Year 11 Paper 1: Small Business Foundations
Enterprise and entrepreneurship, spotting a business opportunity, business aims and objectives, cash flow and break-even analysis.
Year 11 here means a typical teaching order, not a syllabus rule. No exam board defines what belongs to Year 11, and schools sequence the course differently. Check it against your own scheme of work before using it to decide what a class has covered.
Questions
Question 1 [2 marks]
Cash Flow
State two differences between cash flow and profit.
Question 2 [2 marks]
Enterprise and Entrepreneurship
State two personal qualities that help an entrepreneur to succeed when starting a new business.
Question 3 [2 marks]
Business Aims and Objectives
State two objectives, other than making a profit, that a new business might set in its first year of trading.
Question 4 [3 marks]
Spotting a Business Opportunity
A new hairdressing salon wants information specific to its own local area rather than relying only on published national reports.
Explain one advantage to the salon of using primary market research rather than secondary market research.
Question 5 [3 marks]
Enterprise and Entrepreneurship
Explain one reason why being decisive is a useful characteristic for an entrepreneur running a new business.
Question 6 [3 marks]
Break-even Analysis
A market stall sells scented candles for 9 pounds each. Each candle costs 3 pounds to make.
The stall's fixed costs are 180 pounds per week. Calculate the contribution per candle, and the number of candles the stall must sell each week to break even.
Question 7 [5 marks]
Spotting a Business Opportunity
A new gym sends a questionnaire to 400 potential customers, and 92 of them respond.
Calculate the response rate as a percentage, and explain one way the gym could try to increase this response rate.
Question 8 [4 marks]
Enterprise and Entrepreneurship
A furniture maker buys wood and other materials costing 45 pounds to build a bookshelf, then sells the finished bookshelf for 140 pounds.
Calculate the value the furniture maker has added to the raw materials, and explain one way, other than price, that a business can add value to a product.
Question 9 [4 marks]
Business Aims and Objectives
A family-run bakery has grown steadily for five years.
Explain two reasons why the owners might now set an objective of growth rather than survival.
Question 10 [4 marks]
Enterprise and Entrepreneurship
A mobile pizza van owner is turning away customers at busy times and is deciding whether to use her savings to buy a second, larger van.
Explain two risks to the owner of using her savings to buy the second van.
Question 11 [5 marks]
Break-even Analysis
A tutoring business has fixed costs of 900 pounds a month. It charges 30 pounds per hour of tutoring, and the variable cost per hour, for materials, is 5 pounds.
Calculate the number of hours needed each month to break even, and the number of hours needed to make a target profit of 750 pounds.
Question 12 [5 marks]
Enterprise and Entrepreneurship
A candle maker buys 6 pounds of wax and wick to make a scented candle, then sells the finished candle for 21 pounds.
Calculate the value the candle maker has added to the raw materials, calculate this added value as a percentage of the material cost, and explain one factor of production the candle maker has used to create this value.
Question 13 [6 marks]
Cash Flow
A cafe's cash flow forecast is shown below.
March: opening balance of 400 pounds, inflows of 8000 pounds, outflows of 8300 pounds. April: opening balance equal to March's closing balance, inflows of 8600 pounds, outflows of 8100 pounds.
Calculate the closing balance for March and for April, and evaluate whether the cafe needs to take any action based on this forecast.
Question 14 [6 marks]
Break-even Analysis
A cinema's snack kiosk has fixed costs of 1200 pounds per month. Popcorn sells for 4 pounds per tub, with a variable cost of 1 pound per tub, and the kiosk currently sells 500 tubs a month.
Calculate the kiosk's break-even output and margin of safety at current sales, and evaluate the risk to the kiosk if a nearby cinema opens and monthly sales fall by 30 percent.
Question 15 [6 marks]
Spotting a Business Opportunity
A market map for fitness apps shows most apps clustered around low price with a broad range of features. A gap exists for a high price, single-feature app focused only on running.
