Year 11 Paper 2: Growing the Business
Business aims and objectives, business ownership and growth, profit margins, human resources and external influences on business.
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 [3 marks]
Human Resources
Explain one drawback to a business of always employing staff on temporary contracts rather than permanent ones.
Question 2 [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 3 [3 marks]
Business Ownership and Growth
Explain one advantage to a business of becoming a private limited company rather than remaining a sole trader.
Question 4 [3 marks]
External Influences on Business
Explain one effect an economic boom, when the economy is growing strongly and consumer confidence is high, is likely to have on a business selling non-essential luxury goods.
Question 5 [4 marks]
Profit and Financial Performance
A cafe's figures are shown below.
Year 1: revenue of 80000 pounds, net profit of 9600 pounds.
Year 2: revenue of 95000 pounds, net profit of 9500 pounds.
Calculate the net profit margin for each year, and state which year shows better financial performance in percentage terms.
Question 6 [5 marks]
Business Ownership and Growth
A factory produces 8000 units a month with total costs of 64000 pounds.
After a further expansion, it produces 15000 units a month, but total costs rise to 135000 pounds because of the extra management and coordination the larger factory now needs.
Calculate the average cost per unit before and after this expansion, and state whether the business has experienced diseconomies of scale.
Question 7 [4 marks]
Business Aims and Objectives
A driving school currently helps 40 pupils pass their driving test each year. Its objective is written as: to pass more pupils.
Rewrite this as a SMART objective that increases the number of pupils passing to 55 within 18 months, then calculate the percentage increase this target represents.
Question 8 [4 marks]
Business Ownership and Growth
A pair of friends running a successful gardening partnership are considering converting to a private limited company as the business grows.
Explain two reasons why they might make this change.
Question 9 [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 10 [4 marks]
External Influences on Business
A small accountancy firm currently completes tax returns entirely by hand.
New accounting software becomes available that could automate much of this work.
Explain two effects this new technology could have on the firm.
Question 11 [5 marks]
Business Ownership and Growth
A prospective franchisee is comparing opening an independent cafe, costing 40000 pounds to set up with no ongoing brand fees, against buying a cafe franchise.
The franchise costs a 15000-pound joining fee plus an ongoing 8 percent royalty on the franchise's forecast annual revenue of 150000 pounds.
Calculate the total first-year cost of the franchise option, fee plus the first year's royalty, and state which option has the lower first-year cost.
Question 12 [6 marks]
Human Resources
A care home employs 46 care assistants, each currently paid 20000 pounds a year. A rise in the minimum wage will increase this to 23000 pounds a year for every assistant.
To keep its total wage bill unchanged, management is considering reducing the number of care assistants instead of finding the extra money.
Calculate the current total wage bill, and the maximum number of care assistants the home could employ at the new pay rate without increasing this total wage bill, then evaluate whether cutting staff numbers this way is a good response to the wage rise.
Question 13 [6 marks]
Profit and Financial Performance
A phone case maker sells each case for 12 pounds. The variable cost per case is 5 pounds, and it currently sells 8000 cases a year. It is considering a 20 percent discount, expecting sales to rise to 11000 cases a year.
Calculate the total contribution at the current price and at the discounted price, and evaluate whether the discount is worthwhile.
Question 14 [6 marks]
Human Resources
A retail chain currently employs 6 supervisors, each earning 28000 pounds a year, to manage 60 shop floor staff. It is considering removing 2 supervisor posts, so the remaining supervisors manage more staff each.
Calculate the annual saving from removing 2 supervisor posts, and evaluate whether the retailer should go ahead with this change.
Model solutions
| Question 1[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that staff on temporary contracts may feel less secure and committed to the business | B1 |
| developing this, such as reducing their motivation, or leading them to leave for a permanent job elsewhere as soon as one is offered | B1 |
| concluding that this leads to higher staff turnover and repeated recruitment and training costs for the business | B1 |
| Final answer: Temporary staff may feel less secure and committed, leading them to leave for a permanent job elsewhere, which increases staff turnover and repeated recruitment costs | |
| Question 2[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 3[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that the owners gain limited liability | B1 |
| developing this, such as their personal assets being protected if the business fails and cannot pay its debts | B1 |
| concluding that this reduces the personal financial risk of running the business | B1 |
| Final answer: Limited liability protects the owners' personal assets if the business fails, reducing their personal financial risk | |
| Question 4[3 marks] | |
|---|---|
| Answer or working | Marks |
| identifying that consumer confidence and income tend to rise during a boom | B1 |
| developing this, such as customers being more willing to spend on non-essential, luxury items rather than only essentials | B1 |
| concluding that this is likely to increase the business's sales revenue and profit during the boom | B1 |
| Final answer: Rising consumer confidence and income during a boom make customers more willing to spend on non-essential luxury items, increasing the business's sales revenue and profit | |
