 minus 3 | M1 |
| dividing the fixed costs of 250 by the contribution per soap | M1 |
| 50 soaps (contribution = 5 pounds) | A1 |
| Final answer: Contribution = 5 pounds per soap; break-even output = 50 soaps per week | |
| Question 5[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a method, such as giving staff more responsibility or recognition for good work | B1 |
| developing it, such as staff feeling more valued and involved in decisions affecting their own work | B1 |
| concluding that this can increase motivation and effort without needing to increase pay | B1 |
| Final answer: Giving staff more responsibility or recognition makes them feel more valued, increasing motivation and effort without needing to increase pay | |
| Question 6[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a reason, such as investors eventually expecting a return on their investment | B1 |
| developing it, such as shareholders wanting to see actual profit or dividends after years of reinvestment rather than continued expansion | B1 |
| identifying a second reason, such as the market becoming more saturated and growth slowing naturally | B1 |
| developing it, such as it becoming harder to keep growing rapidly, making higher profit from existing customers a more realistic objective than further expansion | B1 |
| Final answer: Two developed reasons, such as investors eventually expecting a return rather than continued reinvestment, and slowing market growth making profit from existing customers more realistic than further expansion | |
| Question 7[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 8[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a segmentation method, such as age | B1 |
| developing it, such as offering different class types or pricing for younger adults compared with older members | B1 |
| identifying a second method, such as income or socio-economic group | B1 |
| developing it, such as setting membership prices and payment plans that suit that group's disposable income | B1 |
| Final answer: Two developed methods, such as segmenting by age to vary class types and pricing, and by income to set membership prices and payment plans | |
| Question 9[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 10[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a risk, such as losing her guaranteed income | B1 |
| developing it, such as earning less than 28000 pounds while she builds a client base | B1 |
| identifying a second risk, such as losing her employment benefits | B1 |
| developing it, such as having no sick pay, holiday pay or pension contributions, which she must now fund herself | B1 |
| Final answer: Two developed risks, such as losing her guaranteed 28000-pound salary and losing employment benefits such as sick pay and pension contributions | |
| Question 11[5 marks] | |
|---|---|
| Answer or working | Marks |
| newspaper cost per person = 240 divided by 8000 | M1 |
| 0.03 pounds per person | A1 |
| social media cost per person = 240 divided by 20000 | M1 |
| 0.012 pounds per person | A1 |
| correctly concluding that the social media advert is more cost-effective, reaching people at a lower cost each | B1 |
| Final answer: Newspaper cost per person reached = 0.03 pounds; social media cost per person reached = 0.012 pounds; social media is more cost-effective | |
| Question 12[5 marks] | |
|---|---|
| Answer or working | Marks |
| net cash flow = 8400 minus 9600 | M1 |
| a net cash flow of negative 1200 pounds | A1 |
| closing balance = 900 plus the net cash flow | M1 |
| a closing balance of negative 300 pounds | A1 |
| calculating that 700 pounds of the 1000-pound overdraft limit remains unused | B1 |
| Final answer: Net cash flow = negative 1200 pounds; closing balance = negative 300 pounds; 700 pounds of the 1000-pound overdraft limit remains unused | |
| Question 13[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 | |
| Question 14[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour of outsourcing, such as the factory already having the equipment and expertise, so she does not need to invest in machinery or learn manufacturing from scratch | B1 |
| developing it, such as this reducing the upfront cost and risk for a first-time entrepreneur with no manufacturing experience | B1 |
| a point against, such as having less control over quality and the production schedule, since she depends on the factory's own priorities | B1 |
| developing it, such as a delay or quality issue at the factory being able to damage her brand's reputation even though she did not cause it directly | B1 |
| a further factor, such as the cost per bottle the factory charges compared with manufacturing alone, and how important direct control over quality is to her new brand | B1 |
| a justified conclusion weighing the lower upfront cost and risk of outsourcing against the loss of control, related to her lack of manufacturing experience | B1 |
| Final answer: A justified judgement weighing outsourcing's lower upfront cost and risk for a first-time manufacturer against the loss of direct control over quality and production schedule | |
| Question 15[6 marks] | |
|---|---|
| Answer or working | Marks |
| contribution per record = 18 minus 6 | M1 |
| dividing the fixed costs of 1500 by the 12-pound contribution | M1 |
| a break-even output of 125 records | A1 |
| identifying that the expected range of 100 to 150 records straddles this break-even point of 125 | B1 |
| developing this, such as selling only 100 records leaving the run in a loss, while only sales above 125 turn it into a profit | B1 |
| a justified conclusion recommending the shop secure more pre-orders towards the top of the range before committing, since the lower end of the estimate results in a loss | B1 |
| Final answer: Break-even = 125 records; a justified judgement noting that the expected 100 to 150 range straddles break-even, so the run needs sales above 125 to be profitable, and more pre-orders should be secured first | |