Evaluate whether launching a high price, single-feature running app into this gap is likely to succeed.
Model solutions
| Question 1[2 marks] | |
|---|---|
| Answer or working | Marks |
| a valid difference, such as cash flow measuring money moving in and out day to day while profit measures total income minus total costs over a period | B1 |
| a second difference, such as a business being able to make a profit but still run short of cash because of timing differences such as credit | B1 |
| Final answer: Cash flow tracks money in and out day to day; profit is income minus costs over a period; a business can be profitable yet still short of cash due to timing, for example when it sells on credit | |
| Question 2[2 marks] | |
|---|---|
| Answer or working | Marks |
| one valid quality, such as determination or risk-taking | B1 |
| a second valid quality, such as self-motivation or creativity | B1 |
| Final answer: Any two of: determination, risk-taking, self-motivation, creativity, resilience | |
| Question 3[2 marks] | |
|---|---|
| Answer or working | Marks |
| a valid objective, such as survival | B1 |
| a second valid objective, such as building a customer base, gaining market share, or a social or ethical objective | B1 |
| Final answer: Any two of: survival, building a customer base, gaining market share, social or ethical objectives | |
| Question 4[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying an advantage, such as the data being collected specifically for the salon's own purpose | B1 |
| developing it, such as it directly answering questions about the salon's own local customers, which a national report cannot | B1 |
| concluding that this makes the findings more relevant and useful for the salon's own decisions | B1 |
| Final answer: Primary research is collected specifically for the salon's own purpose, giving relevant, up-to-date information about its own local customers that a national report cannot | |
| Question 5[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that a new business often needs quick decisions | B1 |
| developing this, such as there being no established procedures or senior colleagues for the entrepreneur to consult before deciding | B1 |
| concluding that being decisive lets the business respond to problems or opportunities before they are lost | B1 |
| Final answer: Decisiveness lets an entrepreneur respond quickly to problems or opportunities, without established procedures or senior colleagues to consult, before they are lost | |
| Question 6[3 marks] | |
|---|---|
| Answer or working | Marks |
| contribution per candle = 9 minus 3 | M1 |
| dividing the fixed costs of 180 by the contribution per candle | M1 |
| 30 candles per week | A1 |
| Final answer: Contribution = 6 pounds per candle; break-even output = 30 candles per week | |
| Question 7[5 marks] | |
|---|---|
| Answer or working | Marks |
| dividing 92 by 400 | M1 |
| multiplying the result by 100 | M1 |
| a response rate of 23 percent | A1 |
| a valid method to increase the response rate, such as offering a small incentive or shortening the questionnaire | B1 |
| developing it, such as explaining that people are more willing to complete a quick survey or one offering a reward | B1 |
| Final answer: Response rate = 23 percent; a method such as offering a small incentive or shortening the questionnaire could increase how many people respond | |
| Question 8[4 marks] | |
|---|---|
| Answer or working | Marks |
| subtracting the material cost from the selling price | M1 |
| 95 pounds | A1 |
| a valid non-price method of adding value, such as branding, design or convenience | B1 |
| explaining that this makes customers willing to pay more than the cost of the materials | B1 |
| Final answer: 95 pounds; added value can also come from branding, design or convenience | |
| Question 9[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a reason, such as the business now being established with a reliable, loyal customer base | B1 |
| developing it, such as being able to use stable income to invest in expansion, such as a second shop, rather than needing to focus on basic costs | B1 |
| identifying a second reason, such as growth increasing market share or bringing economies of scale | B1 |
| developing it, such as lowering the average cost per unit and increasing profit as ingredients are bought in greater bulk | B1 |
| Final answer: Two developed reasons, such as an established, reliable customer base allowing investment in expansion, and growth bringing economies of scale that lower average costs | |