| Question 5[4 marks] | |
|---|---|
| Answer or working | Marks |
| calculating each year's margin as net profit divided by revenue, multiplied by 100 | M1 |
| a Year 1 margin of 12.0 percent | A1 |
| a Year 2 margin of 10.0 percent | A1 |
| concluding that Year 1 shows better performance, since it converted more of each pound of revenue into profit | B1 |
| Final answer: Year 1 margin = 12.0 percent; Year 2 margin = 10.0 percent; Year 1 shows better performance, converting more of each pound of revenue into profit | |
| Question 6[5 marks] | |
|---|---|
| Answer or working | Marks |
| average cost before = 64000 divided by 8000 | M1 |
| an average cost before of 8 pounds per unit | A1 |
| average cost after = 135000 divided by 15000 | M1 |
| an average cost after of 9 pounds per unit | A1 |
| concluding that this shows diseconomies of scale, since average cost per unit has risen despite higher output | B1 |
| Final answer: Average cost before = 8 pounds per unit; average cost after = 9 pounds per unit; yes, this shows diseconomies of scale, as average cost has risen despite higher output | |
| Question 7[4 marks] | |
|---|---|
| Answer or working | Marks |
| a rewritten objective stating the specific target of 55 pupils passing within an 18-month timeframe | B1 |
| calculating the increase = 55 minus 40 | M1 |
| dividing the increase by the original 40 and multiplying by 100 | M1 |
| a percentage increase of 37.5 percent | A1 |
| Final answer: Increase pupils passing from 40 to 55 within 18 months, a 37.5 percent increase | |
| Question 8[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying a reason, such as gaining limited liability | B1 |
| developing it, such as protecting their personal assets, which are currently at risk as partners if the business cannot pay its debts | B1 |
| identifying a second reason, such as being able to raise additional finance more easily, for example by selling shares to new investors | B1 |
| developing it, such as a partnership relying mainly on the partners' own capital and loans, while a private limited company can bring in outside shareholders' money | B1 |
| Final answer: Two developed reasons, such as gaining limited liability to protect personal assets, and being able to raise additional finance more easily by selling shares to new investors | |
| Question 9[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 10[4 marks] | |
|---|---|
| Answer or working | Marks |
| identifying an effect, such as work being completed faster, since the software automates calculations | B1 |
| developing it, such as allowing the firm to handle more clients with the same staff, increasing potential revenue | B1 |
| identifying a second effect, such as the cost and time needed to learn and set up the new software | B1 |
| developing it, such as this reducing productivity or profit in the short term before the benefits are felt | B1 |
| Final answer: Two developed effects, such as work being completed faster, allowing more clients to be handled with the same staff, and an initial cost and learning curve reducing short-term productivity | |
| Question 11[5 marks] | |
|---|---|
| Answer or working | Marks |
| the royalty = 8 percent of 150000 | M1 |
| 12000 pounds | A1 |
| total first-year franchise cost = 15000 plus 12000 | M1 |
| 27000 pounds | A1 |
| correctly concluding that the franchise, at 27000 pounds, has the lower first-year cost than the 40000-pound independent cafe | B1 |
| Final answer: Franchise royalty = 12000 pounds; total first-year franchise cost = 27000 pounds; the franchise has the lower first-year cost, compared with 40000 pounds for the independent cafe | |
| Question 12[6 marks] | |
|---|---|
| Answer or working | Marks |
| current wage bill = 46 times 20000 | M1 |
| 920000 pounds | A1 |
| maximum staff = 920000 divided by 23000 | M1 |
| 40 care assistants | A1 |
| identifying that cutting staff from 46 to 40 directly reduces the amount of care and attention each resident receives | B1 |
| a justified conclusion recommending against simply cutting staff to absorb the wage rise, since this could harm care quality, and suggesting other ways to fund it, such as raising fees | B1 |
| Final answer: Current wage bill = 920000 pounds; maximum staff at the new pay rate without increasing the bill = 40 care assistants; a justified judgement recommending against cutting staff purely to absorb the wage rise, since care quality could suffer | |
| Question 13[6 marks] | |
|---|---|
| Answer or working | Marks |
| current contribution per case = 12 minus 5 = 7 pounds | M1 |
| current total contribution = 7 times 8000 = 56000 pounds | M1 |
| discounted price = 12 minus 20 percent of 12 = 9.60 pounds, giving a new contribution per case of 4.60 pounds | M1 |
| a new total contribution = 4.60 times 11000 = 50600 pounds | A1 |
| correctly identifying that total contribution falls from 56000 pounds to 50600 pounds | B1 |
| a justified conclusion that the discount is not worthwhile in terms of total contribution, since the extra volume does not make up for the lower contribution per case | B1 |
| Final answer: Current total contribution = 56000 pounds; total contribution after the discount = 50600 pounds; the discount is not worthwhile, since total contribution falls despite the higher sales volume | |
| Question 14[6 marks] | |
|---|---|
| Answer or working | Marks |
| saving = 2 times 28000 | M1 |
| an annual saving of 56000 pounds | A1 |
| a point in favour, such as the 56000-pound saving directly increasing profit | B1 |
| a point against, such as the remaining 4 supervisors each having a wider span of control, supervising 15 staff instead of 10 | B1 |
| developing this, such as less time available to support each individual staff member, risking lower supervision quality | B1 |
| a justified conclusion weighing the 56000-pound saving against the risk of supervisors being overstretched | B1 |
| Final answer: Annual saving = 56000 pounds; a justified judgement weighing this saving against the risk of the remaining supervisors being overstretched with a wider span of control | |