| Question 10[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a risk, such as using up her entire savings safety net | B1 |
| developing it, such as having nothing to fall back on if the business then has a difficult period | B1 |
| identifying a second risk, such as the new van's running costs continuing even if it is not fully used | B1 |
| developing it, such as demand for the extra capacity being uncertain, so the second van could sit idle and lose money rather than earn it | B1 |
| Final answer: Two developed risks, such as losing her cash safety net, and the new van's costs continuing even if demand for it turns out lower than hoped | |
| Question 11[5 marks] | |
|---|---|
| Answer or working | Marks |
| contribution per hour = 30 minus 5 | M1 |
| dividing 900 by the 25-pound contribution | M1 |
| a break-even output of 36 hours | A1 |
| dividing the fixed costs plus the 750-pound target profit, 1650, by the 25-pound contribution | M1 |
| 66 hours needed to reach the target profit | A1 |
| Final answer: Break-even = 36 hours per month; hours needed for a 750-pound target profit = 66 hours per month | |
| Question 12[5 marks] | |
|---|---|
| Answer or working | Marks |
| value added = 21 minus 6 | M1 |
| 15 pounds | A1 |
| dividing 15 by 6 and multiplying by 100 | M1 |
| 250 percent | A1 |
| identifying a factor of production used, such as labour, the maker's own time and skill, or capital, such as moulds | B1 |
| Final answer: Value added = 15 pounds, 250 percent of the material cost; this used the maker's own labour and capital such as moulds | |
| Question 13[6 marks] | |
|---|---|
| Answer or working | Marks |
| March's net cash flow = 8000 minus 8300 | M1 |
| a March closing balance of 100 pounds | A1 |
| April's net cash flow = 8600 minus 8100 | M1 |
| an April closing balance of 600 pounds | A1 |
| identifying that the balance stays positive throughout, though it dips to a thin 100 pounds in March before recovering in April | B1 |
| a justified conclusion that no emergency action, such as an overdraft, is needed since the balance never turns negative, but non-essential March spending should still be watched closely given how thin the margin is | B1 |
| Final answer: March closing balance = 100 pounds; April closing balance = 600 pounds; a justified judgement that no emergency action is needed, but March's thin margin means spending should be watched closely that month | |
| Question 14[6 marks] | |
|---|---|
| Answer or working | Marks |
| contribution per tub = 4 minus 1 = 3 pounds | M1 |
| dividing the fixed costs of 1200 by the 3-pound contribution | M1 |
| a break-even output of 400 tubs, giving a margin of safety of 100 tubs at current sales of 500 | A1 |
| calculating that a 30 percent fall in sales takes monthly sales to 350 tubs, which is below the break-even output of 400 | B1 |
| explaining that this would move the kiosk from profit into a loss | B1 |
| a justified conclusion on the risk, such as recommending the kiosk builds a bigger margin of safety, for example by reducing fixed costs, before the rival cinema opens | B1 |
| Final answer: Break-even = 400 tubs, margin of safety = 100 tubs; a 30 percent fall would take sales to 350 tubs, below break-even, moving the kiosk into a loss unless it reduces fixed costs or otherwise widens its margin of safety beforehand | |
| Question 15[6 marks] | |
|---|---|
| Answer or working | Marks |
| a point in favour, such as the gap having little direct competition, making it easier to stand out and be noticed | B1 |
| developing it, such as a single, well-executed feature potentially being seen as higher quality than a broad, generic app | B1 |
| a point against, such as the gap existing because there may be little demand for a single-feature app at a high price | B1 |
| developing it, such as most customers preferring an app with many features for one payment, so the gap may attract few buyers | B1 |
| a further factor, such as researching whether runners specifically would value and pay for this focus before committing resources | B1 |
| a justified conclusion on whether the gap represents genuine unmet demand or simply an area competitors have avoided for good reason | B1 |
| Final answer: A justified judgement weighing the reduced competition of the gap against the risk that it exists because of genuinely low demand for a single-feature app at a high price, and the need for prior research | |